Delhi District Court
National Highways Authority Of India vs M/S Roving Eye on 10 July, 2018
IN THE COURT OF SH VISHAL GOGNE ADDL.
DISTRICT JUDGE02: SOUTHWEST DISTRICT:
DWARKA COURTS:NEW DELHI
Misc NO. 274/17
National Highways Authority of India ...Applicant
Versus
M/s Roving Eye ...... Respondent
Date of institution of the petition : 15.07.2014 Date of pronouncement : 10.07.2018 JUDGMENT
1. This order decides the application of the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996( hereafter referred to as the Arbitration Act)
2. The award dated 12.3.2014 passed by the sole Arbitrator between the parties to the present petition partly allowed claim no.1 of the petitioner for an amount of Rs 81,650/. The award also allowed Misc NO. 274/17 page no. 1/17 National Highways Authority of India Versus M/s Roving Eye counter claim no.1 of the present respondent for an amount of Rs 32,86,957/ after adjusting Rs 81,650/ awarded in favour of the petitioner.
3. The claims of the petitioner in the arbitration proceedings were as under:
Claim No.1: Balance amount of Penalty of Rs 84,25,270/ alongwith an interest 18% compounded monthly leviable from the date of respective penalties levied on the respondent with interest pendent lite. Claim no. 2:Compensation of Rs 10,00,000/ for loss of reputation and goodwill.
Claim no. 3: The petitioner be awarded a cost of Rs 5,00,000/ towards the cost of the Arbitration proceedings.
4. The respondent also made the following counter claims:
Counter Claim No.1: Recovery of illegally withheld salaries of the Employees and service charges payable to the petitioner .
Counter Claim no. 2: Compensation towards Bank Guarantee.
Counter Claim no. 3: Compensation for illegal and unfair termination of the respondent's contract.Misc NO. 274/17 page no. 2/17
National Highways Authority of India Versus M/s Roving Eye Counter Claim no. 4: Compensation for loss of honour and reputation.
Counter Claim No.5: Compensation for illegal invocation of bank Guarantee and consequent damage to the respondent's credit rating.
Counter Claim no. 6: Cost of the proceedings.
5. The gist of the transaction/ agreement and the ensuing dispute between the parties is that the petitioner i.e. the National Highway Authority of India had entered into an agreement dated 01.05.2009 with the respondent i.e. M/s Roving Eye for collection of user fee for a period of one year from 11.4.2009 to 10.4.2010 from the user by temporary plaza in K.M 225.000 of N.H 02 at Tundla ,District Ferozabad, UP.
6. The petitioner has contended in the present petition that the arbitral dispute arose between the parties when the respondent purportedly violated the terms of the agreement from its very inception which led to the imposition of various penalties on it under the Misc NO. 274/17 page no. 3/17 National Highways Authority of India Versus M/s Roving Eye various clauses of the contract agreement dated 01.05.2009.
7. The petitioner now dispatched letter dated 19.7.2010 notifying its intention to commence the arbitration and a sole arbitrator thus came to be appointed in terms of clause 28 of the Contract agreement. This clause reads as under :
Clause 28 : All disputes and / or differences arising between the parties out of this Contract shall be settled by arbitration under and in accordance with the provisions of the Arbitration and Conciliation Act, 1996.
8. During the course of the arbitration proceedings ,the petitioner filed his statement of claim followed by the statement of defence from the respondent and rejoinder from the petitioner .
9. The genesis of the present petition under Section 34 of the Arbitration Act lies in the counter claim filed by the respondent.
10.The running / continuous theme of the grounds for challenging the award is the purported lack of Misc NO. 274/17 page no. 4/17 National Highways Authority of India Versus M/s Roving Eye reference of the dispute agitated in the counter claim to arbitration. The principle ground is crystallized in para C.2 of the grounds which reads as under:
C.2 In the absence of any dispute, the present counterclaim cannot be referred to the Arbitration. For any reference to arbitration, there should be a dispute. There is no notice of demand given to the petitioner as such there is no dispute. It is a matter of fact that the Respondent never gave any notice of demand regarding his claims to the petitioner. Petitioner was not even aware that the Respondent wants something from it. It is respectfully submitted that unless a party makes certain demand and other party refuses it, a dispute cannot be said be arise and therefore an arbitration cannot be invoked. Directly raising claims in arbitration with the complete ignorance of other party about those claims is an afterthought act. Where the claims or counter claims cannot even considered as dispute, the same are incapable of being adjudicated by an Arbitral Tribunal. A disupte is essential for the arbitration. This point has been clearly laid down by the Hon'ble Supreme Court in the matter of SAIL Vs J.C.Budharaja, judgment relied upon by the petitioner, reported in AIR 1999 Supreme Court 3275 in para 30 wherein it has ruled:
"A dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under S.8 or a reference under S.20 of the Misc NO. 274/17 page no. 5/17 National Highways Authority of India Versus M/s Roving Eye Act. See law of Arbitration by R.S.Bachawat, first edition, page 354. There should be dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Mere failure or inaction to pay does not lead to the inference of the existence of dispute. Dispute entails a positive element and assertion or denying, not merely inaction to accede to a claim or a request. Whether in a particular case a dispute has arisen or not has to be found out from the facts and circumstances of the case."
Therefore, Counter Claim No. 1 of the Respondent deserves to be rejected on these grounds only.
11. The other grounds of challenge were either overlapping with the above grounds or plain perfunctory. Indeed,during the course of arguments, the Ld. Counsel for the petitioner canvassed only the ground related to reference of the dispute contained in the counter claim to arbitration.
12.In response to the present petition ,the respondent filed a reply supporting the conclusion reached by the arbitrator.
13.It was stated with respect to the question of reference of the dispute which was the subject of the counter Misc NO. 274/17 page no. 6/17 National Highways Authority of India Versus M/s Roving Eye claim that the said preliminary objections of the petitioner had been dismissed by the sole arbitrator in the award itself and that the petitioner had simply agitated the same ground in challenge before this court. It was further stated that the cause of action for filing of the counter claim also arose from the same transaction i.e. Contract for departmental collection of fee dated 01.05.2009 ( the contract Agreement) .
14.The respondent averred in his reply that the reliance placed by the petitioner upon the decision in SAIL (Supra) was misplaced as the scope of adjudication of a counter claim during arbitration proceedings had been authoritatively defined in the decision of the Hon'ble Supreme Court reported as State of Goa Vs. Praveen Enterprises 2012 12 SCC 581 to hold that a respondent was within its right to file a counter claim except where the arbitration agreement itself restricted the scope of disputes which could be referred to arbitration.
15.The respondent also relied upon clause 28 of the Misc NO. 274/17 page no. 7/17 National Highways Authority of India Versus M/s Roving Eye Contract agreement dated 01.05.2009 to submit that all disputes between the parties were required to be adjudicated through arbitration and there was no restriction / curtailment of the nature of dispute which could be referred to the sole arbitrator.
16.The court has considered the entire record of the arbitration proceedings and the submissions made by the respective counsels.
17.At the outset, the court would observe that a challenge to an arbitral award in the scheme of the Arbitration Act can be made only upon the grounds mentioned in section 34(2) of the Act. Upon query from the counsel, the court could gather that the ground in the present petition was being urged under Section 34 (2)
(a) (iv) of the Act.
18.The said provision reads as under:
34(2)(a)(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.Misc NO. 274/17 page no. 8/17
National Highways Authority of India Versus M/s Roving Eye
19.The court is entirely unable to agree with the submissions made on behalf of the petitioner. The arbitration clause between the parties i.e clause 28 of the Contract Agreement dated 01.05.2009 provided for all disputes/or all differences arising between the parties to be settled by arbitration.
20.Hence, the reference of the dispute to arbitration by the petitioner through the letter dated 19.7.2010 and the subsequent reference of the dispute to the sole Arbitrator in terms of clause 28 constituted valid reference of the dispute to the arbitrator. It is not every dispute or nuance of the same which is capable of being detailed for reference. What is required is an ignition of the arbitration process by reference of a dispute contemplated by/falling under the purview of the contract between the parties. After a dispute comes to be referred by either party and an arbitral tribunal is constituted, the provisions relating to pleadings /claims/defense begin operating in terms of the Arbitration Act.
Misc NO. 274/17 page no. 9/17National Highways Authority of India Versus M/s Roving Eye
21.Section 23(1) of the Act permits the claimant to state the facts supporting his claim , the points at issue and relief sought.Subsequently,the respondent is directed to state a defense in response to the particulars provided by the petitioner. The only embargo on the pleadings is if the agreement between the parties has agreed otherwise upon what would be the required elements of the statements of claim and defense. In other words , unless the Contract between the parties excludes the reference of a particular dispute, each party to the dispute has a reasonable leeway in making an exposition of its claim or defence, as the case may be.
22.More pertinently, in the context of the challenge through the present petition under Section 34, section 23(2A) of the arbitration Act also permits a respondent to submit a counter claim which shall be adjudicated by the arbitral tribunal if the same falls within the scope of the arbitration agreement.
23. Unless the counter claim is beyond the terms of Misc NO. 274/17 page no. 10/17 National Highways Authority of India Versus M/s Roving Eye arbitration agreement, it is the right of the respondent to make a counter claim.
24.Infact, sub section of 3 of section 23 allows the parties to amend or supplement the claim or defense through the course of arbitration proceedings. This provision too allows for incorporation of disputes which may not have been subject of original reference to the arbitration by the parties.
25. On a plain reading of section 23 itself, the challenge to the present award must fail in as much as raising of the counter claim during arbitral proceedings is not contingent upon a previous notice from the respondent to the claimant requesting that the disputes relating to counter claim be referred to the arbitration and the claimant having given concurrence for such reference.
26.The position of the law with respect to a counter claim raised before the arbitral tribunal was explained in the decision relied upon by the petitioner i.e. Praveen Enterprises ( supra) .
Misc NO. 274/17 page no. 11/17National Highways Authority of India Versus M/s Roving Eye
27.The Apex court was seized of the following questions in the said proceedings.
8.Therefore the question that arises for our consideration is as under: Whether the Respondent in an arbitration proceedings is precluded from making a counter claim, unless
a) it had served a notice upon the claimant requesting that the disputes relating to that counter claim be referred to arbitration and the claimant had concurred in referring the counter claim to the same arbitrator;
and/ or
b) it had set out the said counter claim in its reply statement to the application under Section 11 of the Act and the Chief Justice or his designate refers such counter claim also to arbitration.
28.The court answered this issue in the following manner :
22. Section 23 of the Act makes it clear that when the arbitrator is appointed, the claimant is required to file the statement and the Respondent has to file his defence statement before the Arbitrator. The claimant is not bound to restrict his statement of claim to the claims already raised by him by notice, ''unless otherwise agreed by the parties'' the claimant Misc NO. 274/17 page no. 12/17 National Highways Authority of India Versus M/s Roving Eye can also subsequently amend or supplement the claims in the claim statement. That is, unless the arbitration agreement required the Arbitrator to decide only the specifically referred disputes, the claimant can while filing the statement of claim or thereafter, amend or add to the claims already made. Similarly section 23 read with section 2(9) makes it clear that a Respondent is entitled to raise a counter claim '' unless the parties have otherwise agreed'' and also add to or amend the counter claim, '' unless otherwise agreed''. In short, unless the arbitration agreement requires the Arbitrator to decide only the specifically referred disputes, the Respondent can file counter claims and amend or add to the same, except where the arbitration agreement restricts the arbitration to only those disputes which are specifically referred to arbitration, both the claimant and Respondent are entitled to make any claims or counter claims and further entitled to add to or amend such claims and counter claims provided they are arbitrable and within limitation.
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 Misc NO. 274/17 page no. 13/17 National Highways Authority of India Versus M/s Roving Eye 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 arbitration agreement and whether he has jurisdiction to adjudicate on those claims) and if the answer is in the affirmative, proceed to adjudicate upon the same.
25. It is of some relevance to note that even where the arbitration proceedings were initiated in pursuance of a reference under section 20 of the old Act, this Court held ( in Indian Oil Corporation Ltd V. Amritsar Gas Service and Ors, MANU/SC/0513/1991: 1991(1) SCC 533) that claims directly before the arbitrator, where all disputes between parties are referred to arbitration. This Court observed:
The Appellant's grievance regarding non consideration of its counter claim for the reason given in the award does appear to have some Misc NO. 274/17 page no. 14/17 National Highways Authority of India Versus M/s Roving Eye merit. In view of the fact that reference arbitrator was made by this Court in an appeal arising out of refusal to stay the suit under section34 of the Arbitration Act and their reference was made of all disputes between the parties in the suit, the occasion to make a counterclaim in the written statement could arise only after the order of reference. The pleadings of the parties were filed before the arbitrator, and the reference covered all disputes between the parties in the suit. Accordingly, the counterclaim could not be made at any earlier stage. Refusal to consider the counterclaim for the only reason given in the award does, therefore, disclose an error of law apparent on the fact of the award.
26. A counter claim by a Respondent pre supposes the pendency of proceedings relating to the disputes raised by the claimant. The Respondent could No. doubt raise a dispute ( in respect of the subject matter of the counter claim) by issuing a notice seeking reference to arbitration and follow it by an application under Section 11 of the Act for appointment of Arbitrator, instead of raising a counter claim in the pending arbitration proceedings. The object of providing for counter claims is to avoid multiplicity of proceedings and to avoid divergent findings. The position of a Respondent in an arbitration proceedings being Misc NO. 274/17 page no. 15/17 National Highways Authority of India Versus M/s Roving Eye similar to that of a Defendant in a suit , he has the choice of raising the dispute by issuing a notice to the claimant calling upon him to agree for reference of his dispute to arbitration and then resort to an independent arbitration proceedings or raise the dispute by way of a counter claim, in the pending arbitration proceedings.
29.It is certainly a well recognized and explicit position of the law with respect to counter claims that the counter claimant has two options he may either chose to first issue a notice to the claimant requiring his concurrence for reference of the dispute to the arbitration. In the alternate, the counter claimant may directly raise the dispute through the counter claim in the pending arbitration proceedings.
30. A perusal of the various counter claims made by the respondent during the arbitral proceedings reveals that all of them had a direct nexus with the dispute related to the levy of all penalties by the petitioner upon the respondent. After all ,the salaries of the employees, possession towards the bank guarantee, Misc NO. 274/17 page no. 16/17 National Highways Authority of India Versus M/s Roving Eye charge of unfair termination of the contract, compensation for loss of reputation and compensation for illegal invocation of bank guarantee were in the context of the imposition of the penalty upon the respondent by the petitioner.
31.The court finds the challenge raised by way of the present petition under Section 34 of the arbitration Act to be ill advised, misplaced in its understanding of reference of a dispute to arbitration and certainly to be in the face of section 23 of Arbitration Act as well as the decisions in Praveen Enterprises ( Supra).
32. The grounds of challenge are rejected.
33. The petition is dismissed.
Pronounced in the open (Vishal Gogne)
court on 10.07.2018 Addl. District Judge02/SouthWest,
Dwarka Courts Complex, New Delhi
Digitally signed
by VISHAL
VISHAL GOGNE
Date:
GOGNE 2018.07.10
16:29:49
Misc NO. 274/17 +0530
page no. 17/17
National Highways Authority of India Versus M/s Roving Eye Misc NO. 274/17 page no. 18/17 National Highways Authority of India Versus M/s Roving Eye