Union of India. Vs. M/S. G.S. Atwal & Co. (Asansole) [1996] INSC 304 (22 February 1996)
Ramaswamy,
K.Ramaswamy, K.G.B. Pattanaik (J) K. Ramaswamy. J.
CITATION:
1996 SCC (3) 568 JT 1996 (2) 607 1996 SCALE (2)447
ACT:
HEAD NOTE:
This
appeal by special leave arises from the judgment and order dated February 12, 1992 of the Division Bench of the
Calcutta High Court in F.M.A.T. No. 1990 of 1991. The respondent had entered
into an agreement in 1968-69 for excavation of feeder canal from RD.68.00 to
RD.97.00. During the course of the execution of the work certain disputes had
arisen between the respondent and the appellant. The disputes were referred
from time to time to arbitration.
This
is the 5th arbitration the instalment. Details of previous four arbitrations
are as under:
S.
Name of the Award Interest Amount No. Arbitrator Rs. Rs. Rs.--- -----------
----------- ------------ -------------
1.
R.P. Ahuja 4,70.000.00 78,129.45 5,48,129.45
2.
O.P. Gupta 7,00,974.00 7,604.96 7,08,578.96
3. T. Rajaram
23,78,100.00 23,34,501.00 47,12,601.60
4. Brig.D.R.
Kathuria 78,90,570.00 38,40.653.88 1,17,31,223.00
------------------------------------------------------------ The dispute as
regards hire charges of equipment load by Farakka Barage Project was referred
to Goyal Committee for rationalization. On submission of its report and in
furtherance thereof the respondent by letter dated August 8, 1984 had claimed for reference to the arbitration thus:
"And
whereas M/s. Tarapore & Co. having long back been refunded the excess hire
charges recovered earlier, but having became refundable on the basis of said Goyal
Committee Report, in our case the excess recovered amount and now refunded to
us despite repeated, written as well as oral requests and demands in this
respect." [emphasis supplied] In furtherance thereof, by proceedings dated
November 18, 1984, the General Manager, Farakka
Barrage Project appointed T. Raja Ram as the sole arbitrator to settle the
disputes. After entering into the reference on December 12, 1984, admittedly the respondent laid claim for the refund of
hire charges which was disputed by counter-statement by the appellant. Later
the respondent laid further claims on March 6, 1985 for Rs.1,68,000/- towards
repairs on departmental equipments; Rs.1,38,600/- towards refund of expenses on
security watch and ward; Rs.28,12,085.33 towards final bill of the firm; Rs.
95,60,653.10 towards part interest and the amount of claim in addition to the
refund of hire charges was Rs.32,45,538.27. The appellant in its statement had
objected to unilateral enlargement of the reference. The arbitrator awarded by
a non-speaking award dated August 18, 1987,
a sum of Rs.35,72,550/- with interest at 15% per annum from July 1, 1976 or the date of the payment of
decree whichever was earlier.
The
appellant fixed Misc. Case No.95/87 on April 8, 1988 under Section 30(c) of the
Arbitration Act, 1940 [for short, the 'Act'], questioned the award contending
that the claim was barred by limitation; the arbitrator had no power to enlarge
the scope of the arbitration and he had no power to award interest at higher
rate without any claim before it. The Assistant District Judge, Murshidabad by
his order dated January
19, 1991 set aside the
award upholding these contentions. On appeal, in the inpugned order the High
Court set aside the order of the civil Court holding that there was no error
apparent on the face of the award warranting setting aside of the award. It
directed the civil Court to take steps for passing a decree in terms of the
award as expeditiously as possible not later than four months. Thus this appeal
by special leave.
Since Shri
Goswamy, learned senior counsel appearing for the appellant has not pressed the
bar of limitation for our consideration, it is unnecessary for us to go into that
question. Only two questions have been canvassed, viz., the power of the
arbitrator to unilaterally enlarge the scope of the reference and the power to
award the amount in a non- speaking award and the rate of interest. The
question therefore, is: whether the arbitrator has jurisdiction and power to
unilaterally enlarge the reference? As extracted above, the specific demand and
acceptance by the Manager of Farakka Barage Project was to refer the dispute of
refund of hire charges pursuant to the report of the Goyal Committee.
That
was acceded to and reference to T. Raja Ram was made for arbitration on November 18, 1984 and claim in that behalf was duly
made. On March 6, 1985 claims were laid by the respondent
for arbitration. They were objected to by the respondent. The question emerges:
whether the arbitrator has power to unilaterally enlarge the reference and
adjudicate the claims? It is seen that impugned award is a non-speaking award. Shri
Soli J. Sorabjee, learned senior counsel for the respondent contended that the
appellant having participated before the arbitrator and had an award
unfavorable to them, could not question invalidity thereafter. The appellant
had participated in the proceedings before the arbitrator with full knowledge
of these facts. The conduct on the part of the appellant amounts to
acquiescence to the power and jurisdiction of the arbitrator to make the award.
Thereby the plea of lack of jurisdiction cannot be permitted to be raised by
the unsuccessful party to the arbitration. In support thereof he placed strong
reliance in N.Chillappam v. Secretary, Kerala State Electricity Board and Anr.[(1975)
1 SCC 289]; M/S. Neelkanthan Construction v. Superintending Engineer, National
Highways, Salem and Ors. [(1988) 4 SCC 462]; Russel
on Arbitration, 17th Edition, page 215; 33, Chowdhri Murtaza Hossein v. Mussumat
Bibi Bechunnisa [L.R. (IA) Vol.III 209]; Champsey Bhara & Company v. Jivraj
Balloo Spinning and Weaving Company, Ltd. [L.R. (IA)Vol.I 324]; Champsey Bhara
Company v. The Jivraj Ballo Spinning and Weaving Company Ltd. [AIR 1923 P.C.
66] and Firm Madanlal Roshan Lal Mahajan v. Hukumchand Mills Lrd., Indore
[(1967) 1 SCR 105 ].
To
constitute an arbitration agreement, there must be an agreement that is to say
the parties must be ad idem.
Arbitrability
of a claim depends upon the dispute between the parties and the reference to
the arbitrator. On appointment, he enters upon that dispute for adjudication.
The
finding of the arbitrator on the arbitrability of the claim is not conclusive,
as under Section 33 ultimately it is the court that decides the controversy. In
U.P. Rajkiya Nirman Nigam Ltd. v. Indure Pvt.Ltd. & Ors. decided on February 9, 1996, a three-Judge Bench of this Court
[to which one of us, K. Ramaswamy, J., was a member was to consider the
question whether the arbitrator had jurisdiction to decide the arbitrability of
the claim itself. In that context, the question arose: whether there was an
arbitration agreement for reference to the arbitrator? It was held that the arbitrability
of the controversy of the claim being a jurisdictional issue, the arbitrator
cannot cloth himself with jurisdiction to conclusively decide, whether or not
he had power to decide his own jurisdiction. Relying upon the passage in "Russel
on Arbitration" [19th Edn.] at page 99, this Court had held that it can
hardly be within the arbitrator's jurisdiction to decide whether or not a
condition precedent to his jurisdiction has been fulfilled. The arbitrator had
no power cide his own jurisdiction. The arbitrator is always entitled to
inquire whether or not he has jurisdiction to decide the dispute. He can refuse
to deal with the matter at all and leave the parties to go to the court if he
comes to the conclusion that he has no power to deal with the matter; or he can
consider the matter and if he forms the view that the contract upon which the
claimant is relying on and from which, if established, he alone has
jurisdiction, he can proceed to decide the dispute accordingly. Whether or not
the arbitrator has jurisdiction and whether the matter is referred to or is
within the ambit of clause for reference of any difference or dispute which may
arise between the martis, it is for the Court to decide it. The arbitrator by a
wrong decision cannot enlarge the scope of the submission.
It is
for the court to decide finally the arbitrability of the claim in dispute or
any clause or a matter or a thing contained therein or the construction
thereof. It was, therefore, held that "arbitrators cannot cloth themselves
with jurisdiction to decide conclusively the arbitrability of the
dispute." It si for the court under Section 33 or on appeal thereon to
decide it finally". There is no estoppel to challenge the action and to
seek a declaration under Section 33. It was further held that "mere
acceptance or acquiescence to the jurisdiction of the arbitrator for
adjudication of the dispute as to the extent of the arbitration agreement or arbitrabity
of the dispute does not disentitle the appellant to have the remedy under
Section 33 through the court." The remedy under Section 33 is "the
only right royal way for deciding the controversy." In Law of Arbitration
by Justice Bachawat [2nd (1987) Ed.] at page 90 it is stated that jurisdiction
of the arbitrator is solely derived from the arbitration agreement.
The
arbitrator has jurisdiction to deal only with matters which on a fair
construction of the terms of the contract,the parties agreed to refer to him.
Whether or not the arbitrator acts within the jurisdiction depends solely upon
the clause of reference. The court may grant a declaration that the party
appointed by the defendants as the arbitrator has no jurisdiction. The
submission furnishes the source and prescribes the limit of the arbitrator's
authority. The arbitrator take upon himself an authority which the submission
does not confer on him. The award must in substance and form conform to the submission,
It must comply in point of form to the directions contained in the submission.
If the award determines any matter not referred to arbitration and such matter
cannot be separated without affecting the determination of the matters
preferred, the award is invalid. It may be remitted to the arbitrator for
reconsideration under Section 16 and if the arbitrator acts in excess of
authority, the award should be set aside.
In N. Chellappan v. Secretary, Kerala State Electricity Board and Anr. [(1975) 1 SCC 289], the facts
therein were that the arbitrators nominated an umpire. The arbitrators did not
make the award within the time limit which ultimately expired. Thereupon the
appellant had invoked the jurisdiction of the civil Court to revoke the
authority of the arbitrator under Sections 5 and 11 of the Act. An application
was made to appoint 'K' to enter upon the reference as an umpire and to proceed
with the arbitration.
Another
application was made to appoint 'K' as the sole arbitrator in place of two
arbitrators. The court revoked the authority of the arbitrators and directed
the umpire to enter upon the dispute in his capacity as an umpire and allowed
the application of the appellant to appoint 'K' as the sole arbitrator. The
umpire entered upon the reference in his capacity as an umpire. The party
submitted to his jurisdiction, conducted the proceedings and when the award
went against the respondent-Board umpire's jurisdiction was challenged. On
those facts a three-Judge Bench of this Court had held that when the respondent
Board acquiesced to the jurisdiction of the umpire as the sole arbitrator, the
Board was, by acquiescence, precluded from challenging the jurisdiction of the
umpire. When the party consented to the appointment and took part in the
proceedings with full knowledge of the relevant fact of appointment as the sole
arbitrator it amounted to acquiescence. Same is the ratio in M/s. Neelankantan
& Bros. Construction v. Superintending Engineer, National Highway, Salem & Ors. [(1986) 4 SCC 462] wherein a two-Judge Bench of
this Court held that if the parties to the reference either agree beforehand to
the method of appointment, or afterwards acquiesce in the appointment made,
with full knowledge of all the circumstances, they will be precluded from
objecting to such appointment as invalidating subsequent proceedings.
Attending
and taking part in the proceedings with full knowledge of the relevant fact
will amount to such acquiescence. The rest of the decisions are not directly on
the point. Therefore, it is not necessary to burden the judgment with reference
to those cases.
It
would thus be seen that appointment of an arbitrator is founded upon the
agreement between the parties, Once on his appointment either by consensus or
by an order of the court, the parties put forth their claim and participate in
the proceedings, the parties acquiesce to the appointment of the arbitrator and
the award made thereon binds the parties.
The
party who has suffered the award is precluded from questioning the power and
jurisdiction of the arbitrator to make the award. The reason being that the
parties have by contract consented to the forum to adjudicate their dispute and
to-give a decision, by a non-speaking or speaking award in terms of the
agreement. This principle is inapplicable to the jurisdiction of the arbitrator
to unilaterally enlarge his own power to arbitrate any of the disputes. It is
seen that by express agreement between the parties, arbitrability of the claim
for refund of the hire charges was referred to arbitration and T. Raja Ram came
to be appointed as arbitrator and entered upon that reference. But when claim
was made, he enlarged the dispute unilaterally without there being any
agreement by the appellant. In fact they objected to the enlargement of the
Scope of the arbitration. Since arbitrator went on adjudicating the disputes,
they were left with no option but to participate in the proceedings as the
claims were pressed for and parties submitted to the jurisdiction of the
arbitrator. Therefore, it did not amount to acquiescence. The jurisdiction of
the arbitrator is founded upon the agreement between the parties. To the extent
of the agreement, the parties are bound by the decision of the arbitrator. But
the arbitrator cannot enlarge the scope of his arbitration and make in a non
speaking award, a lump sum amount of all claims, after enlarging his
jurisdiction on non-accepted or objected claims. In Champsey Bhara Company case
[supra] Lord Dunedin, speaking for the Privy Council had held that "(t)he
question of whether an arbitrator acts within his jurisdiction is, of course,
for the Court to decide but whether the arbitrator acts within his jurisdiction
or not depends solely upon the clause of the reference. It is, therefore, for
the Court to decide... whether the dispute which has arisen is a dispute
covered by Cl. 13 of the Articles". In Gobardhan Das v. Lachmi Ram and
Ors. [AIR 1954 SC 689], this Court held that so long as the arbitrator acts
within the scope of his authority there is no doubt that the decision must be
accepted as valid and binding on the parties. In that case, the agreement
entered into between the parties read as under:
"that
the arbitrators should sit together, take down the statements of the parties,
hear and consider the arguments brought forward by the parties, inspect the
documents of all descriptions and take other evidence and evidence of witnesses
and whatever award they shall give, is and shall be, acceptable to the parties
and whatever award the arbitrators may give unanimously or by majority of votes
shall be treated as true and correct and valid in every court and shall be
binding upon all of us executants parties." The arbitrators went out of
their way to declare that whatever amount in addition to Rs.3,500/- was found
due from respondent No.1 upon the bahikhata account was remitted having regard
to his labour and poverty and the whole unspecified amount found due against
respondent No.2 was remitted in full in view of his labour and poverty. It was
contended that the award was decided outside the authority of the arbitrators.
It was held that the arbitrators had clearty misdirected themselves and had
exceeded the scope of their authority and the award was, therefore set aside.
Thereby,
the arbitrator had misdirected himself and committed legal misconduct in making
the award vitiating the entire award itself. It is difficult to decide as to
what extent each of the claims was accepted or rejected. In that view, it is
not necessary to go into the second question of the power of the arbitrator to
award interest or excess rate of interest.
The
appeal is accordingly allowed. The order and judgment of the High Court is set
aside and that of the trial Court is restored, but in the circumstances,
parties are directed to bear their own costs.
Back
Pages: 1 2
