# M/S. INDIAN FARMERS FERTILIZER CO-OPERATIVE LIMITED v. M/S BHADRA PRODUCTS

- **Citation:** [2018] 1 S.C.R. 848
- **Court:** Supreme Court of India
- **Decided:** 2018-01-23
- **Case number:** Civil Appeal No. 824 of 2018
- **Bench:** R. F. Nariman, Navin Sinha
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/m-s-indian-farmers-fertilizer-co-operative-limited-v-m-s-bhadra-products-32852
- **Pages:** 25

## Headnote

Arbitration and Conciliation Act, 1996 - ss. 2(c), 31(6), 32
and 34 - Interim Arbitral Award - Whether an award delivered by
an Arbitrator, which decides the issue of limitation, can be said to
be an interim award and whether such interim award can then be
set aside u/s.34 of the Act - Held: Insofar as first question is
concerned, yes, the language of s.31(6) is advisedly wide in nature -
A reading of the said sub-section makes it clear that the jurisdiction
to make an interim arbitral award is left to the good sense of the
arbitral tribunal and that it extends to "any matter" with respect to
which it may make a final arbitral award - The expression "matter"
is wide in nature and subsumes issues at which the parties are in
dispute - It is clear, therefore, that any point of dispute between the
parties which has to be answered by the arbitral tribunal can be
the subject matter of interim arbitral award - Insofar as second
question is concerned, yes, such an "interim award" is within the
meaning of s.2(1)(c) of the Act and being subsumed within the
expression "arbitral award", therefore, can be challenged u/s.34
of the Act - English Arbitration Act, 1996 - s. 47.
Arbitration and Conciliation Act, 1996 - s.16 - Appellant
issued a tender enquiry for supply of Defoamers - Respondent
successfully submitted its bid, pursuant to which respondent supplied
the Defoamers - Respondent demanded payment - However,
appellant took the stand that nothing was due and payable to
respondent - Since, dispute arose between the parties, respondent
invoked arbitration - Issue of limitation was taken first by the
Arbitrator and vide an award the said issue was decided in favour
of respondent-claimant stating that their claim had not become time
barred - Whether a decision on a point of limitation would go to
jurisdiction and, therefore, be covered by s.16 of the Act, in which
case all other issues have to be decided first, and it is only after
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such issues are decided that such an award can be challenged u/s.
34 of the Act - Held: In the instant case, the award passed by the
Arbitrator is an interim award, which being an arbitral award, can
be challenged separately and independently u/s.34 of the Act -
Such an award, which does not relate to the arbitral tribunal's own
jurisdiction u/s.16, does not have to follow the drill of s.16(5) and
(6) of the Act - In the light of this, Parliament may consider amending
s.34 of the Act so as to consolidate all interim awards together with
the final arbitral award, so that one challenge u/s. 34 can be made
after delivery of the final arbitral award - Piecemeal challenges
like piecemeal awards lead to unnecessary delay and additional
expense.
Words and Phrases - "Jurisdiction" - The sense of term
"jurisdiction" used in s.16 of the Arbitration and Conciliation Act,
1996 - Discussed.
Doctrines/Principles - Kompetenz - kompetenz principle -
Discussed - English Arbitration Act, 1996 - ss. 30, 31 - UNCITRAL
Model Law - Art. 16.
Allowing the appeal, the Court
HELD: Whether an award on the issue of limitation can
first be said to be an interim award?
1.1 As can be seen from Section 2(c) and Section 31(6) of
Arbitration and Conciliation Act, 1996, except for stating that an
arbitral award includes an interim award, the Act is silent and
does not define what an interim award is. Section 31(6) which
delineates the scope of interim arbitral awards and states that
the arbitral tribunal may make an interim arbitral award on any
matter with respect to which it may make a final arbitral award.
[Para 8] [856-F-G]
1.2 The language of Section 31(6) is advisedly wide in
nature. A reading of the said sub-section makes it clear that the
jurisdiction to make an interim arbitral award is left to the good
sense of the arbitral tribunal, and that it extends to "any matter"
with respect to which it may make a final arbitral award. The
expression "matter" is wide in nature, and subsumes is

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848
SUPREME COURT REPORTS
[2018] 1 S.C.R.
M/S. INDIAN FARMERS FERTILIZER CO-OPERATIVE
LIMITED
v.
M/S BHADRA PRODUCTS
(Civil Appeal No. 824 of 2018)
JANUARY 23, 2018
[R. F. NARIMAN AND NAVIN SINHA, JJ.]
Arbitration and Conciliation Act, 1996 - ss. 2(c), 31(6), 32
and 34 - Interim Arbitral Award - Whether an award delivered by
an Arbitrator, which decides the issue of limitation, can be said to
be an interim award and whether such interim award can then be
set aside u/s.34 of the Act - Held: Insofar as first question is
concerned, yes, the language of s.31(6) is advisedly wide in nature -
A reading of the said sub-section makes it clear that the jurisdiction
to make an interim arbitral award is left to the good sense of the
arbitral tribunal and that it extends to "any matter" with respect to
which it may make a final arbitral award - The expression "matter"
is wide in nature and subsumes issues at which the parties are in
dispute - It is clear, therefore, that any point of dispute between the
parties which has to be answered by the arbitral tribunal can be
the subject matter of interim arbitral award - Insofar as second
question is concerned, yes, such an "interim award" is within the
meaning of s.2(1)(c) of the Act and being subsumed within the
expression "arbitral award", therefore, can be challenged u/s.34
of the Act - English Arbitration Act, 1996 - s. 47.
Arbitration and Conciliation Act, 1996 - s.16 - Appellant
issued a tender enquiry for supply of Defoamers - Respondent
successfully submitted its bid, pursuant to which respondent supplied
the Defoamers - Respondent demanded payment - However,
appellant took the stand that nothing was due and payable to
respondent - Since, dispute arose between the parties, respondent
invoked arbitration - Issue of limitation was taken first by the
Arbitrator and vide an award the said issue was decided in favour
of respondent-claimant stating that their claim had not become time
barred - Whether a decision on a point of limitation would go to
jurisdiction and, therefore, be covered by s.16 of the Act, in which
case all other issues have to be decided first, and it is only after
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such issues are decided that such an award can be challenged u/s.
34 of the Act - Held: In the instant case, the award passed by the
Arbitrator is an interim award, which being an arbitral award, can
be challenged separately and independently u/s.34 of the Act -
Such an award, which does not relate to the arbitral tribunal's own
jurisdiction u/s.16, does not have to follow the drill of s.16(5) and
(6) of the Act - In the light of this, Parliament may consider amending
s.34 of the Act so as to consolidate all interim awards together with
the final arbitral award, so that one challenge u/s. 34 can be made
after delivery of the final arbitral award - Piecemeal challenges
like piecemeal awards lead to unnecessary delay and additional
expense.
Words and Phrases - "Jurisdiction" - The sense of term
"jurisdiction" used in s.16 of the Arbitration and Conciliation Act,
1996 - Discussed.
Doctrines/Principles - Kompetenz - kompetenz principle -
Discussed - English Arbitration Act, 1996 - ss. 30, 31 - UNCITRAL
Model Law - Art. 16.
Allowing the appeal, the Court
HELD: Whether an award on the issue of limitation can
first be said to be an interim award?
1.1 As can be seen from Section 2(c) and Section 31(6) of
Arbitration and Conciliation Act, 1996, except for stating that an
arbitral award includes an interim award, the Act is silent and
does not define what an interim award is. Section 31(6) which
delineates the scope of interim arbitral awards and states that
the arbitral tribunal may make an interim arbitral award on any
matter with respect to which it may make a final arbitral award.
[Para 8] [856-F-G]
1.2 The language of Section 31(6) is advisedly wide in
nature. A reading of the said sub-section makes it clear that the
jurisdiction to make an interim arbitral award is left to the good
sense of the arbitral tribunal, and that it extends to "any matter"
with respect to which it may make a final arbitral award. The
expression "matter" is wide in nature, and subsumes issues at
which the parties are in dispute. It is clear, therefore, that any
point of dispute between the parties which has to be answered by
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the arbitral tribunal can be the subject matter of an interim arbitral
award. However, in an appropriate case, the issue of more than
one award may be necessitated on the facts of that case. However,
by dealing with the matter in a piecemeal fashion, what must be
borne in mind is that the resolution of the dispute as a whole will
be delayed and parties will be put to additional expense. The
arbitral tribunal should, therefore, consider whether there is any
real advantage in delivering interim awards or in proceeding with
the matter as a whole and delivering one final award, bearing in
mind the avoidance of delay and additional expense. Ultimately,
a fair means for resolution of all disputes should be uppermost in
the mind of the arbitral tribunal. [Para 9] [856-G-H; 857-A-C]
1.3 To complete the scheme of the Act, Section 32(1) is
also material. This section goes on to state that the arbitral
proceedings would be terminated only by the final arbitral award,
as opposed to an interim award, thus making it clear that there
can be one or more interim awards, prior to a final award, which
conclusively determine some of the issues between the parties,
culminating in a final arbitral award which ultimately decides all
remaining issues between the parties. [Para 10] [857-D]
1.4 Tested in the light of the statutory provisions and the
case laws cited, it is clear that as the Arbitrator has disposed of
one matter between the parties i.e. the issue of limitation finally,
the award in the instant case is an "interim award" within the
meaning of Section 2(1)(c) of the Act and being subsumed within
the expression "arbitral award" could, therefore, have been
challenged under Section 34 of the Act. [Para 16] [860-G-H; 861A]
Satwant Singh Sodhi v. State of Punjab (1999) 3 SCC
487 : [1999] 2 SCR 230; McDermott International Inc.
v. Burn Standard Co. Ltd. (2006) 11 SCC 181: [2006]
2 Suppl. SCR 409 - relied on.
Exmar BV v. National Iranian Tanker Co. [1992] 1
Lloyd's Rep. 169 - referred to.
Whether a decision on a point of limitation would go to jurisdiction
and, therefore, be covered by Section 16 of the Act?
2.1 Section 16 of the Arbitration and Conciliation Act, 1996
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lays down what, in arbitration law, is stated to be the Kompetenzkompetenz principle, viz. that an arbitral tribunal may rule on its
own jurisdiction. At one time, the law was that the arbitrator, being
a creature of the contract, could not rule on the existence or
validity of the arbitration clause contained in the contract. This,
however, gave way to the Kompetenz principle which was adopted
by the UNCITRAL Model Law. [Para 17] [861-C]
2.2 It may be noticed that Section 16(1) to (4) of the Act
are based on Article 16 of the UNCITRAL Model Law. The
Kompetenz principle deals with the arbitral tribunal's jurisdiction
in the narrow sense of ruling on objections with respect to the
existence or validity of the arbitration agreement. What is
important to notice in the language of Section 16(1) is the fact
that the arbitral tribunal may rule on its own jurisdiction, which
makes it clear that it refers to whether the arbitral tribunal may
embark upon an inquiry into the issues raised by parties to the
dispute. [Para 19] [862-E]
2.3 The "jurisdiction" mentioned in Section 16 of the Act
has reference to three things: (1) as to whether there is the
existence of a valid arbitration agreement; (2) whether the arbitral
tribunal is properly constituted; and (3) matters submitted to
arbitration should be in accordance with the arbitration agreement.
[Para 20] [863-G-H]
2.4 It is clear that the award passed in the instant case is
an interim award, which being an arbitral award, can be challenged
separately and independently under Section 34 of the Act. Such
an award, which does not relate to the arbitral tribunal's own
jurisdiction under Section 16, does not have to follow the drill of
Section 16(5) and (6) of the Act. The Parliament may consider
amending Section 34 of the Act so as to consolidate all interim
awards together with the final arbitral award, so that one challenge
under Section 34 can be made after delivery of the final arbitral
award. Piecemeal challenges like piecemeal awards lead to
unnecessary delay and additional expense. [Para 29] [871-F-H]
National Thermal Power Corpn. Ltd. v. Siemens
Atkeingesellschaft (2007) 4 SCC 451; Ittavira Mathai
v. Varkey Varkey [1964] 1 SCR 495 - relied on.
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Official Trustee v. Sachindra Nath Chatterjee (1969) 3
SCR 92; Pandurang Dhoni Chougule v. Maruti Hari
Jadhav [1966] 1 SCR 102; Anisminic v. Foreign
Compensation Commission (1969) 2 AC 147; M.L. Sethi
v. R.P. Kapur (1972) 2 SCC 427: [1973] 1 SCR 697;
Hari Prasad Mulshanker Trivedi v. V.B. Raju (1974) 3
SCC 415 : [1974] 1 SCR 548; ITW Signode India Ltd.
v. CCE (2004) 3 SCC 48 : [2003] 5 Suppl. SCR 751;
Foreshore Coop. Housing Society Ltd. v. Praveen D.
Desai (2015) 6 SCC 412 : [2015] 5 SCR 1075 -
referred to.
Case Law Reference
[1992] 1 Lloyd's Rep. 169
referred to
Para 13
[1999] 2 SCR 230
relied on
Para 14
[2006] 2 Suppl. SCR 409
relied on
Para 15
[1969] 3 SCR 92
referred to
Para 21
[1964] 1 SCR 495
relied on
Para 22
(2007) 4 SCC 451
relied on
Para 23
[1966] 1 SCR 102
referred to
Para 24
(1969) 2 AC 147
referred to
Para 25
[1973] 1 SCR 697
referred to
Para 25
[1974] 1 SCR 548
referred to
Para 26
[2003] 5 Suppl. SCR 751
referred to
Para 27
[2015] 5 SCR 1075
referred to
Para 28
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 824 of
2018.
From the Judgment and Order dated 30.06.2017 of the High Court
of Orissa, Cuttack in ARBA No. 31 of 2015.
K. K. Venugopal, AG, Balaji Srinivasan, Alok Kumar, Amit
Agnihotri, Ms. Somya Yadava, Ms. Aakriti Sharma, Siddhant Tripathi,
Avi Pandey, Advs. for the Appellant.
Ajit Kumar Sinha, Sr. Adv., Ashwarya Sinha, Ms. Mohini Priya,
Ms. Upasana Nath, Advs. for the Respondent.
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The Judgment of the Court was delivered by
R. F. NARIMAN, J. 1. Leave granted.
2. An interesting question arises as to whether an award delivered
by an Arbitrator, which decides the issue of limitation, can be said to be
an interim award, and whether such interim award can then be set aside
under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter
referred to as "the Act"). The brief facts necessary to dispose of the
present appeal are as follows.
3. The appellant before us issued a tender enquiry to 19 parties,
including the respondent, for supply of Defoamers. The respondent
submitted its bid, pursuant to which a Letter of Intent dated 2nd November,
2006 was issued to the respondent for supply of 800 Metric Tonnes of
Defoamers to be used for production of 3,08,880 Metric Tonnes of P2O5.
By 11th April, 2007, the respondent had supplied 800 Metric Tonnes of
Defoamers, however, they could not achieve the targeted production by
the end of 1st November, 2007, which was the validity of the supply
period. After considerable delay, on 6th June, 2011, the respondent issued
a legal notice demanding payment of Rs.6,35,74,245/- on 27th September,
2012. The appellant made it clear that there was nothing due and payable
to the respondent. Since disputes arose between the parties, on 1st
October, 2014 the respondent invoked arbitration, and on 25th January,
2015, Justice Deepak Verma, a retired Judge of the Supreme Court,
was appointed as the sole arbitrator. On 3rd March, 2015, issues were
framed. On 23rd July, 2015, the learned Arbitrator thought it fit to take
up the issue of limitation first, inasmuch as the counsel appearing for
both the parties submitted that this issue could be decided on the basis of
documentary evidence alone. This issue was then decided in favour of
the claimant stating that their claims had not become time barred. A
petition filed under Section 34 of the Act challenged the aforesaid award,
styling it as the 'First Partial Award'. On 8th October, 2015, the District
Judge, Jagatsinghpur, dismissed the Section 34 Petition stating that the
aforesaid award could not be said to be an interim award and that,
therefore, the Court lacked jurisdiction to proceed further under Section
34 of the Act. The appeal to the High Court of Orissa was dismissed by
the impugned order dated 30th June, 2017, reiterating the reasoning of
the learned District Judge.
4. Appearing on behalf of the appellant, Mr. K.K. Venugopal,
learned Attorney General, has argued before us that the award made on
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23rd July, 2015 is an interim award under the Act and would, therefore,
be amenable to challenge under Section 34 of the Act as such. He
referred us to various provisions of the Act and buttressed his stand with
reference to a number of judgments, including, in particular, the judgment
of National
Thermal Power Corpn. Ltd. v. Siemens
Atkeingesellschaft, (2007) 4 SCC 451. He also referred us to various
judgments on what constitutes an interim award and argued that,
according to him, the point of limitation being one of the issues raised by
the parties, was finally decided by the aforesaid award and would,
therefore, be amenable to challenge.
5. Shri Ajit Kumar Sinha, learned senior advocate appearing on
behalf of the respondent, also placed reliance on various sections of the
Act, in particular Sections 16 and 37 thereof. According to the learned
senior advocate, a ruling on the point of limitation is a ruling on
"jurisdiction" and any finding thereon goes to the root of the case. This
being the case, the drill of Section 16 has to be followed, and as the plea
of limitation has been rejected by the learned Arbitrator, the arbitral
proceedings have to continue further and the challenge has to be postponed
only after all other issues have been decided. According to the learned
senior advocate, the scheme of Section 37, in particular Section 37(2)(a),
also makes it clear that appeals lie only from an order under Section 16
accepting the plea but not rejecting it. Also, according to the learned
senior advocate, the present award cannot be said to be an interim award,
but is merely an order passed under Section 16 of the Act. He also
relied upon several judgments to buttress his point of view and relied
heavily upon judgments which held that a decision on a point of limitation
goes to jurisdiction in which case Section 16 of the Act would get
attracted.
6. Having heard learned counsel for both parties, it is important
to first set out the relevant provisions of the Act, which are as under:
"2. Definitions.-(1) In this Part, unless the context otherwise
requires,-
(c) "arbitral award" includes an interim award;
xxx xxx xxx
16. Competence of arbitral tribunal to rule on its
jurisdiction.-
(1) The arbitral tribunal may rule on its own jurisdiction, including
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ruling on any objections with respect to the existence or validity
of the arbitration agreement, and for that purpose,-
(a) an arbitration clause which forms part of a contract shall be
treated as an agreement independent of the other terms of the
contract; and
(b) a decision by the arbitral tribunal that the contract is null and
void shall not entail ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction
shall be raised not later than the submission of the statement of
defence; however, a party shall not be precluded from raising
such a plea merely because that he has appointed, or participated
in the appointment of, an arbitrator.
(3) A plea that the arbitral tribunal is exceeding the scope of its
authority shall be raised as soon as the matter alleged to be beyond
the scope of its authority is raised during the arbitral proceedings.
(4) The arbitral tribunal may, in either of the cases referred to in
sub-section (2) or sub-section (3), admit a later plea if it considers
the delay justified.
(5) The arbitral tribunal shall decide on a plea referred to in subsection (2) or sub-section (3) and, where the arbitral tribunal
takes a decision rejecting the plea, continue with the arbitral
proceedings and make an arbitral award.
(6) A party aggrieved by such an arbitral award may make an
application for setting aside such an arbitral award in accordance
with section 34.
xxx xxx xxx
31. Form and contents of arbitral award.-
(6) The arbitral tribunal may, at any time during the arbitral
proceedings, make an interim arbitral award on any matter with
respect to which it may make a final arbitral award.
xxx xxx xxx
32. Termination of proceedings.-(1) The arbitral proceedings
shall be terminated by the final arbitral award or by an order of
the arbitral tribunal under sub-section (2).
M/S. INDIAN FARMERS FERTILIZER CO-OPERATIVE LTD. v.
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37. Appealable orders.-(1) An appeal shall lie from the
following orders (and from no others) to the Court authorised by
law to hear appeals from original decrees of the Court passing
the order, namely:-
(a) refusing to refer the parties to arbitration under section 8;
(b) granting or refusing to grant any measure under section 9;
(c) setting aside or refusing to set aside an arbitral award under
section 34.
(2) Appeal shall also lie to a court from an order of the arbitral
tribunal-
(a) accepting the plea referred to in sub-section (2) or sub-section
(3) of section 16; or
(b) granting or refusing to grant an interim measure under section
17.
(3) No second appeal shall lie from an order passed in appeal
under this section, but nothing in this section shall affect or take
away any right to appeal to the Supreme Court."
7. The point at issue is a narrow one: whether an award on the
issue of limitation can first be said to be an interim award and, second,
as to whether a decision on a point of limitation would go to jurisdiction
and, therefore, be covered by Section 16 of the Act.
8. As can be seen from Section 2(c) and Section 31(6), except
for stating that an arbitral award includes an interim award, the Act is
silent and does not define what an interim award is. We are, therefore,
left with Section 31(6) which delineates the scope of interim arbitral
awards and states that the arbitral tribunal may make an interim arbitral
award on any matter with respect to which it may make a final arbitral
award.
9. The language of Section 31(6) is advisedly wide in nature. A
reading of the said sub-section makes it clear that the jurisdiction to
make an interim arbitral award is left to the good sense of the arbitral
tribunal, and that it extends to "any matter" with respect to which it may
make a final arbitral award. The expression "matter" is wide in nature,
and subsumes issues at which the parties are in dispute. It is clear,
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therefore, that any point of dispute between the parties which has to be
answered by the arbitral tribunal can be the subject matter of an interim
arbitral award. However, it is important to add a note of caution. In an
appropriate case, the issue of more than one award may be necessitated
on the facts of that case. However, by dealing with the matter in a
piecemeal fashion, what must be borne in mind is that the resolution of
the dispute as a whole will be delayed and parties will be put to additional
expense. The arbitral tribunal should, therefore, consider whether there
is any real advantage in delivering interim awards or in proceeding with
the matter as a whole and delivering one final award, bearing in mind the
avoidance of delay and additional expense. Ultimately, a fair means for
resolution of all disputes should be uppermost in the mind of the arbitral
tribunal.
10. To complete the scheme of the Act, Section 32(1) is also
material. This section goes on to state that the arbitral proceedings would
be terminated only by the final arbitral award, as opposed to an interim
award, thus making it clear that there can be one or more interim awards,
prior to a final award, which conclusively determine some of the issues
between the parties, culminating in a final arbitral award which ultimately
decides all remaining issues between the parties.
11.The English Arbitration Act, 1996, throws some light on what
is regarded as an interim award under English Law. Section 47 thereof
states:
"47 Awards on different issues, &c.
(1) Unless otherwise agreed by the parties, the tribunal may
make more than one award at different times on different aspects
of the matters to be determined.
(2) The tribunal may, in particular, make an award relating-
(a) to an issue affecting the whole claim, or
(b) to a part only of the claims or cross-claims submitted to it for
decision.
(3) If the tribunal does so, it shall specify in its award the issue,
or the claim or part of a claim, which is the subject matter of the
award."
12. By reading this section, it becomes clear that more than one
award finally determining any particular issue before the arbitral tribunal
can be made on different aspects of the matters to be determined. A
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preliminary issue affecting the whole claim would expressly be the subject
matter of an interim award under the English Act. The English Act
advisedly does not use the expression "interim" or "partial", so as to
make it clear that the award covered by Section 47 of the English Act
would be a final determination of the particular issue that the arbitral
tribunal has decided.
13.In Exmar BV v National Iranian Tanker Co. [1992] 1
Lloyd's Rep. 169, an interim final award was made, which contained the
decision that it would not issue any such award in the claimant's favour
pending determination of the respondent's counter claims. Detailed
reasons were given for this decision. The Judge, therefore, characterized
the aforesaid award as an award finally deciding a particular issue
between the parties, and concluded that as a result thereof, he had
jurisdiction to review the tribunal's decision.
14.In Satwant Singh Sodhi v. State of Punjab (1999) 3 SCC
487 at 491 and 493, an interim award in respect of one particular item
was made by the arbitrator in that case. The question before the Court
was whether such award could be made the rule of the Court separately
or could be said to have been superseded by a final award made on all
the claims later. This Court held:
"6. The question whether interim award is final to the extent it
goes or has effect till the final award is delivered will depend
upon the form of the award. If the interim award is intended to
have effect only so long as the final award is not delivered it will
have the force of the interim award and it will cease to have
effect after the final award is made. If, on the other hand, the
interim award is intended to finally determine the rights of the
parties it will have the force of a complete award and will have
effect even after the final award is delivered. The terms of the
award dated 26-11-1992 do not indicate that the same is of interim
nature."
On the facts of the case, the Court then went on to hold:
"11. This Court in Rikhabdass v. Ballabhdas [AIR 1962 SC 551
: 1962 Supp (1) SCR 475] held that once an award is made and
signed by the arbitrator, the arbitrator becomes functus officio.
In Juggilal Kamlapat v. General Fibre Dealers Ltd. [AIR 1962
SC 1123 : 1962 Supp (2) SCR 101] this Court held that an
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arbitrator having signed his award becomes functus officio but
that did not mean that in no circumstances could there be further
arbitration proceedings where an award was set aside or that
the same arbitrator could never have anything to do with the
award with respect to the same dispute. Thus in the present
case, it was not open to the arbitrator to redetermine the claim
and make an award. Therefore, the view taken by the trial court
that the earlier award made and written though signed was not
pronounced but nevertheless had become complete and final,
therefore, should be made the rule of the court appears to us to
be correct with regard to Item 1 inasmuch as the claim in relation
to Item 1 could not have been adjudicated by the arbitrator again
and it has been rightly excluded from the second award made by
the arbitrator on 28-1-1994. Thus the view taken by the trial
court on this aspect also appears to us to be correct. Therefore,
the trial court has rightly ordered the award dated 28-1-1994 to
be the rule of the court except for Item 1 and in respect of which
the award dated 26-11-1992 was ordered to be the rule of the
court."
It is, thus, clear that the first award that was made that finally determined
one issue between the parties, with respect to Item no.1 of the claim,
was held to be an interim award inasmuch as it finally determined claim
1 between the parties and, therefore, could not be re-adjudicated all
over again.
15. In McDermott International Inc. v. Burn Standard Co.
Ltd. (2006) 11 SCC 181 at page 211-212, under the heading 'validity of
the partial award', this Court held:
"68. The 1996 Act does not use the expression "partial award".
It uses interim award or final award. An award has been defined
under Section 2(c) to include an interim award. Sub-section (6)
of Section 31 contemplates an interim award. An interim award
in terms of the said provision is not one in respect of which a
final award can be made, but it may be a final award on the
matters covered thereby, but made at an interim stage.
69. The learned arbitrator evolved the aforementioned procedure
so as to enable the parties to address themselves as regards
certain disputes at the first instance. As would appear from the
partial award of the learned arbitrator, he deferred some claims.
M/S. INDIAN FARMERS FERTILIZER CO-OPERATIVE LTD. v.
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He further expressed his hope and trust that in relation to some
claims, the parties would arrive at some sort of settlement having
regard to the fact that ONGC directly or indirectly was involved
therein. While in relation to some of the claims, a finality was
attached to the award, certain claims were deferred so as to
enable the learned arbitrator to advert thereto at a later stage. If
the partial award answers the definition of the award, as
envisaged under Section 2(c) of the 1996 Act, for all intent and
purport, it would be a final award. In fact, the validity of the said
award had also been questioned by BSCL by filing an objection
in relation thereto.
70. We cannot also lose sight of the fact that BSCL did not raise
any objection before the arbitrator in relation to the jurisdiction
of the arbitrator. A ground to that effect has also not been taken
in its application under Section 34 of the Act. We, however, even
otherwise do not agree with the contention of Mr Mitra that a
partial award is akin to a preliminary decree. On the other hand,
we are of the opinion that it is final in all respects with regard to
disputes referred to the arbitrator which are subject-matters of
such award. We may add that some arbitrators instead and in
place of using the expression "interim award" use the expression
"partial award". By reason thereof the nature and character of
an award is not changed. As, for example, we may notice that in
arbitral proceedings conducted under the Rules of Arbitration of
the International Chamber of Commerce, the expression "partial
award" is generally used by the arbitrators in place of interim
award. In any view of the matter, BSCL is not in any way
prejudiced. We may state that both the partial award and the
final award are subject-matter of challenge under Section 34 of
the Act."
The aforesaid judgment makes it clear that an interim award or partial
award is a final award on matters covered therein made at an intermediate
stage of the arbitral proceedings.
16. Tested in the light of the statutory provisions and the case law
cited above, it is clear that as the learned Arbitrator has disposed of one
matter between the parties i.e. the issue of limitation finally, the award
dated 23rd July, 2015 is an "interim award" within the meaning of Section
2(1)(c) of the Act and being subsumed within the expression "arbitral
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award" could, therefore, have been challenged under Section 34 of the
Act.
17. However, Shri Sinha has argued before us that the award
dated 23rd July, 2015 being a ruling on the arbitral tribunal's jurisdiction
would fall within Section 16 of the Act, and inasmuch as the decision
taken on the point of limitation was rejected, the drill of Section 16 must
be followed in which case all other issues have to be decided first, and it
is only after such issues are decided that such an award can be challenged
under Section 34 of the Act. Section 16 of the Act lays down what, in
arbitration law, is stated to be the Kompetenz-kompetenz principle, viz.
that an arbitral tribunal may rule on its own jurisdiction. At one time, the
law was that the arbitrator, being a creature of the contract, could not
rule on the existence or validity of the arbitration clause contained in the
contract. This, however, gave way to the Kompetenz principle which
was adopted by the UNCITRAL Model Law. Article 16 of the
UNCITRAL Model Law, on which Section 16 of the Act is based, reads
as follows:
"Article 16. Competence of arbitral tribunal to rule on its
jurisdiction
(1) The arbitral tribunal may rule on its own jurisdiction, including
any objections with respect to the existence or validity of the
arbitration agreement. For that purpose, an arbitration clause
which forms part of a contract shall be treated as an agreement
independent of the other terms of the contract. A decision by the
arbitral tribunal that the contract is null and void shall not entail
ipso jure the invalidity of the arbitration clause.
(2) A plea that the arbitral tribunal does not have jurisdiction
shall be raised not later than the submission of the statement of
defence. A party is not precluded from raising such a plea by the
fact that he has appointed, or participated in the appointment of,
an arbitrator. A plea that the arbitral tribunal is exceeding the
scope of its authority shall be raised as soon as the matter alleged
to be beyond the scope of its authority is raised during the arbitral
proceedings. The arbitral tribunal may, in either case, admit a
later plea if it considers the delay justified.
(3) The arbitral tribunal may rule on a plea referred to in paragraph
(2) of this article either as a preliminary question or in an award
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on the merits. If the arbitral tribunal rules as a preliminary question
that it has jurisdiction, any party may request, within thirty days
after having received notice of that ruling, the court specified in
article 6 to decide the matter, which decision shall be subject to
no appeal; while such a request is pending, the arbitral tribunal
may continue the arbitral proceedings and make an award."
18. The Statement of Objects and Reasons of the Act expressly
refers to the UNCITRAL Model Law in the following terms:
"3. Though the said UNCITRAL Model Law and Rules are
intended to deal with international commercial arbitration and
conciliation, they could, with appropriate modifications, serve as
a model for legislation on domestic arbitration and conciliation.
The present Bill seeks to consolidate and amend the law relating
to domestic arbitration, international commercial arbitration,
enforcement of foreign arbitral awards and to define the law
relating to conciliation, taking into account the said UNCITRAL
Model Law and Rules."
19. It may be noticed that Section 16(1) to (4) are based on Article
16 of the UNCITRAL Model Law. The Kompetenz principle deals
with the arbitral tribunal's jurisdiction in the narrow sense of ruling on
objections with respect to the existence or validity of the arbitration
agreement. What is important to notice in the language of Section 16(1)
is the fact that the arbitral tribunal may rule on its own jurisdiction, which
makes it clear that it refers to whether the arbitral tribunal may embark
upon an inquiry into the issues raised by parties to the dispute.
20. Here again, the English Arbitration Act of 1996 throws some
light on the problem before us. Sections 30 and 31 of the said Act read
as under:
"30 Competence of tribunal to rule on its own jurisdiction.
- (1) Unless otherwise agreed by the parties, the arbitral tribunal
may rule on its own substantive jurisdiction, that is, as to-
(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance
with the arbitration agreement.
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(2) Any such ruling may be challenged by any available arbitral
process of appeal or review or in accordance with the provisions
of this Part.
31 Objection to substantive jurisdiction of tribunal. - (1)
An objection that the arbitral tribunal lacks substantive jurisdiction
at the outset of the proceedings must be raised by a party not
later than the time he takes the first step in the proceedings to
contest the merits of any matter in relation to which he challenges
the tribunal's jurisdiction.
A party is not precluded from raising such an objection by the
fact that he has appointed or participated in the appointment of
an arbitrator.
(2) Any objection during the course of the arbitral proceedings
that the arbitral tribunal is exceeding its substantive jurisdiction
must be made as soon as possible after the matter alleged to be
beyond its jurisdiction is raised.
(3) The arbitral tribunal may admit an objection later than the
time specified in subsection (1) or (2) if it considers the delay
justified.
(4) Where an objection is duly taken to the tribunal's substantive
jurisdiction and the tribunal has power to rule on its own
jurisdiction, it may- (a) rule on the matter in an award as to
jurisdiction, or (b) deal with the objection in its award on the
merits. If the parties agree which of these courses the tribunal
should take, the tribunal shall proceed accordingly.
(5) The tribunal may in any case, and shall if the parties so agree,
stay proceedings whilst an application is made to the court under
section 32 (determination of preliminary point of jurisdiction)."
These sections make it clear that the Kompetenz principle, which
is also followed by the English Arbitration Act of 1996, is that the
"jurisdiction" mentioned in Section 16 has reference to three things: (1)
as to whether there is the existence of a valid arbitration agreement; (2)
whether the arbitral tribunal is properly constituted; and (3) matters
submitted to arbitration should be in accordance with the arbitration
agreement.
M/S. INDIAN FARMERS FERTILIZER CO-OPERATIVE LTD. v.
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21. That "jurisdiction" is a coat of many colours, and that the said
word displays a certain colour depending upon the context in which it is
mentioned, is well-settled. In the classic sense, in Official Trustee v.
Sachindra Nath Chatterjee, (1969) 3 SCR 92 at 99, "jurisdiction" is
stated to be:
"In the order of Reference to a Full Bench in the case
of Sukhlal v. Tara Chand [(1905) ILR 33 Cal 68] it was stated
that jurisdiction may be defined to be the power of a Court to hear
and determine a cause, to adjudicate and exercise any
judicial power in relation to it: in other words, by jurisdiction
is meant the authority which a Court has to decide matters
that are litigated before it or to take cognizance of matters
presented in a formal way for its decision. An examination of
the cases in the books discloses numerous attempts to define the
term 'jurisdiction', which has been stated to be 'the power to
hear and determine issues of law and fact', the authority by
which the judicial officer take cognizance of and 'decide causes';
'the authority to hear and decide a legal controversy', 'the
power to hear and determine the subject-matter in controversy
between parties to a suit and to adjudicate or exercise any judicial
power over them;' 'the power to hear, determine and pronounce
judgment on the issues before the Court'; 'the power or authority
which is conferred upon a Court by the Legislature to hear and
determine causes between parties and to carry the judgments
into effect'; 'the power to enquire into the facts, to apply the
law, to pronounce the judgment and to carry it into execution'."
(Mukherjee, Acting CJ, speaking for Full Bench of the Calcutta
High Court in Hirday Nath Roy v. Ramachandra Barna
Sarma ILR 68 Cal 138)
22. A Constitution Bench of this Court in Ittavira Mathai v.
Varkey Varkey, (1964) 1 SCR 495 at 501-503, made a distinction
between an erroneous decision on limitation being an error of law which
is within the jurisdiction of the Court, and a decision where the Court
acts without jurisdiction in the following terms:
"The first point raised by Paikedy for the appellant is that the
decree in OS No. 59 of 1093 obtained by Anantha Iyer and his
brother in the suit on the hypothecation bond executed by
Ittiyavira in favour of Ramalinga Iyer was a nullity because the
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suit was barred by time. In assuming that the suit was barred by
time, it is difficult to appreciate the contention of learned counsel
that the decree can be treated as a nullity and ignored in
subsequent litigation. If the suit was barred by time and yet, the
court decreed it, the court would be committing an illegality and
therefore the aggrieved party would be entitled to have the decree
set aside by preferring an appeal against it. But it is well settled
that a court having jurisdiction over the subject-matter of the suit
and over the parties thereto, though bound to decide right may
decide wrong; and that even though it decided wrong it would
not be doing something which it had no jurisdiction to do. It had
the jurisdiction over the subject-matter and it had the jurisdiction
over the party and, therefore, merely because it made an error
in deciding a vital issue in the suit, it cannot be said that it has
acted beyond its jurisdiction. As has often been said, courts have
jurisdiction to decide right or to decide wrong and even though
they decide wrong, the decrees rendered by them cannot be
treated as nullities. Learned counsel, however, referred us to the
decision of the Privy Council in Maqbul Ahmad v. Onkar Pratap
Narain Singh [AIR (1935) PC 85] and contended that since
the court is bound under the provisions of Section 3 of the
Limitation Act to ascertain for itself whether the suit before it
was within time, it would act without jurisdiction if it fails to do
so.