w w w . L a w y e r S e r v i c e s . i n



M/s. Nizam Sugars Limited v/s Prem Heavy Engineering Works Private Limited & Another

    C.M.A.No.423 of 2008 & C.R.P.(SR) No.18005 of 2012

    Decided On, 03 June 2013

    At, High Court of Andhra Pradesh

    By, THE HONOURABLE MR. JUSTICE L. NARASIMHA REDDY & THE HONOURABLE MR. JUSTICE S.V. BHATT

    For the Appellant: N. Vasudeva Reddy, Advocate. For the Respondents: R1, Damodar Mundra, Advocate.



Judgment Text

Common Judgment: (L. Narasimha Reddy, J.)

The C.M.A. and C.R.P. are between the same parties. They arise out of an award passed by an Arbitrator i.e. the 2nd respondent, for resolution of a dispute between the appellant and the 1st respondent.

For the sake of convenience, the parties herein are referred to as arrayed in the C.M.A.

The appellant is a State owned company, which was incorporated during the regime of Nizam. The appellant established several sugar factories in various parts of the State. It wanted to erect a unit in one of its sugar factories. The contract for that work was awarded in favour of the 1st respondent under an agreement, dated 10.01.1978. In terms of the agreement, the unit was supposed to be erected and commissioned by 01.03.1979. However, it was commissioned only on 26.03.1981. Disputes arose between the parties and as provided for under the agreement, they were referred to the 2nd respondent for arbitration.

The appellant submitted a claim for a sum of Rs.24,42,016.17 ps. The 1st respondent opposed the claim of the appellant, even while admitting part of it. In addition to that, it submitted a counter claim, for Rs.9,51,267/-.

The 2nd respondent passed an award, dated 28.03.1992. The claim of the appellant was allowed to the extent of Rs.8,36,091.03 ps. He proceeded further to award a sum of Rs.15,46,671.61 ps., towards counter claim. Ultimately, the 2nd respondent directed the appellant to pay a sum of Rs.7,10,480.58 ps., being the difference of the amounts awarded in the claim and counter claim.

The appellant filed O.S.No.370 of 1992 in the Court of XI Additional Senior Civil Judge, (Fast Track Court), City Civil Court, Hyderabad, under Sections 14 and 17 of the Arbitration Act, 1940 (for short ‘the Act’), with a prayer to make the award passed by the 2nd respondent, to the extent it is in favour of the appellant, as rule of the Court. It has also filed O.P.No.144 of 1992 in the same Court, under Sections 30 and 33 of the Act, with a prayer to set aside the award to the extent it is made in favour of the 1st respondent. Through its judgment, dated 23.01.2006, the trial Court passed a decree in O.S.No.370 of 1992, directing that the award in its entirety, be made the rule of the Court. Interest at the rate of 12% per annum from 01.01.1984, till the date of recovery was ordered. C.R.P.(sr)No.18005 of 2012 is filed against the judgment and decree in O.S.No.370 of 1992.

Through an order passed on the same day, i.e. 23.01.2006, the trial Court dismissed O.P.No.144 of 1992. C.M.A.No.423 of 2008 is filed against the same.

Sri N.Vasudeva Reddy, learned counsel for the appellant, submits that the trail Court committed a serious error, in the context of moulding the relief and drawing the decree. He contends that the award is in two parts, dealing with the claim of the appellant, on the one hand, and the counter claim of the 1st respondent, on the other hand, and in O.S.No.287 of 1992 on the file of the V Senior Civil Judge, City Civil Court, Hyderabad, filed by the 1st respondent, for making the award, to the extent it is in its favour, as rule of a Court, was dismissed, and the only left over enforceable part of the award was the one, in relation to the claim made by the appellant. He submits that in stead of decreeing O.S.No.390 of 1992, as prayed for, or rejecting it, the trial Court passed the decree directing that the entire award be made as rule of the Court.

Learned counsel further submits that once O.S.No.287 of 1992 filed by the 1st respondent was dismissed, O.P.No.144 of 1992 filed by the appellant to set aside the award in relation to the counter claim, ought to have been allowed. He contends that just as a suit cannot be decreed granting a relief, over and above what is prayed for, no relief can be granted in a counter claim which is larger than what was claimed in it. He submits that the counter claim made by the 1st respondent was for a sum of Rs.9,51,267/-, whereas the 2nd respondent awarded a sum of Rs.15,46,671/- towards it.

Sri Damodar Mundra, learned counsel for the 1st respondent, on the other hand, submits that it was not competent or open for the appellant to file a suit under Sections 14 and 17 of the Act in respect of part of the award. According to him, the relief can be claimed under that provision in respect of the entire award.

As regards the relief granted in favour of his client in the counter claim, learned counsel submits that an annexure was enclosed to the counter claim giving the details of various items, and though his client was entitled to claim a sum of Rs.15,46,671/-, the figure of Rs.9,51,267/- was mentioned in the counter claim, after giving credit to a sum of Rs.7 lakhs and odd, covered by an item in his claim, which his client has admitted. He contends that the scope of interference with an award passed by the Arbitrator is very limited and the appeal and revision deserve to be dismissed.

The dispute between the appellant and the 1st respondent in relation to construction or installation of a unit, in one of the factories owned by the appellant, was referred to the 2nd respondent for arbitration in terms of a clause in the agreement. As mentioned in the preceding paragraphs, the appellant submitted a claim statement before the 2nd respondent, under different heads. The 1st respondent submitted a reply to the claim made by the appellant. They admitted the claim to the extent of about Rs.7 lakhs. In addition to disputing the remaining claim made by the appellant, the respondent made a counter claim for Rs.9,51,267/- with interest at 21% per annum. Details of claims as well as counter claim were furnished in separate statements.

The Arbitrator has undertaken a detailed examination of the claims and counter claims. On behalf of the appellant, 68 documents were filed and on behalf of the 1st respondent, 128 documents were filed. Taking the material before him into account and after hearing the arguments of both the parties, the 2nd respondent passed an award, dated 09.03.1992. The claim of the appellant was allowed to the extent of Rs.8,36,091/-. It has also awarded a sum of Rs.15,46,671/- to the 1st respondent towards counter claim.

After hearing the learned counsel for the parties and on perusal of record, we find that the following issues arise for consideration:

a) Whether an arbitrator can award more amount, than what is claimed before him?

b) Whether a civil Court can travel beyond the scope of the prayer in the suit and grant relief to the defendant, which the latter was denied in another suit filed by him?

Point (a):

Since the proceedings are governed by the provisions of the Act, the appellant, on the one hand, and the 1st respondent, on the other hand, filed separate suits, being O.S.No.370 of 1992 on the file of the XI Additional Senior Civil Judge, (Fast Track Court), City Civil Court, Hyderabad, and O.S.No.287 of 1992 on the file of the V Senior Civil Judge, City Civil Court, Hyderabad, respectively, with a prayer to make the respective portions of the award, as rule of the Court. To be precise, the appellant wanted the award for Rs.8,36,091/-, partly allowing its claim as rule of Court. Simultaneously, it has also filed O.P.No.144 of 1992 to set aside the award in so far as it has allowed a sum of Rs.15,46,671/- towards counter claim. The 1st respondent, on the other hand, filed O.S.No.287 of 1992 with a prayer to make the award in so far as it has granted Rs.15,46,671/- on the counter claim as the rule of the Court. However, no appeal was filed by it for setting aside the award in so far as it granted the relief. The record discloses that O.S.No.287 of 1992 was dismissed and no appeal was preferred against it. The reason for the 1st respondent in not filing an appeal to set aside the award, which is against it, appears that, at the concluding para, the Arbitrator directed that the appellant shall pay a sum of Rs.7,10,480/-, being the difference of the respective amounts awarded in favour of the parties. However, the failure on the part of the 1st respondent to challenge the award made in favour of the appellant, leads to the conclusion that it has tacitly acknowledged the entitlement of the appellant to recover a sum of Rs.8,36,091/-.

Now, it needs to be seen as to whether the 2nd respondent was justified in awarding a sum of Rs.15,46,671/- in favour of the 1st respondent towards counter claim.

For all practical purposes, the claim petition before the Arbitrator needs to be treated as plaint, and the counter of the 1st respondent as written statement. The claim petition, together with its annexures contained various items of claims made by the appellant. In their reply, the 1st respondent dealt with each claim and disputed the same. It is thereafter, that a counter claim was made for a sum of Rs.9,51,267/-.

Across the Bar, it is stated on behalf of the 1st respondent that annexure-B was enclosed to the counter claim furnishing various items that are to be paid by the parties to each other and if the same is taken into account, the counter claim would be Rs.15,46,671/-. It is also stated that the 1st respondent admitted that it is liable to pay a sum of about Rs.7 lakhs covered by an item in the claim petition, to the 1st respondent, and it is after giving credit to that amount that the counter claim was made at Rs.9,51,267/-. It is on this basis, that he wants to justify and sustain the award of Rs.15,46,671/-, towards counter claim.

It is too well known that the counter claim, is, in a way, logical or legal extension of set off, provided for under Rule 6 of Order VIII C.P.C. In a suit for recovery of money, a defendant can take the plea that though he is liable to pay the amount to the plaintiff, the latter owes some amount to him and that the same be adjusted towards the suit claim, in its entirety or in part. For this purpose, the defendant would not be under obligation to pay the Court fee. However, the Courts and Legislatures were faced with the situation where the claim made by the defendant against the plaintiff exceeded the one claimed in the suit. It is to meet situations of this nature, that the concept of ‘counter claim’ was introduced in the year 1977 by inserting Rules 6-A to 6-G in Order VIII C.P.C.

For all practical purposes, the counter claim resembles an independent suit, be it in the context of limitation, payment of Court fee and the like. The counter claim can be made even while acknowledging any part of the suit or by totally denying it. The Court is under obligation to deal with the suit as well as counter claim simultaneously and just as a plaintiff has to discharge the burden to prove the suit claim, the defendant has to prove his counter claim through independent evidence. Every principle that applies to adjudication of suits, applies to the counter claim also.

Howsoever convincing and foolproof, the evidence adduced by a plaintiff may be, he cannot get any relief in the suit, beyond what is claimed by him. Take for instance, a suit filed for recovery of a sum of Rs.1,00,000/-, and the evidence on record therein discloses that the plaintiff is entitled to recover a sum of Rs.1,75,000/- from the defendant. Even if the Court is convinced that the defendant is liable to pay a sum of Rs.1,75,000/- to the plaintiff, it cannot pass a decree for an amount exceeding Rs.1 lakh. This becomes inevitable, firstly from the point of view of the nature of relief claimed in the suit, secondly, from the point of view of the Court fee, and thirdly, from that of limitation. Even while being conscious of the fact that the plaintiff was entitled to recover a sum of Rs.1,75,000/- from the defendant, if the plaintiff filed the suit only for one lakh, he is deemed to have waived or given up the remaining part of the claim. There may also be instances where the plaintiff may seek amendment of the suit, if, in the course of trial, it emerges that he is entitled to get more than what was claimed in the suit. For this purpose, he has to satisfy the Court, on the point of limitation, and must pay the Court fee. Same principles apply to the counter claim. Viewed from this angle, when the 1st respondent has submitted a counter claim for a sum of Rs.9,51,267.50 ps., there was absolutely no occasion or basis for the Arbitrator, to award Rs.15,46,671.61 ps.

The attempt made by the learned counsel for the 1st respondent to sustain this by making reference to annexure–B appended to the counter claim is indeed, feeble. Even according to him, there was admission on the part of his client that a sum of Rs.7,10,480/- is payable to the appellant against, one of the items, in the claim. If that is so, the admission would enable the Arbitrator to mould the relief in relation to the claim made before him by the appellant. A perusal of the award, in fact, discloses that the admission made on behalf of the 1st respondent was taken into account, while determining the amount payable to the appellant. Once that was done, the question of its being considered while determining the counter claim, does not arise. The claim in a suit, on the one hand, and the one under a counter claim, on the other hand, need to be dealt with independently, and one cannot overlap the other.

Therefore, we hold that the award passed by the 2nd respondent in so far as it has awarded Rs.15,46,671.61 ps., towards counter claim, made by the 1st respondent is untenable and the maximum that could have been awarded was Rs.9,51,267.50 ps., the amount specified in the counter claim.

Point (b):

The appellant filed the suit with a prayer to make that part of the award which is in his favour, viz., the one awarding a sum of Rs.8,36,091/-, as rule of the Court. In the judgment of the trial Court, an observation was made to the effect that the prayer in the suit is somewhat peculiar and the reliefs under Sections 14 and 17 of the Act, cannot be claimed in respect of part of the award. Even if that were to be the correct principle, the suit as a whole, ought to have been dismissed, or the appellant ought to have been given an opportunity to amend the prayer in the suit. However, the trial Court proceeded to pass a decree making the entire award as rule of the Court. The view taken by the trial Court cannot be sustained.

Assuming that the trial Court is conferred with a power to pass such a decree, in the facts of the present case it was untenable. The reason was that O.S.No.287 of 1992 filed by the 1st respondent with a prayer to make the award to the extent in its favour as a rule of Court, was dismissed. No appeal was preferred against it. The decree therein operates as res judicata and the power of the Co

Please Login To View The Full Judgment!

urt to make that part of the award as rule of Court, stands eclipsed. Obviously, realizing that it has no decree in its favour, the 1st respondent filed the E.P., for execution of the decree passed in O.S.No.370 of 1992, which is filed by the appellant herein. The Executing Court took the award as rule of the Court, and accordingly, sought to recover the balance amount of Rs.7,10,480/-, with interest from the appellant. That necessitated the appellant to file C.R.P. at a belated stage, though it has filed C.M.A. against the order in O.P. in the right earnest. Once the entitlement of the 1st respondent in its counter claim is restricted, to the amount mentioned therein, the award needs to be modified. If so done, the award in favour of the appellant, in relation to its claim would be Rs.8,36,091.03 ps., whereas the award in favour of the 1st respondent vis--vis its counter claim shall be Rs.9,51,267/-. The 1st respondent shall be entitled to be paid the differential amount i.e. Rs.1,15,176.47 ps. The rate of interest awarded by the trial Court is excessive, and we reduce it to 9%, per annum. Hence, we partly allow the C.M.A. and C.R.P., directing that the appellant shall be liable to pay a sum of Rs.1,15,176.47 ps., to the 1st respondent with interest at 9% per annum from 01.01.1984, till the date of realization. The amount, if any, deposited by the appellant at any stage of the proceedings, towards payment of the amount under the award or decree, shall be taken into account. There shall be no order as to costs. The miscellaneous petitions filed in this appeal and revision shall also stand disposed of.
O R