'Shocked & Surprised' : Supreme Court Pulls Up Bihar Legal Department For 'Misadventure' Of Filing Suit Against Arbitration Award

The Supreme Court recently came down heavily on the legal department of the State of Bihar for instituting a wholly non-maintainable legal proceedings.

"We are not dealing with a person having lack of knowledge of law but the State of Bihar having large legal department working for it", a bench headed by Justice Sanjay Kishan Kaul remarked while dismissing a special leave petition filed by the Bihar Government.

The issue related to a dispute between the Bihar government and a road contractor, in which the arbitrator passed an award of nearly Rs 2.05 crores against the government.

Instead of challenging the arbitration award by filing an appeal under Section 34 of the Arbitration Act, the Government filed a title suit. The Supreme Court was taken aback to note this development and termed it "sheer absurdity!'.

"The petitioner for the reasons best known to it persuaded a misconceived adventure of filing a title suit! We are not dealing with a person having lack of knowledge of law but the State of Bihar having large legal department working for it. To say the least, it is the sheer absurdity!"

The title suit continued from 2005 to 2012. After 7 years, the Government realized its mistake and attempted to convert into an appeal under Section 34 of the Arbitration Act by taking recourse to Section 151 of the CPC. This attempt was "naturally unsuccessful", the Supreme Court records in its order, as the suit was dismissed as non-maintainable.

After that, the Government filed first appeal in the High Court, and tried to change the nomenclature of the appeal as an appeal under Section 37 of the Arbitration Act.

The 'second misadventure'(as termed by the Supreme Court) also met with no success, as the High Court dismissed the appeal. Challenging this, the Bihar Government filed SLP in the Supreme Court.

The Supreme Court heavily criticized the legal department for instituting the suit proceedings despite the same were clearly barred as per the Arbitration and Conciliation Act.

"We are shocked and surprised to note that the legal department of the State of Bihar misadventured into a completely non-maintainable remedy when the Arbitration Act is a Code by itself and on top of that took 7 years to realize this mistake", the bench, also comprising Justices Dinesh Maheswari and Hrishikesh Roy observed.

If losses are suffered on account of the non-maintainable proceedings, it is for the State to recover them from the "officers concerned who were so legally ignorant", the Court said.

"If the petitioner has suffered losses on account of this misadventure, it is for it to recover the same from the officers concerned who were so legally ignorant, despite being part of the legal department"

The Court said that it was showing consideration to the fact that a young lawyer was appearing for the Bihar Government while limiting the costs as Rs 25,000. The Court also directed the executing court to proceed with the execution expeditiously, considering the delay.

While issuing notice on the SLP in 2019, the Court had directed Bihar Government to deposit Rupees one crores in the execution court to the credit of the contractor.

Click here to read/download the judgment