Case: State of West Bengal Vs. Sarkar and Sarkar

the State of West Bengal, has preferred the instant civil appeal.7. It was the vehement contention of the learned Counsel for the Appellant based on a series of judgments rendered by this Court, that Clause 12 (extracted above) was not an arbitral clause, and that, the arbitrator as well as the High Court, had erred in determining the same.8. Learned Counsel for the Respondent-Sarkar & Sarkar contested the claim of the Appellant. It was submitted, that the Appellant could not be permitted even to raise the instant plea, so as to assail the order passed, either by the arbitrator (on 15.1.2004), or by the High Court (on 16.5.2006). The instant submission of the learned Counsel for the Respondent, was premised on the judgment rendered by this Court in SBP & Co. v. Patel Engineering Ltd. (2005) 8 SCC 618. Our pointed attention was drawn to the conclusions drawn by the Constitution Bench in the above judgment, in paragraph 20. Paragraph 20 is reproduced below:20. Section 16 is said to be the recognition of the principle of Kompetenz-Kompetenz. The fact that the Arbitral Tribunal has the competence to rule on its own jurisdiction and to define the contours of its jurisdiction, only means that when such issues arise before it, the Tribunal can, and possibly, ought to decide them. This can happen when the parties have gone to the Arbitral Tribunal without recourse to Section 8 or 11 of the Act. But where the jurisdictional issues are decided under these sections, before a reference is made, Section 16 cannot be held to empower the Arbitral Tribunal to ignore the decision given by the judicial authority or the Chief Justice before the reference to it was made. The competence to decide does not enable the Arbitral Tribunal to get over the finality conferred on an order passed prior to its entering upon the reference by the very statute that creates it. That is the position arising out of Section 11(7) of the Act read with Section 16 thereof. The finality given to the order of the Chief Justice on the matters within his competence Under Section 11 of the Act are incapable of being reopened before the Arbitral Tribunal. In Konkan Rly. what is considered is only the fact that Under Section 16, the Arbitral Tribunal has the right to rule on its own jurisdiction and any objection, with respect to the existence or validity of the arbitration agreement. What is the impact of Section 11(7) of the Act on the Arbitral Tribunal constituted by an order Under Section 11(6) of the Act, was not considered. Obviously, this was because of the view taken in that decision that the Chief Justice is not expected to decide anything while entertaining a request Under Section 11(6) of the Act and is only performing an administrative function in appointing an Arbitral Tribunal. Once it is held that there is. an adjudicatory function entrusted to the Chief Justice by the Act, obviously the right of the Arbitral Tribunal to go behind the order passed by the Chief Justice would take another hue and would be controlled by Section 11(7) of the Act.(emphasis is ours)9. It was the submission of the learned Counsel for the Respondent, that proceedings could not have been entertained by the arbitrator Under Section 16 of Arbitration Act, in the present controversy, because by the orders of the High Court - dated 24.5.2002 and 26.9.2002 (extracted above), the appointment of the arbitrator was made, in exercise of the powers vested in the High Court, Under Section 11 of the Arbitration Act. The factual position depicted hereinabove, as also, the orders referred to hereinabove, leave no room for doubt, that Justice (Retired) S.S. Ganguly, was actually appointed as an arbitrator by the High Court, in exercise of the powers vested in the High Court, Under Section 11 of the Arbitration Act. That being the position, learned Counsel for the Respondent is fully justified in her submission, that the said order could not be tested by the arbitrator while considering the claim raised by the Appellant-State of West Bengal Under Section 16 of the Arbitration Act. Thus viewed, irrespective of whether Clause 12 extracted hereinabove, postulated the adjudication of dispute between the parties through an arbitrator, it is now not open to the Appellant before this Court to raise a challenge to the order passed by the High Court appointing an Arbitrator.10. There is another reason for us not to accept the prayer made before us, on behalf of the Appellant-State of West Bengal, for raising a challenge to the order dated 15.1.2004, passed by the arbitrator, and order dated 16.5.2006 passed by the High Court, and that is, that order dated 26.9.2002 passed by the High Court (extracted above) leaves no room for doubt, that the Appellant before this Court, factually requested the High Court to grant liberty to it, to prefer a counter-claim before the arbitrator. In other words, the Appellants prayer to the High Court (on 24.5.2002) was, to permit it to raise its own dispute, by granting liberty to it to prefer a counter-claim before the arbitrator. Such being the position, the Appellant cannot now wriggle out of the aforesaid voluntary acceptance, to have the matter adjudicated before the arbitrator. In any case, even Section 7(4)(c) of the Arbitration Act, in such factual circumstances, would lead to the same conclusion. Therefore, in the facts and circumstances of this case, there is also no dispute about the fact, that as against the claim raised by the Respondent-Sarkar & Sarkar before the arbitrator, the Appellant-State of West Bengal, had indeed raised a counterclaim. And having done so, it must be deemed to have submitted before the arbitrator, a request to adjudicate its claims as well. When both parties, had approached the arbitrator, and submitted themselves to the arbitrators jurisdiction, independent of all other factual and legal considerations, the arbitrability of the disputes was clearly made out Under Section 7(4)(c) of the Arbitration Act.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]The factual position depicted hereinabove, as also, the orders referred to hereinabove, leave no room for doubt, that Justice (Retired) S.S. Ganguly, was actually appointed as an arbitrator by the High Court, in exercise of the powers vested in the High Court, Under Section 11 of the Arbitration Act. That being the position, learned Counsel for the Respondent is fully justified in her submission, that the said order could not be tested by the arbitrator while considering the claim raised by the Appellant-State of West Bengal Under Section 16 of the Arbitration Act. Thus viewed, irrespective of whether Clause 12 extracted hereinabove, postulated the adjudication of dispute between the parties through an arbitrator, it is now not open to the Appellant before this Court to raise a challenge to the order passed by the High Court appointing an Arbitrator10. There is another reason for us not to accept the prayer made before us, on behalf of the Appellant-State of West Bengal, for raising a challenge to the order dated 15.1.2004, passed by the arbitrator, and order dated 16.5.2006 passed by the High Court, and that is, that order dated 26.9.2002 passed by the High Court (extracted above) leaves no room for doubt, that the Appellant before this Court, factually requested the High Court to grant liberty to it, to prefer a counter-claim before the arbitrator. In other words, the Appellants prayer to the High Court (on 24.5.2002) was, to permit it to raise its own dispute, by granting liberty to it to prefer a counter-claim before the arbitrator. Such being the position, the Appellant cannot now wriggle out of the aforesaid voluntary acceptance, to have the matter adjudicated before the arbitrator. In any case, even Section 7(4)(c) of the Arbitration Act, in such factual circumstances, would lead to the same conclusion. Therefore, in the facts and circumstances of this case, there is also no dispute about the fact, that as against the claim raised by the Respondent-Sarkar & Sarkar before the arbitrator, the Appellant-State of West Bengal, had indeed raised a counterclaim. And having done so, it must be deemed to have submitted before the arbitrator, a request to adjudicate its claims as well. When both parties, had approached the arbitrator, and submitted themselves to the arbitrators jurisdiction, independent of all other factual and legal considerations, the arbitrability of the disputes was clearly made out Under Section 7(4)(c) of the Arbitration Act.