UNION OF INDIA v. HIND BUILDERS — 1984 DIGILAW 402 (CAL)

PRATIBHA BONNERJEA, J. ( 1 ) IN the present case, the reference was started under an order of Court made on 6th May 1983 in Special Suit No. 77 of 1983 instituted by the M/s. Hind Builders under S. 20 of the Arbitration Act. The Union of India duly filed its affidavit-in-opposition in the said special suit and contested the said proceeding. Thereafter the parties prosecuted the arbitration proceeding and an award was made in favour of Hind Builders on 26-3-1984. In this application, the Union of India has prayed for setting aside the said award on several grounds mentioned in the petition. ( 2 ) DURING hearing, the petitioner's counsel, however, pressed five grounds only which are as follows:-1. The order of reference D/-6-5-1983 was made without jurisdiction. Hence the reference was bad and the award is non est. 2. In the course of the arbitration proceeding it was agreed between the parties that the final measurement accepted by the parties would form the basis of the adjudication by the Arbitrators. The Joint Arbitrators misconducted themselves in not proceeding on the basis of the said agreed measurements. 3. At the arbitrators" meeting on 2-3-1984, the petitioner had prayed for time to adduce evidence against respondents" claim for additional works. The Arbitrators refused the said prayer and did not record the same in the minutes of the meeting. At the next sitting on 7-3-1984, the petitioner made a formal application for time to adduce evidence. It is alleged that the representatives of the petitioner, who attended the meeting on 7-3-1984 were led to believe by the Arbitrators that the joint arbitrators would not entertain the respondents" claim for additional work and as such the said representatives gave a declaration that the petitioner had completed its submissions. But the arbitrators entertained the said claims and misconducted themselves. 4. The Arbitrators awarded general damages for breach of contract twice and this error appears on the face of the award. 5. The arbitrators misconducted themselves in awarding interest in the manner mentioned in the award. ( 3 ) THE counsel for the petitioner submits that under clause 62 of the contract, the respondent was bound to refer all the disputes first to the Railway for decision. 5. The arbitrators misconducted themselves in awarding interest in the manner mentioned in the award. ( 3 ) THE counsel for the petitioner submits that under clause 62 of the contract, the respondent was bound to refer all the disputes first to the Railway for decision. If the Railway would fail to give decision within a reasonable time, or the respondent was dissatisfied with the decision, then and then only it could invoke the arbitration clause and not otherwise. This was a condition precedent which ought to have been fulfilled before a reference could be made. In the present case the respondent did not refer the disputes to the Railway before making the application under S. 20 of the Act. The condition precedent not being fulfilled, the respondent was not entitled to enforce the arbitration clause on the date of the application. Under the circumstances, the Court also did not have the jurisdiction to pass the order D/-6th May 1983. The reference was therefore bad and the award null and void. In support of his contention, the counsel for the petitioner relies on AIR 1945 Oudh 1 at p. 3 (Sher Bahadur Singh v. Ram Narain Singh ). The facts of that case were that a civil court, after passing a decree in a partition suit, entertained an application for referring the disputes to arbitration in suit. There was an order for reference and an award was made. The award was challenged on the ground that the reference was without jurisdiction because the application for arbitration was not made in any pending suit. It was held that the reference was without jurisdiction as the court, after the decree was passed, entertained the application and started the reference. The respondents" counsel submits that the facts of that case were entirely different from the facts of the present Special Suit No. 77 of 1983 and as such this case has no application. In that case due to the passing of the partition decree, the court lost jurisdiction to entertain the application for reference. But in this case the condition precedent mentioned above, is nothing but one of the terms of the contract for the benefit of the petitioner and as such it must be treated as waived by the petitioner as it did not take this point while contesting the Special Suit No. 77 of 1983. But in this case the condition precedent mentioned above, is nothing but one of the terms of the contract for the benefit of the petitioner and as such it must be treated as waived by the petitioner as it did not take this point while contesting the Special Suit No. 77 of 1983. The petitioner had waived its known right available under the contract by not challenging the said order and by contesting the said reference without any objection. The petitioner is, therefore, debarred from agitating this ground on the principle of waiver. According to the petitioner's counsel the point raised is a question of lack of jurisdiction and as such the principle of waiver or res judicata will not apply. The respondents" counsel on the other hand submits that even the question of jurisdiction can be res judicata. He relies on 58 Ind App 381 at pages 390-391, (Louis Dreyfus and Co. v. Arunachala Ayya ). In this case, an award made by an umpire was set aside. There was an appeal and by an order D/-20-7-1922, the appeal court upheld the order of the trial court for setting aside the award and remitted the matter back to the Umpire. An appeal to the Privy Council from the order D/-20-7-1922 was dismissed due to default. The umpire thereafter made the award which was again challenged. In the petition it was alleged inter alia that the agreement of arbitration was made by a person without having any authority, to do so and as such the petitioner was not bound by the said arbitration agreement and the whole proceeding was bad. The Umpire had no jurisdiction to make the award. On these facts it was held at p. 391 (of IA.) :-". . . . . . . . . . . . THEIR Lordships, are of opinion that the question of the Umpire's jurisdiction is res judicata between the parties under order D/-20-7-1922, the appeal from which to His Majesty in Council was dismissed and the matter was remitted to the Umpire. This could have been done only upon the footing that the respondent was bound by a submission to arbitration. " ( 4 ) ACCORDING to the respondents" counsel the order D/-6-5-1983 is binding on the petitioner and the question of jurisdiction cannot be agitated at this stage. This could have been done only upon the footing that the respondent was bound by a submission to arbitration. " ( 4 ) ACCORDING to the respondents" counsel the order D/-6-5-1983 is binding on the petitioner and the question of jurisdiction cannot be agitated at this stage. I accept the submission of the respondents" counsel and hold that this point is hit by the principle of waiver as well as by the principle of constructive res judicata due to the order D/-6-5-1983. AIR 1963 Cal 140 (Sree Bajrang Jute Mills Ltd. v. Fulchand Kanhaiyalal Co.) is another authority on this point. ( 5 ) THE next point raised by the petitioner is that there was an agreement arrived at between the parties in course of the arbitration proceeding that the adjudication by the arbitrators would be on the basis of the agreed measurements. The respondents" counsel invites my attention to the minutes of the meetings of the arbitration and submits that there was no agreement between the parties as alleged by the petitioner. It appears from the minutes of 23-2-1984 (annexure "c") that the petitioner produced certain documents before the arbitrators relating to the works done by the respondents. A statement of quantity of work executed was submitted in that connection which contained a remark "subjected to checking". The Arbitrators thereupon, directed the parties to submit the result of the checking at the next sitting. At the next meeting on 2-3-1984, these items were discussed. The arbitrators directed the petitioner to submit a detailed description of certain items of works done by the respondents. The next meeting was held by the arbitrators on 7-3-1984. The petitioner produced the purported details of works done, but that document also contained the endorsement "subjected to checking". The petitioner's counsel submits that the remark in the detailed quantity of work "subjected to checking" proved that the document was already checked up. The respondent's counsel invites my attention to the statement of quantities submitted by the petitioner before the arbitrators on 23-2-1984 which also contained the similar remark "subjected to checking". The respondent's counsel submits that the remark "subjected to checking" does not mean that the document had been checked up as submitted by the petitioner's counsel. The document produced by the petitioner before the arbitrators on 23-2-1984 also contained the same remark. The respondent's counsel submits that the remark "subjected to checking" does not mean that the document had been checked up as submitted by the petitioner's counsel. The document produced by the petitioner before the arbitrators on 23-2-1984 also contained the same remark. In spite of that the arbitrators directed the document to be checked up. At that time it was not contended by the petitioner that the document had already been verified and that was why the remark "subjected to checking" was written on it. On the contrary the document was checked up, discussions were held and further details were asked for by the arbitrators. I have carefully scrutinised the two documents submitted before the arbitrators by the petitioner on 23-2-1984 and 7-3-1984 and have found that both of them contained the same remark "subjected to checking". In this view of the matter, it is not possible for me to accept the submission of the petitioner's counsel that this statement of quantity submitted on 7-3-1984 was checked up previously. I asked the petitioner's counsel to have this point clarified from the representatives of the petitioner present in Court. On instruction, the petitioner's counsel submitted that the said remark actually meant "subject to checking". The person responsible for preparing these documents is in the habit of writing "subjected to checking" in place of "subject to checking". This clarified the position. As the statement of quantity remained unchecked, there was no question of any accepted or agreed measurements. In the premises, the question of agreement as alleged by the petitioner did not arise and must be rejected. ( 6 ) REGARDING the 3rd point that the petitioner wanted time on 2-3-1984 to adduce evidence against respondent's claim for additional works but the arbitrators did not allow the same, the records only show that at the meeting on 7-3-1984, a letter was produced by the petitioner praying for time but the same was not pressed. If the petitioner wanted to adduce evidence on 2-3-1984 as alleged, then it could easily come ready with all evidences on 7-3-1984 and the evidence could easily be adduced on the last date. The petitioner is absolutely silent on the point as to whether the petitioner was ready with its witnesses etc. at the last meeting on 7-3-1984 or not. I find that at the last meeting, the petitioner was represented by three persons. The petitioner is absolutely silent on the point as to whether the petitioner was ready with its witnesses etc. at the last meeting on 7-3-1984 or not. I find that at the last meeting, the petitioner was represented by three persons. I also find that the parties gave a joint declaration before the Arbitrators that they had been given full opportunity to place their respective cases. This declaration was signed by Mr. L. M. Chakraborty, the Executive Engineer of the petitioner present on that date. It is alleged in the petition that this declaration was given as the Arbitrators by their conduct, induced them to believe that the respondents" claim for additional work would be rejected. The said allegations have been made by one Debdas Banerjee, the Deputy Chief Engineer of the petitioner, who never attended any of the meetings of the arbitration. It is surprising to note that none of the three persons who attended the last meeting, came forward to say on oath that they were misled like that by the arbitrators. On the contrary, Debdas Banerjee, came forward and verified these allegations as true to his knowledge. It is a matter of regret that a high ranking officer of the petitioner has made these representations to court without having any personal knowledge in this matter. He ought to have realised that his conduct was unbecoming of a high official like him. If, however, he had heard about these allegations from one of the officers present on that date, then it would be hearsay evidence and absolutely inadmissible. The court cannot act on this evidence. No explanation has been given in the petition as to why none of the officers present at the meeting on 7-3-1984 came forward to verify this affidavit. The charge brought against the arbitrators is a serious one. It is also significant to note that even when I allowed the parties to file supplementary affidavits none of the three officers came forward to say on oath that they were misled by the arbitrators. In that view of the matter, no reliance can be placed on Debdas Banerjee's statements in the petition. In this connection, I must record that the habit of making frivolous allegations in the petition falsely verified as true to knowledge is increasing alarmingly. Invariably long arguments are made on the basis of such reckless allegations. In that view of the matter, no reliance can be placed on Debdas Banerjee's statements in the petition. In this connection, I must record that the habit of making frivolous allegations in the petition falsely verified as true to knowledge is increasing alarmingly. Invariably long arguments are made on the basis of such reckless allegations. This is another form of abuse of the process of court and I record my strong disapproval in respect to the same. It is expected that the members of this profession should be careful about these matters. ( 7 ) THE fourth point urged by the petitioner's counsel is that the arbitrators wrongly awarded general damages for breach of contract twice. According to the petitioner's counsel in case of breach of works contract, the measure of general damages should be the loss of profit being the natural consequence of the breach. The respondent in this case entered into a works contract for piling, earth work and some construction works. By cancelling this contract, the petitioner prevented the respondent from earning the profit which it could have earned by completing the works. The loss suffered by the respondent must be measured on the basis of the loss of profit. Therefore, the loss of profit would be the measure of general damages in this case. The arbitrators in their award, specifically mentioned each item of claim on which the damages have been awarded. I find that they awarded damages of Rs. 5,20,000/- for breach of contract and Rs. 5,00,000/- for loss of profit. I accept the contention of the petitioner's counsel that the arbitrators had awarded the general damages twice and this error appears on the face of the award. But I find that the award of Rs. 5,20,000/- is severable from the rest of the award and does not affect the rest of the award in any way. ( 8 ) THE last point taken by the petitioner is that the arbitrators misconducted themselves by granting interest for the period prior to the date of reference without having any evidence in support for the same. The arbitrators could allow such interest only if there was an agreement between the parties to that effect or such interest had been claimed by the respondents under the Interest Act. The arbitrators could allow such interest only if there was an agreement between the parties to that effect or such interest had been claimed by the respondents under the Interest Act. There was no evidence on record to that effect and as such the awarding of interest for the period prior to the reference was bad in law. The arbitrators, however, had the jurisdiction to award interest from the date of the reference to the date of the award at the rate of 11% per annum on the principal sum awarded. The period prior to the reference for which interest was awarded is severable and if separated, will not affect the rest of the award. ( 9 ) IN the premises, the principal sum awarded stands reduced by Rs. 5,20,000/- as mentioned above. The respondents will be entitled to interest at the rate of 11% per annum from the date of the reference to the date of the award. ( 10 ) EACH party to pay and bear its own cost of this application. Order accordingly.