2000 JTR(SC) 1653
2000 AIR(SC) 3185 ; 2000 AIR(SCW) 3690 ; 2001 44 AllLR 315 ; 2000 3 ArbLR 522 ; 2000 DNJ 492 ; 2000 1 JT 497 ; 2000 Supp1 JT 497 ; 2000 3 RAJ 179 ; 2001 1 RCR(Civ) 363 ; 2000 7 Scale 168 ; 2000 8 SCC 1 ; 2000 Supp4 SCR 1 ; 2000 7 SLT 511 ; 2000 KHC 1709 ; 2000 7 Supreme 72
2000(7) Supreme 72
SUPREME COURT OF INDIA
(From Calcutta High Court)
G.B. Pattanaik, M.B. Shah & S.N. Phukan, JJ.
Union of India -Appellant
versus
M/s. Popular Builders, Calcutta -Respondent
Civil Appeal No. 5937 of 2000
(Arising out of SLP (C) No. 13395 of 1999)
Decided on 17-10-2000
Counsel for the Parties :
For the Appellant : A. Subba Rao, B. Krishna Prasad and K. Swami, Advocates.
For the Respondent : L. Nageswara Rao, Abhijit Sengupta, Ms. Madhurima Tatia, D. Bharat Kumar, Advocates.
Act Referred :ARBITRATION ACT : S.33, S.30
(A) Sections 30 and 33 of the Arbitration Act, 1940 govern the setting aside of an arbitral award on specified grounds and provide the procedure for challenging an award made by an arbitrator. Section 30 mandates that a party must be given an opportunity of being heard before an award is set aside, while Section 33 empowers the Court to set aside an award on the grounds of fraud or illegality. In this case, these provisions were invoked by the Union of India to challenge the award passed in an arbitration arising from a contract for the construction of an annex building, where the dispute centered on whether claims relating to work executed after the execution of the final bill were arbitrable. The applicability of the limitation bar and the scope for raising objections concerning the existence of an arbitrable dispute post-acceptance of the final bill were examined under these statutory provisions.
(B) The core legal principles include that the existence of an arbitrable dispute is a condition precedent for the appointment of an arbitrator under a clause referring to an appointed authority. A party cannot raise a belated objection on the ground of absence of an arbitrable dispute if it has already participated in the arbitration proceedings without specifically contesting that issue. Additionally, a claim regarding matters settled by a final payment without protest generally ceases to be arbitrable, and challenges to an award must be specifically taken in the objection filed under Sections 30 and 33.
Facts of the case:
The respondent-contractor entered into an agreement with the appellant for the construction of an annex building, which contained an arbitration clause. After completion, the final bill was accepted and paid by the respondent without objection. Later, the respondent claimed additional sums for work executed on directions of the appropriate authority, which was not included in the final bill. The Chief Engineer appointed an arbitrator, and the Union of India participated in the arbitration. The arbitrator passed an award, which was challenged by the Union of India under Sections 30 and 33 on the ground of lack of arbitrability concerning one claim item. The Single Judge and Division Bench dismissed the objection, leading to this appeal.
Findings of Court:
The Court found that while the respondent accepted the final bill without protest, a dispute as to item No. 2 concerning claims arising after the final bill persisted, satisfying the condition for arbitration under Clause 25. However, the Union of India had raised the specific objection on arbitrability before the arbitrator and in the initial objection under Sections 30 and 33, and the award on item No. 2 was set aside. For other items, the Union of India was held precluded from raising the bar of arbitrability due to lack of specific objection in the statutory challenge proceedings.
Issues:
Whether a claim item based on work executed after acceptance of the final bill is arbitrable when the party had previously accepted the final bill without protest, and whether the Union of India was entitled to raise the issue of arbitrability for the first time in this appeal after participating in the arbitration process.
Ratio Decidendi:
The existence of an arbitrable dispute is a condition precedent for the appointment of an arbitrator. If a party raises a specific objection concerning arbitrability in the initial challenge to the award and participates in the arbitration, it cannot later raise the same objection in appeal for items it did not contest. The award must be set aside only to the extent that the dispute was not arbitrable and the objection was specifically taken.
Result:
The appeal is allowed in part; the award in respect of claim item No. 2 is set aside, and the remaining award is affirmed.
(A) Sections 30 and 33 of the Arbitration Act, 1940 govern the setting aside of an arbitral award on specified grounds and provide the procedure for challenging an award made by an arbitrator. Section 30 mandates that a party must be given an opportunity of being heard before an award is set aside, while Section 33 empowers the Court to set aside an award on the grounds of fraud or illegality. In this case, these provisions were invoked by the Union of India to challenge the award passed in an arbitration arising from a contract for the construction of an annex building, where the dispute centered on whether claims relating to work executed after the execution of the final bill were arbitrable. The applicability of the limitation bar and the scope for raising objections concerning the existence of an arbitrable dispute post-acceptance of the final bill were examined under these statutory provisions.
(B) The core legal principles include that the existence of an arbitrable dispute is a condition precedent for the appointment of an arbitrator under a clause referring to an appointed authority. A party cannot raise a belated objection on the ground of absence of an arbitrable dispute if it has already participated in the arbitration proceedings without specifically contesting that issue. Additionally, a claim regarding matters settled by a final payment without protest generally ceases to be arbitrable, and challenges to an award must be specifically taken in the objection filed under Sections 30 and 33.
Facts of the case:
The respondent-contractor entered into an agreement with the appellant for the construction of an annex building, which contained an arbitration clause. After completion, the final bill was accepted and paid by the respondent without objection. Later, the respondent claimed additional sums for work executed on directions of the appropriate authority, which was not included in the final bill. The Chief Engineer appointed an arbitrator, and the Union of India participated in the arbitration. The arbitrator passed an award, which was challenged by the Union of India under Sections 30 and 33 on the ground of lack of arbitrability concerning one claim item. The Single Judge and Division Bench dismissed the objection, leading to this appeal.
Findings of Court:
The Court found that while the respondent accepted the final bill without protest, a dispute as to item No. 2 concerning claims arising after the final bill persisted, satisfying the condition for arbitration under Clause 25. However, the Union of India had raised the specific objection on arbitrability before the arbitrator and in the initial objection under Sections 30 and 33, and the award on item No. 2 was set aside. For other items, the Union of India was held precluded from raising the bar of arbitrability due to lack of specific objection in the statutory challenge proceedings.
Issues:
Whether a claim item based on work executed after acceptance of the final bill is arbitrable when the party had previously accepted the final bill without protest, and whether the Union of India was entitled to raise the issue of arbitrability for the first time in this appeal after participating in the arbitration process.
Ratio Decidendi:
The existence of an arbitrable dispute is a condition precedent for the appointment of an arbitrator. If a party raises a specific objection concerning arbitrability in the initial challenge to the award and participates in the arbitration, it cannot later raise the same objection in appeal for items it did not contest. The award must be set aside only to the extent that the dispute was not arbitrable and the objection was specifically taken.
Result:
The appeal is allowed in part; the award in respect of claim item No. 2 is set aside, and the remaining award is affirmed.
JUDGMENT
Pattanaik, J.-Leave granted.
2. This appeal by the Union of India is directed against the judgment dated 28th of January, 1999 of the Division Bench of Calcutta High Court, dismissing the appeal of the Union of India, arising out of an arbitration proceeding. The undisputed facts are that the respondent had entered into an agreement with the appellant for construction of Annex Building to Telephone Bhawan at Calcutta. The agreement between the parties contained an arbitration clause therein. After the completion of work, the final bill was drawn and was sent to the respondent and he agreed to accept the final bill and in fact did receive the money under the final bill without any objection. But thereafter, he wrote a letter to the concerned Chief Engineer, indicating several items of claim and additional works which the respondent had executed pursuant to the directions of the appropriate authority and the said work had not been included in the final bill. He, therefore, requested the Chief Engineer, the authority under Clause 25 of the agreement to appoint an arbitrator and pursuant to the said request, the Chief Engineer by his letter dated 25.11.93 did appoint an arbitrator. Subsequently, the appointed-arbitrator was changed. Pursuant to an order of the High Court and before the arbitrator, the respondent filed his claim on different heads. The Union of India-appellant herein, filed his objection as well as filed a counter claim before the arbitrator. The learned Arbitrator ultimately passed an award and that award was filed before the High Court, for being made a rule of Court under Section 14 of the Arbitration Act, 1940. The Union of India filed an objection under Sections 30 and 33 for setting aside the award. The learned Single Judge considered the objections filed by the Union of India and rejecting the same, made the award a rule of Court. Against the aforesaid order of the learned Single Judge, an appeal was carried to the Division Bench under Section 39 of the Arbitration Act. The Division Bench having dismissed the Union s appeal by the impugned order, the present appeal has been preferred by the Union of India. From the judgment of the learned Single Judge, rejecting the objections of the Union of India as well as the impugned judgment of the Division Bench, it appears that the Union of India had urged the sole point of limitation and the same had been negatived by the courts below and in our view rightly.
3. Mr. A. Subba Rao, the learned counsel for the Union of India however raised the question that the final bill having been accepted by the respondent-contractor, without any objection, there did not subsist any arbitrable dispute to be referred to arbitration, invoking Clause 25 of the agreement and, therefore, the impugned award has to be set aside. In support of this contention, reliance has been placed on two decisions of this Court- M/s. P.K. Ramaiah and Company v. Chairman & Managing Director, National Thermal Power Corpn.1 as well as a three Judge Bench decision of this Court in Nathani Steels Ltd. v. Associated Constructions2.
4. Mr. L. Nageswara Rao, appearing for the respondent-claimant on the other hand contended that this objection had not specifically been taken in the objection, that was filed under Sections 30 and 33 of the Arbitration Act, and therefore, the Union Government should not be permitted to take up this plea in this forum. He further contended that pursuant to the request made by the Contractor, the Chief Engineer himself having appointed an arbitrator on the ground that dispute subsists for arbitration and in the arbitration proceeding, the Union Government having fully participated and further, subsequent to the award, a rectification application having been filed by the Union Government and in that application also, only challenge being made on the quantum and not on the ground of absence of arbitrable disputes, it would not be appropriate for this Court to allow the Union Government to take this plea at this belated stage. He also contended that the two decisions referred to by the Union Government are prior the appointment of arbitrator and none of these decisions are applicable to the case in hand, where an award has been passed by the appointed arbitrator after due participation of Union Government in the arbitration proceedings.
5. Having considered the rival submissions at the Bar and on careful scrutiny of the objections filed by the Union Government under Sections 30 and 33 of the Arbitration Act, though we find sufficient force in the contention of Mr. Nageswara Rao, but the existence of a dispute being the condition precedent for appointment of an arbitrator under Clause 25 and in view of the two decisions of this Court and that the respondent-claimant did receive the final bill without any protest, we are not persuaded to outright reject the contention of Mr. Subba Rao, appearing for the Union Government. It transpires from the award itself that only as against claim item No. 2, the Union of India had pleaded that the said claim cannot be entertained in view of the receipt of the final bill by the contractor without any protest, though the arbitrator had rejected the said plea of the Union of India. It is no doubt true as contended by Mr. Nageswara Rao that neither the judgment of the learned Single Judge nor the judgment of the Division Bench, which is under challenge in this appeal before this Court did indicate the fact that the Union of Indiahad raised this contention before the aforesaid two forums below but notwithstanding the same when the existence of an arbitrable dispute is the condition precedent for exercise of power for appointment of an arbitrator under Clause 25 and since the final bill that was prepared by the appropriate authority was accepted by the respondent without any protest as is apparent from the letter of the claimant-contractor and the question had been raised before the arbitrator in respect of the claim item No. 2 by the Union of India, we think it appropriate to hold that so far as claim item No. 2 is concerned, the same could not have been a matter of reference of an arbitrable dispute and as such, the award of the arbitrator to that extent must be set aside. So far as the other claim items are concerned, the Union of India not having taken any objection to the same on the aforesaid score and that even the objection filed under Sections 30 and 33 of the Arbitration Act not being specific on that issue, we do not think it appropriate to allow the Union Government to raise that objection, so far as the other items of claim are concerned. Accordingly, the impugned award in respect of claim item No. 2 is set aside and the rest of the award amount, stand affirmed. The appeal is allowed in part.
(C.R.) Appeal partly allowed.
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