Full Text
HIGH COURT OF DELHI
Date of Decision: 1st February 2023
UNIVERSITY OF DELHI ..... Petitioner
Through: Ms. Aakanksha Kaul, Advocate with Mr. Aman Sahani, Advocate, Mr. Manek Singh, Advocate and Mr. Harsh Ojha, Advocate.
Through: Mr. Gaurav Kumar Singh, Advocate.
JUDGMENT
By way of the present petition under section 34 of the
Arbitration & Conciliation Act, 1996 („A&C Act‟ for short), the petitioner/University of Delhi/non-claimant impugns arbitral award dated 30.11.2011 („impugned award‟) made by the learned Sole
Arbitrator in proceedings arising from disputes with the respondent/M/s Kalra Electricals/claimant. The disputes between the parties arose from Work Contract bearing No.
UE/898/DU/EM/57(2005-06) dated 09.06.2005 („subject work contract‟) and were referred to arbitration in view of clause 25 thereof.
2. By way of the impugned award, though the learned Arbitrator recorded a finding that the petitioner had already paid to the respondent the amounts due towards the subject work contract, he nevertheless directed the petitioner to release “… pending payments amounting to Rs.20 Lakhs…” in respect of the other 44 contracts between the parties. Petitioner’s Submissions
3. Ms. Aakanksha Kaul, learned counsel for the petitioner submits, that the primary issue for consideration before this court is simply this: whether an arbitral tribunal can decide and grant relief in respect of matters not referred to it.
4. Counsel submits that it will be seen from the record that though clearly vide order dated 02.06.2010 made in Arb P No. 120/2010, a Co-ordinate Bench of this court had referred the disputes between the parties which were raised vide invocation notice dated 03.02.2010 to arbitration with respect only to one contract, viz. the subject work contract, the learned Arbitrator has erroneously proceeded to deal with disputes relating to 44 other contracts between the parties. It is stated that disputes arising from the 44 other contracts were neither contemplated in invocation notice dated 03.02.2010, nor in this court‟s referral order. This, Ms. Kaul submits, is impermissible and is a ground to set-aside the impugned award under section 34(2)(a)(iv) of the A&C Act. Ms. Kaul also challenges the arbitral award on two other grounds viz. that the disputes with respect to the other 44 contracts, based on which the petitioner has been directed to pay the awarded sum, were also time-barred; and that the impugned award is liable to be set-aside in view of section 34(2)(b).
5. Attention of this court is drawn to the referral order dated 02.06.2010 which reads as under: “There appears to be in existence a dispute which has arisen between the petitioner and the respondent. For the moment, in the present petition, I am only concerned with the disputes qua contract bearing no. UE/898/DU/EM/57(2005-06) dated 09.06.2005. Mr Saxena submits before me that he would have no difficulty if the court were to direct appointment of an arbitrator in terms of clause 25 of the contract obtaining between the petitioner and the respondent. Accordingly, the respondent is directed to appoint an arbitrator in terms of clause 25 of the contract obtaining between the parties. The respondent shall appoint an arbitrator within ten days from today with prior notice to the petitioner. The petition is disposed of in terms of the directions above. Needless to say the disposal of this petition will not come in the way of the petitioner taking recourse of an appropriate remedy with regard to the remaining contracts” (emphasis supplied)
6. Attention is further drawn to section 34 of the A&C Act, the relevant portion of which reads as under:
7. It is the petitioner‟s contention that in its statement of claim dated 22.06.2010, the respondent (claimant) had itself raised the following claim: “b. In view of the fact that only a dispute regarding one contract, the University be directed to release the payment of other contracts, as per Annexure „B‟, the payment of which has been unnecessarily withheld, as there is no dispute regarding the said contracts;…” It is submitted that further to the above claim, on being queried by the learned Arbitrator as to the other claims made by the respondent, an Assistant Engineer employed with the petitioner had issued letter dated 14/15.09.2010, which letter stated the following: “6. As per claim against point No. 9,10 and 11 M/s. Kalra Electricals has requested to withheld Rs.[2] lakh and release the balance payment. This point may be considered by the Arbitrator.”
8. Ms. Kaul submits that the aforesaid letter came to be written without any authority, and departmental action was taken against the said Assistant Engineer. She submits that, in any case, a stray letter addressed to the arbitrator cannot tantamount to additional claims being referred to arbitration. Counsel submits that further to this letter, the petitioner filed an application under section 16 of the A&C Act, challenging the learned Arbitrator‟s jurisdiction over the claims arising from the other contracts, contending that those claims would be beyond the scope of reference. She submits that in fact, in its reply to the said application, the respondent conceded one, that the other claims did not fall within the scope of the arbitral proceedings; and two, that contractual payments towards those claims were not disputed, in the following words: “… The claim in these proceedings is only for Rs. 92,901.25/- which is disputed. Other reliefs are consequential which need no determination by Arbitration, as the other contractual payments are not disputed.”
9. On being queried, Ms. Kaul fairly concedes that it is true all the contracts find mention in the invocation notice issued and in the statement of claim filed by the respondent, as follows: Invocation Notice dtd 03.02.2020 “13. That in order to avoid any technical objection, and by way of abundant caution, my Client is giving this detailed legal notice as in all the contracts for which my Client has worked for the University, the amount of Rs.20 lakhs is due against 44 contracts, as per list annexed hereto. Thus, my Client requests you to appoint a single Arbitrator to decide about the release of payment to my Client which has been illegally withheld by your University or your goodselves may appoint different Arbitrators in all the 44 contracts as the University has withheld payment against all the 44 contracts, though there is a dispute only in respect of cone(sic, one)contract of about Rs. One lakh awarded in June 2005 and Aug. 2005regarding flats in Reids Lane, University of Delhi.” Statement of Claim dtd. 22.06.2010 “16. That from the perusal of the facts mentioned above, and as also from the perusal of the Orders of the High Court dated 2/6/2010, it is crystal clear that there is only a dispute regarding only one contract and hence, there is no justification for holding the amount of Rs.20 lakhs in respect of the various other contracts, details of which are given in a list annexed hereto as
ANNEXURE „B‟. Hence the University is bound to make payment of the outstanding amount of Rs.20 lacs to the Claimant herein. Thus, as there is no dispute in respect of all these contracts and even otherwise the University is bound to release the payment of Rs.20 lacs as per
ANNEXURE „E‟. Thus, even your goodself can give a direction to this effect besides deciding the main point of controversy.” But counsel states, that as is evident from the invocation notice and the statement of claim, the dispute pending adjudication before the learned Arbitrator was only with respect to the sum of Rs.92,101.25, which was claimed to be due under the subject work contract; and since arbitral proceedings were founded on the referral order of this court, the learned Arbitrator had jurisdiction only as regards the said dispute and no more.
10. Ms. Kaul points-out, that the referral order specifically gave to the respondent, liberty for “... taking recourse of an appropriate remedy with regard to the remaining contracts”. She submits that since the court had clearly segregated and separated the disputes at the time of making reference to arbitration, by not referring all disputes to arbitration, the scope of the reference was limited. Thus, the arbitral award has dealt with matters beyond the scope of submission, and accordingly, deserves to be set-aside.
11. It is also submitted that, assuming the respondent could have included its claims in respect of the other contracts in its statement of claim, the claims having arisen from contracts entered into between the parties in 2005, and the statement of claim having been filed on 22.06.2010, such claims were also ex-facie time-barred. Relying upon the statement of defence filed by the petitioner, it is further submitted, that since the decisions on the claims are not severable, the arbitral award would have to be set-aside in its entirety; especially since any change made in the calculations would amount to „modification‟ of the arbitral award, which the court cannot do under section 34.
12. Ms. Kaul also argues that notwithstanding the above, given that the relief granted was in respect of other contracts, which were separate and distinct agreements, separate arbitral tribunals ought to have been constituted for each such contract. The submission is that since the jurisdiction of an arbitral tribunal is limited, it must be restricted to the dispute referred to it; and a contravention thereof would not be an error within the tribunal‟s jurisdiction but outside its jurisdiction, making the award amenable to interference under section 34.
13. In support of the petitioner‟s case, the following judicial precedents have been cited: 13.[1] Ssangyong Engineering and Construction Company Limited vs. National Highways Authority of India (NHAI)1: To argue, that when reference is made to an arbitral tribunal to decide specific disputes enumerated by the court, the tribunal can decide only those specific disputes; and if the arbitral award decides matters beyond the disputes specifically referred, it would amount to an error beyond the tribunal‟s jurisdiction, which can be corrected by setting-aside the award on the ground of “patent illegality”; 13.[2] MSK Projects India (JV) Limited vs. State of Rajasthan and Another[2]: On the point, that it is impermissible for an arbitral tribunal to travel beyond the terms of its reference, and that an arbitral tribunal cannot exercise powers to enlarge the scope of the reference; 13.[3] State of Goa vs. Praveen Enterprises[3]: On the point, that though additional/supplementary claims may be made by a claimant even without such claims having been included in the notice seeking reference, the relevant date for calculating limitation for such additional/supplementary claims would be the date on which these claims are made in terms of section 23(3) A&C Act; 13.[4] Alupro Building Systems Pvt Ltd vs. Ozone Overseas Pvt Ltd[4]: To say, that in arbitral proceedings, the date on which a recipient of an invocation notice is put to notice as regards a claim, is the applicable date for the purpose of calculating limitation; and 13.[5] Indus Biotech Private Limited vs. Kotak India Venture (Offshore) Fund (Earlier Known as Kotak India Venture Limited) and Others[5] and DLF Home Developers Limited vs. Rajapura Homes Private Limited and Another[6]: On the point, that even though contracts and agreements may be interlinked and connected, separate arbitral tribunals (even if comprising the same member/s) would have to be constituted for each of the contracts/agreements.
14. Opposing the petition, Mr. Gaurav Kumar Singh, learned counsel for the respondent submits that the disputes in relation to all payments under the other 44 contracts arose from the subject work contract. This submission is premised on the respondent‟s contention that the petitioner had maliciously withheld payment of admitted amounts payable to the respondent under the other 44 contracts, amounting to about Rs.20 lacs, only because there was a dispute between the petitioner and the respondent arising from work contract dated 09.06.2005 i.e. the subject work contract. Mr. Singh submits that therefore, the learned Arbitrator acted well within his jurisdiction in directing payment of amounts due under all 44 contracts, while deciding the dispute under work contract dated 09.06.2005.
15. Mr. Singh points-out that vide communication dated 30.08.2010, the learned Arbitrator had written to the petitioner seeking answers to the following queries: “… … … I hereby request Delhi University for the following-
1. Furnish copies of orders referred above.
2. To state whether the work against the said orders were executed
3. To check & confirm whether payment against the orders were released and if so, the amount released.
4. Please recall during the first arbitration meeting, Kalra Electricals informed that work against the orders dt. 18/6/05 and 21/7/05 were executed and payments received by them. As per Kalra Electricals there is no outstanding issue with respect to these orders. Please state the position of Delhi University in respect of these work orders.
5. Kalra Electricals have in the document — statement of claim — has an an enclosure - Annexure A (Annexure B of their submission). This mentions list of contracts against which Delhi University have yet to release payments. Please indicate the position of Delhi University in this regard. If the payments have not been released, the reason for withholding the payment may please be stated. … ….. ”
16. It is submitted that, in response to the above letter, vide communication dated 14/15.09.2010 an Assistant Engineer informed the learned Arbitrator that the respondent‟s claim for release of balance payment under the other contracts“… may be considered by the Arbitrator.”
17. It is Mr Singh‟s submission that if the learned Arbitrator had jurisdiction to decide matters arising from the other 44 contracts, he had jurisdiction to decide the same in his own wisdom on the facts; and this court would not interfere with such decisions under section
34.
18. The respondent has not cited any judicial precedents in support of its contentions. Discussion & Conclusion
19. To address the principal legal issue raised by the petitioner, viz. the scope of the arbitrator‟s jurisdiction when disputes have been referred to arbitration by court under section 11 of the A&C Act, a brief reference to the observations of the Supreme Court in Ssangyong (supra) would be appropriate: “The ground of challenge under Section 34(2)(a)(iv) * * * * * “67. In State of Goa v. Praveen Enterprises [State of Goa v. Praveen Enterprises, (2012) 12 SCC 581] (Praveen Enterprises), this Court set out what is meant by “reference to arbitration” as follows: (SCC pp. 587-88, paras 10-11)
decide all disputes raised in the pleadings (both claims and counterclaims) subject to any limitations placed by the arbitration agreement. Where the arbitration agreement provides that all disputes shall be settled by arbitration but excludes certain matters from arbitration, then, the arbitrator will exclude the excepted matter and decide only those disputes which are arbitrable. But where the reference to the arbitrator is to decide specific disputes enumerated by the parties/court/appointing authority, the arbitrator's jurisdiction is circumscribed by the specific reference and the arbitrator can decide only those specific disputes.”
21. Finally therefore, against a claim of Rs. 92,101.25 arising from the subject work contract, the learned Arbitrator has proceeded to award Rs.20 lacs which admittedly arises from the other 44 contracts, which contracts were never subject matter of the arbitral proceedings.
22. It requires to be emphasised that the entire awarded sum of Rs.20 lacs arose entirely from the other 44 contracts and had nothing to do with the subject work contract, that had been referred to arbitration.
23. To be clear, since the petitioner had engaged the respondent to perform certain works of the same type in different locations, for which separate and distinct contracts/work orders were issued, though the parties could have referred their inter-se disputes arising from the other contracts, if any, to the same person who had been appointed as arbitrator pursuant to referral order dated 02.06.2010; and the same arbitrator could have decided the disputes as separate references; but that was never done.
24. What falls foul of section 34(2)(a)(iv) however, is the fact that despite finding that the contracts were not inter-related, the learned Arbitrator intertwined the disputes arising from the other contracts and proceeded to decide the same as part of the specific reference made to him by referral order dated 02.06.2010. This is impermissible in law.
25. Therefore, it requires not much discussion to hold that the arbitral award to the extent that it awards to the respondent Rs. 20 lacs is clearly in the teeth of section 34(2)(a)(iv) of the A&C Act and deserves to be set-aside on that ground alone.
26. Accordingly, the court is persuaded to accept the present petition; and since, as discussed above, the decision on matters submitted to arbitration is separable from those not so submitted, arbitral award dated 30.11.2011 is partly set-aside to the extent that the petitioner was directed to make payments amounting to about Rs.20 lacs arising from the other contracts; while upholding the arbitral award to the extent that it finds that no payment is due towards the subject work contract.
27. The petition stands disposed of accordingly.
28. Pending applications, if any, also stand disposed of.
29. There shall be no order as to costs.
ANUP JAIRAM BHAMBHANI, J FEBRUARY 01, 2023 ds/ak