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Judgment
R. Banumathi, J.—Challenge in this appeal is the order dated 12.04.2006 in O.P. No. 197 of 2001 dismissing the Petition filed u/s 34 of
Arbitration Act, 1996 and declining to interfere with the Award passed by the Arbitrator.
First Respondent-Balmer Lawrie and Company Limited is a Government of India Enterprise having interalia Leather Chemicals Division situate
at Manali, Chennai producing Leather Chemicals required by the Tanneries. For selling those products, 1st Respondent appoints stockists and
consignment stock Agents throughout India. In order to market the products in Northern India, 1st Respondent entered into three Agreements with
the Appellant -(i) Stockist Agreement dated 01.8.1995 effective from 01.4.1995; (ii) Consignment Stockist Agreement dated 20.03.1996; and
(iii) Consignment Stockist Agreement dated 12.07.1997 effective from 01.04.1997 for a period of five years. Under the Consignment Stockist
Agreement, Appellant had been appointed as Consignment Stock Agent in Punjab, Haryana, Himachal Pradesh, Uttar Pradesh, Rajasthan, Union
Territory of Delhi and Jammu and Kashmir to sell directly or indirectly to persons or firms located in those Territories. Consignment Stock Agent
was required to send the account sale accompanied by Demand Draft for the sale amount after deducting 20% commission and admissible
expenses. If it fails to remit the amount, it has to pay interest at 20% per annum. Consignment Stockist Agreement dated 12.07.1997 contains
Arbitration clause that is if any dispute arises between the parties, by the Managing Director of the 1st Respondent''s Company or his nominee. 1st
Respondent has been consigning its Leather Chemicals to the Appellant for sale as per the agreement. Inspite of supply of goods to the Appellant
which in turn has been sold by the Appellant, the amounts due and payable to the 1st Respondent has not been paid. There were also certain
unsold stocks at Delhi and Kanpur which have not been returned to the 1st Respondent nor their value remitted. The said default committed by the
Appellant gave rise. dispute between the parties. Dispute having thus arisen, the 1st Respondent invoked Clause 22 of the agreement providing for
Arbitration by the Managing Director or his nominee. The Managing Director had nominated Justice G. Ramanujam, J. (retired) as an Arbitrator to
decide the said dispute by letter dated 09.12.1999. 2nd Respondent-Arbitrator entered on the reference on 11.12.1999 and held the first sitting
on 22.12.1999 after notice to the parties. 2nd Respondent-Arbitrator held the sittings on 22.12.1999, 01.02.2000, 03.03.2000, 29.04.2000,
20.05.2000, 03.06.2000, 24.06.2000. On 29.04.2000, Appellant and his counsel were not present and hence, Appellant was set exparte and
matter was adjourned to 20.05.2000. On 20.05.2000, Appellant gave letter dated 19.05.2000 stating that he would negotiate for settlement; but
Appellant did not attend the hearing on 20.05.2000 and the matter was adjourned to 03.06.2000. In the hearing on 03.06.2000, 1st Respondent
took time for adducing evidence and 2nd Respondent-Arbitrator adjourned the hearing to 24.06.2000. On 24.06.2000 evidence of 1st
Respondent was recorded and documents were marked. After reserving the matter, 2nd Respondent-Arbitrator passed the Award on
24.07.2000.
1st Respondent has made the claim as under:
Amount due for supply of goods : 1,74,97,110
Overdue interest for delayed payments : 95,02,334
Value of unsold stocks : 15,02,301
Loss of interest related to unsold stocks : 11,28,561
Consequential loss suffered : 1,42,80,000
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4,39,10,306
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2nd Respondent-Arbitrator has passed the Award in respect of Claims as follows:
First Claim:
Supply of goods
Based on evidence of CW1 and Exs.C4, C5, C6, C7- series, C8-series, Arbitrator awarded Rs. 1,74,97,100.10 towards the amount due for
supply of goods.
Second Claim:
Overdue interest
As per Clause-10 of the Agreement, in case the consignment stockist fails to remit the amount along with the account sale, it shall pay interest at
21% p.a. and therefore, 1st Respondent-Claimant is entitled to Rs. 95,02,333.54 towards overdue interest for delayed payments.
Third Claim:
Value of unsold goods
As per Ex.C3, Appellant is bound to return the unsold goods or pay their value to the 1st Respondent. As per Ex.C13, the remittance price of the
stocks as on 31.8.1999 is Rs. 15,02,301.15. Therefore, 1st Respondent-Claimant is entitled to Rs. 15,02,301.15 towards the value of unsold
stocks.
Thus 2nd Respondent-Arbitrator has passed the Award for a total sum of Rs. 2,85,01,745.00. On the amount awarded, Appellant was directed
to pay interest at the rate of 18% p.a. from the date of claim i.e. 21.12.1999 till the date of payment.
Challenging the Award, Appellant filed O.P. No. 197 of 2001 u/s 34 of Arbitration and Conciliation Act, 1996. Award was challenged mainly
on two grounds:
(i) Lack of opportunity to participate in the hearing particularly, no notice of hearing on 24.6.2000 was given;
(ii) Only Consignment Stockist Agreement dated 12.7.19997 effective from 01.4.1997 contains Arbitration clause and while so, the 2nd
Respondent-Arbitrator went beyond the scope of reference and he has adjudicated on claims in respect of matters not referred to him i.e.
pertaining to claims even prior to 01.4.1997.
Regarding first contention, after referring to the Minutes of Meeting of the Arbitrator, learned single Judge held that no opportunity was given by
the 2nd Respondent-Arbitrator is not maintainable. Learned single Judge further held that Appellant was aware of the hearing date on 20.05.2000
and even though, he was personally present on 20.05.2000, Appellant did not attend the hearing except giving a letter dated 19.05.2000 on that
date. It was held that Appellant should have taken care to verify the next hearing date and 2nd Respondent-Arbitrator had sent notice of hearing
fixed on 03.06.2000 and therefore, it cannot be said that Appellant was not given reasonable opportunity to put forth his case.
Regarding second contention, learned single Judge held that though the stockist agreement dated 01.08.1995 did not contain Arbitration clause.
Relying on the judgment reported in Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and Others, , learned single Judge held that a
reading of Clause 22 of the Agreement dated 12.07.1997 makes it clear that any dispute in terms of agreement shall be referred to the Arbitrator
and the learned single Judge held that 2nd Respondent-Arbitrator is competent to decide the dispute relating to the stockist agreement dated
01.08.1995 and the Award in respect of Rs. 18,70,701.10 is well within its jurisdiction. Finding that Court is not sitting as Court of Appeal and
that the Arbitrator has given reasoning for awarding the amount and that it is not fit case for interfering with the Award, learned single Judge
dismissed the Petition. Hence the Appeal.
In this Appeal, the Appellant has mainly raised two grounds:
No opportunity was given to the Appellant and that Appellant was ""unable to present his case"" which would vitiate the Award as per Section
34(2)(a)(iii) of Arbitration and Conciliation Act, 1996.
2nd Respondent-Arbitrator has dealt with the dispute not falling within the terms of reference and the Arbitrator has gone beyond the scope of
terms of reference and the Award is vitiated as per Section 34(2)(a)(iv) of Arbitration and Conciliation Act, 1996.
Re-Contention of inability to present case (S. 34(2)(a)(iii) of Arbitration Act) -Mr. B.T. Seshadri, learned Counsel for Appellant has submitted
that as per Section 34(2)(a)(iii) of Arbitration Act, lack of proper notice of appointment of Arbitrator or of arbitral proceedings or some other
inability to present the case would vitiate the Award. Learned Counsel for Appellant would contend that no notice was given for the adjourned
hearing on 24.06.2000 and in the absence of parties while adjourning the case, Arbitrator has to give notice for the adjourned date and non-
issuance of notice for the hearing on 24.06.2000 would have effect of vitiating the Award.
Drawing our attention to the proceedings of 2nd Respondent-Arbitrator, learned Counsel for Appellant would further contend that admittedly,
Appellant did not attend the hearing on 03.06.2000 and 2nd Respondent-Arbitrator ought to have given notice of next hearing date 24.06.2000
and because of non-issuance of notice, Appellant was ""unable to present his case"" and the Award is liable to be set aside for ""lack of proper
opportunity"".
For setting aside the Award, Section 34(2)(a)(iii) of Arbitration Act covers three inter-related as well as separate grounds:
(1) lack of proper notice of appointment of arbitrator;
(2) lack of proper notice of arbitral proceedings;
or
(3) inability to present case for any reason.
There cannot be any dispute with regard to the proposition of law that the parties would be entitled to a reasonable opportunity of putting their
case. A reasonable opportunity would mean that a party must be given an opportunity to explain his arguments before the Tribunal and to adduce
evidence in support of his case. The inability to present the case before the Arbitrator must be real and not stretched for the purposes of fitting the
facts within its scope.
In CDJ 2003 SC 809 Sohan Lal Gupta (dead) through L.Rs. and Ors. v. Smt. Asha Devi Gupta and Ors., the Supreme Court held as follows:
There cannot be any dispute with regard to the proposition of law that the parties would be entitled to a reasonable opportunity of putting their
case. (See Mantrose Cannel Foods Ltd. v. Eric Wells (Merchants) Ltd. (1965) 1 Lyoyd''s report 597. A reasonable opportunity would mean that
a party must be given an opportunity to explain his arguments before the Tribunal and to adduce evidence in support of his case. However, under
the old Act, an oral hearing would only be permitted if a party requested one, unless there was some agreement to the contrary (See Henry
Southern Ltd. v. Norwich Union Life Insurance Society (1992) 31 E.G. 70
What would constitute a reasonable opportunity of putting case as also qualification of the right has been stated in ""Russell on Arbitration"",
22nd Edition, paragraphs 5-053 and 5-054 which are in the following terms:
5-053 A reasonable opportunity of putting case. Each party must be given a reasonable opportunity to present his own case. This means he must
be given an opportunity to explain his arguments to the tribunal and to adduce evidence in support of his case. Failure to comply with this
requirement may render the award subject to challenge u/s 68 of the Arbitration Act, 1996. It is also a ground for refusing enforcement of the
resulting award under the New York Convention.
5-054 Qualification of the right. The need to allow a party a reasonable opportunity to present his case can give rise to difficulties. To what extent
can the tribunal intervene where, for example, a party''s submissions or evidence is needlessly long, repetitive, focuses on irrelevant issues or is
sought to be made over an extended period of time? What if a party ignores procedural deadlines imposed by the tribunal but maintains he still has
points to put before it in support of his case? Inevitably each situation has to be dealt with in it own context but the following general considerations
should be taken into account.
For constituting a reasonable opportunity, the following conditions are required to be observed:
1) Each party must have notice that the hearing is to take place.
2) Each party must have a reasonable opportunity to be present at the hearing, together with his advisers and witnesses.
3) Each party must have the opportunity to be present throughout the hearing.
4) Each party must have the opportunity to present evidence and argument in support of his own case.
5) Each party must have a reasonable opportunity to test his opponent''s case by cross-examining his witnesses, presenting rebutting evidence and
addressing oral argument.
6) The hearing must, unless the contrary is expressly agreed, be the occasion on which the parties present the whole of their evidence and
argument.
The principles of natural justice, it is trite, cannot be put in a straight jacket formula. In a given case the party should not only be required to
show that he did not have a proper notice resulting in violation of principles of natural justice but also to show that he was seriously prejudiced
thereby. In The Chairman, Board of Mining Examination and Chief Inspector of Mines and Anr. v. Ramjee (1997) 2 SCC 256 this Court held:
Natural justice is no unruly horse, no lurking land mine, nor a judicial cure all. If fairness is shown by the decision-maker to the man proceeded
against, the form, features and the fundamental of such essential procedural propriety being conditioned by the facts and circumstances of each
situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, without reference to the administrative realities
and other factors of a given case, can be exasperating. We can neither be finical nor fanatical but should be flexible yet firm in this jurisdiction. No
man shall be hit below the belt that is the conscience of the matter.
(See also Union of India and Others Vs. Anand Kumar Pandey and Others, , and R.S. Dass Ors. Vs. Union of India (UOI) and Others, .
In Aligarh Muslim University and Others Vs. Mansoor Ali Khan, , it was held:
The principle that in addition to breach of natural justice, prejudice must also be proved has been developed in several cases. In K.L. Tripathi v.
State Bank of India Sabyasachi Mukharji, J (as he then was) also laid down the principle that not mere violation of natural justice but de facto
prejudice (other than non issue of notice) had to be proved. It was observed, quoting Wade''s Administrative Law (5th End. pp. 472.75), as
follows:
It is not possible to lay down rigid rules as to when the principles of natural justice are to apply, nor as to their scope and extent... there must also
have been some real prejudice to the complainant; there is no such thing as a merely technical infringement of natural justice. The requirements of
natural justice must depend on the facts and circumstances of the case, the nature of the inquiry, the rules under which the tribunal is acting, the
subject-matter to be dealt with, and so forth.
Since then, this Court has consistently applied the principle of prejudice in several cases. The above ruling and various other rulings taking the same
view have been exhaustively referred to in State Bank of Patiala v. S.K. Sharma. In that case, the principle of ''prejudice'' has been further
elaborated. The same principles has been reiterated again in Rajendra Singh v. State of M.P.
Dealing with the question of ""reasonable opportunity"" and that ""principles of natural justice"" must not be stretched too far, in CDJ 2003 SC
809 Sohan Lal Gupta (dead) through L.Rs. and Ors. v. Smt. Asha Devi Gupta and Ors., the Supreme Court held that ""parties should not only
prove that he was not given proper notice, but also to show that he was seriously prejudiced thereby.
Grievance of Appellant is that he has not been given proper opportunity to present his case before the 2nd Respondent-Arbitrator and adduce
evidence in support of his case. The copy of Minutes/Proceedings of the 2nd Respondent-Arbitrator was produced before us. By perusal of the
same, the various sittings/gist of proceedings of Arbitrator are as follows:
11.12.1999
Arbitrator entered on reference and intimated the date of first sitting.
22.12.1999
First Sitting - Claimant filed claim statement and documents. Appellant represented by counsel. Time given till 01.02.2000 for counter statement.
01.02.2000
Second Sitting - At the request of counsel for Appellant, time extended for filing counter statement till 03.03.2000.
03.03.2000
Third Sitting - Appellant filed Petition for extension of time. Time given till 29.04.2000.
29.04.2000
Fourth Sitting - Appellant and counsel were not present. Hence Appellant was set exparte. Claimant already filed documents even in the first
hearing. Posted for Enquiry on 20.05.2000.
20.05.2000
Appellant gave a letter dated 19.05.2000 stating that he would negotiate for settlement and seeking for adjournment. Even though Appellant
personally present on 20.05.2000, not chosen to stay back and did not attend the hearing on 20.05.2000. Next hearing adjourned to 03.06.2000.
Notice of hearing sent to the Appellant.
03.06.2000
Counsel for 1st Respondent-Claimant requests time as he has to go through the voluminous documents filed. At request the next hearing date fixed
on 24.6.2000.
24.06.2000
CW1 examined. Exs.C1 to C26 were marked. Submissions of counsel for Respondent-Claimant heard and the matter is adjourned for passing
Award.
24.07.2000
Award passed.
By perusal of the proceedings, it is seen that time was granted to the Appellant for filing counter from 22.12.1999 to 29.04.2000. On
29.04.2000, neither the Appellant nor his counsel attended the hearing and after waiting for an hour, 2nd Respondent-Arbitrator set the Appellant
exparte and posted the matter for enquiry on 20.05.2000. By perusal of the Minutes/Proceedings of the 2nd Respondent-Arbitrator, it is seen that
on 20.5.2000, Appellant came to the venue of the meeting and handed over the letter seeking an opportunity for having discussion with the
Claimant to have the matter settled by negotiation outside the Arbitration. On 20.05.2000, even though Appellant was present, he has not chosen
to stay back and appear before the Arbitral Tribunal and to make representation. Pointing out that Appellant was already set exparte and that he
has to take steps to set aside the exparte order by appearing before the Arbitral Tribunal and then seek adjournment of the case, Arbitrator
adjourned the matter to 03.06.2000. Notice was also sent to the Appellant regarding adjournment of the matter to 03.06.2000. Only thereafter
enquiry was conducted and Award was passed on 24.07.2000. Proceedings of the 2nd Respondent-Arbitrator clearly shows that Appellant was
well aware of the proceedings on 20.05.2000. In fact, notice was also sent to the Appellant regarding adjournment of the matter to 03.06.2000.
As pointed out by the learned single Judge, Appellant should have taken steps to find out the outcome result on the basis of the letter dated
19.05.2000. Having not taken any steps, Appellant cannot contend that no notice was given for the hearing held on 03.06.2000 and 24.06.2000.
Award cannot be challenged on the ground that ""no sufficient opportunity was given to the Appellant"".
Section 25 of Arbitration and Conciliation Act, 1996 carries the provisions as to the effect of a party''s default. An Arbitrator is authorised by
the nature of his office to proceed exparte. He may make an exparte award if a party fails to appear inspite of notice to attend. Where a party
once appeared before the Arbitrator and sought extension of time for filing his written statement, this amounted to submission to the jurisdiction of
the Arbitrator. The Appellant might have remained exparte for any number of reasons. Having appeared before the Arbitral Tribunal and
repeatedly taken adjournments from 22.12.1999 to 29.04.2000, Appellant cannot contend that he did not have the opportunity of ""presenting his
case before the Arbitrator"". In fact on 20.05.2000, Appellant personally appeared before the Arbitral Tribunal and left the letter dated 19.05.2000
in the Arbitral venue addressed to the Arbitrator seeking an opportunity for discussion with the 1st Respondent-Claimant to have the matter settled
by negotiation outside the Arbitration. Even though, Appellant came on 20.5.2000 for handing over the said letter dated 19.5.2000, Appellant has
not chosen to stay back and appeared before the Arbitral Tribunal. As pointed out earlier, inspite of notice sent to the Appellant for hearing on
03.6.2000, Appellant has not chosen to appear on 03.6.2000.
Grievance of Appellant is that no notice of hearing fixed on 24.6.2000 was given to the Appellant. Having appeared before the Arbitrator till
20.05.2000, it is for the Appellant who should have approached the Arbitrator and find out the next hearing date. Learned Counsel for Appellant
contended that failure to give notice for the hearing on 24.6.2000 would vitiate the Award. It was further contended that without affording
opportunity, 2nd Respondent-Arbitrator proceeded with the matter and the Award suffers from infirmity and is liable to be set aside u/s 34(2)(a)
(iii) of Arbitration Act. No duty was cast upon the 2nd Respondent-Arbitrator to send notice to the Appellant when it has not evinced any interest.
Upon the Appellant''s failure to attend for number of hearings, 2nd Respondent-Arbitrator was justified in proceeding the matter exparte.
Observing that the procedural rule applicable to Arbitration proceedings is more tolerant than the rule followed in Court of law, in Juggilal
Kamlapat Vs. General Fibre Dealers Ltd., , the Calcutta High Court summarised the principles which govern the matter as follows:
If a party to an arbitration agreement fails to appear at one of the sittings, the arbitrator cannot or, at least, ought not to, proceed exparte against
him at that sitting. Where the non-appearance was accidental or casual, the arbitrator ought ordinarily to proceed in the ordinary way, fixing
another date of hearing and awaiting the future behaviour of the defaulting party.
If, on the other hand, it appears that the defaulting party had absented himself with a view to preventing justice or defeating the object of the
reference, the arbitrator should issue a notice that he intends at specified time and place to proceed with the reference and that if the party
concerned does not attend, he will proceed in his absence. But, if after making such a peremptory appointment and issuing such a notice, the
arbitrator does not in fact proceed ex parte on the day fixed, but fixes another subsequent date, he cannot proceed ex parte on such subsequent
date, unless he issues a similar notice in respect of that date as well.
If he issues a similar notice and the party concerned does not appear, an award made ex parte, will be in order. But if he does not issue such a
notice on the second occasion, but nevertheless proceeds ex parte, the award will be liable to be set aside in spite of a notice of a peremptory
hearing having been given in respect of the earlier date, subject, however, to the condition that prejudice was caused to the party against whom the
ex parte order was made. But this duty to give notice of an intention to proceed ex parte is not an absolute duty.
If it appears from the circumstances of the case that a particular party is determined not to appear before the arbitrators in any event, as when he
has openly repudiated either the reference itself or the particular arbitrators and has show no desire to recant, the arbitrators are not required to
issue a notice of an intention to proceed ex parte against such a recusant person and may proceed ex parte and make a valid award without issuing
a notice. The better course, however even in such a case is to issue a notice and give the party concerned a chance to change his mind.
The said decision of the Calcutta High Court was followed by the learned single Judge of Delhi High Court in Lovely Benefit Chit Fund and
Finance Pvt. Ltd. Vs. Shri Puran Dutt Sood and Others, ..
Appellant was set exparte on 29.04.2000 and the matter was adjourned to 20.05.2000. Notice of hearing for 20.05.2000 was sent to the
counsel for Appellant. As pointed out earlier, on 20.05.2000 Appellant personally appeared and left a letter dated 19.05.2000 stating that he
would negotiate for settlement. Even though Appellant personally appeared, he did not choose to stay back for the hearing on 20.05.2000. The
Arbitral Tribunal adjourned the hearing to 03.06.2000 and notice of hearing on 03.06.2000 was sent to the Appellant. By perusal of the
Proceedings of 2nd Respondent-Arbitrator, it is seen that sufficient opportunity was given to the parties and there is no wanting of compliance of
principles of natural justice"". In our considered view, there had been consistent default on the part of the Appellant in appearing before the 2nd
Respondent-Arbitrator.
While it is not denied that the 2nd Respondent-Arbitrator should not proceed hastily, at the same time, it is the incumbent on the parties to the
proceedings to co-operate to resolve the disputes at the earliest point of time. Considering the conduct of the Appellant, it cannot be said that 2nd
Respondent-Arbitrator committed a misconduct in the matter of passing the Award. Referring to number of decisions, the learned single Judge
rightly held that the Award cannot be assailed on the ground of ""want of sufficient opportunities"" and we do not find any reason warranting
interference.
Contention regarding excess of jurisdiction (S.34(2)(a)(iv) of Arbitration Act) -Appellant entered into three agreements with the 1st
Respondent on 01.08.1995 - viz., Stockist Agreement (Ex.C1) to be commenced with effect from 1st April, 1995 and on 20.03.1996 (Ex.C2)-
Consignment Stockist Agreement for a period of three years and yet another Agreement viz., Consignment Stockist Agreement dated 12.07.1997
(Ex.C3) with effect from 1st April, 1997 for a period of five years. As regards, Agreement No. 1 (Ex.C1), admittedly, there was no clause for
Arbitration. So far as, Agreement Nos. 2 and 3 (Exs.C2 and C3) are concerned, Arbitration clauses have been incorporated. The said Arbitration
clause in clause-22 of the third agreement (Ex.C3) was invoked and the Arbitrator has been appointed on emergence of disputes in between the
parties.
In case of dispute, Clause-22 of Consignment Stockist Agreement dated 12.07.1997 provides for reference to Arbitration. Clause-22 of the
said Agreement dated 12.07.1997 reads as under:
If any dispute arises between the parties hereof as to the interpretation of the terms of the agreement or as to the performance or non-
performance of the terms thereof or in connection with or arising out of this agreement, the same shall be referred first to the arbitration of the
Managing Director of the said Principal or to his nominee.
While issuing notice dated 30.09.1999, the 1st Respondent has pointed out that ""..... disputes once arisen in respect of the aforesaid agreement
has to be necessarily resolved by referring the same to arbitration as per Clause 22 of the aforesaid agreement dated 12.07.1997.
In the letter dated 09.12.1999, appointing Justice G. Ramanujam (retired) as Arbitrator, the Managing Director has requested the Arbitrator to
arbitrate in the matter of ""various disputes arisen pertaining to an agreement dated 12.07.1997"". The points of reference to Arbitration stated in the
said letter is as under:
The claim and counter claim, if any, including stock dispute of both the parties and reconciliation thereof, for authentication.
The mode of settlement of claim of one party by the other party and prescribe maximum time frame by which settlement of claim should be
completed.
You may please indicate your fee with structure for the arbitration to enable us forward our share of 50% fee after deduction of applicable
taxes.
The Arbitrator entered appearance on reference on 11.12.1999.
The contention of Appellant is that 2nd Respondent-Arbitrator was appointed to arbitrate in the matter of various disputes arisen pertaining to
Consignment Stockist Agreement dated 12.07.1997 and hence, the 2nd Respondent-Arbitrator could adjudicate only the disputes arising in
respect of the said agreement dated 12.07.1997 whereas, the 2nd Respondent-Arbitrator had dealt with the dispute not contemplated or not
falling within the terms of submission to the Arbitration. It was further contended that the claim of Rs. 18,70,701.01 was in respect of the
Consignment Stockist Agreement dated 01.08.1995 which does not contain Arbitration clause and while so, 2nd Respondent-Arbitrator went
beyond the scope of reference to Arbitration. It was further submitted that the claim which was referred to the 2nd Respondent-Arbitrator is only
in respect of the Consignment Stockist Agreement dated 12.07.1997 and the claim arising out of the Stockist Agreement dated 01.08.1995
cannot be in connection with or arising out of the Consignment Stockist Agreement dated 12.07.1997 as the agreements dated 01.08.1995 and
12.07.1997 wholly operated on different field. In other words, the contention of the Appellant is that the Agreement dated 01.08.1995 is a
Stockist Agreement and the other agreement dated 12.07.1997 is a Consignment Stock Agency Agreement, the finding of the learned single Judge
is erroneous.
Merits of the above contention is to be considered in the light of Section 16(3) of Arbitration Act. Section 16(3) reads as follows:
Section 16(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.
Sub-section (3) of Section 16 provides that a plea that the arbitral tribunal is exceeding the scope of its authority should be raised as soon as the
matter is referred to Arbitration and during the proceedings. The arbitral tribunal can admit on these points even at a later stage if the delay is
justified. In the case on hand, the claim statement filed before the 2nd Respondent-Arbitrator on 22.12.1999 makes specific reference to Stock
Agreement dated 01.08.1995 and the salient features thereon. The claim statement also refers to the salient features of Consignment Stockist
Agreement dated 12.07.1997. The claim of Rs. 15,02,301.15 is made towards ""value of unsold stock"" and the claim statement states as to how
the claim of Rs. 15,02,301.15 is made. If the Appellant felt that claim for the value of unsold stock of Rs. 15,02,301.15 is in excess of jurisdiction
of the 2nd Respondent Arbitrator, objection ought to have been raised at the right time. At the right movement, Appellant failed to raise the plea of
excess of jurisdiction by the 2nd Respondent-Arbitrator. Of course, Arbitral Tribunal/Court can admit the plea of lack of/excess of jurisdiction if
the delay is justified.
Even though, we feel that plea of ""excess of jurisdiction"" ought to have been raised before the 2nd Respondent-Arbitrator, we proceeded to
consider the merits of the plea whether the Arbitrator acted beyond the scope of reference. The Stockist Agreement dated 01.08.1995 (Ex.C1)
was entered into between the parties for the purpose of stocking the products for sale of the said products in North India for the area of Union
Territory of Delhi, Punjab, Uttar Pradesh, Haryana, Rajasthan and Jammu & Kashmir. The said products are leather chemicals listed in the
Annexure-I of the said agreement. The agreement dated 20.03.1996 (Ex.C2) named as Consignment Stockist Agreement was entered into
between the parties for a period of three years. It deals with various stipulations and covenants regarding the products of 1st Respondent for its
distribution in the same area Union Territory of Delhi, Punjab, Haryana, Himachal Pradesh, Agra, Rajasthan. The last agreement is also in the name
of Consignment Stockist Agreement dated 12.07.1997 (Ex.C3) with effect from 1st April, 1997 for a period of five years. The said agreement
was for the purpose of distribution of the products of 1st Respondent in the Union Territory of Delhi, Punjab, Haryana, Himachal Pradesh, Uttar
Pradesh, Rajasthan and Jammu & Kashmir.
Contention of Appellant is that the agreements are different and one has no connection with the other. Further contention is that the agreement
dated 01.08.1995 is the ""Stockist Agreement"" and the other agreement dated 12.07.1997 is the ""Consignment Stockist Agency Agreement"" and
therefore, the Stockist Agreement dated 01.08.1995 cannot be said to be in connection with or arising out of the agreement dated 12.07.1997.
Appellant mainly relies upon the letter written by the Arbitrator dated 19.12.1999. Case of the 1st Respondent is that in the claim statement, he
had stated all the three agreements (Exs.C1 to C3) as disputed agreements and they have been annexed with the claim statement for ready
reference, since they are arising out and in connection with the transactions of the same product in between the same parties and the Appellant did
not object to the same.
No doubt, the letter of reference mentions that the dispute between the parties pertains to the agreement dated 12.07.1997 (Ex.C3).
However, the parties to the other agreements namely first and second agreements (Exs.C1 and C2) are one and the same and the disputes in
between the parties to the agreement dated 12.07.1997 (Ex.C3) would apply to parties who are ""Principal"" and ""Agent"" in other two agreements
also. As pointed out earlier, the first agreement dated 01.8.1995 (Ex.C1), we could see that 1st Respondent has appointed the Appellant as
Stockist Agent for the area viz., Union Territory of Delhi, Punjab, Uttar Pradesh, Haryana, Rajasthan and Jammu & Kashmir for the leather
chemicals products of 1st Respondent. The Consignment Stockist Agreement in between the same parties have been entered into through the
second agreement (Ex.C2) dated 20.03.1996 with regard to the same area Union Territory of Delhi, Punjab, Uttar Pradesh, Haryana, Rajasthan
and Jammu & Kashmir for the leather chemicals products of 1st Respondent. In the third agreement (Ex.C3) dated 12.07.1997 the area covered
by this agreement would also cover most of the areas mentioned in the earlier two agreements. When the third agreement dated 12.07.1997
(Ex.C3) has got Arbitration clause and by virtue of the said Arbitration clause, an Arbitrator has been appointed and the earlier two agreements
were entered into between the same parties for the same products and for the same area could be certainly considered as connected with the
disputes under Arbitration in between the parties. As per the terms of both the agreements, both Principal (1st Respondent) and Stockist Agent
(Appellant) are to advertise and promote the products in the Territory. The dispute as to the sale of stocks is said to be connected with the
Consignment Stockist Agreement dated 12.07.1997. On behalf of 1st Respondent, it was also submitted that 1st Respondent has been maintaining
one running account for all the agreements.
It is pertinent to note through Exs.C25 and C26 which are notice dated 30.10.1999 issued by the 1st Respondent and the reply notice dated
01.12.1999 sent by the Appellant regarding the disputes arising between them. As per the notice issued by the 1st Respondent in Ex.C25, he
clubbed all the three agreements and calculated the sum at Rs. 1,74,97,110.10 being the value of the goods and the accrued interest was Rs.
95,02,333.54 are outstanding. In the statement attached with Ex.C25, 1st Respondent had demanded the claim over all the three agreements and
the overdue interest over the outstanding of all the three claims were clubbed together and interest was calculated thereon. For the said notice,
Appellant replied through Ex.C26 stating that all the claims arising out of the three agreements have been sorted out by the Meeting of both parties
at Chennai on 09.6.1997 and the Minutes recorded on that date would be self-explanatory. Therefore, both parties have considered that the
subject and performance of the three agreements are interconnected. Therefore, there cannot be any controversy regarding the fact that all the
three agreements (Exs.C1 to C3) are arising out of and interconnected with each other. As per Clause-22 of Consignment Stockist Agreement
dated 12.07.1997 ""if any dispute arises between the parties ...... in connection with or arising out of the agreement shall be referred to the
arbitration"". In our considered view, 2nd Respondent-Arbitrator was justified in proceeding to consider the dispute of unsold stocks as being
connected with the Consignment Stockist Agreement dated 12.07.1997.
In Renusagar Power Co. Ltd. Vs. General Electric Company and Another, ., the Supreme Court considered the scope of the terms ""arising
out of"", ""in relation to"" and ""in connection with"" used in an arbitration clause. In the said decision, the Supreme Court pointed out as follows:
Four propositions emerge very clearly from the authorities discussed above:
(1) Whether a given dispute inclusive of the arbitrator''s jurisdiction comes within the scope or purview of an arbitration clause or not primarily
depends upon the terms of the clause itself; it is a question of what the parties intend to provide and what language they employ.
(2) Expressions such as ''arising out of'' or ""in respect of"" or ""in connection with'' or ""in relation to"" or ""in consequence of"" or ""concerning"" or
relating to"" the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope) of the
arbitration agreement.
(3) Ordinarily as a rule an arbitrator cannot clothe himself with power to decide the questions of his own jurisdiction (and it will be for the Court to
decide those questions) but there is nothing to prevent the parties from investing him with power to decide those questions, as for instance, by a
collateral or separate agreement which will be effective and operative.
(4) If, however, the arbitration clause, so widely worded as to include within its scope questions of its existence, validity and effect (scope), is
contained in the underlying commercial contract then decided cases have made a distinction between questions as to the existence and or validity
of the agreement on the one hand and its effect (scope) on the other and have held that in the case of former those questions cannot be decided by
the arbitrator, as by sheer logic the arbitration clause must fall along with underlying commercial contract which is either non-existent or illegal while
in the case of the latter it will ordinarily be for the arbitrator to decide the effect or scope of the arbitration agreement i.e. to decide the issue of
arbitrability of the claims preferred before him.
In Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and Others, , the parties entered into two separate agreements, one for the
construction of a flat and the other for its interior designing. Each contract contained an arbitration clause. The arbitration clause in the construction
contract provided for reference of connected disputes also. Several clauses in both the contracts were the same. In the said facts and
circumstances, it was held by the Supreme Court that ""the interior designing agreement was connected with the construction agreement. Disputes
under both the agreements could be covered by the arbitration clause in the construction agreement"".
Applying the ratio of Olympus case, we find that the learned single Judge has rightly held that the scope of Arbitrator appointed under the third
agreement dated 12.07.1997 (Ex.C3) is also covering the disputes in the earlier two agreements dated 01.08.1995 and 20.03.1996 (Exs.C1 and
C2) entered into between the parties as they are interconnected and arising out of the transactions mentioned in the third agreement dated
12.07.1997 (Ex.C3).
As pointed out earlier, the dispute as to the sale of stocks is said to be connected with the Consignment Stockist Agreement dated
12.07.1997. The Arbitration Clause contained in the Consignment Stockist Agreement dated 12.07.1997 is comprehensive for the Arbitrator to
resolve the connected dispute and the learned single Judge rightly held that the Award cannot be assailed on the ground of ""want of sufficient
opportunities"" and ""lack of /excess of jurisdiction. We do not find any infirmity warranting interference with the order of learned single Judge and
the appeal is liable to be dismissed.
In the result, the appeal is dismissed. No costs.