State Of Goa vs M/S Praveen Enterprises

2. Under an agreement dated 4.11.1992, the appellant (State of Goa) entrusted a construction work (Farm Development Works in Command Area of Water Course No.3 and 3A of minor M-3 of SIP in Salcette Taluka) to the respondent. Clause 25 of the agreement provided for settlement of disputes by arbitration, relevant portions of which are extracted below:

3. Respondent raised certain claims and gave a notice to the appellant to appoint an arbitrator in terms of the arbitration clause. As the appellant did not do so, the respondent filed an application under section 11 of the Arbitration and Conciliation Act, 1996 (`Act' of `new Act' for short) for appointment of an arbitrator. By order dated 4.12.1998 the said application was allowed and Mr. S.V.Salilkar, retired Adviser, Konkan Railway Corporation was appointed as the sole arbitrator. The arbitrator entered upon the reference on 22.2.1999 and called upon the parties to file their statement.

4. The respondent filed its claim statement before the arbitrator on 15.4.1999. The appellant filed its Reply Statement with counter claim on 3 30.6.1999. The arbitrator considered the fourteen claims of the contractor and four counter claims of the appellant. The Arbitrator made an award dated 10.7.2000. He awarded to the respondent, Rs.1,00,000/- towards claim No.2 with interest at 12% per annum from 26.8.1998 to 19.2.1999;

Rs.3,63,416/- towards claim No.3 with interest at 12% per annum from 18.9.1995 to 22.2.1999; and Rs.59,075/- towards claim No. 14 (additional claim No. ii) with interest at 12% per annum from 18.9.1995 to 22.2.1999.

In regard to the counter claims made by the appellant, the arbitrator awarded to the appellant Rs.2,94,298/- without any interest in regard to counter claim No.3. The arbitrator rejected the other claims of respondent and appellant.

He awarded simple interest at 18% per annum on the award amount from the expiry of one month from the date of the award and directed both parties to bear their respective costs.

5. Feeling aggrieved the respondent filed an application under section 34 of the Act, challenging the award insofar as (i) rejection of its other claims;

and (ii) award made on counter claim No.3. The civil court (Adhoc Additional District Judge, Fast Track Court No.1, South Goa) disposed of the matter upholding the award in regard to the claims of the respondent but accepted the objection raised by the respondent in regard to award made on the counter claim. The court held that the arbitrator could not enlarge the 4 scope of the reference and entertain either fresh claims by the claimants or counter claims from the respondent.

24. Section 23 of the Act enables the claimant to file a statement of claim stating the facts supporting his claim, the points at issue and the relief or remedy sought by him and enables the respondent to state his defence in respect of those claims. Section 2(9) provides that if any provision [other than section 25 (a) or section 32(2)(a)], refers to a "claim", it shall apply to a "counter claim" and where it refers to a "defence", it shall also apply to a defence to that counter claim. This would mean that a respondent can file a counter claim giving the facts supporting the counter claim, the points at issue and the relief or remedy sought in that behalf and the claimant (who is the respondent in the counter claim) will be entitled to file his defence to such counter claim. Once the claims and counter claims are before the arbitrator, the arbitrator will decide whether they fall within the scope of the 21 arbitration agreement and whether he has jurisdiction to adjudicate on those disputes (whether they are claims or the counter claims) and if the answer is in the affirmative, proceed to adjudicate upon the same.

(emphasis supplied)

Respondent's contentions

Summation

32. The position emerging from above discussion may be summed up as follows:

The position in this case

34. Counter claim no.(3) in regard to which Rs.2,94,298/- has been awarded by the Arbitrator relates to the cost of pipes entrusted by the appellant for carriage from store to site, which were not accounted for by the respondent. It is not shown to be barred by limitation. We find no error in 30 the reasoning of the arbitrator in awarding Rs.2,94,298/- under counter claim no.(3).

Conclusion

35. In view of the above, this appeal is allowed and the order of the High Court affirming the judgment of the trial court in regard to counter claim No.3, is set aside. Consequently the award of arbitrator is upheld in its entirety and the challenge thereto by the respondent is rejected.