REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.     824       OF 2018 (ARISING OUT OF SLP (C) NO.19771 OF 2017)

M/S INDIAN FARMERS FERTILIZER  CO-OPERATIVE LIMITED          …APPELLANT

VERSUS

M/S BHADRA PRODUCTS ...RESPONDENT

J U D G M E N T  

R.F. Nariman, J.

1. Leave granted.  

2. An  interesting question  arises  as  to  whether  an award

delivered by an Arbitrator, which decides the issue of limitation,

can be said to be an interim award, and whether such interim

award can then be set aside under Section 34 of the Arbitration

and Conciliation Act, 1996 (hereinafter referred to as “the Act”).

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The brief facts necessary to dispose of the present appeal are

as follows.

3. The appellant  before  us issued a tender  enquiry  to  19

parties, including the respondent, for supply of Defoamers.  The

respondent  submitted  its  bid,  pursuant  to  which  a  Letter  of

Intent dated 2nd November, 2006 was issued to the respondent

for supply of 800 Metric Tonnes of Defoamers to be used for

production of  3,08,880 Metric  Tonnes of  P2O5.   By 11th April,

2007,  the  respondent  had  supplied  800  Metric  Tonnes  of

Defoamers,  however,  they  could  not  achieve  the  targeted

production by the end of 1st November, 2007, which was the

validity of the supply period.  After considerable delay, on 6 th

June,  2011, the respondent issued a legal  notice demanding

payment  of  Rs.6,35,74,245/-  on  27th September, 2012.   The

appellant made it clear that there was nothing due and payable

to the respondent. Since disputes arose between the parties,

on 1st October, 2014 the respondent invoked arbitration, and on

25th January, 2015, Justice Deepak Verma, a retired Judge of

the Supreme Court, was appointed as the sole arbitrator.  On

3rd March, 2015, issues were framed.  On 23rd July, 2015, the

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learned Arbitrator thought it fit to take up the issue of limitation

first,  inasmuch as the counsel appearing for  both the parties

submitted  that  this  issue  could  be  decided  on  the  basis  of

documentary evidence alone.  This issue was then decided in

favour of the claimant stating that their claims had not become

time  barred.   A  petition  filed  under  Section  34  of  the  Act

challenged the aforesaid award, styling it  as the ‘First Partial

Award’.   On  8th October,  2015,  the  District  Judge,

Jagatsinghpur, dismissed the Section 34 Petition  stating that

the aforesaid award could not be said to be an interim award

and  that,  therefore,  the  Court  lacked  jurisdiction  to  proceed

further  under  Section 34 of  the Act.  The  appeal  to  the High

Court of Orissa was dismissed by the impugned order dated

30th June, 2017, reiterating the reasoning of the learned District

Judge.    

4. Appearing on behalf of the appellant, Mr. K.K. Venugopal,

learned Attorney General, has argued before us that the award

made on 23rd July, 2015 is an interim award under the Act and

would, therefore, be amenable to challenge under Section 34 of

the Act as such.  He referred us to various provisions of the Act

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and  buttressed  his  stand  with  reference  to  a  number  of

judgments,  including,  in  particular,  the  judgment  of  National

Thermal Power Corpn. Ltd. v. Siemens Atkeingesellschaft,

(2007) 4 SCC 451.   He also referred us to various judgments

on  what  constitutes  an  interim  award  and  argued  that,

according to him, the point of limitation being one of the issues

raised  by  the  parties,  was  finally  decided  by  the  aforesaid

award and would, therefore, be amenable to challenge.  

5. Shri Ajit Kumar Sinha, learned senior advocate appearing

on behalf  of  the respondent,  also placed reliance on various

sections of  the Act,  in particular Sections 16 and 37 thereof.

According to the learned senior advocate, a ruling on the point

of limitation is a ruling on “jurisdiction” and any finding thereon

goes to the root of the case.   This being the case, the drill of

Section 16 has to be followed, and as the plea of limitation has

been rejected by the learned Arbitrator, the arbitral proceedings

have to continue further and the challenge has to be postponed

only after all other issues have been decided.   According to the

learned senior advocate, the scheme of Section 37, in particular

Section 37(2)(a), also makes it clear that appeals lie only from 4

an order under Section 16 accepting the plea but not rejecting

it.  Also, according to the learned senior advocate, the present

award cannot be said to be an interim award, but is merely an

order passed under Section 16 of the Act.   He also relied upon

several  judgments  to  buttress  his  point  of  view  and  relied

heavily upon judgments which held that a decision on a point of

limitation goes to jurisdiction in which case Section 16 of the Act

would get attracted.   

6. Having  heard  learned  counsel  for  both  parties,  it  is

important  to  first  set  out  the  relevant  provisions  of  the  Act,

which are as under:

“2. Definitions.—(1) In this Part, unless the context otherwise requires,—

(c) “arbitral award” includes an interim award;

xxx xxx xxx

16. Competence of arbitral tribunal to rule on its jurisdiction.—

(1)  The  arbitral  tribunal  may  rule  on  its  own jurisdiction, including ruling on any objections with respect to the existence or validity of the arbitration agreement, and for that purpose,—  

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(a)  an  arbitration  clause  which  forms  part  of  a contract  shall  be  treated  as  an  agreement independent of the other terms of the contract; and  

(b)  a  decision  by  the  arbitral  tribunal  that  the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.  

(2)  A plea that  the arbitral  tribunal does not have jurisdiction  shall  be  raised  not  later  than  the submission of the statement of defence; however, a party  shall  not  be  precluded  from raising  such  a plea  merely  because  that  he  has  appointed,  or participated in the appointment of, an arbitrator.  

(3) A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter  alleged  to  be  beyond  the  scope  of  its authority is raised during the arbitral proceedings.  

(4) The arbitral tribunal may, in either of the cases referred  to  in  sub-section  (2)  or  sub-section  (3), admit a later plea if it considers the delay justified.  

(5)  The  arbitral  tribunal  shall  decide  on  a  plea referred to in sub-section (2) or sub-section (3) and, where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceedings and make an arbitral award.  

(6) A party aggrieved by such an arbitral award may make  an  application  for  setting  aside  such  an arbitral award in accordance with section 34.

xxx xxx xxx

31. Form and contents of arbitral award.—  

(6) The arbitral tribunal may, at any time during the arbitral proceedings, make an interim arbitral award on any matter with respect to which it may make a final arbitral award.

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xxx xxx xxx

32. Termination of proceedings.—(1) The arbitral proceedings shall be terminated by the final arbitral award or by an order of the arbitral tribunal under sub-section (2).

xxx xxx xxx

37.  Appealable  orders.—(1)  An  appeal  shall  lie from the following orders (and from no others) to the Court  authorised  by  law  to  hear  appeals  from original  decrees  of  the  Court  passing  the  order, namely:—  

(a) refusing to refer the parties to arbitration under section 8;  

(b) granting or refusing to grant any measure under section 9;  

(c) setting aside or refusing to set aside an arbitral award under section 34.

(2) Appeal shall also lie to a court from an order of the arbitral tribunal—  

(a) accepting the plea referred to in sub-section (2) or sub-section (3) of section 16; or  

(b) granting or refusing to grant an interim measure under section 17.  

(3) No second appeal shall lie from an order passed in  appeal  under  this  section,  but  nothing  in  this section shall affect or take away any right to appeal to the Supreme Court.”

7. The point at issue is a narrow one: whether an award on

the issue of limitation can first be said to be an interim award

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and, second, as to whether a decision on a point of limitation

would go to jurisdiction and, therefore, be covered by Section

16 of the Act.

8. As  can  be  seen  from Section  2(c)  and  Section  31(6),

except  for  stating  that  an  arbitral  award  includes  an  interim

award,  the Act  is silent  and does not define what  an interim

award  is.   We  are,  therefore,  left  with  Section  31(6)  which

delineates the scope of interim arbitral awards and states that

the arbitral tribunal may make an interim arbitral award on any

matter with respect to which it may make a final arbitral award.

9. The language of Section 31(6) is advisedly wide in nature.

A  reading  of  the  said  sub-section  makes  it  clear  that  the

jurisdiction to make an interim arbitral award is left to the good

sense of the arbitral tribunal, and that it extends to “any matter”

with respect to which it may make a final arbitral award.  The

expression “matter” is wide in nature, and subsumes issues at

which the parties are in dispute.  It is clear, therefore, that any

point of dispute between the parties which has to be answered

by the arbitral tribunal can be the subject matter of an interim

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arbitral award. However, it is important to add a note of caution.

In an appropriate case, the issue of more than one award may

be necessitated on the facts of that case. However, by dealing

with the matter in a piecemeal fashion, what must be borne in

mind is that  the resolution of  the dispute as a whole will  be

delayed  and  parties  will  be  put  to  additional  expense.  The

arbitral tribunal should, therefore, consider whether there is any

real  advantage in  delivering interim awards  or  in  proceeding

with  the  matter  as  a  whole  and  delivering  one  final  award,

bearing in mind the avoidance of delay and additional expense.

Ultimately, a fair means for resolution of all disputes should be

uppermost in the mind of the arbitral tribunal.  

10. To complete the scheme of the Act, Section 32(1) is also

material.    This  section  goes  on  to  state  that  the  arbitral

proceedings  would  be  terminated  only  by  the  final  arbitral

award, as opposed to an interim award,  thus making it  clear

that there can be one or more interim awards, prior to a final

award,  which  conclusively  determine  some  of  the  issues

between the parties, culminating in a final arbitral award which

ultimately decides all remaining issues between the parties.   9

11. The English Arbitration Act,  1996, throws some light on

what  is  regarded  as  an  interim  award  under  English  Law.

Section 47 thereof states:

“47 Awards on different issues, &c.  

(1)  Unless  otherwise  agreed  by  the  parties,  the tribunal may make more than one award at different times  on  different  aspects  of  the  matters  to  be determined.

(2) The tribunal may, in particular, make an award relating—  

(a) to an issue affecting the whole claim, or  

(b)  to  a  part  only  of  the  claims  or  cross-claims submitted to it for decision.  

(3)  If  the  tribunal  does  so,  it  shall  specify  in  its award  the  issue,  or  the  claim or  part  of  a  claim, which is the subject matter of the award.”

12. By reading this section, it becomes clear that more than

one award finally determining any particular  issue before the

arbitral tribunal can be made on different aspects of the matters

to be determined.  A preliminary issue affecting the whole claim

would  expressly  be  the  subject  matter  of  an  interim  award

under the English Act.  The English Act advisedly does not use

the expression “interim” or “partial”, so as to make it clear that

the award covered by Section 47 of the English Act would be a 10

final  determination  of  the  particular  issue  that  the  arbitral

tribunal has decided.   

13. In  Exmar BV v National  Iranian Tanker Co. [1992]  1

Lloyd's  Rep.  169,  an  interim  final  award  was  made,  which

contained the decision that it would not issue any such award in

the claimant’s favour pending determination of the respondent’s

counter claims.   Detailed reasons were given for this decision.

The Judge, therefore, characterized the aforesaid award as an

award finally deciding a particular  issue between the parties,

and concluded that as a result  thereof,  he had jurisdiction to

review the tribunal’s decision.

14. In  Satwant Singh Sodhi  v. State  of  Punjab  (1999)  3

SCC 487 at 491 and 493, an interim award in respect of one

particular item was made by the arbitrator in that case.   The

question before the Court was whether such award could be

made the rule of the Court separately or could be said to have

been superseded by a final award made on all the claims later.

This Court held:

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“6. The question whether  interim award is  final  to the extent it goes or has effect till the final award is delivered will depend upon the form of the award. If the interim award is intended to have effect only so long as the final award is not delivered it will have the force of the interim award and it  will  cease to have effect after the final award is made. If, on the other hand, the interim award is intended to finally determine the rights of the parties it  will  have the force of a complete award and will have effect even after the final award is delivered. The terms of the award  dated  26-11-1992  do  not  indicate  that  the same is of interim nature.”

On the facts of the case, the Court then went on to hold:

“11. This  Court  in Rikhabdass v. Ballabhdas [AIR 1962 SC 551 : 1962 Supp (1) SCR 475] held that once an award is made and signed by the arbitrator, the  arbitrator  becomes  functus  officio.  In Juggilal Kamlapat v. General  Fibre  Dealers  Ltd. [AIR  1962 SC 1123 : 1962 Supp (2) SCR 101] this Court held that an arbitrator having signed his award becomes functus  officio  but  that  did  not  mean  that  in  no circumstances  could  there  be  further  arbitration proceedings where an award was set aside or that the same arbitrator could never have anything to do with  the award with  respect  to  the same dispute. Thus in the present  case,  it  was not open to the arbitrator  to  redetermine  the  claim  and  make  an award. Therefore, the view taken by the trial court that  the  earlier  award  made  and  written  though signed was not  pronounced but  nevertheless had become  complete  and  final,  therefore,  should  be made  the  rule  of  the  court  appears  to  us  to  be correct with regard to Item 1 inasmuch as the claim in  relation  to  Item  1  could  not  have  been adjudicated by the arbitrator again and it has been

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rightly  excluded from the second award  made by the arbitrator on 28-1-1994. Thus the view taken by the trial court on this aspect also appears to us to be  correct.  Therefore,  the  trial  court  has  rightly ordered the award dated 28-1-1994 to be the rule of the court except for Item 1 and in respect of which the award dated 26-11-1992 was ordered to be the rule of the court.”

It is, thus, clear that the first award that was made that finally

determined one issue between the parties, with respect to Item

no.1 of the claim, was held to be an interim award inasmuch as

it finally determined claim 1 between the parties and, therefore,

could not be re-adjudicated all over again.   

15. In  McDermott International Inc. v. Burn Standard Co.

Ltd. (2006) 11 SCC 181 at page  211-212, under the heading

‘validity of the partial award’, this Court held:

“68. The  1996  Act  does  not  use  the  expression “partial award”. It uses interim award or final award. An award has been defined under Section 2(c) to include an interim award. Sub-section (6) of Section 31 contemplates an interim award. An interim award in terms of the said provision is not one in respect of which a final award can be made, but it may be a final  award  on  the  matters  covered  thereby,  but made at an interim stage.

69. The  learned  arbitrator  evolved  the aforementioned  procedure  so  as  to  enable  the parties  to  address  themselves  as  regards  certain

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disputes at the first instance. As would appear from the  partial  award  of  the  learned  arbitrator,  he deferred  some  claims.  He  further  expressed  his hope and trust that in relation to some claims, the parties  would  arrive  at  some  sort  of  settlement having  regard  to  the  fact  that  ONGC  directly  or indirectly was involved therein. While in relation to some of the claims, a finality was attached to the award, certain claims were deferred so as to enable the  learned  arbitrator  to  advert  thereto  at  a  later stage. If the partial award answers the definition of the award, as envisaged under Section 2(c) of the 1996 Act,  for  all  intent  and purport,  it  would be a final  award.  In fact,  the validity of  the said award had  also  been  questioned  by  BSCL  by  filing  an objection in relation thereto.

70. We cannot also lose sight of the fact that BSCL did not raise any objection before the arbitrator in relation to the jurisdiction of the arbitrator. A ground to  that  effect  has  also  not  been  taken  in  its application  under  Section  34  of  the  Act.  We, however,  even  otherwise  do  not  agree  with  the contention of Mr Mitra that a partial award is akin to a preliminary decree. On the other hand, we are of the opinion that it is final in all respects with regard to  disputes  referred  to  the  arbitrator  which  are subject-matters  of  such  award.  We may add that some arbitrators instead and in place of using the expression  “interim  award”  use  the  expression “partial  award”.  By reason thereof  the nature and character  of  an  award  is  not  changed.  As,  for example, we may notice that in arbitral proceedings conducted  under  the  Rules  of  Arbitration  of  the International  Chamber  of  Commerce,  the expression “partial award” is generally used by the arbitrators in place of interim award. In any view of the matter, BSCL is not in any way prejudiced. We may state that both the partial award and the final

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award  are  subject-matter  of  challenge  under Section 34 of the Act.”

The aforesaid judgment makes it clear that an interim award or

partial award is a final award on matters covered therein made

at an intermediate stage of the arbitral proceedings.

16. Tested in the light of the statutory provisions and the case

law cited above, it  is clear that as the learned Arbitrator has

disposed of  one matter  between the parties i.e.  the issue of

limitation finally, the award dated 23rd July, 2015 is an “interim

award”  within  the meaning of  Section 2(1)(c)  of  the Act  and

being subsumed within the expression “arbitral  award” could,

therefore, have been challenged under Section 34 of the Act.  

17. However, Shri Sinha has argued before us that the award

dated 23rd July, 2015 being a ruling on the arbitral  tribunal’s

jurisdiction would fall within Section 16 of the Act, and inasmuch

as the decision taken on the point of limitation was rejected, the

drill  of  Section  16  must  be  followed  in  which  case  all  other

issues have to be decided first, and it is only after such issues

are  decided  that  such  an  award  can  be  challenged  under

Section 34 of the Act.   Section 16 of the Act lays down what, in 15

arbitration  law,  is  stated  to  be  the  Kompetenz-kompetenz

principle,  viz.  that  an  arbitral  tribunal  may  rule  on  its  own

jurisdiction.  At one time, the law was that the arbitrator, being a

creature  of  the  contract,  could  not  rule  on  the  existence  or

validity of the arbitration clause contained in the contract.   This,

however,  gave  way  to  the  Kompetenz principle  which  was

adopted  by  the  UNCITRAL  Model  Law.    Article  16  of  the

UNCITRAL Model Law, on which Section 16 of the Act is based,

reads as follows:

“Article  16.  Competence  of  arbitral  tribunal  to rule on its jurisdiction  

(1)  The  arbitral  tribunal  may  rule  on  its  own jurisdiction, including any objections with respect to the  existence  or  validity  of  the  arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement  independent  of  the other  terms of  the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.  

(2)  A plea that  the arbitral  tribunal does not have jurisdiction  shall  be  raised  not  later  than  the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that  he  has  appointed,  or  participated  in  the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be  raised  as  soon  as  the  matter  alleged  to  be beyond the scope of its authority is raised during the

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arbitral  proceedings.  The  arbitral  tribunal  may,  in either  case,  admit  a  later  plea  if  it  considers  the delay justified.  

(3) The arbitral tribunal may rule on a plea referred to  in  paragraph  (2)  of  this  article  either  as  a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue  the  arbitral  proceedings  and  make  an award.”

18. The  Statement  of  Objects  and  Reasons  of  the  Act

expressly refers to the  UNCITRAL Model Law in the following

terms:

“3.  Though  the  said  UNCITRAL  Model  Law  and Rules  are  intended  to  deal  with  international commercial arbitration and conciliation, they could, with appropriate modifications, serve as a model for legislation on domestic arbitration and conciliation. The present  Bill  seeks to  consolidate and amend the law relating to domestic arbitration, international commercial  arbitration,  enforcement  of  foreign arbitral  awards  and  to  define  the  law  relating  to conciliation, taking into account the said UNCITRAL Model Law and Rules.”

19. It may be noticed that Section 16(1) to (4) are based on

Article  16  of  the  UNCITRAL Model  Law.    The  Kompetenz

principle  deals  with  the  arbitral  tribunal’s  jurisdiction  in  the 17

narrow  sense  of  ruling  on  objections  with  respect  to  the

existence  or  validity  of  the  arbitration  agreement.   What  is

important to notice in the language of Section 16(1) is the fact

that the arbitral tribunal may rule on its own jurisdiction, which

makes it clear that it refers to whether the arbitral tribunal may

embark upon an inquiry into the issues raised by parties to the

dispute.

20.  Here again, the English Arbitration Act  of  1996 throws

some light on the problem before us.   Sections 30 and 31 of

the said Act read as under:

“30 Competence of tribunal  to rule on its own jurisdiction. -  (1) Unless otherwise agreed by the parties,  the  arbitral  tribunal  may  rule  on  its  own substantive jurisdiction, that is, as to—  

(a) whether there is a valid arbitration agreement,  

(b) whether the tribunal is properly constituted, and  

(c) what matters have been submitted to arbitration in accordance with the arbitration agreement.  

(2)  Any  such  ruling  may  be  challenged  by  any available arbitral process of appeal or review or in accordance with the provisions of this Part.  

31  Objection  to  substantive  jurisdiction  of tribunal. -  (1) An objection that the arbitral tribunal lacks  substantive  jurisdiction  at  the  outset  of  the proceedings must be raised by a party not later than the time he takes the first step in the proceedings to

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contest the merits of any matter in relation to which he challenges the tribunal’s jurisdiction.  

A  party  is  not  precluded  from  raising  such  an objection  by  the  fact  that  he  has  appointed  or participated in the appointment of an arbitrator.  

(2)  Any objection during the course of the arbitral proceedings that the arbitral tribunal is exceeding its substantive jurisdiction must be made as soon as possible after  the matter alleged to be beyond its jurisdiction is raised.  

(3) The arbitral tribunal may admit an objection later than the time specified in subsection (1) or (2) if it considers the delay justified.  

(4) Where an objection is duly taken to the tribunal’s substantive jurisdiction and the tribunal has power to rule on its own jurisdiction, it may— (a) rule on the matter in an award as to jurisdiction, or (b) deal with the objection in its award on the merits. If the parties  agree which  of  these courses the tribunal should take, the tribunal shall proceed accordingly.  

(5) The tribunal may in any case, and shall  if  the parties  so  agree,  stay  proceedings  whilst  an application is made to the court  under section 32 (determination of preliminary point of jurisdiction).”

These  sections  make  it  clear  that  the  Kompetenz

principle, which is also followed by the English Arbitration Act of

1996,  is  that  the  “jurisdiction”  mentioned  in  Section  16  has

reference  to  three  things:  (1)  as  to  whether  there  is  the

existence  of  a  valid  arbitration  agreement;  (2)  whether  the

arbitral  tribunal  is  properly  constituted;  and  (3)  matters 19

submitted  to  arbitration  should  be  in  accordance  with  the

arbitration agreement.  

21. That “jurisdiction” is a coat of many colours, and that the

said word displays a certain colour depending upon the context

in which it is mentioned, is well-settled.   In the classic sense, in

Official Trustee v. Sachindra Nath Chatterjee, (1969) 3 SCR

92 at 99, “jurisdiction” is stated to be:

“In the order of  Reference to a Full  Bench in the case  of Sukhlal v. Tara  Chand [(1905)  ILR  33  Cal 68] it was stated that jurisdiction may be defined to be the power of a Court to hear and determine a cause,  to  adjudicate  and  exercise  any  judicial power in relation to it: in other words, by jurisdiction is meant the authority which a Court has to decide matters  that  are  litigated  before  it  or  to  take cognizance of matters presented in a formal way for its  decision.  An  examination  of  the  cases  in  the books  discloses  numerous  attempts  to  define  the term ‘jurisdiction’, which has been stated to be ‘the power to hear and determine issues of law and fact’, the  authority  by  which  the  judicial  officer  take cognizance of and ‘decide causes’; ‘the authority to hear and decide a legal controversy’, ‘the power to hear  and  determine  the  subject-matter  in controversy  between  parties  to  a  suit  and  to adjudicate  or  exercise  any  judicial  power  over them;’ ‘the power to hear, determine and pronounce judgment  on  the  issues  before  the  Court’;  ‘the power or authority which is conferred upon a Court by the  Legislature  to  hear  and  determine  causes between  parties  and  to  carry  the  judgments  into

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effect’; ‘the power to enquire into the facts, to apply the law, to pronounce the judgment and to carry it into execution’.” (Mukherjee,  Acting CJ, speaking for Full  Bench of the  Calcutta  High  Court  in  Hirday  Nath Roy v. Ramachandra  Barna  Sarma ILR  68  Cal 138)

22. A Constitution Bench of this Court in  Ittavira Mathai v.

Varkey  Varkey, (1964)  1  SCR  495  at  501-503,  made  a

distinction between an erroneous decision on limitation being

an error of law which is within the jurisdiction of the Court, and a

decision  where  the  Court  acts  without  jurisdiction  in  the

following terms:

“The first point raised by Paikedy for the appellant is that the decree in OS No. 59 of 1093 obtained by Anantha  Iyer  and  his  brother  in  the  suit  on  the hypothecation bond executed by Ittiyavira in favour of  Ramalinga  Iyer  was  a  nullity  because the  suit was barred by time. In assuming that the suit was barred  by  time,  it  is  difficult  to  appreciate  the contention of learned counsel that the decree can be treated as a nullity and ignored in subsequent litigation. If the suit was barred by time and yet, the court decreed it, the court would be committing an illegality and therefore the aggrieved party would be entitled to have the decree set aside by preferring an appeal against it. But it is well settled that a court having jurisdiction over the subject-matter of the suit and  over  the  parties  thereto,  though  bound  to decide  right  may  decide  wrong;  and  that  even though  it  decided  wrong  it  would  not  be  doing something which it had no jurisdiction to do. It had

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the jurisdiction over  the subject-matter  and it  had the jurisdiction over the party and, therefore, merely because it made an error in deciding a vital issue in the suit, it cannot be said that it has acted beyond its jurisdiction. As has often been said, courts have jurisdiction to decide right or to decide wrong and even  though  they  decide  wrong,  the  decrees rendered  by  them cannot  be  treated  as  nullities. Learned  counsel,  however,  referred  us  to  the decision  of  the  Privy  Council  in Maqbul Ahmad v. Onkar  Pratap  Narain  Singh [AIR  (1935) PC 85] and contended that since the court is bound under the provisions of Section 3 of the Limitation Act to ascertain for itself whether the suit before it was within time, it would act without jurisdiction if it fails to do so. All that the decision relied upon says is that Section 3 of the Limitation Act is peremptory and that it is the duty of the court to take notice of this provision and give effect to it even though the point of limitation is not referred to in the pleadings. The Privy Council has not said that where the court fails to perform its duty, it acts without jurisdiction. If it fails to do its duty, it merely makes an error of law and an error  of  law can be corrected only in  the manner laid down in the Civil Procedure Code. If the party aggrieved does not take appropriate steps to have that error corrected, the erroneous decree will hold good and will not be open to challenge on the basis of being a nullity.”

23. It is in this sense of the term that “jurisdiction” has been

used in  Section  16  of  the  Act.   Indeed,  in  NTPC  (supra)  at

460-461, a  Division  Bench  of  this  Court,  after  setting  out

Sections 16 and 37 held:

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“10. Now,  the  only  question  that  remains  to  be decided in the present case is whether against the order  of  partial  award  an  appeal  is  maintainable directly under Section 37 of the Act or not. We have considered the submissions of learned counsel for the  appellant  and  after  going  through  the counterclaim and the partial  award,  we are of the opinion that no question of jurisdiction arises in the matter so as to enable the appellant to file a direct appeal under Section 37 of the Act before the High Court.  As  already  mentioned  above,  an  appeal under sub-section (2) of Section 37 only lies if there is an order passed under Sections 16(2) and (3) of the  Act.  Sections  16(2)  and  (3)  deal  with  the exercise of jurisdiction. The plea of jurisdiction was not  taken  by  the  appellant.  It  was  taken  by  the respondent in order to meet their counterclaim. But it was not in the context of the fact that the Tribunal had no jurisdiction,  it  was in  the context  that  this question of counterclaim was no more open to be decided  for  the  simple  reason that  all  the  issues which had been raised in Counterclaims 1 to 10 had already  been  settled  in  the  minutes  of  meeting dated 6-4-2000/7-4-2000 and it  was recorded that no other issues were to be resolved in first and third contracts. Therefore, we fail to understand how the question of jurisdiction was involved in the matter. In fact it was in the context of the fact that the entire counterclaims  have  already  been  satisfied  and settled in the meeting that it was concluded that no further  issues  remained  to  be  settled.  In  this context,  the  counterclaims  filed  by  the  appellant were  opposed.  If  any  grievance  was  there,  that should  have  been  (sic raised)  by  the  respondent and not by the appellant. It is only the finding of fact recorded  by  the  Tribunal  after  considering  the counterclaim vis-à-vis the minutes of meeting dated 6-4-2000/7-4-2000.  Therefore,  there  was  no question of jurisdiction involved in the matter so as

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to enable the appellant to approach the High Court directly.”

Interestingly,  in  a  separate  concurring  judgment,  P.K.

Balasubramanyan, J., held:

“17. In the larger sense, any refusal to go into the merits of a claim may be in the realm of jurisdiction. Even  the  dismissal  of  the  claim  as  barred  by limitation may in a sense touch on the jurisdiction of the court or tribunal. When a claim is dismissed on the ground of it being barred by limitation, it will be, in a sense, a case of the court or tribunal refusing to exercise  jurisdiction  to  go  into  the  merits  of  the claim. In Pandurang Dhoni Chougule v. Maruti Hari Jadhav [AIR 1996 SC 153 : (1996) 1 SCR 102] this Court observed that: (AIR p. 155, para 10)

“It is well settled that a plea of limitation or a plea of res judicata is a plea of law which  concerns  the  jurisdiction  of  the court  which  tries  the  proceedings.  A finding on these pleas in favour of the party  raising  them  would  oust  the jurisdiction  of  the  court,  and  so,  an erroneous decision on these pleas can be said to be concerned with questions of  jurisdiction  which  fall  within  the purview of Section 115 of the Code.”

In a particular sense, therefore, any declining to go into the merits of a claim could be said to be a case of refusal to exercise jurisdiction.

18. The expression “jurisdiction” is a word of many hues. Its colour is to be discerned from the setting in which it is used. When we look at Section 16 of the

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Act,  we find that  the said provision is one, which deals with the competence of the Arbitral Tribunal to rule  on  its  own  jurisdiction. SBP  &  Co. v. Patel Engg. Ltd. [(2005) 8 SCC 618] in a sense confined the  operation  of  Section  16  to  cases  where  the Arbitral Tribunal was constituted at the instance of the parties to the contract without reference to the Chief  Justice under Section 11(6) of the Act.  In a case  where  the  parties  had  thus  constituted  the Arbitral Tribunal without recourse to Section 11(6) of the  Act,  they  still  have  the  right  to  question  the jurisdiction of the Arbitral Tribunal including the right to invite a ruling on any objection with respect to the existence or validity of the arbitration agreement. It could therefore rule that there existed no arbitration agreement, that the arbitration agreement was not valid,  or  that  the  arbitration  agreement  did  not confer jurisdiction on the Tribunal to adjudicate upon the  particular  claim  that  is  put  forward  before  it. Under sub-section (5), it has the obligation to decide the  plea  and  where  it  rejects  the  plea,  it  could continue with the arbitral proceedings and make the award. Under sub-section (6), a party aggrieved by such an arbitral award may make an application for setting aside such arbitral award in accordance with Section 34. In other words, in the challenge to the award,  the  party  aggrieved  could  raise  the contention that  the Tribunal  had no jurisdiction to pass  it  or  that  it  had  exceeded  its  authority,  in passing  it.  This  happens  when  the  Tribunal proceeds to pass an award. It is in the context of the various sub-sections of Section 16 that one has to understand  the  content  of  the  expression “jurisdiction” and the scope of the appeal provision. In a case where the Arbitral  Tribunal  proceeds to pass an award after overruling the objection relating to  jurisdiction,  it  is  clear  from  sub-section  (6)  of Section 16 that the parties have to resort to Section 34 of the Act to get rid of that award, if possible. But, if  the  Tribunal  declines  jurisdiction  or  declines  to

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pass  an  award  and  dismisses  the  arbitral proceedings,  the party  aggrieved is  not  without  a remedy. Section 37(2) deals with such a situation. Where the plea of absence of jurisdiction or a claim being in  excess of  jurisdiction is  accepted by the Arbitral Tribunal and it refuses to go into the merits of the claim by declining jurisdiction, a direct appeal is  provided.  In  the context  of  Section 16 and the specific  wording  of  Section  37(2)(a)  of  the  Act,  it would  be  appropriate  to  hold  that  what  is  made directly appealable by Section 37(2)(a) of the Act is only  an  acceptance  of  a  plea  of  absence  of jurisdiction, or of excessive exercise of jurisdiction and the refusal to proceed further either wholly or partly.

19. In  a case where a counterclaim is  referred to and dealt with and a plea that the counterclaim does not  survive  in  view  of  the  settlement  of  disputes between the parties earlier arrived at is accepted, it could not be held to be a case of refusal to exercise jurisdiction  by  the  Arbitral  Tribunal.  Same  is  the position when an Arbitral Tribunal finds that a claim was dead and was not available to be made at the relevant time or that the claim was not maintainable for other valid reasons or that the claim was barred by  limitation.  They  are  all  adjudications  by  the Tribunal on the merits of the claim and in such a case the aggrieved party can have recourse only to Section 34 of the Act and will have to succeed on establishing any of the grounds available under that provision. It would not be open to that party to take up the position that by refusing to go into the merits of his claim, the Arbitral Tribunal had upheld a plea that  it  does  not  have  jurisdiction  to  entertain  the claim  and  hence the  award  or  order  made  by  it, comes within the purview of Section 16(2) of the Act and consequently is appealable under Section 37(2) (a) of the Act.”

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(at pages 463-464)

24. This judgment is determinative of the issue at hand and

has our respectful concurrence.   However, various judgments

were  referred  to  by  learned  senior  advocate  appearing  on

behalf  of  the  respondent,  in  which  “jurisdiction”  in  the  wide

sense was used.  Thus, a jurisdictional error under Section 115

of  the  Code  of  Civil  Procedure,  1908,  dealing  with  revision

petitions,  was  held  to  include  questions  which  relate  to  res

judicata and limitation.  [See  Pandurang Dhoni  Chougule v.

Maruti Hari Jadhav (1966) 1 SCR 102 at 107)].

25. This judgment was expressly referred to in the context of

Anisminic v. Foreign Compensation Commission, (1969) 2

AC 147, delivered in England, which virtually made all “errors of

law”  “errors of  jurisdiction” in the Administrative Law sphere

and  explained  in  M.L.  Sethi  v.  R.P. Kapur, (1972)  2  SCC

427 at 435 as under:

“...The dicta of the majority of the House of Lords in the  above  case  would  show the  extent  to  which “lack”  and  “excess”  of  jurisdiction  have  been assimilated or, in other words, the extent to which we have moved away from the traditional concept of “jurisdiction”. The effect of the dicta in that case is to

27

reduce  the  difference  between  jurisdictional  error and  error  of  law  within  jurisdiction  almost  to vanishing point. The practical effect of the decision is  that  any  error  of  law  can  be  reckoned  as jurisdictional. This comes perilously close to saying that there is jurisdiction if the decision is right in law but none if it is wrong. Almost any misconstruction of  a  statute  can  be  represented  as  “basing  their decision on a matter with which they have no right to  deal”,  “imposing  an  unwarranted  condition”  or “addressing themselves to a wrong question”. The majority  opinion  in  the  case  leaves  a  Court  or Tribunal  with  virtually  no  margin  of  legal  error. Whether  there  is  excess  of  jurisdiction  or  merely error within jurisdiction can be determined only by construing the empowering statute, which will  give little guidance. It is really a question of how much latitude the court is prepared to allow. In the end it can only be a value judgment (see H.N.R. Wade, “Constitutional  and  Administrative  Aspects  of  the Anisminic  case”. Law  Quarterly  Review,  Vol. 85,1969, p. 198). Why is it that a wrong decision on a question of limitation or res judicata was treated as a jurisdictional error and liable to be interfered with in revision? It is a bit difficult to understand how an erroneous decision on a question of limitation or res judicata would oust the jurisdiction of the court in  the primitive sense of  the term and render  the decision  or  a  decree  embodying  the  decision  a nullity liable to collateral attack. The reason can only be that the error of law was considered as vital by the court. And there is no yardstick to determine the magnitude of the error other than the opinion of the Court…”

26. Likewise,  in  Hari  Prasad  Mulshanker  Trivedi  v.  V.B.

Raju (1974) 3 SCC 415 at 423-424, a Constitution Bench of

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this Court again referred to the blurring of lines between errors

of law and errors of jurisdiction found in Anisminic (supra) as

follows:

“Though the dividing line between lack of jurisdiction or power and erroneous exercise of it has become thin with the decision of the House of Lords in the Anisminic case, [(1967) 3 WLR 382] we do not think that  the  distinction  between  the  two  has  been completely wiped out. We are aware of the difficulty in formulating an exhaustive rule to tell when there is  lack of  power  and when there is  an erroneous exercise of it. The difficulty has arisen because the word “jurisdiction” is an expression which is used in a  variety  of  senses  and  takes  its  colour  from its context,  (see  per  Diplock,  J.,  at  p.  394  in the Anisminic case).  Whereas the “pure” theory of jurisdiction would reduce jurisdictional  control to a vanishing point, the adoption of a narrower meaning might  result  in  a  more  useful  legal  concept  even though  the  formal  structure  of  law  may  lose something  of  its  logical  symmetry.  “At  bottom the problem of  defining the concept  of  jurisdiction for purpose of  judicial  review has been one of  public policy  rather  than  one  of  logic”.  [S.  A.  Smith  : “Judicial Review of Administrative Action”, 2nd Edn., p. 98] And viewed from the aspect of public policy as reflected in the provisions of the 1950 and 1951 Acts,  we do not think that a wrong decision on a question of  ordinary  residence for  the purpose of entering a person's name in the electoral roll should be  treated  as  a  jurisdictional  error  which  can  be judicially reviewed either in a civil court or before an election tribunal.”

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27. In  ITW Signode India Ltd. v. CCE (2004) 3 SCC 48 at

74, a case strongly relied upon by Shri Sinha, this Court held in

the context of limitation qua recovery of duty under Section 11A

of the Central Excise Act, 1944 as follows:

“69. The question of limitation involves a question of jurisdiction.  The finding of  fact  on the question of jurisdiction  would  be  a  jurisdictional  fact.  Such  a jurisdictional  question  is  to  be  determined  having regard to both fact  and law involved therein.  The Tribunal, in our opinion, committed a manifest error in  not  determining  the  said  question,  particularly, when in the absence of any finding of fact that such short-levy of excise duty related to any positive act on  the  part  of  the  appellant  by  way  of  fraud, collusion,  wilful  misstatement  or  suppression  of facts,  the  extended  period  of  limitation  could  not have been invoked and in that view of the matter no show-cause notice in terms of Rule 10 could have been issued.”

28. Given the context of Section 11A of  the Central  Excise

Act,  1944, obviously the expression “jurisdiction” would mean

something  more  than  merely  being  able  to  embark  on  the

merits of a dispute.  In a recent judgment under Section 9A of

the Code of Civil Procedure, 1908 (as inserted by the State of

Maharashtra), this Court in Foreshore Coop. Housing Society

Ltd. v. Praveen D. Desai (2015) 6 SCC 412, referred to the

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expression “jurisdiction”  occurring in  Section 9A and held an

earlier judgment of this Court to be per incuriam.  Though the

Constitution Bench judgment in Ittavira (supra) was mentioned

by the Bench, referring to the argument of one of the counsel

for the parties, in the concluding portion, this judgment is not

referred to at all.  In any case, the reasoning of the Court in that

case was in the context of Section 9A which, when contrasted

with Order XIV of the Code of Civil Procedure, 1908, made the

Court accept the  wider concept of “jurisdiction” as laid down in

Pandurang (supra).

29. In our view, therefore, it is clear that the award dated 23 rd

July, 2015 is an interim award, which being an arbitral award,

can be challenged separately and independently under Section

34 of the Act.   We are of the view that such an award, which

does not relate to the arbitral tribunal’s own jurisdiction under

Section 16, does not have to follow the drill  of Section 16(5)

and (6) of the Act.  Having said this, we are of the view that

Parliament may consider amending Section 34 of the Act so as

to consolidate all interim awards together with the final arbitral

award, so that one challenge under Section 34 can be made 31

after delivery of the final arbitral award. Piecemeal challenges

like piecemeal awards lead to unnecessary delay and additional

expense.  

30. The  appeal  is,  accordingly,  allowed  and  the  impugned

judgment is set aside.   The Section 34 proceedings before the

District  Judge,  Jagatsinghpur  may now be  decided.    There

shall, however, be no order as to costs.

……………………….J. (R.F. Nariman)

……………………….J. (Navin Sinha)

New Delhi; January 23, 2018.  

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