Supreme Court of India
STATE OF GOAversusPRAVEEN ENTERPRISES
- Citation
- 2011 INSC 423
- Decided
- 4 July 2011
- Disposal
- Appeal(s) allowed
- Bench
- R V RAVEENDRAN
Holding
When an arbitration agreement provides for referral of all disputes, the arbitrator has jurisdiction to entertain counter‑claims even if they were not listed in the Section 11 application, and the award is therefore upheld.
Summary
The State of Goa contracted Praveen Enterprises for construction work and included an arbitration clause that referred all disputes to a sole arbitrator appointed by the Chief Engineer, CPWD. After terminating the contract, the contractor filed claims and the State filed counter‑claims; the State failed to appoint an arbitrator, prompting the contractor to seek appointment under s.11 of the Arbitration and Conciliation Act, 1996. A sole arbitrator was appointed, heard both the contractor's claims and the State's counter‑claims, and issued an award that the contractor challenged under s.34. The lower courts held the arbitrator lacked jurisdiction to consider the counter‑claims because they were not listed in the s.11 application, but the Supreme Court reversed this, holding that where the arbitration agreement refers to "all disputes" the arbitrator’s jurisdiction includes counter‑claims even if not specifically referenced. The Court clarified that s.11 only mandates appointment of the arbitrator and does not require the appointing authority to list disputes, and that s.23 together with s.2(9) permits parties to raise counter‑claims unless the agreement limits the reference. Consequently, the award was upheld in full and the challenge dismissed.
Issues considered
- Whether a counter‑claim filed in arbitration is maintainable when the arbitration agreement does not expressly limit the reference to specific disputes.
- Whether Section 11 of the Arbitration and Conciliation Act, 1996 requires the appointing authority to specify the disputes to be referred to the arbitrator.
- Whether the arbitrator can entertain counter‑claims that were not mentioned in the application under Section 11.
- Whether an arbitration clause that refers to "all disputes" confers jurisdiction on the arbitrator to decide counter‑claims.
- How limitation periods under the Limitation Act, 1963 apply to counter‑claims in arbitration.
Legislation cited
- Arbitration Act, 1940s. 20
- Arbitration and Conciliation Act, 1996s. 11, s. 21, s. 23, s. 25, s. 2(9), s. 3, s. 32, s. 34, s. 43
- Limitation Act, 1963s. 2(2)(b), s. 3
Subjects
ArbitrationCounter‑claimSection 11Section 23Reference to arbitrationLimitationArbitral jurisdictionConstruction contractArbitration clause
Judgment
[2011] 10 S.C.R. 1026
A STATE OF GOA
v.
PRAVEEN ENTERPRISES
(Civil Appeal No. 4987 of 2011)
JULY 4, 2011
B
[R.V. RAVEENDRAN AND A.K. PATNAIK, JJ.)
Arbitration and Conciliation Act, 1996 - s.11, s.23 r/w
s.2(9) and s.34 - Appellant-State had entrusted construction
C work to respondent in terms of a contract...,. Contract contained
an arbitration clause - Contract terminated by the appellant
- Respondent raised certain claims and gave a notice to the
appellant to appoint an arbitrator in terms of the arbitration
clause - As appellant did not do so, respondent filed
D application u/s. 11 of the Act for appointment of an arbitrator
- Application allowed and a sole arbitrator appointed -
Arbitrator considered the claims of the respondent-contractor
as also counter claims of the appellant and thereafter passed
arbitral award -Award challenged by respondent uls.34 - The
E civil court held that the arbitrator could not enlarge the scope
of the reference and entertain either fresh claims by the
claimant-respondent or counter claims from the appellant -
Order upheld by the High Court - On appeal, held: Section
11 of the Act requires the Chief Justice or his designate to
F either appoint the arbitratorls or take necessary measures in
accordance with the appointment procedure contained in the
arbitration agreement - The Chief Justice or the designate
is not required to draw up the list of disputes and refer them
to arbitration - Appointment of Arbitral Tribunal is an implied
G reference in terms of the arbitration agreement - Where the
arbitration agreement provides for referring all disputes
between the parties (whether without any exceptions or subject
to exceptions), the arbitrator will have jurisdiction to entertain
any counter claim, even though it was not raised at a stage
H 1026
STATE OF GOA v. PRAVEEN ENTERPRISES 1027
earlier to the stage of pleadings before the Arbitrator - Where A
however the arbitration agreement requires specific disputes
to be referred to arbitration and provides that the arbitrator will
have the jurisdiction to decide only the disputes so referred,
the arbitrator's jurisdiction is controlled by the specific
reference and he cannot travel beyond the reference, nor B
entertain any additional claims or counter claims which are
not part of the disputes specifically referred to arbitration - In
the instant case, the. arbitration clause contemplated all
disputes being referred· to arbitration by a sole arbitrator - It
referred to an Appointing Authority (Chief Engineer, CPWD), c
whose role was only to appoint the arbitrator - Though the
arbitration clause required the party invoking the arbitration
to specify the disputels to be referred to arbitration, it did not
require the appointing authority to specify the disputes or refer
any specific disputes to arbitration nor required the Arbitrator 0
to decide only the referred disputes - It did not bar the
arbitrator deciding any counter claims - In the absence of
agreement to the contrary, the counter claims by the appellant
were maintainable and arbitrable having regard to s.23 r/w
s.2(9) of the Act - Consequently the award of arbitrator is E
upheld in its entirety and the challenge thereto by the
respondent is rejected.
Under an agreement, the appellant-State of Goa
entrusted construction work to the respondent. Clause
25 of the agreement provided for settlement of disputes F
by arbitration. On the ground that the Respondent-
contractor did not complete the work even by the
extended date of completion, the contract was terminated
by the appellant. The respondent raised certain claims
and gave a notice to the appellant to appoint an arbitrator G
in terms of the arbitration clause. As the appellant did not
do so, the respondent filed an application under section
11 of the Arbitration and Conciliation Act, 1996 for
appointment of an arbitrator. The said application was
H
1028 SUPREME COURT REPORTS [2011] 10 S.C.R.
A allowed and a sole arbitrator was appointed. The
arbitrator entered upon the reference and called upon the
parties to file their statement.
The respondent filed its claim statement before th·e
8 arbitrator. The appellant filed its Reply Statement with
counter claim. The arbitrator considered the claims of the
contractor and counter claims of the appellant and
thereafter passed arbitral award. Respondent filed
application under section 34 of the Act, challenging the
C award insofar as (i) rejection of some its other claims; and
(ii) award made on counter claim No.3. The civil court
upheld the award in regard to the claims of the
respondent but accepted the objection raised by the
respondent in regard to award made on the counter
claim. The court held that the arbitrator could not enlarge
D the scope of the reference and entertain either fresh
claims by the claimant-respondent or counter claims from
the appellant. The order was upheld by the High Court
in appeal. The High Court held that the counter claims
were bad in law as they were never placed before the
E court by the appellant (in the proceedings under section
11 of the Act for appointment of arbitrator) and they were
not referred by the court to arbitration, and in such
circumstances the arbitrator had no jurisdiction to
entertain a counter claim.
F
In the instant appeal, the appellant contended that as
a respondent in arbitration proceedings, in the absence
of a bar in the arbitration agreement, it was entitled to
raise its counter claims before the arbitrator, even though
G it had not raised them in its statement of objections to the
proceedings under section 11 of the Act. It further
contended that section 11 of the Act does not
contemplate 'reference of disputes' by the Chief Justice
or his designate; and the High Court committed a serious
error in holding that in the absence of a reference by the
H
STATE OF GOA v. PRAVEEN ENTERPRISES 1029
court, the arbitrator had no jurisdiction to entertain a A
counter claim.
The respondent, on the other hand, contended that ··
having regard to the provisions of section 21 of the Act,
an arbitrator will have jurisdiction to decide only those 8
disputes which were raised and referred to him by the
court.
The question which therefore arose for consideration
was: Whether the respondent in an arbitration
proceedings is precluded from making a counter-claim, C
unless a)it had served a notice upon the claimant
requesting that the disputes relating to that counter-claim
be referred to arbitration and the claimant had concurred
in referring the counter claim to the same arbitrator; and/
or b) it had set out the said counter claim in its reply D
statement to the application under section 11 of the Act
and the Chief Justice or his designate refers such counter
claim also to arbitration.
Allowing the appeal, the Court
E
HELD:
What is 'Reference to arbitration'
1.1. 'Reference to arbitration' can be by parties
F
themselves or by an appointing authority named in the
arbitration agreement or by a court on an application by
a party to the arbitration agreement. (a) If an arbitration
agreement provides that all disputes between the parties
relating to the contract (some agreements may refer to
some exceptions) shall be referred to arbitration and that G
the decision of the arbitrator shall be final and binding,
the 'reference' contemplated is the act of parties to the
arbitration agreement, referring their disputes to an
agreed arbitrator to settle the disputes. (b) If an arbitration
agreement provides that in the event of any dispute H
1030 SUPREME COURT REPORTS [2011] 10 S.C.R.
A between the parties, an authority named therein shall
nominate the arbitrator and refer the disputes which
required to be settled by arbitration, the 'reference'
contemplated is an act of the appointing authority
referring the disputes to the arbitrator appointed by him.
B (c) Where the parties fail to concur in the appointment of
arbitrator/s as required by the arbitration agreement, or
the authority named in the arbitration agreement failing
to nominate the arbitrator and refer the disputes raised
to arbitration as required by the arbitration agreement, on
c an application by an aggrieved party, the court can
appoint the arbitrator and on such appointment, the
disputes between the parties stand referred to such
arbitrator in terms of the arbitration agreement. [Para 9]
[1044-F-H; 1045-A-D]
D 1.2. Reference to arbitration can be in respect of all
disputes between the parties or all disputes regarding a
contract or in respect of specific enumerated disputes.
Where 'all disputes' are referred, the arbitrator has the
jurisdiction to decide all disputes raised in the pleadings
E (both claims and counter claims) subject to any
limitations placed by the arbitration agreement. Where the
arbitration agreement provides that all disputes shall be
settled by arbitration but excludes certain matters from
arbitration, then, the arbitrator will exclude the excepted
F matter and decide only those disputes which are
arbitrable. But where the reference to the arbitrator is to
decide specific disputes enumerated by the parties/court/
appointing authority, the arbitrator's jurisdiction is
circumscribed by the specific reference and the arbitrator
G can decide only those specific disputes. [Para 10] [1045-
E-G]
1.3. Though an arbitration agreement generally
provides for settlement of future disputes by reference to
arbitration, there can be 'ad-hoc' arbitrations relating to
H
STATE OF GOA v. PRAVEEN ENTERPRISES 1031
existing disputes. In such cases, there is no prior A
arbitration agreement to refer future disputes to
arbitration. After a dispute arises between the parties,
they enter into an arbitration agreement to. refer that
specific dispute to arbitration. In such an arbitration, the
arbitrator can.not enlarge the scope of arbitration by B
permitting either the claimant to modify or add to the
claim or the respondent to make a counter claim. The
arbitrator can only decide the dispute referred to him,
unless the parties again agree to refer the additional
disputes/counter claims to arbitration and authorize the c
arbitrator to decide them. [Para 11] [1045-H; 1046-A-B]
1.4. 'Reference to arbitration' can be in respect of
reference of disputes between the parties to arbitration,
or may simply mean referring the parties to arbitration.
Section 8 of the Act is an example of referring the parties D
to arbitration. While section 11 contemplates
appointment of arbitrator [vide sub-sections (4), (5) and
(9)] or taking necessary measure as per the appointment
procedure under the arbitration agreement [vide sub-
section (6)], section 8 of the Act does not provide for E
appointment of an arbitrator, nor referring of any disputes
to arbitration, but merely requires the judicial authority
before whom an action is brought in a matter in regard
to which there is an arbitration agreement, to refer the
parties to arbitration. When the judicial authority finds F
that the subject matter of the suit is covered by a valid
arbitration agreement between the parties to the suit, it
will refer the parties to arbitration, by refusing to decide
the action brought before it and leaving it to the parties
to have recourse to their remedies by arbitration. When G
such an order is made, parties may ~ither agree upon an
arbitrator and refer their disputes to him, or failing
agreement, file an application under section 11 of the Act
for appointment of an arbitrator. The judicial authority
'referring the parties to arbitration' under section 8 of the H
1032 SUPREME COURT REPORTS [2011) 10 $.C.R.
A Act, has no power to appoint an arbitrator. It may however
record the consent of parties to appoint an agreed
arbitrator. [Para 12) [1046-C-G]
Charuvil Koshy Verghese v. State of Goa 1998 (2) SCC
21 - referred to. ·
8
Sections 21 and 43 of the Act
2.1. Section 21 provides that unless otherwise
agreed by the parties, the arbitral proceedings in respect
c of a particular dispute commences on the date on which
a request for that dispute to be referred to arbitration is
received by the respondent. Taking a cue from the said
section, the respondent submitted that arbitral
proceedings can commence only in regard to a dispute
0 in respect of which notice has been served by a claimant
upon the other party, requesting such dispute to be
referred to arbitration; and therefore, a counter claim can
be entertained by the arbitrator only if it has been
referred to him, after a notice seeking arbitration in regard
to such counter claim. There is no basis for such a
E contention. The purpose of section 21 is to specify, in the
absence of a provision in the arbitration agreement in
that behalf, as to when an arbitral proceedings in regard
to a dispute commences. This becomes relevant for the
purpose of section 43 of the Act. Sub-section (1) of
F section 43 provides that the Limitation Act 1963 shall
apply to arbitrations as it applies to proceedings in courts.
Sub-section (2) of section 43 provides that for the
purposes of section 43 and the Limitation Act, 1963, an
arbitration shall be deemed to have commenced on the
G date referred to in section 21 of the Act. Having regard
to section 43 of the Act, any claim made beyond the
period of limitation prescribed by the Limitation Act, 1963
will be barred by limitation and the arbitral tribunal will
have to reject such claims as barred by limitation. [Para
H 13) [1046-H; 1047-A-E]
STATE OF GOA v. PRAVEEN ENTERPRISES 1033
2.2. Section 3 of the Limitation Act, 1963 provides for A
bar of limitation. In regard to a claim which is sought to
be enforced by filing a civil suit, the question whether the
suit is within the period of limitation is decided with
reference to the date of institution of the suit, that is, the
date of presentation of a plaint. As Limitation Act, 1963 B
is made applicable to arbitrations, there is a need to
specify the date on which the arbitration is deemed to be
instituted or commenced as that will decide whether the
proceedings are· barred by limitation or not. Section 3 of
Limitation Act, 1963 specifies the date of institution for c
suit, but does not specify the date of 'institution' for
arbitration proceedings. Section 21 of the Act supplies
the omission. But for section 21, there would be
considerable confusion as to what would be the date of
'institution' in regard to the arbitration proceedings. It will 0
be possible for the respondent in an arbitration to argue
that the limitation has to be calculated as on the date on
which statement of claim was filed, or the date on which
the arbitrator entered upon the reference, or the date on
which the arbitrator was appointed by the court, or the
date on which the application was filed under section 11 E
of the Act. In view of section 21 of the Act providing that
the arbitration proceedings shall be deemed to
commence on the date on which "the request for that
dispute to be referred to arbitration is received by the
respondent" the said confusion is cleared. Therefore the F
purpose of section 21 of the Act is to determine the date
of commencement of the arbitration proceedings,
relevant mainly for deciding whether the claims of the
claimant are barred by limitation or not. [Paras 14, 15]
[1047-F; 1048-F-H; 1049-A-C] G
2.3. There can be claims by a claimant even without
a notice seeking reference. One may take an example
where a notice is issued by a claimant raising disputes
regarding claims 'A' and 'B' and seeking reference H
1034 SUPREME COURT REPORTS [2011] 10 S.C.R.
A thereof to arbitration. On appointment of the arbitrator, the
claimant files a claim statement in regard to the said
claims 'A' and '8'. Subsequently if the claimant amends
the claim statement by adding claim 'C' [which is
permitted under section 23(3) of the Act] the additional
B claim 'C' would not be preceded by a notice seeking
arbitration. The date of amendment by which the claim 'C'
was introduced, will become the relevant date for
determining the limitation in regard to the said claim 'C',
whereas the date on which the notice seeking arbitration
c was served on the other party, will be the relevant date
for deciding the limitation in regard to Claims 'A' and 'B'.
[Para 16) [1049-D-G]
2.4. As far as counter claims are concerned, there is
no room for ambiguity in regard to the relevant date for
D determining the limitation. Section 3(2)(b) of Limitation
Act, 1963 provides that in regard to a counter claim in
suits, the date on which the counter claim is made in court
shall be deemed to be the date of institution of the counter
claim. As Limitation Act, 1963 is made applicable to
E arbitrations, in the case of a counter claim by a
respondent in an arbitral proceedings, the date on which
the counter claim is made before the arbitrator will be the
date of "institution" in so far as counter claim is
concerned. There is, therefore, no need to provide a date
F of 'commencement' as in the case of claims of a claimant.
Section 21 of the Act is therefore not relevant for counter
claims. There is however one exception. Where the
respondent against whom a claim is made, had also made
a claim against the claimant and sought arbitration by
G serving a notice to the claimant but subsequently raises
that claim as a counter claim in the arbitration
proceedings initiated by the claimant, instead of filing a
separate application under section 11 of the Act, the
limitation for such counter claim should be computed, as
H on the date of service of notice of such claim on the
STATE OF GOA v. PRAVEEN ENTERPRISES 1035
claimant and not on the date of filing of the counter claim. A ·
[Para 17] [1049-H; 1050-A-D]
Scope of sections 11 and 23 of the Act
3.1. Section 11 refers to appointment of arbitrators.
Section 11 contemplates the Chief Justice or his B
designate appointing the arbitrator but does not contain
any provision for the court to refer the disputes to the
arbitrator. Sub-sections (4), (5) and (9) of section 11 of the
Act require the Chief Justice or his designate to appoint
the arbitrator/s. Sub-section (6) requires the Chief Justice C
or his designate to 'take the necessary measure' when
an application is filed by a party complaining that the
other party has failed to act as required under the
appointment procedure. All these sub-sections
contemplate an applicant filing the application under D
section 11, only after he has raised the disputes and only
when the respondent fails to co-operate/concur in regard
to appointment of arbitrator. [Paras 18 to 21) [1050-E;
1051-A-C]
3.2. Section 23 of the Act makes it clear that when the E
arbitrator is appointed, the claimant is required to file the
statement and the respondent has to file his defence
statement before the Arbitrator. The claimant is not bound
to restrict his statement of claim to the claims already
raised by him by notice, "unless the parties have F
otherwise agreed',as to the required elements" of such
claim statement.: It is also made clear that "unless
otherwise agreed \by the parties" the claimant can also
subsequently amend or supplement the claims in the
claim statement. That is, unless the arbitration agreement G
requires the Arbitrator to decide only the specifically
referred disputes, the claimant can while filing the
statement of claim or thereafter, amend or add to the
claims already made. Similarly section 23 read with
section 2(9) makes it clear that a respondent is entitled H
1036 SUPREME COURT REPORTS [2011] 10 S.C.R.
A to r11ise a counter claim "unless the parties have
otherwise agreed" and also add to or amend the counter
claim, "unless otherwise agreed". Unless the arbitration
agreement requires the Arbitrator to decide only the
specifically referred disputes, the respondent can file
B counter claims and amend or add to the same, except
where the arbitration agre~ment restricts the arbitration
to only those disputes which are specifically referred to
arbitration, both the claimant and respondent are entitled
to make any claims or counter claims and further entitled
c to add to or amend such claims and counter claims
provided they are arbitrable and within limitation. [Para
22] [1054-D-H; 1055-A-B]
3.3. Section 11 of the Act requires the Chief Justice
or his designate only to appoint the arbitrator/s. It does
D not require the Chief Justice or his designate to identify
the disputes or refer them to the Arbitral Tribunal for
adjudication. Where the appointment procedure in an
arbitration agreement requires disputes to be formulated
and specifically referred to the arbitrator and confers
E jurisdiction upon the arbitrator to decide only such
referred disputes, when an application is filed under
section 11 (6) of the Act, alleging that such procedure is
not followed, the Chief Justice or his designate will take
necessary measures under section 11 (6) of the Act to
F ensure compliance by the parties with such procedure.
Where the arbitration agreement requires the disputes to
be formulated and referred to arbitration by an appointing
-authority, and the appointing authority fails to do so, the
Chief Justice or his designate will direct the appointing
G authority to formulate the disputes for referel"!ce as
required by the arbitration agreement. The assumption by
the courts below that a reference of specific disputes to
the Arbitrator by the Chief Justice or his designate is
necessary while making appointment of arbitrator under
H section 11 of the Act, is without any basis. Equally
STATE OF GOA v. PRAVEEN ENTERPRISES 1037
baseless is the assumption that where one party filed an A
application under section 11 and gets an arbitrator
appointed the arbitrator can decide only the disputes
raised by the applicant under section 11 of the Act and
not the counter claims of the respondent. [Para 23] [1055·
B·F] B
3.4. Section 23 of the Act enables the claimant to file
a statement of claim stating the facts supporting his claim,
the points at issue and the relief or remedy sought by him
and enables the respondent to state his defence in
respect of those claims. Section 2(9) provides that if any C
provision [other than section 25 (a) or section 32(2)(a)],
refers to a "claim", it shall apply to a "counter claim" and
where it refers to a "defence", it shall also apply to a
defence to that counter claim. This would mean that a
respondent can file a counter claim giving the facts D
supporting the counter claim, the points at issue and the
relief or remedy sought in that behalf and the claimant
(who is the respondent in the counter claim) will be
entitled to file his defence to such counter claim. Once
the claims and counter claims are before the arbitrator, E
the arbitrator will decide whether they fall within the
scope of the arbitration agreement and whether he has
jurisdiction to adjudicate on those disputes (whether they
are claims or the counter claims) and if the answer is in
the affirmative, proceed to adjudicate upon the same. F
[Para 24] [1055-G-H; 1056-A-C]
3.5. A counter claim by a respondent pre-supposes
the pendency of. proceedings relating to the disputes
raised by the claimant. The respondent could no doubt
raise a dispute (in respect of the subject matter of the G
counter claim) by issuing a notice seeking reference to
arbitration and follow it by an application under section
11 of the Act for appointment of Arbitrator, instead of
raising a counter claim in the pending arbitration
proceedings. The object of providing for counter claims H
1038 SUPREME COURT REPORTS [2011) 10 S.C.R.
A is to avoid multiplicity of proceedings and to avoid
divergent findings. The position of a respondent in an
arbitration proceedings being similar to that of a
defendant in a suit, he has the choice of raising the
dispute by issuing a notice to the claimant calling upon
B him to agree for reference of his dispute to arbitration and
then resort to an independent arbitration proceedings or
raise the dispute by way of a counter claim, in the
pending arbitration proceedings. [Para 26] [1057-B-D]
C Indian Oil Corporation Ltd. vs. Amritsar Gas Service and
Ors. 1991(1) SCC 533: 1990 (3) Suppl. SCR 196; SBP &
Co. vs. Patel Engineering Ltd. 2005 (8) SCC 618: 2005 (4)
Suppl. SCR 688; National Insurance Co.Ltd. v Boghara
Polyfab Private Ltd. 2009 (1) SCC 267: 2008 (13) SCR 638;
Indian Oil Corporation Ltd. v. Mis SPS Engineering Ltd. 2011
D (2) SCALE 291 - referred to.
Heyman v. Darwins Ltd. 1942 AC 356 - referred to.
Law and Practice of Commercial Arbitration in England
E [Mustill & Boyd (1989) Second Edn., page 131] - referred
to.
Summation
4. The position may be summed up as follows:
F
(a) Section 11 of the Act requires the Chief Justice
or his designate to either appoint the arbitratorls or
take necessary measures in accordance with the
appointment procedure contained in the arbitration
agreement. The Chief Justice or. the designate is not
G required to draw up the list of disputes and refer them
to arbitration. The appointment of Arbitral Tribunal is
an implied reference in terms of the arbitration
agreement.
H (b) Where the arbitration agreement provides for
STATE OF GOA v. PRAVEEN ENTERPRISES 1039
referring all disputes between the parties (whether A
without any exceptions or subject to exceptions), the
arbitrator will have jurisdiction to entertain any
counter claim, even though it was not raised at a
stage earlier to the stage of pleadings before the
Arbitrator. B
(c) Where however the arbitration agreement requires
specific disputes to be referred to arbitration and
provides that the arbitrator will have the jurisdiction
to decide only the disputes so referred, the C
arbitrator's jurisdiction is controlled by the specific
reference and he cannot travel beyond the reference,
nor entertain any ·additional claims or counter claims
which are not part of the disputes specifically referred
to arbitration. [Para 32) [1062-C-G]
D
The position in this case
5.1. The arbitration clause in this case conternplates
all disputes being referred to arbitration by a sole
arbitrator. It refers to an Appointing Authority (Chief E
Engineer, CPWD), whose role is only to appoint the
arbitrator. Though the arbitration clause requires the
party invoking the arbitration to specify the dispute/s to
be referred to arbitration, it does not require the
appointing authority to specify the disputes or refer any
specific disputes to arbitration nor requires the Arbitrator F
to decide only the referred disputes. It does not bar the
arbitrator deciding any counter claims. In the absence of
agreement to the contrary, it has to be held that the
counter claims by the appellant were maintainable and
arbitrable having regard to section 23 read with section G
2(9) of the Act. [Para 33) [1062-H; 1063-A-H]
5.2. Counter claim no.(3) in regard to which
Rs.2,94,298/- has been awarded by the Arbitrator relates
to the cost of pipes entrusted by the appellant for H
1040 SUPREME COURT REPORTS [2011] 10 S.C.R.
A carriage from store to site, which were not accounted for
by the respondent. It is not shown to be barred by
limitation. There is no error in the reasoning of the
arbitrator in awarding Rs.2,94,298/- under counter claim
no.(3). [Para 34] [1063-C-D]
B
Conclusion
6. The order of the High Court affirming the judgment
of the trial court in regard to counter claim No.3, is set
aside. Consequently the award of arbitrator is upheld in
C its entirety and the challenge thereto by the respondent
is rejected. [Para 35] [1063-E-F]
Case Law Reference:
1998 (2) sec 21 referred to Para 6
D
1990 (3) Suppl. SCR 196 referred to Para 25
2005 (4) Suppl. SCR 688 referred to Para 27
2008 (13) SCR 638 referred to Para 27
E 2011 (2) SCALE 291 referred to Para 28
1942 AC 356 referred to Para 31
CIVIL APPELLATE JURISDICTION: Civil Appal No. 4987
of 2011.
F
From the Judgment & Order dated dated 31.8.2007 of the
High Court of Bombay at Goa in Arbitration Appeal No. 3 of
2006.
G Harish Salve (A.C.), Jaideep Gupta, Dhruv Mehta, A.
Subhashini, Yashraj Singh Deora, Rajesh Kumar, Sarv Mitter,
Mitter & Mitter Co., for the appearing parties.
The Judgment of the Court was delivered by
H R.V.RAVEENDRAN, J. 1. Leave granted.
STATE OF GOA v. PRAVEEN ENTERPRISES 1041
[R.V. RAVEENDRAN, J.]
2. Under an agreement dated 4.11.1992, the appellant A
(State of Goa) entrusted a construction work (Farm
Development Works in Command Area of Water Course No.3
and 3A of minor M-3 of SIP in Salcette Taluka) to the
respondent. Clause 25 of the agreement provided for settlement
of disputes by arbitration, relevant portions of which are B
extracted below:
"Except where otherwise provided in the contract, all
questions and disputes relating to the meaning of the
specifications, designs, drawings and instructions herein C
before mentioned and as to the quality of workmanship or
materials used on the work or as to any other question.
claim right matter or thing whatsoever, in any way arising
out of or relating to the contract, designs, drawings,
specifications, estimates, instructions orders or these
conditions or otherwise concerning the works, or the D
execution or failure to execute the same whether arising
during the progress of the work or after the completion or
abandonment thereof shall be referred to the sole
arbitration of the person appointed by the Chief Engineer,
Central Public Works Department in charge of the work E
at the time of dispute ................... It is a term of contract
that the party invoking arbitrations shall specify the dispute
or disputes to be referred to arbitration under this clause
<' together with the amount or amounts claimed in respect
of each such disputes." F
As per the contract, the work had to be commenced on
16.11.1992 and completed by 5.5.1994. On the ground that the
contractor did not complete the work even by the extended date
of completion (31.3.1995), the contract was terminated by the G
appellant.
3. Respondent raised certain claims and gave a notice to
the appellant to appoint an arbitrator in terms of the arbitration
clause. As the appellant did not do so, the respondent filed an
application under section 11 of the Arbitration and Conciliation H
1042 SUPREME COURT REPORTS (2011) 10 S.C.R.
A Act, 1996 ('Act' of 'new Act' for short) for appointment of an
arbitrator. By order dated 4.12.1998 the said application was
allowed and Mr. S.V.Salilkar, retired Adviser, Konkan Railway
Corporation was appointed as the sole arbitrator. The arbitrator
entered upon the reference on 22.2.1999 and called upon the
B parties to file their statement.
4. The respondent filed its claim statement before the
arbitrator on 15.4.1999. The appellant filed its Reply Statement
with counter claim on 30.6.1999. The arbitrator considered the
C fourteen claims of the contractor and four counter claims of the
appellant. The Arbitrator made an award dated 10.7.2000. He
awarded to the respondent, Rs.1,00,000/- towards claim No.2
with interest at 12% per annum from 26.8.1998 to 19.2.1999;
Rs.3,63,416/- towards claim No.3 with interest at 12% per
annum from 18.9.1995 to 22.2.1999; and Rs.59,075/- towards
D claim No. 14 (additional claim No. ii) with interest at 12% per
annum from 18.9.1995 to 22.2.1999. In regard to the counter
claims made by the appellant, the arbitrator awarded to the
appellant Rs.2,94,298/- without any ii1terest in regard to counter
claim No.3. The arbitrator rejected the other claims of
E respondent and appellant. He awarded simple interest at 18%
per annum on the award amount from the expiry of one month
from the date of the award and directed both parties to bear
their respective costs.
F 5. Feeling aggrieved the respondent filed an application
under section 34 of the Act, challenging the award insofar as
(i) rejection of its other claims; and (ii) award made on counter
claim No.3. The civil court (Adhoc A.dditional District Judge,
Fast Track Court No.1, South Goa) disposed of the matter
G upholding the award in regard to the claims of the respondent
but accepted the objection raised by the respondent in regard
to award made on the counter claim. The court held that the
arbitrator could not enlarge the scope of the reference and
entertain either fresh claims by the claimants or counter claims
H from the respondent.
STATE OF GOA v. PRAVEEN ENTERPRISES 1043
[R.V. RAVEENDRAN, J.]
6. The appellant challenged the said judgment by filing an A
arbitration appeal before the High Court. The High Court of
Bombay dismissed the appeal by judgment dated 31.8.2007.
The High Court held that the counter claims were bad in law
as they were never placed before the court by the appellant (in
the proceedings under section 11 of the Act for appointment B
of arbitrator) and they were not referred by the court to
arbitration. The High Court held that in such circumstances
arbitrator had no jurisdiction to entertain a counter claim. The
High Court followed its earlier decision in Charuvil Koshy
Verghese v. State ofGoa-1998 (2) sec 21. In that case, an c
application was made by a contractor under Section 20 of the
Arbitration Act, 1940 ('old Act' for short), for filing the arbitration
agreement and referring the disputes to the arbitrator. In its reply
statement to the said application, the respondent did not assert
its counter claim. The court allowed the application under
0
section 20 and appointed an arbitrator to decide the disputes
raised by the contractor. However when the matter went before
the arbitrator, the respondent therein made a counter claim,
which was allowed by the arbitrator. The Bombay High Court
held that the arbitrator had no jurisdiction to entertain or allow
such a counter claim as the same had neither been placed E
before the court in the proceedings under section 20 nor the
court had referred it to the arbitrator. The said judgment of the
High Court is challenged in this appeal by special leave.
7. The appellant contends as a respondent in arbitration F
proceedings, in the absence of a bar in the arbitration
agreement, it was entitled to raise its counter claims before the
arbitrator, even though it had not raised them in its statement
of objections to the proceedings under section 11 of the Act. It
further contends that section 11 of the Act does not contemplate G
'reference of disputes' by the Chief Justice or his designate;
and the High Court committed a serious error in holding that in
the absence of a reference by the court, the arbitrator had no
a
jurisdiction to entertain counter claim, by following its earlier
decision in Charuvil Koshy Verghese (supra}, rendered with H
1044 SUPREME COURT REPORTS [2011] 10 S.C.R.
A reference to section 20 of the old Act, which is materially
different from section 11 of the new Act. The· respondent
supported the decision of the High Court, contending that
having regard to the provisions of section 21 of the Act, an
arbitrator will have jurisdiction to decide only those disputes
B which were raised and referred to him by the court.
8. Therefore the question that arises for our consideration
is as under:
Whether the respondent in an arbitration proceedings is
C precluded from making a counter-claim, unless
(a) it had served a notice upon the claimant requesting
that the disputes relating to that counter-claim be
referred to arbitration and the claimant had
0 concurred in referring the counter claim to the same
arbitrator;
and/or
(b) it had set out the said counter claim in its reply
E statement to the application under section 11 of the
Act and the Chief Justice or his designate refers
such counter claim also to arbitration.
What is 'Reference to arbitration'
F 9. 'Reference to arbitration' describes various acts.
Reference to arbitration can be by parties themselves or by an
appbinting authority named in the arbitration agreement or by
a court on an application by a party to the arbitration agreement.
We may elaborate.
G
(a) If an arbitration agreement provides that all disputes
between the parties relating to the contract (some agreements
may refer to some exceptions) shall be referred to arbitration
and that the decision of the arbitrator shall be final and binding,
H the 'reference' contemplated is the act of parties to the
STATE OF GOA v. PRAVEEN ENTERPRISES 1045
[R.V. RAVEENDRAN, J.]
arbitration agreement, referring their disputes to an agreed A
arbitrator to settle the disputes.
(b) If an arbitration agreement provides that in the event
of any dispute between the parties, an authority named therein
shall nominate the arbitrator and refer the disputes which 8
required to be settled by arbitration, the 'reference'
contemplated is an act of the appointing authority referring the
disputes to the arbitrator appointed by him.
(c) Where the parties fail to concur in the appointment of
arbitrator/s as required by the arbitration agreement, or the C
authority named in the arbitration agreement failing to nominate
the arbitrator and refer the disp1Jtes raised to arbitration as
required by the arbitration agreement, on an application by an
aggrieved party, the court can appoint the arbitrator and on such
appointment, the disputes between the parties stand referred D
to such arbitrator in terms of the arbitration agreement. .
10. Reference to arbitration can be in respect of all disputes
between the parties or all disputes regarding a contract or in
respect of specific enumerated disputes. Where 'all .disputes'
E
are referred, the arbitrator has the jurisdiction to decide all
disputes raised in the pleadings (both claims and counter
claims) subject to any limitations placed by the arbitration
agreement. Where the arbitration agreement provides that all
disputes shall be settled by arbitration but excludes certain
matters from arbitration, then, the arbitrator will exclude the
F
excepted matter and decide only those disputes which are
arbitrable. But where the reference to the arbitrator is to decide
specific disputes enumerated by the parties/court/appointing
authority, the arbitrator's jurisdiction is circumscribed by the
specific reference and the arbitrator can decide only those G
specific disputes.
11. Though an arbitration agreement generally provides for
settlement Of future disputes by reference to arbitration, there
can be 'ad-hoc' arbitrations relating to existing disputes. In such H
1046 SUPREME COURT REPORTS [2011] 10 S.C.R.
A cases, there is no prior arbitration agreement to refer future
disputes to arbitration. After a dispute arises between the
parties, they enter into an arbitration agreement to refer that
specific dispute to arbitration. In such an arbitration, the
arbitrator cannot enlarge the scope of arbitration by permitting
B either the claimant to modify or add to the claim or the
respondent to make a counter claim. The arbitrator can only
decide the dispute referred to him, unless the parties again
agree to refer the additional disputes/counter claims to
arbitration and authorize the arbitrator to decide them.
c 12. 'Reference to arbitration' can be in respect of
reference of disputes between the parties to arbitration, or may
simply mean referring the parties to arbitration. Section 8 of the
Act is an example of referring the parties to arbitration. While
section 11 contemplates appointment of arbitrator [vide sub-
D sections (4), (5) and (9)] or taking necessary measure as per
the appointment procedure under the arbitration agreement
[vide sub-section (6)], section 8 of the Act does not provide for
appointment of an arbitrator, nor referring of any disputes to
arbitration, but merely requires the judicial authority before
E whom an action is brought in a matter in regard to which there
is an arbitration agreement, to refer the parties to arbitration.
When the judicial authority finds that the subject matter of the
suit is covered by a valid arbitration agreement between the
parties to the suit, it will refer the parties to arbitration, by
F refusing to decide the action brought before it and leaving it to
the parties to have recourse to their remedies by arbitration.
When such an order is made, parties may either agree upon
an arbitrator and refer their disputes to him, or failing
agreement, file an application under section 11 of the Act for
G appointment of an arbitrator. The judicial authority 'referring the
parties to arbitration' under section 8 of the Act, has no power
to appoint an arbitrator. It may however record the consent of
parties to appoint an agreed arbitrator.
H
STATE OF GOA v. PRAVEEN ENTERPRISES 1047
[R.V. RAVEENDRAN, J.]
Sections 21 and 43 of the Act A
13. Section 21 provides that unless otherwise agreed by
the parties, the arbitral proceedings in respect of a particular
dispute commences on the date on which a request for that
dispute to be referred to arbitration is received by the
8
respondent. Taking a cue from the said section, the respondent
submitted that arbitral proceedings can commence only in
regard to a dispute in respect of which notice has been served
by a claimant upon the other party, requesting such dispute to
be referred to arbitration; and therefore, a counter claim can C
be entertained by the arbitrator only if it has been referred to
him, after a notice seeking arbitration in regard to such counter
claim. On a careful consideration we find no basis for such a
contention. The purpose of section 21 is to specify, in the
absence of a provision in the arbitration agreement in that
behalf, as to when an arbitral proceedings in regard to a D
dispute commences. This becomes relevant for the purpose of
section 43 of the Act. Sub-section (1) of section 43 provides
that the Limitation Act 1963 shall apply to arbitrations as it
applies to proceedings in courts. Sub-section (2) of section 43
provides that for the purposes of section 43 and the Limitation E
Act, 1963, an arbitration shall be deemed to have commenced
on the date referred to in section 21 of the Act. Having regard
to section 43 of the Act, any claim made beyond the period of
limitation prescribed by the Limitation Act, 1963 will be barred
by limitation and the arbitral tribunal will have to reject such F
claims as barred by limitation.
14. Section 3 of the Limitation Act, 1963 provides for bar
of limitation and is extracted below:
"3. Bar of Limitation. (1) Subject to the provisions G
contained in sections 4 to 24 (inclusive), every suit
instituted, appeal preferred, and application made after the
prescribed period shall be dismissed although limitation ·
has not been set up as a defence.
H
1048 SUPREME COURT REPORTS [2011] 10 S.C.R.
A (2) For the purposes of this Act,-
(a) a suit is instituted,-
(i) in an ordinary case, when the plaint is presented
to the proper officer,
B
(ii) in the case of a pauper, when his application for
leave to sue as a pauper is made; and
(iii) in the case of a claim against a company which
is being wound up by the court, when the claimant
c first sends in his claim to the official liquidator;
(b) any claim by way of a set off or a counter claim, shall
be treated as a separate suit and shall be deemed to
have been instituted-
D (i) in the case of a set off, on the same date as the
suit in which the set off is pleaded;
(ii) in the case of a counter claim, on the date on
which the counter claim is made in. court;
E (c) an application by notice of motion in a High Court is
made when the application is presented to tile proper
officer of that court."
(emphasis supplied)
F - 15. In regard to a claim which is sought to be enforced by
filing a civil suit, the question whether the suit is within the period
of limitation is decided with reference to the date of institution
of the suit, that is, the date of presentation of a plaint. As
Limitation Act, 1963 is made applicable to arbitrations, there
G is a need to specify the date on which the arbitration is deemed
to be instituted or commenced as that will decide whether the
proceedings are barred by limitation or not. Section 3 of
Limitation Act, 1963 specifies the date of institution for suit, but
does not specify the date of 'institution' for arbitration
H proceedings. Section 21 of the Act supplies the omission. But
STATE OF GOA v. PRAVEEN ENTERPRISES 1049
[R.V. RAVEENDRAN, J.]
for section 21, there would be considerable confusion as to what A
would be the date of 'institution' in regard to the arbitration
proceedings. It will be possible for the respondent in an
arbitration to argue that the limitation has to be calculated as
on the date on which statement of claim was filed, or the date
on which the arbitrator entered upon the reference, or the date B
on which the arbitrator was appointed by the court, or the date
on which the application was filed under section 11 of the Act.
In view of section 21 of the Act providing that the arbitration
proceedings shall be deemed to commence on the date on
which "the request for that dispute to be referred to arbitration c
is received by the respondent" the said confusion is cleared.
Therefore the purpose of section 21 of the Act is to determine
the date of commencement of the arbitration proceedings,
relevant mainly for deciding whether the claims of the claimant
are barred by limitation or not. 0
16. There can be claims by a claimant even without a
notice seeking reference. Let us take an example where a
notice is issued by a claimant raising disputes regarding claims
'A' and 'B' and seeking reference thereof to arbitration. On
appointment of the arbitrator, the claimant files a claim E
statement in regard to the said claims 'A' and 'B'. Subsequently
1if the claimant amends the claim statement by adding claim 'C'
[which is permitted under section 23(3) of the Act] the additional
claim 'C' would not be preceded by a notice seeking
arbitration. The date of amendment by which the claim 'C' was F
introduced, will become the relevant date for determining the
limitation in regard to the said claim 'C', whereas the date on
1which the notice seeking arbitration was served on the other
1
party, will be the relevant date for deciding the limitation in
regard to Claims 'A' and 'B'. Be that as it may. G
17. As far as counter claims are concerned, there is no
room for ambiguity in regard to the relevant date for determining
the limitation. Section 3(2)(b) of Limitation Ad, 1963 provides
that in regard to a counter claim in suits, the date on which the H
1050 SUPREME COURT REPORTS [2011] 10 S.C.R.
A counter claim is made in court shall be deemed to be the date
of institution of the counter claim. As Limitation Act, 1963 is
made applicable to arbitrations, in the case of a counter claim
by a respondent in an arbitral proceedings, the date on which
the counter claim is made before the arbitrator will be the date
B of "institution" in so far as counter claim is concerned. There
is, therefore, no need to provide a date of 'commencement' as
in the case of claims of a claimant. Section 21 of the Act is
therefore not relevant for counter claims. There is however one
exception. Where the respondent against whom a claim is
c made, had also made a claim against the claimant and sought
arbitration by serving a notice to the claimant but subsequently
raises that claim as a counter claim in the arbitration
proceedings initiated by the claimant, instead of filing a
separate application under section 11 of the Act, the limitation
for such counter claim should be computed, as on the date of
D service of notice of such claim on the claimant and not on the
date of filing of the counter claim.
Scope of sections 11 and 23 of the Act
18. Section 11 refers to appointment of arbitrators. Sub-
sections (4), (5), (6) and (9) of section 11 relevant for our
purpose are extracted below:
"(4) If the appointment procedure in sub-section (3)
applies and-
F
(a) a party fails to appoint an arbitrator within thirty
days from the receipt of a request to do so from the
other party; or
G (b) the two appointed arbitrators fail to agree on the
third arbitrator within thirty days from the date of
their appointment,
the appointment shall be made, upon request of
a party, by the Chief Justice or any person or
H institution Designated by him.
STATE OF GOA v. PRAVEEN ENTERPRISES 1051
[RV. RAVEENDRAN, J.]
(5) Failing any agreement referred to in sub-section A
(2), in an arbitration with a sole arbitrator, if the
parties fail to agree on the arbitrator within thirty
days from receipt of a request by one party from
the other party to so agree the appointment shall
be made, upon request of a party, by the Chief B
Justice or any person or institution Designated by
him.
(6) Where, under an appointment procedure agreed
upon by the parties,-
c
(a) a party fails to act as required under that
procedure; or
(b) the parties, or the two appointed
arbitrators, fail to reach an agreement D
expected of them under that procedure; or
(c) a person, including an institution, fails to
perform any function entrusted to him or it
under that procedure,
E
a party may request the Chief Justice or any person or
institution Designated by him to take the necessary
measure, unless the agreement on the appointment
procedure provides other means for securing the
apµ,ointment. F
xxxxxxxxx
(9) ·in the case of appointment of sole or third arbitrator in
an international commercial arbitration, the Chief Justice
of India or the person or institution designated by him may G
appoint an arbitrator of a nationality other than the
nationalities of the parties where the parties belong to
different nationalities.•
(emphasis supplied) H
1052 SUPREME COURT REPORTS [2011] 10 S.C.R.
A 19. Section 23 relating to filing of statements of claim and
defence reads thus:
"23. Statements of claim and defence.· (1) Within the
period of time agreed upon by the parties or determined
by the· arbitral tribunal, the claimant shall state the facts
B
supporting his claim, the points at issue and the relief or
remedy sought, and the respondent shall state his defence
in respect of these particulars, unless the parties have
otherwise agreed as to the required elements of those
statements.
c
(2) The parties may submit with their statements all
documents they consider to be relevant or may add a
reference to the documents or other evidence they will
submit.
D
(3) Unless otherwise agreed by the parties, either party
may amend or supplement his claim or defence during
the course of the arbitral proceedings, unless the arbitral
tribunal considers it inappropriate to allow the amendment
or supplement having regard to the delay in making it."
E
(emphasis supplied)
Section 2 contains the definitions. Sub-section (9) clarifies that
except in sections 25(a) and 32(2)(a) , any reference in the Act
F to a 'claim' will apply to a 'counter-claim'. The said sub-section
reads thus:
"(9) Where this Part, other than clause (a) of section 25 or
clause (a) of sub-section (2) of section 32, refers to a
claim, it shall also apply to a counterclaim, and where it
G refers to a defence, it shall also apply to a defence to that
counterclaim."
20. In contrast, section 20 of the old Act which provided
for applications to file the arbitration agreement in court, read
H as under:
STATE OF GOA v. PRAVEEN ENTERPRISES 1053
[R.V. RAVEENDRAN, J.]
"20. Application to file in Court arbitration agreement. A
(1) Where any persons have entered into an arbitration
agreement before the institution of any suit with respect to
the subject matter ofthe agreement or any part of it, and
where a difference has arisen to which the agreement
applies, they or any of them, instead of proceeding under B
Chapter II, may apply to a Court having jurisdiction in the
matter to which the agreement relates, that the agreement
be filed in Court.
(2) The application shall be in writing and shall be C
numbered and registered as a suit between one or more
of the parties interested or claiming to be interested as
plaintiff or plaintiffs and the remainder as defendant or
defendants, if the application has been presented by all
the parties, or, if otherwise, between the applicant as
plaintiff and the other parties as defendants. D
(3) On such application being made, the Court shall direct
notice thereof to be given to all parties to the agreement
other than the applicants, requiring them to show cause
within the time specified in the notice why the agreement E
should not be filed.
(4) Where no sufficient cause is shown, the Court shall
order the agreement to be filed, and shall make an order
of reference to the arbitrator appointed by the parties,
whether in the agreement or otherwise, or, where the F
parties cannot agree upon an arbitrator, to an arbitrator
appointed by the Court.
(5) Thereafter the arbitration shall proceed in accordance
with, and shall be governed by, the other provisions of this G
Act so far as they can be made applicable."
(emphasis supplied)
21. Section 20 of the old Act required the court while
ordering the arbitration agreement to be filed, to make an order H
1054 SUPREME COURT REPORTS [2011] 10 S.C.R.
A of reference to the arbitrator. The scheme of the new Act
requires minimal judicial intervention. Section 11 of the new Act,
on the other hand, contemplates the Chief Justice or his
designate appointing the arbitrator but does not contain any
provision for the court to refer the disputes to the arbitrator. Sub-
B sections (4), (5) and (9) of section 11 of the Act require the
Chief Justice or his designate to appoint the arbitrator/s. Sub-
section (6) requires the Chief Justice or his designate to 'take
the necessary measure' when an application is filed by a party
complaining that the other party has failed to act as required
c under the appointment procedure. All these sub-sections
contemplate an applicant filing the application under section 11,
only after he has raised the disputes and only when the
respondent fails to co-operate/concur in regard to appointment
of arbitrator.
D 22. Section 23 of the Act makes it clear that when the
arbitrator is appointed, the claimant is required to file the
statement and the respondent has to file his defence statement
before the Arbitrator. The claimant is not bound to restrict his
statement of claim to the claims already raised by him by
E notice, "unless the parties have otherwise agreed as to the
required elements" of such claim statement. It is also made
clear that "unless otherwise agreed by the parties" the claimant
can also subsequently amend or supplement the claims in the
claim statement. That is, unless the arbitration agreement
F requires the Arbitrator to decide only the specifically referred
disputes, the claimant can while filing the statement of claim
or thereafter, amend or add to the claims already made.
Similarly section 23 read with section 2(9) makes it clear that
a respondent is entitled to raise a counter claim "unless the
G parties have otherwise agreed" and also add to or amend the
counter claim, "unless otherwise agreed". In short, unless the
arbitration agreement requires the Arbitrator to decide only the
specifically referred disputes, the respondent can file counter
claims and amend or add to the same, except where the
H arbitration agreement restricts the arbitration to only those
STATE OF GOA v. PRAVEEN ENTERPRISES 1055
[R.V. RAVEENDRAN, J.]
disputes which are specifically referred to arbitration, both the A
claimant and respondent are entitled to make any claims or
counter claims and further entitled to add to or amend such
claims and counter claims provided they are arbitrable and
within limitation.
B
23. Section 11 of the Act requires the Chief Justice or his
designate only to appoint the arbitrator/s. It does not require
the Chief Justice or his designate to identify the disputes or
refer them to the Arbitral Tribunal for adjudication. Where the
appointment procedure in an arbitration agreement requires C
disputes to be formulated and specifically referred to the
arbitrator and confers jurisdiction upon the arbitrator to decide
only such referred disputes, when an application is filed under
section 11 (6) of the Act, alleging that such procedure is not
followed, the Chief Justice or his designate will take necessary
measures under section 11 (6) of the Act to ensure compliance D
by the parties with such. procedure. Wh~re the arbitration
agreement requires the disputes to be formulated and referred
to arbitration by an appointing authority, and the appointing
authority fails to do so, the Chief Justice or his designate will
direct the appointing authority to formulate the disputes for E
reference as required by the arbitration agreement. The
assumption by the courts below that a reference of specific
disputes tolhe.Arbitrator by the Chief Justice or his designate
is necessary while making appointment of arbitrator under
section 11 of the Act, is without any basis. Equally baseless is F
the assumption that where one party filed an application under
section 11 and gets an arbitrator appointed the arbitrator can
decide only the disputes raised by the applicant under section
11 of the Act and not the counter claims of the respondent.
24. Section 23 of the Act enables the claimant to file a G
statement of claim stating the facts supporting his claim, the
points at issue and the relief or remedy sought by him and ·
enables the respondent to state his defence in respect ofthose
claims. Section 2(9) provides that if any provision [other than
l H
1056 SUPREME COURT REPORTS [2011] 10 S.C.R.
A section 25 (a) or section 32(2)(a)]. refers to a "claim", it shall
apply to a "counter claim" and where it refers to a "defence", it
shall also apply to a defence to that counter claim. This would
mean that a respondent can file a counter claim giving the facts
supporting the counter claim, the points at issue and the relief
B or remedy sought in that behalf and the claimant (who is the
respondent in the counter claim) will be entitled to file his
defence to such counter claim. Once the claims and counter
claims are before the arbitrator, the arbitrator will decide
whether they fall within the scope of the arbitration agreement
c and whether he has jurisdiction to adjudicate on those disputes
(whether they are claims or the counter claims) and if the
answer is in the affirmative, proceed to adjudicate upon the
same.
25. It is of some relevance to note that even where the
D arbitration proceedings were initiated in pursuance of a
reference under section 20 of the old Act, this Court held (in
Indian Oil Corporation Ltd. vs. Amritsar Gas SeNice and Ors.
- 1991 (1) sec 533) that the respondent was entitled to raise
counter claims directly before the arbitrator, where all disputes
E between parties are referred to arbitration. This Court observed
"The appellant's grievance regarding non-consideration of
its counter-claim for the reason given in the award does
F appear to have some merit. In view of the fact that
reference to arbitrator was made by this Court in an
appeal arising out of refusal to stay the suit under Section
34 of the Arbitration Act and their reference was made of
all disputes between the parties in the suit, the occasion
to make a counter-claim i(I the written statement could
G
arise only after the order of reference. The pleadings of
the parties were filed before the arbitrator, and the
reference covered all disputes between the parties in the
suit. Accordingly, the counter-claim could not be made at
any earlier stage. Refusal to consider the counter-claim for
H
STATE OF GOA v. PRAVEEN ENTERPRISES 1057
[R.V. RAVEENDRAN, J.)
the only reason given in the award does, therefore, disclose A
an error of law apparent on the face of the award."
(emphasis supplied)
26. A counter claim by a respondent pre-supposes the
pendency of proceedings relating to the disputes raised by the B
claimant. The respondent could no doubt raise a dispute (in
respect of the subject matter of the counter claim) by issuing a
notice seeking reference to arbitration and follow it by an
application under section 11 of the Act for appointment of
Arbitrator, instead of raising a counter claim in the pending C
arbitration proceedings. The object of providing for counter
claims is to avoid multiplicity of proceedings and to avoid
divergent findings. The position of a respondent in an arbitration
proceedings being similar to that of a defendant in a suit, he
has the choice of raising the dispute by issuing a notice to the D
claimant calling upon him to agree for reference of his dispute
to arbitration and then resort to an independent arbitration
proceedings or raise the dispute by way of a counter claim, in
the pending arbitration proceedings.
E
Respondent's contentions
27. The respondent submitted that this Court in SBP & Co.
vs. Patel Engineering Ltd. - 2005 (8) SCC 618 and National
Insurance Co.Ltd. v Boghara Polyfab Private Ltd. - 2009 (1)
SCC 267, has observed that while deciding an application F
under section 11 of the Act, the Chief Justice or his designate
can decide the question whether the claim was a dead one
(long time barred) that was sought to be resurrected. According
to appellant the logical inference from this observation is that
an application under section 11 should sufficiently enumerate G
and describe the claims tO demonstrate that they are within
limitation. Extending the same logic, respondent contends that
any col.inter claim by the respondent should also be described
in his statement of objections with relevant particulars so that
1
the Chief Justice or his designate could consider and H
I
1058 SUPREME COURT REPORTS (2011) 10 S.C.R .
.Apronounce whether such counter claim is barred by limitation.
The respondent therefore argues that every claim unless
specifically mentioned in the application under section 11 of the
Act, and every counter claim unless specifically mentioned in
the statement of objections, cannot be the subject matter of
B arbitration.
28. The aforesaid contention of the respondent is based
on the erroneous premises that whenever an application is fried
under section 11 of the Act, it is necessary for the Chief Justice
or his Designate to consider and decide whether the claims
C or counter claims are barred by limitation or not. In SBP & Co.
and Boghara Polyfab, this Court classified the questions that
may be raised in an application under section 11 of the Act into
three groups : (i) those which the Chief Justice/his designate
shall have to decide; (ii) those which the Chief Justice/his
D designate may choose to decide or alternatively leave to the
decision of the Arbitral Tribunal; and (iii) those which the Chief
Justice/his designate should leave exclusively for the decision
of the Arbitral Tribunal. This Court heid that the issue whether
a claim is dead claim (long barred claim) is an issue which the
E Chief Justice or his designate may choose to decide or leave
for the decision of the Arbitral Tribunal. The difference between
a dead/stale claim and a mere time barred claim was
explained by this Court in Indian Oil Corporation Ltd. v. Mis
SPS Engineering Ltd. [2011 (2) SCALE 291 ] thus : -
F
"When it is said that the Chief Justice or his designate may
choose to decide whether the claim is a dead claim, it is
implie.d that he will do so only when the claim is evidently
and patently a long time barred claim and there is no need
for any detailed consideration of evidence. We may
G
elucidate by an illustration: If the contractor makes a claim
a decade or so after completion of the work without
referring to any acknowledgement of a liability or other
factors that kept the claim alive in law, and the claim is
patently long1ime barred, the Chief Justice or his designate
STATE OF GOA v. PRAVEEN ENTERPRISES 1059
[R.V. RAVEENDRAN, J.]
will examine whether the claim is a dead c1aim (that is, a A
long time barred claim). On the other hand, if the contractor
makes a claim for payment, beyond three years of
completing of the work but say within five years of
completion of work, and alleges that the final bill was drawn
up and payments were made within three years before the B
claim, the court will not enter into a disputed question
whether the claim was barred by limitation or not. The court
will leave the matter to the decision of the Tribunal. If the
distinction between apparent and obvious dead claims,
and claims involving disputed issues of limitation is not c
kept in view, the Chief Justice or his designate will end up
deciding the question of limitation in all applications under
Section 11 of the Act."
29. The issue of limitation is not ;:in issue that has to be
decided in an application under section 11 of the Act. SBP & D
Co. and Boghara Polyfab held that the Chief Justice or his
designate will not examine issues relating to limitation, but may
consider in appropriate cases, whether the application was in
regard to a claim which on the face of it was so hopelessly
barred by time, that it is already a dead/stale claim which did E
not deserve to be resurrected and referred to arbitration. The
said decisions do not support the respondent's contention that
the details of all claims should be set out in the application under
section 11 of the Act and that details of all counter claims should
be set out in the statement of objections, and that a claim or a F
counter claim which is not referred to or set out in the pleadings
in the proceedings under section 11 of the Act, cannot be
entertained or decided by the arbitral tribunal.
30. Reliance was next placed on the following passage
from the Law and Practice of Commercial Arbitration in G
England [Mustill & Boyd - (1989) Second Edn. Page 131) to
contend that the counter claim ought to have been submitted
to the Arbitrator when he is appointed:
"The fourth situation, in which both the claim and the cross- H
1060 SUPREME COURT REPORTS [2011) 10 S.C.R.
A claim are arbitrable, is the one most commonly
encountered in practice. The arbitrator should carefully
consider whether the subject matter of the counter claim
was one of the matters submitted to him at the time of
the appointment. If it is, then it is up to him whether to allow
B the matter to be raised by counter claim or made the
subject of a separate arbitration. In practice, we have
never known the second course to be followed. If, on the
other hand, the cross-claim was not a dispute which was
submitted to him, he should not entertain it unless it raises
c a pure defence, or unless the parties clearly agree that he
is to have jurisdiction over it."
(emphasis supplied)
The said observations. were made with reference to the
D Arbitration Law prevailing in United Kingdom in the year 1989,
prior to the enactment of (English) Arbitration Act, 1996. Further
the observations obviously related to an arbitration where
specific disputes were referred to arbitration and consequently
the arbitrator was bound to restrict himself to the disputes
E referred. We have already adverted to this aspect earlier.
31. The respondent lastly contended that the Court is
required to ascertain the precise nature of the dispute which
has arisen and then decide whether the dispute is one which
falls within the terms of the arbitration clause, before appointing
F an arbitrator; and that could be done only if the claims are set
out in the application under section 11 of the Act and the counter
claims are set out in the statement of objections and court had
an opportunity to examine it. It is therefore submitted that a
dispute (relating to a claim or counter claim) not referred in the
G pleadings, is not arbitrable. Reliance was placed upon certain
observations in the decision of the House of Lords in Heyman
v. Darwins Ltd.-· 1942 AC 356. We extract below the
paragraph containing the relied upon observations :
H "The law permits the parties to a contract to include in it
STATE OF GOA v. PRAVEEN ENTERPRISES 1061
[R.V. RAVEENDRAN, J.]
as one of its terms an agreement to refer to arbitration A
disputes which may arise in connection with it, and the
court of England enforce such a reference by staying legal
proceedings in respect of any matter agreed to be referred
"if satisfied that there is no sufficient reason why the matter
should not be referred in accordance with the submission." B
Arbitration Act, 1889, sec. 4. Where proceedings at law
are instituted by one of the parties to a contract containing
an arbitration clause and the other party, founding on the
clause, applies for a stay, the first thing to be ascertained
is the precise nature of the dispute which has arisen The c
next question is whether the dispute is one which falls
within the terms of the arbitration clause. Then sometimes
. the question is raised whether the arbitration clause is still
effective or whether something has happened to render it
no longer operative. Finally, the nature of the dispute being
0
ascertained, it having been held to fall within the terms of
the arbitration clause, and the clause having been found
to be still effective, there remains for the court the question
whether there is any sufficient reason why the matter in
dispute should not be referred to arbitration."
E
(emphasis supplied)
The said observations were made while examining whether a
suit should be stayed at the instance of the defendant on the
ground that there was an arbitration agreement between the F
parties. If a party to an arbitration agreement files a civil suit
and the de.fendant contends that the suit should be stayed and
the parties should be referred to arbitration, necessarily, the
court will have to find out what exactly is the subject matter of
the suit, whether it would fall within the scope of the arbitration G
clause, whether the arbitration clause was valid and effective
and lastly whether there was sufficient reason as to why the
subject matter of the suit should not be referred to arbitration.
The observations made in Heymen, in the context of an
application seeking stay of further proceedings in a suit, are
H
1062 SUPREME COURT REPORTS (2011] 10 S.C.R.
A not relevant in respect of an application under section 11 of the
Act. This Court has repeatedly held that the questions for
consideration in an application under section 8 by a civil court
in a suit are different from the questions for consideration under
section 11 of the Act. The said decision is therefore of no
B assistance.
Summation
32. The position emerging from above discussion may be
summed up as follows:
c
(a) Section 11 of the Act requires the Chief Justice or his
designate to either appoint the arbitrator/s or take necessary
measures in accordance with the appointment procedure
contained in the arbitration agreement. The Chief Justice or the
0 designate is not required to draw up the list of disputes and
refer them to arbitration. The appointment of Arbitral Tribunal
is an implied reference in terms of the arbitration agreement.
(b) Where the arbitration agreement provides for referring
all disputes between the parties (whether without any
E exceptions or subject to exceptions), the arbitrator will have
jurisdiction to entertain any counter claim, even though it was
not raised at a stage earlier to the stage of pleadings before
the Arbitrator.
F (c) Where however the arbitration agreement requires
specific disputes to be referred to arbitration and provides that
the arbitrator will have the jurisdiction to decide only the disputes
so referred, the arbitrator's jurisdiction is controlled by the
specific reference and he cannot travel beyond the reference,
G nor entertain any additional claims or counter claims which are
not part of the disputes specifically referred to arbitration.
The position in this case
33. The arbitration clause in this case contemplates all
H disputes being referred to arbitration by a sole arbitrator. It refers
STATE OF GOA v. PRAVEEN ENTERPRISES 1063
[RV. RAVEENDRAN, J.]
to an Appointing Authority (Chief Engineer, CPWD), whose role A
is only to appoint the arbitrator. Though the arbitration clause
requires the party invoking the arbitration to specify the dispute/
s to be referred to arbitration, it does not require the appointing
authority to specify the disputes or refer any specific disputes
to arbitration nor requires the Arbitrator to decide only the B
referred disputes. It does not bar the arbitrator deciding any
counter claims. In the absence of agreement to the contrary, it
has to be held that the counter claims by the appellant were
maintainable and arbitrable having regard to section 23 read
with section 2(9) of the Act. c
34. Counter claim no.(3) in regard to which Rs.2,94,298/-
has been awarded by the Arbitrator relates to the cost of pipes
entrusted by the appellant for carriage from store to site, which
were not accounted for by the respondent. It is not shown to
be barred by limitation. We find no error in the reasoning of the D
arbitrator in awarding Rs.2,94,298/- under counter claim no.(3).
Conclusion
35. In view of the above, this appeal is allowed and the E
order of the High Court affirming the judgment of the trial court
in regard to counter claim No.3, is set aside. Consequently the
award of arbitrator is upheld in its entirety and the challenge
thereto by the respondent is rejected.
B.B.B. Appeal allowed. F
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