2002 (5) TMI 701 - SC - Companies Law

Whether a given dispute inclusive of the arbitrator s jurisdiction comes within the scope or purview of an arbitration clause or not? Held that - Appeal allowed. The jurisdiction to remit an award by the Court to the arbitrators is a discretionary jurisdiction conferred on the Court and so long as the said discretion has been judicially exercised, an Appellate Court would not be justified in interfering with the exercise of discretion unless the discretion is misused. Thus no fault can be found with the discretion exercised by the learned Civil Judge, Senior Division. The High Court has erroneously formed an opinion that part of the award was beyond the jurisdiction of the arbitrators.

Summary

Issues:
Dispute over arbitration award remittance and setting aside by the High Court.

Analysis:
The case involved a dispute between a co-operative sugar factory (appellant) and another party (respondent) over an agreement for modernization machinery supply. The agreement contained an arbitration clause, and the disputes were referred to two arbitrators. The arbitrators awarded Rs. 151.97 lakhs to be paid by the respondent to the appellant. Both parties objected to the award, leading to a judgment by the Civil Judge remitting the award back to the arbitrators. The High Court set aside a portion of the award, leading to appeals by the appellant.

The Civil Judge found errors in the award, including the arbitrators' failure to consider relevant documents and a violation of natural justice. The Judge decided to remit the award for a fresh decision. However, the High Court held that the arbitrators could not assume jurisdiction over an issue not referred to them, setting aside a portion of the award beyond the scope of arbitration.

The appellant had raised disputes regarding the machinery's performance and demanded reimbursement. Notices and memorandums exchanged between the parties highlighted the issues referred to arbitration. The arbitrators framed specific issues related to the claimed losses and damages, falling within the arbitration agreement's scope.

Referring to precedent, the Supreme Court emphasized that the nature of the claim before arbitrators should be considered, and disputes arising out of the contract should be within the arbitration's scope. The Court disagreed with the High Court's finding that the arbitrators exceeded their jurisdiction.

The Court further clarified the legal provisions regarding remitting an award to arbitrators for reconsideration. It upheld the Civil Judge's discretion in remitting the award and set aside the High Court's decision. The award was remitted to the arbitrators as directed by the Civil Judge, with a new six-month timeline for the decision.

In conclusion, the appeals were allowed, the High Court's judgment was set aside, and the Civil Judge's decision was restored. The award was remitted to the arbitrators for reconsideration within the specified timeline. No costs were awarded in the case.