JUDGMENT
A.K. Doshi, J.
1. This O.P. is filed under Section 34(2) of the Arbitration and Conciliation Act, 1996 to set aside the interim award/order dated 26.10.1998 made by the arbitral tribunal consisting of the respondents 2 to 4 herein. For convenience sake, in this order the petitioner Board herein is referred to as the Board, the first respondent firm as the Contractor and the respondents 2 to 4 arbitrators.
2. The brief facts of the case are as follows :
The Contractor M/s. Aban Constructions is a registered partnership firm. They entered into two out the work of providing inside lining and outside coating with cement mortar for MS Raw Water and Clear Water Transmission main and laying and joining by welding and testing to the required pressure and commissioning on turn-key basis under Coimbatore and Salem Water Supply Schemes. The above agreements were not signed by the partners of Contractors or by their Power of attorney but only by one Rajasekara Kurup. The said work was awarded to the Contractor in November, 1991 and the same has to be completed within 12 months from the date of signing the agreement. It is alleged by the Board that because of the inability and mismanagement of the Contractor they could complete the work in part by December, 1994 only and the Board was constrained to complete the balance work through other agencies and recover the extra cost from the contractor. The contractor had been paid the entire amounts due to them under the agreement on their raising the final bill. The contractor has initiated arbitration proceedings in January, 1998 in respect of certain alleged disputes arising out the contract agreements Nos. CE/WBP/15/91-92 and CE/WEP/16/91-92 entered into between the Board. The arbitrators were nominated as the arbitral tribunal by the parties. The Board has filed their reply statement on 26.2.1998 by way of objections to the claims made by the respondent before the arbitrators. The jurisdiction issue was agreed to be tried as preliminary issue and the counsel for the both sides have advanced arguments on this question. Further it was contended by the Board before the arbitrators that the claim itself has been filed on the basis of the arbitration clause contained in the contractor. The contract entered into between them is not valid as such the arbitration clause is also void/invalid and that the contract has been entered into the name of M/s. Aban Constructions but the contract was signed by one Rajasekara Kurup who has nothing to do with the firm and hence the contract is invalid/void. In reply, on behalf of the contractor it was contended that Rajasekara Kurup is a Power of Attorney Holder of the contractor as such he was competent to represent firm. After considering the documents produced by the parties and deposition of the witness the arbitrators by their interim order/award dated 26.10.1998 overruled the objections regarding the jurisdiction of the arbitral tribunal and proceeded further. Aggrieved by the said interim award the present O.P. is filed. The respondent has filed a detailed counter statement vehemently opposing the said O.P. on the ground that the said order cannot be construed as an interim award and the arbitrators have rightly overruled the objections of the Board. The arbitral tribunal has framed the following issues for consideration as follows :
(i) Whether M/s. Aban Constructions is a mere name and neither a living person nor a legal entity and if so the claim made by such a legal non-entity is liable to be dismissed in limine ?
(ii) Whether there are no valid arbitration clauses in the agreement dated 8.11.1991 for referring the disputes now raised and hence this arbitral tribunal has no power/authority/jurisdiction to arbitrate the disputes ?
(iii) Whether the TWAD Board has no power or authority to enter into agreements with arbitration clauses for referring the disputes for arbitration and hence the agreements for arbitration are null and void ?
3. In respect of World Bank Project in Salem and Coimbatore, two agreements viz., Ex. P-1 and P-14 were entered into between the contractor and the Board, Ex. P-2, dated 29.5.1991 and Ex. P-50, dated 29.5.1991 are the two letters from the Executive Engineer of the Board addressed to the contractor enclosing the tender documents. Ex. P-3 and Ex. P-51, dated 1.10.1991 are work orders issued by the Board to the contractors in respect of the said two works. Ex. P-88 is an application made by the contractor to the Board for registering itself as a contractor. The contractor is a registered partnership firm, Ex. P-89 is the letter dated 1.1.1991 by the board to the contractor stating it has been registered as a class-I contractor. In the Income Tax Clearance Certificate under Column 7, the Managing Partner has signed for the contractor. Ex. P-23 is the letter dated 4.6.1993 from the Chief Engineer to TWAD Board enclosing the Minutes of the Review Committee Meeting dated 27.5.1993. Ex. P. 39 is the minutes of the meeting held on 2.9.1994 by the Chief Engineer of the Board. In both Ex. P-23 and P-39, the contractor is referred to as a firm. Ex. P-41 is the letter dated 10.3.1995 from the Contractor to the Board wherein a partner has signed for the contractor. Ex. P. 91 is the supplement agreement dated 29.7.1994 to the Original agreement Ex. P-44 in respect of Coimbatore Project. The claim statement has been filed by the contractor signed by one N. P. Kumar, Senior Accounts Officer and verified by one R.R. Kurup, General Manager for the contractor. The arbitral tribunal has first time stated before the arbitrators that the contractors M/s. Aban Constructions is a mere name and neither living person nor legal entity. Ex. P-88 contains the original partnership deed dated 29.10.1983 consisting of three partners. Ex. P-95 is a resolution dated 1.4.1990 passed by all the partners. Ex. P-90, dated 2.7.1991 is the power of attorney executed by the Managing Partner M. A. Abraham of the contractor firm in favour of Rajasekara Kurup, Project Manager to represent to sign on the relevant documents and to act on behalf of the contractor as its representative in respect of tender for Salem Project. Under Ex. P-96 the said Rajasekara Kurup was empowered to sign the agreement relating to Coimbatore Project. The Board has contended that Ex. P-96 is not a true and genuine document, which has been created and cooked up by M/s. Aban Constructions, i.e., the Contractor by using old stamp papers. The Board has examined R.W. 1 Mrs. D. Ratna, the District Registrar, Chengalpet and P.W. 2 Sri Natesan, the stamp vendor of Sriperumbadur. The register Ex. R-55 relating to the sale of stamp papers maintained by R.W. 2 was also marked by the Board. The tribunal has come to the conclusion that Ex. R-55 is not maintained correctly and properly by R.W. 2. Considering all the aspects, the arbitral tribunal has concluded that both the agreements Exs. P-1 and P-44 were signed by R. Rajasekara Kurup who had enough power and authority to represent and sign for the contractor and decided point No. 1 in favour of the contractor.
4. Points No. 2 and 3 : So far as points Nos. 2 and 3 are concerned, the tribunal has found that both the agreements Exs. P-1 and P-44 contains arbitration clause. In the reply statement filed by the Board, they have not raised such disputes that the contracts under Ex. P-1 and P-44 are null and void, but they had made such plea only at the time of argument that the agreements are null and void. They have also taken the plea that when the agreement is invalid as such every part of it inclusive of arbitration clause contained therein is invalid. The Board however contended that it being a corporation created under Tamil Nadu Water Supply and Drainage Board Act, 1970 neither the said Act nor the Rule nor the regulations framed there under has conferred any power on the Board to enter into contracts with third parties nor to refer the disputes arising thereunder to arbitration. The arbitral tribunal came to the conclusion that the power conferred under Section 17 of the TWAD Board Act are wide enough for the Board to enter into agreements with necessary clause from arbitration, hence Exs. P-1 and P-44 are valid in the eye of law. Ultimately, the arbitral tribunal has rejected the plea of the Board and continued its arbitral proceedings. Aggrieved by the said order/interim award dated 26.10.1998, the Board has filed the above O.P. under Section 34(2) of the Arbitration and Conciliation Act, 1996.The points for consideration in this O.P. are :
(1) Whether the order passed by the arbitral tribunal is liable to be set aside or not ?
(2) Whether the O.P. is maintainable under Section 34 of Act or not ?
5. The learned counsel for the Board has built up his arguments on the ground that the decision of the arbitrators overruling the objections of the Board regarding jurisdiction is contrary to law and the order passed by the arbitral tribunal deciding its jurisdiction is an interim award since it is a judicial determination of the disputes. The learned counsel appearing for the contractor opposed both the said contention that any order passed by a tribunal in respect of its jurisdiction is sustainable in law and shall not be construed as an interim award as such the petition is not at all maintainable. In support of his contentions the learned counsel appearing for the Board has filed upon Sections 2(c), 16, 31(b), 34 and 37 of Arbitration and Conciliation Act, 1996. Now, we look into the relevant provisions of the Act for necessary Section 2(c) of Arbitration Act :
“Definitions : In this part, unless the context otherwise requires :
(c) “arbitral award” includes an interim award.
Section 16 of Arbitration Act
Competence of arbitral tribunal to rule on its own jurisdiction :
(1) The arbitral tribunal may rule on its own jurisdiction, including ruling on any objections with respect of the existence or validity of the arbitration agreement, and for the purpose :
(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 jurisdiction shall be raised not later than the submissions 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 case 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 and arbitral award in accordance with Section 34.
Section 31(6) :
31(6) The arbitral tribunal may, at any nine during the arbitral proceedings, make an interim award or any matter with respect to which it may make a final arbitral award.
Section 34(2) :
34. Application for setting aside arbitral award :
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if –
(a) the party making the application furnishes proof that, –
(i) a party was under some incapacity; or
(ii) the arbitration agreement is not valid under the law to which the parties have subject it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that –
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force; or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation – Without prejudice to the generality of sub-clause (ii) of Clause (b), it is hereby declared, the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was inducted or affected by fraud or corruption or was in violation of Section 75 or Section 81.
Section 37 : Appealable orders :
(1) An appeal shall lie from the following orders (and from no others) to the Court authorized by law to hear appeals from original decrees of the Court passing the order, namely :
(a) granting or refusing to grant any measure under Section 9;(b) setting aside or refusing to set aside an arbitral award under Section 34.
(2) An appeal shall also lie to a Court from an order of the arbitral tribunal :
(a) accepting the plea referred to in sub-section (2) of 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 the second appeal shall affect or take away any right to appeal to the Supreme Court.”
6. It is crystal clear under Section 16(1) of the Act, the Arbitrator is vested with power to rule on its own jurisdiction. The position under Act, 1940 was that the Arbitrator has no power to decide upon the legal validity of the submissions. The disputes about the existence or validity of the contract and as to the existence of facts which rendered illegal had to be determined by the Court and not by the Arbitrator. In fact under the old Act, the Arbitrator found that the arbitration agreement was laid and such a finding could not bind the parties. Section 16 of the Act is newly introduced by the Parliament. Under the new Act, the power is invested with arbitral tribunal to decide the question of its own jurisdiction and also objection with respect to the existence or validity of the arbitration agreement. Under Section 16(1), when at the time of conclusion of the contract, which gave rise to the dispute and which contained an arbitration clause, the person signing the contract on behalf of the other party did not possess the necessary power to do so, the Arbitrators rule that no arbitration clause existed in writing between the parties. Under Section 16(2) of the Act, the plea arbitral tribunal does not have jurisdiction should be raised not latter than the submissions of the defence. If the excess of jurisdiction crops up during the proceedings the objection should be made at the very time to the tribunal itself under Section 16(3) not to the Court. It is open to the tribunal to permit the delayed objection also under Section 16(4). Any objection has been accepted by the tribunal, the other party can appeal to the Court under Section 37(2)(a). If the objection is overruled, the tribunal continue its proceedings and make an award and until the remedy to the aggrieved party is to apply for setting aside the award under Section 34. Under Section 16(5) the arbitral tribunal takes a decision rejecting the plea to continue with arbitral proceedings and make an award. The sub-sections are most important in the case on hand. It is evident from the said sub-sections (5) of Section 16 whatever be the decision of the arbitral tribunal its is final and binding on the parties and neither party has a right to come to the Court to challenge the findings or decision till such time the award is made. In other words, the proceedings shall continue before the arbitral tribunal and the aggrieved party by the decision may proceed under protest to challenge the decision under Section 34 only after the arbitral tribunal has made the award. In case the objection raised by one of the party is accepted by the arbitral tribunal, the other party can appeal to the Court under Section 37(2)(a) whereas if the objection is overruled, the aggrieved party has no such remedy available by way of appeal but he has to wait till the award is passed and later file an application for setting aside the arbitral award. A close reading of Section 16 will exhibit the intention of the Parliament that the Arbitrators have the power to rule on their own jurisdiction. The aggrieved party has no right to challenge the order passed by the tribunal in respect of the jurisdiction under Section 34 of the Act. On the contrary, the objection raised by one of the parties is accepted, the aggrieved party can file an appeal under Section 37(2)(a). The intention of the Parliament is if the arbitral tribunal has come to the conclusion that it is not vested with the jurisdiction, then nothing remains with them as such the aggrieved party has to necessarily rush up the Court of law. Whereas, if the arbitral tribunal found that it is vested with the jurisdiction, it can proceed further and the aggrieved party can agitate the said finding as well as the final award under Section 34 of the Act. The intelligible difference in providing the remedy of an appeal to one party and not providing such an appeal to the other party is not at all discriminatory, and there is a nexus for the object to be achieved namely resolving the dispute expeditiously. The learned counsel for the Board relied on the decision reported in Satwant Singh Sodhi vs. State of Punjab and others ), wherein it was held thus :
“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 the same is of interim nature.”
7. In the said case, both the parties have entered into an agreement relating to construction of a bridge, dispute arose in connection with certain claim made by appellant and the matter was referred to an Arbitrator. The appellant sought for an interim award as regards a particular claim, item No. 1. The Arbitrator by an award granted certain amount for a particular period with interest. The Arbitrator has made a second award which was including all the earlier items. The appellant applied under Section 14 of the Arbitration Act, 1940 to have both the awards made rule of Court. The trial Court ordered that the award be made rule of Court as regards item No. 1 and that item No. 1 covered in the second award should merge in the first award. The trial Court further ordered that the second award should also be made rule of the Court but after excluding 1st item which had been taken care of by the first award. In appeal, the High Court held that the award could not be held as final and made rule of Court because it had never been pronounced even though it had been signed; High Court concluded that the second award superseded the first award. Before the Supreme Court it was contended by the appellant that it was not open to the Arbitrator to revise his first award as he had become functus officio immediately after making it and the High Court was wrong in holding that the award become final only after pronouncement. Once an award is made and signed, it is binding. In this case, the Apex Court held that if the interim award is intending to have any 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, if 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 learned counsel for the Board relied upon the above said decision to say that whether interim award is final to the extent it goes or only till final award is delivered. The said question could be decided only on the form of the award. If an interim award is intended to finally determine the rights of the parties it will have the force of complete award and will continue to have effect even after the final award is delivered. The Arbitrator is functus officio as regards the claim covered in such an award and such a claim cannot be re-determined. If the order of the Arbitrators does not decide the claim or even any part of the claim of any issue of liability it is not an award hence no remedy available under Section 34 of the Act. The learned counsel appearing for the Board advanced arguments on different dimensions that the impugned order is an interim award and as such the application under Section 34 is maintainable since the appeal is restricted if the objections made by one of the parties is accepted by the tribunal. The learned counsel appearing for the Board referred to Section 31(6) of the Act read with Section 2(1)(c) in support of his contention that the order passed by the arbitral tribunal is an interim award. Prior to Arbitration Act, 1940, an Arbitrator had power to give a piecemeal award unless authorized to do so by an agreement. Under Section 27(1) of the Act, 1940, an Arbitrator was permitted to give an interim award. Of course, this position has been maintained in Act, 1996 also. The power of making an award is conferred under Section 31(6) of the Act, 1996. The Arbitrator can by an interim award decide a part of the dispute referred to him. The learned counsel for the Board also pointed out that under Section 31(b) an issue relating to jurisdiction was also decided by the arbitral tribunal which are also one of the issues referred to them and hence the order passed by the Arbitrators is nothing but an interim award. He further contended with an interim award on any matter with respect to which arbitral tribunal may make a final award also as such the impugned order can be construed as an interim award under Section 31(6) read with Section 2(1)(c) of the Act. In support of his contentions, the learned counsel for the Board has taken me to Russell on Arbitration 21st Edition, page 199 wherein it is stated as follows :
“Jurisdiction : A tribunal should consider the existence and scope of its jurisdiction, whether or not it is challenged by one or more of the parties and whether or not the tribunal is being asked to make a ruling on it. Rather, as a matter of practice, the tribunal should ascertain for itself whether it has jurisdiction to hear the dispute. The tribunal does so by obtaining from the parties and examining the arbitration agreement, the notice of arbitration and any other documents which are relevant to the jurisdiction issue. Provided, the tribunal is satisfied that it does have jurisdiction to hear the dispute, it should proceed with reference. It will then be for a party who objects to the tribunal’s jurisdiction to decided what steps to take and it may be that a ruling from the tribunal or the Court will follow.” The learned counsel has cited the above passage and argued that the Board has every right under Section 34 to question the order which is nothing but an interim award. The learned counsel further quoted page 202 of Russell on Arbitration which runs as follows :
“Obtaining an award on jurisdiction : Rather than refusing to participate in the arbitration, a party may raise with the tribunal his challenge to the jurisdiction to proceed with the reference. He may ask the tribunal to receive submissions on the point and then to make an award dealing with issue. He cannot compel the tribunal to give an award on jurisdiction, but it is common in these circumstances for the tribunal to agree to do so because if its decision is to be challenged in the Courts that process can be commenced without delay. The tribunal might well be criticized if it were to refuse to deal with an objection to its jurisdiction until the issue of its final award, by which time the merits of the substantive issues in the reference has been considered in full, and its decision was that in fact had no jurisdiction to deal with the matters in dispute and consequently the arbitration proves to be a nullity. On the other hand the nature of the objection may be such that the tribunal could not properly form a view on jurisdiction until it had heard evidence on the merits of the case. In these circumstances the tribunal can exercise its power to deal with the objection to jurisdiction in its award on the merits.”
8. The learned counsel relied on the above said passage to say that obtaining an order on jurisdiction is also an award. The counsel also referred to the following :
“Status on tribunal’s determination : Although the tribunal can and should inquire into the merits of any objection to jurisdiction, its determination on the matter is subject to challenge, whether it has been made in an award on jurisdiction or in an award on the merits. The party who is challenging the tribunal’s jurisdiction must therefore accept the tribunal’s decisions or apply promptly to the Court. The Court will then look at the issue afresh and may confirm the award, vary it or set aside in whole or part.”Referring the above passage, the learned counsel for the Board emphasized that determination of jurisdiction by the arbitral tribunal is an award which can be challenged under Section 34 of the Act. The learned counsel also relied upon Vadilal Chatrabhuj Gandhi vs. Thakorelal Chimanlal Munshaw and others , wherein it was held as follows :
“(2) The first contention that has been raised before us by the Advocate General is that the decision of Sir Jamshedji Kanga constituted an award and that award could only be given effect to in the manner provided under the Arbitration Act and that a decree could not be taken on that award by having a compromise recorded. In order to determine this point, we have to consider what Sir Jamshedji Kanga had to do in order to fix the liability of each of the directors. If a dispute is referred to a person and if a person decides that dispute and in deciding that dispute he holds a judicial inquiry and comes to a judicial decision than undoubtedly that decision would constitute an award. On the other hand, if a matter is referred to a person and he is not called upon either to hold a judicial enquiry or to give a judicial decision, but it is permissible to him to rely on his own skill, knowledge or experience in order to arrive at a particular decision, then the decision would not be an award. …….”
9. The abovesaid decision was referred to by the learned counsel appearing for the Board to say that an award must be a result of judicial decision. To my opinion, the said decision is not applicable. No doubt, an award is a result of judicial decision but a decision of the arbitral tribunal on the issue of jurisdiction is not an interim award as it does not decide the claim or any part of the claim or an issue of liability of the parties. The learned counsel also relied upon Sundaram Finance Limited vs. NEPC India Limited , wherein it is held as follows :
“8. Prior to the promulgation of the 1996 Act, the law on arbitration in India was substantially contained in three enactments namely the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961. In the statement of Objects and Reasons appended to the Bill, it was stated that the 1940 Act which contained the general law of arbitration had become outdated. The said Objects and Reasons noticed that the United Nations Commission on International Trade Law (UNICITRAL) adopted in 1985 the Model Law on International Commercial Arbitration. The General Assembly had recommended that all countries give due consideration to the said model law, which, along with the Rules, was stated to have harmonized concepts on arbitration and conciliation of different legal systems of the world and thus contained provisions which were designed for universal application.
9. The 1996 Act is very different from the Arbitration Act, 1940. The provisions of this Act have, therefore, to be interpreted and construed independently and in fact reference to the 1940 Act may actually lead to misconstruction. In other words, the provisions of the 1996 Act have to be interpreted being uninfluenced by the principles underlying the 1940 Act. In order to get help in construing these provisions, it is more relevant to refer to the UNICITRAL Model Law rather than the 1940 Act.”
10. Article 16 of Uniciteral Model Law on international commercial arbitration runs as follows :
“(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 validity 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 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 Para (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 and award.”
11. Even after a comparative reading of Article 16 of Uniciteral Model Law and Section 16 of the Act, 1996, no way improve the case of the Board. Indeed, Section 16 is totally different from Article 16 of the Uniciteral Model Law and I will assign reasons for the said conclusion later.
12. The learned counsel for the Board relied upon the decision is K.K. Modi vs. K.N. Modi and others , wherein it was held as follows :
“17. Among the attributes which must be present for an agreement to be considered as an arbitration agreement are :
(1) The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement.
(2) That the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the Court or from a statute, the terms of which make it clear that the process is to be an arbitration.
(3) The agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal.
(4) That the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides.
(5) That the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly.
(6) The agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.
30. A long line of English cases starting with Carus-Wilson and Greene, In re., have also been cited before us. In Carus-Wilson and a Greene, In re., on the sale of land, one of the conditions of sale was that the purchaser should pay for the timber on the land at a valuation for which purpose, each party should appoint a valuer and the valuers should, before they proceed to Act, appoint an Umpire. The Court said that such valuation was not in the nature of an award. The Court applied the tests which we have already referred to, namely, (1) Whether the terms of the agreement contemplated that the intention of the parties was for the person to hold an enquiry in the nature of a judicial enquiry, hear the respective cases of the parties and decide upon evidence laid before him, (2) whether the person was appointed to prevent differences arising and not for settling them when they had arisen. The Court held that the agreement to be for valuation. It said that the fact that if the valuers could not agree as to price, an umpire was to be appointed would not indicate that there were any disputes between the parties.
34. Undoubtedly, in the course of correspondence exchanged by various members of Groups A and B with the Chairman, IFCI, some of the members have used the words “arbitration” in connection with Clause 9. That by itself, however, is not conclusive. The intention of the parties was not to have any judicial determination on the basis of evidence led before the Chairman, IFCI. Nor was the chairman, IFCI required to base his decision only on the material placed before him by the parties and their submissions. He was free to make his own inquiries. He had to apply his own mind and use his own expertise for the purpose. He was free to take the help of other experts. He was required to decide the question of valuation and the division of assets as an expert and not as an Arbitrator. He has been authorised to nominate another in his place. But, the contract indicates that he has to nominate an expert. The fact that submissions were made before the Chairman, IFCI, would not turn the decision-making process into an arbitration.”
31. The learned counsel for the Board taken me to Konkan Railway Corporation Limited and another vs. Rani Construction Private Limited , wherein it was held as follows :
“It was pointed out that there is a more important aspect of a practical nature which had to be borne in mind. If such an order of the Chief Justice (or his nominee) was to be treated as an administrative order, it could be challenged before a single Judge of the High Court and then before a Division Bench and then in this Court under Article 136, and such a procedure would only delay the arbitration proceedings more than if the order was accepted as a judicial order and was permitted to be challenged directly under Article 136. In fact, if the order was to be treated as administrative in nature, even the order of the Chief Judge of the High Court (or his nominee) could be challenged first before a single Judge of the High Court and then before a Division Bench and then under Article 136 rather then being treated as a final order of this Court. That would only delay the proceedings further. Similarly, if the order of the Chief Justice of the High Court (or his nominee) is treated as a judicial order, there would be only one appeal to this Court under Article 136 of the Constitution. It was contended that the reasoning of three Judge bench, that if the order was to be treated as an administrative order, time would be saved, could thus be rendered nugatory. In practice, the defaulting party could drag on the matter for years at the two stages of Article 226, proceedings on the preliminary issues, it is pointed out. “The learned counsel for the Board bought to by notice Olympus Superstructures Pvt. Ltd. vs. Meena Vijay Khetan and others , wherein it was held thus :
“(12) Before we go into the interpretation of the arbitration clauses, we have to refer to the conduct of the appellant which is very much relevant for purposes of Section 16 of the Act. The respondent had referred in their claim statement before the Arbitrator dated 29.7.1997 to the disputes and differences arising under the main agreements as well as under the interior design agreements. The appellant filed its written statement dated 22.10.1997 but no objection was raised that the disputes and differences contained in the interior design agreements were not intended to be referred to the Arbitrator or that the same could not be decided by the Arbitrator appointed under the main agreement. The appellant’s counsel had cross-examined the respondents’ witnesses up to a stage and even then no such objection as to scope of reference was raised. The Arbitrator referred in his award to the sole contention of the appellant before him so far as the interior design agreements were concerned and that was that the said agreements were void inasmuch as no amount was paid at the time of the agreements (though Rs. 10 lakhs each was agreed to be paid). That was the only contention concerning these three interior design agreements. No dispute as to the power of the Arbitrator to deal with the disputes under these three agreements was raised. That means that the appellant accepted that the disputes under these agreements were also covered by the reference. In the objections to the award filed in the Court under Section 34 no such point was raised except a general ground (i) that the entire proceedings of arbitration were illegal and bad in law, null and void and that the award was liable to be set aside. In the order of the learned single Judge in para 5 it was stated that only 3 points were raised and we find that this was not one of those points argued before the learned single Judge. For the first time this point relating to the scope of the reference was raised/argued before the Division Bench and the same was rejected.(14) It will be noticed that under the Act of 1996 the arbitral tribunal is now invested with power under sub-section (1) of Section 16 to rule on its own jurisdiction including ruling on any objection with respect to the existence or validity of the arbitration agreement and for that purpose, the arbitration clause which forms part of the contract shall be treated as an agreement independent of the other terms of the contract and any decision by the arbitral tribunal that the contract is null and void shall not entail ispo jure affect the validity of the arbitration clause. This is clear from Clause (b) of Section 16(1) which states that a decision by the arbitral tribunal that the main contract is null and void shall not entail ispo jure the validity of the arbitration clause.
(15) In the present context sub-sections (2) and (3) of Section 16 are relevant. They refer to two types of pleas and stages at which they can be raised. Under sub-section (2) a plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submissions of the statement of defence, however, a party shall not be precluded from raising such a plea merely because he has appointed or participated in the appointment of an Arbitrator. Under sub-section (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. These limitations in sub-sections (2) and (3) are subject to the power given to the Arbitrator under sub-section (4) of Section 16 that the tribunal may, in either of the cases referred to in sub-section (2) or sub-section (3) admitted a later plea if it considered the delay justified. Sub-section (5) requires the arbitral tribunal to decide on the plea referred to in sub-section (2) or sub-section (3) at that stage itself. It is further provided that if either of the pleas is rejected and the arbitral tribunal holds in favour of its own jurisdiction, the tribunal will continue with the arbitral proceedings and proceed to make the arbitral award. Then comes sub-section (6) which states that the party aggrieved by such an arbitral award may make an application for setting such an arbitral award in accordance with Section 34.(21) It may be argued on one side that the time limits set in arbitration Clauses (2) and (3) of Section 16 are mandatory and do not permit the said question to be raised at a later point for time even under Section 34. An opposite view could be that these being jurisdiction issues, the fact that they were not raised earlier could not be preclude the questions being raised under Section 34 inasmuch as consent, express or implied could not confer jurisdiction.”
13. The said three judgments of the Hon’ble Supreme Court of India are relied by the learned counsel to a limited purpose of demonstrating that any tribunal or forum so chosen is intended to act judicially, after taking into account relevant evidence and submissions made by the parties before it and its decision is intended to bind the parties then it is nothing but a judicial decision, hence it is an interim award as defined in Section 2(1)(c) read with Section 31(6) of the Act as such the O.P. under Section 34 of the Act is maintainable. I do not agree with the arguments of the learned counsel for the Board. An award must determine all the differences, which the parties by their agreement referred to arbitration. An interim award must determine some part of the dispute an shall be made in the same manner as an award. The impugned order apparently does not satisfy the said requisites.
14. The general law of arbitration, either English or Indian does not prevent the Arbitrator, from deciding the questions of their own jurisdiction. If Court has taken contrary view that there was no jurisdiction, the award will not be given effect to. This power has been expressly conferred on the tribunal under Section 16 and can be set aside if it was found wrong by Court. The present provisions of Sections 16 and 34 are definitely safeguard right and liability of the party subjected to arbitration. The learned counsel appearing for the Contractor brought to my notice that in a similar circumstance, the Division Bench of the Andhra Pradesh High Court in M. Mohan Reddy vs. Union of India and others (2000 (1) Arb. LR 39), found that there is nexus for the object to be achieved and as such no discrimination at all and the relevant portion is extracted hereunder :
“Hitherto, arbitration were covered by the Indian Arbitration Act, 1940. But the same was confined for domestic arbitration. So far as foreign arbitration is concerned, two Acts namely. The Arbitration Protocol and Convention Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1960 were operated. Experience has own that the above Acts, instead of facilitating expeditious disposal of the claims, were dodged for years to come and the very purpose of arbitration failed as the object of arbitration is to settle the disputes faster avoiding the cumbersome procedure of the common law Court. In order to consolidate the law of arbitration, both domestic and foreign and also to delete several provisions like Section 34 and provisions for making the award rule of the Court etc., of the act of 1940 which proved to be obstacles in speedy disposal, the Parliament had taken cognizance of the same and also Model Law of International.
15. Commercial arbitration adopted by the United Nations Commission on International Trade Law (UNICITRAL) 1985. That being the objective of the Central Act 26 of 1996, which was preceded by an Ordinance, the interpretation given to the provisions of the Act should be to advance the object and intendment of the Act and not to thwart the same. Reading the act as a whole and particularly, the provisions combined in Sections 13, 16, 34 and 37, it leaves no doubts that where there is an arbitration clause, the party can directly invoke the arbitration and appointed an Arbitrator and at the first opportunity, the party subjected to arbitration has to state his objections, even raising the question of jurisdiction of the Arbitrator. If his apprehensions of bias are overruled as also the jurisdiction to embark, the party subjected to arbitration is provided with a remedy of seeking to set aside the award by invoking Section 34 of the Act. While the ground of bias is a ground enumerated in sub-section (5) of Section 13 for challenging the award under Section 34, the other grounds like the adverse order regarding the competence of the Arbitrator to arbitrate on the subject matter is a ground for setting aside the award in invoking Section 34, under sub-section (6) of Section 16 of the Act. It is needless to mention that party seeking arbitration and appointing Arbitrator is estopped from raising the plea of bias against the Arbitrator even at a later point of time. He is entitled to invoke the appeal remedy under Section 37(1)(a) should the Arbitrator rule against him holding that he does not have jurisdiction, upholding the plea of the party subjected to the arbitration thus, resulting in termination of arbitration proceedings. The intelligible differential stares at us in providing such an appeal at the threshold, as without deciding the competence first, it is not desirable that Arbitrator should proceed with the enquiry and once the Arbitrator rules that he has got jurisdiction to deal with the matter, the party subjected to arbitration is not left remediless, but he has to wait and invoke Section 34 for setting aside the award, if he feels aggrieved. On the other hand, if the party subjected to arbitration is given an appeal at the threshold, as is given to the party seeking arbitration, entire proceedings will be stalled and it may take years to finally decide the same because of the hierarchy of the authorities and if ultimately it is held that the Arbitrator has competence to deal with the matter, the proceedings have to restart, which will certainly entail in delay. As already stated above, Central Act 26 of 1996 has aimed at consolidating the law of arbitration, both domestic and foreign and to cut short the procedural aspects for providing speedy and efficacious remedy and not providing of appeal against ruling of the Arbitrator upholding his competence to deal with the matter is one such step in aid of faster disposal of the arbitral proceedings, and by giving opportunity to the party aggrieved to question the award under Section 34 of the Act. The only thing is that the party has to wait till the award is rendered and is not given that traditional right of interrupting the proceedings at each stage of the proceedings. As such, there is a nexus for the object to be achieved i.e. speedy disposal of the arbitration proceedings and also the intelligible differentia as already mentioned supra. Differentia as already mentioned. “The learned counsel for the contractor relied upon the decision in Union of India vs. M/s. East Coast Builders and Engineers Limited :
“(16) I have carefully considered the respective contentions of the learned counsel for parties and have gone through the provisions of the Arbitration and Conciliation Act, 1996, as well as the relevant provisions of the British Arbitration Act, 1996, the UNICITRAL Model Law and Rules and the commentary of Russell on Arbitration Act. For reasons given in the following Paragraphs, I am of the view that this petition is not maintainable as no appeal is provided under the Act against the impugned order and that the impugned order is not an interim award and thus not challengeable under Section 34 of the Act.
(17) No doubt the preamble of the Act says that it is expedient to make laws Arbitration and Conciliation taking into account the UNICITRAL Model Law and Rules but it cannot be said that each and every provision of the said Model Law and Rules forms part of the Act. Those Model Law and Rules were in fact taken into account while drafting and enacting the Act but whatever has been enacted is the law on arbitration enforceable in India. It may be a fact that the British Arbitration Act, 1996 contains a provision that if the arbitral tribunal rules on jurisdiction in its favour, the order would be an award and thus challengeable in Courts but any such provision in the British Act enacted on the lines of said Model Law and Rules cannot be binding in the country of India where the provisions of the India Act do not conform to the provisions of the British Act on the point under consideration. In my opinion, had there had been lacuna in the provisions of the Indian Arbitration Act on the point at issue or if it contained such provision which is capable of two or more different interpretations then of course internal aid of the preamble to the Act could be taken for interpreting such provisions and then the relevant provisions of the said Model Law and Rule could be read so as to interpret that provisions because while enacting the Indian Act, said Model Law and Rules were taken into account. I however, do not find any such lacuna or confusion. The provisions on the relevant point at issue is unambiguous. The scheme of the Act is in clear terms. Provisions of Section 37 appears to been consciously enacted not to provide relief of the aggrieved party at that stage of the arbitral proceedings where the arbitral tribunal decides the issue of jurisdiction in its favour. Otherwise, Section 37 of the Act would have been enacted differently. To my mind, Section 37 had been enacted in that manner only to minimize the supervisory role of Courts in the arbitral process at that stage.(18) From the scheme of the Act, it is apparent that the legislature did not provide appeal against the order under Section 16(5) where the arbitral tribunal takes a decision rejecting the plea that the arbitral tribunal has no jurisdiction. The intention appears to be that in such case, the arbitral tribunal shall continue with the arbitral proceedings and make an award without delay and without being interfered in the arbitral process at that stage by any Court in their supervisory role.”
16. I am of the view that the said two judgments relied upon by the counsel for the contractor can be made applicable to the case on hand.
17. The intention of the Parliament not to allow any party to have any recourse against the decision of the arbitral tribunal rejecting a challenge, which is clear under Article 16(5). The Parliament also left out the provisions of Articles 13(3) and 16(3) of Model Law enacted by UNICITRAL with an idea of supporting the theory of non-interference by the Courts in arbitral proceedings.
18. Under Section 37(2) an appeal is provided against the decision of the arbitral tribunal accepting the plea of not having jurisdiction made under Section 16. The said provision was added at the time of the Bill was presented before the Parliament which did not find place in the Ordinance. The Parliament, has decided not to provide any appeal or recourse against the order of arbitral tribunal rejecting the challenge to its jurisdiction.
19. The arbitral tribunal after thorough scrutiny of documentary and oral evidence let in by both the parties rejected the preliminary objection of the Board. I do not find any infirmities in the impugned order passed by the arbitral tribunal. Hence, I decide the first point against the Board. For the aforesaid reasons, the O.P. under Section 34(2) filed by the Board is not at all maintainable. Hence this point is decided against the Board. Therefore, the O.P. is liable to be dismissed. In the result, the O.P. is dismissed. No costs. It is made clear that nothing stated herein can be taken into consideration by the arbitral tribunal, when the disputes are decided on merits.