Punjab Dairy Dev. Corporation vs Multisack Corporation
1991 Latest Caselaw 261 Del

JUDGMENT

S.N. Sapra, J.

(1) Respondent I had agreed to supply kraft paper bags to petitioner on 24.4.79 It made some supplies and then asked for enhancement of rates on the ground that Central Govt. had increased price of the raw material Petitioner then resorted to risk purchase after notice on 31.10.79. Thus dispues arose between parties and respondent I filed an application u/S 20, Arb. Act stating fits claims in pars 13. High Court allowed it and appointed Justice Mehar Singh (Retd.) arbitrator who withdrew and then on 16.8.85, High Court appointed Chairman of petitioner Corp. as arbitrator. Upon latter's retirement, High Court appointed successor Chairman Mr. M.S.Gill on 12.11.86. Mr. Gill gave award on 3.11.87, awarding Rs. 71,309.00 with interest to respondent 1 and also allowed counterclaim of Rs 1,01,300.00 of petitioner. Petitioner filed application u/Ss. 14, 17 for making award rule of Court. Respondent I filed objections contending that arbitrator could not entertain counter Claims of petitioner. After detailing above, judgment is :

(2) The contention, urged before me by Mr. K. N. Kataria, learned counsel for objector, was that in entertaining the counter claim of Rs. 1,01,300.0

(3) On the other hand, Mr. Rishi Kesh, learned counsel for petitioner, contended that all the disputes between the parties, were referred for adjudication, to the arbitrator. These dispes included the counter claims of the petitioner also. His further contention was that the order dt. 7.3.84 was modified by the order dt. 12.11.86 of N. N. Goswamy. J. who while disposing of I. A., No. 1451/85 directed that all the diputes, between the parties, be referred to the sole arbitration of Shri M. S. Gill.

(4) In Orissa Mining Corp. Ltd. (supra), their Lordships of the Supreme Court were considering the jurisdiction of an arbitrator to decide the relief or claims, which were referred, by the Court, upon an application, u/S 20. It was held : "On a reading of the plaint, we are satisfied that the claim of transporting the iron ore for the extra distance is limited to Rs. 68,582.00 and the whole claim after including the claim for construction of the road is confined only to Rs. 93,582.00 The arbitrator having disallowed Rs. 25,000.00 being the claim for construction of the road should have confined his award only to Rs. 93,582.00 The claim of additional Rs. 68,582.00 before the arbitrator was clearly beyond the order of reference which incorporated the reliefs prayed for in the plaint by the respondent herein. It would have been different if the entire claim relating to the transport of the iron ore for the extra distance was made without specifying the amount of claim. When the amount has been specified in the plaint and when the reference is confined to the claim find in the plaint, the arbitrator would have to restrict his award only to the claim. We are satisfied that in this case the arbitrator has exceeded his jurisdiction in embarking on the claim that was for the first time put forward before him by the respondent. There is therefore, an error apparent on the face of the award. In Natwarlal Shamaldas & Co. (supra), this Court held : "It will be recalled that the arbitration proceeding were preceded by an application under Section 20 of the Act. Under sub-Section (4) of Section 20 the court ordered the agreement to be filed and made an order of reference to the sole arbitrator. Safeer, J. referred to the arbitrator disputes which are Subject matter of controversy between the parties. These disputes were specified in the application in terms of rupees, annas and pies. Now the order of reference defines the limits of the authority and jurisdiction of the arbitrator. The arbitrator's authority has its source in the order of reference. He cannot traverse beyond the reference made by the Court. If he does so he acts without jurisdiction. The arbitrator has necessarily to restrict his award only to the claim as put forward before the Court in Section 20 proceedings. This principle was laid down in Orissa Mining Corp. Ltd. vs. P.V. Rawalley . The Supreme Court said : "When an agreement is filed in Court and order of reference is made then the claim as a result of the order of reference is limited to a particular relief and the arbitrator cannot enlarge the scope of the reference and entertain fresh claims without a further order of reference from the Court."

(5) There is no substance in the argument of Mr. Rishikesh.

(6) Vide order dt. 7.3.84, it was specifically stated that the disputes between the parties as set out in para 13 of the petition, be referred to the arbitration of Justice Mehar Singh (Retd.). In other words, the reference, which was made by the Court upon an application, filed by respondent no. 1, u/S. 20 covered only the disputes, which were mentioned in para 13 of the application. The order dt. 16.8.85, passed by Jagdish Chandra, J. was upon an application for appointment of another arbitrator, namely. Justice Mehar Singh (retd.) had withdrawn from the reference.

(7) Accordingly, the disputes and differences between the parties, were then referred for decision to the Chairman of Punjab Dairy Dev. Corp., Chandigarh. This means, only such disputes and differences between the parties, as were mentioned in para 13 of petition, were referred to the arbitrator, vide order dt. 7.3.84. It may be noticed that in the order dt. 7.3.84, the words are disputes between the parties. But, these disputes were only such disputes, as were set out in para 13 of the petition.

(8) Similarly, the order dt. 12.11.86 was passed by N. N. Goswamy, J., upon an application u/Ss. 5, 8 and 12 of the Arbitration Act, to fill in the vacancy in the office of the arbitrator as the previous chairman had retired.

(9) In my view, the subsequent orders do not modify the order dt. 7.3.84, nor the same could be modified. The principles of law, as laid down in Orissa Mining Corp. Ltd. and Natwarlal Shamaldas & (supra), fully apply to the facts of the present case.

(10) The order of reference, defines the limit of the Authority and jurisdiction of the arbitrator. The arbitrator's authority, was derived from the order of reference ; The respondent no. 1, in this petition u/S. 20 of the Arbitration Act, had asked for reference of disputes to the arbitrator. The disputes/claims were specifically mentioned in the petition, itself. Admittedly, the counter claim of the petitioner herein, was not mentioned in para 13 of the petition, filed u/S. 20 of the Act. The arbitrator had thus, no jurisdiction to entertain the counter claim of Rs. 1,01,300.00 of the petitioner. The arbitrator was bound to restrict bids award, only to the claims, as were put forward before the Court, u/S. 20 of the Act. In taking into account the claim of petitioner, for risk purchase, the arbitrator has acted beyond the scope of reference. There is, thus, fan error, apparent on the face of the award, and the award, so far as, it relates to the counter claim, is to be modified.

(11) Accordingly, the objections filed by respondent no. 1, are allowed and the award dt 3. 11.87 so far as it allows the counterclaim of Rs. 1,01,300.00 of petitioner, is set aside and modified. The modified award, is made a Rule of the Court and decree in terms thereof is passed. The modified award shall form part of the decree. Petitioner shall also be liable to pay interest @ 12% p. a. from the date of decree till realisation.