Civil Procedure Code (CPC)

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Tuhin Batra (Advocate)     19 February 2012

Limited power of arbitrator.

Facts:

X, a company, entered into a contract with Y, a consultancy company. A clause in the agreement was as follows:

  Any disputes between the parties arising in relation only to the breach of the confidentiality clause in the contract will be solely decided by Mr. A within 15 days of such disputes arising between the parties. The decision of Mr. A shall be final and binding and shall exclude all other remedies including those of seeking redressal from a court of law with respect to such disputes or differences.

Query:

1. Whether the power of arbitrator be limited to a part of the contract only (breach of confidentiality clause in this case)?

2. Whether such limitation, of 15 days, can be imposed?

3. What remedies are available to the parties if neither party aproaches the arbitrator within 15 days of breach of confidentiality clause?



 9 Replies

Rajesh Hazra (Mediator Mediation Counsel)     21 February 2012

The role of Arbitrator would be limited to the breach of confidentiality clause and the time limit of 15 days can be imposed.

In case none of the parties approaches which can not be generally one has to be aggreieved then the partie can approach the Hon'ble Court for appointment of Arbitrator.

regards

Advocate Bhartesh goyal (advocate)     23 February 2012

Yes Arbitrator can not go beyond the scope of agreement/contract.Arbitrator has to decide the matter within granted period but period may be extended with the consent of both the parties.In case 


Srinivasan (Contracts Mgr)     28 August 2012

Dear Goyal Sir,

With due regard to your experience and expert advises in this forum, I second your opinion in this case on your first statement. Please correct me if Iam wrong. About your second statement it is absolutely correct.

Arbitration Act 1996 has given full powers to the Arbitrator based on the doctrine of Komptenz-Kompetenz principle, viz., Arbitrator has the powers to travel beyond the agreed terms and conditions, provided he shall not travel beyond the JURISDICTIONS for which I hereby draw your attentions to Clause: 16 of Chapter-IV of the said Act,

Furthermore i would like to refer one of the Supreme Court Judgment : M/S Konkan Railway Corpn. Ltd. & ... vs M/S Rani Construction Pvt. Ltd on 14 October, 2000, wherein, it is clearly mentioned that the Arbitrator has absolute powers in terms of travelling beyond the agreed terms and to rule his own Jurisdictions as well. That is the very reason the Arbitration clause is deemed to be independent of the Main Contract.

I plead you to correct if Iam wrong.

Kind regards,

Srinivas

 

dr g balakrishnan (advocate/counsel supreme court)     28 August 2012

the questions are:

whether with in 15 days one need to approach A? if not what is the position of breach of contract?

Under what law 15 days provision is protected, How to determine 15 days from breach of contract? How A's decision can be final?

Under CPC sec 80 prescribes 60 days. That seems reasonable for one to give a legal notice to the other for suitable replies, after all, one has to check if there is a 'breach of contract' calls for thorough examination of circumstances of the issue. Then whether that breach has a remedy to be seen is also important else it will be a frivalous exercise. So 15 days is indeed inadequate so can be under natural justice equity and good conscience one need to allow maximum 60 days period if not that itself is arbitrary under the contract.

Then again how A's decision can be final when audi alteram partem principle is not followed under natural justice, one needs to see. If 'audi alteram partem'  that is oral/written hearing of arguments need to precede the decision of competent person to judge. if hearing principle is violated, then vitiates the judges directions, so every judicial court hears the case by necessary hearings of arguments placed before the judge. so it means no summary decision is valid and is indeed questionable and so final decision stated in the query suffers from a lot of deficiencies. So the decision is contestable before a court of competent jurisdiction, if the pettitioner is aggrieved. So  I THINK FINALITY IS ITSELF QUESTIONABLE HERE IN THE REFERRED MATTER.

 

whether the A's decision is final as far as breach of contract?

FINALITY IS QUESTIONABLE ON THE BREACH OF CONTRACT.

 

Whether arbitrator can travel beyond the terms of reference?

Here the A is restricted upto  'breach of contract', beyoud that his travel is restricted as is shown in the query.So Mr Goyal 's view appears okay.

Srinivasan's proposition will not apply in this particular reference please, with due apologies to srinivasan. Law is to view every single issue individually and not generally, so law needs professional approach please. So one pays hefty fees to good advocates sirs!

Good advocates means one need to spend timeon the issue very professionally in consonance with relevant law and facts of the issue sirs. thanks n regards.

1 Like

Srinivasan (Contracts Mgr)     10 September 2012

Thanks a lot Dr.G.Balakrishnan Sir, It was really an eye opener for professionals like me, specially on Kompetenz-Kompetenz principle.

Apologies Goyal Sir.

Srinivasan

Sushil (Director)     24 January 2013

Hi all.

Sole Arbitrator was challanged on Ground of Biased, Colluded and Currupt in our Company's dispute with a PSU. The Arbitrator called up first meeting, issued some interim Order and in the second hearing passed an Award ex-parte. He is in business link interest with PSU. We challanged Arbitrator in every submission, but he never even replied to our Challange and passed his award without even refering to any document, and his Award was pre-drafted and pre-decided.

In this case we also realized that the Contract Obligation Period of 12 Months was over and even the Arbitration Clause was invalid. Hence we believe Arbitration is un-constitutional and its Award is Patently Illigle.

We already moved a Application to Court for Set-Aside.

Being in this case, the PSU has encashed the Bank-Guarantee without meeting its Obligations, we moved FC Magistrate and he passed CrPC 156(3) for Police Investigation, which is in process. Hence, during Arbitration we also submitted that this case is Criminal in nature and shall be adjudged by Criminal Courts and not by Private Arbitrator, but Arbitrator never addressed to this point. Arbitrator passed Award without giving any reasons for doing so. He also denied to have signed and issued his Interim Order and mentioned in final Award that he has not issued those, and that some body maliciously duplicated his sign in those letters. The Letters are issued by him and when he realised that this may be big ground for Set Aside, he denied to have issued same.

My querries are-

1. When Contract Obligation Period of 12months (Bank Guarantee Cover) is over (more than 3 months) Arbitration can be constituted (invoked) forcefully by one Party. There was no Arbitration Agreement and only Arbitration Clause. In this Arbitration unconstitutional and its Award illigle. 

2. We have challanged Arbitrator, but was not successful, and resulted into Award. Can this is enough Ground for Set-Aside.

3. Against our Complaint of Fraud and Cheating, the FC Magistrate ordered 156(3) in same case. Will this be ground for us that Arbitration can not address Criminal Issued.

4. Is there any option available for us to go ahead with Legal Action against Arbitrator who was involved in Criminal Frauds and Conspiracy against in collusion with claimant, for which we have full evidences, even the hand-writing experts report and Post office record.

5. Against our RTI applications to learn standard Contract Terms, the PSU is writing false and non-serious information. Can this be prosecutable.

Will experts guide me.

dr g balakrishnan (advocate/counsel supreme court)     24 January 2013

BG is invalid for revocation. PSU cannot enforce the BG unless ratified by due endorcement. So cannot allow enforcing of BG by PSU. if bank allowed enforcement you have a case against bank as also PSU, AS 2ND PARTY.

Arbitration procedure faulted. Arbitration is a process if both the contestants approve the arbitrator and it seems he is a PSU appointed but not by Mr.Shusil 's company, as procedure followed is not in terms of Arb Act 1996, as Art act 1940 is already repealed.

Yes Arbitrator seemed to have behaved like PSU advocate. U have a case. yes but i cannot say for certai8n unless i read your whole agreement sir. i am an independent director on a textile company board as corporate advisor too.

dr.g balakrishnan

 

 

 

 

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dr g balakrishnan (advocate/counsel supreme court)     24 January 2013

it is always said, in green bag  292...Even in arbitration lawyers are condemned, for there is an English proverb, 'Arbitrate, lose somw, give lawyer more' and Scotch say,'Refer my coat, and lose a sleeve'!

Not in this world are lawers condemned to be thought badly of, for French  haqve it that, ' Unless Hell  is full never will a lawyer be saved'. The Danes say that the Devil once sat between two lawyers and declared, 'Virtue was in the middle', while the Dutch proverb  is so well known  that it has been adopted by many lands, ' the greatest lawyer, the worse christian'!, The English  express the same idea in the proverb, ' Dair and Softly , as awyers go to Heaven'!

Arbitrator is obverse or other side of Advocate! 

Sushil (Director)     24 January 2013

Thanks a lot Dr G B.

Full Cronology is as under.

PSU invited Tender for Machine. In Tender Documents, Arbitration Clause is mentioned.

We participated in Tender while signing all Pages, in which Arbitration Clause was mentioned.

As per Arbitration Clause, the Arbitrator was to be appointed by GM of PSU, but proceeding will be as per provisions in IA&RA1996. Court Option was also available.

Order was recd by us

Executed Order

PSU reported few descripencies. MoM was signed mentioning all points, we also agreed to take-back Machine if same is rejected by PSU.

PSU never rejected same and continued using same for their production. Instead they asked us to submit Performance Bank Guarantee (PBG) to cover One Year Warranty, and other Documents, so that they can release complete Balance Payment.

Instead of releasing Balance Payment, they encased the PBG from our Bank, well before its Expiry Date. In PBG clearly mentions that same is against complete Balance Payment without Deduction. But PSU said they only are intended to recover Amount.

We send Legal Notice against unlawfull invocation, against which they send us Compensation Claim for the cause of defencincies of Machine.

PSU accepted our Machine, never rejected the Machine, never claimed any losses before invocation of PBG, encashed the PBG without even a notice.

After keeping mum for nearly 6 months, even after expiry of contract obligation period of 1 year (PBG expiry date), they suddenly wrote us about Appointment of Arbitrator, one sided, their own advocate (Sales Tax Practitioner)

PBG clearly mentioned our liabilities to fixed amount, for all or any type of losses and damages, within defect liability period of 12 months. PBG encased well before expiry, but even the PBG period also exprired.

Against our complain about unlawfull encashing of PBG, Hon FC Magistrate taking cognizence of Frauds ordered 156(3).

While we challanged Arbitrator, he never replied. We challanged Constitution of Arbitrator, but never replied. He gone ahead with Award, which was pre-set and pre-decided. He called first meeting, where we submitted challange, he passed award in 2nd meeting and accepted all claims as it is from PSU, exparte, and passed award. In award he mentioned that he got few post-acknowledgements which are suspected to be sent by us. Whereas we have recieved his interim Order rules in first hearing which proves his collusion and biasness with PSU. Predicting possible Set-Aside in Court, he denied his earlier signed and posted us. This was his misconduct.

We already moved Set-Aside in Hon Court well within specified Period.

Hence my querries are-

1. When Contract Obligation Period of 12months (Bank Guarantee Cover) is over (more than 3 months) Arbitration can be constituted (invoked) forcefully by one Party. There was no Arbitration Agreement and only Arbitration Clause. In this Arbitration unconstitutional and its Award illigle.

2. We have challanged Arbitrator, but was not successful, and resulted into Award. Can this is enough Ground for Set-Aside.

3. Against our Complaint of Fraud and Cheating, the FC Magistrate ordered 156(3) in same case. Will this be ground for us that Arbitration can not address Criminal Issued.

4. Is there any option available for us to go ahead with Legal Action against Arbitrator who was involved in Criminal Frauds and Conspiracy against in collusion with claimant, for which we have full evidences, even the hand-writing experts report and Post office record.

5. Against our RTI applications to learn standard Contract Terms, the PSU is writing false and non-serious information. Can this be prosecutable.

Kindly advise.

 

 


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