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1997 DIGILAW 1077 (RAJ)

K. C. CHHIBBAR & COMPANY PVT. LTD. v. UNION INDIA

1997-09-04

ARUN MADAN

body1997
JUDGMENT Arun Madan, J. - This revision petition has been filed against the order dated 2-6-1995 passed by the learned Additional District Judge, Gangapur City in Civil miscellaneous application (Arbitration) No. 17 of 1995 whereby the relief sought by the applicant in the said application was declined by the Trial Court. 2. The facts which are relevant for deciding the controversy between the parties briefly stated are that the petitioner is a registered company of Contractors engaged in the execution of construction contracts and in terms of the agreement, dated 5-10-1984 executed with Union of India thought the Secretary, Ministry of Urban Development Nirman Bhawan, New Delhi, respondent No. 1, had commenced the construction of a grain Godown at Sawaimadhopur having the capacity of 30000 metric tonne pursuant to the acceptance of its tender by the respondents, the petitioner had undertaken the aforesaid work w.e.f. 5-10-1994 and the said project was to be completed within the stipulated period of 12 months, the time being the essence of the agreement. The petitioner had started the work within the stipulated time but due to the conditions which were required to be fulfilled by non-petitioner No. 1, and which were either not fulfilled or fulfilled in a placemeal manner, the construction work was hampered and as result thereof the aforesaid agreement was terminated by the Respondents on 11-9-1985, and disputes arose between the parties. 3. Thereafter in accordance within the agreement, a notice was served on the Chief Engineer, C.P.W.D. by the petitioner company for appointment of the Arbitrator but since the Arbitrator was not appointed, an application was filed by the petitioner company before the Addl. District Judge, Gangapur city under Sections 11, 12 and 20 of the Indian Arbitration Act, 1940 (for short "the Act") against the respondents on 16-11-1984 for appointment of another Arbitrator with a prayer that non-petitioner No. 2 the erstwhile Arbitrator appointed by the Court be removed and another independent person though retired from the same department and who has been higher in rank than the said Arbitrator, be appointed by the Court with a decision to enter upon the reference and proceed with the hearing of the matter and make and publish his award in accordance with the Rules. It was further contended by the petitioner before the Trial Court that since non-petitioner No. 2 Shri S. S. Juneja had failed to use of the reasonable despatch in the proceedings with reference to making of award and since he had mis-conducted himself and the proceedings some other Arbitrator be appointed in his placed. 4. The aforesaid matter was subsequently transferred by the learned District Judge, Sawaimadhopur to the Court of Addl. District Judge, Gangapur city who finally heard and decided the same vide impugned order dated 2-6-1995. 5. Serious objections were raised by the learned Counsel for the petitioner before the Trial Court regarding the functioning of the respondents No. 2 as an Arbitrator on the grounds that though the said Arbitrator had entered upon the reference w.e.f. 25-7-1991 but he had not proceeded with the matter which resulted in inordinate delay of nearly two and half years. He had further neither made nor published the award within the statutory period of four months, thereby resulting in inordinate delay and injustice to the petitioner. It was further contended by the petitioner before the Trial Court in reply to the objections advanced by the respondents that not withstanding the illness of the stenographer of the said Arbitrator, this itself could not be ground for inordinate delay caused in the matter, since he had made and published several awards during the aforesaid period and copies of the some of award were also produced before the said Court by way of corroborative evidence in this regard. The said awards were made and published by Arbitrator (non-petitioner No. 2) during the period 7-7-1994 to 22-11-1994. 6. In rebuttal to the petitioner's case the respondents had raised objections before the Trial Court to the effect that it has been the consistent habit and practice of the petitioner always to move the application for change or Arbitrators whenever a particular Arbitrator was appointed by the Court and it is for this reason that the delay had occurred in completion of the proceedings. The Trial Court after examining the rival claims and contentions of the parties and also after discussing the relevant law on the subject came to the conclusion that earlier also three Arbitrators were appointed and none of them could conclude the proceedings for one reason or the other and which had resulted in inordinate delay in conducting the arbitration proceedings and as a result of which the same could not be concluded within the stipulated period. The learned Trial Court finally came to the conclusion that since the reasons for the delay in view of the objections advanced by the petitioner could not be attributed to the Arbitrator on account of which misconduct was attributed to him nor it could be said that the said Arbitrator had ever refused to act as an Arbitrator but the circumstances on account of which he could not conclude the proceedings within the statutory period was on account of illness of his stenographer and hence it could not be said that he had committed any misconduct and as a result of which the award could not be made and published by the said Arbitrator and hence it would not be proper to appoint another Arbitrator in place of Shri S. S. Juneja-non-petitioner No. 2, consequently the learned Trial Court declined to grant any relief to the petitioner and rejected the same vide impugned order dated 2-6-1995. It is under these circumstances that the aforesaid Revision Petition has come up before this Court and which has been heard at length and is now being finally disposed of by this order. This contract which is a subject matter of dispute between the parties to the proceedings was on the basis of the tenders which were advertised by the C.P.W.D., New Delhi for construction of grain godown of the capacity of thirty thousand metric tone at Sawaimadhopur and the petitioner had undertake the said task and had tried to complete the same within the stipulated period but which could not be completed in view of the aforesaid circumstances. During the subsistence of the contract in view of the disputes having arisen between the parties non-petitioner No. 1 had alleged violation of some terms and conditions of the contract and since despite service of the notice by the petitioner requesting the respondents to change the Arbitrator earlier appointed by them i.e. non-petitioner No. 2, the petitioner was constrained to move to the Trial Court for appointment of another Arbitrator on 10-3-1986. The respondents had committed inordinate delay in compliance of the directions of the Court for 5-6 years and it was only in the year 1991 that the first Arbitrator was appointed and during the intervening period of 1986-91 atleast four Arbitrators were appointed by the respondents who had all refused to act after their appointments on one pretext or another as a result of which the petitioner was subjected to irreparable loss and injury. Even the last Arbitrator (Shri S. S. Juneja non-petitioner No. 2) who was appointed to act as an Arbitrator by the department on 25-7-1991, had committed inordinate delay of over two and half years, as already stated above, in completing the proceedings and did not make and publish the award even after expiry of seven months of conclusion of proceedings as aforesaid, I am of the view that prima-facie it was the duty of the erstwhile Arbitrator (Shri S. S. Juneja non-petitioner No. 2) to have completed the months as envisaged under the law and if the delay was not intentional on his part even view of the circumstances as discussed by the learned Trial Court in its impugned order, it was his duty to have moved the Court at the earliest and before expiry the statutory period of four months and should have sought appropriate directions from the Trial Court for extension of time, since he was not able to complete the proceedings within the stipulated period which admittedly he failed to do so and hence proceedings pending before him automatically stood abated. 7. During the course of hearing it was contended by the learned Counsel for the petitioner that non-petitioner No. 2 was appointed to act as an Arbitrator on 25-7-1991 and entered upon reference w.e.f. 8-8-1991. 7. During the course of hearing it was contended by the learned Counsel for the petitioner that non-petitioner No. 2 was appointed to act as an Arbitrator on 25-7-1991 and entered upon reference w.e.f. 8-8-1991. Though he proceeded with the reference and after hearing the arguments had concluded the proceedings on 31-1-1994 by giving option to the parties to file their respective documents relied upon them, if any, within a period of 20 days and though the petitioner company had complied with the said directions of the learned Arbitrator on 18-2-1994, itself upon the India represented by Secretary, Ministry of Urban Development, New Delhi (Non-Petitioner No. 1) had sought further time to do the needful but it failed to comply with the said direction inspite of the opportunity granted by the Arbitrator. 8. Thereafter in April 1994, the petitioner-company had filed its rejoinder within the stipulated period of 15 days including the submissions of non-judicial stamp papers on 28-4-1994 itself before Arbitrator but inspite of this non-petitioner No. 2 neither made nor published the award till date. 9. I have heard learned Counsel for the parties at length and examined the summoned record as well as legal position on the subject. 10. Prima facie I am of the considered opinion that once the parties have complied with the necessary directions by submitting their documents and the hearing stood concluded before the learned Arbitrator as on 31-1-1994, it was the boundened duty of non-petitioner No. 2 to have made and published the award within the statutory period of four months as stipulated under the Act but unfortunately the said learned Arbitrator took almost two and half years to conclude the arbitration proceedings and inspite of this he had failed to make or publish the award even after expiry of 10 months of the conclusion of the proceedings and had deliberately delayed the same and thus committed misconduct and mis-conducted the proceedings. 11. Upon notice being issued by this Court to non-petitioner No. 2, the erstwhile Arbitrator, filed his reply to the petitioner's application before the Trial Court and controverted and stand of the petitioner by contending that the award could not be given or pronounced within the statutory period for reasons beyond his control. 11. Upon notice being issued by this Court to non-petitioner No. 2, the erstwhile Arbitrator, filed his reply to the petitioner's application before the Trial Court and controverted and stand of the petitioner by contending that the award could not be given or pronounced within the statutory period for reasons beyond his control. He further contended that though the award was complete and was required only for publication but the same could not be done since the stenographer who was deputed to type out the award on the stamp papers was not available on account of his sickness and there was no other stenographer available by way of replacement. In this regard I am of the view that this is obviously a very flimsy approach adopted by non-petitioner No. 2 and there is obvious fallacy in not having complied with the statutory requirement of the Act since nothing prevented the Arbitrator to have sought extension of time by approaching the Trial Court by way of necessary application had nothing prevented him to have sought further directions from the Trial Court in this regard and admittedly he failed to take necessary steps in accordance with law. Hence, in my considered opinion the learned Trial Court had committed grave illegality in not appreciating the legal position that before the expiry of statutory limit of four months which is the time limit fixed under the scheduled of the Act for making and publishing of the award by an Arbitrator, the time cannot be unilaterally extended at the option of a party without obtaining the consent of the aggrieved party. The Trial Court has further failed to consider that where an Arbitrator is appointed through has entered upon the reference pursuant to direction of this Court appointing the said Arbitrator and in case he does not make or publish the award within the statutory period as envisaged under the Act, the Arbitrator has no option to unilaterally extend the time but it is enjoined upon the said Arbitrator to make and publish the award within the statutory period unless the time has been extended by the Court on necessary request having been made in this regard before the expiry of the said period. 12. 12. During the course of hearing I was informed by Shri S. S. Hasan learned Counsel for the respondents that Shri S. S. Juneja (non-petitioner No. 2) who was earlier functioning as Arbitrator has since being promoted as Chief Engineer and has consequently becomes functus-officio. I consequently directed the learned Counsel for the parties to suggest the name of other suitable Arbitrator which may be agreeable to both the parties. Accordingly the names of two officials were suggested by the learned Counsel for the respondents of the rank of Chief Engineer, C.P.W.D., New Delhi and since the said names were not agreeable to the petitioner, it was suggested as to whether it is impossible to appoint any retired official of the concerned department and accordingly there was consensus of opinion to appoint Shri C. Ramarao a retired Director General (Works) C.P.W.D., New Delhi to act as the Arbitrator. Notice was accordingly issued to Shri Ramarao directing him as to whether he will be willing to accept arbitration and he accordingly conveyed his willingness to act as an Arbitrator in the matter. Thereafter Shri C. Ramarao entered upon reference in pursuance of the order dated 13-9-1996 passed by this Court by resuming the hearing of the parties from the stage it was left by after giving sufficient opportunity of hearing the parties on various dates made and published his award within the stipulated period in accordance with law on 18-1-1997. Thereafter the original award was also transmitted to this Court by Shri C. Ramarao, the sole Arbitrator through the Registrar of this Court which as been examined and perused by this Court. The learned Arbitrator in his award directed the respondents to pay to the claimant a sum of Rs. 17,37,974/- alongwith simple interest @ 18% p.a. on an amount of Rs. 9,46,856/- w.e.f. 1-1-1986 representing the final bill and other items and simple interest @ 18% p.a. on an amount of Rs. 7,91,118.00 representing other award w.e.f. 1-7-1987 to the date of payment or decree whichever is earlier minus the awarded amounts of the counter claims of the respondents i.e. Rs. 2,26,579.00 which are to be paid by the claimants or adjusted against the final payment due to the petitioner/ claimants in terms of the said award. 13. 7,91,118.00 representing other award w.e.f. 1-7-1987 to the date of payment or decree whichever is earlier minus the awarded amounts of the counter claims of the respondents i.e. Rs. 2,26,579.00 which are to be paid by the claimants or adjusted against the final payment due to the petitioner/ claimants in terms of the said award. 13. Soon after the aforesaid award was listed in this Court by the abovenamed arbitrator Shri Ramarao, the respondents filed their objections against the award in this court on various grounds and the reply to the said objections and also filed by the petitioner company. 14. In the backdrop of the above events, the basic question which arises for consideration is an to whether the Arbitrator was justified in filing the award in this Court particularly when there was no such direction given to the said Arbitrator and in absence of which, he had choosed to file the same in absence of any directions given by this Court in this regard. Since the award dated 18-1-1997 had been filed in this Court by the Arbitrator, this Court vide its order dated 28-1-1997 had directed the issuance of notice under Section 14(ii) of the Act to respondent No. 1 regarding filing of the award. Thereafter the arguments as advanced by the learned Counsel for the parties was heard at length on 15-5-1997 and stood concluded. 15. Prima facie I am of the opinion that the Arbitrator should not have filed the Award directly in this Court when there was no specific direction in this regard. Since the Arbitrator had already filed the Award hence the objections to the said award have also been filed by the respondents, I deem it appropriate to direct the Registry of this Court to remit the record alongwith the original award dated 18-1-1997 to Addl. District Judge, Gangapur city. The parties are directed to appear before the learned Addl. District Judge, Gangapur city on 22-9-1997. The parties shall be at liberty to take necessary steps in the matter in accordance with law. 16. District Judge, Gangapur city. The parties are directed to appear before the learned Addl. District Judge, Gangapur city on 22-9-1997. The parties shall be at liberty to take necessary steps in the matter in accordance with law. 16. In support of his contentions advanced at the bar learned Counsel for the petitioner placed reliance upon the following decisions on the question of limitation as to whether the Court should take note of the objections when filed by the opposite party within the period of limitation and whether in such circumstances the Court was bound to pass a decree in terms of the award :- 17. Union of India v. R. S. Sharma (1995(1) Arb. LR 474), M/s. Bharat Cooking Coal Ltd. v. M/s. C.K. Ahuja and another (1995(3) J.T. SC 132 = 1995(2) Arb. LR 66), Union of India and Ors. v. Smt. Satyawati & Ors. (1996(1) J.T. SC 674 = 1996(1) Arb. LR 388), Madan Lal v. Sunder Lal and Anr. ( AIR 1967 S.C. 1233 ), Bodhraj Sabharwal and Anr. v. Prem Singh and Anr. (1994 NOC 278 (Delhi)), and State of Bihar v. Dhajadhari Rai (AIR 1985 Patna 187), where it is open to the objector to challenge the reasonableness of the reasons given by the Arbitrator in making and publishing of the award, whether it is necessary for the Arbitrator to give reasons for his award by giving a speaking award whether it is open to the Court to sit in appeal over views expressed by the Arbitrator by re-examining, re-assessing the material on the record and whether the Court has any jurisdiction vested in it to modify the award, on the question as to whether the Arbitrator has ultimately jurisdiction to grant interest etc. and whether it is open to the Court to go into the terms of the contract learned Counsel for the petitioner placed reliance upon the following decisions. 18. M/s. Pola Singh & Co. v. Union of India & Ors. (1995(2) Arb. LR 303), Bank of Baroda v. B. J. Bhambani & Anr. (1988(1) J.T. SC 342), Jagdish Chander v. Hindustan Vegetable Oils Corpn. & Anr. (AIR 1990 Delhi 204 = 1989(2) Arb. LR 189), M/s. R.S. Builders v. Delhi Development Authority (AIR 1996 Delhi 10), Food Corporation of India v. Joginderpal Mohiunderpal and Anr. ( AIR 1989 S.C. 1263 = 1989(2) Arb. (1988(1) J.T. SC 342), Jagdish Chander v. Hindustan Vegetable Oils Corpn. & Anr. (AIR 1990 Delhi 204 = 1989(2) Arb. LR 189), M/s. R.S. Builders v. Delhi Development Authority (AIR 1996 Delhi 10), Food Corporation of India v. Joginderpal Mohiunderpal and Anr. ( AIR 1989 S.C. 1263 = 1989(2) Arb. LR 159), and various other decisions on the question of interest, award of damages, security deposit, loans and profits, levy of compensation, liquidated damages etc. 19. Learned Counsel for the respondent place reliance upon the judgment of Delhi High Court in the matter of M/s. Oriental Structural Engineers v. D.D.A. ( 1993(49) DLT 514 = 1993(2) Arb. LR 74), Jagdish Chander v. Hindustan Vegetable Oils Corporation and another (AIR 1997 Delhi 68). 20. Since the scope of the respondent placed reliance upon the judgment of Delhi High Court in the matter of M/s. Oriental Structural Engineers v. D.D.A. (supra) and Jagdish Chander v. Hindustan Vegetable Oils Corporation and another (supra). 21. Since the scope of the present revision petition is only confined to examine the legality and propriety of the impugned order, dated 2-6-1995 passed by the learned Addl. District Judge, Gangapur city on an application moved under Sections 11 and 12 of the Act by the petitioner company for appointment of another Arbitrator in place of respondent No. 2 and since the said order has already been quashed and set aside by this Court by order dated 13-9-1996, and thereafter the newly appointed Arbitrator after making and publishing the Award dated 18-1-1997 had filed the same in this Court to which the objections have also been filed by respondent No. 1, I deem it appropriate to direct the learned Counsel for the parties to advance all such contentions as may be open to them under the law to convass before the learned Addl. District Judge, Gangapur City. 22. As a matter of prudence it was appropriate for the learned Counsel for the petitioner to have sought indulgence of this Court for making the award rule of the Court in accordance with Sections 14 and 17 of the Act and thereafter notice would have been issued to the respondents inviting their objections, if any, and thereafter the award could have been made the rule of the Court as per the procedure envisaged under the Act. This admittedly not having been done by the petitioner, this Court could not have suo moto taken cognizance of the matter by directing the award dated 18-1-1997 filed in this Court as rule of the Court. Moreover the scope of the present revision petition is limited only to the question of appointment of the new Arbitrator in view of the misconduct committed by erstwhile Arbitrator, i.e., Respondent No. 2 and this having been done by appointment of Shri C. Ramarao to act as an Arbitrator in the matter and the award also having been filed in this Court, it would not have been proper for this Court to have over stepped its jurisdiction by directing the aforesaid award to be made rule of the Court. Thus, I am of the considered, view that the award deserves to be remitted to learned Addl. District Judge, Gangapur City who had earlier passed the order on petitioner's application under Sections 11 and 12 of the Act against which the present revision petition has been preferred. 23. As a result of the above discussion, the order dated 2-6-1995 passed by Addl. District Judge, Gangapur City in Civil Misc. Application (Arbitration) No. 17/1995 is quashed and set aside. The Trial Court is directed to deal with the matter expeditiously and decide the same finally within a period of four months from the date of receipt of the records alongwith the Award after the parties have taken necessary steps in the matter in accordance with law. The parties are directed to appear before Addl. District Judge, Gangapur City on 22-9-1997. The summoned record be sent back to the said Court immediately. Petition allowed