Sanjib Banerjee, J.@mdashCourts and tribunals in this country-and Judges and officers manning them-do not have omnibus authority to right any perceived wrong. The contours of their authority are defined either by the statute under which they operate or the business that is allocated. The present challenge is fashioned u/s 34 of the Arbitration and Conciliation Act, 1996 and the petitioner insists that the order dated November 1, 2011 passed by the arbitrator is an arbitral award within the definition of section 2(2) of the Act of 1996. At any rate, the petitioner contends that it is an interim award and as an interim award is included within the definition of an award in the Act, it is amenable to challenge directly u/s 34 of the Act.
2. Some of the essential facts need to be noticed before the question of the authority of the Court to entertain the challenge is assessed. Following a request by the petitioner herein u/s 11 (6) of the Act, the arbitration Judge of this Court found that there was a valid arbitration agreement and there were live disputes to go to a reference - only so much is trusted to the arbitration Judge of this Court, the task of naming of the arbitrator or arbitrators is assigned elsewhere. Following the adjudication of the matter by the arbitration Judge, to the extent the adjudication was necessary in the light of the Constitution Bench judgment rendered in
3. The arbitrator was appointed and the statement of claim Tiled by this petitioner in the reference. The respondent herein lodged its counter statement where matters pertaining to an altogether different contract between the parties, containing a separate arbitration agreement, were made part of a counter-claim. The petitioner herein objected to such matters pertaining to another agreement being carried to the reference by the respondent in course of its counter-claim. It does not appear that a written application in such regard was filed by the petitioner herein but the objection was squarely taken and it was on the objection that the arbitrator rendered a finding which has been assailed as an interim award in the present proceedings.
4. It is also a matter of some relevance that the respondent herein has filed a suit in this Court on the basis of its perceived claim in the other agreement, matters pertaining to which were sought to be included by way of the counter-claim. The petitioner herein claims to have already filed its written statement in the suit.
5. The arbitrator held that the counter-claim could be entertained in course of the reference only upon the respondent herein seeking and obtaining a stay of its suit filed in furtherance of the same claim in this Court. A letter has since been written by the respondent to the arbitrator seeking an adjournment in the reference on the ground that an application of such nature was being prepared by the respondent.
6. The question that arises is as to whether the challenge that was made by the petitioner herein before the arbitrator can be renewed at this stage u/s 34 of the 1996 Act. There is a short answer to the question. It is that in view of sections 16 and 37(2) of the 1996 Act no question arises of the arbitrator''s decision rejecting the petitioner''s objection being subjected to a challenge u/s 34 of the 1996 Act at this stage as such decision cannot be deemed to be an award, whether interim or final, in the scheme of the 1996 Act.
7. But a more protracted answer is called for in the context of the body of judicial authorities that has been cited on behalf of the petitioner herein. The petitioner says that even decisions rendered by an arbitral tribunal on matters concerning procedure that attain an element of finality may be regarded as interim awards and immediately made the subject- matter of a challenge u/s 34 of the 1996 Act. In support of such proposition, the petitioner has referred to Russell on Arbitration (23rd Ed.) and passages from Chapter 6 thereof on what order would amount to an award and what factors would go in an order of the arbitral tribunal being regarded as an award. The discussion in the revered text and the petitioner''s submission on such aspect does not appear to be apposite in the context. It is possible that some arbitral orders (say. a finding as to the law applicable to the parent contract) may be deemed to interim orders if there is an element of finality in them. But the present matter is squarely covered by the clear provisions of the statute.
8. The petitioner refers to a judgment reported at
9. A judgment of a Single Judge of Delhi High Court reported at 2005 (3) ALR 234 has been cited by the petitioner for the proposition that in matters as the present one, where the petitioner would be prejudiced and there would be serious miscarriage of justice in a protracted reference in considering a matter for which the parties did not agree to go to that arbitral tribunal, the order of the arbitral tribunal, however, it is named, should be seen to be an award that is capable of being challenged u/s 34 of the Arbitration and Conciliation Act, 1996. The judgment noticed the contrary view expressed by the Delhi High Court itself, that upon reading of sections 16 and 37 of the 1996 Act it was not possible to hold that a failed challenged to the competence of the arbitral tribunal could be carried to Court before a final award was rendered in the reference; but distinguished such view on the basis of the second sentence appearing in paragraph 11 of the report:
This issue is not concerned with the competence of the arbitral tribunal, therefore, the impugned order cannot be placed in the category of orders passed under sections 16(2) and 16(3) of the Act."
10. Such distinction will make whatever principle that has been decided by the Single Judge inapplicable in the present context without the Court now being called upon to accept or reject the view expressed on the legal question that was answered in that case. The objection in that case was on the ground of section 69 of the Partnership Act, 1932 which the arbitral tribunal rejected.
11. The petitioner also refers to Commercial Arbitration by Mustill & Boyd (1982 Ed.) and Redfern & Hunter on Law and Practice of International Commercial Arbitration (3rd Ed.) on the various kinds of orders that may be passed by the arbitral tribunals and regarded as awards by Court.
12. The petitioner has brought a judgment reported at
13. At paragraphs 17 and 18 of the report, the Supreme Court said in so many words that the word "jurisdiction" has several hues. The Supreme Court read the objection carried by the claimant in the relevant reference to be an objection not on the ground of the competence of the arbitral tribunal but an objection in the nature of waiver or estoppel barring a party to carry a particular claim or counter-claim. There is a distinction between the two: in a case where the authority of a tribunal to adjudicate upon any particular matter is challenged, its competence based on the contract or the law governing the tribunal is called into question; in the other case it is the propriety of the claim being made by a party to the proceedings which is under attack. Qualitatively, the two are poles apart. The Supreme Court judgment must be read in such context. In the present case, it is the authority of the arbitrator to adjudicate upon the counter-claim that was challenged. Such challenge was on the ground of the perceived incompetence of the arbitrator to take up the matter in view of his authority being restricted to the agreement under which he was appointed. The challenge was not on the ground that the counter-claim was barred on account of the respondent having waived or abandoned the same.
14. Judgments reported at 1992(1) LLR 1 and 1992(1) LLIR 169 have also been placed by the petitioner. These judgments deal with orders of arbitral tribunals which amount to awards despite such orders covering procedural'' matters. The decisions rendered on arbitration matters prior to 1996 have all to be read with the caveat that the law relating to arbitration has undergone such a sea change internationally that it may not be safe to go by the older authorities. In any event, in the first case cited, the seller was found to have abandoned the claim and a subsequent inclusion of such claim before the arbitral tribunal was repelled on the ground that it stood abandoned. This decision was regarded by the Court to be an interim award since there was an element of finality in it in that it concluded the seller''s claim such that the seller was precluded from making any further claim without the arbitral tribunal''s view being dislodged. In the second case, the Court entertained the challenge as a challenge to an award not on the Court''s satisfaction that the arbitral tribunal''s ruling amounted to an award but only by virtue of the arbitral tribunal having described the ruling as an "interim final award." The further case referred to by the petitioner is reported at 1999(1) LLR 225. There were two originating summons before the Court and the Court''s opinion was sought on several matters. The question was whether the arbitral tribunal in that case had the authority to revisit an order of amendment that had already been made. With respect, it cannot be appreciated as to how a decision rendered on the originating summons and on the question that was posed before the Court can be of any relevance in the present context or of any assistance to the petitioner.
15. Section 16 of the 1996 Act permits a challenge to the jurisdiction of the arbitral tribunal to be made before the arbitral tribunal. After the Constitution Bench judgment in SBP & Co., if an arbitral tribunal is constituted upon a request being received by the Chief Justice or his designate, it is for the Chief Justice or his designate to assess whether there are live claims to go to a reference and whether the arbitration agreement is valid and in existence. In course of a reference carried directly to an arbitral tribunal without the intervention of the Court, the arbitral tribunal is left free to rule on its own jurisdiction. Even in cases where the arbitral tribunal is constituted by the Chief Justice or his designate, questions as to the existence or validity of the arbitration agreement and as to the jurisdiction of the arbitral tribunal can also be gone into by the tribunal itself. The fact that the tribunal has been constituted by the Court would not preclude all challenges conceivable u/s 16 of the 1996 Act being carried before it.
16. An example may be appropriate. Say, the physical existence of an arbitration agreement is called into question in course of a request u/s 11(6) of the 1996 Act before the Chief Justice or his designate and that is answered in favour of the applicant and the arbitral tribunal is constituted. It would not follow that in view of the existence or the validity of the arbitration agreement having been pronounced upon by the Chief Justice or his designate, all other questions available to be raised u/s 16 of the 1996 Act would be barred. Despite the Chief Justice or his designate finding an arbitration agreement to be valid, matters which are not covered by such agreement may be carried by either party to the reference by way of a claim or a counter-claim and it would be open to the other party to challenge the competence of the arbitral tribunal to entertain such matters. The resultant decision of the arbitral tribunal would then be amenable to an appeal u/s 37(2) of the 1996 Act only if the challenge is upheld. If the challenge is repelled by the arbitral tribunal, in view of the wording of sub-sections (5) and (6) of section 16 of the 1996 Act, the party aggrieved has to wait till the arbitral award is rendered before the objection as to the competence of the arbitral tribunal can be made a part of the challenge to the arbitral award itself. It may well be that despite a challenge to the scope of the arbitration agreement failing, the award is passed in favour of the challenger on merits. The challenger, in such case, will not be called upon to challenge the award merely on the ground that the original objection carried by the challenger was overruled.
17. In the present case, it is the clear case of the petitioner that there were two or more agreements between the same parties which contained individual arbitration clauses. In fact, in respect of one of the agreements there is a suit pending in this Court. The respondent in the reference sought to make the claim in such pending suit as part of its counter-claim in the reference. The objection that the petitioner herein carried before the arbitral tribunal was on the competence of the arbitral tribunal to adjudicate upon the matters referred to in the counter-claim. It was a jurisdictional-objection-founded on the agreement under which the arbitrator derived his authority -that was taken and that is squarely covered by section 16 of the 1996 Act. In the order dated November 1, 2011 finding against the petitioner on such objection, the petitioner cannot assail it as an interim award u/s 34 of the 1996 Act.
18. Section 16(5) of the 1996 Act mandates that upon a challenge as to the jurisdiction of the arbitral tribunal (it must be remembered that the nature of the challenge is not exhaustively described in the opening limb of sub-section (1), the arbitral tribunal may decide on such issue, "and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award." Sub-section (6) says that a party aggrieved "by such an arbitral award" may make an application for setting aside the same in accordance with section 34. The expression "such an arbitral award" in sub-section (6) refers to the last two words of sub-section (5). In other words, upon an objection as to jurisdiction being rejected by an arbitral tribunal, the arbitral tribunal should proceed to deal with the merits of the matter before it and render an award and upon such award being rendered would the objector have a chance to renew the objection in course of challenging the award.
19. Section 34(2)(a)(iv) of the 1996 Act contemplates a challenge to the arbitral award based on the competence of the arbitral tribunal to decide certain matters. The proviso to the relevant sub-clause makes it abundantly clear that if matters which fall within the jurisdiction of the arbitral tribunal can be severed from matters which have been decided and are perceived to have been outside the domain of the arbitral tribunal, it would be the duty of the Court to do so. In any event, the underlying non-interventionist philosophy of the 1996 Act, from the model on which it is founded to section 5 thereof and the judicial interpretation rendered thereon, would go to show that the scope of interference by Court is limited only to the extent expressly provided. Merely because the arbitrator may have committed an error or that the Court perceives the arbitrator to have committed a mistake in the matter that is carried to the Court by a party to the reference cannot overwhelm the Court and make it disregard the bounds of its authority to right to perceived error.
20. A reference in such context may be made to a recent judgment of the Supreme Court reported at
21. There is no merit in the petitioner''s assertion that this Court would have the authority to accept a challenge to the order dated November 1, 2011 u/s 34 of the 1996 Act. AP No. 1056 of 2011 is dismissed with costs. It is made clear that the merits of the matter have not been gone into and nothing in this order should be deemed to be an endorsement of the view expressed by the arbitrator in the order dated November 1, 2011.
The respondent has not been called upon.
Urgent xerox photocopies of this order, if applied for, be supplied to the parties subject to compliance with all requisite formalities.
