ESCORTS LIMITED Vs. KNORR BREMSE-AG

JUDGEMENT

(1.) THIS petition has been preferred under Section 37 (2) (a) of The Arbitration and Conciliation Act, 1996 against an order under Section 16 (2) (3) of The Arbitration and Conciliation Act, passed by the Arbitral Tribunal by majority whereby it refused to consider the counter claim of the petitioner during the arbitration proceedings before the Tribunal. The Tribunal by majority held that it had to confine itself to the authority vested in it by the agreement of the parties as can be culled out from the correspondence exchanged between the parties referred in the order. Since, the Arbitral Tribunal was constituted to adjudicate the disputes which were the subject matter of proceedings pending before the Delhi High Court, It could not confer upon itself any other jurisdiction and therefore could not entertain the counter claim raised by the petitioner.

(2.) THE petitioner and respondent had entered into a license agreement under which the petitioner was given license to manufacture brakes for rail and road vehicles. The license agreement was entered into in 1977, it was amended on 9th January, 1987 and with the approval of Government of India vide its letter No. FC II 631 (9)) dated 13/12/1991, the validity of license agreement was extended upto 31st December, 1995. No dispute arose between the parties after expiry of the agreement till the year 2001. On 28th November, 2002 respondent served a legal notice upon the petitioner alleging violation of Article 1 (3) of the license agreement. There was an arbitration clause under Article XI (4) of the license agreement which provided that any dispute, difference or claim arising out of or in relation to the license agreement between the parties shall be referred to the Indo-German Chamber of Commerce at Bombay for settlement under the arbitration rules then in force. Respondent invoked the arbitration clause and forwarded a statement of case to the Indo-German Chamber of Commerce. The petitioner sent its reply taking several pleas. Respondent thereafter moved a petition under Section 9 of Arbitration and Conciliation Act before this Court seeking a restraint orders against the petitioner and its employees. The said petition was heard by Single Bench of this Court, who vide its order dated 1. 9. 2003 declined to grant an injunction but directed the petitioner to furnish an undertaking in favour of the respondent that the petitioner will pay any amount (s) that will ultimately be found liable in terms of the agreement to the respondent. An appeal was preferred against the order of Single Bench before the Division Bench. The parties simultaneously took steps for constitution of Arbitral Tribunal. The FAO came for hearing before the Division Bench on 24th September, 2003. The petitioner had entered a caveat and put appearance before the Bench and accepted notice. The matter was adjourned to 1st October, 2003 to enable the counsel for petitioner to obtain instructions. In the meantime, the respondent had sent a letter to the petitioner proposing three names for concurrence of petitioner for appointment as sole arbitrator. The petitioner responded that Arbitral Tribunal be constituted where one arbitrator be appointed by the petitioner, one by the respondent and the two arbitrators may appoint a third arbitrator as Presiding Arbitrator. This proposal was accepted and the matter between the parties was referred to the Arbitral Tribunal for settlement. On 14th October, 2003 when the matter came up before the Division Bench, the Court observed that since the parties had taken steps to appoint the Arbitral Tribunal during the pendency of the appeal, there was no necessity of examining the validity of order of Single Bench, the liberty was given to the respondent to approach the Tribunal for appropriate relief and the appeal was disposed of.

(3.) BEFORE the Arbitral Tribunal, respondent filed its claim and the petitioner filed counter claim. Vide impugned order, the Arbitral Tribunal by majority refused to entertain the counter claim filed by the petitioner, hence this petition.