1999 (5) TMI 581 - SC - Indian Laws

Whether the appellant is right in contending that the arbitration clause 39 in the main agreement did not permit the arbitrator to deal with the disputes relating to the Interior Design Agreement which contained a different arbitration clause and whether the award, in respect of the Interior Design Agreement was void? Whether the appellant who did not raise any question of jurisdiction under Section 16 of the Act in relation to the disputes under the Interior Design Agreements, could have raised a question of jurisdiction of the arbitrator or of his power to deal with issues arising under the said Agreements at the stage of section 34? Whether an arbitrator is not entitled to pass an award directing specific performance of an agreement of sale and the subject matter of the dispute is not capable of arbitration under section 34(2)(b)(i) of the Act? Whether the appellant could question factual findings relating to default, time being essence, readiness and willingness etc. before the arbitrator under Section 34 of the Act? Held that - Appeal dismissed. we do not think it necessary to decide this question in view of the fact that though Section 16 was referred to during the course of the hearing, the learned senior counsel for respondents had argued on merits that the arbitrator had Jurisdiction to decide the disputes/differences concerning the Interior Design agreements also and that even if the appellant could be permitted to raise these issues at the stage of Section 34, there was no substance in the said contentions. There are several items in Schedule E of the main agreement which overlap the items in Schedule A of the Interior Design Agreement. In view of the overlapping, in our opinion it has to be said that several items in the Schedule A of the Interior Design Agreement are in modification/substitution of the items in the Main Agreement. Therefore the coverage of the two agreements makes it clear that the execution of the Interior Design Agreement is connected with the execution of the main Agreement. It may also be noted that the date of the main agreement and the Interior Design Agreement is the same in each of the three cases and clause 3 of the Interior Design Agreement states specifically that the work of the said renovation, designing and installation shall commence from the execution thereof which means that the execution of the Interior Design agreement and the main agreement is to be simultaneous. We hold on Point 3 that disputes relating to specific performance of a contract can be referred to arbitration and Section 34(2)(b)(i) is not attracted. We overrule the view of the Delhi High Court. Point 3 is decided in favour of respondents. The Explanation to the provisions says that without prejudice to the generality of sub-clause (ii) of clause (b), it is declared for the avoidance of any doubt, that an award is to be treated as in conflict with the public policy of India if the making of the award was induced or affected by fraud, or corruption or was in violation of sections 75 or 81. Section 75 deals with confidentiality while section 81 deals with admissibility of evidence in other proceedings. We do not have any such situation before us falling within section 34(2)(b)(ii). The factual points raised in the case before us, to which we have referred to earlier, do not fall within Section 34(2)(b)(ii). Coming to Section 34(2)(b)(i) we have already held that the subject matter of the dispute is not incapable of settlement by arbitration under the law for the time being in force. Nor is any point raised that the arbitral award is in conflict with the public policy of India. We are, therefore, of the view that the merits of the award, on the facts of the case do not fall under Section 34(2)(b) of the Act. Appeal dismissed.

Issues Involved:

1. Jurisdiction of the arbitrator to deal with disputes related to the Interior Design Agreements.
2. Raising jurisdictional objections under Section 16 of the Arbitration and Conciliation Act, 1996.
3. Arbitrator's authority to grant specific performance of an agreement.
4. Challenging factual findings under Section 34 of the Arbitration and Conciliation Act, 1996.

Issue-wise Detailed Analysis:

Point 1: Jurisdiction of the Arbitrator Regarding Interior Design Agreements

The appellant argued that the arbitration clause in the main agreements did not extend to disputes under the Interior Design Agreements, which had a separate arbitration clause specifying named arbitrators. The Supreme Court noted that the arbitration clause in the main agreements covered disputes "connected with, arising out of, or in relation to the subject matter of this agreement." The Court found that the items in the Interior Design Agreements overlapped with those in the main agreements, indicating that disputes under both agreements were interconnected. Therefore, the general arbitration clause in the main agreements applied, allowing the arbitrator to address disputes under the Interior Design Agreements as well. The Court concluded that the arbitration clause in the Interior Design Agreements was intended for situations where disputes were confined solely to those agreements.

Point 2: Raising Jurisdictional Objections under Section 16

The appellant did not raise jurisdictional objections under Section 16 of the Act before the arbitrator. The Court emphasized that objections to the arbitrator's jurisdiction must be raised at the earliest stage, as stipulated by Section 16(2) and (3). However, the Court decided to address the merits of the jurisdictional issue, assuming that the appellant was not precluded from raising it under Section 34. The Court reiterated that the arbitration clause in the main agreements covered disputes connected with the subject matter of the agreements, thereby including disputes under the Interior Design Agreements.

Point 3: Arbitrator's Authority to Grant Specific Performance

The appellant contended that the arbitrator could not grant specific performance of an agreement, as this discretion was conferred on civil courts by the Specific Relief Act, 1963. The Court rejected this argument, aligning with the views of the Punjab, Bombay, and Calcutta High Courts, which held that arbitrators could grant specific performance of contracts. The Court noted that there was no prohibition in the Specific Relief Act or the Arbitration and Conciliation Act, 1996, against referring disputes related to specific performance to arbitration. The Court emphasized that parties could agree to refer such issues to arbitration to shorten litigation.

Point 4: Challenging Factual Findings under Section 34

The appellant challenged the arbitrator's findings on default, time being of the essence, and readiness and willingness. The Court noted that Section 34(2)(b) permits setting aside an award only if the subject matter is not capable of arbitration or if the award conflicts with public policy. The Court found that the appellant's factual challenges did not fall within these grounds. The Court emphasized that the scope for challenging an arbitral award under Section 34 is narrow and does not extend to re-evaluating factual findings. Therefore, the appellant's challenges to the arbitrator's factual findings were not permissible under Section 34.

Conclusion:

The Supreme Court dismissed the appeals, upholding the arbitrator's awards and confirming that the arbitrator had jurisdiction to decide disputes under both the main and Interior Design Agreements. The Court also affirmed that arbitrators could grant specific performance of contracts and that the appellant's factual challenges were not grounds for setting aside the awards under Section 34.

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