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2006 DIGILAW 136 (DEL)

MANISH MITTAL v. MAHESH CHAND

2006-01-19

SWATANTER KUMAR

body2006
SWATANTER KUMAR, J. ( 1 ) THIS order will dispose of both the above arbitration cases as they are inter-connected, are between the same parties and are in relation to the same contract. ( 2 ) PETITIONER Manish Mittal had entered into a Partnership Deed dated 15th July, 1994 with Dr. Mahesh Chand. The partnership business was carrying on under name and style of M/s. Bio Polymer Systems for manufacture of micro porus tape. Under clause 19 of the Partnership Deed the disputes between the parties were liable to be referred to the arbitration. Clause 19 reads as under:"19. That all the disputes relating to the partnership business shall be referred to the arbitration under the Indian arbitration Act, 1940 and the decision of the Arbitrator shall be binding on all the parties. " ( 3 ) DR. Mahesh Ch and filed a petition in the court of Distt. Judge, Delhi under Section 8 read with Section 11 of the Arbitration and conciliation Act, (hereinafter referred to as the Act ) for referring the claims as stated in that petition to arbitration, in accordance with the above clause. The respondent (petitioner herein) filed a reply to the said petition and raised certain counter-claims, however, without quantifying the extent of the claims in terms of money. The learned distt. Judge by his order dated 14th november, 2002 allowed the said petition and referred the claim and counter-claims to the sole arbitrator for adjudication in accordance with law. The relevant part of the said order reads as under:"4. After going through the record, statements made by both the parties and the partnership deed dated 15. 11. 95. I hereby appoint Mr Justice satpal (Retired) as a sole arbitrator to decide the disputes between the parties. Both the parties are directed to appear before the Arbitrator on 21. 11. 2002 at 4. 00 pm Permanent Lok adalat Office, Delhi Vidyut Board, Mata sundri Lane, Opposite Diwane Ghalib to file claims and counter claims. The arbitrator shall fix his own fees. " ( 4 ) WHILE mentioning the disputes in paragraph XIV of that petition, the petitioner had valued the subject matter of his claims for Rs. 13 lacs and that is how the petition was filed in the Court of the learned Distt. Judge, Delhi. The arbitrator shall fix his own fees. " ( 4 ) WHILE mentioning the disputes in paragraph XIV of that petition, the petitioner had valued the subject matter of his claims for Rs. 13 lacs and that is how the petition was filed in the Court of the learned Distt. Judge, Delhi. As already noticed, the counter-claims of the respondent in that petition were stated in detail, but the exact amount due and claimed under the counter-claims was not specified despite the disputes having been clearly stated in the said reply. During the pendency of the arbitration proceedings, manish Mittal filed an application before the arbitrator stating that the claimant had made his claims of more than Rs. 2 crores while the value of the entire subject matter of the claims preferred by that applicant before the learned Distt. Judge was Rs. 13 lacs. It was also specifically stated that the Court of the distt. Judge had no jurisdiction to entertain and decide the claim, if they were in excess of rs. 20 lacs. The learned Arbitrator vide his order dated 10th April, 2003 accepted the said application and called upon the claimant to amend his claim petition within the permissible limits and the same should not exceed Rs. 20 lacs. The operative part of the order dated 10th April, 2003 reads as under:"in view of the above discussion, the present application filed on behalf of the respondent is allowed partly and it is held that this Tribunal has no jurisdiction to entertain the claim of rs. 2,03,87,239/- claimed in the statement of Claim filed on behalf of the claimant in these proceedings. The claimant is, however, granted 3 weeks time to file revised Statement of Claim where the value of the subject matter does not exceed Rs. 20 lacs. " ( 5 ) THE above order of the arbitrator was not challenged by the claimant Dr. Mahesh chand Jain but in furtherance to the said order he filed an amended claim petition before the arbitrator restricting his claims to Rs. 20 lacs and the arbitration proceedings continued on the basis of the amended claim. Thereafter the respondent before the arbitrator (petitioner herein) filed his counter-claims on 2nd July, 2003 and raised the same to the extent of Rs. 2,00,09,554/ -. 20 lacs and the arbitration proceedings continued on the basis of the amended claim. Thereafter the respondent before the arbitrator (petitioner herein) filed his counter-claims on 2nd July, 2003 and raised the same to the extent of Rs. 2,00,09,554/ -. An application was filed on behalf of the claimant that the counter-claims raised by the respondent were liable to be rejected and could not be entertained before the arbitrator as they were in excess of Rs. 20 lacs. The submission made was that the parties to the lis should be treated equally and the way the claims of the claimant were rejected and he was called upon to file the amended claims, the respondent should also be directed to file amended claim restricting his claim to the extent of Rs. 20 lacs. The learned arbitrator vide his order dated 8th April, 2004 accepted the objections of the claimant and issued the following directions:"in view of the discussion in the said order dated 10. 04. 2003, and che provisions of the CPC mentioned. hereinabove, the same principle shall apply to the counter-claims raised on behalf of the respondent. For the reasons recorded in my aforesaid order dated 10. 04. 2003, Issue No. 1 is decided in favour of the claimant and against the respondent and it is held that this tribunal has no jurisdiction to entertain. the counter-claims of Rs. 2,00,09,554/ claimed by the respondent. The respondent is, however, granted three weeks time to file revised counter-claims where the value of the subject matter does not exceed Rs. 20 lakhs. " ( 6 ) IT is this order passed by the learned arbitrator, the correctness of which has been questioned by the petitioner before this Court in the present appeals/petitions filed under section 37 of the Act. ( 7 ) THERE can hardly be any dispute to the fact that the order of the arbitrator is an order passed under Section 16 (3) of the Act, which order would be appealable under section 37 of the Act. The arbitrator has held in the said order that he had no jurisdiction to entertain the counterclaims in excess of Rs. 20 lacs as the pecuniary jurisdiction of the Court, which made the reference, was upto Rs. 20 lacs. The arbitrator has held in the said order that he had no jurisdiction to entertain the counterclaims in excess of Rs. 20 lacs as the pecuniary jurisdiction of the Court, which made the reference, was upto Rs. 20 lacs. The legality of this order is challenged as the referring Court had referred the counterclaims of the respondent for adjudication to the arbitrator and the learned arbitrator had no jurisdiction to review the order of the Court and held that the counterclaims were beyond the jurisdiction of the arbitrator. It is also contended that the arbitrator. had no jurisdiction to restrict the counterclaims as they in their entirety were, referred to the arbitrator by the Court. It is also the contention that there was no question of treating the parties equally as the claimant of its own accord has not challenged the order of the arbitrator and had accepted the same while the petitioner has questioned the correctness thereof and as such no parity could be derived between the parties on the basis of provisions of Section 18 of the Act. ( 8 ) IT can hardly be a matter of any controversy that vide order dated 14th november, 2002, the claims and counterclaims had been referred for adjudication IQ the sole arbitrator. The petitioner had opted to declare the value of his claims before the Court of the Distt. Judge while the respondent had only stated his disputes without quantifying the extent of amount which the said respondent was entitled to. At the time of passing of the order of reference, the claimant/petitioner took no objection to this aspect of the matter and consented to the order of reference referring the counterclaims as. detailed in paragraph 10 and the prayer clause of the reply. It was for the claimant/petitioner to raise an objection at that stage, but once all such counterclaims were referred to the learned arbitrator for adjudication, neither the arbitrator nor the petitioner could alter the scope of order of reference or vary its scope. In view of the scope of reference all questions can be decided by the Arbitrator including whether the disputes are covered or not. There are no limitations to the pecuniary jurisdiction of an arbitrator and it has not been restricted by any prescribed law. Matters of any magnitude and quantum are referable to any arbitrator. In view of the scope of reference all questions can be decided by the Arbitrator including whether the disputes are covered or not. There are no limitations to the pecuniary jurisdiction of an arbitrator and it has not been restricted by any prescribed law. Matters of any magnitude and quantum are referable to any arbitrator. Once all the counterclaims as pleaded in paragraph 10 were referred to, the arbitrator would be expected to examine the claims on merits, as it was nobody s case that the claims raised by the counter claimant did not arise or the disputes are not covered under Clause 19 of the agreement dated 15th July, 1994. The proper course, if any, available to the claimant was to move the Court of the learned distt. Judge, Delhi for clarification or review of the order as the case may be. No such steps were taken by the claimant and having accepted the earlier order of the arbitrator, he waived his objection, if any, against the order of reference. ( 9 ) LEARNED counsel appearing for the petitioner white replying to the arguments placed on behalf of the respondent herein, relied upon the judgment of the Supreme court in the case of P. Anand Gajapathi raju and others Vs. P. V. G. Raju (died) and others 2000 III AD (S. C.) 497 = AIR 2000 Supreme Court 1886 and judgment of this Court in the case of National Thermal power Corpn. Vs. R. S. Avtar Singh and co. and Anr. 2001 VII AD (DELHI) 371, and argued that the Court to which the party shall have recourse to challenge the award would be the Court as defined in Clause (e) of section 2 of the Act and filing of an application under Section 8 does not constitute filing of an application as contemplated under Section 42 of the Act. On this premise it is argued that the order of the learned Arbitrator is contrary to law. In the case of National thermal Power Corpn. (supra), the Court had taken the view that even where the arbitrator was appointed by the Supreme court, the High Court, being the principal court of civil jurisdiction and having the pecuniary jurisdiction, would be the court where the award and objections thereto could be filed. In the case of National thermal Power Corpn. (supra), the Court had taken the view that even where the arbitrator was appointed by the Supreme court, the High Court, being the principal court of civil jurisdiction and having the pecuniary jurisdiction, would be the court where the award and objections thereto could be filed. No doubt, the law enunciated in both these judgments is on the basis of the definition of the expression "court" in Section 2 (e) of the Act and as the principal Court of Civil jurisdiction , the High Court has the pecuniary jurisdiction and is the Court of original jurisdiction. The Supreme Court enunciated the above principle in the case of P. Anand gajapathi Raju (supra) and held as under:"the Court to which the party shall have recourse to challenge the A ward would be the Court as defined in clause (e) of Section 2 of the new Act and not the Court to which an application under Section 8 of the new Act is made. An application before a Court under Section 8 merely brings to the court s notice that the subject matter of the action before it is the subject matter of an arbitration agreement. This would not be such an application as contemplated under Section 42 of the act as the Court trying the action mayor may not have had jurisdiction to try the suit to start with or be the competent court within the meaning of Section 2 (e) of the new Act. " ( 10 ) IN view of the above principle, it is clear that the application as contemplated under section 42, so as to create a bar for filing of subsequent applications in other courts, except the Court where the application was filed, would not cover an application under section 8 of the Act. It is making and pronouncing of the award which would determine the jurisdiction of the court which will be competent to entertain and decide the petition filed by a party in relation to objections to the award and the proceedings thereafter. The corollary of this main argument is that the learned Arbitrator could not have allowed the objection taken by the claimant before the Arbitrator in relation to the extent of counter claims. The corollary of this main argument is that the learned Arbitrator could not have allowed the objection taken by the claimant before the Arbitrator in relation to the extent of counter claims. Since the complete counter claims had been referred, and even otherwise the counter-claimant while confining his claims to the mentioned items only quantified the amount within the stated heads of paragraph 9 of the reply before the Court of the learned district Judge, the Arbitrator should have entertained the counter claim irrespective of the amount mentioned therein. This contention also has merit. Reference to the arbitrator was by an order of the Court and all the counter claims have been referred for adjudication. It was not a case where the counter claims prayed for were stated to be beyond the order of reference, beyond the terms of the arbitration agreement, or were otherwise barred in law. ( 11 ) ANOTHER important aspect of these cases is that the petitioner Mr. Manish Mittal has filed a petition under Section 11 of the Act being arb. P. 22/2005 praying for reference of the disputes to the arbitral tribunal before whom the earlier referred disputes are pending determination. In support of this petition, the petitioner has also relied upon the orders of the arbitrator dated 8th April, 2004 and 16. 09. 2004. By these orders, the arbitrator had rejected entertainment of counter claims in excess of the pecuniary jurisdiction of the court making the reference and rejection of the review application filed by the applicant by order dated 8th April, 2004. The claims of this applicant have been detailed in paragraph four of the petition. In the reply filed to this petition, the arbitration agreement between the parties for reference of the disputes, is not questioned. What is stated by way of objections is that in view of the orders passed by the learned Additional District Judge dated 14th November, 2002, the present petition is not maintainable before this Court in view of the provisions of Section 42 of the Act. This objection, in fact, has already been answered by the Supreme Court in the case of P. Anand Gajapathv Raju (supra) and calls for no further discussion. It may also be noticed here that the Arbitrator passed the order directing the counter claimant to reduce his claims upto Rs. This objection, in fact, has already been answered by the Supreme Court in the case of P. Anand Gajapathv Raju (supra) and calls for no further discussion. It may also be noticed here that the Arbitrator passed the order directing the counter claimant to reduce his claims upto Rs. 20 lacs on the basis that the learned Additional District Judge had pecuniary jurisdiction to entertain and decide the petition only to the extent of Rs. 20 lacs. Beyond that, this Court alone would have the jurisdiction to entertain and decide the petition. Once the arbitration proceedings are pending and there is no dispute to the existence and validity of the arbitration agreement, there would be no justification whatsoever for this court not to entertain the present petition and refer the said disputes to the Arbitrator, who is already dealing with the disputes between the parties, arising from the same partnership agreement. All the claims and counter-claims relate to the carrying on of business of partnership and its dissolution. In fact, the present petition would render all the other questions academic, as there exits no legal ground why the disputes raised in the present petition cannot be referred to the same Arbitrator in accordance with law. ( 12 ) FOR the reasons afore-recorded, both these petitions are allowed. The petitioner (counter-claimant) would be at liberty to raise the counter claims stated in paragraph 10 of this petition before the same Sole Arbitrator, who may adjudicate thereupon in accordance with law. It is expected that the arbitration proceedings would be concluded expeditiously. Parties are left to bear their own costs. .