Thermal Power Corporation Ltd Vs. Siemens Atkeingesellschaft  Insc 229 (28
P.K. BALASUBRAMANYAN, J.
I respectfully agree with the
reasoning and conclusion of my learned brother. I am inclined to add a few words
in view of the significance of the question and the frequency with which it may
Before the Arbitral Tribunal, Seimens, the contractor, made a claim for
compensation for the delay on the part of the N.T.P.C. for whom a works
contract was executed by Seimens. N.T.P.C. not only resisted the claim but also
made a counter claim. The counter claim was sought to be resisted by Seimens by
contending that all outstanding claims between the parties other than the one
it had put forward in the claim before the Arbitral Tribunal had been settled
between the parties as evidenced by a Memorandum of Understanding arrived at
between them described in the proceedings as Minutes of the Meeting (M.O.M.).
Seimens, therefore, contended that the claims made by N.T.P.C. before the
Arbitral Tribunal by way of counter claim was not maintainable or did not
survive the M.O.M. They had also raised a contention that N.T.P.C. not having
acted in terms of the arbitration clause by first raising the claim before the Engineer,
it could not straightaway raise the claim before the Arbitral Tribunal. That
part of the objection was given up at the stage of arguments. Therefore, what
survived for decision before the Arbitral Tribunal was the effect of the M.O.M.
on the claims of N.T.P.C. in the counter claim filed by it. The Arbitral
Tribunal thought it appropriate to dispose of certain preliminary questions
including the question whether N.T.P.C.
could pursue its counter claim in the light of the M.O.M. The Tribunal held
that other than claims 1 and 7 in the counter- claim, the other claims had
already been settled as evidenced by the M.O.M. and the said claims did not
survive for adjudication by the Arbitral Tribunal. It held that claim No. 7 was
not really a claim since what N.T.P.C. had done was to reserve its right to
make a claim on that score. As regards claim No. 1, the Tribunal held that it
was barred by limitation.
Thus, in what was called a partial award, the claim of Seimens was found to
be in time and the counter claim made by N.T.P.C. was found to be
N.T.P.C. sought to file an appeal against the partial award of the
Arbitral Tribunal by resort to Section 37(2)(a) of the Arbitration and
Conciliation Act, 1996 (for short, 'the Act').
It was the contention of N.T.P.C. that when the arbitrators refused to go
into the merits of its counter claim, they were really declining jurisdiction
in terms of sub-section (2) of Section 16 of the Act and in such a situation,
an appeal was clearly maintainable under Section 37(2)(a) of the Act. This was
sought to be met by Seimens by pointing out that it was not a case of declining
of jurisdiction by the Arbitral Tribunal to entertain the counter claim made by
N.T.P.C., but it was really a case of the counter claim being found
unsustainable for the reasons stated in the award. The partial award thus made
by the Arbitral Tribunal was an award on the counter claim of N.T.P.C. and it
was not a case which fell within either sub-section (2) or sub-section (3) of
Section 16 of the Act attracting Section 37(2)(a) of the Act.
What is sought to be argued on behalf of N.T.P.C., the appellant, is that
the Arbitral Tribunal had intended to deal with the question of jurisdiction
and limitation in the first instance and it was during the course of deciding
those questions that the counter claim had been rejected and this amounted to a
declining of jurisdiction by the Arbitral Tribunal in dealing with the counter
claim of N.T.P.C. The partial award was therefore a decision on a plea under
Section 16(2) of the Act and consequently appealable under Section 37(2)(a) of
In the larger sense, any refusal to go into the merits of a claim may be
in the realm of jurisdiction. Even the dismissal of the claim as barred by
limitation may in a sense touch on the jurisdiction of the court or Tribunal.
When a claim is dismissed on the ground of it being barred by limitation, it
will be, in a sense, a case of the court or Tribunal refusing to exercise
jurisdiction to go into the merits of the Jadhav [(1966) 1 S.C.R. 102], this
Court observed that:
"It is well-settled that a plea of limitation or a plea of res judicata
is a plea of law which concerns the jurisdiction of the court which tries the
proceedings. A finding on these pleas in favour of the party raising them would
oust the jurisdiction of the court, and so, an erroneous decision on these
pleas can be said to be concerned with questions of jurisdiction which fall
within the purview of S. 115 of the Code."
In a particular sense, therefore, any declining to go into the merits of a
claim could be said to be a case of refusal to exercise jurisdiction.
The expression 'jurisdiction' is a
word of many hues.
Its colour is to be discerned from the setting in which it is used. When we
look at Section 16 of the Act, we find that the said provision is one, which
deals with the competence of the Arbitral Tribunal to rule on its own
jurisdiction. SBP & Co.
sense confined the operation of Section 16 to cases where the Arbitral
Tribunal was constituted at the instance of the parties to the contract,
without reference to the Chief Justice under Section 11(6) of the Act. In a
case where the parties had thus constituted the Arbitral Tribunal without
recourse to Section 11(6) of the Act, they still have the right to question the
jurisdiction of the Arbitral Tribunal including the right to invite a ruling on
any objection with respect to the existence or validity of the arbitration
agreement. It could therefore rule that there existed no arbitration agreement,
that the arbitration agreement was not valid, or that the arbitration agreement
did not confer jurisdiction on the Tribunal to adjudicate upon the particular
claim that is put forward before it. Under sub-section (5), it has the obligation
to decide the plea and where it rejects the plea, it could continue with the
arbitral proceedings and make the award. Under sub- section(6), a party
aggrieved by such an arbitral award may make an application for setting aside
such arbitral award in accordance with Section 34. In other words, in the
challenge to the award, the party aggrieved could raise the contention that the
Tribunal had no jurisdiction to pass it or that it had exceeded its authority,
in passing it. This happens when the Tribunal proceeds to pass an award. It is
in the context of the various sub-sections of Section 16 that one has to
understand the content of the expression 'jurisdiction' and the scope of the
appeal provision. In a case where the Arbitral Tribunal proceeds to pass an award
after overruling the objection relating to jurisdiction, it is clear from
sub-section (6) of Section 16 that the parties have to resort to Section 34 of
the Act to get rid of that award, if possible. But, if the Tribunal declines
jurisdiction or declines to pass an award and dismisses the arbitral
proceedings, the party aggrieved is not without a remedy. Section 37 (2) deals
with such a situation.
Where the plea of absence of jurisdiction or a claim being in excess of
jurisdiction is accepted by the Arbitral Tribunal and it refuses to go into the
merits of the claim by declining jurisdiction, a direct appeal is provided. In
the context of Section 16 and the specific wording of Section 37(2)(a) of the
Act, it would be appropriate to hold that what is made directly appealable by
Section 37(2)(a) of the Act is only an acceptance of a plea of absence of
jurisdiction, or of excessive exercise of jurisdiction and the refusal to
proceed further either wholly or partly.
In a case where a counter claim is
referred to and dealt with and a plea that the counter claim does not survive in
view of the settlement of disputes between the parties earlier arrived at is
accepted, it could not be held to be a case of refusal to exercise jurisdiction
by the Arbitral Tribunal.
Same is the position when an Arbitral Tribunal finds that a claim was dead
and was not available to be made at the relevant time or that the claim was not
maintainable for other valid reasons or that the claim was barred by
limitation. They are all adjudications by the Tribunal on the merits of the
claim and in such a case the aggrieved party can have recourse only to Section
34 of the Act and will have to succeed on establishing any of the grounds
available under that provision.
It would not be open to that party to take up the position that by refusing
to go into the merits of his claim, the Arbitral Tribunal had upheld a plea
that it does not have jurisdiction to entertain the claim and hence the award
or order made by it, comes within the purview of Section 16(2) of the Act and
consequently is appealable under Section 37(2)(a) of the Act.
In the case on hand, what the Tribunal has found is that in view of the M.O.M. wherein the various claims of either party were thrashed out and
settled, N.T.P.C. could not pursue most of the claims set out in the counter
claim. This is a finding on the merits of the claim of N.T.P.C. It is not a
decision by the Arbitral Tribunal either under Section 16(2) or Section 16(3)
of the Act. Consequently, the High Court was right in holding that the appeal
filed by N.T.P.C. under Section 37(2)(a) was not maintainable.