Summary
The Court restored an arbitral award in the contractor's favour, which the High Court had set aside on the view that the tribunal, constituted on the State's notice about one dispute, could not decide the contractor's other disputes for want of its own Section 21 notice. Section 21 only fixes when arbitration commences for limitation purposes and does not confine the tribunal's jurisdiction. The arbitration clause was wide, and by its conduct the State had thrown all the disputes open before the tribunal.
Issues
- Whether the High Court was right that the Arbitral Tribunal was constituted at the State's request to decide only dispute No. 1.
- Whether the appellant's failure to issue its own notice under Section 21 of the Arbitration and Conciliation Act, 1996 barred it from pursuing disputes Nos. 2 to 4 before the tribunal.
- Whether the State could rely on the contractual time limits in the multi-tier dispute clauses to confine the arbitration.
Provisions considered
- Section 21, Arbitration and Conciliation Act, 1996Held to be procedural, not jurisdictional: it only marks when arbitration commences for a particular dispute, for reckoning limitation. A Section 21 notice is not a mandatory precondition, and claims within the arbitration agreement may be raised without one. (¶¶ 3, 14, 16, 20)
- Section 23 read with Section 2(9), Arbitration and Conciliation Act, 1996Once the tribunal is constituted, either side may file claims or counter-claims within the arbitration agreement and amend them; any restriction on claims must come from Section 23, not Section 21. The 'claimant' is simply the party that files its statement of claim first. (¶¶ 16, 18, 19, 20)
- Section 16, Arbitration and Conciliation Act, 1996The tribunal's ruling on the State's jurisdictional objection was upheld: the claims were unsettled, the clause was comprehensive, and the State's prayer to declare the Adjudicator's decision void showed an intention to reopen all four disputes. (¶¶ 5.17, 15)
- Section 28(b), Indian Contract Act, 1872The Court noted the High Court's finding that the 28-day limit in Clause 25.2 for referring the Adjudicator's decision to arbitration offended Section 28(b); the State had in any case not treated the decision as final. (¶¶ 5.20, 15)
Held
- The State's own conduct precluded it from invoking the time limits in Clauses 24.1, 25.1 and 25.2. It raised no time-bar before the Adjudicator, referred dispute No. 1 well after 28 days while asserting that delay could itself go to the arbitrator, and withheld all payment pending arbitration. It also asked the tribunal to declare the whole adjudication void. Pre-arbitration steps can be waived, and a party at fault cannot take advantage of its own wrong. (¶ 15)
- Section 21 is concerned only with the commencement of arbitral proceedings for reckoning limitation; failure to issue a Section 21 notice is not fatal if the claim is otherwise valid and arbitrable. Disputes not mentioned in a notice may still be raised, and a respondent may raise counter-claims without a notice, if they fall within the arbitration agreement. (¶¶ 16, 17)
- Where the arbitration clause covers any dispute arising out of or connected with the agreement, the claimant is not confined to the claims in the notice and either party may raise and amend claims or counter-claims. The State's reliance on para 41(c) of State of Goa v. Praveen Enterprises, which applies where the agreement limits arbitration to specifically referred disputes, was rejected. (¶ 18)
- Labelling the party that files its statement first as 'claimant' is a matter of convenience; the contention that the appellant could not be a claimant because it had not issued a Section 21 notice is untenable. (¶ 20)
- There was no breach of procedure in constituting the tribunal and it did not travel beyond the reference, so the High Court erred in holding that the tribunal exceeded its jurisdiction by deciding all the disputes. (¶¶ 14, 21)
Result
Appeal allowed; the High Court's judgment set aside and the arbitral award dated 29.06.2006 upheld in its entirety. No order as to costs.