SUPREME COURT OF INDIA

Before:- Dr. A.S. Anand and K. Venkataswami, JJ.

Civil Appeal No. 6942 of 1997 Special Leave Petn. (C) No. 25034 of 1996). D/d. 30.9.1997.

M/s. Punj Sons Pvt. Ltd. - Appellant

Versus

National Aluminium Company Ltd. and another - Respondents

Arbitration Act, 1940, Section 13 - Arbitration - Counter claim in arbitration - Maintainability of - Arbitrator held that the counter claim was not maintainable being outside the scope of the reference but could seek adjudication of dispute by raising second reference - Supreme Court directed that the counter claim be treated as reference and be adjudicated along with the dispute covered by the main reference.

[Paras 3 and 4]

Cases Referred :-

K.V. George v. Secretary to Government Water and Power Deptt., Trivandrum, AIR 1990 Supreme Court 53.

JUDGMENT

Leave granted.

2. The parties entered into an agreement which also contains an arbitration clause. On certain differences and disputes arising between them, a reference was made to Justice G.K. Misra, Retired Chief Justice, Orissa High Court on 10-12-1986. The Arbitrator entered upon the reference on 15-2-1987. During the pendency of the reference before the learned Arbitrator, respondent No. 1 filed a "counter claim" before him on 5-7-1987. The learned Arbitrator vide order dated 14-5-1988 held that the "counter claim" was not included in the reference, and therefore it could not be adjudicated upon in that reference. The learned Arbitrator opined that the parties could be secure a fresh reference regarding the disputes which are the subject matter of the "counter claim" and that both the original reference and the second reference could be consolidated and decided together. The "counter claim" was held to be not maintainable. Respondent No. 1 filed another application before the learned Arbitrator on 5-7-1992. Seeking adjudication of the "counter claim" once again basing its case on a judgment of this Court in K.V. George v. Secretary to Government Water and Power Deptt., Trivandrum, AIR 1990 Supreme Court 53, the learned Arbitrator on 10-1-1993 held that the judgment in AIR 1990 Supreme Court 59 (supra) had no application to the fact situation and even otherwise, the principles of res judicata would come in the way of respondent No. 1 in view of the earlier order dated 14-5-1988. Respondent No. 1 thereafter, filed an application under Section 33/41 of the Arbitration Act before the learned Civil Judge on 25-3-1996. The learned Civil Judge held that the "counter claim" was maintainable and that the Arbitrator should have dealt with the same in the pending reference on the ground that the whole gamut of the dispute had been referred to the Arbitrator and the "counter claim" fell within the disputed already referred and as such the Arbitrator should have dealt with the "counter claim" also. A Civil Revision filed by the appellant herein in the High Court failed. Hence this appeal by special leave.

3. We have heard learned counsel for the parties. It appears to us that the learned Arbitrator had, in the facts and circumstances of this case, rightly opined that whereas respondent No. 1 was not justified to raise a "counter claim" in the manner in which it was raised, but it could seek adjudication of the disputes involved in the "counter claim" by asking for a second reference and that as and when the second reference is made, both the references could be heard together. Respondent No. 1 could have sought a reference thereafter in respect of the disputes which were covered by the "counter claim" but he choose not to do so and in the bargain, almost ten years have gone by. According to Mr. Nariman, the view of the arbitrator was correct because the "counter claim" was outside the scope of the reference made on 10-12-1986.

4. Keeping in view the observations of the learned Arbitrator and the peculiar facts and circumstances of this case, it appears appropriate to us, with a view to do equity to direct that the "counter claim" filed by respondent No. 1 shall be treated, not as a "counter claim" but as a reference of the dispute covered by the "counter claim" and made by us today to the learned Arbitrator to be adjudicated upon along with the dispute covered by the reference made in 1986. The learned Arbitrator shall proceed with the reference proceedings from the stage at which they were when the matter was taken to the Civil Court by respondent No. 1. The learned Arbitrator shall give an opportunity to the appellant herein to file objections, if any, to the claim/dispute contained in the petition styled as counter-claim by respondent No. 1 and also an opportunity to respondent No. 1 to file a rejoinder thereto if necessary. It shall be open to the appellant to raise all such pleas, as are available to it in law, including the plea of limitation to the adjudication of the disputes raised by respondent No. 1 and referred by us today to the Arbitrator. It would be permissible for respondent No. 1 also to urge all such pleas, as are available to it in law including the grounds for seeking condonation of delay, if any, before the Arbitrator. The learned Arbitrator shall dispose of both the reference within six months from the date of receipt of a copy of this order. The learned Arbitrator shall fix his own fee for adjudication of the disputes referred to him by us today.

5. Nothing said hereinabove shall be construed as any expression of opinion on the merits of the case. The appeal is disposed of in the above terms but without any order as to costs.

Order accordingly.