# STATE OF GOA v. PRAVEEN ENTERPRISES

- **Citation:** [2011] 10 S.C.R. 1026
- **Court:** Supreme Court of India
- **Decided:** 2011-07-04
- **Case number:** Civil Appeal No. 4987 of 2011
- **Bench:** R.V. Raveendran, A.K. Patnaik
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-goa-v-praveen-enterprises-27106
- **Pages:** 38

## Headnote

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 Respondentcontractor 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 arbitr

## Text

_Characters 0–39,167 of 73,131. This is a partial read: ask again with offset=39167 for what follows._

A
B
[2011] 10 S.C.R. 1026
STATE OF GOA
v.
PRAVEEN ENTERPRISES
(Civil Appeal No. 4987 of 2011)
JULY 4, 2011
[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 Respondentcontractor 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
HELD:
What is 'Reference to arbitration'
1.1. 'Reference to arbitration' can be by parties
themselves or by an appointing authority named in the
arbitration agreement or by a court on an application by
E
F
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
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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] [1045E-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 subsection (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
8 21 - referred to.
·
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
purpose of section 21 of the Act is to determine the date
F
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]
2.3. There can be claims by a claimant even without
G
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
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
B
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
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
F
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.
F
G
H
Summation
4. The position may be summed up as follows:
(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
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
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]
D
E
F
G
Case Law Reference:
1998 (2) sec 21
referred to
Para 6
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
2011 (2) SCALE 291
referred to
Para 28
1942 AC 356
referred to
Para 31
CIVIL APPELLATE JURISDICTION: Civil Appal No. 4987
of 2011.
From the Judgment & Order dated dated 31.8.2007 of the
High Court of Bombay at Goa in Arbitration Appeal No. 3 of
2006.
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
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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."
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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
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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
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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.
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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
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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
jurisdiction to entertain a counter claim, by following its earlier
decision in Charuvil Koshy Verghese (supra}, rendered with
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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'
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9. 'Reference to arbitration' describes various acts.
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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.
(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'
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
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
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specific disputes.
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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
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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.