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2013 (5) TMI 375 - SC - Companies LawArbitration agreement - appellant calculated the actual extra cost incurred in completing the work and the total amount recoverable from the petitioner in terms of the contract - Whether the Chief Justice or his designate can examine the tenability of a claim, in particular whether a claim is barred by res judicata, while considering an application under section 11 of the Act? - Held that:- As decided in SBP & Co. case (2005 (10) TMI 495 - SUPREME COURT) The Chief Justice or his designate is not expected to go into the merits of the claim or examine the tenability of the claim, in an application under section 11 of the Act. The Chief Justice or his Designate may however choose to decide whether the claim is a dead (long-barred) claim or whether the parties have, by recording satisfaction, exhausted all rights, obligations and remedies under the contract, so that neither the contract nor the arbitration agreement survived. When it is said that the Chief Justice or his Designate may choose to decide whether the claim is a dead claim, it is implied that he will do so only when the claim is evidently and patently a long time barred claim and there is no need for any detailed consideration of evidence. The question whether a claim is barred by res judicata, does not arise for consideration in a proceedings under section 11 of the Act. Such an issue will have to be examined by the arbitral tribunal. A decision on res judicata requires consideration of the pleadings as also the claims/issues/points and the award in the first round of arbitration, in juxtaposition with the pleadings and the issues/points/claims in the second arbitration. The limited scope of section 11 of the Act does not permit such examination of the maintainability or tenability of a claim either on facts or in law. Thus the Designate has clearly exceeded his limited jurisdiction under section 11 by deciding that the claim for extra cost, though covered by the arbitration agreement was barred by limitation and by the principle of res judiata. He was also not justified in terming the application under section 11 of the Act as ‘misconceived and malafide’. Nor could he attribute ‘mala fides’ to the appellant, a public sector company, in filing an application under section 11 of the Act, without any material to substantiate it. The Designate should have avoided the risks and dangers involved in deciding an issue relating to the tenability of the claim without necessary pleadings and documents, in a proceeding relating to the limited issue of appointing an Arbitrator. It is clear that the Designate committed a jurisdictional error in dismissing the application filed by the appellant under section 11 of the Act, on the ground that the claim for extra cost was barred by res judicata and by limitation. Consideration of an application under section 11 of the Act, does not extend to consideration of the merits of the claim or the chances of success of the claim - appeal is allowed and the order of the Designate is set aside.
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