TaxTMI 
TaxTMI 
2018 (7) TMI 2388
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....n December 16, 2008 for a specified monthly sum of about Rs. 12.67 lakh. The case of the appellant is that the vessel was damaged as it ran aground near Campbell Bay on July 6, 2009 due to negligence on the part of the respondent, which rendered the vessel unusable for a considerable period of time. A claim for damages was levied on the respondent; the security deposit was forfeited and the performance guarantee furnished by the respondent was encashed. The respondent disputed the right of the appellant herein to adjust the security deposit and performance guarantee against the claim of damages and sought a reference of the disputes that had arisen between the parties to arbitration. 4. Indeed, the respondent initially approached this Court with a petition under Article 226 of the Constitution, complaining of the arbitrary deduction of amounts due to it from bills pertaining to other contracts. Such petition was not entertained on the ground that there was an alternative remedy available to the petitioner by way of arbitration. The order on such petition under Article 226 of the Constitution, of November 18, 2014, also noticed that a request under Section 11 of the Arbitration a....
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..../Complement, that causes loss of life, accidents or serious financial loss to the ship shall be treated as default. The Manning Agent's services can be terminated within 10 days notice, and without paying any compensation. If the Manning Agent fails to place the required officer on any of the vessel, the manning fees for the particular period shall be disallowed and the penalty @ Rs. 25,000/- per vessel per day shall be imposed for such period the vessel was short manned. If the vessel is unavailable due to the fault of the manning agent at any time during the contract, the administration may opt for terminating the contract with the manning agent without any compensation and penalty of 0.75% of Annual fees per vessel per day shall be imposed for such period the vessel was unavailable. In addition to this, the Administration may opt for terminating the contract with the man agent without compensation and the EMD/Bank guarantee/security deposit held by the department shall be forfeited. The Administration reserves the right to recover any financial loss occurred to it or to the vessel due to willful action/omission/commission or negligence of the Agent....
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....the orders passed by this Court on the respondent's writ petition, the appeal therefrom, the request under Section 11 of the said Act, the appeal from the order passed on such request and the Supreme Court order thereupon, the ground of jurisdiction that is urged at the appellate stage of the proceedings under Section 34 of the said Act had been duly covered in course of the long journey of the parties in this Court even before the commencement of the arbitral reference. The respondent exhorts that upon the arbitration agreement standing scrutiny in the various sets of proceedings in Court referred to above, it is no longer open to the appellant to canvass that the primary dispute between the parties was not arbitrable or amenable to a decision of the arbitral tribunal constituted by the Supreme Court. 12. It is here that the legal position has to be emphasised. It may require a bit of history in the reference to the previous regime of arbitration under the Arbitration Act, 1940. 13. Though the provisions of the 1996 Act are not really comparable to the provisions under the 1940 Act and high judicial pronouncements caution against interpreting the provisions of the 1996 A....
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....f the 1940 Act, sometimes carry the baggage of the primacy of the court's authority while directing a reference, though the 1996 Act has turned the concept on its head and has left the issue of arbitrability to be decided first by the arbitral tribunal. 15. At its nascent stage of the successor statute, the exercise of the authority under Section 11 of the 1996 Act was regarded as an administrative function in view of the Constitution Bench (2002) 2 SCC 388 (Konkan Railway Corpn. Ltd. v. Rani Construction (P) Ltd.) However, such view was overturned by the majority opinion in a larger bench (2005) 8 SCC 618 (SBP & Co. v. Patel Engineering Ltd.). It is inarguable that the decision rendered on a request under Section 11 of the 1996 Act involves a judicial function. In the same judgment in SBP & Co., while the adjudicatory function of the Chief Justice or his designate under Section 11 of the Act has been regarded as judicial, the extent of the authority available under such provision has been strictly limited. This is because of the existence of provisions like Section 12 and Section 16 in the 1996 Act which were an anathema to the jurisprudential philosophy under the 1940 Act.....
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....ent of the arbitral reference, the issue of jurisdiction had been conclusively pronounced upon ? is not acceptable. 18. The conduct of the appellant herein was somewhat perplexing. It lodged a counter-claim and completed its defence to the claim pursued by the respondent without seeking to challenge the authority of the arbitrator to adjudicate on the disputes pertaining to the deductions made by the appellant in pursuance of its claim for damages under the default clause. Ordinarily, when a party to an arbitral reference has misgivings as to the authority of the arbitrator in taking up the adjudication or a part thereof, an application has to be made at the initial stage whereupon an order is passed thereon by the arbitrator. If the order upholds the challenge, the arbitral reference proceeds without the objectionable areas being gone into; if the challenge fails, the arbitral reference goes on in full swing. 19. In the present case, it was only at the stage of the commencement of oral evidence that the appellant herein filed a belated, handwritten application challenging the jurisdiction of the arbitrator to adjudicate upon such part of the disputes as was covered by the de....
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....ret the clause which would not lead to absurdity and inconsistency with the rest of the Contract i.e. CD-1. It is settled position of law that different Clause of the Contract have to be construed harmoniously. Therefore, in my opinion the provision contained in Clause 3.22 would prevail over the 'No arbitration proceedings on this account', as provided in clause 3.20. 6.7 Furthermore, it appears from the fact that the Respondent had accepted that arbitration is permissible in the facts of present case. It is matter or record that initially the Claimant had challenged the recovery made by the Respondent under Clause 3.20 by Order dated 25.09.2014 by filing Writ Petition being WP No. 368 of 2014. The Learned Single Judge noted the relevant facts and submissions of the parties and made the following observations: "There is no dispute that the Agreement between the Petitioner company and the Administration contained an arbitration clause and an application has been filed under section 11 of the arbitration and conciliation Act, 1996 for appointment of an Arbitrator." 6.8 It is noteworthy that Claimant had served a notice dated 08.06.2015 on Lt. Gover....
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....as canvassed by the appellant in course of the reference, the delay in the plea being urged was condoned and the plea was taken up for adjudication on merits. Section 16 of the Act deals with the competence of the arbitral tribunal to rule on its jurisdiction. Sub-section (4) thereof mandates that an arbitral tribunal may admit a plea later than what is provided for in sub-sections (2) and (3) thereof "if it considers the delay justified". In the recording at paragraph 6.15 of the award as above, it is evident that the delay in the plea being carried to the arbitrator was condoned and the plea was taken up to be considered. It does not appear that the respondent herein protested the condonation of the delay or such belated challenge as to the authority of the arbitrator being considered on merits. At any rate, the respondent has not questioned the propriety of the arbitrator's order by which the challenge was received to be assessed on merits. Further, the respondent has not challenged the award on the ground that the belated objection as to the jurisdiction of the arbitrator should not have been entertained at all. 23. The arbitrator dealt with such objection on merits and ....
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....ing the respondent herein from either approaching a court of law or raising any dispute pertaining to the default clause before an arbitrator. The two parts have to be seen independently and in isolation: the part prohibiting the respondent herein from approaching even a court of law; and, the other restraining the respondent from carrying the matter to arbitration. It is possible that the first limb of such restriction may be contrary to Section 28 of the Contract Act and, therefore, illegal and not binding. But that is not for the arbitrator to adjudicate upon. Once there is a clear bar in the matrix contract containing the arbitration agreement prohibiting the adjudication in respect of some specified matters by the arbitrator, the arbitrator cannot look beyond the relevant clause. If the restriction in the first limb of the prohibitory clause is carried to a court, the court may say that there cannot be such a restriction providing for no remedy to the respondent herein and render an opinion that the prohibition in the initial part of the restriction would be hit by Section 28 of the Contract Act. The arbitrator could not have strayed into such area as it was never an issue bef....
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....ry implication of any provision of law, the parties are free to decide on what they may do and how they may address the disputes that may arise out of their interaction. There is statutory recognition of the contemporary ethos of party autonomy even in the 1996 Act. Sections 10, 11, 13, 15, 19 and 20 of the Act, to name but a few, give primacy to the parties to choose the manner or procedure and, only in some cases, the statutory contours of the extent of party autonomy are defined; in some others, there is complete freedom enjoyed by the parties in their choice. 30. When an arbitration agreement is contained in the matrix contract and there are certain clauses in the contract bearing any reference to arbitration ? whether appearing in the agreement either before the arbitration clause or after the arbitration clause ? the effect of such clauses, and any prohibition contained therein, has to be assessed with reference to the arbitration clause. If, on a meaningful conjoint reading of such other clauses with the arbitration clause, it is discovered that the parties intended certain matters to be kept outside the purview of arbitration, any adjudication thereon by the arbitrator h....
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....eunder to decide on its own jurisdiction, the scope or degree of the judicial inquiry conducted by a Chief Justice or his delegate under Section 11 of the 1996 Act is very limited. Unless the very physical existence of an arbitration agreement is called into question by the respondent upon a request being made under Section 11 of the 1996 Act, if the challenge is as to the efficacy or the ambit of the arbitration agreement, only a prima facie view as to the permissibility of the arbitral reference has to be taken by a Chief Justice or his delegate and the more protracted adjudication on such score left to the arbitral tribunal. But when the physical existence of an arbitration agreement is challenged, that must be completely answered by the Chief Justice or his delegate in course of the request under Section 11 of the 1996 Act and such aspect of the matter attains finality." 35. The respondent has also referred in (2011) 5 SCC 758 where the Supreme Court strictly interpreted clause 63 of the general conditions governing railway contracts. However, it was inapposite on the part of the respondent to refer to such judgment because the discussion in interpreting clause 63 of the rai....