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Crompton Greaves Ltd. Vs. Hindustan Steel Ltd. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberC.R. No. 320 of 1978
Judge
Reported inAIR1978Cal444,82CWN996
ActsArbitration Act, 1940 - Sections 5, 23, 23(2) and 33
AppellantCrompton Greaves Ltd.
RespondentHindustan Steel Ltd.
Appellant AdvocateT.K. Biswas and ;Rupen Mitra, Advs.
Respondent AdvocateN.C. Chakravarty and ;P.N. Chunder, Advs.
Cases ReferredPrafulla Chandra Karmakar v. Panchanan Karmakar
Excerpt:
- .....completed and the power distribution equipment was put into commission, the petitioner found some surplus cables lying in its custody which were not incorporated in the said 'turn-key', job. the petitioner claimed that the said surplus cables belonged to it while the opposite party claimed title and ownership to the same. so a dispute arose between the parties as to the ownership of the surplus cables. the contract dated dec. 23, 1965 contained an arbitration clause and the dispute between the parties over the ownership of the surplus cables was referred to the arbitration of two arbitrators one nominated by the petitioner and the other by the opposite party. after the arbitrators had entered on the reference, the petitioner filed a statement of facts and the opposite party filed a.....
Judgment:

M.M. Dutt, J.

1. This Rule is at the instance of the petitioner Crompton Greaves Limited and it is directed against order No. 23 dated Sept. 22, 1977 of the learned Subordinate Judge, Burdwan. By the said order, the learned Subordinate Judge allowed the application of the opposite party Hindustan Steel Limited under Section 33 of the Arbitration Act, 1940.

2. It appears that on Dec. 23, 1965 the petitioner and the opposite party entered into a contract for the erection of the power distribution system and putting them into commission on the 'turn-key' basis to be executed by the petitioner, the contractor. After the 'turn-key' job was completed and the power distribution equipment was put into commission, the petitioner found some surplus cables lying in its custody which were not incorporated in the said 'turn-key', job. The petitioner claimed that the said surplus cables belonged to it while the opposite party claimed title and ownership to the same. So a dispute arose between the parties as to the ownership of the surplus cables. The contract dated Dec. 23, 1965 contained an arbitration clause and the dispute between the parties over the ownership of the surplus cables was referred to the arbitration of two Arbitrators one nominated by the petitioner and the other by the opposite party. After the Arbitrators had entered on the reference, the petitioner filed a statement of facts and the opposite party filed a Counter state of facts. The Arbitrators raised as many as 8 issues of which issues 4 and 5 are as follows :

'4 (a). Is the statement of quantities of surplus cables and their values made in Schedule 'A' to the Statement of Facts correct ?

(b) Is the claimant liable to render any account of cables imported or to deliver surplus cables, to the respondent as alleged in para 10 of the Counter State of Facts or at all ?

(c) To whom the surplus cables belonged after completion of the entire construction works ?

5 (a). If the property in the surplus cables had vested in the respondent, is the respondent liable to pay to the claimant the value thereof either under the terms of the contract or under the provision of Section 70 of the Indian Contract Act?

(b) Is the Claimant entitled to be reimbursed the expenses incurred in connection with the storage, insurance etc. of and in respect of the surplus cables ?

(c) Is the Respondent entitled to claim a set-off as alleged in Para. 18 (b) of the Counter State of Facts?'

While the arbitration proceeding was going on, an agreement dated May 14, 1973, was entered into by and between the parties whereby various other disputes between them were settled. Clause 2 of the said agreement is as follows :

'That the issue regarding the ownership of surplus cables already referred to Arbitration by both the parties under the terms and conditions of the subject contract shall be kept outside the scope of this agreement.'

Before the said agreement dated May 14, 1973, the petitioner examined one witness in the arbitration proceeding. The evidence of the second witness of the petitioner, who was examined after the said agreement dated May 14. 1973, was cancelled by consent of parties. Thereafter on Feb. 20, 1975, the opposite party made an application before the Arbitrators praying for the following orders :

'(a) An order be made recording that all the disputes which are subject-matter of the present proceedings other than the dispute relating to the ownership or title of the cables in question have been adjusted by lawful agreement or compromise.

(b) All the issues raised by the learned Arbitrators which do not relate to the question of ownership or title of the cables be expunged or deleted.

(c) Directions be given on the claimant not to adduce or lead any evidence relating to the question other than the question of ownership or title of the cables.

(d) Such further or other direction or directions be given and/or orders be made as may seem fit and proper to the learned Arbitrators.'

It was contended in the said application that after the reference to arbitration was made, all outstanding issues between the parties relating to or arising out of the contract dated Dec. 23, 1965 were settled by the said agreement dated May 14, 1973 excepting the issue relating to the title or ownership of the cables in question. It was submitted by the opposite party that the learned Arbitrators should delete or expunge all the issues raised by the parties which do not relate to the question of ownership of or title to the cables in question.

3. The Arbitrators, after considering the submissions made on behalf of both the parties, inter alia passed the following orders :

'It was shown to us that the parties had acted on the footing of the agreement dated 14-5-73.

In view of this there seems to be no justification for taking up for decision by us any issue except issues 4 and 5 mentioned above. We have heard the submissions made by the learned counsel on behalf of the parties and considered the decisions cited by them.

We make an order in terms of prayers (a), (b) and (c) of the respondent's petition verified on its behalf on 20-2-75, but in the circumstances of the case we make no order as to the costs on the respondent's application.

We direct that the Arbitration will go on its scope being limited, however, to Reference No. 2 and Reference No. 3 as mentioned in the Statement of Facts and to issues (4) and (5) settled as stated above.'

4. The opposite party was not satisfied with the said order of the Arbitrators and filed an application under Section 33 of the Arbitration Act before the learned Subordinate Judge, praying for an order deciding the effect of the arbitration agreement dated 23-12-1965 read with the subsequent agreement dated 14-5-1973. It was contended in the said application that the order of the Arbitrators dated Oct. 1, 1975 was bad and invalid in so far as the same purported to direct that the arbitration would go on in respect of issues 4 and 5, and that the last portion of the said order was contradictory to the earlier portion. The said application was opposed by the petitioner. It was contended by the petitioner that the application was not maintainable unless the award had been filed in Court. Further, it was contended that the decision of the Arbitrators that the Arbitration will proceed in respect of issues 4 and 5 was in accordance with the agreement dated May 14, 1973.

5. The learned Subordniate Judge came to the finding that the application under Section 33 was maintainable overruling the contention of the petitioner that unless the award was filed in Court, the opposite party had no locus standi to file an application under Section 33. The learned Subordinate Judge took the view that the Arbitrators had passed a conflicting order, and that they ought to have held that they had no jurisdiction to take up and decide any issue except the issue relating to the ownership of the surplus cables. Accordingly, he held that the Arbitrators had no jurisdiction to decide any issue other than the issue in respect of ownership of the cables, and that they had no power nor jurisdiction to pass any award on the basis of Section 70 of the Indian Contract Act. Upon the said findings, the learned Subordinate Judge allowed the Misc. Case arising out of the said application under Section 33 of the Arbitration Act, Hence this Rule.

6. We may first of all consider the question of maintainability of the application under Section 33 which is set out as follows :

'Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits:

Provided that where the Court deems it just and expedient it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit.'

Under Section 33. a party to the arbitration agreement may challenge the existence or validity of an arbitration agreement or an award or may ask for the determination of the effect of an award or an arbitration agreement. If the award is challenged, there can be no doubt that the award must be produced. But when the party prays for the determination of the effect of an arbitration agreement, there can be no question as to the production of the award. It is, however, contended on behalf of the petitioner that the said order of the Arbitrators dated Oct. 1, 1975 is an award, We are unable to accept the contention. By no stretch of imagination can it be said that by the said order the Arbitrators decided the dispute or any part thereof which was referred to them by the parties. The said order is not, therefore, an award as contended on behalf of the petitioner.

7. It is next argued on behalf of the petitioner that although there is a prayer by the opposite party for the determination of the effect of the arbitration agreement and also the agreement dated May 14, 1973, really the opposite party was challenging the said order of the Arbitrators and, as such, the application was not strictly one under Section 33 of the Act. It is contended that the Court cannot adjudicate the propriety of the said order of the Arbitrators. It is true that the prayers made in the application under Section 33 also include a challenge to the legality and validity of the said order of the Arbitrators, but the principal prayer of the opposite party was for the determination of the effect of the arbitration agreement dated Dec. 23, 1965 and the subsequent agreement dated May 14, 1973. In view of such a specific prayer, the other prayers may be ignored.

8. It is argued on behalf of the petitioner that the same principle as embodied in Section 23(2) should be followed by the Court in dealing with an application under Section 33. Section 23(2) provides that where a matter is referred to arbitration, the Court shall not save in the manner and to the extent provided in the Act, deal with such matter in the suit. Section 23 relates to arbitration in suits. It is, however, contended that as the dispute is being considered by the Arbitrators, an application under Section 33 is not maintainable. In our view, this contention is without any substance. Section 33 does not give any indication whatsoever that the effect of an arbitration agreement cannot be decided by the Court after the Arbitrators have entered upon the reference. Section 23(2) stands on a different footing. After the Court makes a reference of a dispute to arbitration, it shall not deal with the same in the suit so long as the arbitration proceeding will remain pending. The principle behind the provision of Section 23 seems to be that a Court making the reference to arbitration should not ignore such reference and usurp the jurisdiction to decide the dispute itself pending such arbitration. In the instant case, the reference has not been made by the Court, but by the parties themselves and. therefore, there is no impediment for the Court to decide the scope and effect of the arbitration agreement. The Bench decision in Prafulla Chandra Karmakar v. Panchanan Karmakar, 50 Cal WN 287 : (AIR 1946 Cal 427) laying down the principle, that after a reference to arbitration has been made in a suit through the intervention of the Court, the parties cannot be allowed, by mere consent to abandon the arbitration and go on with the suit or ask for a fresh reference, has no manner of application to the instant case.

9. It is next contended on behalf of the petitioner that by laying down the effect of the arbitration agreement dated May 17, 1973, the learned Subordinate Judge really revoked the authority of the Arbitrators which he could not. In support of this contention reliance has been placed on behalf of the petitioner on Section 5 of the Arbitration Act which provides that the authority of an appointed Arbitrator or Umpire shall not be revocable except with the leave of the Court, unless a contrary intention is expressed in the arbitration agreement. We fail to understand how by interpreting an arbitration agreement and determining the effect thereof the Court cancels or revokes the authority of the Arbitrator. The revocation of the authority of an Arbitrator or an Umpire as provided in Section 5 contemplates the cancellation of the appointment of the Arbitrator or Umpire. If on an interpretation of an arbitration agreement under Section 33, the Court determines its effect, as a result of which the Arbitrator will not be entitled to decide a particular dispute between the parties. Such determination would not, in our view, be revocation of the authority of the Arbitrator under Section 5 of the Arbitration Act. In any event, Section 5 should be read subject to the provision of Section 33 of the Arbitration Act. Moreover, it is clear from Section 5 that the authority of an Arbitrator or Umpire can be revoked with the leave of the Court. There is, therefore, no substance in the contention of the petitioner based on Section 5 of the Act.

10. The only dispute between the parties before the agreement dated May 14, 1973 was executed, was about the ownership of the surplus cables. It was that dispute alone that was referred to the Arbitrators. It appears from the agreement dated May 14, 1973 that the parties had other disputes between them and those disputes were settled by the said agreement. Lest there should be any confusion as to the scope of the arbitration proceeding it was clearly provided in the said agreement dated May 14, 1973 that the issue regarding the ownership of surplus cables already referred to arbitration by both the parties under the terms and conditions of the subject contract would be kept outside the scope of that agreement. It is not the case of either party that the dispute as to the ownership of surplus cables is not covered by the arbitration agreement dated Dec. 23, 1965, and that the said dispute has been kept unsettled between them by the subsequent agreement dated May 14, 1973. The effect of the said arbitration agreement and the subsequent agreement is that beyond the dispute as to the ownership of the surplus cables the Arbitrators will not have any jurisdiction to decide any other disputes between the parties. In this connection, we may also refer to Clause (ii) of the agreement dated May 14, 1973 which inter alia provides as follows :

'That the above agreement shall form part and parcel of the said contract and that neither of the parties shall have any further claim whatsoever in connection with or arising out of the subject contract except to the extent mentioned above in the preceding paras.'

This clause has made abundantly clear that the only existing dispute between the parties is the dispute over ownership of surplus cables.

11. It is amply clear from the said order dated Oct. 1, 1975 of the Arbitrators that they were also of the view that excepting the dispute about the ownership of the cables, all other disputes have been settled between the parties. The Arbitrators, however, thought that issues 4 and 5 which have been referred to above relate to the dispute about the ownership of the surplus cables. We do not find that there is any conflict between the first part and the latter part of the order of the Arbitrators. The question, however, is whether issues 4 and 5 including the sub-issues thereunder relate to the dispute as to the ownership of the surplus cables. It may be said that the Court is not concerned with what issues wall be framed by the Arbitrators over the dispute referred to them by the parties. Under Section 33, the Court is only concerned with considering the existence or validity of an arbitration agreement or the validity of an award or the determination of the effect of an arbitration agreement or an award. In the instant case, the Court cannot decide whether the issues which have been framed by the Arbitrators are germane to the dispute referred to them. All that the Court can say and it has been, in our opinion, rightly held by the learned Subordinate Judge that the Arbitrators are only concerned with the dispute as to the ownership of the surplus cables, and that they have no power nor jurisdiction to pass any award on the basis of Section 70 of the Indian Contract Act. It may, however, be stated in this connection that the Arbitrators, while deleting all other issues excepting issues 4 and 5 have overlooked Clause (11) of the agreement dated May 14, 1973. Be that as it may, after considering both the agreements we hold that the Arbitrators will not have any jurisdiction to decide any dispute other than the dispute as to the ownership of the surplus cables. Further, we would like to observe that the Arbitrators will be entitled to decide any issue or any matter without deciding which the dispute as to the ownership of the surplus cables cannot be decided. In that case, only such issue or the matter will relate to the dispute as to the ownership of the cables. But if the issue as to the ownership of the surplus cables can be decided independently of any other issue or issues, we are afraid, the Arbitrators will have no jurisdiction to decide such other issue or issues. As we have already said that it is not for the Court to consider the propriety of the issues framed by the Arbitrators, we refrain from expressing any opinion on the same. The Arbitrators, however, will be at liberty to reconsider their decision in the light of the observations made above.

12. The Rule is disposed of as above. There will be no order for costs.

D.C. Chakravobti, J.

13. I agree.


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