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2010 DIGILAW 66 (HP)

STATE OF H. P. v. INDERJEET SINGH AVTAR SINGH

2010-01-06

DEV DARSHAN SUD

body2010
JUDGMENT Dev Darshan Sud, J.- The State has challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter referred to as the Act) made by the arbitrators in the claim petition instituted by the respondent herein. The award has been challenged on a number of grounds as detailed in the petition. One basic ground urged by the State in support of its objections is that the award deserves to be quashed and set aside as the arbitrators have not adjudicated the counter claim instituted by the objectors. The award takes note of the fact that counter claim was filed by the State and that the claimant has filed his reply to the counter claim. The record shows that hearings were held on 2.6.200, 14.9.2000, 29.9.2000, 23.10.2000, 18.11.2000, 4.1.2001, 5.1.2001 and 23.1.2001. The arbitrators record: “…This Forum conducted 8 hearings in the matter on 2.6.200, 14.9.2000, 29.9.2000, 23.10.2000, 18.11.2000, 4.1.2001, 5.1.2001 and 23.1.2001. With the consent of both the parties the arguments in the case were closed on 23.1.2001. At the request of the parties the site was also inspected by the tribunal in the presence of the parties on 24.2.2001….” 2. The orders passed by the arbitrators contemplate the time schedule which was framed by them for considering both the claims and counter claims. When proceedings were held on 2.6.2000, the Tribunal fixed its fees and framed the following time schedule: “ The Tribunal framed the following schedule: (1) Statement of Claims by claimant by 11.06.2000 (2) Statement of defence and counter Claims by respondent by 15.7.2000. (3) Rejoinder, if any to be Within 10 filed by claimant. days from the eceipt of Defence & Counter Claims from respondent. Please note that these dates are absolutely firm and shall have to be strictly adhered to. Each party shall also file copies of reliances before the Arbitrators and the copies thereof should be sent to the opposite party. The next meeting will be fixed and intimated separately.” 3. On the next meeting, that is on 14.9.2000, an objection was taken by the claimant that the counter claim was not maintainable as counter claim was never brought before the arbitration clause was invoked. The case continued thereafter. The next meeting will be fixed and intimated separately.” 3. On the next meeting, that is on 14.9.2000, an objection was taken by the claimant that the counter claim was not maintainable as counter claim was never brought before the arbitration clause was invoked. The case continued thereafter. On 23.1.2001, the arbitrators hold: “The Arbitral Tribunal pointed out that in order to sustain a claim or a counter claim there must be a dispute crystallized within the parties by assertion by one of them and repudiation by the other. It came to light to the Arbitrators that there had been no assertion of claim by the Respondent. In the context of this admitted position, this Forum does not think that the Counter claims of the Respondent can be adjudicated before it. Hearing of the case is closed with consent of both the parties. The claimant is directed to submit Non Judicial Stamp Papers of the maximum value i.e. Rs. 112.50 P for purposes of making and publishing the award. This may be done within one week. The NJP may be sent to the Presiding Arbitrator.” 4. This can hardlybe expressed a sound manner of adjudicating the disputes which have been raised by the parties. Before considering rival contentions of the parties, the provisions of law applicable may be noticed. 5. Section 2(9) of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the Act) defines a claim to mean: “ (9) Where this Part, other than clause (a) of section 25 or clause (a) of sub section (2) of section 32, refers to a claim, it shall also apply to a counter claim, and where it refers to a defence, it shall also apply to a defence to that counter claim.” 6. It is, thus, obvious and without referring to any case law, that claim includes a counter claim and it is the bounden duty of the arbitrators to adjudicate on this claim. 7. In K.V.George v. The Secretary to Govt., Water and Power, Dept. Trivandrum and another, AIR 1990 SC 53, dealing with the aspect of counter claims, the Supreme Court holds: “13. The first question that falls for consideration in this case is whether the finding of the High Court setting aside the order of review made in 1. 7. In K.V.George v. The Secretary to Govt., Water and Power, Dept. Trivandrum and another, AIR 1990 SC 53, dealing with the aspect of counter claims, the Supreme Court holds: “13. The first question that falls for consideration in this case is whether the finding of the High Court setting aside the order of review made in 1. A. No. 3780 of 1981 and setting aside the order made in O. P. (Arbi.) No. 81 of 1981 dated 18.08.1981 whereby the case was remanded to the Arbitrator is sustainable or not. Admittedly, the appellant filed a claim petition being Arbitration Case No. 132 of 1980 making certain claims before the Arbitrator. The respondents filed the counter-claims. The Arbitrator without considering the counter-claims kept the counter-claims for subsequent consideration and made an award. The trial Court set aside the award and remitted the same to the Arbitrator for making a fresh award considering the claims and counter-claims filed by the parties. On an application for review, the trial Court set aside the order and passed a decree in terms of the award. It is not disputed that the Arbitrator did not at all consider the counterclaims and kept the same for consideration subsequently while making award in respect of the claims filed by the appellant. Undoubtedly, this award made by the Arbitrator is not sustainable in law and the Arbitrator has mis-conducted himself and in the proceedings by making such an award. It is the duty of the Arbitrator while considering the claims of the appellant to consider also the counter-claims made on behalf of the respondents and to make the award after considering both the claims and counterclaims. This has not been done and the Arbitrator did not at all consider the counterclaims of the respondents in making the award. As such the first award dated 22.01.1981 made by the Arbitrator in Arbitration Case No. 132 of 1980 is wholly illegal and unwarranted and the High Court was right in holding that the Arbitrator mis-conducted himself and the proceedings in making such an award and in setting aside the same and directing the Arbitrator to dispose of the reference in accordance with law considering the claim of the contractor and the counter-claim of the respondents. The order allowing the application for review by the trial Court is also bad inasmuch as there was no mistake or error apparent on the face of the order dated 18.08.1981 made in O. P. (Arb.) No. 81 of 81 nor any sufficient reason has been made out for review of the said order. The order dated 18.08.1981 is legal and valid order and the order dated 18.03.1982 allowing the application for review being I. A. No. 3780 of 1981 and setting aside the order in O. P. (Arb.) 81 of 1981 dated 18.08.1981 is, therefore, bad and unsustainable.” 8. To similar effect is the judgment in Indian Oil Corporation Ltd. v. Amritsar Gas Service and Others, 1991 (1) SCC 533, holding: “15. The appellants 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 S. 34 of the Arbitration Act and the 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. However, in the present case, the counter-claim not being pressed at this stage by learned counsel for the appellant, it is unnecessary to examine this matter any further.” 9. The Madhya Pradesh High Court in Western Coalfields Ltd. , Nagpur v. M/S Narbada Constructions, Jabalpur, 1991 (1) M.P.L.J. 55, following the decision of the Supreme Court in K.V.George’s case (supra) holds: “9. True, the order of reference does not speak of counter claim but as the disputes having arisen between the parties in relation to the claims and counter claims of the parties concerning the contract covered by Arbitration agreement Arbitrator was bound to decide and a separate reference on counter claims was not necessary. True, the order of reference does not speak of counter claim but as the disputes having arisen between the parties in relation to the claims and counter claims of the parties concerning the contract covered by Arbitration agreement Arbitrator was bound to decide and a separate reference on counter claims was not necessary. The word “dispute” means if one party asserts a right and other party repudiates the same that is a “dispute” within the meaning of the Act of 1940. Any question of which the parties join issue is a “dispute” before an Arbitrator to be inquired into. In Black’s Law Dictionary, 6th edition, page 472, “Dispute” means a conflict or controversy; a conflict of claims or rights; an assertion of a right; a claim; or demand on one side, met by contrary claims or allegations on the other. The subject of litigation; the matter for which a suit is brought and upon which issue is joined, and in relation to which jurors are called and witnesses examined. The word “claim” is of very extensive signification embraced in every species of legal demand. It is one of the largest word of law and includes “demand” and “debt”. A “claim” means the assertion of a cause of action which includes relief and also any grounds of obtaining relief. “Counter claim” is a claim set up against the plaintiff lodging a claim in the same suit being based on a cause of action which if established will defeat or diminish the plaintiff’s claim. See Black’s Law Dictionary, 6th Edition, at page 349. The main purpose of allowing a defendant to set up a counter claim is to avoid multiplicity of proceedings between the parties. 11. Part I of the Act of 1996 deals with Arbitration of which Chapter 1 relates to general provisions. Section 2 of the Act of 1996 in Chapter I of Part 1 is a ‘Definitions’ provision. Subsection (9) of section 2 reads thus: “(9) Where this Part, other than clause (a) of section 25 or clause (a) of sub section (2) of section 32, refers to a claim, it shall also apply to a counter claim, and where it refers to a defence, it shall also apply to a defence to that counter claim.” From a bare reading of sub section (9) of section 2 it is clear that counter claims are equally arbitrable as claims. It will not now be open for a claimant to raise a controversy that a counter claim is not entertainable by an arbitral tribunal. The law so far was not different under the Act of 1940. Where the claimant goes before the Arbitrator with a set of claims, and the other party resists by filing counter claim or advances counter claims, if there by any, it is the duty of the Arbitrator to consider both claim and counter claim before making the award otherwise the Arbitrator misconducts himself. See the decision of Supreme Court in K.V.George case supra. Therefore, there is no foundation in the contention that the Arbitrator has exceeded his authority in traveling outside the powers conferred upon him by the reference by entertaining the counter claim and adjudicating the same unless the two parties join in, making a combined reference or the appellant also ought to have applied for reference about its claim in dispute to be decided under arbitration clause. The decisions relied by the learned counsel for the distinguishable wdown that in a respondent hich nowhere reference on are lay the dispute between the parties in relation to claim if the counter claim is lodged by the other party that would mean enlarging the scope of the reference and beyond the competence of the Arbitrator.” 10. The ratio laid down by the Supreme Court is explicit and binding on this Court. The judgment of the Madhya Pradesh Court applies this ratio only. 11. In Himachal Fruit Grower Cooperative Society v. Upper India Food Preservers and Processors (P) Ltd., Parwanu and another, 1997(2) Sim. L.C. 110, one of the points raised by the appellants before this Court was that a counter claim was in the nature of a suit. The objection was raised in the context that according to Section 76 of the Himachal Pradesh Cooperative Societies Act, a notice was required to be served on the cooperative society before any action could be commenced. Dealing with this contention, the Court holds: “15. We have already referred to the fact that the learned trial Judge has negatived the contention of the plaintiff on the question. Dealing with this contention, the Court holds: “15. We have already referred to the fact that the learned trial Judge has negatived the contention of the plaintiff on the question. The relevant part of the judgment of the learned Judge reads as follows: “ It is nowhere provided under Order VIII, Rule 6-A of the Code that the counter-claim is a separate suit, although it has the effect of a cross suit. A counter claim is to be decided in the suit in which it is filed. Only one final judgment is to be pronounced meaning thereby that the suit remains one. The filing of a counter claim does not convert the original suit into two suits and two judgments and two decrees are not to be delivered. Order VIII, Rule 6-A (4) of the Code further states that the counter claim is to be treated as a plaint and governed by the rules applicable to plaints (emphasis supplied). It clearly suggests that a counter claim by itself is not a plaint but is to be treated as a plaint and governed by the rules applicable to plaints. The words ‘plaint’ and suit are not defined in the Code of Civil Procedure. ‘Suit’ ordinarily means, and apart from some context must be taken to mean, a civil proceedings instituted by the presentation of a plant, as has been held in 1933 PC 63, Hansrai Gupta and others v. Dehra Dun Mussoorie Electricity Tramway Co. Ltd. In AIR 1932 Lahore 374, Secretary of State v. Kundan Singh and others, an application under para 17, Schedule 2 of the Code was filed. Such application is numbered and registered as a suit under sub-para 2 of para 17 of the Code. It has been held that such an application is not a suit within the meaning of section 80 of the Code. Thus a counter-claim filed by a defendant is to be treated as a plaint or a cross-suit, still it will be treated as a plaint or a cross-suit, still it will not become a separate suit for the purpose of the Code because no judgment and decree is to be passed on this counter-claim and it has only to be decided in the judgment of the original suit filed by the plaintiff. It is a different matter that the plaintiff may get his suit dismissed or withdrawn but still the counter-claim is to be heard and decided. In any case a counter-claim does not become a separate suit and can only be treated as a limb of the original civil suit.” 16. We are entirely in agreement with the aforesaid reasoning of the learned Judge. We have gone through the judgment of the Lahore High Court in Secretary of State v. Kundan Singh and others, AIR 1932 Lahore 374. That judgment was delivered by the great and eminent Judge, Shadi Lal, Chief Justice. He has pointed out that a proceeding, which does not commence with a plaint cannot be considered to be a suit. The same reasoning is also found in the judgment of the Privy Council, which came into existence about nine months later in Hansraj Gupta and others v. Dehra Dun Mussoorie Electric Tramway co. ltd., AIR 1933 PC 63. The Privy Council said that the word ‘suit’ ordinarily means and apart from some context must be taken to mean, a civil proceeding instituted by the presentation of a plant. Raising of a counter-claim in the written statement by the defendant cannot be held to be a suit within the meaning of section 76 of the Himachal Pradesh Cooperative Societies Act, as it is not initiated with the plaint, though for the purposes of applying the rules of the Code of Civil Procedure, it shall be treated as a plaint. It is not a plaint as such. Sub-rule (2) of Rule 6-A merely shows that the counter-claim shall have the same effect as a cross suit, but the very same rule contemplates and provides for only one judgment in the same suit both on the original claim and on the counter-claim. If for all purposes, the counter-claim is to be treated as a separate or independent suit, then the Code must provide for and enable the Court to pass two decrees, one in the original suit and the other in the counter claim. The very fact that the Code only provides for a single judgment and single decree would itself show that the counter-claim is not a cross suit for all purposes. Sub-rule (4) of Rule 6-A does not make any difference in the situation whatever. The very fact that the Code only provides for a single judgment and single decree would itself show that the counter-claim is not a cross suit for all purposes. Sub-rule (4) of Rule 6-A does not make any difference in the situation whatever. The ruling of the Lahore High Court has been followed by a Division Bench of Allahabad High Court in Union of India v. Gorakh Mohan Das and another, AIR 1964 All 477. The Division Bench has also made reference to a judgment of East Punjab High Court in Ruby General Insurance Co. Ltd. v. Bharat Bank Ltd., AIR 1950 EP 352, in which a similar view was expressed following the judgment of the Lahore High Court. Very recently, the Supreme Court has expressed the same view in Supreme Cooperative Group Housing Society v. M/s. H.S. Nag and Associates (P) Ltd., AIR 1996 SC 2443, holding that though an application under section 20 of the Arbitration Act is treated as a suit, the mandatory requirement of section 90 of the Delhi Co-operative Societies Act, which provides for issue of notice before the filing of a suit does not get attracted to the said application. 17. In T.K.V.S. Vidyapoornachary Sons and others v. M.R. Krishnamachary, AIR 1983 Mad 291, Single Judge of the said High Court after referring to the provisions of Rules 6-A and 6-C of Order 8 of the Code of Civil Procedure observed that the provision emphasizes by implication that as a general rule a suit claim and a counter-claim ought properly to be regarded as constituting a unified proceeding. Thus, there is only proceeding before the Court though a counter-claim has been made by the defendants in the written statement. Hence, the counter-claim cannot be treated as a suit for the purpose of section 76 of the Himachal Pradesh Co-operative Societies Act, 1971. 18. Learned Counsel for the respondents has placed reliance on the judgment of the Supreme Court in Gurbachana Singh v. Bhag Singh and others, AIR 1996 SC 1087. The Court has held in that case that in a suit for injunction, a counter-claim for possession could be entertained. That judgment does not help the respondents in any manner. 19. There is yet another reason for holding that a notice will not be necessary before filing a counter-claim under Rule 6-A, sub rule (1). The Court has held in that case that in a suit for injunction, a counter-claim for possession could be entertained. That judgment does not help the respondents in any manner. 19. There is yet another reason for holding that a notice will not be necessary before filing a counter-claim under Rule 6-A, sub rule (1). The defendant has to make the counter-claim either in the written statement or before the time limited for delivering his defence has expired. The rule does not contemplate the Court giving separate time to the defendant in order to enable him to issue a notice before filing a counter-claim. If in a particular case, the Court refuses to grant such time, as may be required for issue of notice and delivery of the same to the plaintiff, the defendant cannot lose his right to file a counter-claim. Such a situation is not contemplated at all by the provisions of Order 8 of the Code of Civil Procedure. Hence, no notice is necessary before the defendant makes a counter-claim in a suit.” 12. The decision of this Court dealing with the concept of counter claim under the Code of Civil Procedure has been noticed in some detail as a counter claim in arbitration would be no different from that as envisaged under the Code of Civil Procedure. In any event, to remove all doubts, the Act itself envisages under sub section (9) of Section 2 that a claim includes a counter claim and the matter stands concluded by the judgments referred to above. It would be trite to observe that a counter claim negates the very claim set up by a petitioner. 13. The arbitrators have not dealt with the counter claim in a manner required by law. To say that the order disposes of the counter claim by a non speaking order, is but stating the obvious. In these circumstances, the award of the arbitrators is quashed and set aside. The arbitrators shall reconsider the entire case of the parties on merits and adjudicate the claim and counter claim of the petitioner-respondent herein on the material on record. It is clarified that in case any of the arbitrators is not willing to act or cannot act for some reason, then his vacancy shall be supplied by the party who had so named him in the first place. 14. It is clarified that in case any of the arbitrators is not willing to act or cannot act for some reason, then his vacancy shall be supplied by the party who had so named him in the first place. 14. I have not entered into the other merits of the submissions urged by the parties as that would have a material bearing on the merits of the case urged by the parties. For the purposes of reconstituting the Arbitral Tribunal consisting of the very arbitrators who made this award or in their absence by an arbitrator to be nominated by the party(s) who had nominated him, both the parties to this agreement shall meet at a mutually agreed place on 8.3.2010 for which purpose they shall issue notice to the other party. The proceedings before the arbitrators shall commence thereafter. 15. The Arbitral Tribunal shall be provided with the record as has been sent to this Court for which purpose, either the arbitrators or the parties shall file an appropriate application in this Court. This petition is disposed of. There shall be no order as to costs. 16. All pending applications shall stand disposed of and all interim order(s) shall stand vacated.