Holding

The arbitrator appointed under the main agreement had jurisdiction over the interior design disputes, specific performance is arbitrable, and the award cannot be set aside under Section 34.

Summary

Olympus Superstructures Pvt. Ltd. entered into three main sale agreements for flats and three separate interior design agreements, each containing arbitration clauses. Disputes arose over payment, construction progress and interior work, and a sole arbitrator was appointed under the main agreements. The arbitrator granted specific performance for both the main and interior design agreements, which Olympus challenged under Sections 5 and 34 of the Arbitration and Conciliation Act, 1996, arguing lack of jurisdiction and that specific performance is non‑arbitrable. The Supreme Court held that the general arbitration clause in the main agreements covered the interior design matters as "connected" disputes, that jurisdictional objections should have been raised under Section 16 but could be considered under Section 34, and that specific performance is a permissible award. Consequently, the Court found no ground to set aside the award and dismissed the appeals.

Issues considered

Whether the arbitration clause in the main agreement extends to disputes arising under the separate interior design agreements.
Whether a party may raise a jurisdictional objection under Section 16 at the stage of a Section 34 application when it was not raised earlier.
Whether an arbitrator can grant specific performance of a contract involving immovable property and whether Section 34(2)(b)(i) applies.
Whether factual findings such as default, time‑being‑essence and readiness can be challenged under Section 34.

Legislation cited

Arbitration and Conciliation Act, 1996s. 16, s. 34, s. 5
Specific Relief Act, 1963

Subjects

arbitrationjurisdictionspecific performanceSection 34connected mattersarbitration clauseaward setting aside

Judgment

A OLYMPUS SUPERSTRUCTURES PVT. LTD.
v.
MEENA VIJAY KHETAN AND ORS.

MAY I I, I999

B [M. JAGANNADHA RAO AND S.N. PHUKAN JJ.]

Arbitration : Arbitration and Conciliation Act, 1996-Sections 5, 16
and 34-Two sets ofagreements-Main agreement for sale offlats and another
for interior decoration, both containing separate arbitration clauses.-Main
C agreement did not specify arbitrator while the other does-By virtue of
clause 39 of the main agreement, "connected" matters can be referred to
arbitraior-Held : arbitrator appointed under the main agreement has
jurisdiction to deal with the questions relating to the interior decoration
which is a "connected" matter-Arbitrator can grant specific relief since
D there is no bar in the Specific Relief Act of Arbitration Act-Questions offact
do not fall within the purview of Section 34(2) (b) (ii)-Court cannot
interfere under Section 34(2) (b) since the award is not in conflict with
public policy not being induced or affected by fraud or. corruption and
subject matter not incapable of being settled by arbitration under the law
in force at the relevant time-Tribunal, under S 16, can decide on validity
E of arbitration clause and entertain question of jurisdiction at any time
during the proceedings-If jurisdiction is upheld, Tribunal will proceed to
make the award-Arbitration clause is independent of the other term of the
contract and any decision of the arbitral tribunal on validity of the contract
dose not ipso facto affect the validity of the arbitration clause.
F Specific Relief-Right to specific performance arises out of a contract-
Parties can agree to refer the issues relating to specific performance to
arbitrator to shorten the litigation and he can grant such a relief-Section
34(2) (b) (i) will not attracted '

G The appellant Company entered into an agreement with respondents
for sale of some flats and incorporated an arbitration clause, without
specifying the name of the arbitrator, in case of disputes. The agreement had
a general clause by which all "connected" matters could also be referred to
the said arbitrator. Separate agreements with separate arbitration clause,
with named arbitrator, was also drawn up for interior decoration. In course
H of time disputes arose and on the directions of Court, a sole arbitrator was
490
OLYMP. SUPERSTRUCTURES PVT. LTD.'" MV. KHETAN 491

appointed. Issues relating to interior decoration were also referred to the A.
said arbitrator along with other issues relating to the main agreement. The
arbitrator after hearing the partier .1md the evidence, passed an award granting
relief of specific performance i• ·pect of both the main agreement as well
as the one relating to interior Ott., ation. The appellant Company did not
raise any objection about referring matters relating to interior decoration B
to arbitration either before the arbitrator, or later before the Single Judge,
when they filed an application for setting aside the award. The question was
raised for the first time before the Division Bench which rejected it. Both
the single Judge as well as the Division Bench rejected the application of
the appellant for setting aside the award. Hence this appeal.
c
It was contended by the appellants that the arbitration was based on the
three main agreements and therefore the arbitrator could not decide the
disputes relating to interior decoration which formed a separate agreement;
the agreement for interior decoration provided for named arbitrators and so
the main agreement could not supersede this provision; though the appellant
was ex parte, the arbitrator should have asked for better proof, that the D
arbitrator could not grant specific relief and so Section 34 (2) (b) (i) of the
Arbitration Act was attracted; that the respondent had defaulted and
termination of main agreement by appellant was right; that the respondents
ought to have paid interest on the balance amount. On behalf of the
respondents, it was pointed out that under the main agreement. It was E
permissible to refer "connected" matters to the arbitrator ; the appellant did
not raise any objection to the reference before the arbitrator or the Single
Judge; and that arbitrator can grant specific relief.

Dismissing the appeal, this Court
F
HELD : 1. It is true that there are two agreements in each of the three
appeals. One is the main agreement relating to construction of flats and the
arbitration clause 39 is general and dose not refer to any named arbitrator.
It is also true that there is a separate arbitration clause 5 in the Interior
Design Agreement which gives the names of specific arbitrator. But it must G
be noticed that clau~e 39 permits reference to arbitration not only of issues
arising under the main agreement but also those disputes or differences
which are "c<>nnected" with disputes arising under the main agreement. In
other words, clause 39 refers to the 'subject matter' or the main agreement
and also to 'any other matters' and these 'any other matters' if they are
"connected" with or arise out of or are in relation to the subject matter of H
492 SUPREME COURT REPORTS [1999] 3 S.C.R.

.. A the main agreement, the disputes and differences concerning those 'other
matters' can also be referred to arbitration under clause 39 of the main
agreement. In other words, parties intended arbitration in respect of the
main disputes and connected disputes before one arbitral tribunal. There are
several items in Schedule E of the main agreement which overlap the items
B in Schedule A of the Interior Design Agreement. In view of the overlapping,
it has to be said that several items in the Schedule A of the Interior Design
Agreement are in modification/substitution of the items in the main
agreement. Therefore the coverage of the two agreements makes it clear
that the execution of the Interior Design Agreement is 'connected with' the
execution of the main agreement. It may also be noted that date of the main
C agreement and the Interior Design Agreement is the same in each of the
three cases and clause 3 of the Interior Design Agreement states specifically
that 'the work of renovation, designing and installation shall commence form
the execution thereof which meant that the execution of the Interior Design
Agreement and the main agreement, is simultaneous. Therefore, in a case
D like the present where the disputes and differences cover the main agreement
as well as the Interior Design Agreement it is the general arbitration
clause 3~ in the main agreement that governs because the questions arise
also in regard to disputes relating to the overlapping items in the Schedule
to the main agreement and the Interior Design Agreement . There cannot
be conflicting awards in regard to items which overlap in the two agreements.
E Such a situation was never contemplated by the parties. The intention of,the
parties when incorporated clause 39 in the main agreement and clause Sin
the Interior Design Agreement was that the former clause was to apply to
situations when there were disputes arising under both agreements and the
latter was to apply to a situation where there were no disputes or differences
arising under the main contract but the disputes and differences were confined
F only to the Interior Design Agreement. (506-B-E; 507-C-H; 508-C-E)

Renusager Power Co. Ltd. v. General Electric Co., (1984) 4 SCC 679,
referred to.

G Aggarwal Engineering Co. v. T.H. Machine Industries, AIR (1977) S.C.
2122, distinguished.

2. Disputes relating to specific performance of a contract can be
referred to arbitration and Section 34 (2) (b) (i) is not attracted. The right
to specific performance of an agreement of sale deals with contractual rights
H and it is certainly open to the parties to agree-with a view to shorten
OLYMP. SUPERSTRUCTURES PVT. LTD. v. MV. KHETAN 493
litigation in regular court-to refer the issues relating to specific A.
performance to arbitration. Merely because there is need for exercise of
discretion in case of specific performance, it cannot be said that only the civil
court can exercise such a discretion. There is no prohibition in the Specific
Relief Act, 1963 that issues relating to specific performance of contract
relating to immovable property cannot be referred to arbitration. Nor is
there such a prohibition contained in the Arbitration and Conciliation Act, B
1996 as contrasted with Section 15 of the English Arbitration Act, 1950 or
section 48 (S)(b) of the English Arbitration Act, 1996 which contained a
prohibition relating to specific performance of contracts containing immovable
Property.1510-F; 509-E-GI

Laxmi Narayan v. Raghubir Singh, AIR (1956) Punjab 249, Fertiliser
c
Corporation of India v. Chemical Construction Corporation, ILR (1971)
Bombay; Keventor Agro Ltd v. Seegram Comp. Ltd, Apo 498of1997 & Apo
449 of 401(dated27.1.98) (Calcutta High Court), approved.

Mis PNB Finance Limited v. Shital Prasad Jain & others, AIR (1991) D
· Del 13 Overruled Keir v. Leeman, (1846) 9 Q. 8. 371, Soilleux v. Herbal,
(1801 0 2 Bos & p. 444; Wilson v. Wilson, 1848] 1 HL Cas 538 and Cahill
v. Cahill, (1883) 8 App Cas 420 (HL), referred to.

Halsburys Laws of England-4th Ed, (Arbitration Vol. 2 para 503),
referred to. E
3. The issues between the parties on the merits of the award relate to
default, time being essence, readiness and willingness etc. These are all
issues of fact. The factual points r.aised do not fall within Section 34 (2) (b)
(ii). Coming to Section 34 (2) (b) (i) the subject matter of the dispute is not
incapable of settlement by arbitration under the law for the time being in F
force. Nor is any point that the arbitral award is in conflict with the public
policy of India. Therefore the merits of the award in the fact of the case do
not fall under Section 34 (2) (b) of the Act. (510-G; 511-C-DI

4. No dispute as to the power of the arbitrator to deal with the disputes G
under these three agreements was raised. That means the appellant accepted
that disputes under these agreements were also covered by the reference. In
the objections to the award filed in the Court under Section 34 no such point
was raised except a general ground that the entire proceedings of arbitration
were illegal and bad in law, null and void and that the award was liable to be
set aside. For the first time this point relating to the scope of the reference H
494 SUPREME COURT REPORTS [1999] 3 S.C.R.

A was raised/ argued before the Division Bench and the same was rejected. If
parties before the ar.bitrator had any objections to the arbitrator's jurisdiction,
the same must be raised before the arbitrator as provided in sub-clauses (2)
and (3) of Section 16. (500-F-H; 501-AI

5. Under sub-clause 2(a) (iv) of Section 34, the arbitral award may be
B set aside by the Court ifthe award deals with a dispute not contemplated by
or not falling within the terms of the submission to arbitrator or it contains
a decision on matters beyond the scope of the submission to arbitration. The
words 'term of submission to arbitration' in Section 34(2) (a) (iv) refer to
the terms of the arbitration clause. This appears to be the meaning of the
C words if one refers to Section 28 which uses the words 'dispute submitted
to arbitration, and to Section 43(3) which uses the word 'submit' future
dispute to arbitration. (504-D-E]

Rajinder Krishan Khanna v. Union ofIndia, [1998) 7 SCC 129, referred
to.
D
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 2912-2914
of 1999.

From the Judgment and Order dated 2.4.98 of the Bombay High Court
in A.No. 175-177of1998.
E
H.L. Tiku, Balachandran Karup, Ms. Yashmeet and Ashok K. Mahajan
for the Appellant.

D.R. Dhanuka, K.K. Venugopal, S.U. Kamdar, Deepak Chitnis, Mahesh
Agrawal, Rishi Agrawal, E.C. Agrawala and MS. Triveni Potikar for the
F Respondents.

The Judgment of the Court was, delivered by

M. JAGANNADHA RAO, J. Leave granted.

G These three Civil Appeals are directed against the Judgment of the
Bombay High Court in A. Nos. 175-177 of 1998 dated 2.4.98 in Arbitration
Petitions 281-283of1997. By virtue of th is judgment dated 2.4.98, the decision
of the learned Single Judge in Arbitration Petitions 281-283 of 1997 dated
12.1.1998 was confirmed. The learned Single Judge had, by his decision,
dismissed the objections filed by the appellant under Sections 5 and 34 of the
H Arbitration and Conciliation Act, 1996 (hereinafter called the 'Act') to the
OLYMP. SUPERSTRUCTURES PVT. LTD. l'. M.V. KHETAN [JAGANNADHA RAO, J.] 495

awards and confirmed the three Awards passed by the Arbitrator on 13. l I.,I 997. A
The learned Chief Justice of the Bombay High Com;t had appointed a retired
Judge of that Court on ~,6;) 997 as sole arbitrator and the said arbitrator had
passed the three awards on 13 .11.1997.

The facts are as follows: 1

B
There were three main agreements dated 9.3.94, 9.3.94 and 29.6.1994
under which the appellant agreed to sell Flat Nos. I01-102, 201-202 and 301-
302 on first, second and third floors of the proposed building Wembley at
Play ground Road, Vile Parle (East) Bombay to the respondents on the terms
contained in the agreements. The consideration was Rs. 76, 72 and 74 lakhs C
respectively. The possession of the flats was to be handed over alongwith
amenities by 30.10.94. The terms of the contract provided the time- schedule
for payments by the purchasers and said time was to be the essence of the
contract and it was stated that failure to pay would entail· te~ination of the
agreement. The purchasers were to pay 21 % interest in case of default. There
were various other terms. Clause 7 provided that the power of termination D
should not be exercised by the appellant unless and until the appellant had
given to the purchasers 15 days prior notice in writing of the intention to
terminate the agreement and given the purchasers opportunity to set right the
breaches, if any committed, within the said period. Clause 39 in each agreement
contained an arbitration clause which read as follows:
E
"39. All disputes of differences whatsoever which shall at any time
hereafter (whether during the continuance and in force of this
Agreement or upon or after it discharges or determination) arise
between the parties hereto or their respective successors in title and
assigns touching or concerning this Agreement or its interpretation F
or effect or as to the rights duties and liabilities of the parties and
liabilities of the parties hereto or either of them under or by virtue of
this Agreement or otherwise as to any other matter in any way
connected with arising out of or in relation to the subject matter of
this Agreement shall in accordance with the subject to the provisions G
of the Arbitration Act, 1940 or any statutory modification or re-
enactment thereof for the time being in force be referred to a single
arbitrator if agreed upon by the parties or otherwise to the arbitration
of two arbitrators to be appointed by each party to the dispute whose
decision in the matters shall be final and binding on the parties
hereto." H
496 SUPREME COURT REPORTS (1999] 3 S.C.R.

A It will have to be noticed that the above clause did not refer to any
.specific named arbitrator or arbitrators.

Considerable amounts were paid under the above said t~r~e main
agreements to the appellant: The appellant would contend there yvas 'defau It
on part of t~e responden~ while the respondents would contend thpt there
B was no progress in the construction.

There were three other separate agreements dated 9.3..94, 9.3.94 and
29.6.94 (hereinafter called the Interior Design Agreements) between the
appellant and the same identical purchasers in which the appellant was
C appointed as 'Interior Designer' for carrying out renovation and interior
designing and decorating the respective flats and the exterior area and to
provide/install the special amenities in the flats for a lumpsum payment of
Rs. I 0 lakhs each. No amount was, however, paid to the appellant under these
three agreements before or at the time of executing of these three agreements.
,There is again a separate arbitration clause in each of these three agreements.
D It reads as follows:
"5. All disputes and difference which may arise between the parties
hereto in connection with this agreement of interpretation and effect
thereof or in connection with the rights and obligations of the parties
hereto shall be referred to the Joint Arbitration of Shri P.N. Nanavati
E (Solicitor) and Mr. Rashmi Mehta (Solicitor). If the aforesaid Arbitrators
then and in such event such disputes and differences shall be referred
to arbitration of two arbitrators, one to be appointed by each of the
parties hereto. The Arbitrators so appointed shall appoint an umpire
before entering upon the reference. The Arbitrators of the umpire as
the case may be shall be governed by the provisions of the Indian
F Arbitration Act, 1940 or any statutory modification or re-enactment
thereof from time to time in force."

It will be noticed that this clause required reference to specific named
arbitrators.
G
On 24.4.95, the respondent wrote to the appellant seeking information
as to the stage of the construction and as to when the appellant would be
handing over possession of the flats. The appellant replied on 6.6.95
complaining default on the part of the purchasers as some cheques were
dishonored and stated that he was terminating the three agreements giving
H 15 days notice. On 22.6.95 the respondents wrote to the appellant that
OLYMP. SUPERSTRUCTURES PVT. LTD. v. M.V. KHETAN[JAGANNADHA RAO, J.) 497

considerable amounts were paid under each of the main agreements and that A
the appellant had not cared to inform the respondents about the progress of
the construction, that the story of default was false, that the dishonored
cheques had been substituted by Banker's cheques or cash and that the
termination was invalid. The respondents were ready and willing to complete
the contract. On 21. l 0.95 the respondents wrote to the appellant giving details B
of payments and the mode of payment of the balance under the main and the
Interior Design Agreements and stating that l 0 lakhs were paid under each
of the three Interior Design Agreement, by way of cash to the appellant's
solicitor, that only 6 lakhs remained to be paid after the 6th slab was laid and
that the termination of the main agreement was bad in law etc. The appellant
was called upon to withdraw the contention regarding termination and was C
asked as to when the 6th of the slabs would be laid so that the payment of
Rs. 6 lakhs could be made. The appellant did not send any reply. The
respondent then gave a notice on 19.3.96 making various allegations against
the appellant. A reply was sent by the appellant on 27.7.96 limited to the
allegations in the said letter dated 19.3.96. A final notice was given by the
respondents on 8.7.96 stating that as there were several disputes and D
differences between the parties in relation to the agreements dated 9 .3 .94,
9.3.94 and 29.6.1994, they should be referred to one out of the three retired
Judges whose names were suggested by the respondents. As the appellant
failed to reply agreeing for arbitration, one of the respondents moved the
Court on 9.8.96 seeking interim protection before the filing ofa regular petition E
under the Arbitration and Conciliation Act, 1996. Thereafter a regular petition
for appointment of arbitrator was moved under section 11 of the Act on 3.6.97
and an order dated 13.6.97 was passed by the learned Chief Justice appointing
a sole arbitrator on 7.7.97. The learned Arbitrator fixed a preliminary meeting
on 14.7.97. On that day the arbitrator issued certain directions. On 29.7.97, the
respondents filed their claim before the arbitrator. The appellant took several F
adjournments on 19.8.97, 23.9.97 and 3.10.97 and raised an objection on
9. I0.97 regarding the continuance of the arbitrator which objection was
dismissed on 16.10.97. On 16.10.97 the appellant's new counsel sought time
to challenge the order of the arbitrator dated 9.10.97. Adjournment was refused.
The arbitrator took up the matter for evidence. On 16.10.97, the respondents G
(i.e. claimants before arbitrator) examined their witnesses in chief and the
appellant's counsel partly cross-examined them and sought time and the
matter was adjourned for 21.10.97. There were some winding up proceedings
against the appellant and a provisional liquidator was appointed on 30.4.97.
On an application by the respon~ents, the arbitrator, after hearing the counsel
for the parties, passed an order on 22.10.97 that no leave of the company H
498 SUPREME COURT REPORTS [1999] 3 S.C.R.

A court was required at the stage of appointment of a provisional liquidator. The
appellant's advocate sought further time and the same was refused. The
appellant's advocate then filed three IAs for condoning delay in filing the
written statement dated 22.10.97 in all three matters. Delay was condoned.
, Further adjournment sought by appellant was refused. On 27.10.97 evidence
B was recorded but there was no cross examination by the appellants' counsel
and the evidence was closed. On 13. l l. 97, the award was passed granting
relief of specific performance in respect of the three main agreements and also
in respect of the three Interior Design Agreements.

· The appellant challenged the three awards under Section 34 by filing
C three applications in December 1997 and these were dismissed by a learned
Single Judge on 12.1.98 ai;ld by the Division Bench on 2.4.98. It is against
these judgments that the present appeals have been filed.

Learned counsel for the appellant Sri H.L.Tiku raised various contentions.
He contended that the reference to arbitration was based upon the three main
D Agreements dated 9.3.94, 9.3.94 and 29.6.94 and therefore the arbitrator could
not have decided the disputes regarding the three other Interior Design
agreements dated 9.3.94, 9.3.94 and 29.6.94 and there was neither.a prayer nor
a reference of the disputes under the three latter Interior Design Agreements.
It was pointed out that the arbitration clauses in the main agreements could
E not supersede the separate arbitration clauses under the Interior Design
Agreements which provided for named arbitrators. Merely, because the
appellant remained ex parte before the arbitrator after· a stage, the arbitrator
could not assume the correctness of the pleas of the respondents and he
ought to have insisted on, proof of t~e pleas raised by the respondents. A
. point was raised in the grounds...lfithis Court that an arbitrator could not grant
F specific performance of an agreement and hence section 34(2)(b)(i) of the Act
was attracted. It was also contended that in respect of the main agreements,
the respondents had committed default, that respondents were not ready and
willing, that the termination of the main agreement by the appellant was valid
and that, on facts, an award for specific performance coufd not have been
G granted. In any event, as provided in the agreements, the respondents should
have been directed to pay interest on the balance at consideration @ 21 %.

On the other hand, the learned senior counsel for the respondents Sri
D.R. Dhanuka and Sri K.K. Venugopal pointed out that under the arbitration
clause contained in the main agreements, it was permissible to refer to arbitrator
H not only disputes and differences under the main agreements but also in
I.,

OLYMP. SUPERSTRUCTURES PVT. LTD. v. M.V. KHETAN [JAGANNADHA RAO, J.] 499
respect of "connected" matters, that the appellant never raised any point A
relating to jurisdiction under Section 16 of the Act, that the arbitrator could
not decide the dispute concerning the Interior Design Agreements and that
the point was not also raised before the learned Single Judge. For the first
time the point was raised before the Division Bench. The same could not be
permitted to be raised after the award. An arbitrator could grant specific
..... performance of an agreement of sale. So far as the other points raised on the B
merits of the award were concerned, the same could not have been raised in
view of the narrow scope of objections permitted by sub-clause (2)(b) of
Section 34 of the new Act. It was contended that the challenge to the award

- was rightly rejected by the High Court. It was prayed that the appeals be
dismissed. C

On these contentions, the following points arise for consideration:

(I) Whether the appellant is right in. contending that the arbitration
clause 39 in the main ~greement did not permit the arbitrator to deal with the
disputes relating to the' Interior Design Agreement which contained a different D
arbitration clause and whether the award, in respect of the Interior Design
Agreement was void?

(2) Whether the appellant who did not raise any question of jurisdiction
under Section 16 of the Act in relation to the disputes under the Interior
Design Agreements, could have raised a question of jurisdiction of the E
arbitrator or of his power to deal with issues arising under the said Agreements
at the stage of section 34?

(3) Whether an arbitrator is not entitled to pass an award directing
specific performance of an agreement of sale and the subject matter of the F
dispute is not capable of arbitration under section 34(2)(b)(i) of the Act?

(4) Whether the appellant could question factual findings relating to
default, time being essence, readiness and willingness etc. before the arbitrator
under Section 34 of the Act?
G
Points i and 2:

·From the facts mentioned, it would be noticed that there were two sets
of agreements, namely the main set of three agreements dated 9.3.94, 9.3.94
and 29.6.94 and the three other agreements of the same dates dealing with
Interior Designing. Each of main agreements contained an arbitr~tion
I
clause H
,,I

500 SUPREME COURT REPORTS [1999] 3 S.C.R.

A (clause 39) ofa general nature which did not specify any particular arbitrator's
name while the interior Design Agreements in each case contained a separate
arbitration clause (clause 5) mentioning the name of specified arbitrators. It
was the case of the appellant that the notice given on 8.7.96, the petition
under Section 11 of the Act for appointment ofan arbitrator and the reference
B covered only disputes and differences arising under the main agreements and
there was no reference in respect of the disputes and differences arising out
of Interior Design Agreements. It is contended for the appellant that the order
appointing the arbitrator dated 13.6.97 specifically dealt with disputes and
differences under the main agreements only and not those under the Interior
Design Agreements.
c
Before we go into the interpretation of the arbitration clauses, 'we have
to refer to the conduct of the appellant which is very much relevant for
purposes of section 16 of the Act. The respondents had referred in their claim
statement before the arbitrator dated 29.7.97 to the disputes and differences
D arising under the Main agreements as well as under the interior Designer
Agreements. The appellant filed its written statement dated 22. I 0.97 but no
objection was raised that the disputes and differences contained in the three
Interior Design Agreements were not intended to be referred to the arbitrator
or that the same could not be decided by the arbitrator appointed under the
main agreement. The appellants' counsel had cross~exam'ined the respondents'
E witnesses upto a stage and even then no such objection as to scope of
reference was raised: The arbitrator referred in his award to the sole contention
of the appellant before him so far as the Interior Design Agreements were
concerned and that was that the said agreements were void inasmuch as no
amount was paid at the time of the agreements (though Rs. I 0 lakhs each was
-
p agreed to be paid). That was the only contention concerning these three
Interior Design agreements. No dispute as to the power of the arbitrator to
deal with disputes under these three agreements was raised. That means that
the appellant accepted that disputes under these agreements were also covered
by the reference. In the objections to the award filed in the Court under
G section 34 no such point was raised except a general ground G) that the entire
proceedings of arbitration were illegal and bad in law, null and void and that
the award was liable to be set aside. In the order of the learned Single Judge
in para 5 it was stated that only 3 points were raised and we find that this
was not one of those points argued before the learned Single Judge. For the
first time this point relating to the scope of the reference was raised/argued
H before the Division Bench and the same was rejected.
OLYMP. SUPERSTRUCTURES PVT. LTD. v. M.V. KHETAN [JAGANNADHA RAO, J.) 501
...,i
In our view, learned senior counsel for the respondents are right in A
contending that if parties before the arbitrator had any objections to the
arbitrator's Jurisdiction, the same must be raised before the arbitrator as
·,. provided in sub-clauses (2) and (3) of section 16. (We are, however, not
deciding the consequences of not raising the said question at that stage).
Section 16 of the Act reads as follows:
B
"16. Competence of arbitral tribunal to rule on its jurisdiction - (I) 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 the purpose,-

(a) an arbitration clause which forms part of a contract shall be c
treated as an agreement independent of the other terms of the
contract; and
(b) a decision by the arbitral that the contract is null and void
shall not entail ipso jure the invalidity of the arbitration clause.
D
(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 ra;sing such a plea

- merely because that he has appointed, or participated in the
appointment of an arbitrator.
• E
(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 F
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. G
(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."

Section 16 is based on Article 16 of the UNCITRAL model law. Sub- H
502 SUPREME COURT REPORTS [1999] 3 S.C.R.
A clause ( l) of section 16 corresponds to sub-clause ( 1) of Article 16. Sub-
clauses (2) and (3) of section 16 of the Act correspond substantially to sub-
clause (2) of Article 16. The words 'not later than' and 'as soon as may be'
in sub-clause (2) of Article 16 of the Model Law occur in sub- clauses (2) and
(3) of section 16 of the Act.

B It will be noticed that under the Act of 1996 the arbitral tribunal is now
invested with power under sub-clause (1) of section 16 to rule on its own
Jurisdiction including ruling on any objection with respect to the existence
or validity of the arbitration agreement and for that purpose, the arbitration
clause which forms part of the contrac~ shall. be treated as an agreement
C independent of other terms of the contract and any decision by the arbitral
tribunal that the contract is null and void shall not entail ipso jure affect the
validity of the arbitration clause. This is clear from sub-clause (b) of Section
16(1) which states that a decision by the arbitral tribunal that the main
contract is null and void shall not entail ipso jure the invalidity of the
arbitration clause.
D
In the present context sub-clauses (2) and (3) of Section 16 are relevant.
They refer to two types of pleas and the stages at which they can be raised.

E
Under sub-clause (2) a plea that the arbitral tribunal does not have Jurisdiction
shall be raised not later than the submissions of the statement of defence:
however, a party shall not be precluded from raising. such a plea merely
-
because he has appointed or participated in the appointment of an arbitrator.
Under sub-clause (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. These
limitations in sub-clauses (2) and (3) are subject to the power given to the
F arbitrator under sub-clause (4) of Section 16 that the tribunal may, in either
of the. cases referred to in sub-section (2) or sub-section (3) - admit a later
plea if it considered the delay justified. Sub-section (5) requires the arbitral
tribunal to decide on the pleas referred to sub-section (2) or sub-section (3)
at that stage itself. It is further provided that if either of the pleas is rejected
G and the arbitral tribunal holds in favour of its own Jurisdiction, the tribunal
will continue with the arbitral proceedings and proceed to make the arbitral
award. Then comes sub-clause (6) which states that the party aggrieved by
such an arbitral award may make an application for setting aside such an
arbitral award in accordance with Section 34.

H Section 34 of the Act deals with the filing of an application for setting
OL YMP. SUPERSTRUCTURES PVT.LTD. v. M. V. KHETAN (JAGANNADHA RAO, J.] 503

aside the award and reads as follows. Sub-clauses ( l) and (2) are relevant for A
our purpose and they read as follows:

"34. Application for setting aside arbitral award - (1) Recourse to a
court against an arbitral award may be made only by an application
for setting aside such award in accordance with sub-section (2) and
sub-section (3). B
(2) An arbitral award may be set aside by the court only if -
(a) the party making the application furnishes proof th~t -
(i) a party was under some incapacity; or

(ii) the arbitration agreement is not valid under the law to C
which the parties have subjected it or failing any
indication thereon, under the law for the time being in
force; or
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the D
arbitral proceedings or was otherwise unable to present
his case; or
(iv) the arbitral award deals with a dispute not contemplated
by or not falling within the tenns of the submission to
arbitration, or it contains decisions on matters beyond E
the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains
decisions on matters not submitted to arbitration may be F
set aside; or
(v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of
the parties, unless such agreement was in conflict with
a provision of this Part from which the parties cannot G
derogate, or, failing such agreement, was not in
accordance with this Part; or
(b) the court finds that -

(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being H
504 SUPREME COURT REPORTS (1999] 3 S.C.R.

A in force; or

(ii) the arbitral award is in conflict with the public policy of
India.

Explanation.- Without prejudice to the generality of sub-clause (ii)
of clause (b), it is hereby declared, for the avoidance of any doubt,
B
that an award is in conflict with the public policy of India if the making
of the award was induced or affected by fraud or corruption or was
in violation of section 75 or section 81."

Section 34 of the Act is based on Article 34 of the UNCITRAL Model
C Law and it will be noticed that under the 1996 Act the scope of the provisions
for setting aside the award is far less the same under Section 30 or Section
33 of the Arbitration Act of 1940.

It will be noticed that under sub-clause 2(a) (iv) of Section 34, the
arbitral award may be set aside by the Court if the award deals with a dispute
D not contemplated by or not falling within the terms of the submission to
arbitrator or if it contains a decision on matters beyond the scope of the
submission to arbitration. The proviso to clause (iv) deals with severability.

The words 'te1n1s of the submission to arbitration' in Section 34 (2)(a)(iv)
in our view, refer to the te1n1s of the arbitration clause. This appears to be
E the meaning of the word if one refer to Section 28 which uses the words
'dispute submitted to arbitration' and to Section 43 (3) which uses the word
'submit' future dispute to arbitration.

A question arises whether in view of the provisions of Section 16(2)
which uses the words 'not later than', any such objection as contained in
F Section 16(2) not raised before the arbitrator can be permitted to be raised for
·the first time under Section 34. Similarly a question arises whether in view of
the proviso of Section 16(3) which uses the words 'as soon as' any objection
as contained in Section 16(3), cannot be raised for the first time under Section
34.
G
It may be argued on one side that the time limits set in Arbitration
Clauses (2) and (3) of Section 16 are mandatory and do not permit the said
question to be raised at a later point of time even under Section 34. An
opposite view could be that these being jurisdictional issues, the fact that
they were not raised earlier could not preclude the questions being raised
H under Section 34 inasmuch as consent, express or implied could not confer
OL YMP. SUPERSTRUCTURES PVT.LTD. v. M. V. KHETAN [JAGANNADHA RAO, J.J 505
__..
,
jurisdiction. A
·we do not think it necessary to decide this question in view of the fact
that though Section 16 was referred to during the course of the hearing, the
learned senior counsel for respondents had argued on merits that the arbitrator
had jurisdiction to decide the disputes/differences concerning the Interior
Design Agreements also and that even if the appellant could be permitted to B
raise these issues at the stage of Section 34, there was no substance in the
said contentions.

We shall, therefore, proceed to decide the question of jurisdiction on
the assumption that the appellant is not precluded from raising these questions
at the stage of Section 34 though these issues have not been raised before
c
the arbitration as per sub-clauses (2) and (3) Section 16.

Before we do so, we shall advert to a recent decision of this Court in
Rajinder Krishan Khanna v. Union of India, [1998] 7 SCC 129, wherein this
Court referred to Section 16 and Section 34 (2)(a)(iv) of the Act. In that case D
a reference was made to arbitrators when the appeal was being heard by this
Court. The appellant was the claimant. The opposite party raised a specific
plea before the arbitrators that they had no jurisdiction to decide about the
; value of the potentiality of the land and that the claim petition before the
arbitrator could not have included the above claim, which was outside the
E

- reference and outside the writ petition and the Civil ~ppeal from which the
reference arose by consent. It was argued for the appellant in reply that the
respondents did not have a specific issue framed by the arbitrators in regard
to the scope of the reference and the respondents were estopped from
contending that the arbitrators could not have dealt with the question. This
Court held that this case was not a case where no objection was raised by F
the respondent before the arbitrators as to the scope of the reference. A
specific objection was raised in the written statement of the respondents that
the potentiality of the land was not one of the questions referred to the

' arbitrators. This Court held that the fact that an issue was not framed by the
arbitrators that the item was not covered by the reference did not raise any
G
estoppel. The said questjon as to the scope of the reference could therefore
be permitted" to be raised under Section 34(2)(a)(iv) in the objections to the
award. I• is true that on the facts of the case before us, the objection as to
the scope of the reference was not raised in the written statement of the
appellant. But as already stated, we are not deciding the question whether the
appellant is precluded at the stage of section 34 from raising the question H
506 SUPREME COURT REPORTS (1999] 3 S.C.R.

A relating to the scope of the reference. We shall assume, for the purpose of
this case, that the said contention can still be raised under Section 34(2)(a)(iv).
We shall accordingly deal with the merits of the question of jurisdiction of
the arbitrator.

It is true that there are two agreements in each of the three appeals
B before us. One is the main agreement relating to construction of flats and the
arbitration clause 39 there is general and does not refer to any named arbitrator.
It is also true that there is a separate arbitration clause 5 in the Interior Design
Agreement which gives the names of specific arbitrators. But it must be
noticed that clause 39 permits reference to arbitration not only of issues
C arising under the _main agreement but also those disputes or differences which
are "connected" with disputes arising under the main agreement. The following
words in the main agreement are important.

"Otherwise as to any other method in any way connected with, arising
out of or in relation to the subject matter of this agreement."
D In other words, clause 39 refers to the 'subject matter' of the main
agreement and also to 'any other matters' and- these 'any other matters' if
they are "connected" with or arise out of or are in relation to the subject
matter of the main agreement, the disputes and differences concerning those
'other m_atters' can also be referred to arbitration under clause 39 of the main
E agreement. In other words, parties intended arbitration in respect of the main
disputes and connected disputes before one arbitral tribunal.

As to the meaning of the words "connected with, arising out of or in
relation thereto", we may refer to Renusagar Power Co.Ltd v. General Electric
Co., (1984] 4 SCC 679. It was held that these words are of the widest amplitude
F and content and include even questions as to the existence and effect (scope)
of the arbitration agreement.

Question is whether the disputes and differences arising under the
Interior Design Agreement are integrally "connected with" the disputes and
G difference~rising from the main contract? In our view, they are. The main
agreement refers to the payment of the last instalment of Rs.17 lakhs against
'taking of possession' of the flats. Therefore the main agreements extended
upto the time of taking of possession by the purchasers. Para 8 of the main
agreement states that the fixtures, fittings and amenities to be provided by
the Developers in the said building and the flat/unit are those that are set out
H in Annexure E annexed to the main agreement. Now annexure E refers not only
OLYMP. SUPERSTRUCTURES PVT. LTD. v. M.V. KHETAN [JAGANNADHA RAO, J.] 507
to the building but to the type of doors, corridors, fixtures, the nature of the A
flooring, the bathroom tiles and fittings, the Kitchen, the W.C. and the nature
of the Electric Wiring. When we come to the Interior Design Agreement,
Annexure A itself refers to the element of designs, Interior finishes/fittings/
services and deals with the Walls, Balcony, type of Main Door and Internal
Doors, External Doors. It also deals ';Vith the type of staircase, the flooring B
(Italian marbles for Hall room, Bed rooms and passages), Toilet (Italian Marbles,
Designed Basin Ceiling Valve plastering, Bathtub/Jacuzzi all hardware fitting
inclusively Germany range), Marble skirting, Lobby & Entrance (Italian Marble
Flooring), Plumbering, Gas system, Electrical (Heavy Duty ISi quality concealed
copper wiring) etc.
c
Thus it will be noticed that there are several it~ms in Schedule E of the
main agreement which overlap the items in Schedule A of the Interior Design
Agreement. In view of the overlapping, in our opinion it has to be said that
several items in the Schedule A of the Interior Design Agreement are in
modification/substitution of the items in the Main Agreement. Therefore the D
coverage of the two agreements makes it clear that the execution of the
Interior Design Agreement is 'connected with' the execution of the main
Agreement. It may also be noted that the date of the main agreement and the
Interior Design Agreement is the same in each of the three cases and clause
3 of the Interior Design Agreem~nt states specifically that 'the work of the E
said renovation, designing and installation shall commence from the execution
thereof which means that the execution of the Interior Design agreement and
the main agreement is to be simultaneous.

But then, we have to explain the purpose of the arbitration Agreement
contained in clause 5 of the Interior Design Agreement. ls it wholly superfluous. F

If there is a situation where there are disputes and differences in
connection with the main agreement, and also disputes in regard to "other
matters" "connected" with subject matter of the main agreement then in such
a situation, in our view, we are governed by the general arbitration clause 39 G
of the main agreement under which disputes under the main agreement and
disputes connected therewith can be referred to the same arbitral tribunal.
This clause 39 no doubt does not refer to any named arbitrators .. So far as
Clause 5 of the Interior Decorator Agreement is concerned, it refers to disputes
and differences arising from that agreement which can be referred to named
arbitrators and said clause 5, in our opinion, comes into play only in a H
508 SUPREME COURT REPORTS [1999] 3 S.C.R.

A situation where there are no disputes and differences in relation to the main
agreement and the disputes and differences are solely confined to the Interior
Design Agreement. That, in our view, is the true intention of parties and that
is the only way by which the general arbitration provision in clause 39 of the
main agreement and the arbitration provision for named arbitrator contained
B in clause 5 of the Interior Design Agreement can be harmonised or reconciled.
Therefore, in a case like the present where the disputes and differences cover
the main agreement as well as the Interior Design Agreement, - (that there are
disputes arising under the main agreement and the Interior Design Agreement
is not in dispute) - it is the general arbitration clause 39 in the main agreement
that governs because the questions arise also in regard to disputes relating
C to the overlapping items in the Schedule to the main agreement and the
Interior Design Agreement, as detailed earlier. There cannot be conflicting
awards in regard to items which, overlap in the two agreements. Such a
situation was never contemplated by the parties. The intention of the parties
when they incorporated clause 39 in the main agreement and clause 5 in the
D Interior Design agreement was that the former clause was to apply to situations
when there were disputes arising under both agreements and the latter was
to apply to a situation where there were no disputes or differences arising
under the main contract but the disputes and differences were confined only
to the Interior Design Agreement. A case containing two agreements with
arbitration clauses arose before this Court in Aggarwal Engineering Co. v.
E T.H. Machine Industries, AIR (1977) S.C. 2122. There were arbitration Clauses
in two contracts one for sale of two machines to the appellant and the other
appointing the appellant as sales-representative. On the facts of the case, it
was held that both the clauses op~rated separately and this conclusion was
based on the specific clause in the sale contract that it was the "sole repository"
F of the sale transaction of the two machines. Krishna Iyer, J. held that if that
were so, then there was no jurisdiction for travelling beyond the sale contract.
The language of the other agreement appointing the appellant as sales
representative was prospective and related to a sales agency and 'later
purchases', other than the purchases of these two machines. There was
therefore no overlapping. The case before us and the above case exemplify
G contrary situations. In one case the disputes are connected and in the other
they are distinct and not connected. Thus, in the present case, clause 39 of
the main agreement applies. Points I and 2 are decided accordingly in favour
of the respondents.

H Point 3: This point becomes relevant because if the arbitrators cannot
OL YMP. SUPERSTRUCTURES PVT. LTD. v. M.V. KHETAN [JAGANN:ADHA RAO, J.] 509

grant specific performance, a point can be raised under Section 34(2)(b)(i) that A
the subject matter of the dispute is not capable of arbitration.

One of the points raised in the grounds in this Court is that the grant
of specific perfonnance is discretionary and the discretion to grant or not to
grant specific perfonnance has been conferred by the Specific Relief Act, 19~3
on the Civil Court and hence the arbitrator cannot be deemed to have been B
empowered to grant such a relief.

We may point out that the Punjab High Court in Laxmi Narayan v.
Raghubir Singh, AIR ( 1956) Punjab 249, the Bombay High Court in Fertiliser
Corporation of India v. Chemical Construction Corporation, ILR (1974) C
Bombay 856/858 (DB) and the Calcutta High Court in Keventer Agro Ltd v.
Seegram Comp. Ltd, Apo 498 of(l997) & Apo 449 of(401) (dated 27.1.98)
have taken the view that an arbitrator can grant specific perfonnance of a
contract relating to immovable property under an award. No doubt, the Delhi
High Court in Smt. Sulochana Uppal v. Shri Surinder Sheel Bhabri, AIR
(1991) Del. 138, has however held that the arbitrator cannot grant specific D
perfonnance. The question arises as to which view is correct.

In our opinion, the view taken by the Punjab, Bombay and Calcutta
High Courts is the correct one and the view taken by the Delhi High Court
is not correct. We are of the view that the right to specific performance of
an agreement of sate deals with contractual rights and it is certainly open to E
the parties to agree - with a view to shorten litigation in regular courts - to
refer the issues relating to specific performance to arbitration. There is no
prohibition in the Specific Relief Act, 1963 that issues relating to specific
performance of contract relating to immovable property cannot be referred to
arbitration. Nor is there such a prohibition contained in the Arbitration and F
Conciliation Act, 1996 as contrasted with Section 15 of the English Arbitration
Act, 1950 or Section 48(5)(b) of the English Arbitration Act, 1996 which
contained a prohibition relating to specific performance of contracts concerning
immoveable property.

It is stated in Halsburys' Laws of England 4th Ed., (Arbitration Vol.2 G
para 503) as follows:

"Nature of the dispute or difference: The dispute or difference which
the parties to an arbitration agreement agree to refer must consist of
a justiciable issue triable civilly. A fair test of this is whether the
differences can be compromised lawfully by way of accord and H
510 SUPREME COURT REPORTS [1999] 3 S.C.R.

A satisfaction (Cf. Bacon's Abidgement and Award A)."

Reference is made there to certain disputes like criminal offences of a
public nature, disputes arising out of illegal agreements and disputes relating
to status, such as divorce, which cannot be referred to arbitration. It has,
however, been held that if in respect of facts relating to a criminal matter, (say)
B physical injury, if there is a right to damages for personal injury, then such
a dispute can be referred to arbitration (Keir v. Leeman) (1846) 9 Q.B. 371.
Similarly, it has been held that a husband and wife may, refer to arbitration
the terms on which they shall separate, because they can make a valid
agreement between themselves on that matter (Soi//eux v. Herbst) (1801) 2
C Bos & p. 444; Wilson v. Wilson, (1848) l HL Cas 538; (Cahill v. Cahill) (1883)
8 App Cas 420(HL).

Further, as pointed in the Calcutta case, merely because there is need
for exercise of discretion in case of specific perfonnance, it cannot be said that
only the civil court can exercise such a discretion. In the. above case, Ms.
D Ruma Pal, J. observed:

" ..... merely because the sections of the Specific Relief Act confer
discretion on courts to grant specific performance of a contract does
not means that parties cannot _agree that the discretion will be exercised
by a forum of their choice. If the converse were true, then whenever
E a relief is dependent upon the exercise of discretion of a court by
statute e.g. the grant of interest or costs, parties should be precluded
from referring the dispute t'> arbitration."

We agree with this reasoning. We hold on Point 3 that disputes relating
F to specific performance of a contract can be referred to arbitration and Section
34(2)(b)(i) is not attracted. We ove1rule the view of the Delhi High Court. Point
3 is decided in favour of respondents.

Point 4: This point concerns the issues between the parties on the
merits of the award relating to default, time being exercise, readiness and
G willingness etc. These are all issues of fact. Ifwe examine Section 34(2) of the
Act, the relevant provisions of which have already been extracted under Point
I and 2, it will be seen that under sub-clause (b) of Section 34(2), interference
is pennissible by the Court only if

(i) the subject matter of the dispute is non capable of settlement by
H arbitration under the law for the time being in force, or
OLYMP. SUPERSTRUCTURES PVT. LTD. v M.V. KHETAN [JAGANNADHA RAO, J.] 511
(ii) the arbitral amount is in conflict with the public policy in India. A
The Explanation to the provisions says that without prejudice to the
generality of sub-clause (ii) of clause (b), it is declared for the avoidance of
any doubt, that an award is to be treated as in conflict with the public poiicy
of 1ndia if the making of the award was induced or affected by fraud, or
corruption or was in violation of Sections 75 or 81. Section 75 deals with B
confidentiality while Section 81 deals with admissibility of evidence in other
proceedings. We do not have any such situation before us falling within
Section 34(2)(b)(ii). The factual points raised in the case before us, to which
we have referred to earlier, do not fall within Section 34(2)(b)(ii). Coming to
Section 34{2)(b)(i) we have already held that the subject matter Bf the dispute £
is not incapable of settlement by arbitration under the law for the time being
in force. Nor is any point raised that the arbitral award is in conflict with the
public policy of India. We are, therefore, of the view that the merits of the
award, on the facts of the case do not fall under Section 34(2)(b) of the Act.
Point 4 is held accordingly against the appellant.
D
For the aforesaid reasons, the appeals fail and are dismissed but in the
circumstances without costs.

l.M.A. Appeals .dismissed.

•