Appellants: Bharat Petroleum Corporation Limited
Respondent: Go Airlines (India) Limited
FACTS: Dispute arose between the parties when the appellant raised a claim for interest for the delayed payments of the fuel supplied during the period from 1-4-2009 to 31-3-2011. The respondent did not accept any amount payable towards interest. Since the dispute in respect of the liability and payment of interest on delayed payment could not be resolved through mutual correspondence between the parties, the appellant vide its notice dated 25-3-2010 invoked arbitration clause i.e. Clause 12 of the agreement dated 1-1-2007 suggesting the name of Mrs Justice (Retd.) Sujatha Manohar as the sole arbitrator. The respondent vide its letter dated 27-4-2010 agreed to the dispute being referred for arbitration and accepted Mrs Justice (Retd.) Sujatha Manohar as the arbitrator.
The appellant also filed an application under Section 16 of the Arbitration and Conciliation Act, 1996 inter alia submitting that the counterclaim filed by the respondent was beyond the scope and jurisdiction of the arbitrator and that the respondent demanded the CENVAT invoices from the appellant for the supplies made from the year 2005 onwards for the first time only by letter dated 5-5-2010 i.e. after the commencement of the arbitration. The respondent filed its reply to the said application filed under Section 16 of the Act inter alia stating that the counterclaim filed by the respondent was well within the scope and jurisdiction of the arbitrator.
The learned arbitrator vide order dated 18-4-2011 allowed the application filed by the appellant under Section 16 of the Act inter alia holding that the counterclaim relating to CENVAT invoices is beyond the scope and jurisdiction of the arbitrator and rejected that part of the counterclaim. Insofar as the counterclaim of the respondent praying for damages for the alleged imposition of “Cash and Credit”, the learned arbitrator held that the same is maintainable before the arbitrator.
The appellant has submitted that as per the arbitration clause in the agreement dated 1-1-2007, the arbitrator could adjudicate disputes arising out of the terms and conditions of the agreement and the counterclaim raised by the respondent in an arbitration proceeding does not arise from the terms and conditions of the contract/agreement under which the arbitrator has been appointed. It was submitted that under Section 16 of the Act, the arbitrator can refuse to entertain the said counterclaim even at the time of filing of such counterclaim on the ground that the same is beyond the jurisdiction and the findings arrived at by the learned arbitrator is a possible view and the High Court ought not to have substituted its own view in the place of the finding arrived at by the arbitrator. It was submitted that at no point of time before the commencement of the arbitration proceeding, the respondent ever claimed furnishing of CENVAT invoices and the learned arbitrator rightly held that the counterclaim is beyond the specific reference to the Arbitral Tribunal and the High Court erred in substituting its view with the findings of the learned arbitrator which is in contravention of the settled position.
HELD: The questions whether the issue regarding CENVAT invoices was outside the terms of agreement or whether CENVAT invoices relates to the agreement and whether it was arbitrable and whether it falls beyond the scope of reference to arbitration and such other related questions, were to be determined only during the enquiry. It may be that after enquiry, the Arbitrator might reject the counter claim for CENVAT invoices as not arbitrable and the counter claim beyond the scope of reference to arbitration. But to reject the counter claim at the threshold on the ground that the Arbitrator had no jurisdiction would not be proper. The High Court, had rightly set aside the order of the Arbitrator.