1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION ARBITRATION PETITION NO. 171 OF 2009 Union of India, through, Divisional Railway Manager (Works), Mumbai Division, Mumbai Central, Mumbai ...Petitioner. Vs. M/s.Suraj Construction Co., M-1, Mezanine Floor, Mansarovar Apartments, Ulhasnagar-421 005. ...Respondent. Mr. Suresh Kumar for the Petitioner. None for the Respondent. CORAM :- ANOOP V. MOHTA, J. DATED :- 5th February, 2010. ORAL JUDGMENT: 1 The petitioner has invoked Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act) and thereby challenged the Award dated 15.12.2007 passed by the Arbitral Tribunal, based upon the dispute arising out of work contract. The relevant clauses of the contract are as under: “41.1 The successful tender/s shall put up his/their claim as per clause 43 of the General Conditions of Contract 2 during the progress of work and not after completion of the work. All such claims and disputes shall be settled promptly during the progress of the works. The final authority for giving the decision on claims and disputes put up by the tenderer/s, contractor/s shall be the Divisional Railway Manager (Works) (C), Western Railway, Bombay only. The claim if any, will be considered time barred if monthly claims are not given in terms of clause No.43 (i) of General condition of contract. 41.2 The provision of the Clause 63 and 64 of General Conditions of contract will be applicable only for settlement of claims or disputes between the parties for values less than or equal to 20% the value of the contract.” 2 The respondent has claimed a sum of Rs.57,93,372/- with interest thereon at 20% p.a. The contract was for a sum of Rs.18,82,575/-. Admittedly, the total claim is above 20% of the value of the contract. Therefore, objection under Section 16 of the Act was raised with regard to the arbitrability, as well as, the jurisdiction of the Arbitral Tribunal to deal with the claims as raised, as, by order dated 13.02.2004 while appointing the Arbitrator, the Court has permitted the parties to raise the issue with regard to the valuation of the claim which is admittedly more than 20% of 3 the value of the contract, as provided under above clauses. The learned Tribunal, however, rejected the application as filed by the petitioner under Section 16 of the Act and, therefore, as contemplated under Section 34 of the Act, the petitioner has raised this preliminary issue while challenging the Award in question. 3 In Arbitration Petition No.285/2007-Union of India vs. M/s.Jain Brothers by Order dated 5.2.20089, the Hon’ble Judge of this Court has observed as under, in view of the same clauses and similar facts: “ The principal challenge to the arbitral award is that under Clause 42.2 of th Special Conditions of Contract, it was enunciated that the provisions of Clauses 63 and 64 of the General Conditions of Contract will be applicable only for a settlement of claims or disputes between the parties of a value less than or equal to 20% of the value of the contract. The value of the contract was Rs.1,22,41,974/-. The claim in arbitration was Rs.2,44,65,269/-. In view of the fact that the claim that was urged in the arbitral proceedings was in excess of 20% of the value of the contract, it was urged on behalf of the petitioner that such a claim was not arbitrable. In view of this submission, Counsel appearing on behalf of the petitioner and the respondent have agreed that by consent, the award of the arbitral Tribunal dated 30th March 2007, be quashed and set aside. Accordingly the award which is impugned in these proceedings shall sand quashed and set aside. By consent, parties have agreed to refer their disputes to arbitration subject to the condition that the respondent who is the claimant shall restrict his claim in the arbitration to a value less than or equal to 20% of the value of the contract so as to bring the claim within the scope of arbitrability under Clause 42.2 of the Special Conditions of Contract. The Arbitration Petition shall accordingly stand disposed of.” 4 The Tribunal, however, while dealing with the preliminary issue 4 proceeded with the matter by; observing that the respondents have participated in the proceedings and, therefore, the formation of the Arbitral Tribunal cannot be the reason to close the arbitration. The Arbitral Tribunal accordingly proceeded with the matter and passed the impugned Award. This, in my view, is not correct in view of the specific order passed by the High Court while appointing the Arbitrator itself as recorded above. Even otherwise, the objection so raised with regard to the valuation of the claim of more than 20% of the contract value is based upon the agreed clauses between the parties. The parties are governed and controlled by such written agreements. The petitioner in fact had raised that objection which was rejected at that time. However, considering th scope and purpose of the arbitration and Section 34 of the Act and as it is permissible for such party to re-agitate such issue at the time of challenging the final Award and as done in the present case. The reasoning given by the Arbitral Tribunal by rejecting the preliminary issue so raised is contrary to the clauses as well as the order passed by the High Court on 13.02.2004 itself. The High Court while appointing the Arbitrator has kept this issue open. The learned Arbitrator, therefore, ought to have considered the issue while passing the final Award. The agreed clauses, if prohibits such Tribunal to proceed and/or to deal with the claim having more than valuation of 20% of the contract, the proceedings by the Arbitral Tribunal inspite of this and grant of award is illegal and it is in breach of agreed 5 terms and conditions between the parties. 5 Mere participation by all the parties in the present facts and circumstances of the case is not sufficient in view of the specific objection raised by the petitioner under Section 16 at the relevant time and also in view of the specific order and the agreed clauses as referred above. 6 It is necessary to take note of Section 4 of the Act, which is as under:- “Sec. 4.Waiver of right to object.- A party who knows that- (a) any provision of this Part from which the parties may derogate, or (b) any requirement under the arbitration agreement, has not been complied with and yet proceeds with the arbitration without stating his objection to such non- compliance without undue delay or, if a time limit is provided for stating that objection, within that period of time, shall be deemed to have waived his right to so object.” We have to consider Sections 4, 16 and 34 of the Act together for deciding the issue raised in the present Petition. 7 Admittedly, as contemplated under Section 16(2)(3) of the Act, a plea was raised about the jurisdiction at earliest point of time, that claims are beyond the scope. The Tribunal had rejected the same and proceeded with the matter. Therefore, the Petitioner being aggrieved party of such order while applying for setting aside the award under Section 34 read with 16(6) of the Act re-agitating the issue. It is clear that the Petitioner participated in the proceedings after raising the plea and objection. 6 Therefore, there was no intention at any point of time of relinquishment of known right. 8 The participation of the Petitioner in the present facts and circumstances in the arbitration proceedings, therefore, cannot be considered as “waiver” and “equitable estoppel and/or acquiescence” as contemplated under Section 4 of the Act. The Petitioner is not debarred from challenging and or raising such plea of jurisdiction even after taking part in the Arbitration proceedings. (Bharat Sanchar Nigam Limited Vs. Motorola India Private Limited, (2009) 2 SCC 337; AIR 2009 SC, 357). 9 It is also relevant to note the following para from Russell on Arbitration, 20th Edition page 267:- “If a party to a reference objects that the arbitrators are entering upon the consideration of a matter not referred to them and protest against it, and the arbitrators nevertheless go into the questions and receive evidence on it, and the party, still under protest, continues to attend before the arbitrators and cross-examines the witnesses on the point objected to, he does not thereby waive his objection, nor is he estopped from saying that the arbitrators have exceeded their authority by awarding on the matter.” 10 The wrong interpretation or interpretation which is contrary to the agreed terms and/or reasoning given by overlooking the agreed terms and therefore such Award is bad and contrary to law. [Numaligarh Refinery Ltd. v. Daehim Industrial Co.Ltd., 2007 (10) SCALE 57/(2007) 8 SCC 466]. It is not the case of possible/plausible view. 7 11 In view of the above, I am setting aside the Award on this point of jurisdiction only without considering the merits of the matter. However, the liberty is granted to the respondents to take appropriate plea or proceeding to claim and/or settle their disputes in or by any other appropriate proceedings. 12 Resultantly, the petition is allowed. The impuged order dated 22.05.2006 and the impugned Award dated 15.12.2007 are quashed and set aside accordingly, with liberty. No costs. (ANOOP V. MOHTA, J.)