Union Of India (Uoi) vs S.R. Construction Co. And Anr.
2007 Latest Caselaw 1652 Del

JUDGMENT

Badar Durrez Ahmed, J.

1. This is an application filed on behalf of the respondent for rejection of the petition filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the said Act") on the ground that this Court does not have jurisdiction to entertain the said petition. It has been contended by the respondent that, first of all, the arbitrator was appointed by an order dated 7.1.2004 passed by the Additional District Judge on a petition under Section 11 of the said Act. Therefore, in accordance with Section 42 of the said Act, the objections, if any, under Section 34 of the Act, would lie before the Court of the Additional District Judge, Delhi who appointed the sole arbitrator. Secondly, it was contended on behalf of the respondent that the total claims preferred before the sole arbitrator came to Rs 19.55 lakhs. Thus, this Court would not have jurisdiction inasmuch as, had a suit been filed of the same value, then the suit would have had to be filed before the District Court and not before this Court. This submission has been made in view of the provisions of Section 2(1)(e) read with Section 34 of the said Act. The learned Counsel for the petitioner opposed this application and advanced arguments to the contrary in respect of both the points urged on behalf of the respondent.

2. Insofar as the first point taken by the learned Counsel for the respondent is concerned, it is pertinent to note that when an order is passed under Section 11(6) of the said Act for the appointment of an arbitrator, the Chief Justice or his designate does not function as a Court. This has been clearly stated by the Supreme Court in the case of Rodemadan India Ltd. v. International Trade Expo Centre Ltd. . The Supreme Court was of the view that neither the Chief Justice nor his designate under Section 11(6), is a "court" as contemplated under Section 2(1)(e) the said Act. It was also held that the bar of jurisdiction under Section 42* is only intended to apply to a "court" as defined in Section 2(1)(e). It is, therefore, clear that an order passed under Section 11(6) of the said Act by the Chief Justice or his designate would not fall within the purview of Section 42 thereof. Accordingly, the order dated 7.1.2004 passed by the learned Additional District Judge functioning as a designate of the Chief Justice under Section 11(6) of the said Act and appointing the learned arbitrator cannot be regarded as an order passed by a Court. Therefore, Section 42 would not have any applicability in respect of this order. Consequently, the first point urged on behalf of the respondent has no merit.

3. As regards the second point taken on behalf of the respondent, it would be relevant to note the definition of "court" as it appears in Section 2(1)(e) of the said Act. The same reads as under:

2 (1) xxxx xxxx xxxx xxxx

(e) "Court" means the principal Civil Court of original jurisdiction in a district, and includes the High Court in exercise of its ordinary original civil jurisdiction, having jurisdiction to decide the questions forming the subject-matter of the arbitration if the same had been the subject-matter of a suit, but does not include any civil court of a grade inferior to such principal Civil Court, or any Court of Small Causes;

xxxx xxxx xxxx xxxx

4. A plain reading of the aforesaid definition makes it clear that the word "court" has reference to the principal civil court of original jurisdiction which would have had jurisdiction to decide the questions forming the subject matter of the arbitration if the same had been the subject matter of a suit. It means that had there been no arbitration clause, the court, where the suit, for the same cause of action, could have been filed, would be the court which has been referred to under Section 2(1)(e) of the said Act. This definition of court, as it appears in Section 2(1)(e) has to be read into Section 34 of the said Act which permits the filing of an application for setting aside the arbitral award before a "court". Therefore, reading Section 2(1)(e) along with Section 34 of the said Act, an application for setting aside an arbitral award can only be filed in a court which would have had jurisdiction to entertain a suit had there been no arbitration agreement between the parties.

5. The claim that has been filed by the respondent before the arbitrator was under seven heads. The details of the claims as made by the claimant before the arbitrator are set out hereunder:

Details of Claims Contractor's Claims:

Claim No.      Description of Claims                     Amount
 1.       The claimants claim on account of balance 
          payment due and payable for works done 
          but not paid by the Department            Rs. 4,00,000/-
 2.       The claimants claim on account of extra 
          expenditure incurred due to increase in 
          prices of material labour and 
          transportation as the contract period 
          prolonged by about 13 months              Rs. 8,50,000/-
3.        The claimants claim on account of extra 
          expenditure incurred on salaries and 
          other establishments of supervisory 
          staff etc. as the contract period 
          prolonged by about 13 months              Rs. 2,60,000/-
4.        The claimants claim on account of extra 
          expenditure incurred for idle machinery, 
          T&P etc. as the contract period 
          prolonged by about 13 months.             Rs. 1,45,000/-
5.        The claimants claim on account of 
          wrong deductions and recoveries made 
          for various items by the department 
          and Sale Tax deducted at later stage 
          of the contract.                          Rs. 2,50,000/-
6.        The claimants claim pre-suit and future 
          interest @ Rs 24% per annum
7         The claimants claim towards the cost of 
          arbitration proceedings.                  Rs. 50,000/-

               TOTAL                              Rs. 19,55,000/-

 

The total of the claims comes to Rs 19,55,000/-. Since item No. 7 pertains to the cost of arbitration proceedings, it was to be excluded for the purposes of construing the valuation of the subject matter had the same been filed as a suit. Subtracting Rs 50,000/- from Rs 19,55,000/- we are left with a claim of Rs 19,05,000/-. According to the learned Counsel for the respondent, since this is less than Rs 20,00,000/-, the suit would have had to be filed before the District Judge and not before this Court. Therefore, it would be the District Court which would have jurisdiction to entertain an application under Section 34 and not this Court. In response, the learned Counsel for the petitioner submitted that the sum of Rs 19,05,000/- has reference only of claims Nos. 1 to 5. It does not have any reference to item No. 6 which has been left blank by the respondent/claimant in its claims made to the learned arbitrator. Item No. 6 pertains to the claim of pre-suit and future interest @ 24% per annum. Obviously, interest is being claimed in respect of the amounts given in items 1 to 5. The respondent/claimant is claiming the said sums as having become due and payable to it by the petitioner from January 2000. The claim before the arbitrator was ultimately made on July 2004. Therefore, a period of four and a half years had elapsed before the claim, according to the respondent, had crystallized and the claim was preferred. Consequently, the pre-suit period would be this period of four and a half years commencing from January, 2000 and ending July, 2004. An amount of interest at the rate of 24% per annum has been claimed for this period. The interest that is claimed would, therefore, be claimed in respect of the principal amount of the claims which has been stated above to be Rs 19,05,000/-. Surely, if this interest element for the pre-suit period is added to the claim, then the total claim would be far in excess of Rs. 20,00,000/-.

6. As per the Suits Valuation Act, 1887, and in particular, Section 8 thereof, the present claim, had it been a suit, would be valued in the same manner as its valued for the purposes of computing Court fees. Under Section 7 of the Court Fees Act, 1870, the claim, had it been a suit, would be a suit for money and would have to be valued according to the amount claimed. Since the respondent has made a claim in respect of items 1 to 5 referred to above as also item No. 6 which includes a claim for pre-suit interest, the valuation of items 1 to 5 as well as of interest for the pre-suit period would have to be taken into account for arriving at the value of the suit for computing court fees. As already pointed out, the value for the purpose of jurisdiction is to be the same as that for the purposes of court fee. Taking that into account and including the valuation for the pre-suit interest element, the suit, if it had been filed (assessing that there was no arbitration agreement), would have been valued in excess of Rs 20,00,000/- both for the purposes of computing court fees and for jurisdiction. Therefore, such a suit could have been filed only before the High Court and not before the District Court as the pecuniary jurisdiction of the District Court was limited to suits up to Rs 20,00,000/-. That being the position, reading the provisions of Section 2(1)(e) read with Section 34 of the said Act, the inescapable conclusion is that this Court would have jurisdiction to entertain the present petition under Section 34

Both the grounds taken by the respondent in support of this application are untenable. This application is dismissed.