Case Note & Summary
The petitioner, Union of India, through the Divisional Railway Manager (Works), Mumbai Division, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 15.12.2007 passed by the Arbitral Tribunal in a dispute arising out of a work contract with the respondent, M/s. Suraj Construction Co. The contract value was Rs.18,82,575/-. The respondent claimed a sum of Rs.57,93,372/- with interest at 20% p.a., which was admittedly more than 20% of the contract value. The Special Conditions of Contract contained Clause 41.2, which stated that the provisions of Clauses 63 and 64 of the General Conditions of Contract (which provide for arbitration) would be applicable only for settlement of claims or disputes of a value less than or equal to 20% of the contract value. The petitioner raised an objection under Section 16 of the Act regarding the arbitrability and jurisdiction of the Arbitral Tribunal to deal with the claims, as the claim exceeded the 20% limit. The Arbitral Tribunal rejected the objection. The High Court, relying on a previous decision in Union of India vs. M/s. Jain Brothers (Arbitration Petition No.285/2007), where similar clauses were interpreted, held that the Arbitral Tribunal lacked jurisdiction to entertain the claim as it exceeded the contractual limit. The court noted that the parties had agreed to the terms of the contract, including the limitation on arbitration. Consequently, the court set aside the award and allowed the petition.
Headnote
A) Arbitration Law - Jurisdiction of Arbitral Tribunal - Contractual Bar on Arbitrability - Section 16 and Section 34 of the Arbitration and Conciliation Act, 1996 - The dispute arose from a work contract where the Special Conditions of Contract (Clause 41.2) provided that arbitration under Clauses 63 and 64 of the General Conditions of Contract would apply only for claims less than or equal to 20% of the contract value. The respondent's claim of Rs.57,93,372/- exceeded 20% of the contract value of Rs.18,82,575/-. The Arbitral Tribunal rejected the petitioner's objection under Section 16. The High Court held that the Arbitral Tribunal lacked jurisdiction to entertain the claim as it exceeded the contractual limit, and set aside the award. (Paras 1-5)
Issue of Consideration
Whether the Arbitral Tribunal had jurisdiction to entertain claims exceeding 20% of the contract value in view of the specific clauses in the Special Conditions of Contract that restrict arbitration to claims less than or equal to 20% of the contract value.
Final Decision
The court allowed the petition and set aside the arbitral award dated 15.12.2007, holding that the Arbitral Tribunal lacked jurisdiction to entertain the claim as it exceeded 20% of the contract value.
Law Points
- Arbitration
- Jurisdiction of Arbitral Tribunal
- Contractual Limitation on Arbitrability
- Section 16 and Section 34 of Arbitration and Conciliation Act
- 1996
Case Details
2010 LawText (BOM) (02) 46
Arbitration Petition No. 171 of 2009
Mr. Suresh Kumar for the Petitioner. None for the Respondent.
Union of India, through Divisional Railway Manager (Works), Mumbai Division, Mumbai Central, Mumbai
M/s. Suraj Construction Co., M1, Mezanine Floor, Mansarovar Apartments, Ulhasnagar 421 005
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Nature of Litigation
Petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging an arbitral award.
Remedy Sought
The petitioner sought to set aside the arbitral award dated 15.12.2007 on the ground that the Arbitral Tribunal lacked jurisdiction to entertain the claim as it exceeded 20% of the contract value.
Filing Reason
The respondent's claim exceeded 20% of the contract value, which was barred by Clause 41.2 of the Special Conditions of Contract, and the Arbitral Tribunal erroneously rejected the petitioner's objection under Section 16 of the Act.
Previous Decisions
The Arbitral Tribunal rejected the petitioner's application under Section 16 of the Act regarding arbitrability and jurisdiction. The High Court had earlier appointed the arbitrator by order dated 13.02.2004, permitting the parties to raise the issue of valuation.
Issues
Whether the Arbitral Tribunal had jurisdiction to entertain claims exceeding 20% of the contract value in view of Clause 41.2 of the Special Conditions of Contract.
Whether the award is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 for lack of jurisdiction.
Submissions/Arguments
The petitioner argued that under Clause 41.2 of the Special Conditions of Contract, arbitration under Clauses 63 and 64 of the General Conditions of Contract is applicable only for claims less than or equal to 20% of the contract value. Since the respondent's claim of Rs.57,93,372/- exceeded 20% of the contract value of Rs.18,82,575/-, the Arbitral Tribunal had no jurisdiction.
The respondent did not appear to contest the petition.
Ratio Decidendi
Where the parties have contractually agreed that arbitration is available only for claims up to a certain percentage of the contract value, claims exceeding that limit are not arbitrable. The Arbitral Tribunal cannot assume jurisdiction over such claims, and any award passed in respect of such claims is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 for lack of jurisdiction.
Judgment Excerpts
The learned Tribunal, however, rejected the application as filed by the petitioner under Section 16 of the Act and, therefore, as contemplated under Section 34 of the Act, the petitioner has raised this preliminary issue while challenging the Award in question.
In view of the fact that the claim that was urged in the arbitral proceedings was in excess of 20% of the value of the contract, it was urged on behalf of the petitioner that such a claim was not arbitrable.
Procedural History
The dispute arose out of a work contract. The respondent filed claims before the Arbitral Tribunal. The petitioner raised an objection under Section 16 of the Arbitration and Conciliation Act, 1996 regarding jurisdiction, which was rejected by the Tribunal. The Tribunal passed an award on 15.12.2007. The petitioner then filed the present petition under Section 34 of the Act to challenge the award.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 16, Section 34
