1. Breach of contract — claim for damages — discrepancy between the claim specified in the notice initiating arbitration and the claim filed before the arbitrator. (Para 2 )
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1996 Supreme(SC) 2483
SUPREME COURT OF INDIA
A.M. Ahmadi, C.J.I., Sujata V. Manohar And K. Venkataswami, JJ.
Indian Aluminium Cables Ltd. - Appellant
Versus
Haryana State Electricity Board & Ors. - Respondents
C.A. No. ..... of 1996 (arising out of SLP No. 6220 of 1996)
Decided On : 04-04-1996
Important Points
Arbitrators' jurisdiction is confined to the specific disputes set out in the notice forming the basis of the reference. A claim that is totally different or inconsistent with the notice is outside the scope of the reference and cannot be entertained by the arbitrators.
Subject
Arbitration Law - Jurisdiction and Scope of Reference
Headnote
Claim of compensation - Claim made by HSEB is outside the scope - Jurisdiction of arbitrators - Damages is a matter of evidence - Rate had increased from time to time by which time order for purchasing material was placed with M/s Industrial Cables Ltd. Delhi. and thus differential amount of was claimed as loss suffered on account of breach of contract - It will thus be seen that under this claim in paragraph 6 of the notice the rate at which the purchase was made is stated to be party from which the purchase was made is stated to be M/s Industrial Labels Ltd., Delhi. and the relevant period referred - As against that if we turn to the claim made before the Arbitrator we find that the rate is stated to be Rs. party which supplied the material is to New Delhi, the relevant date is gated to claim is stated to be Rs - It is, therefore,- obvious that this is a claim which is totally different from the one found in paragraph 6 of notice. Even the Arbitrator has noticed this change when he observes as under – Held, True it is, in the notice - HSEB put forth a claim for based on the contract with M/s Industrial Cables for purchase of conductors, whereas in the claim filed by HSEB, the allegation is that they made the purchase from JJH Industries and were put to a loss question whether HSEB are entitled to get any damages is a matter of evidence which cannot be decided at this stage - No doubt, there is inconsistency or difference between the claim made in notice and the claim filed before us. As to what is the effect of this will have to be decided on merits – But for that reason it cannot be said that the claim made by HSEB is unsustainable and wholly beyond the scope of arbitration clause or the reference to arbitration so as to oust the jurisdiction of arbitrators – Court are afraid this approach of the Arbitrators is not correct - If the claim made by HSEB is outside the scope of the reference made to the Arbitrators must confine themselves to the reference and cannot travel outside it merely because under the terms of the contract the dispute in regard to this matter would have been covered and could have been referred to arbitration. In the instant case, since the reference is in relation to the item set out in the notice, the jurisdiction of the Arbitrators stands confined to those matters only and cannot travel outside it. Therefore, there is no question of examining the claim which is totally different from the one made in the notice which is the basis of the reference as to whether or not damages could be awarded on that claim. Once the claim is outside the reference it is outside the scope and ambit of the inquiry by the Arbitrators and, therefore, the Arbitrators cannot go into it - Therefore, in our view claim made in reference, which is inconsistent with paragraph 6 of the notice, cannot be entertained by the Arbitrators – Appeal disposed of
Legal Category Hierarchy
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practice and procedure
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arbitration
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jurisdiction
- scope of reference (Para 2)
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jurisdiction
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arbitration
Table of Contents
2. Whether an arbitrator has jurisdiction to entertain a claim that differs significantly from the specific claim detailed in the notice forming the basis of the reference. (Para 2 )
3. Arbitrators must confine themselves to the specific reference and cannot entertain claims that are totally different from those set out in the notice initiating the reference. (Para 2 )
4. Where an arbitration reference is based on a specific notice, the arbitrator's jurisdiction is confined to the matters in that notice and cannot extend beyond it. (Para 2 )
5. Appeal allowed; the claim inconsistent with the notice cannot be entertained by the arbitrators. (Para 2 , 3 )
6. Does an arbitrator have the power to decide a claim that differs from the one mentioned in the notice of arbitration?
No. If the reference to arbitration is based on a specific notice, the arbitrator's jurisdiction is confined to the matters set out in that notice and cannot travel outside it. (Para 2 )
7. Can an arbitrator entertain a claim inconsistent with the reference notice if the contract terms would have otherwise covered the dispute?
No. Arbitrators must confine themselves to the reference and cannot travel outside it merely because the terms of the contract would have covered the dispute and allowed it to be referred to arbitration. (Para 2 )
JUDGMENT :
1. Special leave granted.
2. Heard counsel for both the parties. The claim in paragraph 6 of the notice dated July 26, 1976 was in relation to the purchase of material for Rs. 11.300/- (exclusive of E.O. & C.S.I.) as against the contractual rate of Rs. 4,390/- p-' Km. exclusive of E.O. & C.S.I. and it was this difference which was claimed by way of damages. The rate had increased from time to time between 31.3.1974 and 26.5.1975 by which time the order for purchasing the material was placed with' M/s Industrial Cables Ltd., Delhi. and thus the differential amount of Rs. 87.81,465.CC (sic) was claimed as loss suffered on account of breach of contract. It will thus be seen that under this claim in paragraph 6 of the notice the rate at which the purchase was made is stated to be Rs. 11,300/-, the party from which the purchase was made is stated to be M/s Industrial Labels Ltd., Delhi. and the relevant period referred to is 31.3.1974 to 26.5.1975. As against that if we turn to the claim made before the Arbitrator we find that the rate is stated to be Rs. 12,100/-, the party which supplied the material is to be M/s J.J.H. Industries, New Delhi, the relevant date is gated to be 10.2.1976 and the claim is stated to be Rs. 63,56,737.42. It is, therefore,- obvious that this is a claim which is totally different from the one found in paragraph 6 of the notice. Even the Arbitrator has noticed this change when he observes as under: -
"True it is, in the notice dated 26.7.1976. HSEB put forth a claim for Rs. 37.61,465/- based on the contract with M/s Industrial Cables for purchase of conductors, whereas in the claim filed by HSEB, the allegation is that they made the purchase from JJH Industries and were put to a loss of Rs. 1.25.98.091. The question whether HSEB are entitled to get any damages is a matter of evidence which cannot be decided at this stage. No doubt, there is inconsistency or difference between the claim made in the notice and the claim filed before us. As to what is the effect of this will have to be decided on merits. But, for that reason it cannot be said that the claim made by HSEB is unsustainable and wholly beyond the scope of arbitration clause or the reference to arbitration so as to oust the jurisdiction of arbitrators."
We are afraid this approach of the Arbitrators is not correct. If the claim made by HSEB is outside the scope of the reference made to the Arbitrators, Cie Arbitrators must confine themselves to the reference and cannot travel outside it merely because under the terms of the contract the dispute in regard to this matter would have been covered and could have been referred to arbitration. In the instant case, since the reference is in relation to the item set out in the notice, the jurisdiction of the Arbitrators stands confined to those matters only and cannot travel outside it. Therefore, there is no question of examining the claim which is totally different from the one made in the notice which is the basis of the reference as to whether or not damages could be awarded on that claim. Once the claim is outside the reference it is outside the scope and ambit of the inquiry by the Arbitrators and, therefore, the Arbitrators cannot go into it. Therefore, in our view, the claim made in the reference, which is inconsistent with paragraph 6 of the notice, cannot be entertained by the Arbitrators.
3. The appeal succeeds and will stand disposed of accordingly with no order as to costs.
