1 srk app-1-11.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.1 OF 2011 IN ARBITRATION PETITION NO.1097 OF 2010 Tata Industries Limited and another. ... Appellants Versus Grasim Industries Limited. ... Respondent Mr. Janak Dwarkadas, Senior Advocate with Mr. Milind Sathe, Senior Advocate, Mr. K.K. Lahiri, Mr. Goipal Jain, Ms. Ruby Ahuja, Mr. S.V. Doijode, Mr. Parag Kabadi, Ms. Priyanka Kothari i/by M/s. Doijode Associates for the appellant. Dr. Veerendra Tulzapurkar, Senior Advocate, with Mr. Virag Tulzapurkar, Senior Advocate, Dr. Birendra Saraf, Mr. Vikram Trivedi, Mr. Gaurav Pachnanda, Mr. Sachin Chandarana and Ms. Shilpa Joshi i/by M/s. Maniklal Kher Ambalal & co. for respondent. CORAM : MOHIT S. SHAH, C.J. & S.J. VAZIFDAR, J. Friday, January 7, 2011 P .C. This appeal is directed against the judgment dated 18th November, 2010 of the learned Single Judge, dismissing the arbitration petition filed by the appellants challenging the procedural order dated 13th May, 2010 of the arbitral tribunal constituted pursuant to an order passed by the designated Judge of the Supreme Court under section 11(6) of the Arbitration and Conciliation Act, 1996. 2. The order of the arbitral tribunal opens with the following profess: "This order shall dispose of an application filed by the claimants under Section 16(3) read with Section 19(3) of the Arbitration and 2 srk app-1-11.sxw Conciliation Act 1996 praying that the question whether the counter-claim filed by the respondent is maintainable, may be considered before the framing of issues and to reject it at the threshold if it is found not maintainable. Though, the respondent opposed this application submitting that the question of maintainability of the counter-claim could be the subject matter of an issue that could be dealt with in the enquiry, on the insistence of the claimants, we decided to hear this application and pass an order thereon." 3. The arbitral tribunal then considered the two-fold submissions made on behalf of the appellant. It was contended that in an adhoc arbitration, no counter-claim can be entertained by the arbitral tribunal unless the parties agree to the same and that in the absence of an agreement in that regard, the arbitral tribunal has to act upon the notice issued as contemplated by Section 21 of the Act and if no such notice had been issued before the constitution of the arbitral tribunal, the arbitral tribunal would lack jurisdiction to entertain a counter-claim. The second submission on behalf of the appellants was based on the previous conduct of the respondent in asmuch as the respondent had contended in reply to the appellants' application under section 11(6) that there was no live dispute between the parties. 4. After framing the first submission, the arbitral tribunal held that a counter-claim presupposes the filing of the claim before it can be put forward. Under Section 23 of the Act, the statement of claim has to be made or filed before the appropriate tribunal and the defence has also to be stated before the arbitral tribunal. A counter-claim has to be made while making the statement in defence and that would obviously be before the arbitral tribunal. The Act does not envisage the treating of the application made under section 11(6) of the Act as the statement of claim. The obligation to raise a counter-claim will arise while delivering a defence to the statement of claim and that would be before 3 srk app-1-11.sxw the arbitral tribunal. The arbitral tribunal, accordingly, held that nothing stands in the way of making a counter-claim even if a respondent before the arbitral tribunal had earlier opposed the constitution of the arbitral tribunal itself. 5. In this background, the arbitral tribunal also noted that while settling the time schedule by an order dated 7th September, 2008, it was specifically mentioned that the respondent was granted time to file "Statement of Defence and Counter-claim, if any," by 15th January, 2008. The appellant did not challenge this direction for almost three years. 6. The arbitral tribunal, accordingly, held that the arbitral tribunal did not lack jurisdiction to take on record the counter-claim made by the respondent. 7. As regards the second objection raised by the appellants against the maintainability of the counter-claim, the arbitral tribunal held that the respondent is entitled to file the counter claim and the counter claim it has filed has to be decided on merits after the evidence is taken. The arbitral tribunal, therefore, clarified that the observations made in the order shall not be construed as any expression of opinion on the merits of the claim set up by either of the parties, so that the observations have been made only to consider and dispose of the application filed by the appellants-claimants. 8. Subject to the above observations, the arbitral tribunal dismissed the appellants' application purported to be filed under section 16(3) read with section 19(3) of the Act. 4 srk app-1-11.sxw 9. The appellants challenged the above order of the arbitral tribunal by filing arbitration petition, giving rise to the present appeal. 10. The appellants-petitioners raised the following three contentions: (i) When the designated Judge appoints a Tribunal under section 11(6) of the Act, only those disputes which are referred to in the notice under section 21 can proceed to arbitration. Since the respondent has not issued any such notice of request under section 21, respondent has no right to file a counter-claim. (ii) The respondent had consistently opposed the application under section 11(6) of the Act on the ground that there is no live dispute surviving between the parties and, therefore, the respondent is barred from raising the counter-claim on the principles of res judicata, election and on the basis that the parties cannot approbate and reprobate. (iii) The decision of the arbitral tribunal on merits can never be a subject matter of proceedings under section 34 of the Act. The arbitral tribunal has taken a final view about maintainability of the counter-claim and, therefore, the arbitration petition was maintainable even for the partial award made at an interim stage. 11. The learned Single Judge found no merit in any of the above contention and, therefore, the present appeal. 5 srk app-1-11.sxw 12. The learned counsel for the appellants raised the same contentions before us and vehemently stated that respondent having consistently opposed the application filed under section 11(6) on the ground that there were no live disputes between the parties, the respondent was estopped from raising any counter-claim and that the arbitral tribunal has for all practical purposes expressed a final opinion on the question of maintainability and left it open to the appellants to contest the counter-claim on merits for which evidence will have to be led and the appellants will be required to go through the entire gamut of arbitral proceedings in so far as the counter-claim is concerned. Reliance is placed on the decision of the Apex Court in National Thermal Power Corpn.Ltd. v. Siemens Atkeingesellschaft, (2007) 4 SCC 451. 13. Dr. Tulzapurkar, learned counsel for the respondent has opposed the appeal and submitted that when the arbitral tribunal observed that the counter-claim has to be decided on merits after the evidence is taken, it would mean not only the merits of the counter-claim but also the question of estoppel being raised by the appellants. Dr. Tulzapurkar, invited our attention to the following draft issues prepared by the arbitral tribunal on 18th February, 2010: 19. Whether the counter claim made by the Respondent is maintainable? 20. In view of its prior conduct and the stand it has adopted, is the respondent entitled to put forward a counter claim? 21. If the counter claim is maintainable, whether the respondent has made out the grounds for reliefs claimed therein? 14. It is submitted by the learned counsel for the respondent that it was on account of the application taken out by respondent purportedly under 6 srk app-1-11.sxw sections 16(3) and 19(3) of the Act that the arbitral tribunal was called upon to give its ruling and the arbitral tribunal has held that the counter-claim is maintainable. However, the arbitral tribunal has not expressed any opinion on the question whether the respondent is disabled from putting forward the counter-claim on account of his alleged prior conduct. The learned counsel for the respondent has also submitted that the arbitration petition itself was not maintainable as the scheme under section 16 of the Arbitration Act specifically contemplates that if an objection as to the jurisdiction of the tribunal to entertain the dispute under section 16(3) is overruled, the arbitral tribunal has to proceed with the arbitration proceedings and make an arbitral award and it is only the final award which can be challenged under section 34 of the Act. 15. Having heard the learned counsel for the parties, we find substance in the submission of the learned counsel for the respondent. All that the arbitral tribunal has decided is that the tribunal has jurisdiction to receive the counter- claim and that lodging of the counter-claim is not barred merely because the order under section 11(6) did not refer to any dispute now being raised by the respondent. Whether it is maintainable or not is another matter which, even as admitted by Dr. Tulzapurkar, is kept open before the arbitral tribunal. 16. Without dwelling at length on the above aspect, in our view, the very fact that the arbitral tribunal has circulated draft issues Nos.19 to 21, amongst others, is sufficient to show that the arbitral tribunal has not expressed any opinion either on merits of the counter-claim or even on the question of estoppel as to whether the respondent is estopped from raising the counter- claim. A statement is also made on behalf of the learned counsel for the 7 srk app-1-11.sxw respondent that the respondent has no objection to the above issues being framed as proposed by the tribunal. 17. Subject to above observations and the statements as indicated above, the appeal is dismissed. CHIEF JUSTICE S.J. VAZIFDAR, J.