Bharat Sanchar Nigam Ltd. vs Kavveri Telecom Products Ltd. & ...
2009 Latest Caselaw 3076 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                 OMP No.313/2006

%                                  Date of decision:10.08.2009

BHARAT SANCHAR NIGAM LTD.                             ....Petitioner
                        Through: Mr. Chandan Kumar, Advocate

                                Versus

KAVVERI TELECOM PRODUCTS LTD. & ANR. ... Respondents

                        Through: Mr. Ankur S. Kulkarni & Mr. Nirnimesh
                                 Dube, Advocates for the Respondent
                                 No.1.

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?       YES

2.    To be referred to the reporter or not?           YES

3.    Whether the judgment should be reported          YES
      in the Digest?


RAJIV SAHAI ENDLAW, J.

1. A petition under Section 9 (ii) (e) of the Arbitration Act, 1996 is

preferred challenging inter-alia the order of the arbitral tribunal

holding that as per its mandate it could not entertain the counter

claims preferred by the petitioner before it. It is the contention of the

counsel for the petitioner that the court under Section 9 (ii) (e) is

empowered to issue any interim measure of protection as may

appear to be just and convenient and not necessarily in the form of

protection of any property or asset or for securing the amounts due

in arbitration. The contention of the petitioner if accepted would lead

to this court under Section 9 (ii) (e) exercising the jurisdiction as

exercised by this court under Article 227 of the Constitution of India

qua proceedings before courts/tribunals inferior to this court.

2. The disputes between the parties arose out of an agreement

containing an arbitration clause. As per the said clause, any

question, dispute or difference arising under the agreement or in

connection therewith was to be referred to sole arbitration of the

Director General, Deptt. of Telecommunication or of an officer

holding the equivalent designation. The Director General, under the

said clause, if unwilling to act as the arbitrator, was also empowered

to appoint any other person as the arbitrator.

3. Disputes and differences having arisen between the parties the

respondent applied to the petitioner for appointment of the

arbitrator. Upon failure of the petitioner to appoint the arbitrator the

respondent preferred writ petitions No.30700-701 of 2004 before the

High Court of Karnataka at Bangalore. The said writ petitions were

rejected, however with a direction that the petitioner herein shall

nominate the arbitrator within two weeks therefrom and the

arbitrator so appointed shall dispose of the claims of the parties

expeditiously. Directions were also issued with respect to the bank

guarantees furnished by the respondent to the petitioner.

4. The Chairman & Managing Director of the petitioner vide

order dated 27th January, 2005, referring to the order aforesaid of

the High Court of Karnataka, appointed one Shri V.P. Sinha as the

arbitrator to settle the disputes so arbitrable.

5. The respondent filed its claim before the arbitrator and the

petitioner filed its counter claim. The respondent filed replies to the

counter claim of the petitioner. Even though there was no objection

by the respondent to the maintainability of the counter claim of the

petitioner before the arbitrator or of the jurisdiction of the arbitrator

to entertain the same, the arbitrator vide his letter, Annexure R-1 to

the petition, date whereof is disclosed by counsels for both the

parties to be 29th August, 2005 inter-alia ordered that the scope of

his mandate was in terms of the order dated 27th January, 2005

(Supra) i.e. to arbitrate to settle the disputes with regard to the

balance bills & performance bank guarantee against the supply of

HDSL equipment and the counter claim preferred by the petitioner

could not be taken on record. It was further ordered that either a

fresh mandate is to be given for the arbitrator to entertain the said

counter claim or the petitioner can go to any other court/arbitrator

for redressal of its grievance.

6. The petitioner after nearly one year of the date of the aforesaid

letter, on 13th July, 2006 filed the present petition. The relief claimed

herein is for setting aside of the aforesaid order of the arbitrator and

for a direction to the arbitrator to consider the counter claim of the

petitioner already filed.

7. The respondent has in its reply to this petition raised a plea as

to the maintainability of the petition.

8. The counsel for the petitioner has urged that the language of

Section 9 (ii) (e) is very wide. Reliance is placed on Maharashtra

State Elect. Board Vs. Datar Switchgears Ltd. 2003 (Suppl.) Arb.

LR 39 (Bomb.) & on BLB Institute of Financial Markets Ltd. Vs.

Ramakar Jha 154 (2008) DLT 121 in support of the wide amplitude

of Section 9 (ii) (e). However, the counsel for the petitioner, on

inquiry as to whether any of the said judgments lay down that the

powers thereunder can be invoked to set aside any errors in the

arbitral proceedings, even if necessary to provide protection to any

of the parties, the counsel for the petitioner has fairly stated that in

none of the judgments such proposition has been laid down. I may

however notice that the single judge of Bombay High Court in

Maharashtra State Electricity Board, though holding the powers

of the court under Section 9 (ii) (e) to be very wide, made the said

observations only in the context of ensuring compliance of interim

order of the Arbitral Tribunal. Else therein also, relying on Bhatia

International Vs. Bulk Trading SA (2002) 4 SCC 105, it was held

that the Act does not contemplate the interference of courts at the

interim stage in matters of jurisdiction of the Arbitral Tribunal and

that the court would in such cases not be entitled to exercise powers

under Section 9.

9. The counsel has further argued that unless the present petition

is held to be maintainable, the petitioner would be remediless. He

has further explained the delay in filing the present petition by

submitting that after the letter dated 29th August, 2005 (Supra)

review was applied for before the arbitrator and which was

ultimately dismissed on 10th May, 2006, copy of the order of which

date was received by the petition on 6 th June, 2006 and immediately

whereafter this petition was preferred.

10. Per contra, the counsel for the respondent has while

reiterating his submissions as to the non-maintainability of the

present petition drawn attention to NTPC Ltd. Vs. Siemens

Atkeingesellschaft 2007 (3) SCALE 657 whereunder with reference

to Section 16 of the Act it has been laid down that the remedy of

appeal is available to a party against the order allowing the objection

taken thereunder.

11. The counsel for the petitioner has in rejoinder submitted that

no objection under Section 16 had been raised by the respondent

qua the counter claim of the petitioner and hence the remedy of

appeal was not available to the petitioner.

12. The present is a classic case of how the arbitral proceedings

can be derailed. It is informed that the arbitration qua the claims of

the respondent is also held up before the arbitrator owing to the

pendency of the present petition since 2006.

13. The arbitrator appears to have treated the proceedings before

him as a reference under the 1940 Act whereunder the disputes had

to be referred to the arbitrator for adjudication and the arbitrator

was empowered to settle/adjudicate only the referred disputes and

none else. The 1996 Act, does not envisage reference of disputes to

arbitrator and only provides for the appointment of the arbitrator.

The arbitration clause in the present case also names the Director

General of the Deptt. of Telecommunications or officer of equivalent

rank/designation as the arbitrator, also empowers him, if unwilling,

to appoint any other arbitrator. All that was thus required was for

the claims to be raised by either party before the named arbitrator

or his nominee and no reference was to be made. The order dated

27th January, 2005 of appointment of the arbitrator is also with

reference to the agreement and the order in the writ petitions. The

order is further for adjudication by arbitration of disputes so

arbitrable.

14. Even though in the opinion of the court the arbitrator ought

not to have rejected the counter claim of the petitioner but the fact

remains that the remedy, if any, of the petitioner against the said

order is not by way of the present petition. In fact the arbitrator

himself had shown the way to the petitioner which the petitioner

failed to follow. The simplest step for the petitioner to take was to

again approach the appointing authority for clarification that the

counter claim also could be entertained by the arbitrator. However,

the petitioner instead of doing so after following the route of review

before the arbitrator ultimately invoked wrong remedy for its

genuine/correct grievance.

15. The contention of the counsel for the petitioner that Section 9

(ii) (e) ought to be read/interpreted so as to vest power in this court

to correct such errors committed by the arbitrator cannot be

permitted. Section 9 (ii) (e) empowers the court only to pass orders

of interim nature. The said power cannot be said to be encompassing

within itself the right to correct the errors committed during the

course of arbitral proceedings and with respect whereto the party

may be needing protection.

16. The contention of the petitioner that the petitioner has no

other remedy against the order aforesaid of the arbitrator is also not

found correct. The said order of the arbitrator amounts to dismissal

of the counter claim of the petitioner and has a finality about it and

is in the nature of an award and the remedy thereagainst under

Section 34 was available to the petitioner.

17. I also find that Section 16 empowers the arbitral tribunal to

rule on its jurisdiction suo moto also without any plea being taken in

that regard. Section 16 (1) empowers the arbitral tribunal to do so,

including ruling on any objections with respect to the existence or

validity of arbitration agreement. Thus, it appears that the remedy

of an appeal under Section 37 (2) (a) was also available to the

petitioner.

18. I have also toyed with the idea of treating the present petition

under Section 34. However, in view of the bar of limitation as laid

down in UOI Vs. M/s Popular Construction Co. AIR 2001 SC 4010

the same is not possible. I have also suggested to the counsel for the

respondent to, for the sake of expediency, consent to treating the

present petition as an appeal under Section 37 (2) (a) of the Act in as

much as no period of limitation appears to have been prescribed

therefor. However, the counsel for the respondent states that he is

unable to give any consent and the petitioner may prefer the

appropriate remedy if so advised.

19. Since the powers exercised by this court are under the

Arbitration Act, 1996 and Section 5 whereof limits the extent of

interference by the court, it is not felt appropriate, to without any

prayer in this regard, treat the present petition as an appeal under

Section 37 (2) (a) of the Act.

20. The petition is accordingly dismissed as not maintainable.

However, in the facts of the case the parties are left to bear their

own costs.

RAJIV SAHAI ENDLAW (JUDGE)

August 10th, 2009 PP