Case: State of West Bengal Vs. Sarkar and Sarkar

The order dated 24.5.2002 is reproduced below:THE COURT: The Learned Counsel appearing for the Respondent submitted that the State of West Bengal may be granted liberty to prefer counterclaim, if any, before the Learned Arbitrator. Mr. Dutta, the Learned Counsel appearing for the Petitioner very fairly submitted that it will always be open to the Respondent to prefer its counterclaim, if any, before the Learned Arbitrator and there cannot be any possible objection to this from his client. Accordingly, there is no reason why the matter should not be placed before the Honble the Chief Justice for appointment of an ArbitratorLet the matter be placed before His Lordship for nominating a fit and proper person to act as the Arbitrator as prayed forLikewise, the order dated 26.9.2002, is extracted below:The Court: In exercise of power Under Section 11 of the Arbitration & Conciliation Act, 1996 I appoint Justice S.S. Ganguly (Retd.) as Arbitrator to decide the disputes arising in the matter and I fix the remuneration a sum of ` 5000/- per sitting. The Arbitrator shall give the award within four months from the date of filing of the claims and counter claims. The remuneration of the Clerk and Stenographer shall be decided by the Arbitrator in the meeting with the partiesLet a copy of the order be communicated to the Arbitrator concerned by the Registrar, O.SAll parties including the Arbitrator and Registrar, O.S. are to act on a Xeroxed Signed Copy of this dictated order on the usual undertaking2. A collective perusal of the aforesaid orders, leads to the clear and unambiguous conclusion, that Justice (Retired) S.S. Ganguly, came to be appointed as an arbitrator, by the High Court, in exercise of its powers Under Section 11 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Arbitration Act"). Additionally, it emerges, from the above orders, that learned Counsel appearing for the State of West Bengal sought liberty from the High Court, to raise a counter claim, before the arbitrator. In furtherance of the said prayer, learned Counsel for the Respondent-Sarkar & Sarkar accepted before the High Court, that it would be open to the State of West Bengal to prefer a counterclaim3. Consequent upon the appointment of the above arbitrator, the State of West Bengal raised a challenge (against the appointment of an arbitrator by the High Court Under Section 11 of the Arbitration Act) during the course of the arbitral proceedings, Under Section 16 of the Arbitration Act, that the dispute raised by the Respondent was not arbitrable. The arbitrator accepted the aforesaid prayer and held by an order dated 15.1.2004, that the arbitrator had no jurisdiction to entertain the dispute raised by the Respondent-Sarkar & Sarkar, for arbitration4. It is essential for us to extract herein Clause 12 of the contractual agreement between the parties. The same is reproduced hereinbelow:Clause 12 - the Engineer-in-charge shall have power to make any alteration in, omissions from, additions to or substitutions for, the original specifications : drawings, designs and instructions, that may appear to him to be necessary or advisable during the progress of the work and the contractor shall be bound to carry out the work in accordance with any instructions which may be given to him in writing signed by the Engineer-in-charge and such alterations, omissions additions or substitutions shall not invalidate the contract but shall be deemed to have formed as work included in the original tender & any altered, additional or substituted work which the contractors may be directed to do in the manner above specified as part of the work shall be carried but by the contractor on the same conditions in all respects on which he agreed to do the main work and at the same rates, if any, may be specified in the tender for the main work. The time for the completion of the work shall be extended in the proportion that the altered additional or substituted work bears to the original contract work and the certificate of the Engineer-in-charge shall be conclusive as to such proportion. And if the altered additional or substituted work includes any class of work for which no rate is specified in this contract, then such class of work shall be carried out at the rates entered in the Schedule of rates of the Presidency Circle which was in force at the time of the acceptance of the contract minus/plus the percentage which the total tendered amount bears to the estimated cost of the entire work put to tender and if the altered, additional or substituted work is not entered in the said schedule of rates payment thereof shall be made by the Engineer-in-charge by determining the rates on analysis worked out from (a) the basic rates of materials and labour provided in the current schedule of rates or (b) the current market rates of materials and labour when even basic rates for the work are not available in the schedule. In case when such rates are determined on analysis by the Engineer-in-charge under (a) above, the stipulated percentage above or below schedule of rates as provided in the contract shall also apply and in case of rates worked out on analysis under (b) above regarding rates determined on analysis for any altered, additional or substituted work under this clause the decision of Superintending Engineer of Circle, shall be final and binding.. The order passed by the arbitrator on 15.1.2004, was assailed by the Respondent-Sarkar & Sarkar, Under Section 37 of the Arbitration Act, before the High Court by preferring A.P.O. No. 108/2004. The High Court accepted the appeal and set aside the order passed by the arbitrator dated 15.1.2004. The High Court arrived at the conclusion, that Clause 12 (extracted above) was indeed a clause providing for settlement of disputes between the parties, arising out of their contractual obligation, by way of arbitration6. To assail the order passed by the High Court, the State of West Bengal, has preferred the instant civil appeal.

Court's reasoning:
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.