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TMI Blog2011 (7) TMI 1313X X X X Extracts X X X X X X X X Extracts X X X X ..... y way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions orders or these conditions or otherwise concerning the works, or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, Central Public Works Department in charge of the work at the time of dispute.... It is a term of contract that the party invoking arbitrations shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such disputes. As per the contract, the work had to be commenced on 16.11.1992 and completed by 5.5.1994. On the ground that the contractor did not complete the work even by the extended date of completion (31.3.1995), the contract was terminated by the Appellant. 3. Respondent raised certain claims and gave a notice to the Appellant to appoint an arbitrator in terms of the arbitration clause. As the Appellant did not do so, the Respondent filed an application under Section 11 of the Arbitration an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 11 of the Act for appointment of arbitrator) and they were not referred by the court to arbitration. The High Court held that in such circumstances arbitrator had No. jurisdiction to entertain a counter claim. The High Court followed its earlier decision in Charuvil Koshy Verghese v. State of Goa 1998 (2) SCC 21. In that case, an application was made by a contractor under Section 20 of the Arbitration Act, 1940 ('old Act' for short), for filing the arbitration agreement and referring the disputes to the arbitrator. In its reply statement to the said application, the Respondent did not assert its counter claim. The court allowed the application under Section 20 and appointed an arbitrator to decide the disputes raised by the contractor. However when the matter went before the arbitrator, the Respondent therein made a counter claim, which was allowed by the arbitrator. The Bombay High Court held that the arbitrator had No. jurisdiction to entertain or allow such a counter claim as the same had neither been placed before the court in the proceedings under Section 20 nor the court had referred it to the arbitrator. The said judgment of the High Court is challenged in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disputes. (b) If an arbitration agreement provides that in the event of any dispute between the parties, an authority named therein shall nominate the arbitrator and refer the disputes which required to be settled by arbitration, the 'reference' contemplated is an act of the appointing authority referring the disputes to the arbitrator appointed by him. (c) Where the parties fail to concur in the appointment of arbitrator/s as required by the arbitration agreement, or the authority named in the arbitration agreement failing to nominate the arbitrator and refer the disputes raised to arbitration as required by the arbitration agreement, on an application by an aggrieved party, the court can appoint the arbitrator and on such appointment, the disputes between the parties stand referred to such arbitrator in terms of the arbitration agreement. 10. Reference to arbitration can be in respect of all disputes between the parties or all disputes regarding a contract or in respect of specific enumerated disputes. Where 'all disputes' are referred, the arbitrator has the jurisdiction to decide all disputes raised in the pleadings (both claims and counter claims) subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to have recourse to their remedies by arbitration. When such an order is made, parties may either agree upon an arbitrator and refer their disputes to him, or failing agreement, file an application under Section 11 of the Act for appointment of an arbitrator. The judicial authority 'referring the parties to arbitration' under Section 8 of the Act, has No. power to appoint an arbitrator. It may however record the consent of parties to appoint an agreed arbitrator. Sections 21 and 43 of the Act 13. Section 21 provides that unless otherwise agreed by the parties, the arbitral proceedings in respect of a particular dispute commences on the date on which a request for that dispute to be referred to arbitration is received by the Respondent. Taking a cue from the said section, the Respondent submitted that arbitral proceedings can commence only in regard to a dispute in respect of which notice has been served by a claimant upon the other party, requesting such dispute to be referred to arbitration; and therefore, a counter claim can be entertained by the arbitrator only if it has been referred to him, after a notice seeking arbitration in regard to such counter claim. On a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1963 is made applicable to arbitrations, there is a need to specify the date on which the arbitration is deemed to be instituted or commenced as that will decide whether the proceedings are barred by limitation or not. Section 3 of Limitation Act, 1963 specifies the date of institution for suit, but does not specify the date of 'institution' for arbitration proceedings. Section 21 of the Act supplies the omission. But for Section 21, there would be considerable confusion as to what would be the date of 'institution' in regard to the arbitration proceedings. It will be possible for the Respondent in an arbitration to argue that the limitation has to be calculated as on the date on which statement of claim was filed, or the date on which the arbitrator entered upon the reference, or the date on which the arbitrator was appointed by the court, or the date on which the application was filed under Section 11 of the Act. In view of Section 21 of the Act providing that the arbitration proceedings shall be deemed to commence on the date on which "the request for that dispute to be referred to arbitration is received by the Respondent" the said confusion is cleared. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounter claim should be computed, as on the date of service of notice of such claim on the claimant and not on the date of filing of the counter claim. Scope of Sections 11 and 23 of the Act 18. Section 11 refers to appointment of arbitrators. Sub-sections (4), (5), (6) and (9) of Section 11 relevant for our purpose are extracted below: (4) If the appointment procedure in Sub-section (3) applies and-(a) a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party; or (b) the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment, the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution Designated by him. (5) Failing any agreement referred to in Sub-section (2), in an arbitration with a sole arbitrator, if the parties fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other party to so agree the appointment shall be made, upon request of a party, by the Chief Justice or any person or institution Designated by him. (6) Where, under an appointment procedure agreed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for applications to file the arbitration agreement in court, read as under: 20. Application to file in Court arbitration agreement. (1) Where any persons have entered into an arbitration agreement before the institution of any suit with respect to the subject matter of the agreement or any part of it, and where a difference has arisen to which the agreement applies, they or any of them, instead of proceeding under Chapter II, may apply to a Court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in Court. (2) The application shall be in writing and shall be numbered and registered as a suit between one or more of the parties interested or claiming to be interested as Plaintiff or Plaintiffs and the remainder as Defendant or Defendants, if the application has been presented by all the parties, or, if otherwise, between the Applicant as Plaintiff and the other parties as Defendants. (3) On such application being made, the Court shall direct notice thereof to be given to all parties to the agreement other than the Applicants, requiring them to show cause within the time specified in the notice why the agreement should not be filed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counter claim "unless the parties have otherwise agreed" and also add to or amend the counter claim, "unless otherwise agreed". In short, unless the arbitration agreement requires the Arbitrator to decide only the specifically referred disputes, the Respondent can file counter claims and amend or add to the same, except where the arbitration agreement restricts the arbitration to only those disputes which are specifically referred to arbitration, both the claimant and Respondent are entitled to make any claims or counter claims and further entitled to add to or amend such claims and counter claims provided they are arbitrable and within limitation. 23. Section 11 of the Act requires the Chief Justice or his designate only to appoint the arbitrator/s. It does not require the Chief Justice or his designate to identify the disputes or refer them to the Arbitral Tribunal for adjudication. Where the appointment procedure in an arbitration agreement requires disputes to be formulated and specifically referred to the arbitrator and confers jurisdiction upon the arbitrator to decide only such referred disputes, when an application is filed under Section 11(6) of the Act, alleging that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Respondent was entitled to raise counter claims directly before the arbitrator, where all disputes between parties are referred to arbitration. This Court observed: The Appellant's grievance regarding non-consideration of its counter-claim for the reason given in the award does appear to have some merit. In view of the fact that reference to arbitrator was made by this Court in an appeal arising out of refusal to stay the suit under Section 34 of the Arbitration Act and their reference was made of all disputes between the parties in the suit, the occasion to make a counter-claim in the written statement could arise only after the order of reference. The pleadings of the parties were filed before the arbitrator, and the reference covered all disputes between the parties in the suit. Accordingly, the counter-claim could not be made at any earlier stage. Refusal to consider the counterclaim for the only reason given in the award does, therefore, disclose an error of law apparent on the face of the award. (Emphasis supplied) 26. A counter claim by a Respondent pre-supposes the pendency of proceedings relating to the disputes raised by the claimant. The Respondent could No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in an application under Section 11 of the Act into three groups: (i) those which the Chief Justice/his designate shall have to decide; (ii) those which the Chief Justice/his designate may choose to decide or alternatively leave to the decision of the Arbitral Tribunal; and (iii) those which the Chief Justice/his designate should leave exclusively for the decision of the Arbitral Tribunal. This Court held that the issue whether a claim is dead claim (long barred claim) is an issue which the Chief Justice or his designate may choose to decide or leave for the decision of the Arbitral Tribunal. The difference between a dead/stale claim and a mere time barred claim was explained by this Court in Indian Oil Corporation Ltd. v. SPS Engineering Ltd. 2011 (2) SCALE 291 thus: When it is said that the Chief Justice or his designate may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time barred claim and there is No. need for any detailed consideration of evidence. We may elucidate by an illustration: If the contractor makes a claim a decade or so after completion of the work without referring to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him at the time of the appointment. If it is, then it is up to him whether to allow the matter to be raised by counter claim or made the subject of a separate arbitration. In practice, we have never known the second course to be followed. If, on the other hand, the cross-claim was not a dispute which was submitted to him, he should not entertain it unless it raises a pure defence, or unless the parties clearly agree that he is to have jurisdiction over it. (Emphasis supplied) The said observations were made with reference to the Arbitration Law prevailing in United Kingdom in the year 1989, prior to the enactment of (English) Arbitration Act, 1996. Further the observations obviously related to an arbitration where specific disputes were referred to arbitration and consequently the arbitrator was bound to restrict himself to the disputes referred. We have already adverted to this aspect earlier. 31. The Respondent lastly contended that the Court is required to ascertain the precise nature of the dispute which has arisen and then decide whether the dispute is one which falls within the terms of the arbitration clause, before appointing an arbitrator; and that could be done on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve and lastly whether there was sufficient reason as to why the subject matter of the suit should not be referred to arbitration. The observations made in Heymen, in the context of an application seeking stay of further proceedings in a suit, are not relevant in respect of an application under Section 11 of the Act. This Court has repeatedly held that the questions for consideration in an application under Section 8 by a civil court in a suit are different from the questions for consideration under Section 11 of the Act. The said decision is therefore of No. assistance. Summation 32. The position emerging from above discussion may be summed up as follows: (a) Section 11 of the Act requires the Chief Justice or his designate to either appoint the arbitrator/s or take necessary measures in accordance with the appointment procedure contained in the arbitration agreement. The Chief Justice or the designate is not required to draw up the list of disputes and refer them to arbitration. The appointment of Arbitral Tribunal is an implied reference in terms of the arbitration agreement. (b) Where the arbitration agreement provides for referring all disputes between the parties (whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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