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1998 DIGILAW 56 (RAJ)

Rajasthan State Electricity Board v. Gammon India Limited

1998-01-13

D.C.DALELA

body1998
JUDGMENT 1. - Respondent-M/s. Gammon India Limited (who was claimant before the learned Arbitrator) submitted a tender for 'Construction of 180 M high three-fuel RCC Chimney for Kota Thermal Power Station, Kota, (Specification No. 3325), and, the same was accepted by the appellant-Rajasthan State Electricity Board (R.S.E.B), on 31.7.1984 for Rs. 2,80,66,500/-, and, the work was commenced on 15.8.1984 and was completed on 15.7.1988. Certain disputes and differences arose between the parties, and, the respondent claimant solicited arbitration to resolve the disputes. Shri C.S. Hukmani, (Retired Chief Engineer, Irrigation, Rajasthan), was appointed as Sole Arbitrator. 2. The respondent claimant submitted its 18 Claims and the appellant-respondent submitted its reply thereto. Both the parties submitted documentary evidence. No oral evidence was adduced before the learned Arbitrator. After hearing both the sides, and, considering the entire material on record, the learned Arbitrator made and signed the award, on 2.3.1994. 3. According to the appellant, Claims Nos. 4, 5, 6 & 7 were rejected by the learned Arbitrator. Claim No. 9 for Rs. 1,06,560/- was accepted by the learned Arbitrator, to the extent of Rs. 5,577/-, only. During the proceedings before the learned Arbitrator, Claim No. 12 was compromised by the parties. Regarding Claim No. 16, no award has been passed by the learned Arbitrator. 4. The respondent moved the learned District Judge, Kota, for making the award of the learned Arbitrator as rule of the Court. The appellant filed its objection. The matter was transferred to the learned Additional District Judge No. 1, Kota, who after hearing both the sides, vide his order dated 2.4.1996 set aside the award in respect of the Claims No. 10, 13 & 15, and, upheld the award in respect of other remaining Claims. Feeling aggrieved thereby, the learned (who was respondent before the learned Arbitrator) has preferred this appeal. 5. The appellant has challenged the award and the order of the learned Additional District Judge No. 1, Kota, in respect of the Claims Nos. 1, 2, 3, 8,11, 14 & 17. According to the appellant, the award with regard to the Claims Nos. 1,2,3,8,11, 14 & 17 is required to be set aside. While contesting the appeal, the respondent has preferred cross objection with regard to the Claims Nos. 1, 2, 3, 8,11, 14 & 17. According to the appellant, the award with regard to the Claims Nos. 1,2,3,8,11, 14 & 17 is required to be set aside. While contesting the appeal, the respondent has preferred cross objection with regard to the Claims Nos. 10, 13 & 15 which were allowed by the learned Arbitrator, but, were set aside by the learned Additional District Judge No. 1, Kota.I have heard the argument of both the sides. 6. It is well-known that arbitration is the forum selected by the parties to get their disputes resolved. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a Judge on the evidence before the arbitrator. In case State of Rajasthan v. Puri Construction Co. Ltd., (1994) 6 SCC 485 , Hon'ble the Supreme Court has laid down that the Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid is a decision within the competency of the arbitrator. By purporting to construe the contract the Court cannot take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the Court. Where the reason has been given by the arbitrator in making the award the Court cannot examine the reasonableness of the reasons. In the case of B.V. Radha Krishna v. Sponge Iron India Ltd., (1997) 4 SCC 693 , Hon'ble the Supreme Court has laid down that the Court while considering the question whether the award should he set aside, does not examine that question as an appellate Court. The Court cannot re-appreciate all the materials on the record for the purpose of recording a finding whether in the fact stand circumstances of a particular case, the award in question could have been made. The Court cannot re-appreciate all the materials on the record for the purpose of recording a finding whether in the fact stand circumstances of a particular case, the award in question could have been made. It has been further observed that if a question of law is referred to arbitrator and the arbitrator comes to a conclusion, it is not open to challenge the award on the ground that an alternative view of law is possible. In the case of Food Corporation of India v. Joginderpal Mohinderpal & Anr., AIR 1989 SC 1263 , Hon'ble the Supreme Court has laid down that an arbitrators' award may be set aside for error of law appearing on the face of it or the arbitrator has misconducted himself. But it is not misconduct on the part of an arbitrator to come to an erroneous decision whether his error is on of factor taw and whether or not his findings of fact are supported by evidence. It has been further laid down that if the order of the arbitrator was a fair order after according all the records and the conclusion arrived at by him is a plausible conclusion, then, the Court has no jurisdiction to interfere or modify the award. The Court cannot sit in appeal over the views of the arbitrator by re-examining and re-assessing the material. It is well settled in law that if the reasons for giving award has been stated, the award cannot be set aside on the ground that the detailed reasons are not given. 7. Bearing in mind the principles laid down by Hon'ble the Supreme Court as indicated above, the matter has to be looked into and dealt with. 8. The work was stipulated to be completed on 16.8.1986, but, it was actually completed on 15.7.1987. For the delay in completion of work, the appellant deducted a sum of Rs. 14.03,32/- as compensation. The learned arbitrator upon examining all the material before him, came to the conclusion that the period of completion was prolonged due to causes beyond control of the claimants (respondent in the present appeal). Accordingly, the learned arbitrator ordered to refund the aforesaid amount which has been deduced by the appellant. The learned arbitrator has given his finding upon considering the entire material and documentary evidence placed before him. Accordingly, the learned arbitrator ordered to refund the aforesaid amount which has been deduced by the appellant. The learned arbitrator has given his finding upon considering the entire material and documentary evidence placed before him. I think that the conclusion arrived at by the learned arbitrator that the period of completion was prolonged due to causes beyond control of the claimants, is conceivable and possible. Therefore, no interference is called for on the ground that an alternative view is possible. It cannot be said that the view taken by the learned Arbitrator is not based on the evidence and material on record. The award in respect of the Claim No. 1, therefore, cannot be set aside. 9. Claim No. 2 is relating to the payment of balance material escalation. Under this head, the learned arbitrator has awarded a sum of Rs 6,15,088/- to the respondent claimant. The learned arbitrator has made an award under this head on the basis of a formula derived at by interpreting the contract and escalation clause. It is well settled that if the arbitrator has come to a conclusion upon interpretation of the contract or clause, it is not open to challenge the award on the ground that an alternative construction of the contract and toe clause, is, possible. In my opinion, no interference is called for in the finding of the learned arbitrator in relation to the Claim No. 2. 10. Claim No. 3 is with regard to the refund of amount withheld by the appellant for alleged saving in steel for staircase. After considering the entire material on record, the learned arbitrator has found that the relevant drawing was for bidding purpose only and was by no means the final drawing for carrying out the work as stipulated in Cl. 2 of Section C. The learned arbitrator has further found that the alleged saving of steel as given by the appellant-respondent is based on several assumptions to which have no basis. The learned arbitrator, therefore, admitted the claim in full for a sum of Rs. 4,53,037/-. The conclusion and the finding of the learned arbitrator is based on the material on record and was plausible. No interference is called for on the ground that another view was possible. 11. Claim-No. 8 is with regard to the refund of amount withheld against return of departmentally issued steel. 4,53,037/-. The conclusion and the finding of the learned arbitrator is based on the material on record and was plausible. No interference is called for on the ground that another view was possible. 11. Claim-No. 8 is with regard to the refund of amount withheld against return of departmentally issued steel. After considering the design specification, the learned arbitrator held that the amount claimed of Rs. 1,18,533/- is admissible to the claimant respondent. The Claim in this regard was admitted by the learned arbitrator. The finding and the conclusion of the learned arbitrator is based on appreciation of evidence and material on record. Since the Court cannot re-appreciate the material and evidence on record for the purpose of finding as to whether the award in this regard could have been made & the arbitrator is the sole judge of the quality as well as the quantity of evidence it will not be for the Court to take upon itself the task of being a judge on the evidence before the arbitrator. Therefore, no interference is called for with regard to the award in Claim No. 8. 12. Claim No. 11 is with regard to the reimbursement of Sales Tax on work contract amounting to Rs. 2,11,805/-. Interpreting the Cl. 5 of the work order, the learned arbitrator has held that the sales tax is not the liability of the claimant respondent, and, it is to be reimbursed in full. The Claim was admitted in full. It is well settled that if a question of law is referred to an arbitrator and the arbitrator comes to a conclusion that it is not open to challenge the award on the ground that an alternative view is possible. The Court does not sit in appeal over award and review the reasons. Therefore, no interference is called for with regard to the award in respect of the Claim No. 11. 13. Claim No. 14 is with regard to the payment of full escalation on labour and materials. As the learned arbitrator found that the contract period has been prolonged for reasons beyond control of the contractor, an additional escalation of Rs. 9,08,588/- was allowed to be payable to the claimant-respondent. The finding of the learned arbitrator is based on the appreciation of the evidence and material on record. As the learned arbitrator found that the contract period has been prolonged for reasons beyond control of the contractor, an additional escalation of Rs. 9,08,588/- was allowed to be payable to the claimant-respondent. The finding of the learned arbitrator is based on the appreciation of the evidence and material on record. The view taken by the learned arbitrator in this behalf is possible though perhaps not the only correct view. The Court cannot re-appreciate the material and evidence on record and substitute its own view. No interference is called for merely because an alternative view is possible. 14. The learned Additional District Judge has also confirmed and upheld the award in respect of the Claims Nos. 1, 2,3,8, 11 & 14, and has made the award on these Claims the rule of Court. Therefore, the decision of the learned Additional District Judge in respect of these Claims are upheld and maintained. 15. Regarding Claim No. 17, which is with regard to the interest, both the sides have felt aggrieved. The appellant is dissatisfied with the award of interest on interest so far as the post award interest is concerned. While the respondent, on the other hand, in cross objection is dis-satisfied with the rate of interest awarded. Therefore, the Claim No. 17 will be discussed and dealt with later on after the cross objections have been discussed and decided. Therefore, I now proceed to take up the cross objection. 16. Besides the Claim No. 17, the respondent has preferred cross objections in respect of the Claims Nos. 10, 13 & 15. The award of the learned arbitrator on all these three Claims have been set aside by the learned Additional District Judge no. 1, Kota. 17. Claim No. 10 is with regard to the refund of excess recovery towards electricity charges amounting to Rs. 1,51,885/-. The appellant has effected recovery of electricity charges in accordance with the electricity tariff which were enforced from time to time. The learned arbitrator after interpreting the Cl. 6 of the work-order came to the conclusion that the electricity charges were to be charged according to the tariff prevalent at the time of contract and no unilateral changes can be effected in the tariff by the appellant. Therefore, the learned arbitrator allowed the claimant's appeal, and, directed to refund of excess recovery towards the electricity charges amounting to Rs. 1,51,885/-. 18. Therefore, the learned arbitrator allowed the claimant's appeal, and, directed to refund of excess recovery towards the electricity charges amounting to Rs. 1,51,885/-. 18. The learned Additional District Judge No. 1, Kota, while dealing with the Claim No. 10, has held that the learned arbitrator has based his findings on the interpretation of Cl. 6 of the Work-order. According to the learned Additional District, Judge, the learned arbitrator did not consider the condition No. 9.12 of Specification No. 3325. According to the learned Additional District Judge, the electricity charges should be in accordance with the tariff made applicable from time to time. The learned Additional District Judge, therefore, set aside the award of the learned arbitrator in respect of the Claim No. 10. 19. It seems that the finding of the learned arbitrator is based on the interpretation of Cl. 6 of the Work-order, whereas, that of the learned Additional District Judge is based on the interpretation. of condition No. 9.12 of Specification No. 3325. It would be evident that the learned Additional District Judge has substituted his own view in place of arbitrator's view as if it was dealing with an appeal. That is exactly what is forbidden by the decisions of the Hon'ble Supreme Court as indicated hereinbefore. Hon'ble the Supreme Court has laid down that the Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. It is well settled that if a question of law is referred to arbitrator and the arbitrator comes to a conclusion, it. is not open to challenge the award on the ground that an alternative view of law is possible. The Court is not required to re-appreciate the material on record and to sit in appeal over the award and review the reasons. The learned arbitrator upon considering the entire material on record, came to the conclusion on the interpretation of Cl. 6 of the Work-order that no unilateral changes can be made in the electricity tariff and no recovery can be made towards the electricity charges in excess of the tariff prevalent at the time of contract. The learned Additional District Judge on the interpretation of condition No. 9.12 of Specification No. 3325 substituted its own conclusion and held that the conclusion of the learned arbitrator was incorrect. The learned Additional District Judge on the interpretation of condition No. 9.12 of Specification No. 3325 substituted its own conclusion and held that the conclusion of the learned arbitrator was incorrect. This cannot be done by the learned Additional District Judge, as such course of action is forbidden by the decisions of Hon'ble the Supreme Court. In this view of the matter, the findings of the learned arbitrator in respect of the Claim No. 10 should be upheld and made rule of the Court, and, the decision of the learned Additional district Judge No. 1, Kota, in this behalf is required to be set aside. 20. Claim No. 13 is with regard to the extra-expenditure due to the prolongation of contract-period. The learned arbitrator after considering the entire material on record, found that the contract-period was prolonged for the reasons beyond control of the claimant respondent, and, allowed a sum of Rs. 4,12,000/- as compensation towards expenditure on water supply, electricity, labour colony, labour incentives/ staff visits, telephone/telex, bonuses, health services, sanitation etc. for the prolonged period. The learned Additional District Judge No. 1, Kota, has set aside the award in respect of Claim No. 13 on the ground that no evidence was adduced. According to the learned Additional District Judge, the learned arbitrator has awarded the amount under this Claim on presumption only. 21. Arbitration is a forum selected by the parties to get their disputes resolved. It is well-known in law that if the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a Judge on the evidence before the arbitrator. Upon considering the material on record, certain facts and circumstances of the case emerge in a particular case. The arbitrator is free to appreciate those circumstances and facts of a particular case and come to a conclusion based on the appreciation of the facts and the circumstances. The Court cannot re-appreciate the material on record for the purposes of recording the finding whether in the facts and the circumstances of a particular case, the award in question could have been made or not. The Court cannot re-appreciate the material on record for the purposes of recording the finding whether in the facts and the circumstances of a particular case, the award in question could have been made or not. The Court does not sit in appeal over the award and review the reasons. The Court cannot substitute its own conclusion to the Conclusion of the arbitrator. Admittedly, the work was stipulated to be completed on 16.8.1986, but the work was actually completed on 15.7.1987. After considering the material on record, the learned arbitrator has come to a definite finding that the period of completion of the work was prolonged due to causes, beyond the control of the claimant respondent. Therefore, the facts and the circumstances that emerge in the case in hand, are, (a) that the period of completion of the work was prolonged, and (b) that the period was prolonged due to the causes beyond control of the claimant respondent. Considering these facts and the circumstances, the learned arbitrator allowed some compensation towards certain expenditure incurred by the claimant respondent during the prolonged period. Therefore, the learned Additional District Judge fell into apparent error that there was no evidence on record in this regard. On the other hand, certain facts and the circumstances emerged and on the basis on which the learned arbitrator has given the award on this Claim, and, has given reasons therefor. Since the Court is not to review the reasons of the award and is not required to re-appreciate the material on record for the purpose of recording of the finding whether in the facts and circumstances of a particular case the award in question could have been made, the decision of the learned Additional District Judge in respect of the Claim No. 13(13) deserves to be set aside because he has substituted his own view in place of arbitrator's view as if he was dealing with an appeal. Therefore, the award of the learned arbitrator in respect of the Claim No. 13 should be made the rule of the Court, and, the decision of the learned Additional District Judge should be set aside. 22. Coming to the Claim No. 15, it may be seen that it is with regard to the reimbursement of the commission charges paid to the bank by the claimant respondent for extending the validity dates of bank-guarantee-bonds towards security deposit. 22. Coming to the Claim No. 15, it may be seen that it is with regard to the reimbursement of the commission charges paid to the bank by the claimant respondent for extending the validity dates of bank-guarantee-bonds towards security deposit. The learned arbitrator found that the appellant should not have with-held the bank-guarantee-bonds beyond the expiry of defect liability period. Therefore, the Claim of Rs. 46,117/- was allowed by the learned arbitrator. The learned arbitrator made an award under this Claim upon his interpretation of the condition of contract. The learned arbitrator came to the conclusion that the bank guarantee-bonds of the respondent was with-held by the appellant even after the expiry of defect liability period and on this basis, the commission charges amounting to Rs. 46,117/- were awarded. The learned Additional District Judge was of the view that it was necessary for the respondent to keep bank-credit-bond towards the security amount operative till the final assessment by the appellant after the completion of work, and, if on that amount, the commission charges were paid by the respondent to the bank, the appellant could not be held responsible for the same. Upon considering and interpreting the terms of the contract, the learned arbitrator came to the conclusion that the appellant had no authority to retain the bank-guarantee-bonds beyond the expiry of defect liability period. The finding and the award of the teamed arbitrator under this Claim, is based on the interpretation of the terms of the contract. When a period has been decided by the learned arbitrator upon his interpretation of the terms of contract it is not open to challenge the award on the ground that an alternative interpretation of contract is possible. The learned Additional District Judge has substituted his own interpretation of the contract in place of the arbitrator's interpretation as if he was dealing with an appeal. This is prohibited by the decisions of Hon'ble the Supreme Court. Therefore, the award of the learned arbitrator in respect of the Claim No. 15 is required to be made rule of the Court, and, the decision of the learned Additional District Judge No. 1, Kota, is required to be set aside. 23. Now remains the Claim No. 17, which is with regard to the interest and both the sides have felt aggrieved on the findings of the learned Additional District Judge No. 1, Kota. 23. Now remains the Claim No. 17, which is with regard to the interest and both the sides have felt aggrieved on the findings of the learned Additional District Judge No. 1, Kota. The learned arbitrator has award the interest at the rate of 10%. The respondent in the cross-objection has urged that the interest should be awarded at the rate of 18% p.a. The respondent-claimant put-forward the Claim of interest before the learned arbitrator at the rate of 18% p.a. But, the learned arbitrator after considering the entire facts and the circumstances of the case, awarded the interest at the rate of 10% p.a. The learned Additional District Judge No. 1, has also agreed with the learned arbitrator with regard to the rate of interest. In my opinion, no interference as called for with regard to the rate of interest. The rate of interest awarded by the learned arbitrator at the rate of 10% is, therefore, upheld. 24. The learned arbitrator has awarded pre-reference interest of Rs. 6,53,445/- at the rate of 10% p.a. and Pedente lite interest of Rs. 7,85,315/- at the rate of 10% p.a. Post awarded interest at the rate of 10% was also allowed. As the learned Additional District Judge No. 1, Kota, disallowed the award in respect of the claims Nos. 10, 13 & 15, the pre-reference interest was reduced to Rs. 6,22,457/- while pendent lite interest was reduced to Rs. 6,87,370/-. Since I have held that the award of the learned arbitrator in respect of the Claims Nos. 10, 13 & 15 deserves to be made the rule of the Court, and, the decision of the learned Additional District Judge No. 1, Kota, on these claims should be set aside, the reduction in the interest does not remain justified. Therefore, the pre-reference interest of Rs. 6,53,445/- as awarded by the learned arbitrator deserves to be upheld, and, made the rule of the Court. Similarly, the pendent lite interest of Rs. 7,85,315/- as awarded by the learned arbitrator should be upheld and made the rule of the Court. 25. With regard to the post award interest, the interest on interest should not be allowed. Therefore, the interest only on the pre-reference interest and the pendent lite interest should not be allowed having regard to the provisions of Interest Act.No other point has been argued and pressed before me. 26. 25. With regard to the post award interest, the interest on interest should not be allowed. Therefore, the interest only on the pre-reference interest and the pendent lite interest should not be allowed having regard to the provisions of Interest Act.No other point has been argued and pressed before me. 26. In the result, this appeal of the appellant, Rajasthan State Electricity Board is dismissed in respect of the Claims Nos. 1, 2, 3, 8, 11 & 14. Cross objections of the respondent M/s. Gammon India Ltd., in respect of the Claims Nos. 10, 13 & 15, are allowed. The award of the learned arbitrator on these three Claims, are made the rule of the Court. The decisions of the learned Additional district Judge No. 1, Kota, on these three Claims, namely, Claims Nos. 10, 13 & 15, are set aside. Regarding Claim No. 17, the pre-reference interest of Rs. 6,53,445/- and the pendent lite interest of Rs. 7,85,315/- as awarded by the learned arbitrator is upheld and made the rule of the Court. The reduction, ordered by the learned Additional District Judge in this behalf, is set aside. Regarding the post award interest, it is ordered that the interest at the rate of 10% p.a. on the award amount excluding the amount of pre-reference interest and the pendent lite interest shall be payable from the date of the award, i.e, on 2.3.1994, to the date of final payment. The decree of the learned Additional District Judge No. 1, Kota, shall stand modified accordingly.Appeal dismissed with certain modifications in decree. *******