Full Text
Date of Decision: January 07, 2010
N.D.M.C. …..Plaintiff
Through: Mr.Arvind Shah, Advocate.
Through: Mr.A.K.De, Advocate.
JUDGMENT
(1) Whether reporters of local paper may be allowed to see the judgment? (2) To be referred to the reporter or not? Yes (3) Whether the judgment should be reported in the Digest? Yes
JUDGMENT
ARUNA SURESH, J.
1. Plaintiff filed an application under Sections 13 and 17 of the Arbitration Act, 1940 (hereinafter referred to as the „Act‟) for making the award dated 29th January, 2001, made by Shri D.V. Kapoor, a Rule of the Court. Defendant is a dealer of aquarium and fishes and accessories associated with it and has wide experience in the said field. Plaintiff NDMC entered into an agreement with the defendant on 14th June, 1985, initially for a 2010:DHC:39 period of three years, to be extended later, on fulfillment of certain conditions contained in the agreement, for maintenance of ten aquariums displayed for public viewing at Grotto, Children park, India Gate, New Delhi in exchange of a space for a sale counter to remain in exclusive possession of the defendant at the back of the display aquariums inside Grotto, Children Pak, India Gate. After the expiry of three years, NDMC issued a letter dated 5th May, 1988, followed by another letter dated 26th September, 1988 and called upon the defendant to vacate the premises. Defendant filed a civil suit in the District Court seeking restraint order against the NDMC from dispossessing him from the said premises.
2. Vide order dated 5th October, 1988, the Civil Court ordered NDMC to maintain status quo in respect of the premises in question. Disputes and differences arose inter se the parties relating to extension/renewal of the agreement and for payment of Rs.10,000/- against the supply of aquariums; which was to be made to the defendant by the plaintiff. Defendant wrote a letter to the Administrator, NDMC asking him to refer the dispute between the parties to arbitration under clause 15 of the agreement. Since Administrator refused to refer the dispute, defendant filed a petition being Suit No.961A/1990 under Section 20 of the Act before this Court for appointment of an Arbitrator and for referring the disputes to him for adjudication. Vide order dated 11th July, 1990, this Court directed the plaintiff to maintain status quo with respect to the possession of the suit premises and maintenance of aquariums with further direction to the Administrator, NDMC to appoint an Arbitrator and refer the disputes to him.
3. In compliance of the orders of this Court, plaintiff appointed Shri D.V.Kapoor, Advocate as the sole Arbitrator, who passed his award on 29th January, 2001. NDMC filed this case for making the said award a Rule of the Court. On receipt of notice, defendant has filed objections challenging the validity of the award on the grounds that Arbitrator misconducted himself by entertaining the counter-claim filed by the plaintiff and considering the same while making the impugned award. He also challenged the merits of the award on the grounds that Arbitrator did not properly appreciate the terms and conditions of the agreement, the evidence of the respondents and also by considering that plaintiff had already given him adjustment of Rs.10,000/- out of the total sum awarded in favour of the plaintiff. He has prayed that the award, being against principles of natural justice, be set aside.
4. Mr.A.K.De, counsel appearing for the defendant/objector has argued that, plaintiff did not raise any counter-claim in the petition filed by the defendant under Section 20 of the Act and, therefore, plaintiff could not have raised any counter-claim before the Arbitrator. Hence, the Arbitrator misconducted himself when he entertained the counter-claim of the plaintiff. Not only this, the Arbitrator framed the issues during the writing of the award and not at the relevant time when the proceedings were conducted and acted beyond the terms of the reference and adjudicating upon the same.
5. Mr.Arvind Shah, counsel appearing for the plaintiff has argued that, plaintiff was within its right to raise its counter-claim as the High Court had directed that disputes between the parties be referred and not just disputes raised by the defendant/objector. Defendant is restrained from taking the instant objection, as he failed to take this objection during the arbitration proceedings and, therefore, the Arbitrator rightly considered and adjudicated upon the counter-claim of the plaintiff and passed the impugned award.
6. The principal question to be decided is whether the Arbitrator misconducted himself by traveling beyond the reference made to him by entertaining and adjudicating upon the counter-claim of the plaintiff. The relevant clauses of Agreement No.7 dated 14th June, 1985, inter se the parties, containing the arbitration clauses are reproduced as below:-
7. Thus, it is clear that the premises in suit were given to the defendant initially for a period of three years w.e.f. 14th May, 1985 for display and maintenance of aquarium. After the expiry of three years, defendant was required to hand over the peaceful use and possession of the aquarium to the plaintiff without any demur and was not entitled to claim any compensation in this regard, of course, subject to the parties agreeing to extend the period of three years on satisfactory display and mutual agreement.
8. In the petition filed under Section 20 of the Act, defendant sought appointment of an Arbitrator and for reference of all the disputes and differences among the parties to him, as per the agreement between the parties. The said petition was allowed by this Court vide its order dated 11th July, 1990, with the following observations: “S.No.961-A/90 Despite service of notices, no written statement has been filed. The petitioner has stated that there is an arbitration agreement between the parties contained in Clause 15 of Agreement No.7 dated 14th of June 1985 for maintenance work of 10 aquariums displayed for public viewing at Grotto, Children Park, India Gate, New Delhi. According to the petitioner, he was entitled to renewal of the agreement under Clause 9 thereof, but the respondents have failed to do so. The petitioner has also raised a dispute with regard to non-payment of Rs.10,000/- claimed by the petitioner. Thus, disputes have arisen between the parties to which the agreement applies. I am satisfied that an arbitration agreement exists between the parties, that disputes have arisen between them, and that the arbitration agreement applies to the disputes. Therefore, I direct the Administrator of the N.D.M.C. to appoint an arbitrator within four weeks from today and to refer the above-mentioned disputes to him in accordance with the arbitration agreement. The petition is allowed. No costs.”
9. Thus, it is clear that the disputes mentioned in the petition were referred to the Arbitrator to be appointed by the Administrator of the NDMC in accordance with the arbitration agreement.
10. Administrator NDMC, appointed Shri D.V.Kapoor, Advocate as the sole Arbitrator and made the following reference to the Arbitrator:- “ I, Ramesh Chandra, Administrator, NDMC, therefore, by virtue of powers conferred on me under clause 15 of the said agreement, hereby, appoint Shri D.V. Kapoor, Advocate, H-25, Green Park, Ext., New Delhi-110016 as a sole Arbitrator to decide and make his reasoned award regarding the claims/disputes raised by the claimant as per copy of Writ filed by the Contractor before Delhi High Court in Suit No.961-A/90 and counter-claims of NDMC to follow, if any, subject, however, to their admissibility under clause 15 of the said agreement.”
11. It is pertinent to mention here that plaintiff had not filed any reply to the petition under Section 20 of the Act raising any counter-claim therein. The Arbitrator in his award dated 29th January, 2001, passed the following directions:-
I. The claimant shall vacate the premises giving its peaceful possession to the respondent (NDMC) within 30 days from the date of receipt of this award.
II. The claimant shall pay a sum of
Rs.6,29,000/- plus amount calculated for the current year at the rate of Rs.6,285/- per month to the respondent by 31st March, 2001, subject to installments/extension of time of payment, if any, granted by the Chairman, NDMC acting for and on behalf of the respondent.
III. The delay in making the awarded payment would attract simple interest at the rate of 1.25% per month subject to conditions laid down in installments/time extension, if any, granted by the Chairman, NDMC on application made before him by the claimant.
IV. Parties were left to bear their own costs.
12. Thus, the Arbitrator dismissed the claim of the defendant and allowed the counter-claim of the plaintiff vide the impugned award.
13. If an application under Section 20 of the Act was allowed and the Court referred the disputes to the Arbitrator, the Arbitrator would be required to decide only such question and all such questions, which he considered are covered by the reference. An Arbitrator derives his power from the reference, which furnishes a prescribed limit of his authority. The Arbitrator has, therefore, no right to traverse beyond the particular matters submitted to him for decision. His award must strictly conform both in substance and infer to the submissions. If he goes beyond the scope of the reference in deciding a dispute not submitted to him, the award is bad. So long as the Arbitrators are within the scope of their authority, their decisions are valid and binding. Arbitrators cannot enlarge the scope of the reference and it is pre-requisite for validity of an award that it confirms to the submissions.
14. In Orissa Mining Corporation Ltd. Vs. M/s. Prannath Vishwanath Rawlley, AIR 1977 SC 2014, the Division Bench of the Supreme Court, in para 11 of the judgment analyzed the provisions contained in Section 20 of the Act in the following manner:
15. In Natwarlal Shamal Das & Company, Bombay-1 Vs. The Minerals and Metal Trading Corporation of India Ltd., New Delhi, AIR 1982, Delhi 44, while referring to the Orissa Mining Corporation Ltd’s case (supra), this Court observed as follows:-
16. It was further observed in para 28 as follows:-
17. Learned counsel for the defendant in support of his submissions has also referred to Union of India & Ors. Vs. Santiram Ghosh & Ors., AIR 1989, SC 402, Smt. Saiyada Mossarrat Vs. Hindustan Steel Ltd. Bhilai Steel Plant, Bhilai (M.P.) & ORS., AIR 1989 SC 406, S.S. Sobti Vs. Union of India & Ors., AIR 1982 DELHI 51, M/s. G.S. Atwal & Co. Vs. Union of India & Anr., AIR 1976 DELHI 150, Niranjan Lal Dalmia Vs. Union of India 7 Anr., AIR 1976 DELHI 154, Jivarajbhai Ujamshi Sheth & Ors. Vs. Chintamanrao Balaji & Ors., AIR 1965 SC 214, Ajit Singh & Anr. Vs. Fateh Singh & Ors., AIR 1962, Punjab 412 and Durga Dass s/o L.Balasa Rama & Ors Vs. baru Ram & Ors., AIR 1962, Punjab 417. However, the same are of no help to the defendant.
18. Thus, it is clear that the Arbitrator could not have enlarged the scope of reference by entertaining the counter-claim of the plaintiff corporation and adjudicating upon it. Therefore, he misconducted himself and acted beyond his jurisdiction. He was required to confine himself to the reference made to him by this Court under Section 20 of the Act. As discussed above, plaintiff did not file any written statement nor made any counterclaim in the said petition, which could have been referred to the Arbitrator to be appointed by the Administrator NDMC to adjudicate upon the disputes inter se the parties.
19. Reference made by the Administrator, NDMC does speak of the power of the Arbitrator to enter into reference and adjudicate upon the disputes inter se the parties including the counter-claim of the plaintiff, if it fell within clause 15 of the Agreement No. 7 dated 14th June,
1985. However, the counter-claim made by the plaintiff before the Arbitrator, was to seek possession of the suit premises as well as the charges for use and occupation. The counter-claim, therefore, made by the plaintiff before the Arbitrator was beyond the terms and conditions of the agreement inter se the parties.
20. It is pertinent that NDMC once challenged the jurisdiction of the Arbitrator in the matter and moved the Estate Officer to evict the defendant under P.P. Act. The Estate Officer observed on 11th February, 1988 that the matter could not be continued before two different authorities and that NDMC should have dropped the arbitration case with the direction/order of the High Court, which requirement was not followed by it before requesting for proceedings under P.P. Act. As reflected from the award, the proceedings under the P.P. Act were stayed sine die.
21. What was the fate of the civil suit filed by the defendant seeking stay against the plaintiff from dispossessing him from the premises in question, except in due course of law and also for restraining the plaintiff to open the tenders invited by them for allotment of the premises in suit is not known.
22. Obviously, the Arbitrator travelled beyond the scope of the reference and even in violation of the terms and conditions of the agreement. The agreement does not speak of referring the disputes to the Arbitrator for eviction of the defendant from the suit premises by invoking arbitration clause. The agreement is also silent if the plaintiff can invoke clause 15 of the agreement for claiming charges for use and occupation of the impugned premises till they were vacated by the defendant. Under these circumstances, Haryana Engineering & Foundery Works Vs. Union of India & Anr. 1987 (1) ALR 1, is of no help to the plaintiff. In that case, the petitioner had withdrawn his application under Section 20 of the Act and it was Union of India who made a reference.
23. In Charuvil Koshy Varghese Vs. State of Goa, 1998 (2) BomCR 387, in similar circumstances, it was observed in paras 5, 7 and 9 as follows:-
24. Coming to the merits of the award, as regards interpretation of the agreement, this Court cannot interfere in the findings of the Arbitrator based on oral as well as documentary evidence. Considering the evidence of the parties placed on record, the Arbitrator was within his right to interpret the terms and conditions of the agreement. Hence, this Court cannot sit in appeal against the award and reassess the evidence of the parties on fact finding made by the Arbitrator in the award as no perversity on the part of the Arbitrator in giving finding on interpretation of the terms and conditions of the agreement have been pointed out by the defendant.
25. Consequently, I conclude that the Arbitrator exceeded in his jurisdiction and misconducted himself in entertaining the counter-claim of the plaintiff which he could not have sustained. The objection petition, therefore, partly succeeds.
26. Accordingly, the award so far as it relates to grant of counter-claim is hereby set aside. The remaining part of the award is hereby made a Rule of the Court. There are no orders as to costs. Decree sheet be prepared accordingly.
ARUNA SURESH (JUDGE) JANUARY 07, 2010 sb