Steel Authority of India Limited vs Jaiguru Construction Co. (M/S.)

Vinod Kumar Gupta, J.—This appeal is directed against the order dated August 7, 1998, passed by the learned Single Judge of this Court whereby a direction was issued to the learned Arbitrator already appointed (who had also entered upon the reference and started the arbitration proceedings) to treat some additional and further claims and counter claims made by the parties as part of the Original reference pending before him for settlement and adjudication and thus to adjudicate such new claims and counter claims, including all other disputes between the parties and to pass his award accordingly.

The brief facts leading to the filing of the appeal are that with respect to a contract having been executed between the parties and in particular terms of the Arbitration Clause in the said contract, the Respondent contractor appears to have sent a communication on December 15, 1992, to the Appellant raising certain claims for a total value of Rs. 18,76,343.00 and urging the Executive Director, Steel Authority of India Ltd., to whom this letter was addressed, to take decision in the matter or else to arrange to appoint an Arbitrator in terms of the Arbitration Agreement to settle the disputes. In this letter the Respondent had conveyed that if the decision as urged was not taken and if the Arbitrator was to be appointed, it would submit its claims on various items in details before the learned Arbitrator. Reliance is sought on this relevant para of the letter which reads thus:

If it is not at all possible for you to take any decision if the matter as prayed for above, please arrange to appoint Arbitrator to settle the disputes and/or differences within a reasonable time in terms of Clause 1.7 of the General Terms and Conditions of the Contract, when we will submit our claims on various items in details before the learned Arbitrator.

It appears that in the meanwhile the Respondent filed an application in this Court in terms of Sections 5, 8, 11 and 12 of the Arbitration Act, 1940 asking for revocation of the authority of the Executive Director, S.A.I.L. Raw Materials Division and for appointment of a Sale Arbitrator outside the ambit of the Arbitration Agreement to adjudicate upon the disputes between the parties. Since the copy of the said application for whatever reasons was not filed by the Respondent in this appeal, we vide our order passed on August 7, 2000, directed the Respondent to file a supplementary affidavit enclosing a copy of the aforesaid application. The copy has new been filed. We have seen the copy and find that the application was verified on August 25, 1993, and that in this application the Respondent before us (Petitioner in the aforesaid application) had spelt out ail its claim in para 12 of the application relating to three items, aggregating Rs. 18,76,343.60. It appears that even while this application was pending in this Court, an order was passed by the Director (R.M.), Steel Authority of India Ltd., Raw Materials Division, Calcutta on September 24, 1993, whereby the appointed Shri C.A. Govind as the Sole Arbitrator to adjudicate upon all disputes and differences between the parties subject to the conditions and restrictions contained in that letter which we reproduce herein below for ready reference:

(a) He would adjudicate the claim of SAIL, RMD against M/s. Jai Guru Construction to the tune of Rs. 13,69,734.00 as on 1.12.92 plus interest and costs ;

(b) He will adjudicate the alleged claim as raised by M/s. Jai Guru Construction against SAIL, RMD. subject to the approval/order by Hon''ble High Court, Calcutta, in Matter No.... of 1993- M/s. Jai Guru Construction v. SAIL, RMD, Calcutta.

It appears that the aforesaid Application earlier filed by the Respondent in terms of Sections 5, 8, 11 and 12 of the Arbitration Act, 1940, was finally disposed of by the learned Single Judge of this Court on May 2, 1996, and the following order was passed:

The Court: Learned Counsel submits that the present Arbitrator being Mr. G.A. Govind will, by consent of parties, act as Arbitrator in the matter. It is agreed that the venue of the arbitration will be at Calcutta;

Interim order restraining Mr. Govind from acting as Arbitrator will naturally stand vacated with immediate effect. Time to make and publish the award by Mr. Govind, learned Arbitrator by six months from date.

The application is thus disposed of.

The arbitration proceedings having thus commenced, the Respondent appears to have filed certain additional claims before the Arbitrator, Shri G.A. Govind. He vide his communication dated December 29, 1997, refused to entertain any claims over and above these referred to him by the Appointing Authority on September 24, 1993. It was under these circumstances that the Respondent appears to have filed the application which ultimately led to the passing of the order under appeal by the learned-Single Judge on August 7, 1998.

The most important thing to be noticed at the very outset in this appeal 1s that in the meanwhile the Arbitrator, Shri G.A. Govind has passed his Award on October 9, 1999. The award has been published and it has been filed in the Court as well.

First and foremost, we have no hesitation in saying that once the Arbitrator has passed his award, published the same and filed it in the Court, he has become functus officio. Therefore, reviving the arbitration proceedings all over again by referring to him additional claims and counter-claims of the parties, in our opinion is not at all permissible in law. The Arbitrator being a Special Judge appointed by the choice of the parties becomes wholly functus officio once he has passed his award and has also filed the same in the Court.

Apart from the aforesaid reasons, we find that the learned Single Judge erred in law In permitting the parties to file their claims and counter claims, in addition to what were contained in the order of reference dated September 24, 1993, because the said order of reference was explicit in terms in so far as it defined the extent of jurisdiction of the Arbitrator in relation to the settlement and adjudication of claims by him. This order clearly also said that the appointment of the Arbitrator and the reference of the mentioned dispute to him were subject, to approval of the High Court in the matter which had already been filed by the Respondent. As already noticed, the learned single Judge of this Court while disposing of Sections 5, 8, 11 and 12 application did not expand the scope of the arbitration, nor did he expand the jurisdiction of the Arbitrator to include within its scope certain additional claims as mentioned in the order of reference dated September 24, 1993. In this background, therefore, permitting the Respondent to raise additional claims or the parties to raise additional claims/counter-claims was not permissible in law.

Even though in the letter dated December 15, 1992, the Respondent had kept to itself the option of submitting claims on various items in details before the Arbitrator (relevant para has been extracted here), in the application filed subsequently in the Court under Sections 5, 8, 11 and 12 it crystalised all its claims in para 12 and mentioned the three items under it by claiming an aggregate amount of Rs. 18,76,343,60. Undoubtedly, in the aforesaid letter the Respondent had reserved to itself the option to file its detailed claims before the Arbitrator, it did exercise such option by summarising, crystalising and mentioning such claims in the application filed in the Court. It was on this basis that the order of reference was passed on September 24, 1993, whereby, in reference to the aforesaid application of the Respondent, the Appointing Authority had restricted the adjudication by the Arbitrator of the claims as they formed the Subject-matter of the aforesaid application. Surely, the Arbitrator could not be excepted to go beyond the scope of his reference as that would have amounted to his exercising jurisdiction which was wholly outside the scope of the reference and thus totally impermissible in law.

For the aforesaid reasons, therefore, we set aside the judgment of the learned Single Judge and, while allowing this appeal, direct and observe that it shall be open to the parties to take recourse to such remedies as are available to them under law for settlement and adjudication of their claims/counterclaims.

There will be no order as to costs.

All parties and the Arbitrator are to act on a signed xerox copy of this Dictated Order on the usual undertaking.

Arunbha Barua, J.

I agree.

Appeal allowed.