2007 Supreme(SC) 34

2007(1) Supreme 133
SUPREME COURT OF INDIA
(From Karnataka High Court)
Dr. Arijit Pasayat and S.H. Kapadia, JJ.
Krishna Bhagya Jala Nigam Ltd.—Appellant
versus
G. Harichandra Reddy & Anr.—Respondents
Civil Appeal No. 149 of 2007
(Arising out of SLP (C) No. 10418 of 2005)
Decided on 10-1-2007
Counsel for the Parties :
For the Appellant : C.S. Vaidyanathan, Sr. Advocate, Ms. Lalit Mohini Bhat, Naveen R. Nath and Ms. Hetu Arora, Advocates.
For the Respondents : K.K.Venugopal, K.G. Raghavan, Sr. Advocates, L.K. Bhushan and Mrs. Shiraz Contractor Patodia, Advocates.

IMPORTANT POINT
Where a party submitted to jurisdiction of arbitrator and never called upon arbitrator to rule on its jurisdiction, it could not be allowed to contend that clause in the contract did not constitute an arbitration agreement.

Headnote:(i) Arbitration and Conciliation Act, 1996—Section 34(2)(v)—Arbitration award—Objections filed by appellant before Principal Civil Judge were dismissed and Award was confirmed—Appeal filed in High Court was dismissed—Appeal—Plea of “no arbitration clause” in agreement—No such plea was raised before arbitrator or in the objections filed before Civil Judge—Appellant participated in arbitration proceedings and submitted itself to authority of Arbitrator—Arbitrator was never called upon to rule on its jurisdiction—Appellant could not be allowed to contend that clause 29 in the contract did not constitute an arbitration agreement.

       Held : The plea of "no arbitration clause" was not raised in the written statement filed by Jala Nigam before the Arbitrator. The said plea was not advanced before the civil court in Arbitration Case No.1 of 2001. On the contrary, both the courts below on facts have found that Jala Nigam had consented to the arbitration of the disputes by the Chief Engineer. Jala Nigam had participated in the arbitration proceedings. It submitted itself to the authority of the Arbitrator. It gave consent to the appointment of the Chief Engineer as an Arbitrator. It filed its written statements to the additional claims made by the contractor. The executive engineer who appeared on behalf of Jala Nigam did not invoke Section 16 of the Arbitration Act. He did not challenge the competence of the arbitral tribunal. He did not call upon the arbitral tribunal to rule on its jurisdiction. On the contrary, it submitted to the jurisdiction of the arbitral tribunal. It also filed written arguments. It did not challenge the order of the High Court dated 10.9.99 passed in C.M.P. No.26/99. Suffice it to say that both the parties accepted that there was an arbitration agreement, they proceeded on that basis and, therefore, Jala Nigam cannot be now allowed to contend that Clause 29 of the Contract did not constitute an arbitration agreement.(Para 10)

       Before concluding on this issue, one clarification needs to be mentioned. On 26.7.2005 a three-Judge Bench of this Court has referred the question involving interpretation of Clause 29 of the Contract to the Constitution Bench in the case of M/s. P. Dasaratharama Reddy Complex v. Government of Karnataka and Another – Civil Appeal No.1586 of 2004. Placing reliance on the said order, learned counsel for Jala Nigam submitted that the hearing of this civil appeal be postponed pending disposal of the above reference by the Constitution Bench. We do not find any merit in this argument. As stated above, the plea that Clause 29 of the Contract was not an arbitration clause, was raised in the present case for the first time only in Miscellaneous First Appeal No.1785 of 2002 filed under Section 37(1)(b) of the Arbitration Act before the High Court. As stated above, Jala Nigam, on the contrary, had consented to the Chief Engineer, acting as an Arbitrator. For the aforestated reasons and particularly in view of the fact that there has been considerable delay in the litigation no useful purpose would be served by keeping the matter pending in this Court awaiting the decision of the Constitution Bench. Therefore, on the facts and circumstances of this case and in view of the conduct of the parties, we hold that Jala Nigam cannot be allowed to urge that Clause 29 of the Contract is not an arbitration clause.(Para 11)

       (ii) Arbitration and Conciliation Act, 1996—Sections 9 and 11—Arbitration Award—Objections—Arbitrator had meticulously examined claims of contractor under each separate head and no reason to interfere—Interest at 18% p.m. for pre-arbitration period, pendente lite period and future interest, however, reduced to 9%—Idling charges awarded by Arbitrator at Rs. 42000/- per day at total amount of Rs. 1.47 crores reduced to Rs. one crore as agreed by counsel for claimant.

       Held : The Arbitrator has meticulously examined the claims of the contractor under each separate Heads. We do not see any reason to interfere except on the rates of interest and on the quantum awarded for letting machines of the contractor remaining idle for the periods mentioned in the Award. Here also we may add that we do not wish to interfere with the Award except to say that after economic reforms in our country the interest regime has changed and the rates have substantially reduced and, therefore, we are of the view that the interest awarded by the Arbitrator at 18% for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9%. (Para 12)

       As far as idling charges are concerned, the Arbitrator has awarded Rs.42,000/- per day for the period 1.2.94 to 17.12.94 and from 1.6.95 to 31.12.95 excluding the period 18.12.94 to 31.5.95 and from 1.1.96 to 12.11.96. On this basis the idling charges awarded by the Arbitrator was arrived at Rs.1.47 crores. It is contended that the contractor has not led any evidence to show the existence of the machinery at site and, therefore, he was not entitled to idling charges. We are of the view that the Award of the Arbitrator is fair and equitable. He has excluded certain periods from calculations, as indicated above. We have examined the records. The delay took place on account of non-supply of Drawings and Designs and in the meantime the establishment of the contractor stood standstill. We suggested to the learned counsel for the respondent (contractor) for reduction of the awarded amount under this Head from Rs.1.47 crores to Rs.1 crore. Learned counsel for the respondent fairly accepted our suggestion. We suggested the aforestated figure keeping in mind the longstanding dispute between the parties. Therefore, the amount awarded under this Head shall stand reduced from Rs.1.47 crores to Rs.1 crore.(Para 13)