/2022 INSC 0350/ REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION  CIVIL APPEAL NO. 6258 OF 2014 THE SECRETARY TO GOVT. OF KERALA, IRRIGATION DEPARTMENT AND OTHERS            ...APPELLANT(S) VERSUS JAMES VARGHESE AND OTHERS ...RESPONDENT(S) WITH CIVIL APPEAL NO. 9236 OF 2014 CIVIL APPEAL NO. 9241 OF 2014 CIVIL APPEAL NO. 9226 OF 2014 CIVIL APPEAL NO. 6268 OF 2014 CIVIL APPEAL NO. 6264 OF 2014 CIVIL APPEAL NO. 6265 OF 2014 CIVIL APPEAL NO. 6266 OF 2014 CIVIL APPEAL NO. 6260 OF 2014 CIVIL APPEAL NO. 6262 OF 2014 CIVIL APPEAL NO. 6259 OF 2014 CIVIL APPEAL NO. 6267 OF 2014 CIVIL APPEAL NO. 295 OF 2015 CIVIL APPEAL NO. 6261 OF 2014 CIVIL APPEAL NO. 8995 OF 2014 1 CIVIL APPEAL NO. 9022 OF 2014 CIVIL APPEAL NO. 9016 OF 2014 CIVIL APPEAL NO. 9005 OF 2014 CIVIL APPEAL NO. 8998 OF 2014 CIVIL APPEAL NO. 9009 OF 2014 CIVIL APPEAL NO. 8997 OF 2014 CIVIL APPEAL NO. 9002 OF 2014 CIVIL APPEAL NO. 8996 OF 2014 CIVIL APPEAL NO. 8999 OF 2014 CIVIL APPEAL NO. 9007 OF 2014 CIVIL APPEAL NO. 9004 OF 2014 CIVIL APPEAL NO. 9003 OF 2014 CIVIL APPEAL NO. 9008 OF 2014 CIVIL APPEAL NO. 9017 OF 2014 CIVIL APPEAL NO. 9000 OF 2014 CIVIL APPEAL NO. 9001 OF 2014 CIVIL APPEAL NO. 9215 OF 2014 CIVIL APPEAL NO. 9213 OF 2014 CIVIL APPEAL NO. 9018 OF 2014 CIVIL APPEAL NO. 9217 OF 2014 CIVIL APPEAL NO. 9006 OF 2014 CIVIL APPEAL NO. 9019 OF 2014 CIVIL APPEAL NO. 9219 OF 2014 CIVIL APPEAL NO. 9237 OF 2014 CIVIL APPEAL NO. 9225 OF 2014 CIVIL APPEAL NO. 9221 OF 2014 CIVIL APPEAL NO. 9238 OF 2014 CIVIL APPEAL NO. 9023 OF 2014 2 CIVIL APPEAL NO. 9243 OF 2014 CIVIL APPEAL NO. 9244 OF 2014 CIVIL APPEAL NO. 9224 OF 2014 CIVIL APPEAL NO. 9212 OF 2014 CIVIL APPEAL NO. 9211 OF 2014 CIVIL APPEAL NO. 9222 OF 2014 CIVIL APPEAL NO. 9020 OF 2014 CIVIL APPEAL NO. 9210 OF 2014 CIVIL APPEAL NO. 9239 OF 2014 CIVIL APPEAL NO. 3010 OF 2017 CIVIL APPEAL NO. 2824 OF 2022 CIVIL APPEAL NO. 2825 OF 2022 CIVIL APPEAL NO. 2826 OF 2022 J U D G M E N T B.R. GAVAI, J. 1. Two   important   questions   of   law,   with   regard   to   the legislative   competence   of   the   Kerala   State   Legislature   to enact   the   Kerala   Revocation   of   Arbitration   Clauses   and Reopening of Awards Act, 1998 (hereinafter referred to as the “State Act”) and as to whether the State Act encroaches upon the   judicial   power   of   the   State,   are   involved   in   the   present appeals.   3  BACKGROUND : 2. The   High   Court   of   Kerala   at   Ernakulam,   by   the impugned   judgment   dated   9 th   July   2013   delivered   in   O.P. No.4206 of 1998 and companion matters, has held the State Act   to   be   beyond   the   legislative   competence   of   the   Kerala State   Legislature   and   as   such,   held   the   same   to   be unconstitutional.     The   High   Court   has   also   held   that   the State   Act   had   an   effect   of   annulling   the   awards   of   the arbitrators   and   the   judgments   and   decrees   passed   by   the courts.     It   was   therefore   held   that   the   State   Act   encroaches upon   the   judicial   power   of   the   State.     Being   aggrieved thereby,   the   State   of   Kerala   has   approached   this   Court   by filing various appeals. 3. The   State   of   Kerala   had   started   the   construction   of Kallada   Irrigation   Project   (hereinafter   referred   to   the   “said Project”) in the year 1961.   The said project was proposed to be   executed   with   the   financial   assistance   from   the International   Bank   for   Reconstruction   and   Development   (for short   “World   Bank”)   from   June   1982   to   March   1989.     As required by the World Bank, a special condition namely, the 4 Local   Competitive   Bidding   Specification   (hereinafter   referred to   as   “LCBS”)   as   envisaged   by   the   World   Bank   Authorities was   included   in   the   agreements   relating   to   the   works connected   with   the   said   Project.     Clauses   51   and   52   of   the LCBS   provided   for   the   settlement   of   matters   in   dispute   or difference through  arbitration.   The same was  provided with a   view   to   enable   speedy   settlement   of   matters   in   dispute   or difference   in   a   just   and   equitable   manner.     The   State   of Kerala   found   that   on   account   of   various   disputes   and differences,   the   arbitration   references   did   not   have   the desired   effect   inasmuch   as   several   arbitrators   had   wrongly and arbitrarily awarded unconscionable amounts against the provisions  of  agreements   and  without  material  on  record,  in collusion   with   the   claimant   contractors   and   officials   of   the department,   thereby   causing   heavy   losses   to   the   State.     As such,   the   State   of   Kerala   considered   it   necessary,   in   public interest,   to   cancel   the   arbitration   clauses   in   the   agreements executed   in   terms   of   LCBS,   to   revoke   the   authority   of   the arbitrators   appointed   thereunder   and   to   enable   the   filing   of appeals   against   the   awards   or   decrees   already   passed   in 5 certain   arbitration   references   in   respect   of   which   the   period of limitation had expired.   As such, the State Act came to be enacted with effect from 14 th  November 1997.   4. The State Act is a short Act and therefore, we deem it appropriate to reproduce the same in its entirety as under: “ Kerala   Revocation   of   Arbitration   Clauses   and Reopening of Awards Act, 1998 Preamble  ………….. ……….. Section   1   ­   Short   title,   extent,   commencement and application  (1) This  Act  may   be  called  the  Kerala  Revocation  of Arbitration   Clauses   and   Reopening   of   Awards   Act, 1998.  (2) It extends to the whole of the State of Kerala.  (3) It shall be deemed to have come into force on the 14th day of November, 1997.  (4) It shall apply to all agreements executed in terms of the local competitive bidding specification. Section 2 ­ Definitions   (1)   In   this   Act,   unless   the   context   otherwise requires,  (a)   "agreement"   means   an   agreement executed in terms of the local competitive bidding  specification for various works of the Government of Kerala;  (b)   "local   competitive   bidding specification" means the local competitive bidding   specification   adopted   by   the 6 Government   in   their   Order  G.O.  (Ms)  No. 3/81/I&R dated the 20th January, 1981. (2)   Words   and   expressions   used   but   not   defined   in this Act and defined in  (a)   the   Arbitration  Act,   1940  (Central   Act 10 of 1940); or  (b)   the   Arbitration   and   Conciliation.   Act, 1996 (Central Act 26 of 1996), in relation to arbitration proceedings commenced on or after the 25th day of January, 1996,  shall   have   the   meanings,   respectively,   assigned   to them in those Acts.  Section   3   ­   Cancellation   of   arbitration   clauses and revocation of authority of arbitrator   (1)   Notwithstanding   anything   contained   in   the Indian Contract Act, 1872 (Central Act 9 of 1872) or in the Arbitration Act, 1940 (Central Act 10 of 1940) or   in   the   Arbitration   and   Conciliation   Act,   1996 (Central Act 26 of 1996) or in any other law for the time   being   in   force   or   in   any   judgement,   decree   or order   of   any   court   or   other   authority   or   in   any agreement or other instrument,  (i)   the   arbitration   clauses   in   every agreement shall stand cancelled;  (ii)   the   authority   of   an   arbitrator appointed under an agreement referred to in clause (i) shall stand revoked; and  (iii) any agreement referred to in clause (i) shall   cease   to   have   effect   in   so   far   as   it relates   to   the   matters   in   dispute   or difference referred,  with  effect  on  and  from   the  date  of  commencement of this Act.  (2) Nothing in sub­section (1) shall be a bar for any party   to   a   agreement   to   file   a   suit   in   the   court having   jurisdiction   in   the   matter   to   which   the 7 agreement   relates   and   all   questions   regarding   the validity   or   effect   of   the   agreement   between   the parties to the agreement or persons claiming under them   and   all   matters   in   dispute   or   difference between   the   parties   to   the   agreement   shall   be decided   by   the   court,   as   if   the   arbitration   clauses had never been included in the agreement.   Section 4 ­ Period of limitation for filing suits   Notwithstanding   anything   contained   in   the Arbitration Act, 1940 (Central Act 10 of 1940) or in the   Arbitration   and   Conciliation   Act,   1996   (Central Act   26   of   1996)   or   in   the   Limitation   Act,   1963 (Central   Act   36   of   1963),   a   suit   under   sub­section (2) of section 3 may be filed within six months from the   date   of   commencement   of   this   Act   or   within such   period   as   is   allowed   by   the   provisions   of   the Limitation   Act,   1963   (Central   Act   36   of   1963),   in relation to such suits, whichever is later.  Section   5   ­   Power   of   Government   to   file   appeal against certain awards   Notwithstanding   anything   contained   in   the Arbitration Act, 1940 (Central Act 10 of 1940) or in the   Arbitration   and   Conciliation   Act,   1996   (Central Act   26   of   1996)   or   in   the   Limitation   Act,   1963 (Central Act 36 of 1963) or in any other law for the time   being   in   force   or   in   any   judgement,   decree   or order   of   any   court   or   other   authority   or   in   any agreement or other instrument, where it appears to the   Government   that   any   award   passed   is   not   in accordance with the terms of the agreement or there was   failure   to   produce   relevant   data   or   other particulars   before   the   Arbitrator   before   passing   the award   or   the   award   passed   is   of   unconscionable amounts,   they   may   file   appeal   against   such   award within ninety  days of the date of commencement of this Act.  Section 6 ­ Procedure before court   8 For the removal of doubts, it is hereby clarified that the   provisions   of   the  Code   of   Civil   Procedure,   1908 (Central   Act   5   of   1908),   shall   apply   to   all proceedings   before   court   and   to   all   appeals   under this Act.  Section 7 ­ Arbitration Act not to apply   The   provisions   of   this   Act   shall   apply   to   any proceedings   instituted   under   this   Act notwithstanding   anything   inconsistent   herein   with the   provisions   of   the   Arbitration   Act,   1940   (Central Act   10   of   1940)   or   the   Arbitration   and   Conciliation Act, 1996 (Central Act 26 of 1996) or any other law for the time being in force.  Section 8 ­ Repeal and saving   (1) The Kerala Revocation of Arbitration Clauses and Reopening   of   Awards   Ordinance,   1998   (6   of   1998), is hereby repealed.  (2)   Notwithstanding   such   repeal,   anything   done   or deemed   to   have   been   done   or   any   action   taken   or deemed   to   have   been   taken   under   the   said Ordinance   shall   be   deemed   to   have   been   done   or taken under this Act.” 5. Section  3 of  the State Act provides for  “Cancellation of   arbitration   clauses   and   revocation   of   authority   of arbitrator”.     Sub­section   (1)   of   Section   3   of   the   State   Act provides   that   notwithstanding   anything   contained   in   the Indian   Contract   Act,   1872   or   in   the   Arbitration   Act,   1940 (hereinafter   referred   to   as   “1940   Act”)   or   in   the   Arbitration and   Conciliation   Act,   1996   (hereinafter   referred   to   as   “1996 9 Act”) or in any other law for the time being in force or in any judgment, decree or order  of any  court or  other authority or in   any   agreement   or   other   instrument,   the   arbitration clauses   in   every   agreement   shall   stand   cancelled;   the authority   of   an   arbitrator   appointed   under   an   agreement referred   to   in   clause   (i)   shall   stand   revoked;   and   any agreement   referred   to   in   clause   (i)   shall   cease   to   have   effect insofar   as   it   relates   to   the   matters   in   dispute   or   difference referred.  The same shall be with effect on and from the date of commencement of the State Act.  Sub­section (2) of Section 3   of   the   State   Act   provides   that   nothing   provided   in   sub­ section (1) of Section 3 of the State Act shall be a bar for any party   to   an   agreement   to   file   a   suit   in   the   court   having jurisdiction in the matter to which the agreement relates and all questions regarding the validity or effect of the agreement between   the   parties   to   the   agreement   or   persons   claiming under them and all matters in dispute or difference between the parties to the agreement shall be decided by the court, as if   the   arbitration   clauses   had   never   been   included   in   the agreement. 10 6. Section   4   of   the   State   Act   enables   a   party   to   file   a suit under sub­section (2) of Section 3 of the State Act within a period of six months from the date of commencement of the State   Act   or   within   such   period   as   is   allowed   by   the provisions of the Limitation Act, 1963 (hereinafter referred to as   “1963   Act”),   in   relation   to   such   suits   whichever   is   later. This   is   notwithstanding   anything   contained   in   the   1940   Act or in the 1996 Act or in the 1963 Act.  7. Section   5   of   the   State   Act   enables   the   State Government   to   file   an   appeal   against   any   award   within   a period   of   90   days   from   the   date   of   commencement   of   the State Act, where it appears to the State Government that any award   passed   is   not   in   accordance   with   the   terms   of   the agreement   or   there   was   failure   to   produce   relevant   data   or other   particulars   before   the   Arbitrator   before   passing   the award   or   the   award   passed   is   of   unconscionable   amounts. Again,   this   is   notwithstanding   anything   contained   in   the 1940   Act   or   in   the   1996   Act   or   in   the   1963   Act   or   in   any other   law   for   the   time   being   in   force   or   in   any   judgment, 11 decree   or   order   of   any   court   or   other   authority   or   in   any agreement or other instrument. 8. Section 6 of the State Act clarifies that the provisions of   the   Code   of   Civil   Procedure,   1908   (hereinafter   referred   to as “CPC”) shall apply to all proceedings before the court and to all appeals under the State Act.   9. Section   7   of   the   State   Act   provides   that   the provisions   of   the   State   Act   shall   apply   to   any   proceedings instituted   under   the   State   Act   notwithstanding   anything inconsistent   therein   with   the   provisions   of   the   1940   Act   or the 1996 Act or any other law for the time being in force. 10. Sub­section   (1)  of   Section   8  of   the   State   Act  repeals the   Kerala   Revocation   of   Arbitration   Clauses   and   Reopening of   Awards   Ordinance,   1998.     Sub­section   (2)   of   Section   8   of the   State   Act   provides   that   notwithstanding   such   repeal, anything   done   or   deemed   to   have   been   done   or   any   action taken   or   deemed   to   have   been   taken   under   the   said Ordinance shall be deemed to have been done or taken under the State Act. 12 11. Immediately   after   the   enactment   of   the   State   Act, several   petitions   came   to   be   filed   before   the   High   Court   of Kerala   challenging   the   validity   thereof.     By   the   impugned judgment, the High Court of Kerala allowed the petitions and held and declared the State Act to be unconstitutional, being beyond the legislative competence of the State Legislature.  12. It   will   be   relevant   to   note   that   the   State   Act   was reserved   for   the   consideration   of   the   President   of   India   and had   received   his   assent   as   required   under   Article   254   (2)   of the Constitution of India. 13. The   reasons   that   weighed   with   the   High   Court   of Kerala for holding the State Act to be unconstitutional, are as under: (i) That   the   1940   Act,   Arbitration   (Protocol   and Convention)   Act,   1937   (hereinafter   referred   to   as “1937 Act”) and the Foreign Awards (Recognition and Enforcement)   Act,   1961   (hereinafter   referred   to   as “1961   Act”)   had   become   outdated.     As   such,   the Parliament   found   it   expedient   to   make   a   law   with respect   to   arbitration   and   conciliation,   taking   into 13 account   the   United   Nations   Commission   on International   Trade   Law   (for   short   “UNCITRAL”) Model   Law   and   Rules.     The   1996   Act   was   enacted with   the   clear   intention   of   harmonizing   concepts   on arbitration and conciliation of different legal systems of   the   world   on   the   basis   of   UNCITRAL   Model   Law and   Rules.     As   such,   the   matters   dealt   with   by   the 1996   Act   were   not   the   matters   merely   falling   under Entry   13   of   List   III   of   the   Seventh   Schedule   to   the Constitution   of   India   but   also   falling   within   Entries 10   to   14   of   List   I   of   the   Seventh   Schedule   to   the Constitution of India; (ii) Since   Entries   10   to   14   of   List   I   of   the   Seventh Schedule   to   the   Constitution   of   India   deal   with foreign   affairs,   relationship   with   foreign   countries, United   Nations   Organization,   participation   in international   conferences,   associations   and   other bodies   and   implementing   of   decisions   made   thereat, entering   into   treaties   and   agreements   and implementing   of   treaties,   agreements   and 14 conventions,   the   issue   of   applicability   of   Article   253 of the Constitution of India would arise.  As such, the Union Parliament had an overriding legislative power to   make   any   law   for   the   whole   or   any   part   of   the territory   of   India.     Once   a   Central   Legislation referable   to   Article   253   of   the   Constitution   of   India comes   into   being,   then   the   State   Act   cannot   be   said to   be   valid   only   in   view   of   the   Presidential   assent received   under   Article   254   (2)   of   the   Constitution   of India; (iii) That the executive power of the Union is coextensive with   the   legislative   power   of   the   Parliament   under Article 73(1)(b) of the Constitution of India.  As such, the 1996 Act is enacted by the Central Legislation in order   to   give   effect   to   the   executive   power   of   the Government   of   India,   to   give   effect   to   the   decisions taken   at   the   international   conference.     As   such,   if   it is held that the   Presidential assent under Article 254 (2)   of   the   Constitution   of   India   would   validate   the 15 State Act, then the very purpose of Article 253 of the Constitution of India would be destroyed; (iv) That LCBS can be traced only to entries in the Union List,   in   particular,   to   Entry   37,   as   also,   Entries   10 and   14   of   List   I   of   the   Seventh   Schedule   to   the Constitution   of   India.     Entry   37   in   List   I   of   the Seventh   Schedule   to   the   Constitution   of   India   deals with   foreign   loans.   That   Article   292   of   the Constitution   of   India   specifically   deals   with   the borrowing   by   the   Government   of   India.     That   the assistance provided by the World Bank also primarily falls   within   the   executive   power   of   the   Union referable   to   Article   73   (1)(b)   of   the   Constitution   of India   and   as   such,   the   State   Act   was   beyond   the legislative competence of the State Legislature;  (v) That   the   proceedings   which   were   made   subject matter   of   the   State   Act,   could   have   been   dealt   with only   within   the   Judicial   power   of   the   State   through the courts in terms of the provisions of the 1940 Act and 1996 Act.  As such, the impugned legislation was 16 an encroachment into the Judicial power of the State which   was   exercised   through   the   courts   in   terms   of the   laws   already   made   and   in   force.     It   infracts   the quality   doctrine   and   the   avowed   constitutional principles   insulating   the   Judicial   function   which   is cardinal   to   deliverance   of   justice   as   part   of   the seminal constitutional values, including separation of powers; and  (vi) That   there   was   nothing   on   record   to   show   that   any relevant   material   had   gained   the   attention   of   the legislature   except   the   superfluous   statements   in   the Preamble to the State Act with regard to misconduct by arbitrators.   As such, the State Act suffers on the said count also. 14. We   have   extensively   heard   Shri   Jaideep   Gupta,   and Shri   Pallav   Shishodia,   learned   Senior   Counsel   appearing   on behalf   of   the   appellants.   Shri   Krishnan   Venugopal,   learned Senior   Counsel   led   the   arguments   on   behalf   of   the respondents.     The   arguments   of   Shri   Venugopal   were concisely   supplemented   by   Shri   P.C.   Sen,   learned   Senior 17 Counsel, Shri C.N. Sreekumar, learned Senior Counsel, Smt. Haripriya   Padmanabhan,   learned   counsel,   Shri   Kuriakose Varghese,   learned   counsel,   Shri   John   Mathew,   learned counsel and Shri Roy Abraham, learned counsel.  SUBMISSIONS ON BEHALF OF THE APPELLANTS : 15. Shri   Gupta,   learned   Senior   Counsel   submitted   that the   impugned   judgment   of   the   High   Court   of   Kerala   suffers on   various   grounds.     Shri   Gupta   further   submitted   that   the High Court of Kerala committed a basic error in holding that the 1996 Act is universally applicable.  He submitted that the 1996   Act   would   be   applicable   only   when   there   is   an agreement between the parties, whereby they have agreed to refer   their   dispute   to   arbitration.     It   is   therefore   submitted that what has been done by the State Act is a cancellation of contract   by   a   statute   and   as   such,   the   State   Act   or   a   part thereof would be referable to Entry 7 of List III of the Seventh Schedule to the Constitution of India.   16. Shri Gupta submitted that the rest of the legislation deals with the consequences of cancellation of the Arbitration 18 clause in the Agreement.  It is submitted that on cancellation of an agreement, sub­section (2) of Section 3 of the State Act provides an opportunity to any party to the agreement to file a suit in a competent civil court.   He submitted that Section 4 of the State Act extends the period of limitation for filing of the   suit.     Section   5   of   the   State   Act   enables   the   State Government   to   challenge   the   award   on   various   grounds stated   therein,   within   a   specified   period.     It   is,   therefore, submitted that the State Act is referable to Entries 7 and 13 of List III of the Seventh Schedule to the Constitution of India and   as   such,   within   the   legislative   competence   of   the   State Legislature. 17. Shri   Gupta   further   submitted   that   the   legislative competence   of   the   State   Legislature   can   only   be circumscribed   by   the   express   prohibition   contained   in   the Constitution   of   India   itself.     It   is   submitted   that   unless   and until   there   is   any   provision   in   the   Constitution   of   India expressly   prohibiting   legislation   on   the   subject   either absolutely   or   conditionally,   there   can   be   no   fetter   or limitation   on   the   plenary   power   which   the   State   Legislature 19 enjoys to legislate on the topic enumerated in Lists II and III of   the   Seventh   Schedule   to   the   Constitution   of   India.     In support of this proposition, he relies on the judgment of this Court   in   the   case   of   Maharaj   Umeg   Singh   and   Others   v. State of Bombay and Others 1 . 18. Shri   Gupta   further   submitted   that   there   is   no repugnancy   between   the   1996   Act   and   the   State   Act.     He submitted   that   the   1996   Act   would   apply   where   there   is   an arbitration clause in the agreement.  If there is no arbitration clause in  the agreement,  the 1996 Act would  not apply.   He submitted   that   the   1996   Act   itself   is   a   legislation   enacted with reference to Entry 13 of List III of the Seventh Schedule to   the   Constitution   of   India.     In   support   of   this   proposition, he relies on the judgments of this Court in the cases of   G.C. Kanungo   v.   State   of   Orissa 2 ,   State   of   Gujarat   through Chief Secretary and Another v. Amber Builders 3 ,  Madhya Pradesh Rural Road Development Authority and Another 1 [1955] 2 SCR 164 2 (1995) 5 SCC 96 3 (2020) 2 SCC 540 20 v.   L.G.   Chaudhary   Engineers   and   Contractors 4 (hereinafter   referred   to   as   “ MP   Rural   2012 ”) ,   Madhya Pradesh Rural Road Development Authority and Another v.   L.G.   Chaudhary   Engineers   and   Contractors 5 (hereinafter referred to as “ MP Rural 2018 ”) . 19. Shri   Gupta   submitted   that   assuming,   but   without accepting,   that   there   is   some   conflict   between   the   1996   Act and the State Act, the State Act having been reserved for the consideration   of   the   President   of   India   and   having   received his assent, will prevail over the provisions of the 1996 Act, in view of Article 254 (2) of the Constitution of India. 20. Shri   Gupta   submitted   that   the   State   Act   does   not relate   to   any   Entry   in   List   I   of   the   Seventh   Schedule   to   the Constitution of India.  He submitted that the approach of the High   Court   of   Kerala   has   been   totally   erroneous.     It   is submitted   that   since   all   the   three   Lists   of   the   Seventh Schedule   to   the   Constitution   of   India   contain   a   number   of entries,   some   overlapping   is   bound   to   happen.     In   such   a 4 (2012) 3 SCC 495 5 (2018) 10 SCC 826 21 situation, the doctrine of pith and substance is required to be applied to determine as to which entry does a given piece of legislation  relate  to.    He  submitted that  regard  must  be  had to   the   enactment   as   a   whole,   to   its   main   object   and   to   the scope and effect of its provisions.  He submitted that when a legislation   is   traceable,   in   pith   and   substance,   to   an   entry with   regard   to   which   a   State   is   competent   to   legislate,   then incidental   and   superficial   encroachments   on   the   other   entry will have to be disregarded.  Reference in this respect is made to   the   judgments   of   this   Court   in   the   cases   of   Hoechst Pharmaceutical   Ltd.   and   Others   v.   State   of   Bihar   and Others 6   and   State of  West  Bengal v.  Kesoram Industries Ltd.   and   Others 7 .     It   is   therefore   submitted   that   since   the impugned legislation is in pith and substance a legislation in the field covered by Entries 7 and 13 of List III of the Seventh Schedule   to   the   Constitution   of   India,   the   same   would   not invalidate the State Act. 21. Shri Gupta submitted that the High Court of Kerala has   also   erred   in   holding   that   the   1996   Act   is   referable   to 6 (1983) 4 SCC 45 7 (2004) 10 SCC 201 22 Article   253   of   the   Constitution   of   India.     He   submitted   that the UNCITRAL Model Law which was adopted by the General Assembly   of   the   United   Nations,   recommended   that   all   the countries give due consideration to it while enacting the laws governing international commercial arbitration practices.  He submitted that, in any case, the Model Law is neither a treaty nor   an   agreement,   convention,   decision   within   the   meaning of   Article   253   of   the   Constitution   of   India  or   for   that   matter Entries   13   and   14   of   List   I   of   the   Seventh   Schedule   to   the Constitution   of   India.   He   submitted   that   following   the principle  of   ejusdem   generis ,  the   word  ‘decision’  will   have  to be construed as one which will mean a binding obligation on the States.   In this respect, he relies on the judgment of this Court   in   the   case   of   Kavalappara   Kottarathil   Kochuni   @ Moopil   Nayar   v.   States   of   Madras   and   Kerala   and Others 8 . 22. Shri   Gupta   also   relies   on   the   rule   of   construction known as   Noscitur a sociis , that is, the meaning of a word is to   be   judged   by   the   company   it   keeps.     In   this   respect,   he 8 [1960] 3 SCR 887 23 relies   on   the   judgment   of   this   Court   in   the   case   of   M.K. Ranganathan v. Government of Madras and Others 9 . 23. Shri Gupta further submitted that it is a settled rule of   construction   of   the   Constitution,   that   every   attempt should   be   made   to   harmonize   apparently   conflicting provisions and entries, not only of different lists, but also of the   same   list   and   to   reject   the   construction   that   would   rob one of the entries of its entire content and make it nugatory. In   this   respect,   he   relies   on   the   judgments   of   this   Court   in the   cases   of   Calcutta   Gas   Company   (Proprietary)   Ltd.   v. State   of   West   Bengal   and   Others 10   and   Sri Venkataramana   Devaru   and   Others   v.   State   of   Mysore and Others 11 . 24. Shri   Gupta   further   submitted   that   since   the provisions of Article 253 of the Constitution of India have the effect   of   restricting   the   power   of   the   State   Legislature,   the said Article should  be given  the  narrowest  possible meaning in order to harmonize it with the Entries in Lists II and III of 9 [1955] 2 SCR 374 10 1962 Supp (3) SCR 1 11 [1958] SCR 895 24 the   Seventh   Schedule   to   the   Constitution   of   India.     He submitted that this can be done by interpreting that only the legislations   enacted   to   give   effect   to   binding   obligation   are covered by the said Article. 25. Shri Gupta further submitted that the Model Law is a suggested pattern for  law makers which  only  recommends the   practices   to   be   adopted   in   the   international   arbitration and   not   for   the   domestic   arbitration   and   as   such,   it   cannot be held that it has any binding obligation insofar as domestic arbitration is concerned. 26. Shri   Shishodia,   learned   Senior   Counsel   submitted that in the earlier statutory scheme prior to the 1996 Act, the 1940   Act   governed   the   domestic   arbitration,   whereas   the 1937   Act   and   the   1961   Act   governed   international commercial arbitrations. He submitted that in the 1996 Act, the   domestic   arbitrations   are   governed   by   Part   I,   whereas Part   II   governs   international   commercial   arbitrations   with separate   specific   provisions   for   Geneva   Convention   Awards and   New   York   Convention   Awards.     He   submitted   that however,   even   in   the   1996   Act,   the   historical   as   well   as 25 contemporary   distinction   between   an   international commercial arbitration and domestic arbitration remains.  In this   respect,   he   relies   on   the   judgment   of   this   Court   in   the case   of   Fuerst   Day   Lawson   Limited   v.   Jindal   Exports Limited 12 .     He   submitted   that   the   1996   Act   actually consolidates,   amends   and   puts   together   three   different enactments. 27. Shri   Shishodia   further   submitted   that   after   the Presidential  assent  was  received  under   Article  254  (2)  of the Constitution of India, the test to be applied to the State Law to be held repugnant to Central Law is that “there is no room or possibility for both Acts to apply”.      He submitted that no such repugnancy has been pointed out by the respondents in the   State   Act   vis­à­vis   the   1940   Act   and   1996   Act.       In   this respect, he relies on the judgment of this Court in the case of Rajiv   Sarin   and   Another   v.   State   of   Uttarakhand   and Others 13 . 12 (2011) 8 SCC 333 13 (2011) 8 SCC 708 26 28. Shri Shishodia as well as Shri Gupta submitted that merely   because   some   part   of   the   said   Project   is   financed   by the World Bank, it cannot be a ground to invalidate the State Act   which   is   referable   to   Entry   13   of   List   III   of   the   Seventh Schedule to the Constitution of India.  SUBMISSIONS ON BEHALF OF THE RESPONDENTS : 29. Per   contra,   Shri   Venugopal,   learned   Senior   Counsel appearing   on   behalf   of   some   of   the   respondents   submitted that   the   State   Act   is   wholly   arbitrary   and   violative   of   Article 14   of  the   Constitution   of   India.  He  submitted  that   the   State Act arbitrarily singles out the said Project started in the year 1961   out   of   all   the   projects   in   Kerala,   for   revocation   of arbitration   clauses   in   agreements.     He   submitted   that   the High   Court   of   Kerala   has   rightly   held   that   no   material   was placed   by   the   State   Government   to   show   that   collusive awards   had   been   made   because   of   a   nexus   between arbitrators and claimant contractors.   30. Learned Senior Counsel submitted that the State Act is traceable to Entries 12, 13, 14 as well as Entry 37 of List I of   the   Seventh   Schedule   to   the   Constitution   of   India.     He 27 submitted   that   Entries   12   to   14   relate   to   United   Nations Organization,   participation   in   international   conferences, associations and other bodies and implementing of decisions made thereat and entering into treaties and agreements with foreign   countries   and   implementing   of   treaties,   agreements and   conventions   with   foreign   countries.     He   submitted   that the  State  has enacted  a legislature  which  is related to  these entries, which are exclusively within the domain of the Union Legislature.   He   further   submitted   that   Entry   37   deals   with foreign   loans.     He   submitted   that   since   the   State   Act attempts to deal with the loans taken from the World Bank, it will   be   an   encroachment   on   the   legislative   field   reserved   for the   Union   Legislature.     It   is   therefore   submitted   that   the State   Act   is   enacted   by   the   State   Legislature   in   respect   of entries   which   are   exclusively   within   the   jurisdiction   of   the Central   Legislation   and   as   such,   beyond   the   competence   of the   State   Legislature.     He   submitted   that   the   question   of Presidential   assent   under   Article   254   (2)   of   the   Constitution of India would arise only when the legislation is in respect of items covered in List III, i.e., the Concurrent List.   Since the 28 State   Act   deals   with   the   entries   exclusively   in   List   I,   the Presidential   assent   would   be   of   no   consequence   to   save   the State Act. 31. Shri   Venugopal   submitted   that   the   1996   Act   is clearly   referable   to   the   decision   taken   at   international conference, i.e., the General Assembly of United Nations held on  11 th   December  1985.   In support of the  said submission, he   relies   on   the   judgment   of   this   Court   in   the   case   of Maganbhai   Ishwarbhai   Patel   Etc.   v.   Union   of   India   and Another 14 .    Relying on the judgment of this Court in the case of   S.   Jagannath   v.   Union   of   India   and   Others 15 ,   he submitted that Article 253 of the Constitution of India would also be applicable to the legislations enacted for giving effect to the decisions taken at the  international conference, which are not binding in nature. 32. Shri   Venugopal   submitted   that   a   law   passed   under Article   253   of   the   Constitution   of   India   would   denude   the State   Legislature   of   its   competence   to   make   any   law   on   the 14 (1970) 3 SCC 400 15 (1997) 2 SCC 87 29 same subject matter regardless of whether the subject matter falls   in   List   II   or   List   III.     He   therefore   submitted   that   since the 1996 Act has been enacted by the Parliament in exercise of   Legislative   power   under   Article   253   of   the  Constitution   of India,   the   State   Legislature   would   not   have   the   power   to make  a law  which  is repugnant  thereto,  even with regard to subjects falling in List II or List III.  A reference is again made to   the   judgment   of   this   Court   in   the   case   of   Maganbhai Ishwarbhai Patel  (supra).  In this regard, the learned Senior Counsel   also   relies   on   the   judgments   of   this   Court   in   the cases   of   Mantri   Techzone   Private   Limited   v.   Forward Foundation   and   Others 16 ,   State   of   Bihar   and   Others   v. Bihar   Chamber   of   Commerce   and   Others 17   and   Jayant Verma and Others v. Union of India and Others 18 . 33. Shri Venugopal further submitted that the State Act is   also   discriminatory   inasmuch   as   the   State   Government has   been   given   an   absolute   discretion   as   to   against   which award, it will prefer an appeal and against which, it will not 16 (2019) 18 SCC 494 17 (1996) 9 SCC 136 18 (2018) 4 SCC 743 30 prefer an appeal.  He relies on the judgments of this Court in the cases of   Suraj Mall Mohta and Co. v. A.V. Visvanatha Sastri and Another 19  and  B.B. Rajwanshi v. State of U.P. and Others 20 . 34. Shri Venugopal further submitted that the State Act interferes   with   the   doctrine   of   “separation   of   powers”   and encroaches   upon   the   powers   of   the   judiciary,   inasmuch   as the   State   Act   empowers   the   State   to   interfere   with   the awards.   He submitted that this is not permissible in view of the   law   laid   down   by   this   Court   in   the   case   of   B.B. Rajwanshi  (supra). 35. Shri Venugopal would further submit that assuming, but   without   admitting   that   the   State   Act   was   not   arbitrary when it was originally passed, but by passage of time, it has become   arbitrary   and   unreasonable.     He   submitted   that much earlier to the enactment of the State Act, not only the awards   have   become   final   but   the   amount   awarded   has already been paid to the claimants.  As such, if the State Act 19 [1955] 1 SCR 448 20 (1988) 2 SCC 415 31 is   permitted   to   operate   now,   it   will   amount   to   arbitrariness and   unreasonableness.   He   therefore   submitted   that   the present appeals deserve to be dismissed.  36. Shri  P.C.  Sen,  learned  Senior  Counsel  appearing   on behalf   of   some   of   the   respondents   submitted   that   the   State Act   has   the   effect  of   depriving   the   respondents’   settled   right of   property   under   Article   300­A   of   the   Constitution   of   India which has been acquired as per law.   He submitted that the awards   passed,   create   a   right   in   the   property   and   are enforceable   when   the   same   are   made   a   decree   of   the   court. In this regard, he relies on the judgment of this Court in the case of  Satish Kumar and Others v. Surinder Kumar and Others 21 . 37. Shri Sen further submitted that in the present case, the   awards   have   been   acted   upon   and   payments   have   been made.     Therefore,   vested   rights   have   been   crystalized   in favour   of   the   respondents.     He   submitted   that   such   vested rights   cannot   be   taken   away   by   the   State   Act.     Reliance   in this   respect   is   placed   on   the   judgment   of   this   Court   in   the 21 [1969] 2 SCR 244 32 case   of   Andhra   Pradesh   Dairy   Development   Corporation Federation v. B. Narasimha Reddy and Others 22 . 38. Shri   Sen   further   submitted   that   a   unilateral alteration of contract is violative of the fundamental principle of   justice.     It   is   submitted   that   what   has   been   sought   to   be done   by   the   State   Act   is   unilateral   addition   or   alteration   of the contract and  foisting  the same on unwilling parties.  It is submitted that the same would not be permissible.  Reliance in this respect is placed on the judgment of this Court in the case   of   Ssangyong   Engineering   and   Construction Company   Limited   v.   National   Highways   Authority   of India (NHAI) 23 . 39. Shri   Sen   further   submitted   that   the   impugned legislation   encroaches   upon   the   judicial   power   and   judicial functions and in turn, amounts to infringement  of the basic structure   of   the   Constitution   of   India.     Reliance   in   this respect is placed on the judgment of this Court in the case of SREI   Infrastructure   Finance   Limited   v.   Tuff   Drilling 22 (2011) 9 SCC 286 23 (2019) 15 SCC 131 33 Private Limited 24 .   He further  submitted that the judgment of   this   Court   in   the   case   of   G.C.   Kanungo   (supra),   rather than   supporting   the   case   of   the   appellants,   would   support the case of the respondents. 40. Shri   Sen,   relying   on   the   judgment   of   this   Court   in the   case   of   S.   Jagannath   (supra),   would   submit   that   the 1996   Act   is   referable   to   Article   253   of   the   Constitution   of India and as such, the State Act which is repugnant thereto, would not be valid in law. 41. Shri   C.N.   Sreekumar,   learned   Senior   Counsel appearing   on   behalf   of   some   of   the   respondents   submitted that   the   State   Act   is   liable   to   be   declared   invalid   on   the ground   of   manifest   arbitrariness.     It   is   submitted   that   the State   Act   has   been   enacted,   which   acts   to   the   prejudice   of the   private   parties   and   undoubtedly   favours   the   State Government.    It is submitted that Section 34 (2A) of the 1996 Act   came   into   effect   on   23 rd   October   2015,   i.e.,   much   after the enactment of the State Act.  It is therefore submitted that assuming   that   the   State   Act   was   validly   enacted,   however 24 (2018) 11 SCC 470 34 upon introduction of Section 34 (2A) of the 1996 Act on 23 rd October   2015,   the   State   Act   has   been   impliedly   repealed. Reliance   in   this   respect   is   placed   on   the   judgments   of   this Court   in   the   cases   of   Saverbhai   Amaidas   v.   State   of Bombay 25  and  T. Barai v. Henry Ah Hoe and Another 26 . 42. Smt.   Padmanabhan,   learned   counsel   appearing   on behalf of some of the respondents submitted that the assent of   the   President   of   India   under   Article   254(2)   of   the Constitution   of   India   is   not   a   matter   of   idle   formality.     She submitted   that   unless   the   State   satisfies   that   relevant material was placed before the President of India and he was made   aware   about   the   grounds   on   which   the   Presidential assent   was   sought,   the   Presidential   assent   would   not   save the State Act from being invalid. In this respect, she relies on the judgment  of  this Court in the case of   Gram  Panchayat of Village Jamalpur v. Malwinder Singh and Others 27 . 43. Smt.   Padmanabhan   submitted   that   the   State   Act   is also arbitrary and violative of Article 14 of the Constitution of 25 [1955] 1 SCR 799 26 (1983) 1 SCC 177 27 (1985) 3 SCC 661 35 India.     She   submitted   that   the   State   Act   treats   unequals equally   by   failing   to   make   a   distinction   between   the   cases where there is a  fraud  and where  there  is no  fraud.   In  this respect, she relies on the judgment of this Court in the case of  State of Maharashtra v. Mrs. Kamal Sukumar Durgule and Others 28 . 44. Relying  on  the judgments  of  this Court  in the  cases of   Ashok   Kumar   alias   Golu   v.   Union   of   India   and Others 29 ,   S.S.   Bola   and   Others   v.   B.D.   Sardana   and Others 30   and   Madras   Bar   Association   v.   Union   of   India and   Another 31 ,   Smt.   Padmanabhan   submitted   that   the legislature   does   not   have   the   competence   to   enact   a legislation which sets aside the judgment or an award passed by a court. 45. Shri   John   Mathew,   learned   counsel   appearing   on behalf   of   some   of   the   respondents   submitted   that   the   State Act is discriminatory in nature.  He submitted that the State, 28 (1985) 1 SCC 234 29 (1991) 3 SCC 498 30 (1997) 8 SCC 522 31 2021 SCC OnLine SC 463 36 out of 343 cases, has chosen to file an appeal only insofar as 55  claims/cases are concerned.   He  also submitted that the State  Act has  sought  to  alter  the  rights  and remedies in  the contracts executed with the State nearly a decade before the State Act was brought into effect.   He submitted that certain claimants   are   being   denied   the   equal   treatment   as   is available to large number of similarly situated claimants who are getting benefits under the 1996 Act. 46. Shri   Mathew   submitted   that   if   the   legislative   power is   exercised   by   the   State   Legislature   in   transgression   of Constitutional limitations with respect to Article 13(2) of the Constitution  of  India which prohibits the State from  making any law which takes away or abridges the rights conferred by Part­III   of   the   Constitution   of   India,   such   an   exercise   of power   would   be   invalid   in   law.     In   this   regard,   he   relies   on the   judgment   of   this   Court   in   the   case   of   State   of   Kerala and   Others   v.   Mar   Appraem   Kuri   Company   Limited   and Another 32 . 32 (2012) 7 SCC 106 37 47. Shri Mathew further submitted that the State Act is not   only   in   conflict   with   the   1996   Act   but   is   also   in   conflict with   the   Commercial   Courts   Act,   2015   (hereinafter   referred to   as   “2015   Act”).     He   submitted   that   all   the   disputes involved   in   the   present   matters   are   commercial   disputes   as defined   under   Section   2(c)   of   the   2015   Act.     He   submitted that   the   2015   Act   is   a   subsequent   Central   enactment   and therefore,   the   State   Act   being   an   earlier   Act   enacted   by   the State   Legislature   and   repugnant   to   the   Central   enactment, cannot exist.  It is submitted that the enactment of the 2015 Act   would   amount   to   a   pro   tanto   repeal   of   the   State   Act. Reliance   in   this   respect   is   placed   on   the   judgments   of   this Court   in   the   cases   of   T.   Barai   (supra)   and   Mar   Appraem Kuri Company Limited and Another  (supra). 48. Shri   Mathew   further   submitted   that   only   when   the proceedings went against the State, they illegally enacted the State Act in order to either deny payments or delay them by compelling   the   respondents   to   face   or   to   undergo   an altogether different remedy for the very same cause of action. In this regard, he relies on the judgments of this Court in the 38 cases   of   State   of   Tamil   Nadu   and   Others   v.   K.   Shyam Sunder   and   Others 33   and   Deep   Chand   and   Others   v. State of Uttar Pradesh and Others 34 . 49. Shri Kuriakose Varghese, learned counsel appearing on   behalf   of   some   of   the   respondents   submitted   that   apart from   making   the   bald   allegation   that   there   was   collusion between   the   contractors   and   the   officials,   no   material   is placed on record. He submitted that the State Act which has been enacted, in the absence of sufficient material, would not be   sustainable   in   law.     Reliance  in   this   respect   is   placed   on the judgment of this Court in the case of  Ladli Construction Co.   (P)   Ltd.   v.   Punjab   Police   Housing   Corpn.   Ltd.   and Others 35 . 50. Shri Varghese submitted that though the State Act is purportedly enacted in public interest, rather than it being in public   interest,   it   is   contrary   to   the   public   interest.     It   is submitted   that   this   Court   in   the   case   of   Hindustan 33 (2011) 8 SCC 737 34  [1959] Supp (2) SCR 8 35 (2012) 4 SCC 609 39 Construction Co. Ltd. and Another v. Union of India and Others 36 ,   has   held   that   reasonableness,   adequate determining   principle   and   public   interest   have   to   march hand   in   hand.   He   submitted   that   the   State   Act   derogates from   the   principle   of   speedy   settlement   of   disputes   in   an arbitrary   and   selective   manner   and   therefore,   is   not   valid being contrary to public interest. 51. Shri   Roy   Abraham,   learned   counsel   appearing   on behalf   of   some   of   the   respondents   also   made   submissions which  are  on   similar   lines as  are  made  by  other  counsel  for respondents.  SUBMISSIONS   ON   BEHALF   OF   THE   APPELLANTS   IN REJOINDER : 52. Shri   Gupta,   learned   Senior   Counsel,   in   rejoinder, submitted that the reliance placed by the respondents on the judgment   of   this   Court   in   the   case   of   Kesoram   Industries Ltd.  (supra) is misplaced inasmuch as the paragraphs which are   relied   on   by   the   respondents   are   from   the   minority judgment.   He submitted that,  on the contrary, the majority 36 (2020) 17 SCC 324 40 judgment   upholds   the   validity   of   the   State   Legislation.     He submitted   that   insofar   as   the   reliance   placed   by   the respondents   on   the   judgments   of   this   Court   in   the   cases   of S.   Jagannath   (supra)   and   Mantri   Techzone   Private Limited   (supra)  are  concerned,  the   same  nowhere  held  that the   State   Legislature   would   be   denuded   of   the   field altogether, beyond what the treaty and/or the Parliamentary legislation   covered.   He   submitted   that   merely   because   the said   Project   was,   in   part,   financed   by   the   World   Bank,   it cannot be said that the State Act is, in pith and substance, a legislation   in   the   field   of   foreign   loans   and   is   therefore, beyond the competence of the State Legislature. 53. Shri   Gupta   refuted   the   allegations   with   regard   to arbitrary   and   discriminatory   nature   of   the   State   Act.     He submitted   that   the   correctness   of   the   reasons   stated   by   the State   Legislature   cannot   be   the   subject   matter   of   judicial review.  Reliance in this respect is placed on the judgment of this Court in the case of  K. Nagaraj and Others v. State of Andhra Pradesh and Another 37 . 37 (1985) 1 SCC 523 41 54. Shri   Gupta   submitted   that   Section   9   of   the   CPC provides   for   the   plenary   jurisdiction   of   the   civil   courts   to decide   disputes   of   civil   nature   unless   excluded   by   law.     He submitted   that   so   long   as   the   parties   are   governed   by   an arbitration   agreement,   the   civil   courts,   though   having jurisdiction   to   entertain   civil   suits   in   respect   of   disputes arising  out   of  the  contract   between  the  parties,  are  required to   refer   the   disputes,   if   any,   to   arbitration   under   Sections   8 and 11 of the 1996 Act and Sections 20 and 34 of the 1940 Act.     However,   once   the   arbitration   agreement   stands cancelled,   all   fetters   would   stand   removed   and   the   civil courts will have the jurisdiction to entertain the disputes.   It is   submitted   that   the   argument   with   regard   to   the   forum   to which   an   appeal   would   lie,   being   not   provided   is   without substance.   He   submitted   that   by   virtue   of   Section   6   of   the State   Act,   CPC   is   applicable   to   all   the   proceedings   and   an appeal   will   lie   to   the   court,   based   on   the   court   which   is rendering  the judgment  or  award and/or  passing  the decree on   award.     As   such,   the   argument   regarding   vagueness   is without substance. 42 55. Insofar   as   the   argument   with   regard   to   the   State having   the   right   to   pick   and   choose   cases   in   which   appeals are to be filed, Shri Gupta submitted that every litigant has a choice to accept the judgment and order of a trial court or to challenge   the   same.     He   submitted   that   it   is   not   the   case where   alternative   proceedings   are   available   to   the   State   to take   administrative   action   against   different   parties,   some   of which are more onerous than others.  In this regard, he relies on   the   judgments   of   this   Court   in   the   cases   of   Nagpur Improvement   Trust   and   Another   v.   Vithal   Rao   and Others 38   and   State   of   Kerala   and   Others   v.   T.M.   Peter and   Others 39 .     He   further   submitted   that   Section   5   of   the State   Act   itself   provides   sufficient   guidelines   regarding   the cases   in   which   the   State   would   be   empowered   to   file   an appeal.     As   such,   it   cannot   be   said   that   the   power   given   to the State to file an appeal is unguided. 56. Shri   Gupta   concluded   by   submitting   that   the argument that the State Act interferes with the judicial power of   the   State   is   also   devoid   of   any   substance.     The   State   Act 38 (1973) 1 SCC 500 39 (1980) 3 SCC 554 43 merely   provides   for   an   appeal   against   the   decree   which   will be   tested   in   the   appeal   and   as   such,   the   final   word   still remains   with   the   judiciary.     He   therefore   submitted   that   all the   contentions   raised   on   behalf   of   the   respondents   are without merit.  CONSIDERATION :  LEGISLATIVE   COMPETENCE   OF   THE   STATE LEGISLATURE TO ENACT THE STATE LAW : 57. We   first   propose   to   consider   the   question   as   to whether the State Act is within the legislative competence of the State Legislature as contended by the appellants or as to whether   it   is   beyond   the   legislative   competence   of   the   State Legislature   as   contended   by   the   respondents.     For   that,   the question   that   will   have   to   be   answered   is   as   to   whether   the source  of  the   impugned  legislation  (State   Act)  is  Entry   13  of List   III   of   the   Seventh   Schedule   to   the   Constitution   of   India or   as   to   whether   the   impugned   legislation   (State   Act)   is referable to Entries 12, 13, 14 and 37 of List I of the Seventh Schedule   and   Article   253   of   the   Constitution   of   India.     We 44 will   also   have   to   examine   the   scope   of   clause   (2)   of   Article 254 of the Constitution of India. 58. It   will   be   relevant   to   reproduce   Entries   12,   13,   14 and 37 of List I  of the Seventh Schedule to the Constitution of India as under: “ Seventh Schedule (Article 246) List I – Union List …………. 12.  United Nations Organization. 13.     Participation   in   international   conferences, associations   and   other   bodies   and   implementing of decisions made thereat. 14.     Entering   into   treaties   and   agreements   with foreign   countries   and   implementing   of   treaties, agreements   and   conventions   with   foreign countries. …….. 37.  Foreign loans. ……….” 59. It will also be apposite to refer to Entry 13 of List III of   the   Seventh   Schedule   to   the   Constitution   of   India,   which reads thus: “ Seventh Schedule (Article 246) List III – Concurrent List 45 ………… 13.  Civil procedure, including all matters  included in the Code of Civil Procedure at the  commencement of this Constitution, limitation  and arbitration. ……….” 60. Article 253 of the Constitution of India reads thus: “ 253.     Legislation   for   giving   effect   to international   agreements.   –   Notwithstanding anything  contained in  the  foregoing   provisions of this   Chapter,  Parliament  has   power   to   make  any law   for   the   whole   or   any   part   of   the   territory   of India   for   implementing   any   treaty,   agreement   or convention with any other country or countries or any   decision   made   at   any   international conference, association or other body.”    61. For   considering   the   question   in   hand,   it   will   be apposite to seek guidance from the precedents of this Court. It will be relevant to refer to the following observations of this Court in the case of  G.C. Kanungo  (supra): “ 10.   ……   Subject   of   arbitration   finds   place   in Entry   13   of   List   III,   i.e.,   the   Concurrent   List   of Seventh   Schedule   to   the   Constitution   on   which the   legislation   could   be   made   either   by Parliament or the State Legislature. When there is already the legislation of Parliament made on this subject,   it   operates   in   respect   of   all   States   in India,  if  not  excepted.  Since  it   is   open   to  a   State 46 Legislature   also   to   legislate   on   the   same   subject of   arbitration,   in   that,   it   lies   within   its   field   of legislation   falling   in   an   entry   in   the   Concurrent List   and   when   a   particular   State   Legislature   has made   a   law   or   Act   on   that   subject   for   making   it applicable to its State, all that becomes necessary to validate such law is to obtain the assent of the President   by   reserving   it   for   his   consideration. When   such   assent   is   obtained,   the   provisions   of the   State   Law   or   Act   so   enacted   prevails   in   the State   concerned,  notwithstanding   its  repugnancy to   an   earlier   Parliamentary   enactment   made   on the   subject.   It   was   not   disputed   that   insofar   as the   1991   Amendment   is   concerned,   it   has   been assented to by  the  President  of India after  it was reserved   for  his   consideration.   Hence,   the   Orissa State   Legislature's   enactment,   the   1991 Amendment Act is that made on a subject within its   legislative   field   and   when   assent   of   the President   is   obtained   for   it   after   reserving   it   for his   consideration   it   becomes   applicable   to   the State   of   Orissa,   notwithstanding   anything contained   therein   repugnant   to   what   is   in   the Principal   Act   of   Parliament,   it   cannot   be   held   to be   unconstitutional   as   that   made   by   the   Orissa State Legislature without the necessary legislative competence.” 62. It   could   thus   be   seen   that   this   Court   has   observed that the s ubject of arbitration finds place in Entry 13 of List III,   i.e.,   the   Concurrent   List   of   the   Seventh   Schedule   to   the Constitution   of   India.     It   has   been   held   that   the   legislation pertaining   to   the   said   entry   could   be   made   either   by   the Parliament   or   the   State   Legislature.   It   has   been   held   that 47 since the subject of arbitration is in the Concurrent List, the State can also make a law with regard to the same.  The only requirement is that to validate such a law, it is necessary to reserve   the   same   for   consideration   of   the   President   of   India and obtain his assent.  When such an assent is obtained, the provisions of the State Law or Act so enacted would prevail in the State concerned, notwithstanding its repugnancy with an earlier   Parliamentary   enactment   made   on   the   subject.     It   is not   in   dispute   that   in   the   present   case   also,   the   State   Act was   reserved   for   consideration   of   the   President   of   India   and the   assent   of   the   President   of   India   has   been   obtained.     As such,   the   State   Act   so   enacted   would   prevail   in   the   State   of Kerala. 63. It will further be pertinent to note that in the case of MP   Rural   2012 ,   the   M.P.   Madhyastham   Adhikaran Adhiniyam,   1983   (State   enactment)   provided   for   mandatory statutory   arbitration   in   the   State   of   M.P.   irrespective   of   the arbitration   agreement   in   respect   of   works   contracts   in   the State   of   M.P.   or   its   instrumentalities.   An   argument   was sought to be made on behalf of the claimants that the State 48 Act   was   repugnant   to   the   1996   Act   and   that   in   view   of Section   85   of   the   1996   Act,   the   M.P.   Act,   1983   stood impliedly   repealed.     There   was   a   difference   of   opinion between   the   two   learned   Judges   on   the   Bench.     A.K. Ganguly, J., on the Bench, observed thus: “ 38.   The   argument   of   repugnancy   is   also   not tenable.   Entry   13   of   the   Concurrent   List   in   the Seventh   Schedule   of   the   Constitution   runs   as follows: “ 13.   Civil   procedure,   including   all matters   included   in   the   Code   of   Civil Procedure   at   the   commencement   of this   Constitution,   limitation   and arbitration.” In   view   of   the   aforesaid   entry,   the   State Government   is   competent   to   enact   laws   in relation to arbitration. 39.   The   M.P.   Act   of   1983   was   made   when   the previous Arbitration Act of 1940 was in the field. That Act of 1940 was a Central law. Both the Acts operated   in   view   of   Section   46   of   the   1940   Act. The M.P. Act, 1983 was reserved for the assent of the   President   and   admittedly   received   the   same on   17­10­1983   which   was   published   in   the Madhya Pradesh Gazette Extraordinary dated 12­ 10­1983.   Therefore,   the   requirement   of   Article 254(2) of the Constitution was satisfied. Thus, the M.P. Act of 1983 prevails in  the  State of Madhya Pradesh.   Thereafter,   the   AC   Act,   1996   was enacted   by   Parliament   repealing   the   earlier   laws 49 of arbitration of 1940. It has also been noted that the AC Act, 1996 saves the provisions of the M.P. Act,   1983   under   Sections   2(4)   and   2(5)   thereof. Therefore,   there   cannot   be   any   repugnancy.   (See the   judgment   of   this   Court   in   T.   Barai   v.   Henry Ah Hoe   [(1983) 1 SCC 177 : 1983 SCC (Cri) 143 : AIR 1983 SC 150] .) 40.   In   this   connection   the   observations   made   by the   Constitution   Bench   of   this   Court   in   M. Karunanidhi   v.   Union of India   [(1979) 3 SCC 431 : 1979   SCC   (Cri)   691]   are   very   pertinent   and   the following   observations   are   excerpted:   (SCC   p. 450, para 37) “ 37 .   …   It   is,   therefore,   clear   that   in view   of   this   clear   intention   of   the legislature   there   can   be   no   room   for any argument that the State Act was in any way repugnant to the Central Acts. We   have   already   pointed   out   from   the decisions of the Federal Court and this Court that one of the important tests to find   out   as   to   whether   or   not   there   is repugnancy   is   to   ascertain   the intention   of   the   legislature   regarding the   fact   that   the   dominant   legislature allowed   the   subordinate   legislature   to operate   in   the   same   field   pari   passu the State Act.” 41.   It   is   clear   from   the   aforesaid   observations that   in   the   instant   case   the   latter   Act   made   by Parliament   i.e.   the   AC   Act,   1996   clearly   showed an   intention   to   the   effect   that   the   State   law   of arbitration i.e. the M.P. Act should operate in the State   of   Madhya   Pradesh   in   respect   of   certain specified   types   of   arbitrations   which   are   under 50 the   M.P.   Act,   1983.   This   is   clear   from   Sections 2(4) and 2(5) of the AC Act, 1996. Therefore, there is   no   substance   in   the   argument   of   repugnancy and is accordingly rejected.” 64. Since   Gyan   Sudha   Mishra,   J.   disagreed   with   A.K. Ganguly,   J.   in   the   said   case,   the   matter   was   referred   to   a larger Bench. 65. The Bench consisting of three learned Judges in the case   of   MP   Rural   2018 ,   agreed   with   the   view   expressed   by Ganguly, J.  66. It   could   be   seen   that   this   Court   in   the   case   of   G.C. Kanungo   (supra)   as   well  as   in  the   case   of   MP   Rural   2018 , has   held   that   the   source   of   the   enactment   of   the   1940   Act, 1996 Act so also the State Acts legislated by Orissa and MP Legislatures is Entry 13 of List III of the Seventh Schedule to the Constitution of India.   Ordinarily, if there is any conflict between the Central law and the State law, in view of clause (1) of Article 254 of the Constitution of India, the Central law would prevail.  However, in view of clause (2) of Article 254 of the Constitution of India, the State law would prevail when it 51 is   reserved   for   consideration   and   receives   assent   of   the President of India.   67. Recently,   this   Court,   in   the   case   of   G.   Mohan   Rao and   Others   v.   State   of   Tamil   Nadu   and   Others 40 ,   has observed thus: “ 47.   Article   254(2)   is   produced   again   for   ready reference thus: “254.   Inconsistency   between   laws made   by   Parliament   and   laws   made by the Legislatures of States. — (1) … (2)   Where   a   law   made   by   the Legislature   of   a   State   with respect   to   one   of   the   matters enumerated   in   the   Concurrent List   contains   any   provision repugnant   to   the   provisions   of an   earlier   law   made   by Parliament   or   an   existing   law with   respect   to   that   matter, then,   the   law   so   made   by   the Legislature   of   such   State   shall , if   it   has   been   reserved   for   the consideration   of   the   President and   has   received   his   assent, prevail in that State :” (emphasis supplied) 48.   The   basic   ingredients   for   the   application   of Article 254(2) can be noted thus: 40 2021 SCC OnLine SC 440 52 (i) A law made by the legislature of the State (the 2019 Act in this case); (ii)   Such   law   is   made   on   a   subject falling   in   the   concurrent   list   (Entry­42 of the Concurrent List in this case); (iii)   Such   law   is   repugnant   to   the provisions   of   an   earlier/existing   law made   by   the   Parliament   (the   2013   Act in this case); and (iv)   The   State   law   is   reserved   for   the assent   of   the   President   and   has received the same. 49.   Upon fulfilment of the above conditions, such State law would prevail in the State despite there being a law made by the Parliament on the same subject and despite being repugnant thereto. The most   peculiar   feature   of   Article   254(2)   is   the recognition   of   existence   of   repugnancy   between the   law   made   by   the   Parliament   and   State   law and   rendering   that   repugnancy   inconsequential upon   procurement   of   Presidential   assent.   In   this case,   the   State   legislature   duly   passed   the   2019 Act (State law) on a subject of the concurrent list in  the  presence  of  a  law  made  by  the  Parliament (2013   Act)   and   obtained   the   assent   of   the President   to   the   same   on   02.12.2019   after   duly placing   the   State   law   before   the   President   and duly   stating   the   reason   for   reserving   it   for   his assent.   A   priori,   we   hold   that   this   is   in compliance of Article 254(2). 50.   This   understanding   of   Article   254(2)   is   well settled and reference can be usefully made to the following paragraph of   Pt. Rishikesh 40 : “ 15.   Clause   (2)   of   Article   254   is   an exception   to   clause   (1).   If   law   made by   the   State   Legislature   is   reserved for   consideration   and   receives 53 assent   of   the   President   though   the State   law   is   inconsistent   with   the Central   Act,   the   law   made   by   the Legislature of the State prevails over the Central law and operates in that State   as   valid   law.   If   Parliament amends   the   law,   after   the   amendment made   by   the   State   Legislature   has received   the   assent   of   the   President, the   earlier   amendment   made   by   the State  Legislature,  if  found  inconsistent with   the   Central   amended   law,   both Central   law   and   the   State   Law   cannot coexist   without   colliding   with   each other.   Repugnancy   thereby   arises   and to   the   extent   of   the   repugnancy   the State   law   becomes   void   under   Article 254(1)   unless   the   State   Legislature again   makes   law   reserved   for   the consideration   of   the   President   and receives   the   assent   of   the   President. Full Bench of the High Court held that since   U.P.   Act   57   of   1976   received   the assent of the President on 30­12­1976, while   the   Central   Act   was   assented   on 9­9­1976,   the   U.P.   Act   made   by   the State Legislature, later in point of time it is a valid law.” (emphasis supplied) 51.   The   petitioners   have   advanced   lengthy arguments   as   to   how   the   2019   Act   is   repugnant to   the   2013   Act.   We   are   constrained   to   observe that   the   whole   exercise   of   pointing   out   any repugnancy   after   a   validating   Act   has   obtained the   assent   of   the   President   is   otiose.   For,   the whole   purpose   of   Article   254(2)   is   to   resuscitate and  operationalize  a repugnant  Act or   repugnant provisions   in   such   Act.   For,   the   Constitution 54 provides   concurrent   powers   to   the   states   as   well on subjects falling in List­III. After duly complying with the requirements of Article 254(2), the Court is   left   with   nothing   to   achieve   by   identifying repugnancy   between   the   laws   because   the   same has   already   been   identified,   accepted   and validated   as   per   the   sanction   of   the   Constitution under   Article   254(2).   To   indulge   in   such   an exercise   would   be   intuitive.   Moreover,   the   Court ought   not   to   nullify   a   law   made   in   compliance with   Article   254(2)   on   the   sole   ground   of repugnancy.   For,   repugnancy,   in   such   cases,   is said   to   have   been   constitutionalized.   To   put   it differently,   the   very   purpose   of   engaging   in   the exercise,   in   terms   of   clause   (2)   of   Article   254, presupposes   existence   of   repugnancy   and   is intended   to   overcome   such   repugnancy. Therefore, the endeavour of the petitioners in the present   matter   to   highlight   repugnancy,   is misdirected, flimsy and inconsequential.” 68. As   such,   once   the   State   Act   was   reserved   for consideration   and   received   the   assent   of   the   President   of India,   it   would   prevail.     Once   that   is   the   position,   any endeavour   to   find   out   any   repugnancy   between   the   two, would   be   futile.     No   doubt,   that   it   is   sought   to   be   urged   on behalf of the appellants that there is no repugnancy between the   State   Act   and   the   Central   Act   and   that   applying   the principle   of   harmonization,   both   can   exist.     We   find   that   in 55 view of the State Act receiving the Presidential assent, it will not be necessary to consider the said issue.  69. It   is   next   sought   to   be   urged   on   behalf   of   the respondents   that   the   State   Act   is   essentially   within   the legislative   competence   of   the   Union.     It   is   submitted   by   the respondents   that   the   State   legislation   is   with   respect   to Entries 12, 13, 14 and 37 of List I of the Seventh Schedule to the Constitution of India and as such, exclusively within the competence   of   the   Central   Legislation.     Entry   12   deals   with United   Nations   Organization.   Entry   13   deals   with participation   in   international   conferences,   associations   and other   bodies   and   implementing   of   decisions   made   thereat. Entry   14   deals   with   entering   into   treaties   and   agreements with   foreign   countries   and   implementing   of   treaties, agreements   and   conventions   with   foreign   countries.     Entry 37 deals with foreign loans. 70. It   will   be   apposite   to   refer   to   the   following observations   of   the   Constitution   Bench   in   the   case   of Kesoram   Industries   Ltd.   and   Others   (supra).     In   the   said 56 case, R.C. Lahoti, J., speaking for the majority, has observed thus: “ 31.   Article   245   of   the   Constitution   is   the fountain source of legislative power. It provides — subject   to   the   provisions   of   this   Constitution, Parliament   may   make   laws   for   the   whole   or   any part of the territory of India, and the legislature of a State may make laws for the whole or any part of   the   State.   The   legislative   field   between Parliament   and   the   legislature   of   any   State   is divided   by   Article   246   of   the   Constitution. Parliament   has   exclusive   power   to   make   laws with respect to any of the matters enumerated in List I in the  Seventh Schedule, called the “Union List”. Subject to the said power of Parliament, the legislature   of   any   State   has   power   to   make   laws with respect to any of the matters enumerated in List   III,   called   the   “Concurrent   List”.   Subject   to the   abovesaid   two,   the   legislature   of   any   State has exclusive power to make laws with respect to any   of   the   matters   enumerated   in   List   II,   called the   “State   List”.   Under   Article   248   the   exclusive power of Parliament to make laws extends to any matter  not enumerated in the Concurrent List or State List. The power of making any law imposing a   tax   not   mentioned   in   the   Concurrent   List   or State   List   vests   in   Parliament.   This   is   what   is called the  residuary  power  vesting  in  Parliament. The   principles   have   been   succinctly   summarised and restated by a Bench of three learned Judges of this Court on a review of the available decision in   Hoechst   Pharmaceuticals   Ltd.   v.   State   of Bihar   [(1983)   4   SCC   45   :   1983   SCC   (Tax)   248]   . They are: ( 1 ) The various entries in the three lists are   not   “powers”   of   legislation   but “fields”   of   legislation.   The   Constitution effects   a   complete   separation   of   the 57 taxing   power   of   the   Union   and   of   the States   under   Article   246.   There   is   no overlapping   anywhere   in   the   taxing power   and   the   Constitution   gives independent   sources   of   taxation   to   the Union and the States . ( 2 )   In   spite   of   the   fields   of   legislation having   been   demarcated,   the   question of   repugnancy   between   law   made   by Parliament   and   a   law   made   by   the State   Legislature   may   arise   only   in cases   when   both   the   legislations occupy   the   same   field   with   respect   to one   of   the   matters   enumerated   in   the Concurrent List and a direct conflict is seen.   If   there   is   a   repugnancy   due   to overlapping   found   between   List   II   on the one hand and List I and List III on the   other,   the   State   law   will   be   ultra vires and shall have to  give way  to the Union law. ( 3 )   Taxation   is   considered   to   be   a distinct   matter   for   purposes   of legislative   competence .   There   is   a distinction   made   between   general subjects   of   legislation   and   taxation. The   general   subjects   of   legislation   are dealt   with   in   one   group   of   entries   and power   of   taxation   in   a   separate group.   The   power   to   tax   cannot   be deduced from a general legislative entry as an ancillary power . ( 4 ) The entries in the lists being merely topics or fields of legislation, they must receive   a   liberal   construction   inspired by a broad and generous spirit and not in a narrow pedantic sense. The words and   expressions   employed   in   drafting the   entries   must   be   given   the   widest­ 58 possible   interpretation.   This   is because,   to   quote   V.   Ramaswami,   J., the   allocation   of   the   subjects   to   the lists   is   not   by   way   of   scientific   or logical   definition   but   by   way   of   a mere   simplex   enumeratio   of   broad categories.   A   power   to   legislate   as   to the   principal   matter   specifically mentioned   in   the   entry   shall   also include   within   its   expanse   the legislations   touching   incidental   and ancillary matters . ( 5 ) Where the legislative competence of the   legislature   of   any   State   is questioned   on   the   ground   that   it encroaches   upon   the   legislative competence   of   Parliament   to   enact   a law,   the   question   one   has   to   ask   is whether the legislation relates to any of the entries in List I or III. If it does, no further   question   need   be   asked   and Parliament's   legislative   competence must be upheld. Where there are three lists   containing   a   large   number   of entries,   there   is   bound   to   be   some overlapping   among   them.   In   such   a situation   the   doctrine   of   pith   and substance   has   to   be   applied   to determine   as   to   which   entry   does   a given piece of legislation relate. Once it is   so   determined,   any   incidental trenching   on   the   field   reserved   to   the other   legislature   is   of   no   consequence. The court has to look at the substance of the matter. The doctrine of pith and substance   is   sometimes   expressed   in terms   of   ascertaining   the   true character   of   legislation.   The   name given   by   the   legislature   to   the 59 legislation   is   immaterial.   Regard   must be had to the enactment as a whole, to its   main   objects   and   to   the   scope   and effect   of   its   provisions.   Incidental   and superficial   encroachments   are   to   be disregarded. ( 6 )   The   doctrine   of   occupied   field applies   only   when   there   is   a   clash between   the   Union   and  the  State  Lists within  an area common to both. There the doctrine of pith and substance is to be   applied   and   if   the   impugned legislation substantially falls within the power   expressly   conferred   upon   the legislature   which   enacted   it,   an incidental   encroaching   in   the   field assigned to another legislature is to be ignored.   While   reading   the   three   lists, List   I   has   priority   over   Lists   III   and   II and   List   III   has   priority   over   List   II. However,   still,   the   predominance   of   the Union   List   would   not   prevent   the   State Legislature   from   dealing   with   any matter   within   List   II   though   it   may incidentally affect any item in List I . (emphasis supplied) 71. It   could   thus   be   seen   that   the   Constitution   Bench has   held   that   when   the   legislative   competence   of   a   State Legislature   is   questioned   on   the   ground   that   it   encroaches upon   the   legislative   competence   of   the   Parliament,   since some   entries   are   bound   to   be   overlapping,   in   such   a situation,   the   doctrine   of   pith   and   substance   has   to   be 60 applied to determine as to which entry does a given piece of legislation relate to. Once it is so determined,   any incidental trenching   on   the   field   reserved   to   the   other   legislature   is   of no   consequence.   The   court   has   to   look   at   the   substance   of the   matter.   The   true   character   of   the   legislation   has   to   be ascertained.     Regard   must   be   had   to   the   enactment   as   a whole,   to   its   main   objects   and   to   the   scope   and   effect   of   its provisions.   It   has   been   held   that   incidental   and   superficial encroachments are to be disregarded.   It has been held that the   predominance   of   the   Union   List   would   not   prevent   the State Legislature from dealing with any matter within List II, though it may incidentally affect any item in List I. 72. If we look at the scheme of the State enactment, the subject matter of the enactment is arbitration.   As has been held   by   the   Constitution   Bench   in   the   case   of   Kesoram Industries   Ltd.   and   Others   (supra),   if   the   State   is competent   to   legislate   on   the   subject,   any   incidental encroachment on any item in List I would not affect the State Legislature.     In   any   case,   as   already   observed   hereinabove, this   Court,   in   the   cases   of   G.C.   Kanungo   (supra)   and   MP 61 Rural   2018 ,   has   specifically   held   that   the   1940   Act,   the 1996 Act and the State Acts legislated by the Orissa and M.P. Legislatures   are   referable   to   Entry   13   of   List   III   of   the Seventh   Schedule   to   the   Constitution   of   India.     As   such,   in view of the Presidential assent under clause (2) of Article 254 of   the   Constitution   of   India,   the   State   Legislature   would prevail.  73. Shri Venugopal, learned Senior Counsel has strongly relied   on   paragraphs   234,   238,   239   and   293   in   the   case   of Kesoram Industries Ltd. and Others   (supra), in support of the proposition that the State Act is not within the legislative competence of the State Legislature, which read thus: “ 234.   The   Constitution­makers   found   the   need for power­sharing devices between the Centre and the   State   having  regard  to   the   imperatives  of   the State's security and stability and, thus, propelled the   thrust   towards   centralisation   by   using   non obstante   clause   under   Article   246   so   as   to   see that the federal supremacy is achieved. ………….. 238.   It can be seen that Article 253 contains non obstante   clause.   Article   253,   thus,   operates notwithstanding   anything   contained   in   Article 245 and Article 246. Article 246 confers power on Parliament   to   enact   laws   with   respect   to   matters 62 enumerated   in   List   I   of   the   Seventh   Schedule   to the Constitution. Entries 10 to 21 of List I of the Seventh Schedule pertain to international law. In making   any   law   under   any   of   these   entries, Parliament is required to keep Article 51 in mind. 239.   Article 253 of the Constitution provides that while   giving   effect   to   an   international   treaty, Parliament   assumes   the   role   of   the   State Legislature and once the same is done the power of the State is denuded. …………. 293.   Parliament   in   enacting   the   Tea   Act   has exercised   its   superior   power   in   the   matter   in terms   of   Article   253   of   the   Constitution   of   India. Such   superior   power   in   certain   situations   can also   be   exercised  in   terms  of   Entry   33  List   III   as also   overriding   powers   of   Parliament   during national   emergency   including   those   under Articles   249,   250,   251   and   252   of   the Constitution of India. (See   ITC Ltd.   [(2002) 9 SCC 232])” 74. It   is   to   be   noted   that   the   aforesaid   paragraphs   are from  the minority  view expressed by Sinha, J.   As such, the view expressed by the learned Judge, contrary to the majority judgment   in   the   Constitution   Bench,   would   not   support   the case of the respondents any further.  UNCITRAL   MODEL   LAW   ­   A   DECISION   OR RECOMMENDATION?  : 63 75. That   leaves   us   to   consider   the   contention   on   behalf of   the   respondents   that   the   1996   Act   is   enacted   by   the Parliament under Article 253 of the Constitution of India and since   the   said   Act   has   been   enacted   in   accordance   with   the decision   taken   at   the   international   conference   to   implement the   UNCITRAL   Model   law,   the   State   Legislature   is   not competent to enact the State Law. 76. It   is   submitted   that   since   the   1996   Act   has   been enacted in accordance with the decision taken by the General Assembly of the United Nations, the same would be referable to Article 253 of the Constitution of India.   77. In this respect, it is to be noted that the Preamble of the   1996   Act   would   reveal   that   the   recommendation   of   the General   Assembly   of   the   United   Nations   is   for   adopting UNCITRAL   Model   Law   insofar   as   international   commercial arbitrations are concerned.  It will further be relevant to refer to   paragraphs   (2)   and   (3)   of   the   Statement   of   Objects   and Reasons of the 1996 Act: “ Statement of Objects and Reasons 1. …………… 64 2.   The   United   Nations   Commission   on International   Trade   Law   (UNCITRAL)   adopted   in 1985 the Model Law on International Commercial Arbitration.   The General Assembly  of the United Nations has  recommended that  all countries give due consideration to the said Model Law, in view of   the   desirability   of   uniformity   of   the   law   of arbitral   procedures   and   the   specific   needs   of international   commercial   arbitration   practice. The   UNCITRAL   also   adopted   din   1980   a   set   of Conciliation Rules.   The General Assembly  of the United   Nations   has   recommended   the   use   of these   Rules   in   cases   where   the   disputes   arise   in the   context   of   international   commercial   relations and the parties seek amicable settlement of their disputes   by   recourse   to   conciliation.     An important   feature   of   the   said   UNCITRAL   Model Law   and   Rules   is   that   they   have   harmonized concepts   on   arbitration   and   conciliation   of different   legal   systems   of   the   world   and   thus contain   provisions   which   are   designed   for universal application. 3.   Though   the   said   UNCITRAL   Model   Law   and Rules   are   intended   to   deal   with   international commercial   arbitration   and   conciliation,   they could,   with   appropriate   modifications,   serve   as   a model   for   legislation   on   domestic   arbitration   and conciliation.  The present Bill seeks to consolidate and   amend   the   law   relating   to   domestic arbitration,   international   commercial   arbitration, enforcement   of   foreign   arbitral   awards   and   to define the law relating to conciliation, taking into account   the   said   UNCITRAL   Model   Law   and Rules. …………” 65 78. A   perusal   thereof   would   clearly   reveal   that   the General   Assembly   of   the   United   Nations   has   recommended that   all   countries   give   due   consideration   to   the   UNCITRAL Model Law, in view of the desirability of uniformity of the law of arbitral procedures and the specific needs of international commercial arbitration practices are concerned.   79. It   could   thus   be   seen   that   there   is   no   binding decision   at   the   General   Assembly   of   the   United   Nations   to implement   the   UNCITRAL   Model   Law.   In   any   case,   that recommendation   is   with   regard   to   only   international commercial   arbitration   practices.   No   doubt   that   the Parliament,   with   certain   modifications,   has   given   due consideration   to   the   UNCITRAL   Model  Law   for   legislation   on the   domestic   arbitration.     However,   that   cannot   by   itself   be said   to   be   binding   on   the   Parliament   to   enact   the   law   in accordance with UNCITRAL Model Law. 80. It   will   also   be   relevant   to   refer   to   the   Resolution dated   11 th   December   1985   passed   by   the   United   Nations General Assembly, which reads thus: 66 “ 40/72. Model   Law   on   International Commercial   Arbitration   of   the United   Nations   Commission   on International Trade Law The General Assembly, Recognizing   the   value   of   arbitration   as   a   method of   settling   disputes   arising   in   international commercial relations, Convinced   that  the   establishment   of  a   model   law on   arbitration   that   is   acceptable   to   States   with different   legal,   social   and   economic   systems contributes   to   the   development   of   harmonious international economic relations, Noting   that   the   Model   law   on   International Commercial   Arbitration   was   adopted   by   the United   Nations   Commission   on   International Trade   Law   at   its   eighteenth   session,   after   due deliberation   and   extensive   consultation   with arbitral   institutions   and   individual   experts   on international commercial arbitration, Convinced   that   the   Model   Law,   together   with   the Convention   on   the   Recognition   and   Enforcement of   Foreign   Arbitral   Awards   and   the   Arbitration Rules   of   the   United   Nations   Commission   on International   Trade   Law   recommended   by   the General   Assembly   in   its   resolution   31/98   of   15 December   1976,   significantly   contributes   to   the establishment of a unified legal framework for the fair and efficient settlement of disputes arising in international commercial relations, 1.  Requests  the Secretary­General to transmit the text   of   the   Modern   Law   on   International Commercial   Arbitration   of   the   United   Nations Commission on International Trade Law, together with   the   travaux   preparatoires   from   the eighteenth   session   of   the   Commission,   to 67 Governments   and   to   arbitral   institutions   and other   interested   bodies,   such   as   chambers   of commerce; 2.   Recommends   that   all   States   give   due consideration   to   the   Model   Law   on International   Commercial   Arbitration,   in   view of   the   desirability   of   uniformity   of   the   law   of arbitral   procedures   and   the   specific   needs   of international   commercial   arbitration practice .”   [ emphasis supplied ] 81. A   perusal   of   the   aforesaid   Resolution   would   clearly reveal   that   what   has   been   done   by   the   United   Nations General   Assembly   vide   the   aforesaid   Resolution   is   to recommend to all the States to give due consideration to the Model   Law   on   international   commercial   arbitration. However, a perusal of the Resolution itself would reveal that it   does   not   create   any   binding   obligation   on   the   States   to enact the UNCITRAL Model Law as it is. 82. Shri   Venugopal,   in   support   of   his   contention,   has strongly  relied on the following observations of this Court in the case of  S. Jagannath  (supra):  “ 48.   At   this   stage   we   may   deal   with   a   question which   has   incidentally   come   up   for   our consideration.   Under   para   2   of   the   CRZ 68 Notification,   the   activities   listed   thereunder   are declared   as   prohibited   activities.   Various   State Governments   have   enacted   coastal   aquaculture legislations regulating the industries set up in the coastal areas. It was argued before us that certain provisions of the State legislations including  that of the State of Tamil Nadu are not in consonance with   the   CRZ   Notification   issued   by   the Government   of   India   under   Section   3(3)   of   the Act. Assuming that be so, we are of the view that the   Act   being   a   Central   legislation   has   the overriding   effect.   The   Act   (the   Environment Protection   Act,   1986)   has   been   enacted   under Entry 13 of List I Schedule VII of the Constitution of India. The said entry is as under: “Participation   in   international conferences,   assessment   and   other bodies   and   implementing   of   decisions made thereat.” The preamble to the Act clearly states that it was enacted   to   implement   the   decisions   taken   at   the United   Nations'   Conference   on   the   Human Environment   held   at   Stockholm   in   June   1972. Parliament has enacted the Act under Entry 13 of List   I   Schedule   VII   read   with   Article   253   of   the Constitution of India. The CRZ Notification having been   issued   under   the   Act   shall   have   overriding effect and shall  prevail over  the law  made by  the legislatures of the States.” 83. Shri   Venugopal   further   relied   on   the   following observations   of   this   Court   in   the   case   of   Mantri   Techzone Private Limited  (supra): “ 40.   The   Tribunal   has   been   established   under   a constitutional   mandate   provided   in   Schedule   VII 69 List   I   Entry   13   of   the   Constitution   of   India,   to implement   the   decision   taken   at   the   United Nations   Conference   on   Environment   and Development.   The   Tribunal   is   a   specialised judicial   body   for   effective   and   expeditious disposal   of   cases   relating   to   environmental protection   and   conservation   of   forests   and   other natural   resources   including   enforcement   of   any legal   right   relating   to   environment.   The   right   to healthy   environment   has   been   construed   as   a part of the right to life under Article 21 by way of judicial pronouncements. Therefore, the Tribunal has   special   jurisdiction   for   enforcement   of environmental rights.” 84. At   this   juncture,   it   will   be   relevant   to   note   that   the Preamble   to   the   Environment   (Protection)   Act,   1986 (hereinafter  referred to  as the  “1986 Act”) would itself reveal that   it   refers   to   the   decision   taken   at   United   Nations Conference on the Human Environment held at Stockholm in June   1972,   in   which   India   participated   and   wherein,   a decision   was   taken   to   take   appropriate   steps   for   the protection   and   improvement   of   human   environment.     It further states that it was considered necessary to implement the decisions aforesaid insofar as they relate to the protection and   improvement   of   environment   and   the   prevention   of hazards to human beings and other living creatures.  So also, 70 the National Green Tribunal Act, 2010 (hereinafter referred to as the “NGT Act”) refers to India being a party to the decision taken   at   the   United   Nations   Conference   on   the   Human Environment held at Stockholm in June 1972, in which India had   participated   and   the   decisions   were   taken   to   call   upon the   States   to   take   appropriate   steps   for   the   protection   and improvement of human environment.   It further refers to the decision   taken   at   the   United   Nations   Conference   on Environment   and   Development   held   at   Rio   de   Janeiro   in June 1992, in which India had participated.  The States were called   upon   to   provide   effective   access   to   judicial   and administrative   proceedings   including   redress   and   remedy, and   to   develop   national   laws   regarding   liability   and compensation   for   the   victims   of   pollution   and   other environment   damage.     It   further   observes   that   it   is considered expedient to implement the decision taken at the aforesaid conferences.  85. It   is   thus   clear   that   whereas,   the   1986   Act   and   the NGT   Act   have   been   enacted   specifically   to   implement   the decisions   taken   at   the   international   conferences,   the   1996 71 Act   is   enacted   on   the   basis   of   the   Resolution   passed   by   the General   Assembly   of   the   United   Nations   in   1985,   whereby the   General   Assembly   only   recommended   the   adoption   of UNCITRAL   Model   Law   insofar   as   international   commercial arbitration   practices   are   concerned.     As   such,   the   1986   Act and the NGT Act are directly referable to Entry 13 of List I of the   Seventh   Schedule   and   Article   253   of   the   Constitution   of India.     Therefore,   reliance   on   the   above   referred   judgments, in our view, would not be of any assistance to the case of the respondents,   inasmuch   as   the   Resolution   of   the   General Assembly   of   the   United   Nations   is   only   recommendatory   in nature and there is no binding decision taken thereat.  STATE   LEGISLATURE’S   ENCROACHMENT   ON JUDICIAL POWERS : 86. We next  consider   the finding   of the  High Court  that since   the   State   Act,   in   effect,   annuls   the   awards   passed   by the   Arbitrators   and/or   the   judgments   or   decrees   passed   by the   courts,   it   will   amount   to   encroachment   on   judicial 72 powers   of   the   courts   and   as   such,   is   hit   by   the   doctrine   of separation of powers.   87. A perusal of  the list  containing  details  of the  Kerala arbitration   cases   involved   in   the   present   matters   would reveal   that   in   most   of   the   cases,   the   awards   were   passed prior to the year 1992 and the awards were made rule of the court prior to the year 1993.   In some of the matters, on the date of the enactment of the State Act, the appeals preferred by the State under Section 39 of the 1940 Act were pending before the competent courts.   88. The   appellants   have   heavily   relied   on   the   judgment of   this   Court   in   the   case   of   G.C.   Kanungo   (supra),   wherein this Court has observed thus: “ 15.   What   is   of   importance   and   requires   our examination is, whether such court when makes an award   of   the   Special   Arbitration   Tribunal   filed before   it,   a   “Rule   of   Court”   by   its   judgment   and decree,   as   provided   under   Section   17   of   the Principal   Act,   does   such   award   of   the   Special Arbitration   Tribunal   merge   in   the   judgment   and decree,   as   argued   on   behalf   of   the   petitioners.   We find   it   difficult   to   accede   to   the   argument.   What cannot be overlooked is, that the award of a Special Arbitration   Tribunal,   as   that   of   an   award   of   an arbitrator,   is,   as   we   have   already   pointed   out,   a 73 decision   made   by   it   on   the   claim   or   cause   referred for its decision by way of arbitral dispute. When the court   makes   such   award   of   a   Special   Arbitration Tribunal a “Rule of Court” by means of its judgment and decree, it is not deciding the claim or cause as it would have done, if it had come before it as a suit for its judgment and decree in the course of exercise of   its   ordinary   civil   jurisdiction.   Indeed,   when   such award   is   made   to   come   by   a   party   to   the   dispute before court for being made a “Rule of Court” by its judgment and decree, it is to obtain the superadded seal   of   the   court   for   such   award,   as   provided   for under   the   Principal   Act,   to   make   it   enforceable against   the   other   party   through   the   machinery   of court. Therefore, the judgment and decree rendered by the civil court in respect of an award is merely to superadd   its   seal   thereon   for   making   such   award enforceable through the mechanism available with it for   enforcement   of   its   own   judgments   and   decrees. The   mere   fact   that   such   judgments   or   decrees   of courts   by   which   the   awards   of   Special   Arbitration Tribunals are made “Rules of Court” or are affirmed by   judgments   and   decrees   of   superior   courts   in appeals,   revisions   or   the   like,   cannot   make   the awards   the   decisions   of   courts.   Hence,   when   the awards of Special Arbitration Tribunals are made by the   judgments   and   decrees   of   court,   “Rules   of Court”   for   enforcing   them   through   its   execution process,   they   (the   awards)   do   not   merge   in   the judgments   and   decrees   of   courts,   as   would   make them the decisions of court. The legal position as to non­merger   of   awards   in   judgments   and   decrees   of courts, which we have stated, receives support from certain   observations   in   the   decision   of   this   Court in   Satish   Kumar   v.   Surinder   Kumar   [(1969)   2   SCR 244   :   AIR   1970   SC   833]   .   There,   this   Court   was confronted   with   the   question,   whether   an   award 74 made   by   an   arbitrator   which   had   become unenforceable   for   want   of   registration   under   the Registration   Act,   ceased   to   be   a   decision   of   the arbitrator,   which   binds   the   parties   or   their   privies. In   that   context,   this   Court   observed   that   an   award is   entitled   to   that   respect   which   is   due   to   the judgment and decree of last resort. And if the award which   had   been   pronounced   between   the   parties has become final, a second reference of the subject of   the   award   becomes   incompetent.   It   further observed   that   if   the   award   is   final   and   binding   on the   parties,   it   can   hardly   be   said   that   it   is   a   waste paper unless it is made a “Rule of Court”. Hegde, J. who  agreed with the  above  observations of  Sikri,  J. (as   his   Lordship   then   was)   while   speaking   for Bachawat, J. also observed that the arbitration has the   first   stage   which   commences   with   arbitration agreement and ends with the making of the award, and   then   a   second   stage   which   relates   to   the enforcement   of   the   award.   He   also   observed   that   it was   one   thing   to   say   that   a   right   is   not   created   by the award but it is an entirely different thing to say that   the   right   created   cannot   be   enforced   without further steps. 16.   Therefore,   our   answer   to   the   point   is   that   the awards   of   Special   Arbitration   Tribunals   did   not merge in judgments and decrees of the courts even though   the   courts   by   their   judgments   and   decrees made   such   awards   “Rules   of   Court”   for   their enforceability   through   the   courts   availing   their machinery   used   for   execution   of   their   decisions, that is, their own judgments and decrees. 17.   It is true, as argued on behalf of the petitioners, that a legislature has no legislative power to render ineffective the earlier judicial decisions by making a law   which   simply   declares   the   earlier   judicial decisions as invalid or not binding, for such power if 75 exercised would not be a legislative power exercised by   it   but   a   judicial   power   exercised   by   it encroaching   upon   the   judicial   power   of   the   State exclusively   vested   in   courts.   The   said   argument advanced,   since   represents   the   correct   and   well­ settled   position   in   law,   we   have   thought   it unnecessary   to   refer   to   the   decisions   of   this   Court cited   by   learned   counsel  for   the  petitioners,   in  that behalf and hence have not referred to them. 18.   For   the   1991   Amendment   Act   to   become unconstitutional   on   the   ground   that   it   has rendered   judgments   and   decrees   of   courts   by which   the   Special   Arbitration   Tribunals'   awards are made “Rules of Court”, invalid or ineffective, such   judgments   and   decrees   must   be   decisions of   courts   rendered   by   them   in   exercise   of   their judicial   power   of   decision­making   in   respect   of the   subjects   of   dispute   before   them   and   not where   they   render   judgments   and   decrees   to make   the   awards   of   the   Special   Arbitration Tribunals “Rules of Court” so that they could be made   enforceable   through   the   machinery   of courts.   Thus,   the   awards   of   the   Special Arbitration   Tribunals   when   get   the   superadded seals   of   courts   for   such   awards,   by   the   courts making   them   “Rules   of   Court”   by   their judgments   and   decrees,   such   awards   do   not   get merged in judgments and decrees of courts so as to   make   them   the   decisions   of   courts,   rendered in   exercise   of   State's   judicial   power   of   decision­ making,   as   it   happens   in   the   causes   directly brought   before   them   by   way   of   suits   for   their decisions.  As we have already pointed out, question of   claim   or   cause   of   a   party   which   gets   merged   in the award of a Special Arbitration Tribunal, in turn, getting   merged   in   judgment   and   decree   made   by civil   court,   for   the   purpose   of   making   the   award   a 76 “Rule of Court”, so as to make it enforceable, cannot arise. What needs to be noted is, that courts even if render   their   judgments  and   decrees  for   making   the awards   “Rules   of   Court”,   those   judgments   and decrees   cannot   substitute   their   own   decisions   for the   decisions   of   Special   Arbitration   Tribunals contained   in   their   awards.   This   situation   makes   it clear   that   power   exercised   by   the   civil   courts   in making   the awards  of Special  Arbitration Tribunals “Rules   of   Court”   by   their   judgments   and   decrees   is not   their   judicial   power   exercised   in   rendering judgments and decrees, as civil courts exercise their powers   vested   in   them   for   resolving   disputes between   parties.   To   be   precise,   judgments   and decrees   made   by   civil   courts   in   making   the awards   of   the   Special   Arbitration   Tribunals   the “Rules   of   Court”   for   the   sole   purpose   of   their enforceability   through   the   machinery   of   court, cannot   make   such   judgments   and   decrees   of civil court, the decisions rendered by civil courts in   exercise   of   judicial   power   of   the   State exclusively   invested   in   them   under   our Constitution.   Thus,   when   the   judgments   and decrees   made   by   civil   courts   in   making   the   awards of Special Arbitration Tribunals “Rules of Court” are not those judgments and decrees of courts made in exercise   of   judicial   power   of   State   vested   in   them under   our   Constitution,   the   1991   Amendment   Act when  nullifies the  judgments  and  decrees  of courts by   which   awards   of   Special   Arbitration   Tribunals are   made   “Rules   of   Court”,   cannot   be   regarded   as that   enacted   by   the   Orissa   State   Legislature encroaching   upon   the   judicial   powers   of   State exercisable   under   our   Constitution   by   courts   as sentinels   of   Rule   of   Law,   a   basic   feature   of   our Constitution.   Hence,   the   1991   Amendment   Act insofar   as   it   nullifies   judgments   and   decrees   of courts   by   which   awards   of   Special   Arbitration Tribunals   are   made   “Rules   of   Court”,   even   where 77 they   are   affirmed   by   higher   courts,   cannot   be regarded   as   that   made   by   the   Orissa   State Legislature transgressing upon the judicial power of State   vested   in   courts   as   would   make   it unconstitutional.” [emphasis supplied] 89. It   could   be   seen   that   this   Court   has   observed   that the   judgments   and   decrees   made   by   the   civil   courts   in making   the   awards   of   the   Special   Arbitration   Tribunals   the “Rules   of   Court”   are   for   the   sole   purpose   of   their enforceability through the machinery of courts and therefore, cannot   be   such   judgments   and   decrees   of   civil   courts   made in   exercise   of   the   judicial   power   of   the   State   exclusively vested in them  under the Constitution of India.   This Court, therefore, held that the 1991 Amendment Act, which nullifies the   judgments   and   decrees   of   the   court   by   which   awards   of Special   Arbitration   Tribunals   are   made   “Rules   of   Court”, cannot   be   said   to   be   an   encroachment   upon   the   judicial powers   of   the   State   exercisable   by   the   courts   under   the Constitution of India. 90. However,   it   is   to   be   noted   that   in   the   very   same judgment, this Court observed thus: 78 “ 28.   Thus,   the   impugned   1991   Amendment   Act seeks   to   nullify   the   awards   made   by   the   Special Arbitration   Tribunals   constituted   under   the   1984 Amendment   Act,   in   exercise   of   the   power   conferred upon   them   by   that   Act   itself.   When   the   awards made   under   the   1984   Amendment   Act   by   the Special   Arbitration   Tribunals   in   exercise   of   the State's   judicial   power   conferred   upon   them   which cannot   be   regarded   as   those   merged   in   Rules   of Court   or   judgments   and   decrees   of   courts,   are sought to be nullified by the 1991 Amendment Act, it   admits   of   no   doubt   that   legislative   power   of   the State Legislature is used by enacting  the impugned 1991   Amendment   Act   to   nullify   or   abrogate   the awards   of   the   Special   Arbitration   Tribunals   by arrogating   to   itself,   a   judicial   power.   [See   Cauvery Water Disputes Tribunal, Re   [1993 Supp (1) SCC 96 (2)  :  AIR  1992   SC   522  :  1991   Supp  (2)  SCR   497]  ]. From   this,   it   follows   that   the   State   Legislature   by enacting   the   1991   Amendment   Act   has   encroached upon   the   judicial   power   entrusted   to   judicial authority   resulting   in   infringement   of   a   basic feature   of   the   Constitution   —   the   Rule   of   Law. Thus,   when   the   1991   Amendment   Act   nullifies the   awards   of   the   Special   Arbitration   Tribunals, made in exercise of the judicial power conferred upon   them   under   the   1984   Amendment   Act,   by encroaching   upon   the   judicial   power   of   the State,   we   have   no   option   but   to   declare   it   as unconstitutional   having   regard   to   the   well­ settled   and   undisputed   legal   position   that   a legislature   has   no   legislative   power   to   render ineffective   the   earlier   judicial   decisions   by making   a   law   which   simply   declares   the   earlier judicial decisions as invalid and not binding, for such   powers,   if   exercised,   would   not   be legislative   power   exercised   by   it,   but   judicial power   exercised   by   it   encroaching   upon   the 79 judicial   power   of   the   State   vested   in   a   judicial tribunal   as   the   Special   Arbitration   Tribunal under   the   1984   Amendment   Act.   Moreover, where   the   arbitral   awards   sought   to   be   nullified under the 1991 Amendment Act are those made by   Special   Arbitration   Tribunals   constituted   by the   State   itself  under   the   1984   Amendment   Act to   decide   arbitral   disputes   to   which   State   was   a party,   it   cannot   be   permitted   to   undo   such arbitral   awards   which   have   gone   against   it,   by having recourse to its legislative power for grant of   such   permission   as   could   result   in   allowing the   State,   if   nothing   else,   abuse   of   its   power   of legislation. ” [emphasis supplied]   91. The   court   further   held   that   under   the   1984 Amendment   Act,   the   Special   Arbitration   Tribunals   were constituted by  the State itself to decide arbitral disputes.   It held   that   the   State   was   a   party   before   such   Tribunals   and therefore,   it   cannot   be   permitted   to   undo   such   arbitral awards   which   had   gone   against   it.     It   further   held   that   if such an exercise is permitted to be done, by having recourse to   its   legislative   power,   it   would   result   in   nothing   else   but allowing the State, abuse of its power of legislation.  80 92. The   Court   goes   on   to   hold   that   the   awards   made under   the   1984   Amendment   Act   by   the   Special   Arbitration Tribunals are sought to be nullified by the 1991 Amendment Act.  As such, the legislative power of the State Legislature is used   by   enacting   the   impugned   1991   Amendment   Act   to nullify   or   abrogate   the   awards   of   the   Special   Arbitration Tribunals   by   abrogating   to   itself   a   judicial   power.     In   this respect, the Court relied on the judgment of this Court in the case   of   Cauvery   Water   Disputes   Tribunal 41 .     This   Court further goes on to hold that the State Legislature by enacting the   1991   Amendment   Act   has   encroached   upon   the   judicial power   vested   in   judicial   authorities   and   as   such,   infringed the   basic   feature   of   the   Constitution   of   India   the   “Rule   of Law”.   As such, this Court held the 1991 Amendment Act to be   unconstitutional   on   the   ground   that   the   arbitral   awards passed   by   the   Special   Arbitration   Tribunals   under   the   1984 Amendment   Act   are   sought   to   be   nullified   by   the   1991 Amendment Act. 41 1993 Supp (1) SCC 96 (2) 81 93. A   perusal   of   the  aforesaid   observations   made   in   the case   of   G.C.   Kanungo   (supra)   would   reveal   that   on   one hand,   this   Court   goes   on   to   hold   that   the   judgments   and decrees by which the civil courts make the awards “Rules of Court”   are   not   passed   in   exercise   of   its   judicial   powers.     As such, the awards do not   merge   in the judgments and decrees of   the   court.     But   on   the   other   hand,   the   Court   goes   on   to hold   that   the   awards   passed   by   the   Special   Arbitration Tribunals are the awards passed by the Tribunals exercising the judicial power and as such, when the State nullifies such awards, it abrogates to itself a judicial power and the Statute which   annuls   it,   is   unconstitutional   being   encroachment   on the judicial power of the State. 94. Since   G.C. Kanungo   (supra) has ultimately held the 1991   Amendment   Act   to   be   unconstitutional   on   the   ground that   it   annuls   the   awards   passed   by   the   Special   Arbitration Tribunals,   it   may   not   be   necessary   to   consider   the   question as   to   whether   G.C.   Kanungo   (supra)   was   right   in   holding that   the   judgments   and   decrees   vide   which   the   awards   are made “Rules of Court”, are not passed in exercise of judicial 82 power.   However, the perusal of paragraph 17 in the case of G.C. Kanungo   (supra) would reveal that this Court recorded the   submissions   made   on   behalf   of   the   petitioners   therein that,   a   Legislature   has   no   legislative   power   to   render ineffective   the   earlier   judicial   decisions   by   making   a   law which simply declares the earlier judicial decisions as invalid or   not   binding.     It   also   recorded   that   if   such   a   power   is exercised, it will not be legislative power exercised by it but a judicial   power,   encroaching   upon   the   judicial   power   of   the State   exclusively   vested   in   courts.     It   further   appears   that various decisions of this Court were cited by the counsel for the   petitioners   therein,   however,   this   Court   did   not   find   it necessary   to   refer   to   the   said   decisions,   since   this   Court found   that   the   said   submissions   represent   a   correct   and well­settled position in law.  It will be worthwhile to note that in the said case, this Court was considering the provisions of the   1940   Act   as   against   the   provisions   of   the   Orissa   State Act.     In   the   present   case   also,   all   the   awards   so   also   the judgments   and   decrees   passed   by   the   civil   courts   making such   awards   “Rules   of   Court”   have   been   passed   under   the 83 1940   Act.     We,   therefore,   find   that   it   will   be   appropriate   to examine the correctness of the said finding.   95. It   will   be   necessary   to   consider   the   scheme   of   the 1940   Act   as   will   be   found   in   Sections   15,   16,   17   and   30 thereof, which read thus: “ 15. Power of Court to modify award . —The Court may by order modify or correct an award— (a)   where   it   appears   that   a   part   of   the award   is   upon   a   matter   not   referred   to arbitration   and   such   part   can   be separated   from   the   other   part   and   does not   affect   the   decision   on   the   matter referred; or (b) where the  award is imperfect in  form, or   contains   any   obvious   error   which   can be   amended   without   affecting   such decision; or (c)   where   the   award   contains   a   clerical mistake   or   an   error   arising   from   an accidental slip or omission. 16.   Power   to   remit   award . —(1)   The   Court   may from   time   to   time   remit   the   award   or   any   matter referred   to   arbitration   to   the   arbitrators   or   umpire for reconsideration upon such terms as it thinks fit — (a)   where   the   award   has   left undetermined any of the matters referred to arbitration, or where it determines any matter   not   referred   to   arbitration   and such matter cannot be separated without affecting the determination of the matters referred; or 84 (b) where the award is so indefinite as to be incapable of execution; or (c)   where   an   objection   to   the   legality   of the award is apparent upon the face of it. (2)   Where   an   award   is   remitted   under   sub­section (1)   the   Court   shall   fix   the   time   within   which   the arbitrator or umpire shall submit his decision to the Court: Provided that any time so fixed may be extended by subsequent order of the Court. (3)   An   award   remitted   under   sub­section   (1)   shall become   void   on   the   failure   of   the   arbitrator   or umpire   to   reconsider   it   and   submit   his   decision within the time fixed. 17.   Judgment   in   terms   of   award . —Where   the Court   sees   no   cause   to   remit   the   award   or   any   of the   matters   referred   to   arbitration   for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside   the   award   has   expired,   or   such   application having   been   made,   after   refusing   it,   proceed   to pronounce   judgment   according   to   the   award,   and upon   the   judgment   so   pronounced   a   decree   shall follow,   and   no   appeal   shall   lie   from   such   decree except   on   the   ground   that   it   is   in   excess   of,   or   not otherwise in accordance with the award. …………….. 30.   Grounds   for   setting   aside   award.—   An   award shall  not  be set aside except on one or   more  of the following grounds, namely— ( a )   that   an   arbitrator   or   umpire   has misconducted himself or the proceedings; ( b ) that an award has been made after the issue   of   an   order   by   the   Court superseding   the   arbitration   or   after 85 arbitration   proceedings   have   become invalid under Section 35; ( c )   that   an   award   has   been   improperly procured or is otherwise invalid.” 96. A perusal of Section 15 of the 1940 Act would reveal that the court, by an order, may modify or correct an award, where   it   appears   that   a   part   of   the   award   is   upon   a   matter not   referred   to   arbitration   and   such   part   can   be   separated from   the   other   part   and   does   not   affect   the   decision   on   the matter   referred.     The   Court   may   also   modify   or   correct   the award, where the award  is imperfect in form, or contains any obvious   error   which   can   be  amended   without   affecting   such decision.   The power under Section 15 of the 1940 Act could also   be   exercised,   where   the   award   contains   a   clerical mistake   or   an   error   arising   from   an   accidental   slip   or omission. 97. Section   16   of   the   1940   Act   empowers   the   court   to remit   the   award   or   any   matter   referred   to   arbitration   to   the arbitrators or umpire for reconsideration, where it finds that the award has left undetermined any of the matters referred 86 to arbitration, or where it determines any matter not referred to   arbitration   and   such   matter   cannot  be   separated   without affecting   the   determination   of   the   matters   referred.     Such power can also be exercised, where the award is so indefinite as  to   be  incapable  of   execution.  So  also,   where  an   objection to   the   legality   of   the   award   is   apparent   upon   the   face   of   it, the court would be empowered to remit the award. 98. Section  30 of  the  1940 Act  provides the  grounds on which   an   award   could   be   set   aside.     It   provides   that   the award   could   be   set   aside   when   an   arbitrator   or   umpire   has misconducted   himself   or   the   proceedings.     It   could   be   set aside   when   it   is   found   that   the   award   has   been   made   after the   issue   of   an   order   by   the   Court   superseding   the arbitration   or   after   arbitration   proceedings   have   become invalid under Section 35.   The award could also be set aside when   the   court   finds   that   the   award   has   been   improperly procured or is otherwise invalid. 99. Section   17   of   the   1940   Act   empowers   the   court   to pronounce a judgment according to the award, and upon the judgment   so   pronounced   a   decree   is   to   follow.     It   further 87 provides that no appeal shall lie on such decree except on the ground that it is in excess of, or not otherwise in accordance with,   the   award.   However,   prior   to   pronouncing   the judgment, the court is required to be satisfied that no cause to   remit   the   award   or   any   of   the   matters   referred   to arbitration   for   reconsideration   or   to   set   aside   the   award,   is made out.  The Court is also required to wait till the time for making an application to set aside the award has expired, or such application having been made, has been refused.   100. The   perusal   of   the   scheme   of   the   1940   Act   would itself   reveal   that   the   passing   of   the   judgment   and   decree under   Section   17   of   the   1940   Act   is   not   a   mere   formality. The   judgment   can   be   pronounced   only   when   the   court   is satisfied that no cause is made out for remitting the award or setting aside the award.  The court is also entitled to remit or modify the awards.  As such, it cannot be said that the court, while passing a judgment, which is followed by a decree, does not exercise judicial power.    The court is not supposed to act mechanically and be a Post­Office.  88 101. A   Constitution   Bench   of   this   Court   in   the   case   of Harinagar   Sugar   Mills   Ltd.   v.   Shyam   Sundar Jhunjhunwala   and   Others 42 ,   had   an   occasion   to   consider the scope of Section 111 of the Companies Act, 1956.  It was sought to be urged before this Court that the authority of the Central   Government   under   Section   111   of   the   Companies Act,   1956   was   an   administrative   authority.     Rejecting   the said submission, J.C. Shah, J. observed thus: “………But   that   in   an   appeal   under   Section 111  clause  (3) there is a  lis or  dispute between  the contesting   parties   relating   to   their   civil   rights,   and the   Central   Government   is   invested   with   the   power to determine that dispute according to law i.e. it has to   consider   and   decide   the   proposal   and   the objections   in   the   light   of   the   evidence,   and   not   on grounds of policy or expediency.   The extent of the power   which   may   be   exercised   by   the   Central Government   is   not   delimited   by   express enactment, but the power is not on that account unrestricted.   The   power   in   appeal   to   order registration   of   transfers   has   to   be   exercised subject   to   the   limitations   similar   to   those imposed   upon   the   exercise   of   the   power   of   the court   in   a   petition   for   that   relief   under   Section 155:   the   restrictions   which   inhere   the   exercise of   the   power   of   the   court   also   apply   to   the exercise   of   the   appellate   power   by   the   Central Government   i.e.   the   Central   Government   has   to 42 [1962] 2 SCR 339 89 decide   whether   in   exercising   their   power,   the directors are acting oppressively, capriciously or corruptly,   or   in   some   way   mala   fide.   The decision has manifestly to stand those objective tests,   and   has   not   merely   to   be   founded   on   the subjective   satisfaction   of   the   authority   deciding the   question.   The   authority   cannot   proceed   to decide   the   question   posed   for   its   determination   on grounds   of   expediency:   the   statute   empowers   the Central   Government   to   decide   the   disputes   arising out   of   the   claims   made   by   the   transferor   or transferee which  claim  is opposed by  the company, and   by   rendering   a   decision   upon   the   respective contentions, the rights of the contesting  parties are directly affected.  Prima facie, the exercise of such authority would be judicial. It is immaterial that the   statute   which   confers   the   power   upon   the Central   Government   does   not   expressly   set   out the   extent   of   the   power:   but   the   very   nature   of the   jurisdiction   requires   that   it   is   to   be exercised subject to the limitations which apply to   the   court   under   Section   155.   The   proviso   to sub­section (8) of Section 111 clearly indicates that in   circumstances   specified   therein   reasonable compensation may be awarded in lieu of the shares. This compensation which is to be reasonable has to be   ascertained   by   the   Central   Government;   and reasonable   compensation   cannot   be   ascertained except   by   the   application   of   some   objective standards   of   what   is   just   having   regard   to   all   the circumstances of the case. In   The   Province   of   Bombay   v.   Kusaldas   S. Advani   [(1950)   SCR   621]   this   Court   considered   the distinction   between   decisions   quasi­judicial   and administrative   or   ministerial   for   the   purpose   of ascertaining   whether   they   are   subject   to   the 90 jurisdiction   to   issue   a   writ   of   certiorari,   Fazl   Ali,   J. at p. 642 observed: “The  word   ‘decision’   in  common   parlance is   more   or   less   a   neutral   expression   and it   can   be   used   with   reference   to   purely executive   acts   as   well   as   judicial   orders. The mere fact that an executive authority has   to   decide   something   does   not   make the   decision   judicial.   It   is   the   manner   in which   the   decision   has   to   be   arrived   at which  makes  the  difference,  and   the  real test   is:   Is   there   any   duty   to   decide judicially?” The   Court   also   approved   of   the   following   test suggested   in   King   v.   London   County   Council   [(1931) 2 KB 215, 233] by Scrutton, L.J.: “It   is   not   necessary   that   it   should   be   a court in the sense in which  this Court is a   court;   it   is   enough   if   it   is   exercising, after   hearing   evidence,   judicial   functions in   the   sense   that   it   has   to   decide   on evidence   between   a   proposal   and   an opposition;   and   it   is   not   necessary   to   be strictly   a   court;   if   it   is   a   tribunal   which has   to   decide   rights   after   hearing evidence and opposition, it is amenable to the writ of certiorari.” In   Bharat Bank Ltd., Delhi   v.   Employees   [(1950) SCR   459]   the   question   whether   an   adjudication   by an   Industrial   Tribunal   functioning   under   the Industrial   Tribunals   Act   was   subject   to   the jurisdiction   of   this   Court   under   Article   136   of   the 91 Constitution   fell   to   be   determined:   Mahajan,   J.   in that case observed: “There   can   be   no   doubt   that   varieties   of Administrative   Tribunals   and   Domestic Tribunals   are   known   to   exist   in   this country   as   well   as   in   other   countries   of the  world but the  real question to  decide in each case is as to the extent of judicial power   of   the   State   exercised   by   them. Tribunals   which   do   not   derive   authority from   the   sovereign   power   cannot   fall within   the   ambit   of   Article   136.   The condition   precedent   for   bringing   a tribunal within the ambit of Article 136 is that it should be constituted by the State. Again   a   tribunal   would   be   outside   the ambit of Article 136 if is not invested with any   part   of   the   judicial   functions   of   the State   but   discharges   purely administrative   or   executive   duties. Tribunals   however   which   are   found invested with certain functions of a court of   justice   and   have   some  of  its   trappings also would fall within the ambit of Article 136 and would be subject to the appellate control of this Court whenever it is found and   necessary   to   exercise   that   control   in the interests of justice.” It   was   also   observed   by   Fazi   Ali,   J.   at   p. 463,   that   a   body   which   is   required   to   act judicially   and   which   exercises   judicial   power   of the   State   does   not   cease   to   be   one   exercising judicial   or   quasi­judicial   functions   merely because it is not expressly required to be guided by   any   recognised   substantive   law   in   deciding the disputes which come before it. 92 The   authority   of   the   Central   Government entertaining   an   appeal   under   Section   111(3)   being an   alternative   remedy   to   an   aggrieved   party   to   a petition   under   Section   155   the   investiture   of authority   is   in   the   exercise   of   the   judicial   power   of the   State.   Clause   (7)   of   Section   111   declares   the proceedings   in   appeal   to   be   confidential,   but   that does   not   dispense   with   a   judicial   approach   to   the evidence.   Under   Section   54   of   the   Indian   Income Tax   Act   (which   is   analogous)   all   particulars contained in any statement made, return furnished or   account   or   documents   produced   under   the provisions   of   the   Act   or   in   any   evidence   given,   or affidavit   or   deposition   made,   in   the   course   of   any proceedings   under   the   Act   are   to   be   treated   as confidential; but that does not make the decision of the   taxing   authorities   merely   executive.   As   the dispute   between   the   parties   relates   to   the   civil rights and the Act provides for a right of  appeal and makes detailed provisions about hearing and disposal   according   to   law,   it   is   impossible   to avoid the inference that a duty is imposed upon the   Central   Government   in   deciding   the   appeal to act judicially .”   [ emphasis supplied] 102. It   has   been   held   by   this   Court   that   the   restrictions which inhere the exercise of the power of the court also apply to   the   exercise   of   the   appellate   power   by   the   Central Government.    It has been held  that  the  Central  Government has to decide whether in exercising their power, the directors 93 are acting oppressively, capriciously or corruptly, or in some way   mala   fide.     The   decision   has   manifestly   to   stand   those objective   tests,   and   has   not   merely   to   be   founded   on   the subjective satisfaction of the authority deciding the question. It   has   been   held   that   the   very   nature   of   the   jurisdiction requires   that   it   is   to   be   exercised   subject   to   the   limitations which apply to the court under Section 155 of the Companies Act,   1956.   It   could   be   seen   that   this   Court   has   held   that since   the   dispute   between   the   parties   relates   to   the   civil rights   and   the   Act   provides   for   a   right   of   appeal   and   makes detailed   provisions   about   hearing   and   disposal   according   to law,   it   is   impossible   to   avoid   the   inference   that   a   duty   is imposed upon the Central Government in deciding the appeal to act judicially.   103. M.   Hidayatullah,   J.,   in   a   separate   but   concurring judgment, observed thus: “Courts   and   tribunals   act   “judicially”   in   both senses,   and   in   the   term   “court”   are   included   the ordinary   and   permanent   tribunals   and   in   the   term “tribunal”   are  included   all   others,   which   are   not   so included.   Now,   the   matter   would   have   been simple,   if   the   Companies   Act,   1956   had designated a person or persons whether by name 94 or by office for the purpose of hearing an appeal under   Section   111.   It   would   then   have   been clear   that   though   such   person   or   persons   were not   “courts”   in   the   sense   explained,   they   were clearly   “tribunals”.   The   Act   says   that   an   appeal shall   lie   to   the   Central   Government.   We   are, therefore,   faced   with   the   question   whether   the Central Government can be said to be a tribunal. Reliance   is   placed   upon   a   recent   decision   of   this Court   in   Shivji   Nathubai   v.   Union   of   India   [(1960)   2 SCR   775]   where   it   was   held   that   the   Central Government in exercising power of review under the Mineral Concession Rules, 1949, was subject to the appellate   jurisdiction   conferred   by   Article   136.   In that  case which  came to  this  Court  on appeal from the   High   Court's   order   under   Article   226,   it   was held   on   the   authority   of   Province   of Bombay   v.   Kushaldas   S.   Advani   [(1950)   SCR   621] and   Rex   v.   Electricity   Commissioners   [(1924)   1   KB 171] that the action of the Central Government was quasi­judicial   and   not   administrative.   It   was   then observed: “It  is   in   the   circumstances  apparent   that as   soon   as   Rule   52   gives   a   right   to   an aggrieved party to apply for review a lis is created   between   him   and   the   party   in whose   favour   the   grant   has   been   made. Unless   therefore   there   is   anything   in   the statute to the contrary it will be the duty of   the   authority   to   act   judicially   and   its decision would be a quasi­judicial act.” This   observation   only   establishes   that   the   decision is a  quasi­judicial one, but it does not  say  that  the Central  Government can  be regarded as a tribunal. In my opinion, these are very different matters, and 95 now that the question has been raised, it should be decided. The   function   that   the   Central   Government performs under the Act and the Rules is to hear an   appeal   against   the   action   of   the   Directors. For   that   purpose,   a   memorandum   of   appeal setting   out   the   grounds   has   to   be   filed,   and   the company,   on   notice,   is   required   to   make representations,   if   any,   and   so   also   the   other side,   and   both   sides   are   allowed   to   tender evidence   to   support   their   representations.   The Central   Government   by   its   order   then   directs that   the   shares   be   registered   or   need   not   be registered.   The   Central   Government   is   also empowered to include in its orders, directions as to   payment   of   costs   or   otherwise.   The   function of   the   Central   Government   is   curial   and   not executive. There is provision for a hearing and a decision   on   evidence,   and   that   is   indubitably   a curial function. Now,   in   its   functions   the   Government   often reaches   decisions,   but   all   decisions   of   the Government   cannot   be   regarded   as   those   of   a tribunal.  Resolutions   of  the  Government   may  affect rights   of   parties,   and   yet,   they   may   not   be   in   the exercise   of   the   judicial   power.   Resolutions   of   the Government   may   be   amenable   to   writs   under Articles   32   and   226   in   appropriate   cases,   but   may not   be   subject   to   a   direct   appeal   under   Article   136 as   the   decisions   of   a   tribunal.   The   position, however,   changes   when   Government   embarks upon   curial   functions,   and   proceeds   to   exercise judicial   power   and   decide   disputes.   In   those circumstances,   it   is   legitimate   to   regard   the officer   who   deals   with   the   matter   and   even Government   itself   as   a   tribunal.   The   officer   who 96 decides,   may   even   be   anonymous;   but   the   decision is one of a tribunal, whether expressed in his name or   in   the   name   of   the   Central   Government.   The word “tribunal” is a word of wide import, and the words   “court”   and   “tribunal”   embrace   within them   the   exercise   of   judicial   power   in   all   its forms.   The   decision   of   the   Government   thus   falls within the powers of this Court under Article 136.”   [ emphasis supplied ] 104. M.   Hidayatullah,   J.   proceeded   to   consider   as   to whether the Central Government, while exercising its powers under  Section  111   of   the   Companies   Act,  1956,  can   be   said to be a “Tribunal”.   On perusal of the scheme of Section 111 of the Companies Act, 1956, His Lordship has observed that the   function   of   the   Central   Government   under   the   said section is curial and not executive.  There is a provision for a hearing and a decision on evidence, and that is indubitably a curial function.   His Lordship further held that in its various functions,   Government   often   reaches   a   decision,   but   all decisions of the Government cannot be regarded as those of a tribunal.   However,   when   Government   embarks   upon   curial functions, and proceeds to exercise judicial power and decide disputes, it is legitimate to regard the officer  who deals with 97 the   matter   and   even   Government   itself   as   a   tribunal.   His Lordship further goes on to hold that t he officer who decides, may   even   be   anonymous;   but   the   decision   is   one   of   a tribunal,   whether   expressed   in   his   name   or   in   the   name   of the Central Government.  105. A   Constitution   Bench   of   this   Court   in   the   case   of Shankarlal   Aggarwala   and   Others   v.   Shankarlal Poddar   and   Others 43 ,   was   considering   a   question   as   to whether the order passed by the Company Judge confirming the   sale   was   an   administrative   order   or   a   judicial   order. Answering the said question, this Court, speaking through N. Rajagopala Ayyangar, J., observed thus: “On   the   basis   of   these   provisions,   we   shall proceed to consider whether the confirmation of the sale   was   merely   an   order   in   the   course   of administration and not a judicial order. The sale by the liquidator was, of course, effected in the course of   the   realisation   of   the   assets  of  the   company  and for the purpose of the amount realised being applied towards   the   discharge   of   the   liabilities   and   the surplus to be distributed in the manner provided by the Act. It would also be correct to say that when a liquidator   effects   a   sale   he   is   not   discharging   any judicial   function.   Still   it   does   not   follow   that   every order   of   the   Court   merely   for   the   reason   that   it   is 43 [1964] 1 SCR 717 98 passed in the course of the realisation of the assets of   the   company   must   always   be   treated   as   merely an   administrative   one.   The   question   ultimately depends   upon   the   nature   of   the   order   that   is passed.   An   order   according   sanction   to   a   sale undoubtedly involves a discretion and cannot be termed   merely   a   ministerial   order,   for   before confirming the sale the Court has to be satisfied, particularly   where   the   confirmation   is   opposed, that   the   sale   has   been   held   in   accordance   with the   conditions   subject   to   which   alone   the liquidator   has   been   permitted   to   effect   it,   and that   even   otherwise   the   sale   has   been   fair   and has   not   resulted   in   any   loss   to   the   parties   who would ultimately have to share the realisation. The   next   question   is   whether   such   an   order could   be   classified   as   an   administrative   order.   One thing   is   clear,   that   the   mere   fact   that   the   order   is passed   in   the   course   of   the   administration   of   the assets of the company and for realising those assets is   not   by   itself   sufficient   to   make   it   an administrative,   as   distinguished   from   a   judicial order.   For   instance,   the   determination   of   amounts due   to   the   company   from   its   debtors   which   is   also part of the process of the realisation of the assets of the company is a matter which arises in the course of   the   administration.   It   does   not   on   that   account follow   that   the   determination   of   the   particular amount   due   from   a   debtor   who   is   brought   before the Court is an administrative order. It   is   perhaps   not   possible   to   formulate   a definition   which   would   satisfactorily   distinguish,   in this   context,   between   an   administrative   and   a judicial   order.   That   the   power   is   entrusted   to   or wielded by a person who functions as a Court is not decisive of the question whether the act or decision 99 is administrative or judicial.   But  we conceive that an   administrative   order   would   be   one   which   is directed   to   the   regulation   or   supervision   of matters   as   distinguished   from   an   order   which decides the rights of parties or confers or refuses to   confer   rights   to   property   which   are   the subject   of   adjudication   before   the   Court.   One   of the   tests   would   be   whether   a   matter   which involves the exercise of discretion is left for the decision   of   the   authority,   particularly   if   that authority were a Court, and if the discretion has to   be   exercised   on   objective,   as   distinguished from a purely subjective, consideration, it would be  a judicial decision.   It has sometimes been said that   the   essence   of   a   judicial   proceeding   or   of   a judicial   order   is   that   there   should   be   two   parties and   a   lis   between   them   which   is   the   subject   of adjudication, as a result of that order or a decision on  an  issue between  a  proposal  and  an  opposition. No   doubt,   it   would   not   be   possible   to   describe   an order passed deciding a   lis   before the authority, that it   is   not   a   judicial   order   but   it   does   not   follow   that the   absence   of   a   lis   necessarily   negatives   the   order being   judicial.   Even   viewed   from   this   narrow standpoint   it   is   possible   to   hold   that   there   was a   lis   before the Company Judge which he decided by passing the order. On the one hand were the Claims of   the   highest   bidder   who   put   forward   the contention   that   he   had   satisfied   the   requirements laid   down   for   the   acceptance   of   his   bid   and   was consequently  entitled to have the sale in his favour confirmed,   particularly   so   as   he   was   supported   in this   behalf   by   the   official   liquidators.   On   the   other hand there was the 1st respondent and not to speak of him, the large body of unsecured creditors whose interests,   even   if   they   were   not   represented   by   the 1st   respondent,   the   Court   was   bound   to   protect.   If 100 the   sale   of   which   confirmation   was   sought   was characterised   by   any   deviation   from   the   conditions subject to which the sale was directed to be held or even   otherwise   was   for   a   gross   undervalue   in   the sense   that   very   much   more   could   reasonably   be expected   to   be   obtained   if   the   sale   were   properly held in view of the figure of Rs 3,37,000 which had been bid by Nandlal Agarwalla, it would be the duty of   the   Court   to   refuse   the   confirmation   in   the interests   of   the   general   body   of   creditors   and   this was   the   submission   made   by   the   1st   respondent. There were thus two points of view presented to the Court by two contending parties or interests and the Court was called upon to decide between them. And the decision vitally affected the rights of the parties to   property.   In   this   view   we   are   clearly   of   the opinion   that   the   order   of   the   Court   was,   in   the circumstances,   a   judicial   order   and   not   an administrative one and was therefore not inherently incapable of being brought up in appeal. [ emphasis supplied ] 106. The   Constitution   Bench   in   the   case   of   Shankarlal Aggarwala and Others   (supra) held that the question as to whether   the   order   passed   by   a   court   is   administrative   or judicial,   would   depend   upon   the   nature   of   the   order   that   is passed.     The   order   undoubtedly   involves   a   discretion   and cannot   be   termed   merely   a   ministerial   order.     His   Lordship distinguished   an   administrative   order   to   be   one   which   is 101 directed to the regulation or supervision of matters as against an   order   which   decides   the   rights   of   parties   or   confers   or refuses   to   confer   rights   to   property   which   are   the   subject   of adjudication   before   the   court.   It   has   further   been   held   that one   of   the   tests   for   deciding   whether   the   power   exercised   is administrative or judicial, would be whether a matter, which involves   the   exercise   of   discretion,   is   left   for   the   decision   of the authority, particularly if that authority were a court, and if   the   discretion   has   to   be   exercised   on   objective,   as distinguished   from   a   purely   subjective,   consideration,   it would be a judicial decision. 107. We   have,   hereinabove,   elaborately   considered   the scheme under Sections 15, 16 and 17 of the 1940 Act.   The perusal   of   the   said   scheme   would   clearly   reveal   that   before making an award “Rule of Court” by passing a judgment and decree,   the   court   is   required   to   take   into   consideration various   factors,   apply   its   mind   and   also   exercise   its discretion   judicially.     We   find   that   the   aforesaid   provisions have   not   been   considered   in   the   case   of   G.C.   Kanungo (supra).  The perusal of the aforesaid provisions, as has been 102 considered   by   us   hereinabove,   would   clearly   show   that   the power   exercised   by   the   court   under   Section   17   of   the   1940 Act is a judicial power.   We are therefore of the view that the findings   in   this   respect   as   recorded   by   this   Court   in paragraphs   15   to   18   in   the   case   of   G.C.   Kanungo   (supra) would be  per incuriam  the provisions of the 1940 Act. 108. We further find that the two Constitution Benches in the   cases   of   Harinagar   Sugar   Mills   Ltd.   (supra)   and Shankarlal   Aggarwala   and   Others   (supra)   have elaborately   considered   as   to   what   could   be   construed   as judicial   power   of   a   court.   In   the   case   of   Harinagar   Sugar Mills  Ltd.   (supra), though the power to be exercised was by the   Central   Government,   the   Constitution   Bench,   upon examining   the   scope   of   Section   111   of   the   Companies   Act, 1956, held the said power to be a judicial one.  In the case of Shankarlal   Aggarwala   and   Others   (supra),   the Constitution Bench distinguished between the administrative and judicial powers of the court.  This Court in paragraph 17 in the case of  G.C. Kanungo  (supra) rightly observed that the 103 State Legislature has no legislative power to render ineffective the   earlier   judicial   decisions   by   making   a   law.     It   cannot simply   declare   the   earlier   decisions   invalid   or   not   binding. However,   observing   this,   in   paragraph   18,   this   Court   held that  the  power  exercised by  the  court in  making  the  awards of   the   Special   Arbitration   Tribunals   the   “Rules   of   Court”,   is not a judicial power.   We are of the considered view that the aforesaid finding is not only  per incuriam  the provisions of the 1940   Act   but   also   the   two   judgments   of   the   Constitution Bench   in   the   cases   of   Harinagar   Sugar   Mills   Ltd.   (supra) and  Shankarlal Aggarwala and Others  (supra).   109. A   seven­Judge   Bench   of   this   Court   in   the   case   of Bengal Immunity Company Limited v. State of Bihar and Others 44 ,   was   considering   the   question   as   to   whether   the majority   decision   in   the   case   of   State   of   Bombay   and Another   v.   United   Motors   (India)   Limited   and   Others 45 laid   down   a   correct   law.     The   authority   of   the   court   to   go beyond   the   majority   decision   was   questioned.   While 44 [1955] 2 SCR 603 45 [1953] SCR 1069 104 considering the said objection, before going into the merits of the matter, S.R. Das, Acting C.J., observed thus: “……..Learned   counsel   for   some   of   the interveners question our authority to go behind the majority   decision.   It   is,   therefore,   necessary   at   this stage   to   determine   this   preliminary   question   before entering upon a detailed discussion on the question of construction of Article 286. In   England,   the   Court   of   Appeal   has   imposed upon   its   power   of   review   of   earlier   precedents   a limitation,   subject   to   certain   exceptions.   The limitation thus accepted is that it is bound to follow its own decisions and those of courts of Coordinate jurisdiction,   and   the   “full”   court   is   in   the   same position   in   this   respect   as   a   division   Court consisting of three members. The only exceptions to this Rule are: (1) the court is entitled and bound to decide   which   of   the   two   conflicting   decisions   of   its own it will follow; (2) the Court is bound to refuse to follow   a   decision   of   its   own   which,   though   not expressly   overruled,   cannot,   in   its   opinion   stand with   a   decision   of   the   House   of   Lords;   and   (3)   the court is not bound to follow a decision of its own, if it   is   satisfied   that   the   decision   was   given   per incuriam   e.g.   where   a   statute   or   a   rule   having statutory   effect   which   would   have   affected   the decision   was   not   brought   to   the   attention   of   the earlier   court.   [See   Young   v.   Bristol   Aeroplane   Co. Ltd.   [LR   1944   KB   718   CA]   which,   on   appeal   to   the House of Lords, was approved by Viscount Simon in LR 1946 AC 163 at p. 169]. A decision of the House of   Lords   upon   a   question   of   law   is   conclusive   and binds  the  House  in  subsequent  case.  An  erroneous decision of the House of Lords can be set right only by   an   Act   of   Parliament.   [See   Street Tramways   v.   London   County   Council   [1898   AC   375] This   limitation   was   repeated   by   Lord   Wright 105 in   Radcliffe   v.   Ribble   Motor   Services   Ltd.   [1939   AC 215 at p. 245]”   110. In   the   case   of   State   of   U.P.   and   Another   v. Synthetics  and Chemicals  Ltd.  and Another 46 , this Court observed thus: “ 40.   ‘Incuria’   literally   means   ‘carelessness’.   In practice   per   incuriam   appears   to   mean   per ignoratium .   English   courts   have   developed   this principle   in   relaxation   of   the   rule   of   stare   decisis. The   ‘quotable   in   law’   is   avoided   and   ignored   if   it   is rendered, ‘ in ignoratium   of a statute or other binding authority’.   ( Young   v.   Bristol   Aeroplane   Co. Ltd.   [(1944) 1 KB 718 : (1944) 2 All ER 293] ). Same has   been   accepted,   approved   and   adopted   by   this Court   while   interpreting   Article   141   of   the Constitution   which   embodies   the   doctrine   of precedents   as   a   matter   of   law.   In   Jaisri Sahu   v.   Rajdewan   Dubey   [(1962)   2   SCR   558   :   AIR 1962   SC   83]   this   Court   while   pointing   out   the procedure to  be followed  when  conflicting   decisions are   placed   before   a   bench   extracted   a   passage from   Halsbury's   Laws   of   England   incorporating   one of the exceptions  when the  decision  of  an appellate court is not binding. 41.   Does   this   principle   extend   and   apply   to   a conclusion   of   law,   which   was   neither   raised   nor preceded   by   any   consideration.   In   other   words   can such   conclusions   be   considered   as   declaration   of law? Here again the English courts and jurists have carved out an exception to the rule of precedents. It 46 (1991) 4 SCC 139 106 has   been   explained   as   rule   of   sub­silentio.   “A decision   passes   sub­silentio,   in   the   technical   sense that   has   come   to   be   attached   to   that   phrase,   when the particular point of law involved in the decision is not   perceived   by   the   court   or   present   to   its   mind.” ( Salmond   on   Jurisprudence   12th   Edn.,   p.   153). In   Lancaster   Motor   Company   (London) Ltd.   v.   Bremith Ltd.   [(1941) 1 KB 675, 677 : (1941) 2 All   ER   11]   the   Court   did   not   feel   bound   by   earlier decision as it was rendered ‘without any  argument, without   reference   to   the   crucial   words   of   the   rule and   without   any   citation   of   the   authority’.   It   was approved   by   this   Court   in   Municipal   Corporation   of Delhi   v.   Gurnam   Kaur .   [(1989)   1   SCC   101]   The bench   held   that,   ‘precedents   sub­silentio   and without   argument   are   of   no   moment’.   The   courts thus   have   taken   recourse   to   this   principle   for relieving   from   injustice   perpetrated   by   unjust precedents.   A   decision   which   is   not   express   and   is not   founded   on   reasons   nor   it   proceeds   on consideration of issue cannot be deemed to be a law declared to have a binding effect as is contemplated by Article 141. Uniformity and consistency are core of judicial discipline. But that which escapes in the judgment   without   any   occasion   is   not   ratio decidendi .   In   B.   Shama   Rao   v.   Union   Territory   of Pondicherry   [AIR 1967 SC 1480 : (1967) 2 SCR 650 : 20 STC 215] it was observed, ‘it is trite to say that a decision   is   binding   not   because   of   its   conclusions but   in   regard   to   its   ratio   and   the   principles,   laid down therein’. Any declaration or conclusion arrived without application of mind or preceded without any reason cannot be deemed to be declaration of law or authority   of   a   general   nature   binding   as   a precedent.   Restraint   in   dissenting   or   overruling   is for   sake   of   stability   and   uniformity   but   rigidity 107 beyond reasonable limits is inimical to the growth of law.” 111. This   Court   further   in   the   case   of   Sundeep   Kumar Bafna   v.   State   of   Maharashtra   and   Another 47 ,   observed thus: “ 19.   It cannot be overemphasised that the discipline demanded  by   a   precedent   or   the  disqualification   or diminution   of   a   decision   on   the   application   of the   per   incuriam   rule   is   of   great   importance,   since without   it,   certainty   of   law,   consistency   of   rulings and   comity   of   courts   would   become   a   costly casualty.   A   decision   or   judgment   can   be   per incuriam   any   provision   in   a   statute,   rule   or regulation,   which   was   not   brought   to   the   notice   of the   court.   A   decision   or   judgment   can   also   be   per incuriam   if   it   is   not   possible   to   reconcile its   ratio   with   that   of   a   previously   pronounced judgment   of   a   co­equal   or   larger   Bench;   or   if   the decision   of   a  High   Court   is  not  in   consonance  with the   views   of   this   Court.   It   must   immediately   be clarified   that   the   per   incuriam   rule   is   strictly   and correctly   applicable   to   the   ratio   decidendi   and   not to   obiter   dicta .   It   is   often   encountered   in   High Courts   that   two   or   more   mutually   irreconcilable decisions of the Supreme Court are cited at the Bar. We think that the inviolable recourse is to apply the earliest   view   as   the   succeeding   ones   would   fall   in the category of   per incuriam .” 47 (2014) 16 SCC 623 108 112. The   perusal   of   the   judgment   in   the   case   of   G.C. Kanungo   (supra)   would   reveal   that   though   the   court   has recorded   the   submissions   of   the   counsel   for   the   petitioners therein,   that   the   Legislature   has   no   power   to   render ineffective the earlier judicial decisions by making a law and though   judgments   were   cited   in   support   of   the   said proposition, the court did not consider it necessary to refer to the   said   decisions.     However,   without   considering   the provisions   of   the   1940   Act   or   the   two   judgments   of   the Constitution   Bench   in   the   cases   of   Harinagar   Sugar   Mills Ltd.   (supra)   and   Shankarlal   Aggarwala   and   Others (supra),   it   went   on   to   hold   that   the   powers   exercised   by   a court while making an award “Rule of Court”, are not judicial powers.   We find that the finding to that effect in the case of G.C.   Kanungo   (supra),   apart   from   being   per   incuriam   the provisions   of   the   1940   Act   and   the   law   laid   down   by   the Constitution   Bench   in   the   cases   of   Harinagar   Sugar   Mills Ltd.   (supra)   and   Shankarlal   Aggarwala   and   Others (supra), would also be hit by the rule of  sub silentio .   109 113. The   perusal   of   the   subsequent   judgments   of   this Court   would   also   fortify   the   position   that   the   powers exercised   by   the   court   under   the   provisions   of   the   1940   Act are   judicial   powers   and   that   the   power   to   make   an   award “Rule of Court” is not a mechanical power.   114. In the case of   Steel Authority of India Ltd. v. J.C. Budharaja,   Government   and   Mining   Contractor 48 ,   this Court observed thus: “ 17.   ……Whether   the   arbitrator   has   acted   beyond the terms of the contract or has travelled beyond his jurisdiction   would   depend   upon   facts,   which however   would   be   jurisdictional   facts,   and   are required to be gone into by the court ……” [ emphasis supplied] 115. While   considering   the   discretion   to   be   exercised   by the court under Section 16 of the 1940 Act, this Court, in the case   of   Ramachandra   Reddy   &   Co.   v.   State   of   A.P.   and Others 49 ,   observed thus: “ 5.   Under   the   Arbitration   Act,   Section   16   is   the provision   under   which   the   court   may   remit   the award   for   reconsideration   of   an   arbitrator   and necessity for remitting the award arises when there 48 (1999) 8 SCC 122 49 (2001) 4 SCC 241 110 are   omissions   and   defects   in   the   award,   which cannot   be   modified   or   corrected.   Remission   of   an award   is   in   the   discretion   of   the   court   and   the powers   of   the   court   are   circumscribed   by   the provisions   of   Section   16   itself.   Ordinarily, therefore,   a   court   may   be   justified   in   remitting the   matter   if   the   arbitrator   leaves   any   of   the matters   undetermined   or   a   part   of   the   matter which   had   not   been   referred   to   and   answered and   that   part   cannot   be   separated   from   the remaining   part,   without   affecting   the   decision   on the matter, which was referred to arbitration or the award   is   so   indefinite   as   to   be   incapable   of execution or that the award is erroneous on the face of   it.   Discretion   having   been   conferred   on   the court to remit an award,  the said  discretion has to be judicially exercised  and  an  appellate court would   not   be   justified   in   interfering   with   the exercise   of   discretion   unless   the   discretion   has been   misused.   What   is   an   error   apparent   on   the face of an award which requires to be corrected, has always   been   a   subject­matter   of   discussion.   An error   of   law   on   the   face   of   the   award   would   mean that   one   can   find   in   the   award   or   a   document actually incorporated thereto stating the reasons for a   judgment   some   legal   propositions   which   are   the basis   of   the   award   and   which   can   be   said   to   be erroneous.   Documents   not   incorporated   directly   or indirectly   into   the   award   cannot   be   looked   into   for the   purpose   of   finding   out   any   alleged   error.   The courts   are   not   to   investigate   beyond   the   award   of the   arbitrators   and   the   documents   actually incorporated   therein   and,   therefore,   when   there would be no patent error on the face of the award, it would   not   be   open   for   the   court   to   go   into   the proceedings   of   the   award.   If   the   application   for remittance   filed   by   the   claimants   invoking jurisdiction   of   the   court   under   Section   16   is 111 examined   from   the   aforesaid   standpoint   and   if   the order of the learned civil court, remitting Claim Item 1   is   tested   in   the   light   of   the   discussions   made above, the conclusion is irresistible that no case for remittance had been made out and the learned trial Judge   exercised   his   discretion   on   the   grounds which   do   not   come   within   the   four   corners   of   the provisions   of   Section   16   of   the   Arbitration   Act.   In fact   no   reasons   had   been   ascribed   for   interference with   the   award,   rejecting   Claim   Item   1   and   for remittance   of   the   same.   The   High   Court   being   the court   of   appeal,   was   therefore,   fully   justified   in exercise of its appellate power in correcting the error made by the Civil Judge in remitting Claim Item 1.” [ emphasis supplied] 116. A   seven­Judge   Bench   of   this   Court,   in   the   case   of SBP   &   Co.   v.   Patel   Engineering   Ltd.   and   Another 50 ,   was considering   the   question   as   to   whether   the   powers   of   the Chief   Justice   of   High   Court   or   Chief   Justice   of   India   under Sections   11(6)   and   8   of   the   1996   Act   are   administrative   or judicial.   117. After   referring   to   the   earlier   decisions,   P.K. Balasubramanyan,   J.,   delivering   a   majority   judgment, observed thus:  “ 36.   Going by the above test it is seen that at least in the matter of deciding his own jurisdiction and in the   matter   of   deciding   on   the   existence   of   an arbitration   agreement,   the   Chief   Justice   when confronted with two points of view presented by the 50 (2005) 8 SCC 618 112 rival parties, is called upon to decide between them and   the   decision   vitally   affects   the   rights   of   the parties   in   that,   either   the   claim   for   appointing   an Arbitral Tribunal leading to an award is denied to a party or the claim to have an arbitration proceeding set   in   motion   for   entertaining   a   claim   is   facilitated by   the   Chief   Justice.   In   this   context,   it   is   not possible   to   say   that   the   Chief   Justice   is   merely exercising   an   administrative   function   when   called upon to appoint an arbitrator and that he need not even   issue   notice   to   the   opposite   side   before appointing an arbitrator. 37.   It   is   fundamental   to   our   procedural jurisprudence,   that   the   right   of   no   person   shall   be affected   without   he   being   heard.   This   necessarily imposes an  obligation on the Chief Justice to  issue notice to the opposite party when he is moved under Section   11   of   the   Act.   The   notice   to   the   opposite party   cannot   be   considered   to   be   merely   an intimation   to   that   party   of   the   filing   of   the arbitration   application   and   the   passing   of   an administrative   order   appointing   an   arbitrator   or   an Arbitral   Tribunal.   It   is   really   the   giving   of   an opportunity   of   being   heard.   There   have   been   cases where claims for appointment of an arbitrator based on an arbitration agreement are made ten or twenty years after the period of the contract has come to an end. There have been cases where the appointment of   an   arbitrator   has   been   sought,   after   the   parties had   settled   the   accounts   and   the   party   concerned had   certified   that   he   had   no   further   claims   against the   other   contracting   party.   In   other   words,   there have   been   occasions   when   dead   claims   are   sought to   be   resurrected.   There   have   been   cases   where assertions   are   made   of   the   existence   of   arbitration agreements when, in fact, such existence is strongly disputed by the other side who appears on issuance 113 of   notice.   Controversies   are   also   raised   as   to whether   the  claim   that  is   sought   to  be  put   forward comes   within   the   purview   of   the   arbitration   clause concerned   at   all.   The   Chief   Justice   has   necessarily to apply his mind to these aspects before coming to a   conclusion   one   way   or   the   other   and   before proceeding   to   appoint   an   arbitrator   or   declining   to appoint   an   arbitrator.   Obviously,   this   is   an adjudicatory   process.   An   opportunity   of   hearing   to both   parties   is   a   must.   Even   in   administrative functions   if   rights   are   affected,   rules   of   natural justice   step   in.   The   principles   settled by   Ridge   v.   Baldwin   [(1963)   2   All   ER   66   :   1964   AC 40   :   (1963)   2   WLR   935   (HL)]   are   well   known. Therefore, to the extent,   Konkan Rly . [(2002) 2 SCC 388]   states   that   no   notice   need   be   issued   to   the opposite   party   to   give   him   an   opportunity   of   being heard before appointing an arbitrator, with respect, the same has to be held to be not sustainable.” 118. It could thus be seen that this Court in unequivocal terms has held that the powers exercised by the Chief Justice of   the   High   Court   or   Chief   Justice   of   India   under   Section 11(6)  of the  1996  Act are not administrative but  are  judicial powers.     It   would   thus   not   sound   to   reason,   that   when   a power under Section 11(6) of the 1996 Act for appointment of an arbitrator has been held to be a judicial power, the power to make an award a “Rule of Court”, which can be made only upon   the   satisfaction   of   the   court   on   the   existence   of   the 114 eventualities set out in Section 17 of the 1940 Act, is not an exercise of judicial power. 119. A   Constitution   Bench   of   this   Court   in   the   case   of State   of   Tamil   Nadu   v.   State   of   Kerala   and   Another 51 , after   an   elaborate   survey   of   all   the   earlier   judgments,   has summed   up   the   Law   on   “separation   of   powers   doctrine” under the Constitution of India, as under: “ Summary   of   separation   of   powers   doctrine under the Indian Constitution 126.   On   deep   reflection   of   the   above   discussion,   in our   opinion,   the   constitutional   principles   in   the context of Indian Constitution relating to separation of   powers   between   the   legislature,   executive   and judiciary may, in brief, be summarised thus: 126.1.   Even   without   express   provision   of   the separation   of   powers,   the   doctrine   of   separation   of powers   is   an   entrenched   principle   in   the Constitution   of   India.   The   doctrine   of   separation   of powers   informs   the   Indian   constitutional   structure and   it   is   an   essential   constituent   of   rule   of   law.   In other   words,   the   doctrine   of   separation   of   power though  not  expressly   engrafted in  the  Constitution, its sweep, operation and visibility are apparent from the scheme of Indian Constitution. Constitution has made   demarcation,   without   drawing   formal   lines between   the   three   organs—legislature,   executive and judiciary. In that sense, even in the absence of express   provision   for   separation   of   powers,   the separation   of   powers   between   the   legislature, 51 (2014) 12 SCC 696 115 executive   and   judiciary   is   not   different   from   the Constitutions   of   the   countries   which   contain express provision for separation of powers. 126.2.   Independence   of   courts   from   the   executive and   legislature   is   fundamental   to   the   rule   of   law and   one   of   the   basic   tenets   of   Indian   Constitution. Separation   of   judicial   power   is   a   significant constitutional   principle   under   the   Constitution   of India. 126.3.   Separation of powers between three organs— the   legislature,   executive   and   judiciary—is   also nothing   but a  consequence of  principles  of equality enshrined in Article 14 of the Constitution of India. Accordingly,   breach   of   separation   of   judicial   power may   amount   to   negation   of   equality   under   Article 14.  Stated  thus, a  legislation  can be invalidated  on the basis of breach of the separation of powers since such breach is negation of equality under Article 14 of the Constitution. 126.4.   The   superior   judiciary   (High   Courts   and Supreme   Court)   is   empowered   by   the   Constitution to declare a law made by the legislature (Parliament and   State   Legislatures)   void   if   it   is   found   to   have transgressed   the   constitutional   limitations   or   if   it infringed   the   rights   enshrined   in   Part   III   of   the Constitution. 126.5.   The doctrine of separation of powers applies to the final judgments of the courts. The legislature cannot   declare   any   decision   of   a   court   of   law   to   be void   or   of   no   effect.   It   can,   however,   pass   an amending  Act  to remedy  the defects pointed out by a court of law or on coming to know of it aliunde. In other   words,   a   court's   decision   must   always   bind unless   the   conditions   on   which   it   is   based   are   so fundamentally   altered   that   the   decision   could   not have been given in the altered circumstances. 116 126.6.   If   the   legislature   has   the   power   over   the subject­matter and competence to make a validating law,   it   can   at   any   time   make   such   a   validating   law and   make   it   retrospective.   The   validity   of   a validating law, therefore, depends upon whether the legislature   possesses   the   competence   which   it claims   over   the   subject­matter   and   whether   in making   the   validation   law   it   removes   the   defect which the courts had found in the existing law. 126.7.   The   law   enacted   by   the   legislature   may apparently seem to be within its competence but yet in substance if it is shown as an attempt to interfere with   the   judicial   process,   such   law   may   be invalidated being in breach of doctrine of separation of   powers.   In   such   situation,   the   legal   effect   of   the law on a judgment or a judicial proceeding must be examined   closely,   having   regard   to   legislative prescription or direction. The questions to be asked are: ( i )   Does   the   legislative   prescription   or legislative   direction   interfere   with   the judicial functions? ( ii )   Is   the   legislation   targeted   at   the decided   case   or   whether   impugned   law requires   its   application   to   a   case   already finally decided? ( iii ) What are the terms of law; the issues with which it deals and the nature of the judgment that has attained finality? If   the   answer   to   Questions   ( i )   and   ( ii )   is   in   the affirmative   and   the   consideration   of   aspects   noted in   Question   ( iii )   sufficiently   establishes   that   the 117 impugned law interferes with the judicial functions, the Court may declare the law unconstitutional.” 120. It could thus be seen that the Constitution Bench in the   aforesaid   case   held   that,   though   a   law   enacted   by   the Legislature may apparently seem to be within its competence but yet   in substance if it is shown as an attempt to interfere with the judicial process, such law may be invalidated being in   breach   of   doctrine   of   separation   of   powers.     The Constitution Bench stipulated three questions to be asked in such a situation, which are reproduced hereinabove.   121. We   have   already   held   that   since   the   State   Act   is referable to Entry 13 of List III of the Seventh Schedule to the Constitution of India, it is within the competence of the State Legislature.     The   question   that   will   have   to   be   considered   is whether it is an attempt to interfere with the judicial process. For that, we will have to consider the three questions framed by   the   Constitution   Bench   in   the   case   of   State   of   Tamil Nadu v. State of Kerala and Another   (supra). A perusal of the   various   provisions   of   the   State   Act   would   clearly   show 118 that   the   State   Act   has   been   enacted   since   the   State Government was aggrieved by various awards passed against it.  It was therefore found expedient, in the public interest, to cancel the arbitration clause in the agreement, to revoke the authority   of   the   arbitrators   appointed   thereunder   and   to enable the filing of appeals against the awards or decrees.  As already   discussed   hereinabove,   most   of   the   awards   were made  “Rules  of Court” prior  to  1993.   In many  of  the  cases, appeals   were   also   preferred   by   the   State   Government.     As such, we find that the legislative prescriptions and legislative directions   in   the   State   Act   undoubtedly   interfere   with   the judicial   functions.     It   is   also   clear   that   the   legislation   is targeted   at   the   awards   passed   which   have   become   “Rule   of Court”.     As   already   discussed   hereinabove,   the   powers exercised by the courts under Section 17 of the 1940 Act are judicial   powers   of   the   State.     As   such,   we   are   of   the considered view that question Nos. 1 and 2 as framed by the Constitution   Bench   in   the   case   of   State   of   Tamil   Nadu   v. State   of   Kerala   and   Another   (supra)   are   required   to   be answered in the affirmative.  Upon consideration of the terms 119 of the State Act, the issues with which it deals, it is clear that the State Act interferes with the judicial functions.   122. We   are   therefore   of   the   considered   view   that   the State Act, which has the effect of annulling the awards which have   become   “Rules   of   Court”,   is   a   transgression   on   the judicial   functions   of   the   State   and   therefore,   violative   of doctrine of “separation of powers”.   As such, the State Act is liable to be declared unconstitutional on this count. 123. We   may   also   gainfully   refer   to   the   observations   of this Court in the case of   P.  Tulsi  Das  and   Others  v.  Govt. of   A.P.   and   Others 52 .     In   the   said   case,   this   Court,   while considering the legislative power  of the State to enact a law, which amounted to taking away the rights, which are already accrued to the parties long back, has observed thus: “ 14.   On a careful consideration of the principles laid down   in   the  above   decisions  in   the   light   of   the   fact situation   in   these   appeals   we   are   of   the   view   that they   squarely   apply   on   all   fours   to   the   cases   on hand   in   favour   of   the   appellants.   The   submissions on   behalf   of   the   respondent   State   that   the   rights derived   and   claimed   by   the   appellants   must   be under any statutory enactment or rules made under Article   309   of   the   Constitution   of   India   and   that   in 52 (2003) 1 SCC 364 120 other respects there could not be any acquisition of rights   validly,   so   as   to   disentitle   the   State   to   enact the   law   of   the   nature   under   challenge   to   set   right serious anomalies which had crept in and deserved to   be   undone,   does   not   merit   our   acceptance.   It   is by   now   well   settled   that   in   the   absence   of   rules under Article 309 of the Constitution in respect of a particular   area,   aspect   or   subject,   it   is   permissible for   the   State   to   make   provisions   in   exercise   of   its executive   powers   under   Article   162   which   is coextensive   with   its   legislative   powers   laying conditions   of   service   and   rights   accrued   to   or acquired   by   a   citizen   would   be   as   much   rights acquired   under   law   and   protected   to   that   extent. The orders passed by the Government, from time to time beginning from February 1967 till 1985 and at any   rate   up   to   the   passing   of   the   Act,   to   meet   the administrative   exigencies   and   cater   to   the   needs   of public   interest   really   and   effectively   provided sufficient   legal   basis   for   the   acquisition   of   rights during   the   period   when   they   were   in   full   force   and effect.   The   orders   of   the   High   Court   as   well   as   the Tribunal   also   recognised   and   upheld   such   rights and   those   orders   attained   finality   without   being further   challenged   by   the   Government,   in   the manner   known   to   law.   Such   rights,   benefits   and perquisites   acquired   by   the   teachers   concerned cannot be said to be rights acquired otherwise than in   accordance   with   law   or   brushed   aside   and trampled   at   the   sweet   will   and   pleasure   of   the Government,   with   impunity.   Consequently,   we   are unable   to   agree   that   the   legislature   could   have validly   denied   those   rights   acquired   by   the appellants retrospectively not only depriving them of such rights but also enact a provision to repay and restore the amounts paid to them  to the State. The provisions   of   the   Act,   though   can   be   valid   in   its operation “in futuro” cannot be held valid insofar as it   purports   to   restore   status   quo   ante   for   the   past period   taking   away   the   benefits   already   available, 121 accrued   and   acquired   by   them.   For   all   the   reasons stated   above   the   reasons   assigned   by   the   majority opinion   of   the   Tribunal   could   not   be   approved   in our hands.   The provisions of Sections 2 and 3( a ) insofar   as   they   purport   to   take   away   the   rights from   10­2­1967   and   obligate   those   who   had them to repay or restore them back to the State are   hereby   struck   down   as   arbitrary, unreasonable   and   expropriatory   and   as   such   are violative   of   Articles   14   and   16   of   the Constitution   of   India.   No   exception   could   be taken,   in   our   view,   to   the   prospective   exercise   of powers   thereunder   without   infringing   the   rights already acquired by the appellants and the category of   the   persons   similarly   situated   whether approached   the   courts   or   not   seeking   relief individually.   The   provisions   contained   in   Section   2 have   to   be   read   down   so   as   to   make   it   only prospective,   to   save   the   same   from   the unconstitutionality   arising   out   of   its   retrospective application.”   [ emphasis supplied] 124. It   could   be   seen   that   this   Court   has   held   that   the provisions   of   Sections   2   and   3(a)   of   the   Andhra   Pradesh Education Service Untrained Teachers (Regulation of Services and Fixation of Pay) Act, 1991 insofar as they purport to take away   the   rights   accrued   in   favour   of   the   citizens   and requiring them to repay or restore them back to the State, are arbitrary, unreasonable and expropriatory.   It has, therefore, 122 been held that the said provisions are violative of Articles 14 and 16 of the Constitution of India. 125. As   already   discussed   hereinabove,   what   has   been done   by   the   State   Act,   is   annulling   the   awards   and   the judgments   and   decrees   passed   by   the   court   vide   which   the awards were made “Rule of Court”.  As such, the rights which accrued   to   the   parties   much   prior   to   the   enactment   of   the State Act have been sought to be taken away by it.   126. Though,   elaborate   arguments   have   been   advanced before us on various other issues, since we have held that the State Act is liable to be held unconstitutional on the ground of encroachment upon the judicial powers of the State, we do not   find   it   necessary   to   deal   with   the   submissions   made   on behalf of the parties with regard to other issues.   CONCLUSION : 127. In the result, we hold as under: (i) That the State Act in pith and substance is referable to Entry 13 of List III of the Seventh Schedule to the Constitution   of   India   and   not   to   the   Entries   12,   13, 123 14   and   37   of   List   I   of   the   Seventh   Schedule   nor   to Article   253   of   the   Constitution   of   India.     The   State Act, therefore, is within the legislative competence of the   State   Legislature.     In   any   case,   in   view   of   the Presidential   assent   under   Article   254(2)   of   the Constitution   of   India,   the   State   Act   would   prevail within   the   State   of   Kerala.     The   finding   of   the   High Court of Kerala, to the contrary, is erroneous in law; (ii) That the finding in the case of  G.C. Kanungo  (supra) to   the   effect   that   the   powers   exercised   by   the   courts in   passing   judgments   and   decrees   for   making   the arbitration awards “Rule of Court” is not an exercise of judicial power, is  per incuriam  the provisions of the 1940   Act   and   the   judgments   of   the   Constitution Bench   in   the   cases   of   Harinagar   Sugar   Mills   Ltd. (supra)   and   Shankarlal   Aggarwala   and   Others (supra); and (iii) That   the   High   Court   of   Kerala   is   right   in   law   in holding   that   the   State   Act   encroaches   upon   the 124 judicial   power   of   the   State   and   is   therefore   liable   to be struck down as being unconstitutional. 128. The   present   appeals   are   accordingly   disposed   of. Pending   application(s),   if   any,  shall   stand   disposed   of   in  the above terms. No order as to costs. 129. Before   we   part   with   the   judgment,   we   place   on record   our   deep   appreciation   for   the   valuable   assistance rendered   by   the   learned   counsel   appearing   on   behalf   of   the parties. ……..….......................J. [L. NAGESWARA RAO]  …….........................J.        [B.R. GAVAI] NEW DELHI; MAY 04, 2022. 125