Indian Kanoon - Search engine for Indian Law

Over and above the extracted portion, the clause provides for the manner and method of appointing the sole arbitrator, the continuance of the work during progress of arbitration proceedings, the time and place of holding the arbitration. proceedings, the power to enlarge the period for making the award and finality to be attached to the award of the Arbitrator.

When the arbitration clause was invoked by the appellant, the respondent did contend that the dispute raised by the appellant was not covered by the arbitration clause. After specifying its demur, the respondent formulated the points in dispute on which the arbitration was invited to give his award. Undoubtedly, the respondent proceeded to formulate the points in dispute between the parties on which the Arbitrator was to be invited to give his award without prejudice to its right to contend that the dispute is not covered by the arbitration clause and that the appellant is not entitled to any compensation in respect of the increase in the cost of imported pile driving equipment and technical know-how fees. What is the effect of referring the specific question of law to arbitration without prejudice to one's right to contend to the contrary will be presently examined. The fact remains that on the dispute arising out of a claim for compensation on account of the increase in the cost of imported pile driving equipment and technical know-how fees, the respondent agreed to refer the dispute under two specific heads to the Arbitrator. The dispute so raised have already been extracted. Briefly stated they are : (1) whether the claim for compensation would fall within the purview of the first para of the arbitration clause and (2) if it does the quantum of compensation, if any, to which the appellant would be entitled. Analysing the disputes, let it be made distinctly clear that the appellant asserted that its claim for compensation, would be governed by the arbitration clause and the same was specifically denied by the respondent saying that the claim would be beyond the purview of the arbitration clause. On these rival positions, the specific issue was framed whether the claim for compensation would fall within the purview of the first part of the arbitration clause. This was the specific dispute referred to the arbitrator inviting him specifically to decide this of dispute. If this issue specifically raises a question as to jurisdiction of the arbitrator to arbitrate upon the dispute set out in Point No. 2, it appears to have been specifically referred to the Arbitrator for his decision. Parties, therefore, agreed to submit the specific question even with regard to the scope, ambit, width and the construction of the arbitration clause so as to define its parameters and contours with a view to ascertaining whether the claim advanced by the appellant and disputed by the respondent would be covered by the arbitration clause. Whether upon its true construction the arbitration clause would include within its compass the dispute thus raised between the parties was specifically put in issue because parties were at variance about it. Appellant asserted that its claim to compensation would form the subject matter of arbitration under Clause 40 and the respondent contending to the contrary. While deciding this dispute, as to the scope, width and ambit of arbitration clause vis-a-vis the dispute raised, it is not necessary to decide whether the claim was tenable justified or had any substance in it. That would fall within the second point of reference to the arbitrator which opens with a specific clause that it needs only to be decided if the answer to the first point of reference, namely jurisdiction of the arbitrator under Clause 40 is in the affirmative meaning thereby that the dispute so raised and subsisting between the parties would be covered by the arbitration agreement. In other words, if the dispute is covered by the arbitration agreement, the arbitrator was further required to decide whether there was any substance in the claim made, and if he found some substance in the disputed claim, to ascertain what amount the appellant would be entitled to recover as and by way of compensation from the respondent. The arbitrator was thus required and called upon first to decide whether the dispute is arbitrable as falling within the width and ambit of the arbitration agreement. If the answer is in the affirmative, then alone the second point need be examined. If the answer to the first point of reference is in the negative in that if the arbitrator were of the opinion that the dispute is not arbitrable as it would not fall within the scope, width and ambit of the arbitration agreement, it would not be necessary for him to determine whether the appellant was entitled to recover anything by way of compensation. This aspect is being analysed in depth to point out that the parties specifically referred the question of construction of arbitration agreement, its width, ambit and parameters vis-a-vis the dispute raised so as to decide whether the dispute would fall within the purview of the arbitration agreement, in other words the jurisdiction of the arbitrator.

This correspondence would unmistakably show that while the appellant wanted a general reference about its claim, it was the respondent who now contests that no specific question of law was specifically referred to the arbitrator for his decision was specific about the points to be referred for the decision of the Arbitrator. The first point extracted hereinabove would clearly show that the specific question about the jurisdiction of the arbitrator to arbitrate upon the dispute set out in points Nos. 2, 3 and 4 was specifically referred to the arbitrator. On the first point, the arbitrator had to decide whether the claim made by the appellant and disputed by the respondent would be covered by Clause 40 i.e. the arbitration clause. In other words, the specific question referred to the Arbitrator was about his jurisdiction to arbitrate upon the disputes covered by points Nos. 2, 3 and 4, if and only if, upon a true construction of the arbitration clause that is first paragraph of Clause 40, would cover the disputed claim for compensation he can enter into the merits of the dispute and decide it. It is upon the decision on point No. 1 that the arbitrator would have jurisdiction to decide the dispute involved in points Nos. 2, 3 and 4. The first point of reference is clearly a specific question of law touching upon the jurisdiction of the arbitrator and this was framed and referred to by none other than, despite the initial objection of the petitioner, the respondent. Therefore, the respondent invited the arbitrator by the specific point of reference which involves a specific question of law touching upon the jurisdiction of the arbitrator to decide the same. This becomes further clear from the fact that both the learned counsel appearing before the arbitrator submitted agreed draft issues for the decision of the arbitrator. The first issue amongst the agreed draft issues reads as under:

Mr. F.S. Nariman, learned counsel for the appellant urged that Sec. 16(1) (c) may permit the court to remit or set aside the award on the ground that there is an error of law apparent on the face of it, yet where a specific question of law has been referred to the arbitrator for decision, the fact that the decision is erroneous does not make the award bad on its face so as to permit its being set aside. Expanding the submission, it was urged that a decision on a question of law by an arbitrator may be given in two different and distinct situations; firstly where while deciding a dispute referred to him incidentally a question of law may arise which an arbitrator may decide in order to dispose of the reference and if in such a situation any error of law appears on the face of the award, the court can interfere with the award. But there is an altogether an independent and a distinct situation in which a question of law might arise such as where the parties to the dispute may frame the specific question of law and reflect it to the Arbitrator for his decision. In the later situation, it was urged that the decision of the Arbitrator even if erroneous would not permit the court to interfere with the award. Proceeding along it was urged that in this case a specific question of law touching upon the jurisdiction of the arbitrator was specifically referred to the Arbitrator for his decision and therefore, the decision of the Arbitrator is binding on the parties and the court cannot proceed to inquire whether upon a true construction of the arbitration clause. the dispute referred to the Arbitrator for arbitration would be covered by the arbitration clause so as to clothe the arbitrator with the jurisdiction to arbitrate upon the dispute.

"A pure question of law may be referred to an arbitrator; and where such a question is specifically referred his award will not be set aside merely upon the ground that his decision is wrong."

In Halshury's Laws of England Vol. 2 Para 623 4th Edition the statement of law reads as under:

"If a specific question of law is submitted to the arbitrator for his decision and he decide it, the fact that the decision is erroneous does not make the award bad on its face so as to permit its being set aside; and where the question referred for arbitration is a question of construction, which is, generally speaking, a question of law, the arbitrator's decision cannot be set aside only because the court would itself have come to a different conclusion."