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Thursday, January 25, 2018

whether an award delivered by an Arbitrator, which decides the issue of limitation, can be said to be an interim award, and whether such interim award can then be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”) = the award dated 23rd July, 2015 is an interim award, which being an arbitral award, can be challenged separately and independently under Section 34 of the Act. M/S INDIAN FARMERS FERTILIZER CO-OPERATIVE LIMITED …APPELLANT VERSUS M/S BHADRA PRODUCTS ...RESPONDENT

REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 824 OF 2018
(ARISING OUT OF SLP (C) NO.19771 OF 2017)
M/S INDIAN FARMERS FERTILIZER
CO-OPERATIVE LIMITED …APPELLANT
VERSUS
M/S BHADRA PRODUCTS ...RESPONDENT
J U D G M E N T
R.F. Nariman, J.
1. Leave granted.
2. An interesting question arises as to whether an award
delivered by an Arbitrator, which decides the issue of limitation,
can be said to be an interim award, and whether such interim
award can then be set aside under Section 34 of the Arbitration
and Conciliation Act, 1996 (hereinafter referred to as “the Act”).
1
The brief facts necessary to dispose of the present appeal are
as follows.
3. The appellant before us issued a tender enquiry to 19
parties, including the respondent, for supply of Defoamers. The
respondent submitted its bid, pursuant to which a Letter of
Intent dated 2nd November, 2006 was issued to the respondent
for supply of 800 Metric Tonnes of Defoamers to be used for
production of 3,08,880 Metric Tonnes of P2O5. By 11th April,
2007, the respondent had supplied 800 Metric Tonnes of
Defoamers, however, they could not achieve the targeted
production by the end of 1st November, 2007, which was the
validity of the supply period. After considerable delay, on 6th
June, 2011, the respondent issued a legal notice demanding
payment of Rs.6,35,74,245/- on 27th September, 2012. The
appellant made it clear that there was nothing due and payable
to the respondent. Since disputes arose between the parties,
on 1st October, 2014 the respondent invoked arbitration, and on
25th January, 2015, Justice Deepak Verma, a retired Judge of
the Supreme Court, was appointed as the sole arbitrator. On
3
rd March, 2015, issues were framed. On 23rd July, 2015, the
2
learned Arbitrator thought it fit to take up the issue of limitation
first, inasmuch as the counsel appearing for both the parties
submitted that this issue could be decided on the basis of
documentary evidence alone. This issue was then decided in
favour of the claimant stating that their claims had not become
time barred. A petition filed under Section 34 of the Act
challenged the aforesaid award, styling it as the ‘First Partial
Award’. On 8th October, 2015, the District Judge,
Jagatsinghpur, dismissed the Section 34 Petition stating that
the aforesaid award could not be said to be an interim award
and that, therefore, the Court lacked jurisdiction to proceed
further under Section 34 of the Act. The appeal to the High
Court of Orissa was dismissed by the impugned order dated
30th June, 2017, reiterating the reasoning of the learned District
Judge.
4. Appearing on behalf of the appellant, Mr. K.K. Venugopal,
learned Attorney General, has argued before us that the award
made on 23rd July, 2015 is an interim award under the Act and
would, therefore, be amenable to challenge under Section 34 of
the Act as such. He referred us to various provisions of the Act
3
and buttressed his stand with reference to a number of
judgments, including, in particular, the judgment of National
Thermal Power Corpn. Ltd. v. Siemens Atkeingesellschaft,
(2007) 4 SCC 451. He also referred us to various judgments
on what constitutes an interim award and argued that,
according to him, the point of limitation being one of the issues
raised by the parties, was finally decided by the aforesaid
award and would, therefore, be amenable to challenge.
5. Shri Ajit Kumar Sinha, learned senior advocate appearing
on behalf of the respondent, also placed reliance on various
sections of the Act, in particular Sections 16 and 37 thereof.
According to the learned senior advocate, a ruling on the point
of limitation is a ruling on “jurisdiction” and any finding thereon
goes to the root of the case. This being the case, the drill of
Section 16 has to be followed, and as the plea of limitation has
been rejected by the learned Arbitrator, the arbitral proceedings
have to continue further and the challenge has to be postponed
only after all other issues have been decided. According to the
learned senior advocate, the scheme of Section 37, in particular
Section 37(2)(a), also makes it clear that appeals lie only from
4
an order under Section 16 accepting the plea but not rejecting
it. Also, according to the learned senior advocate, the present
award cannot be said to be an interim award, but is merely an
order passed under Section 16 of the Act. He also relied upon
several judgments to buttress his point of view and relied
heavily upon judgments which held that a decision on a point of
limitation goes to jurisdiction in which case Section 16 of the Act
would get attracted.
6. Having heard learned counsel for both parties, it is
important to first set out the relevant provisions of the Act,
which are as under:
“2. Definitions.—(1) In this Part, unless the context
otherwise requires,—
(c) “arbitral award” includes an interim award;
xxx xxx xxx
16. Competence of arbitral tribunal to rule on its
jurisdiction.—
(1) The arbitral tribunal may rule on its own
jurisdiction, including ruling on any objections with
respect to the existence or validity of the arbitration
agreement, and for that purpose,—
5
(a) an arbitration clause which forms part of a
contract shall be treated as an agreement
independent of the other terms of the contract; and
(b) a decision by the arbitral tribunal that the
contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the
submission of the statement of defence; however, a
party shall not be precluded from raising such a
plea merely because that he has appointed, or
participated in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the
scope of its authority shall be raised as soon as the
matter alleged to be beyond the scope of its
authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases
referred to in sub-section (2) or sub-section (3),
admit a later plea if it considers the delay justified.
(5) The arbitral tribunal shall decide on a plea
referred to in sub-section (2) or sub-section (3) and,
where the arbitral tribunal takes a decision rejecting
the plea, continue with the arbitral proceedings and
make an arbitral award.
(6) A party aggrieved by such an arbitral award may
make an application for setting aside such an
arbitral award in accordance with section 34.
xxx xxx xxx
31. Form and contents of arbitral award.—
(6) The arbitral tribunal may, at any time during the
arbitral proceedings, make an interim arbitral award
on any matter with respect to which it may make a
final arbitral award.
6
xxx xxx xxx
32. Termination of proceedings.—(1) The arbitral
proceedings shall be terminated by the final arbitral
award or by an order of the arbitral tribunal under
sub-section (2).
xxx xxx xxx
37. Appealable orders.—(1) An appeal shall lie
from the following orders (and from no others) to the
Court authorised by law to hear appeals from
original decrees of the Court passing the order,
namely:—
(a) refusing to refer the parties to arbitration under
section 8;
(b) granting or refusing to grant any measure under
section 9;
(c) setting aside or refusing to set aside an arbitral
award under section 34.
(2) Appeal shall also lie to a court from an order of
the arbitral tribunal—
(a) accepting the plea referred to in sub-section (2)
or sub-section (3) of section 16; or
(b) granting or refusing to grant an interim measure
under section 17.
(3) No second appeal shall lie from an order passed
in appeal under this section, but nothing in this
section shall affect or take away any right to appeal
to the Supreme Court.”
7. The point at issue is a narrow one: whether an award on
the issue of limitation can first be said to be an interim award
7
and, second, as to whether a decision on a point of limitation
would go to jurisdiction and, therefore, be covered by Section
16 of the Act.
8. As can be seen from Section 2(c) and Section 31(6),
except for stating that an arbitral award includes an interim
award, the Act is silent and does not define what an interim
award is. We are, therefore, left with Section 31(6) which
delineates the scope of interim arbitral awards and states that
the arbitral tribunal may make an interim arbitral award on any
matter with respect to which it may make a final arbitral award.
9. The language of Section 31(6) is advisedly wide in nature.
A reading of the said sub-section makes it clear that the
jurisdiction to make an interim arbitral award is left to the good
sense of the arbitral tribunal, and that it extends to “any matter”
with respect to which it may make a final arbitral award. The
expression “matter” is wide in nature, and subsumes issues at
which the parties are in dispute. It is clear, therefore, that any
point of dispute between the parties which has to be answered
by the arbitral tribunal can be the subject matter of an interim
8
arbitral award. However, it is important to add a note of caution.
In an appropriate case, the issue of more than one award may
be necessitated on the facts of that case. However, by dealing
with the matter in a piecemeal fashion, what must be borne in
mind is that the resolution of the dispute as a whole will be
delayed and parties will be put to additional expense. The
arbitral tribunal should, therefore, consider whether there is any
real advantage in delivering interim awards or in proceeding
with the matter as a whole and delivering one final award,
bearing in mind the avoidance of delay and additional expense.
Ultimately, a fair means for resolution of all disputes should be
uppermost in the mind of the arbitral tribunal.
10. To complete the scheme of the Act, Section 32(1) is also
material. This section goes on to state that the arbitral
proceedings would be terminated only by the final arbitral
award, as opposed to an interim award, thus making it clear
that there can be one or more interim awards, prior to a final
award, which conclusively determine some of the issues
between the parties, culminating in a final arbitral award which
ultimately decides all remaining issues between the parties.
9
11. The English Arbitration Act, 1996, throws some light on
what is regarded as an interim award under English Law.
Section 47 thereof states:
“47 Awards on different issues, &c.
(1) Unless otherwise agreed by the parties, the
tribunal may make more than one award at different
times on different aspects of the matters to be
determined.
(2) The tribunal may, in particular, make an award
relating—
(a) to an issue affecting the whole claim, or
(b) to a part only of the claims or cross-claims
submitted to it for decision.
(3) If the tribunal does so, it shall specify in its
award the issue, or the claim or part of a claim,
which is the subject matter of the award.”
12. By reading this section, it becomes clear that more than
one award finally determining any particular issue before the
arbitral tribunal can be made on different aspects of the matters
to be determined. A preliminary issue affecting the whole claim
would expressly be the subject matter of an interim award
under the English Act. The English Act advisedly does not use
the expression “interim” or “partial”, so as to make it clear that
the award covered by Section 47 of the English Act would be a
10
final determination of the particular issue that the arbitral
tribunal has decided.
13. In Exmar BV v National Iranian Tanker Co. [1992] 1
Lloyd's Rep. 169, an interim final award was made, which
contained the decision that it would not issue any such award in
the claimant’s favour pending determination of the respondent’s
counter claims. Detailed reasons were given for this decision.
The Judge, therefore, characterized the aforesaid award as an
award finally deciding a particular issue between the parties,
and concluded that as a result thereof, he had jurisdiction to
review the tribunal’s decision.
14. In Satwant Singh Sodhi v. State of Punjab (1999) 3
SCC 487 at 491 and 493, an interim award in respect of one
particular item was made by the arbitrator in that case. The
question before the Court was whether such award could be
made the rule of the Court separately or could be said to have
been superseded by a final award made on all the claims later.
This Court held:
11
“6. The question whether interim award is final to
the extent it goes or has effect till the final award is
delivered will depend upon the form of the award. If
the interim award is intended to have effect only so
long as the final award is not delivered it will have
the force of the interim award and it will cease to
have effect after the final award is made. If, on the
other hand, the interim award is intended to finally
determine the rights of the parties it will have the
force of a complete award and will have effect even
after the final award is delivered. The terms of the
award dated 26-11-1992 do not indicate that the
same is of interim nature.”
On the facts of the case, the Court then went on to hold:
“11. This Court in Rikhabdass v. Ballabhdas [AIR
1962 SC 551 : 1962 Supp (1) SCR 475] held that
once an award is made and signed by the arbitrator,
the arbitrator becomes functus officio. In Juggilal
Kamlapat v. General Fibre Dealers Ltd. [AIR 1962
SC 1123 : 1962 Supp (2) SCR 101] this Court held
that an arbitrator having signed his award becomes
functus officio but that did not mean that in no
circumstances could there be further arbitration
proceedings where an award was set aside or that
the same arbitrator could never have anything to do
with the award with respect to the same dispute.
Thus in the present case, it was not open to the
arbitrator to redetermine the claim and make an
award. Therefore, the view taken by the trial court
that the earlier award made and written though
signed was not pronounced but nevertheless had
become complete and final, therefore, should be
made the rule of the court appears to us to be
correct with regard to Item 1 inasmuch as the claim
in relation to Item 1 could not have been
adjudicated by the arbitrator again and it has been
12
rightly excluded from the second award made by
the arbitrator on 28-1-1994. Thus the view taken by
the trial court on this aspect also appears to us to
be correct. Therefore, the trial court has rightly
ordered the award dated 28-1-1994 to be the rule of
the court except for Item 1 and in respect of which
the award dated 26-11-1992 was ordered to be the
rule of the court.”
It is, thus, clear that the first award that was made that finally
determined one issue between the parties, with respect to Item
no.1 of the claim, was held to be an interim award inasmuch as
it finally determined claim 1 between the parties and, therefore,
could not be re-adjudicated all over again.
15. In McDermott International Inc. v. Burn Standard Co.
Ltd. (2006) 11 SCC 181 at page 211-212, under the heading
‘validity of the partial award’, this Court held:
“68. The 1996 Act does not use the expression
“partial award”. It uses interim award or final award.
An award has been defined under Section 2(c) to
include an interim award. Sub-section (6) of Section
31 contemplates an interim award. An interim award
in terms of the said provision is not one in respect of
which a final award can be made, but it may be a
final award on the matters covered thereby, but
made at an interim stage.
69. The learned arbitrator evolved the
aforementioned procedure so as to enable the
parties to address themselves as regards certain
13
disputes at the first instance. As would appear from
the partial award of the learned arbitrator, he
deferred some claims. He further expressed his
hope and trust that in relation to some claims, the
parties would arrive at some sort of settlement
having regard to the fact that ONGC directly or
indirectly was involved therein. While in relation to
some of the claims, a finality was attached to the
award, certain claims were deferred so as to enable
the learned arbitrator to advert thereto at a later
stage. If the partial award answers the definition of
the award, as envisaged under Section 2(c) of the
1996 Act, for all intent and purport, it would be a
final award. In fact, the validity of the said award
had also been questioned by BSCL by filing an
objection in relation thereto.
70. We cannot also lose sight of the fact that BSCL
did not raise any objection before the arbitrator in
relation to the jurisdiction of the arbitrator. A ground
to that effect has also not been taken in its
application under Section 34 of the Act. We,
however, even otherwise do not agree with the
contention of Mr Mitra that a partial award is akin to
a preliminary decree. On the other hand, we are of
the opinion that it is final in all respects with regard
to disputes referred to the arbitrator which are
subject-matters of such award. We may add that
some arbitrators instead and in place of using the
expression “interim award” use the expression
“partial award”. By reason thereof the nature and
character of an award is not changed. As, for
example, we may notice that in arbitral proceedings
conducted under the Rules of Arbitration of the
International Chamber of Commerce, the
expression “partial award” is generally used by the
arbitrators in place of interim award. In any view of
the matter, BSCL is not in any way prejudiced. We
may state that both the partial award and the final
14
award are subject-matter of challenge under
Section 34 of the Act.”
The aforesaid judgment makes it clear that an interim award or
partial award is a final award on matters covered therein made
at an intermediate stage of the arbitral proceedings.
16. Tested in the light of the statutory provisions and the case
law cited above, it is clear that as the learned Arbitrator has
disposed of one matter between the parties i.e. the issue of
limitation finally, the award dated 23rd July, 2015 is an “interim
award” within the meaning of Section 2(1)(c) of the Act and
being subsumed within the expression “arbitral award” could,
therefore, have been challenged under Section 34 of the Act.
17. However, Shri Sinha has argued before us that the award
dated 23rd July, 2015 being a ruling on the arbitral tribunal’s
jurisdiction would fall within Section 16 of the Act, and inasmuch
as the decision taken on the point of limitation was rejected, the
drill of Section 16 must be followed in which case all other
issues have to be decided first, and it is only after such issues
are decided that such an award can be challenged under
Section 34 of the Act. Section 16 of the Act lays down what, in
15
arbitration law, is stated to be the Kompetenz-kompetenz
principle, viz. that an arbitral tribunal may rule on its own
jurisdiction. At one time, the law was that the arbitrator, being a
creature of the contract, could not rule on the existence or
validity of the arbitration clause contained in the contract. This,
however, gave way to the Kompetenz principle which was
adopted by the UNCITRAL Model Law. Article 16 of the
UNCITRAL Model Law, on which Section 16 of the Act is based,
reads as follows:
“Article 16. Competence of arbitral tribunal to
rule on its jurisdiction
(1) The arbitral tribunal may rule on its own
jurisdiction, including any objections with respect to
the existence or validity of the arbitration
agreement. For that purpose, an arbitration clause
which forms part of a contract shall be treated as an
agreement independent of the other terms of the
contract. A decision by the arbitral tribunal that the
contract is null and void shall not entail ipso jure the
invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have
jurisdiction shall be raised not later than the
submission of the statement of defence. A party is
not precluded from raising such a plea by the fact
that he has appointed, or participated in the
appointment of, an arbitrator. A plea that the arbitral
tribunal is exceeding the scope of its authority shall
be raised as soon as the matter alleged to be
beyond the scope of its authority is raised during the
16
arbitral proceedings. The arbitral tribunal may, in
either case, admit a later plea if it considers the
delay justified.
(3) The arbitral tribunal may rule on a plea referred
to in paragraph (2) of this article either as a
preliminary question or in an award on the merits. If
the arbitral tribunal rules as a preliminary question
that it has jurisdiction, any party may request, within
thirty days after having received notice of that ruling,
the court specified in article 6 to decide the matter,
which decision shall be subject to no appeal; while
such a request is pending, the arbitral tribunal may
continue the arbitral proceedings and make an
award.”
18. The Statement of Objects and Reasons of the Act
expressly refers to the UNCITRAL Model Law in the following
terms:
“3. Though the said UNCITRAL Model Law and
Rules are intended to deal with international
commercial arbitration and conciliation, they could,
with appropriate modifications, serve as a model for
legislation on domestic arbitration and conciliation.
The present Bill seeks to consolidate and amend
the law relating to domestic arbitration, international
commercial arbitration, enforcement of foreign
arbitral awards and to define the law relating to
conciliation, taking into account the said UNCITRAL
Model Law and Rules.”
19. It may be noticed that Section 16(1) to (4) are based on
Article 16 of the UNCITRAL Model Law. The Kompetenz
principle deals with the arbitral tribunal’s jurisdiction in the
17
narrow sense of ruling on objections with respect to the
existence or validity of the arbitration agreement. What is
important to notice in the language of Section 16(1) is the fact
that the arbitral tribunal may rule on its own jurisdiction, which
makes it clear that it refers to whether the arbitral tribunal may
embark upon an inquiry into the issues raised by parties to the
dispute.
20. Here again, the English Arbitration Act of 1996 throws
some light on the problem before us. Sections 30 and 31 of
the said Act read as under:
“30 Competence of tribunal to rule on its own
jurisdiction. - (1) Unless otherwise agreed by the
parties, the arbitral tribunal may rule on its own
substantive jurisdiction, that is, as to—
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration
in accordance with the arbitration agreement.
(2) Any such ruling may be challenged by any
available arbitral process of appeal or review or in
accordance with the provisions of this Part.
31 Objection to substantive jurisdiction of
tribunal. - (1) An objection that the arbitral tribunal
lacks substantive jurisdiction at the outset of the
proceedings must be raised by a party not later than
the time he takes the first step in the proceedings to
18
contest the merits of any matter in relation to which
he challenges the tribunal’s jurisdiction.
A party is not precluded from raising such an
objection by the fact that he has appointed or
participated in the appointment of an arbitrator.
(2) Any objection during the course of the arbitral
proceedings that the arbitral tribunal is exceeding its
substantive jurisdiction must be made as soon as
possible after the matter alleged to be beyond its
jurisdiction is raised.
(3) The arbitral tribunal may admit an objection later
than the time specified in subsection (1) or (2) if it
considers the delay justified.
(4) Where an objection is duly taken to the tribunal’s
substantive jurisdiction and the tribunal has power
to rule on its own jurisdiction, it may— (a) rule on
the matter in an award as to jurisdiction, or (b) deal
with the objection in its award on the merits. If the
parties agree which of these courses the tribunal
should take, the tribunal shall proceed accordingly.
(5) The tribunal may in any case, and shall if the
parties so agree, stay proceedings whilst an
application is made to the court under section 32
(determination of preliminary point of jurisdiction).”
These sections make it clear that the Kompetenz
principle, which is also followed by the English Arbitration Act of
1996, is that the “jurisdiction” mentioned in Section 16 has
reference to three things: (1) as to whether there is the
existence of a valid arbitration agreement; (2) whether the
arbitral tribunal is properly constituted; and (3) matters
19
submitted to arbitration should be in accordance with the
arbitration agreement.
21. That “jurisdiction” is a coat of many colours, and that the
said word displays a certain colour depending upon the context
in which it is mentioned, is well-settled. In the classic sense, in
Official Trustee v. Sachindra Nath Chatterjee, (1969) 3 SCR
92 at 99, “jurisdiction” is stated to be:
“In the order of Reference to a Full Bench in the
case of Sukhlal v. Tara Chand [(1905) ILR 33 Cal
68] it was stated that jurisdiction may be defined to
be the power of a Court to hear and determine a
cause, to adjudicate and exercise any judicial
power in relation to it: in other words, by jurisdiction
is meant the authority which a Court has to decide
matters that are litigated before it or to take
cognizance of matters presented in a formal way for
its decision. An examination of the cases in the
books discloses numerous attempts to define the
term ‘jurisdiction’, which has been stated to be ‘the
power to hear and determine issues of law and fact’,
the authority by which the judicial officer take
cognizance of and ‘decide causes’; ‘the authority to
hear and decide a legal controversy’, ‘the power to
hear and determine the subject-matter in
controversy between parties to a suit and to
adjudicate or exercise any judicial power over
them;’ ‘the power to hear, determine and pronounce
judgment on the issues before the Court’; ‘the
power or authority which is conferred upon a Court
by the Legislature to hear and determine causes
between parties and to carry the judgments into
20
effect’; ‘the power to enquire into the facts, to apply
the law, to pronounce the judgment and to carry it
into execution’.”
(Mukherjee, Acting CJ, speaking for Full Bench of
the Calcutta High Court in Hirday Nath
Roy v. Ramachandra Barna Sarma ILR 68 Cal
138)
22. A Constitution Bench of this Court in Ittavira Mathai v.
Varkey Varkey, (1964) 1 SCR 495 at 501-503, made a
distinction between an erroneous decision on limitation being
an error of law which is within the jurisdiction of the Court, and a
decision where the Court acts without jurisdiction in the
following terms:
“The first point raised by Paikedy for the appellant is
that the decree in OS No. 59 of 1093 obtained by
Anantha Iyer and his brother in the suit on the
hypothecation bond executed by Ittiyavira in favour
of Ramalinga Iyer was a nullity because the suit
was barred by time. In assuming that the suit was
barred by time, it is difficult to appreciate the
contention of learned counsel that the decree can
be treated as a nullity and ignored in subsequent
litigation. If the suit was barred by time and yet, the
court decreed it, the court would be committing an
illegality and therefore the aggrieved party would be
entitled to have the decree set aside by preferring
an appeal against it. But it is well settled that a court
having jurisdiction over the subject-matter of the suit
and over the parties thereto, though bound to
decide right may decide wrong; and that even
though it decided wrong it would not be doing
something which it had no jurisdiction to do. It had
21
the jurisdiction over the subject-matter and it had
the jurisdiction over the party and, therefore, merely
because it made an error in deciding a vital issue in
the suit, it cannot be said that it has acted beyond
its jurisdiction. As has often been said, courts have
jurisdiction to decide right or to decide wrong and
even though they decide wrong, the decrees
rendered by them cannot be treated as nullities.
Learned counsel, however, referred us to the
decision of the Privy Council in Maqbul
Ahmad v. Onkar Pratap Narain Singh [AIR (1935)
PC 85] and contended that since the court is bound
under the provisions of Section 3 of the Limitation
Act to ascertain for itself whether the suit before it
was within time, it would act without jurisdiction if it
fails to do so. All that the decision relied upon says
is that Section 3 of the Limitation Act is peremptory
and that it is the duty of the court to take notice of
this provision and give effect to it even though the
point of limitation is not referred to in the pleadings.
The Privy Council has not said that where the court
fails to perform its duty, it acts without jurisdiction. If
it fails to do its duty, it merely makes an error of law
and an error of law can be corrected only in the
manner laid down in the Civil Procedure Code. If the
party aggrieved does not take appropriate steps to
have that error corrected, the erroneous decree will
hold good and will not be open to challenge on the
basis of being a nullity.”
23. It is in this sense of the term that “jurisdiction” has been
used in Section 16 of the Act. Indeed, in NTPC (supra) at
460-461, a Division Bench of this Court, after setting out
Sections 16 and 37 held:
22
“10. Now, the only question that remains to be
decided in the present case is whether against the
order of partial award an appeal is maintainable
directly under Section 37 of the Act or not. We have
considered the submissions of learned counsel for
the appellant and after going through the
counterclaim and the partial award, we are of the
opinion that no question of jurisdiction arises in the
matter so as to enable the appellant to file a direct
appeal under Section 37 of the Act before the High
Court. As already mentioned above, an appeal
under sub-section (2) of Section 37 only lies if there
is an order passed under Sections 16(2) and (3) of
the Act. Sections 16(2) and (3) deal with the
exercise of jurisdiction. The plea of jurisdiction was
not taken by the appellant. It was taken by the
respondent in order to meet their counterclaim. But
it was not in the context of the fact that the Tribunal
had no jurisdiction, it was in the context that this
question of counterclaim was no more open to be
decided for the simple reason that all the issues
which had been raised in Counterclaims 1 to 10 had
already been settled in the minutes of meeting
dated 6-4-2000/7-4-2000 and it was recorded that
no other issues were to be resolved in first and third
contracts. Therefore, we fail to understand how the
question of jurisdiction was involved in the matter. In
fact it was in the context of the fact that the entire
counterclaims have already been satisfied and
settled in the meeting that it was concluded that no
further issues remained to be settled. In this
context, the counterclaims filed by the appellant
were opposed. If any grievance was there, that
should have been (sic raised) by the respondent
and not by the appellant. It is only the finding of fact
recorded by the Tribunal after considering the
counterclaim vis-à-vis the minutes of meeting dated
6-4-2000/7-4-2000. Therefore, there was no
question of jurisdiction involved in the matter so as
23
to enable the appellant to approach the High Court
directly.”
Interestingly, in a separate concurring judgment, P.K.
Balasubramanyan, J., held:
“17. In the larger sense, any refusal to go into the
merits of a claim may be in the realm of jurisdiction.
Even the dismissal of the claim as barred by
limitation may in a sense touch on the jurisdiction of
the court or tribunal. When a claim is dismissed on
the ground of it being barred by limitation, it will be,
in a sense, a case of the court or tribunal refusing to
exercise jurisdiction to go into the merits of the
claim. In Pandurang Dhoni Chougule v. Maruti Hari
Jadhav [AIR 1996 SC 153 : (1996) 1 SCR 102] this
Court observed that: (AIR p. 155, para 10)
“It is well settled that a plea of limitation
or a plea of res judicata is a plea of law
which concerns the jurisdiction of the
court which tries the proceedings. A
finding on these pleas in favour of the
party raising them would oust the
jurisdiction of the court, and so, an
erroneous decision on these pleas can
be said to be concerned with questions
of jurisdiction which fall within the
purview of Section 115 of the Code.”
In a particular sense, therefore, any declining to go
into the merits of a claim could be said to be a case
of refusal to exercise jurisdiction.
18. The expression “jurisdiction” is a word of many
hues. Its colour is to be discerned from the setting in
which it is used. When we look at Section 16 of the
24
Act, we find that the said provision is one, which
deals with the competence of the Arbitral Tribunal to
rule on its own jurisdiction. SBP & Co. v. Patel
Engg. Ltd. [(2005) 8 SCC 618] in a sense confined
the operation of Section 16 to cases where the
Arbitral Tribunal was constituted at the instance of
the parties to the contract without reference to the
Chief Justice under Section 11(6) of the Act. In a
case where the parties had thus constituted the
Arbitral Tribunal without recourse to Section 11(6) of
the Act, they still have the right to question the
jurisdiction of the Arbitral Tribunal including the right
to invite a ruling on any objection with respect to the
existence or validity of the arbitration agreement. It
could therefore rule that there existed no arbitration
agreement, that the arbitration agreement was not
valid, or that the arbitration agreement did not
confer jurisdiction on the Tribunal to adjudicate upon
the particular claim that is put forward before it.
Under sub-section (5), it has the obligation to decide
the plea and where it rejects the plea, it could
continue with the arbitral proceedings and make the
award. Under sub-section (6), a party aggrieved by
such an arbitral award may make an application for
setting aside such arbitral award in accordance with
Section 34. In other words, in the challenge to the
award, the party aggrieved could raise the
contention that the Tribunal had no jurisdiction to
pass it or that it had exceeded its authority, in
passing it. This happens when the Tribunal
proceeds to pass an award. It is in the context of the
various sub-sections of Section 16 that one has to
understand the content of the expression
“jurisdiction” and the scope of the appeal provision.
In a case where the Arbitral Tribunal proceeds to
pass an award after overruling the objection relating
to jurisdiction, it is clear from sub-section (6) of
Section 16 that the parties have to resort to Section
34 of the Act to get rid of that award, if possible. But,
if the Tribunal declines jurisdiction or declines to
25
pass an award and dismisses the arbitral
proceedings, the party aggrieved is not without a
remedy. Section 37(2) deals with such a situation.
Where the plea of absence of jurisdiction or a claim
being in excess of jurisdiction is accepted by the
Arbitral Tribunal and it refuses to go into the merits
of the claim by declining jurisdiction, a direct appeal
is provided. In the context of Section 16 and the
specific wording of Section 37(2)(a) of the Act, it
would be appropriate to hold that what is made
directly appealable by Section 37(2)(a) of the Act is
only an acceptance of a plea of absence of
jurisdiction, or of excessive exercise of jurisdiction
and the refusal to proceed further either wholly or
partly.
19. In a case where a counterclaim is referred to
and dealt with and a plea that the counterclaim does
not survive in view of the settlement of disputes
between the parties earlier arrived at is accepted, it
could not be held to be a case of refusal to exercise
jurisdiction by the Arbitral Tribunal. Same is the
position when an Arbitral Tribunal finds that a claim
was dead and was not available to be made at the
relevant time or that the claim was not maintainable
for other valid reasons or that the claim was barred
by limitation. They are all adjudications by the
Tribunal on the merits of the claim and in such a
case the aggrieved party can have recourse only to
Section 34 of the Act and will have to succeed on
establishing any of the grounds available under that
provision. It would not be open to that party to take
up the position that by refusing to go into the merits
of his claim, the Arbitral Tribunal had upheld a plea
that it does not have jurisdiction to entertain the
claim and hence the award or order made by it,
comes within the purview of Section 16(2) of the Act
and consequently is appealable under Section 37(2)
(a) of the Act.”
26
(at pages 463-464)
24. This judgment is determinative of the issue at hand and
has our respectful concurrence. However, various judgments
were referred to by learned senior advocate appearing on
behalf of the respondent, in which “jurisdiction” in the wide
sense was used. Thus, a jurisdictional error under Section 115
of the Code of Civil Procedure, 1908, dealing with revision
petitions, was held to include questions which relate to res
judicata and limitation. [See Pandurang Dhoni Chougule v.
Maruti Hari Jadhav (1966) 1 SCR 102 at 107)].
25. This judgment was expressly referred to in the context of
Anisminic v. Foreign Compensation Commission, (1969) 2
AC 147, delivered in England, which virtually made all “errors of
law” “errors of jurisdiction” in the Administrative Law sphere
and explained in M.L. Sethi v. R.P. Kapur, (1972) 2 SCC
427 at 435 as under:
“...The dicta of the majority of the House of Lords in
the above case would show the extent to which
“lack” and “excess” of jurisdiction have been
assimilated or, in other words, the extent to which
we have moved away from the traditional concept of
“jurisdiction”. The effect of the dicta in that case is to
27
reduce the difference between jurisdictional error
and error of law within jurisdiction almost to
vanishing point. The practical effect of the decision
is that any error of law can be reckoned as
jurisdictional. This comes perilously close to saying
that there is jurisdiction if the decision is right in law
but none if it is wrong. Almost any misconstruction
of a statute can be represented as “basing their
decision on a matter with which they have no right
to deal”, “imposing an unwarranted condition” or
“addressing themselves to a wrong question”. The
majority opinion in the case leaves a Court or
Tribunal with virtually no margin of legal error.
Whether there is excess of jurisdiction or merely
error within jurisdiction can be determined only by
construing the empowering statute, which will give
little guidance. It is really a question of how much
latitude the court is prepared to allow. In the end it
can only be a value judgment (see H.N.R. Wade,
“Constitutional and Administrative Aspects of the
Anisminic case”. Law Quarterly Review, Vol.
85,1969, p. 198). Why is it that a wrong decision on
a question of limitation or res judicata was treated
as a jurisdictional error and liable to be interfered
with in revision? It is a bit difficult to understand how
an erroneous decision on a question of limitation or
res judicata would oust the jurisdiction of the court
in the primitive sense of the term and render the
decision or a decree embodying the decision a
nullity liable to collateral attack. The reason can only
be that the error of law was considered as vital by
the court. And there is no yardstick to determine the
magnitude of the error other than the opinion of the
Court…”
26. Likewise, in Hari Prasad Mulshanker Trivedi v. V.B.
Raju (1974) 3 SCC 415 at 423-424, a Constitution Bench of
28
this Court again referred to the blurring of lines between errors
of law and errors of jurisdiction found in Anisminic (supra) as
follows:
“Though the dividing line between lack of jurisdiction
or power and erroneous exercise of it has become
thin with the decision of the House of Lords in the
Anisminic case, [(1967) 3 WLR 382] we do not think
that the distinction between the two has been
completely wiped out. We are aware of the difficulty
in formulating an exhaustive rule to tell when there
is lack of power and when there is an erroneous
exercise of it. The difficulty has arisen because the
word “jurisdiction” is an expression which is used in
a variety of senses and takes its colour from its
context, (see per Diplock, J., at p. 394 in
the Anisminic case). Whereas the “pure” theory of
jurisdiction would reduce jurisdictional control to a
vanishing point, the adoption of a narrower meaning
might result in a more useful legal concept even
though the formal structure of law may lose
something of its logical symmetry. “At bottom the
problem of defining the concept of jurisdiction for
purpose of judicial review has been one of public
policy rather than one of logic”. [S. A. Smith :
“Judicial Review of Administrative Action”, 2nd Edn.,
p. 98] And viewed from the aspect of public policy
as reflected in the provisions of the 1950 and 1951
Acts, we do not think that a wrong decision on a
question of ordinary residence for the purpose of
entering a person's name in the electoral roll should
be treated as a jurisdictional error which can be
judicially reviewed either in a civil court or before an
election tribunal.”
29
27. In ITW Signode India Ltd. v. CCE (2004) 3 SCC 48 at
74, a case strongly relied upon by Shri Sinha, this Court held in
the context of limitation qua recovery of duty under Section 11A
of the Central Excise Act, 1944 as follows:
“69. The question of limitation involves a question of
jurisdiction. The finding of fact on the question of
jurisdiction would be a jurisdictional fact. Such a
jurisdictional question is to be determined having
regard to both fact and law involved therein. The
Tribunal, in our opinion, committed a manifest error
in not determining the said question, particularly,
when in the absence of any finding of fact that such
short-levy of excise duty related to any positive act
on the part of the appellant by way of fraud,
collusion, wilful misstatement or suppression of
facts, the extended period of limitation could not
have been invoked and in that view of the matter no
show-cause notice in terms of Rule 10 could have
been issued.”
28. Given the context of Section 11A of the Central Excise
Act, 1944, obviously the expression “jurisdiction” would mean
something more than merely being able to embark on the
merits of a dispute. In a recent judgment under Section 9A of
the Code of Civil Procedure, 1908 (as inserted by the State of
Maharashtra), this Court in Foreshore Coop. Housing Society
Ltd. v. Praveen D. Desai (2015) 6 SCC 412, referred to the
30
expression “jurisdiction” occurring in Section 9A and held an
earlier judgment of this Court to be per incuriam. Though the
Constitution Bench judgment in Ittavira (supra) was mentioned
by the Bench, referring to the argument of one of the counsel
for the parties, in the concluding portion, this judgment is not
referred to at all. In any case, the reasoning of the Court in that
case was in the context of Section 9A which, when contrasted
with Order XIV of the Code of Civil Procedure, 1908, made the
Court accept the wider concept of “jurisdiction” as laid down in
Pandurang (supra).
29. In our view, therefore, it is clear that the award dated 23rd
July, 2015 is an interim award, which being an arbitral award,
can be challenged separately and independently under Section
34 of the Act. We are of the view that such an award, which
does not relate to the arbitral tribunal’s own jurisdiction under
Section 16, does not have to follow the drill of Section 16(5)
and (6) of the Act. Having said this, we are of the view that
Parliament may consider amending Section 34 of the Act so as
to consolidate all interim awards together with the final arbitral
award, so that one challenge under Section 34 can be made
31
after delivery of the final arbitral award. Piecemeal challenges
like piecemeal awards lead to unnecessary delay and additional
expense.
30. The appeal is, accordingly, allowed and the impugned
judgment is set aside. The Section 34 proceedings before the
District Judge, Jagatsinghpur may now be decided. There
shall, however, be no order as to costs.
……………………….J.
(R.F. Nariman)
……………………….J.
(Navin Sinha)
New Delhi;
January 23, 2018.
32

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