11667, this Court reiterated that the Arbitrator will have jurisdiction to
entertain any Counter Claim, even though it was not raised at a stage earlier
to the stage of pleading before the Arbitrator.
8. Section 32(2)(a) of the Act further provides that the Arbitral Tribunal
may order termination of the arbitral proceedings where the Claimant
withdraws his claim, unless the respondent objects to the order of the
Arbitral Tribunal and the Arbitral Tribunal recognises a legitimate interest
on his part in obtaining a final settlement of the dispute.
9. A Counter Claim by its very nature is an independent claim raised by
the respondent in the arbitration proceedings and even where the claim is to
be dismissed for non-prosecution, the proceedings must continue with
respect to the Counter Claim.
10. In General Exports and Credits Ltd. v. Aditya Birla Finance Ltd.,
2014 SCC OnLine Del 2009, this Court has held that:-
“21…….in case the statement of claim is not filed then the learned
arbitrator would terminate the proceedings via-a-vis the statement of
claim. It would not follow thus, that the proceedings qua the counter
claim, which the respondent may have filed before the learned
arbitrator, shall also stand dissolved.”
Date of decision: 6th April, 2018
O.M.P. (COMM) 319/2016
UNION OF INDIA Vs ARUN KUMAR GUPTA
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1996 (hereinafter referred to as the ‘Act’) has been filed by the petitioners
challenging the Arbitral Award dated 09.04.2015 passed by the Sole
Arbitrator to the extent that by the Impugned Award the Arbitrator has
terminated the arbitration proceedings even with respect to the Counter
Claim filed by the petitioners.
2. The learned counsel for the petitioners submits that the arbitration
proceedings with respect to the Counter Claim could not have been
terminated as there was no allegation that the petitioners were also not
pursuing the Counter Claim with rigour or seriousness before the Arbitrator.
The only allegation was that the respondent was not pursuing its claim
before the Arbitrator, and this was so recorded in the Impugned Award. The
learned counsel for the petitioners further submits that the Arbitrator has
taken note of the objection of the petitioners to the termination of the OMP(Comm) No.319/2016 Page 2
proceedings as communicated by petitioners letter dated 02.03.2015
(wrongly recorded by the Arbitrator as 01.03.2015), however, has still
terminated the proceedings with respect to the Counter Claim without giving
any reason. He submits that the Counter Claim being separate and distinct
from the claim, merely because the claim of the respondent was not being
pursued by the respondent, the arbitration proceedings with respect to the
Counter Claim could not have been terminated. He further submits that the
petitioners had rendered separate fee to the Arbitrator with respect to the
Counter Claim as well.
3. The learned counsel for the respondent, on the other hand, submits
that only claims of the respondent had been referred to the Arbitrator for
adjudication and in view thereof, the Counter Claim filed by the petitioners
was not even maintainable before the Arbitrator. In this regard he relies
upon the judgment of the Supreme Court in State of Goa v. Praveen
Enterprises, (2012) 12 SCC 581 to contend that the Arbitrator would derive
his jurisdiction only from the order of reference and cannot go beyond the
same.
4. I have considered the submissions made by the counsel for the parties.
The Arbitrator had been appointed by this Court vide its order dated
18.11.2013 in ARB.P. 405/2013 titled Arun Kumar Gupta v. Union of India
and Anr. A reading of the order does not indicate that the Arbitrator had
been appointed only with respect to the claims of the respondent and not
with respect to the Counter Claim of the petitioners. The counsel for the
respondent submits that this order has to be read alongwith order dated
15.07.2013 passed in O.M.P. 257/2012 wherein an undertaking on behalf of
the petitioners was recorded that they would be appointing an Arbitrator. In OMP(Comm) No.319/2016 Page 3
my view, this submission cannot be accepted as the Arbitrator had been
appointed by this Court in its order dated 18.11.2013 only because the
petitioners had failed to appoint an Arbitrator in terms of its undertaking in
O.M.P. 257/2012 recorded in the order dated 15.07.2013. Admittedly, the
order dated 18.11.2013 does not confine the powers of the Arbitrator to
adjudicate only the claims filed by the respondent.
5. It is to be noted that unlike section 20 of the Arbitration Act, 1940,
under Section 11 of the Arbitration and Conciliation Act, 1996 the Chief
Justice (now the High Court) only appoints an Arbitrator upon failure of the
parties to act in accordance with the appointment procedure. There is no
provision of making reference of the disputes to the Arbitrator. This change
of the jurisdiction of the Court was taken note of by the Supreme Court in its
judgment in Praveen Enterprises (Supra) in the following words:-
“21. Section 20 of the old Act required the court while ordering the
arbitration agreement to be filed, to make an order of reference to the
arbitrator. The scheme of the new Act requires minimal judicial
intervention. Section 11 of the new Act, on the other hand,
contemplates the Chief Justice or his designate appointing the
arbitrator but does not contain any provision for the court to refer the
disputes to the arbitrator. Sub-sections (4), (5) and (9) of Section 11
of the Act require the Chief Justice or his designate to appoint the
arbitrator/s. Sub-section (6) requires the Chief Justice or his
designate to ‘take the necessary measure’ when an application is filed
by a party complaining that the other party has failed to act as
required under the appointment procedure. All these Sub-sections
contemplate an Applicant filing the application under Section 11, only
after he has raised the disputes and only when the Respondent fails to
co-operate/concur in regard to appointment of arbitrator.
22. Section 23 of the Act makes it clear that when the arbitrator is
appointed, the claimant is required to file the statement and the
Respondent has to file his defence statement before the Arbitrator. OMP(Comm) No.319/2016 Page 4
The claimant is not bound to restrict his statement of claim to the
claims already raised by him by notice, “unless the parties have
otherwise agreed as to the required elements” of such claim
statement. It is also made clear that “unless otherwise agreed by the
parties” the claimant can also subsequently amend or supplement the
claims in the claim statement. That is, unless the arbitration
agreement requires the Arbitrator to decide only the specifically
referred disputes, the claimant can while filing the statement of claim
or thereafter, amend or add to the claims already made. Similarly
Section 23 read with Section 2(9) makes it clear that a Respondent is
entitled to raise a 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 such
procedure is not followed, the Chief Justice or his designate will take
necessary measures under Section 11(6) of the Act to ensure
compliance by the parties with such procedure. Where the arbitration
agreement requires the disputes to be formulated and referred to
arbitration by an appointing authority, and the appointing authority
fails to do so, the Chief Justice or his designate will direct the
appointing authority to formulate the disputes for reference as
required by the arbitration agreement. The assumption by the courts
below that a reference of specific disputes to the Arbitrator by the
Chief Justice or his designate is necessary while making appointment
of arbitrator under Section 11 of the Act, is without any basis. Equally
baseless is the assumption that where one party filed an application
under Section 11 and gets an arbitrator appointed the arbitrator can
decide only the disputes raised by the Applicant under Section 11 of
the Act and not the counter claims of the Respondent.”
6. The Supreme Court, relying upon Section 23 and Section 2(9) of the
Act held that the respondent in an arbitration proceeding can file a Counter
Claim and once such Counter Claim is filed before the Arbitrator, the
Arbitrator has to decide the same, including the question whether such
Counter Claim falls within the scope of the Arbitration Agreement and
whether he has jurisdiction to adjudicate all those disputes and if the answer
is in the affirmative, proceed to adjudicate upon the same. The Supreme
Court further held that a Counter Claim by a respondent presupposes the
pendency of the proceedings relating to the disputes raised by the Claimant.
The object for providing of Counter Claim is to avoid multiplicity of
proceedings and to avoid divergent findings. The respondent in the
arbitration proceedings has a choice of raising the disputes by issuing a
notice to the Claimant calling upon him to agree for reference of his disputes
to arbitration and then resort to an independent arbitration proceeding or
raise his disputes by way of a Counter Claim, in the pending arbitration
proceedings.
7. In Jakki Mull & Sons v. Jagdish Thakral, 2017 SCC OnLine Del
11667, this Court reiterated that the Arbitrator will have jurisdiction to
entertain any Counter Claim, even though it was not raised at a stage earlier
to the stage of pleading before the Arbitrator.
8. Section 32(2)(a) of the Act further provides that the Arbitral Tribunal
may order termination of the arbitral proceedings where the Claimant
withdraws his claim, unless the respondent objects to the order of the
Arbitral Tribunal and the Arbitral Tribunal recognises a legitimate interest
on his part in obtaining a final settlement of the dispute.
9. A Counter Claim by its very nature is an independent claim raised by
the respondent in the arbitration proceedings and even where the claim is to
be dismissed for non-prosecution, the proceedings must continue with
respect to the Counter Claim.
10. In General Exports and Credits Ltd. v. Aditya Birla Finance Ltd.,
2014 SCC OnLine Del 2009, this Court has held that:-
“21…….in case the statement of claim is not filed then the learned
arbitrator would terminate the proceedings via-a-vis the statement of
claim. It would not follow thus, that the proceedings qua the counter
claim, which the respondent may have filed before the learned
arbitrator, shall also stand dissolved.”
11. In the present case, the petitioners had objected to the termination of
the arbitration proceedings. The Arbitrator, in my opinion, therefore, could
not have terminated the arbitration proceedings with respect to the Counter
Claim filed by the petitioners.
12. In view of the above, the Impugned Award is set aside leaving it open
to the petitioners to initiate appropriate legal proceedings as may be open to
it in law. If such proceedings are initiated, the petitioners shall be entitled to
claim the benefits of limitation in terms of Section 43(4) of the Act.
13. The petition is allowed in the above terms, with no orders as to costs.
NAVIN CHAWLA, J
APRIL 06, 2018.
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