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CASE NO.: Appeal (civil)  1953 of 2006

PETITIONER: National Thermal Power Corporation Ltd

RESPONDENT: Siemens Atkeingesellschaft

DATE OF JUDGMENT: 28/02/2007

BENCH: P.K. BALASUBRAMANYAN

JUDGMENT: J U D G M E N T  

P.K. BALASUBRAMANYAN, J.

1.              I respectfully agree with the reasoning and  conclusion of my learned brother.  I am inclined to add a few  words in view of the significance of the question and the  frequency with which it may arise.

2.              Before the Arbitral Tribunal, Seimens, the  contractor, made a claim for compensation for the delay on the  part of the N.T.P.C. for whom a works contract was executed  by Seimens.  N.T.P.C. not only resisted the claim but also  made a counter claim.  The counter claim was sought to be  resisted by Seimens by contending that all outstanding claims  between the parties other than the one it had put forward in  the claim before the Arbitral Tribunal had been settled  between the parties as evidenced by a Memorandum of  Understanding arrived at between them described in the  proceedings as Minutes of the Meeting (M.O.M.).  Seimens,  therefore, contended that the claims made by N.T.P.C. before  the Arbitral Tribunal by way of counter claim was not  maintainable or did not survive the M.O.M.  They had also  raised a contention that N.T.P.C. not having acted in terms of  the arbitration clause by first raising the claim before the  Engineer, it could not straightaway raise the claim before the  Arbitral Tribunal.  That part of the objection was given up at  the stage of arguments.  Therefore, what survived for decision  before the Arbitral Tribunal was the effect of the M.O.M. on the  claims of N.T.P.C. in the counter claim filed by it.  The Arbitral  Tribunal thought it appropriate to dispose of certain  preliminary questions including the question whether N.T.P.C.  could pursue its counter claim in the light of the M.O.M.  The  Tribunal held that other than claims 1 and 7 in the counter- claim, the other claims had already been settled as evidenced  by the M.O.M. and the said claims did not survive for  adjudication by the Arbitral Tribunal.  It held that claim No. 7  was not really a claim since what N.T.P.C. had done was to  reserve its right to make a claim on that score.  As regards  claim No. 1, the Tribunal held that it was barred by limitation.   Thus, in what was called a partial award, the claim of Seimens  was found to be in time and the counter claim made by  N.T.P.C. was found to be unsustainable.   

3.              N.T.P.C. sought to file an appeal against the partial  award of the Arbitral Tribunal by resort to Section 37(2)(a) of  the Arbitration and Conciliation Act, 1996 (for short, ’the Act’).   It was the contention of N.T.P.C. that when the arbitrators

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refused to go into the merits of its counter claim, they were  really declining jurisdiction in terms of sub-section (2) of  Section 16 of the Act and in such a situation, an appeal was  clearly maintainable under Section 37(2)(a) of the Act.  This  was sought to be met by Seimens by pointing out that it was  not a case of declining of jurisdiction by the Arbitral Tribunal  to entertain the counter claim made by N.T.P.C., but it was  really a case of the counter claim being found unsustainable  for the reasons stated in the award.  The partial award thus  made by the Arbitral Tribunal was an award on the counter  claim of N.T.P.C. and it was not a case which fell within either  sub-section (2) or sub-section (3) of Section 16 of the Act  attracting Section 37(2)(a) of the Act.   

4.              What is sought to be argued on behalf of N.T.P.C.,  the appellant, is that the Arbitral Tribunal had intended to  deal with the question of jurisdiction and limitation in the first  instance and it was during the course of deciding those  questions that the counter claim had been rejected and this  amounted to a declining of jurisdiction by the Arbitral  Tribunal in dealing with the counter claim of N.T.P.C.  The  partial award was therefore a decision on a plea under Section  16(2) of the Act and consequently appealable under Section  37(2)(a) of the Act.  

5.              In the larger sense, any refusal to go into the merits  of a claim may be in the realm of jurisdiction.  Even the  dismissal of the claim as barred by limitation may in a sense  touch on the jurisdiction of the court or Tribunal.  When a  claim is dismissed on the ground of it being barred by  limitation, it will be, in a sense, a case of the court or Tribunal  refusing to exercise jurisdiction to go into the merits of the  claim.  In Pandurang Dhoni Chougule Vs Maruti Hari  Jadhav [(1966) 1 S.C.R. 102], this Court observed that:

"It is well-settled that a plea of limitation or a  plea of res judicata is a plea of law which  concerns the jurisdiction of the court which  tries the proceedings.  A finding on these pleas  in favour of the party raising them would oust  the jurisdiction of the court, and so, an  erroneous decision on these pleas can be said  to be concerned with questions of jurisdiction  which fall within the purview of S. 115 of the  Code."

In a particular sense, therefore, any declining to go into the  merits of a claim could be said to be a case of refusal to  exercise jurisdiction.

6.              The expression ’jurisdiction’ is a word of many hues.   Its colour is to be discerned from the setting in which it is  used.  When we look at Section 16 of the Act, we find that the  said provision is one, which deals with the competence of the  Arbitral Tribunal to rule on its own jurisdiction.   SBP & Co.  Vs. Patel Engineering Ltd. & Anr. [(2005) 8 S.C.C. 618] in a  sense confined the operation of Section 16 to cases where the  Arbitral Tribunal was constituted at the instance of the parties  to the contract, without reference to the Chief Justice under  Section 11(6) of the Act.  In a case where the parties had thus  constituted the Arbitral Tribunal without recourse to Section  11(6) of the Act, they still have the right to question the  jurisdiction of the Arbitral Tribunal including the right to  invite a ruling on any objection with respect to the existence or

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validity of the arbitration agreement.  It could therefore rule  that there existed no arbitration agreement, that the  arbitration agreement was not valid, or that the arbitration  agreement did not confer jurisdiction on the Tribunal to  adjudicate upon the particular claim that is put forward before  it.  Under sub-section (5), it has the obligation to decide the  plea and where it rejects the plea, it could continue with the  arbitral proceedings and make the award.  Under sub- section(6), a party aggrieved by such an arbitral award may  make an application for setting aside such arbitral award in  accordance with Section 34.  In other words, in the challenge  to the award, the party aggrieved could raise the contention  that the Tribunal had no jurisdiction to pass it or that it had  exceeded its authority, in passing it.  This happens when the  Tribunal proceeds to pass an award.  It is in the context of the  various sub-sections of Section 16 that one has to understand  the content of the expression ’jurisdiction’ and the scope of the  appeal provision.  In a case where the Arbitral Tribunal  proceeds to pass an award after overruling the objection  relating to jurisdiction, it is clear from sub-section (6) of  Section 16 that the parties have to resort to Section 34 of the  Act to get rid of that award, if possible.  But, if the Tribunal  declines jurisdiction or declines to pass an award and  dismisses the arbitral proceedings, the party aggrieved is not  without a remedy.  Section 37 (2) deals with such a situation.   Where the plea of absence of jurisdiction or a claim being in  excess of jurisdiction is accepted by the Arbitral Tribunal and  it refuses to go into the merits of the claim by declining  jurisdiction, a direct appeal is provided.  In the context of  Section 16 and the specific wording of Section 37(2)(a) of the  Act, it would be appropriate to hold that what is made directly  appealable by Section 37(2)(a) of the Act is only an acceptance  of a plea of absence of jurisdiction, or of excessive exercise of  jurisdiction and the refusal to proceed further either wholly or  partly.   

7.              In a case where a counter claim is referred to and  dealt with and a plea that the counter claim does not survive  in view of the settlement of disputes between the parties  earlier arrived at is accepted, it could not be held to be a case  of refusal to exercise jurisdiction by the Arbitral Tribunal.   Same is the position when an Arbitral Tribunal finds that a  claim was dead and was not available to be made at the  relevant time or that the claim was not maintainable for other  valid reasons or that the claim was barred by limitation.  They  are all adjudications by the Tribunal on the merits of the claim  and in such a case the aggrieved party can have recourse only  to Section 34 of the Act and will have to succeed on  establishing any of the grounds available under that provision.   It would not be open to that party to take up the position that  by refusing to go into the merits of his claim, the Arbitral  Tribunal had upheld a plea that it does not have jurisdiction  to entertain the claim and hence the award or order made by  it, comes within the purview of Section 16(2) of the Act and  consequently is appealable under Section 37(2)(a) of the Act.  

8.              In the case on hand, what the Tribunal has found is  that in view of the M.O.M. wherein the various claims of either  party were thrashed out and settled, N.T.P.C. could not  pursue most of the claims set out in the counter claim.  This is  a finding on the merits of the claim of N.T.P.C.  It is not a  decision by the Arbitral Tribunal either under Section 16(2) or  Section 16(3) of the Act.  Consequently, the High Court was  right in holding that the appeal filed by N.T.P.C. under Section

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37(2)(a) was not maintainable.