1. Contract for railway work — Dispute over execution and abandonment — Appointment of arbitrator under Section 11(6), Arbitration and Conciliation Act, 1996 — Arbitral award challenged. (Para 4 , 5 , 6 , 7 )
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2017 Supreme(SC) 962
SUPREME COURT OF INDIA
J. CHELAMESWAR, S. ABDUL NAZEER, JJ.
SRI CHITTARANJAN MAITY – APPELLANT
VERSUS
UNION OF INDIA – RESPONDENT
CIVIL APPEAL NOS. 15545-15546 OF 2017 (Arising out of SLP (C) Nos.39038-39039 of 2012)
Decided On : 03-10-2017
Important Points
IMPORTANT POINTS
Issue of arbitrability of the claim or jurisdiction of arbitrator should be raised before the High Court u/s 11(6) or before the arbitrator. It cannot be raised for the first time before Division Bench in an appeal.
If the terms of the contract do not provide for payment of interest, arbitrator cannot award any interest.
Issue of arbitrability of the claim or jurisdiction of arbitrator should be raised before the High Court u/s 11(6) or before the arbitrator. It cannot be raised for the first time before Division Bench in an appeal.
If the terms of the contract do not provide for payment of interest, arbitrator cannot award any interest.
Subject
Arbitration Law - Arbitrability of Disputes
Act Referred
Headnote
(a) Arbitration and Conciliation Act, 1996 – Section 11(6), 34 – Respondent not raising arbitrability of claim either before Chief Justice, nor before the arbitrator nor the single Judge hearing application u/s 34 – raising the same for the first time before Division Bench – Issue of jurisdiction of arbitrator ought to be raised before the arbitrator – Court cannot correct errors of Arbitrators – Held, Division Bench not justified in considering the issue of ‘no claim certificate’ for the first time. (Para 11, 13, 14)
(2006) 11 SCC 181 – Relied upon
(2009) 1 SCC 267 – Referred
(b) Arbitration and Conciliation Act, 1996 – Section 31(7)(a) – Bar on award of interest if the contract does not provide for it – Instantly, the GCC barring payment of interest – Held, appellant not entitled to any interest. (Para 15, 22)
(2009) 12 SCC 26; (2010) 8 SCC 767; (2015) 9 SCC 695 – Relied upon
(2017) SCC OnLine SC 678; (1992) 1 SCC 508 – Distinguished
Facts of the case:
The respondent invited tender for certain works against which the appellant’s tender dated 23.3.1991 for Rs.61,24,159/- was accepted. An agreement was entered into between the appellant and the respondent on 22.8.1991. In the said agreement, General Conditions of the Contract were incorporated and the parties were bound by the terms and conditions thereof.
The appellant raised the claim before the respondent and by a subsequent letter demanded reference of the dispute to the arbitration. Finally, the appellant filed an application for appointment of an Arbitrator for adjudication of the claims and disputes before the High Court. The General Manager, South-Eastern Railway, was directed to appoint Arbitrators from their panel pursuant to which the Arbitral Tribunal was constituted which adjudicated the disputes and claims raised by the appellant, as also the respondent.
The Arbitral Tribunal passed an award.
The respondent moved an application under Section 34 of the 1996 Act, for setting aside the said award. The said application was dismissed by the Single Judge of the High Court. The Division Bench has set aside the order of the learned Single Judge and also the award and directed holding of fresh reference by the Arbitral Tribunal.
Finding of the Court:
Respondent could not raise the question of jurisdiction of arbitrator for the fisrt time before the Division Bench.
Appellant is not entitled to any interest.
Result: Appeals partly allowed.
Legal Category Hierarchy
Table of Contents
2. Whether a No Claims Certificate bars arbitrability when not raised in earlier proceedings — Whether interest is payable despite a contractual bar. (Para 8 , 9 )
3. Jurisdictional objections must be raised before the arbitrator — Contractual bars on interest preclude pre-award and pendente lite interest under Section 31(7)(a), 1996 Act. (Para 11 , 12 , 13 , 14 , 15 , 17 , 19 , 20 , 21 )
4. Jurisdictional objections must be raised before the arbitrator — Under Section 31(7)(a), 1996 Act, contractual prohibition on interest bars pre-award and pendente lite interest. (Para 12 , 19 , 21 )
5. Division Bench order set aside regarding arbitrability — Interest award deleted — Respondent directed not to recover excess amount withdrawn by appellant. (Para 22 , 23 )
6. When must a party raise objections regarding the arbitrator's jurisdiction or the existence of a live claim?
A party questioning the arbitrator's jurisdiction has an obligation to raise the issue before the arbitrator, typically during or soon after the initiation of proceedings under Section 16 of the 1996 Act. (Para 12 )
7. Can a court consider the arbitrability of a dispute for the first time in an appeal if it was not raised in earlier proceedings?
No. If the issue of arbitrability or a No Claims Certificate was not raised before the appointing authority, the Arbitral Tribunal, or the court under Section 34, it cannot be entertained for the first time by an appellate court. (Para 11 , 14 )
8. Does a contractual bar on interest prevent the award of pendente lite interest under the Arbitration and Conciliation Act, 1996?
Yes. Under Section 31(7)(a) of the 1996 Act, if the agreement prohibits the payment of interest, the Arbitral Tribunal cannot award interest for the pre-award period, which encompasses both pre-reference and pendente lite interest. (Para 15 , 19 , 20 , 21 )
JUDGMENT
S.ABDUL NAZEER, J.
1. Leave granted.
2. The appellant, in these appeals, has challenged the legality and correctness of the judgment and order dated 29.9.2011 in A.P.O. No.213/2009 in A.P. No.35/2006 whereby the Division Bench of the High Court of Calcutta has set aside the judgment and order of the learned Single Judge in A.P. No.35/2006 dated 27.1.2009.
3. Brief facts necessary for the disposal of these appeals are as follows:
4. On 20.3.1991, respondent invited tender for the execution of balance of earth for formation of banks for laying railway line, roads, platforms and miscellaneous work in connection with new goods terminal yard of South-Eastern Railway at Sankrail in Howrah District. The appellant’s tender dated 23.3.1991 for Rs.61,24,159/- was accepted by issuance of Letter of Acceptance dated 17.6.1991. In this connection, an agreement was entered into between the appellant and the respondent on 22.8.1991. In the said agreement, General Conditions of the Contract (for short ‘GCC’) were incorporated and the parties were bound by the terms and conditions thereof.
5. Various disputes and differences arose between the parties regarding execution of work and its purported abandonment. The respondent issued notice dated 24.10.1991, seeking termination of the agreement. Another notice dated 15.11.1991 was issued to the appellant under Clause 62(1) of the GCC for rescission of the contract. However, at the request of the appellant through letter dated 2.4.1992, the validity of the contract was extended till 30.6.1992. The respondent further granted extension of time to complete the work upto July 1993. According to the appellant, the delay and/or hindrances occurred due to breaches committed by the Railway Administration. The remaining work was abandoned by the appellant w.e.f. 3.11.2003.
6. The appellant raised the claim before the respondent by his letter dated 30.10.1996. By a subsequent letter dated 22.6.1998, the appellant demanded reference of the dispute to the arbitration. Finally, the appellant filed an application under Section 11(6) of the Arbitration and Conciliation Act, 1996 (for short ‘the 1996 Act’) for appointment of an Arbitrator for adjudication of the claims and disputes before the High Court of Calcutta. The Chief Justice of the High Court of Calcutta passed an order dated 6.12.2001, whereupon the General Manager, South-Eastern Railway, was directed to appoint Arbitrators from their panel within four weeks from the said date. Pursuant to the said order, the Arbitral Tribunal was constituted which adjudicated the disputes and claims raised by the appellant, as also the respondent.
7. The Arbitral Tribunal passed an award on 20.9.2006. The respondent moved an application, being A.P. No.35 of 2006 under Section 34 of the 1996 Act, for setting aside the said award. The said application was dismissed by the Single Judge of the High Court. The respondent assailed the order of the learned Single Judge by filing an appeal in A.P.O. No. 213 of 2009, wherein it was contended that the appellant had issued a ‘No Claims Certificate’ to the respondent, thereby forfeiting his right for any claim from the respondent in regard to which the dispute could not be adjudicated by the Arbitral Tribunal. As noticed above, the Division Bench has set aside the order of the learned Single Judge and also the award and directed holding of fresh reference by the Arbitral Tribunal.
8. Learned senior counsel appearing for the appellant submits that the Division Bench failed to appreciate the question that issuance of ‘No Claims Certificate’ by the appellant was not urged before the Chief Justice in the proceedings under Section 11(6) of the 1996 Act. The said plea was not even urged before the Arbitral Tribunal or before the learned Single Judge. The issue relating to existence of any live claim or the arbitrability of the dispute ought to have been urged in the proceedings under Section 11(6) of the 1996 Act or at least before the Ar
