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2003 Supreme(Cal) 520
High Court Of Calcutta
Subhro Kamal Mukherjee
UNION OF INDIA - Appellant
Versus
PAM DEVELOPMENTS PVT.LTD - Respondent
A. P. 137 Of 2002
Decided On : 10/28/2003
JAYANTA BANERJEE, PRANAB ROY, Promit Roy, RATHINDRA NATH DAS, Sarajit Sen, TAPAN KUMAR SEN GUPTA
A party to an arbitration cannot challenge an award on the ground of lack of jurisdiction if they failed to raise the plea of jurisdiction before the tribunal itself and did not request the tribunal to rule on its own jurisdiction during the arbitral proceedings.
Headnote:
ARBITRATION - JURISDICTION - CONSTITUTION OF ARBITRAL TRIBUNAL - WAIVER OF OBJECTION - INTEREST ON AWARD - RAILWAY CONTRACT DISPUTE
Fact of the Case:
Arbitration proceedings were initiated due to disputes arising from a railway contract. The petitioner, South Eastern Railways, challenged the award on grounds of lack of jurisdiction and exceeded authority by the sole arbitrator appointed by the Hon'ble Chief Justice.
Finding of the Court:
1. The petitioner's challenge to the constitution of the arbitral tribunal was not maintainable as they failed to raise the issue of jurisdiction before the tribunal or request a ruling on its jurisdiction during the arbitral proceedings. (Paras 15-18) 2. The petitioner's contention that the learned arbitrator did not consider their counterclaim was factually incorrect as the arbitrator had considered and rejected the counterclaim. (Para 22) 3. The arbitrator had the jurisdiction to award interest on the sum found due and payable, and the rate of interest awarded was justified. (Paras 23-28)
Issues: 1. Whether the petitioner could challenge the award on the ground of lack of jurisdiction when they did not raise the plea of jurisdiction before the tribunal itself? 2. Whether the learned arbitrator exceeded the scope of his authority in considering certain excepted matters? 3. Whether the learned arbitrator did not consider the counterclaim of the petitioner? 4. Whether the arbitrator had the jurisdiction to award interest on the sum found due and payable?
Ratio Decidendi: 1. A party cannot challenge an arbitral award on the ground of lack of jurisdiction if they failed to raise the plea of jurisdiction before the tribunal itself and did not request the tribunal to rule on its own jurisdiction during the arbitral proceedings. (Para 16) 2. The arbitral tribunal is competent to rule on its own jurisdiction, including any objection to the existence or validity of the arbitration agreement. However, such a plea must be raised not later than the submission of the statement of defense, and any plea that the tribunal is exceeding the scope of its authority must be raised as soon as the matter alleged to be beyond its authority is raised during the arbitral proceedings. (Para 17) 3. The arbitrator has jurisdiction to award interest on the sum found due and payable, and the rate of interest awarded was justified. (Paras 23-28)
Final Decision: The application under section 34 of the Arbitration and Conciliation Act, 1996 was rejected.
( 1 ) THIS is an application under section 34 of the Arbitration and conciliation Act, 1996 (the 'said Act' in short) for setting aside of the award made and published on January 25, 2002 by Mr. Satyabrata Mitra, a retired judge of this Court.
( 2 ) ON April 9,1992 the petitioner invited tenders for construction of industrial covered electrical loco-shed and allied works at Santragachi (Phases I and II ). The respondent submitted its tender. The petitioner accepted the offer of the respondent by a letter dated October 19, 1992. A formal agreement was, also, entered into between the parties being contract agreement No. CPM/grc/36/ 92 dated October 19, 1992. The said agreement, inter alia, incorporated the general conditions of contract and some additional special conditions and specifications. The arbitration clause was as under:"64 (3) (A) ARBITRATION : Matters in question, dispute or difference to be arbitrated upon shall be referred for decision to:- 3 (a) (i) A sole Arbitrator who shall be the General Manager or a Gazetted railway Officer nominated by him in that behalf in cases where the claim in question is below Rs. 5,00,000/- (Rupees five lakhs) and in cases where the issues involved are not of a complicated nature. The General Manager shall be the sole Judge to decide whether or not the issues involved are of a complicated nature. 3 (a) (ii) Two Arbitrators who shall be Gazetted Railway Officers of equal status to be appointed in the manner laid in clause 64 (3) (b) for all claims of Rs. 5,00,000/- (Rupees five lakhs) and above, and for all claims irrespective of the amount of value of such claims if the issues involved are of a complicated nature. The General Manager shall be the sole Judge to decide whether the issues involved are of a complicated nature or not. In the event of the two Arbitrators being divided in their opinions the matter under disputes will be referred to an Umpire to be appointed in the manner laid down in clause 3 (b) for his decision. 3 (a) (iii) It is a term of this contract that no person other than a Gazetted railway Officer, should act as an Arbitrator/umpire and if for any reason, that is not possible, the matter is not to be referred to Arbitration at all. 3 (a) (iv) In cases where the claim is up to Rs. 5,00,000/- (Rupees five lakh), the Arbitrator (s)/umpire so appointed, as the case may be, shall give the award on all matters referred to arbitration indicating therein break-up of the sums awarded separately on each individual item of dispute. In cases where the claim is more than Rs. 5,00,000/- (Rupees Five lakh), the arbitrator (s)/umpire so appointed, as the case may be, shall give intelligible award (i. e. the reasoning leading to the award should be stated) with the sums awarded separately on each individual item of dispute referred to arbitration. 3. (b) For the purpose of appointing two arbitrators as referred to in sub-clause (a) (ii) above, the Railway will send a panel of more than three names of Gazetted Railway Officers of one or more departments of the Railway to the contractor who will be asked to suggest to the General Manager one name out the list for appointment as the contractor's nominee. "
( 3 ) THE General Manager, while so appointing the contractor's nominee, will also appoint a second arbitrator as the Railway's nominee either from the panel or from outside the panel, ensuring that one of the two arbitrators so nominated is invariably from the Accounts Department. Before entering upon the reference the two arbitrators shall nominate an Umpire who shall be a Gazetted Railway officer to whom the case will be referred to in the event of any difference between the two arbitrators. Officers of the Junior Administrative grade of the Accounts department of the Railways shall be considered as of equal status to the officers in the intermediate administrative grade of other departments of the Railway for the purpose of appointment as arbitrators.
