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2000 DIGILAW 163 (CAL)

Central Inland Water Transport Corporation Limited v. Afcons Infrastructure Limited

2000-03-31

RONOJIT KUMAR MITRA

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JUDGMENT This was an application made under Sections 30 and 33 of the Arbitration Act, 1940 for setting aside an award dated March 11, 1998. The award had been made by the joint arbitrators, who had been appointed by each of the two parties in terms of the agreement dated July 17, 1984. The prayer in the petition for setting aside the award was restricted to Item Nos. (I). (VI), (VIII), (IX), (X), (XIV), (XV), (XVI), (XIX), (XX), (XXI), (XXII), (XXIII), (XXIV) and (XXV) of the award. Central Inland Water Transport Corporation Limited, the petitioner in this application, was the respondent before the arbitrator and Afcons Infrastructure Limited,' the respondent in this application, was the claimant before the Arbitrator. 2. In pursuance of an agreement between the parties, dated July 27, 1984, the respondent had carried out diverse work of modernization and development of infrastructure facilities at Rajabagan Dockyard Nos. 3 and 4 and other related-works". Disputes and differences arose between the parties and in terms of the agreement the petitioner had referred the matter to the Engineer and then to the joint arbitrators. The parties had each appointed an Arbitrator. The arbitration proceedings had been concluded in the 45th meeting in the reference. It would appear from the award that the joint arbitrators "upon taking all the factors into consideration", made their award, in respect to the claims and counter-claims of the parties which had been referred to the Arbitrators and which covered "all disputes between the two parties". 3. It was submitted' by Counsel appearing for the petitioner that before referring the matter to the joint arbitrators, in terms of the agreement the respondent had by a letter dated December 4, 1993 required the Consulting Engineering Services (India) Private Limited, hereinafter referred to as "the Engineer", to settle the disputes between the parties which had arisen out of the contract dated July 27, 1984. The disputes related to the outstanding matter in connection with the work which the respondent had alleged to have executed. Decision required by the Engineers had been, on disputes which included Item No.5 "Security/Retention to be refunded", where the claim was for a sum of Rs. 1,15,040 33p. The respondent however contended, through Counsel, that while Hem No. 5(a) related to the agreement, Item Nos. Decision required by the Engineers had been, on disputes which included Item No.5 "Security/Retention to be refunded", where the claim was for a sum of Rs. 1,15,040 33p. The respondent however contended, through Counsel, that while Hem No. 5(a) related to the agreement, Item Nos. 5(b) and 5(c) were matters concerning a different agreement which was dated December 28, 1989 and was in no way connected with the agreement which the parties had referred to the joint arbitrators. He argued that the award, though was in respect to Claims 5(b) and (c), clearly was beyond the terms of reference, and consequently the joint arbitrator had committed an error of jurisdiction and the a ward was bad on the face of the records. He submitted that the petitioner, in its counter statement before the joint arbitrators, had in fact pleaded to that effect, and there was no denial by the respondent though, its view was that "learned Arbitrators are requested to settle these two small amounts also in the present arbitration". It was significant, he argued, as would appear from the Minutes of the 28th meeting in the reference held on September 17, 1997 that the joint arbitrators had recorded the submissions of the Advocate for the petitioner, that the two Item Nos. 5(b) and 5(c) of the claim, did not form any part of the agreement dated July 27, 1984 and that it related to a different agreement dated December 28, 1989 which was not in any way included in the reference. With regard to Item No. (XIV) of the award refusing the counter-claim of the petitioner for the refund of site installation charges, according to Counsel for the petitioner, it was quite apparent on the face of the award, that the joint arbitrators had failed to comprehend that there were two kinds of advances, one towards mobilization and the other towards site installation, and in Item No. (XIV) site installation charges should have been treated as an initial advance, and an award should have been made for the refund of such advance to the petitioner, within the meaning of Clause 60(3) of the general conditions of contract. He contended that accordingly the claims in Item Nos. (XV) and (XVI) should have been awarded in favour of the petitioner. He contended that accordingly the claims in Item Nos. (XV) and (XVI) should have been awarded in favour of the petitioner. He argued that it was a time bound contract, and the last extension continued till December 1988, and on record civil work had been completed on June 30, 1990, electro mechanical works on September 20, 1991, and miscellaneous items on March 1, 1994. In terms of Clause 47(1) of the general conditions of contract, the petitioner was entitled to liquidated damages for such inordinate delay, it was submitted by Counsel for the petitioner, and that though the joint arbitrators had considered the question of delay, they had failed to make any award in that respect, in favour of the petitioner, and consequently, the award was perverse. It was argued strenuously, by Counsel for the petitioner, that it would be incorrect to allege that the award was in respect to other related works such as 5(b) or 5(c) above because the name of the contract included the words "other related works". He contended, that there was no logic in the argument by Counsel for the respondent that the arbitrator had relied on the quoted portion of the name of the contract and took into account the agreement dated December 28, 1989 and had made an award in respect to additional electrical works. The contention by the respondent that the Arbitrator had disallowed the claim of the petitioner as it had not been made before the Engineers, argued Counsel for the petitioner, was wholly unfounded arid baseless, because the Arbitrator had allowed the petitioner's claim in Item Nos. (XVIII) and (XIX) though, those claims had not been placed before the Engineers by the petitioner either. He submitted that these contentions had not been urged before the Arbitrator by the respondent, nor was any allegation made in that respect in their affidavit-in-opposition, before this Court. He cited and relied on the decisions reported in (I) AIR 1997 SC 3503 and (2) AIR 1992 SC 232 . According to him, the decisions cited and relied on by the respondent were riot applicable in the facts and circumstances of this case. 4. The respondent by its letter dated December 4, 1993, with a copy to the petitioner, had required the Engineers to settle and decide the differences and disputes which had arisen between the patties, in respect to "Modernization of Dry Doc Nos. 4. The respondent by its letter dated December 4, 1993, with a copy to the petitioner, had required the Engineers to settle and decide the differences and disputes which had arisen between the patties, in respect to "Modernization of Dry Doc Nos. 3 & 4 at Rajabagan Dockyard-AFCONS Contract for Civil & Allied Works", submitted Counsel for the respondent, and that -the disputes relating to "Security/Retention to be refunded" were included. He contended, that no objection in that respect had been raised by the petitioner, either before the Engineers or before the joint arbitrators, and now they were estopped from urging the matter afresh before this Court. According to him they had allowed the disputes to be referred to the joint arbitrators, and after 45 meetings in the reference an award had been made in that respect. According to him the arbitration clause was of the "widest of amplitude" and the disputes in respect to related works were arbitrable by reason of inclusion of the 5(b) and (c) in the reference by the parties. He contended, that it was clear from the averments made in the petition, that the parties had specifically conferred jurisdiction on the joint arbitrators and that they had considered the referred disputes and made their award in accordance with law. In support of his submissions he cited and relied on the decisions reported in (3) AIR 1985 SC 1156 ; (4) AIR 1984 SC 1072 ; (5) AIR 1994 Cal 55 ; (6) AIR 1994 Cal 131 ; (7) AIR 1975 SC 230 . 5. The petitioner's prayer was for setting aside the award so far it related to Item Nos. (I), (VI), (VIII), (IX), (XIV), (XV), (XVI), (XVII) (XX), (XXI), (XXII), (XXIII), (XXIV) and (XXV) of the award, because non-application of mind by the joint arbitrators was clearly apparent on the face of the award. The award under challenge however was a non-speaking award. The petitioner's prayer was for setting aside the award so far it related to Item Nos. (I), (VI), (VIII), (IX), (XIV), (XV), (XVI), (XVII) (XX), (XXI), (XXII), (XXIII), (XXIV) and (XXV) of the award, because non-application of mind by the joint arbitrators was clearly apparent on the face of the award. The award under challenge however was a non-speaking award. It was significant that before commencing to make the actual award, the joint arbitrators in their recital in the last paragraph at page 5 of the award had recorded :- "And whereas upon taking all the factors into consideration, we hereby make the final award in respect of the said claims and counter-claims referred to in the previous para that cover all the disputes between the two parties referred to Arbitrators." A categorical statement by the joint arbitrators, that they had considered all the disputes which had been referred to them, by the parties in their statement of claim, and counter statement of claims. Admittedly, arguments and submissions had been made on behalf of the parties, by Counsels, in respect to the issues that had been raised in the reference which included the claim for refund of "Security Deposit/Retention Money". There was, therefore, very little scope for the petitioner to allege, with any force, that the joint arbitrators in making their award had not applied their minds, merely because the award was 'not to their satisfaction. A specific issue had been raised, it would appear from the records, as to whether the petitioner was entitled to get an award "on account of refund of Security Deposit/Retention Money, as alleged in para 5 of the Statement of Claim." In terms of Clause 67, of the contract between the parties, the disputes had been referred to the Engineers, and being dissatisfied with their decision, the petitioner had referred the matter to arbitration. The claim No. 5 (a), (b) and (c) which were before the Engineers, the respect to the refund of "Security Deposit/Retention Money", was also before the joint arbitrators in terms of the agreement, and the parties had made their respective submissions before the Arbitrators. Obviously, parties would be deemed to have specifically clothed the joint arbitrators with the jurisdiction to arbitrate on such matters even if otherwise they did not have such jurisdiction. Obviously, parties would be deemed to have specifically clothed the joint arbitrators with the jurisdiction to arbitrate on such matters even if otherwise they did not have such jurisdiction. I am unable to accede to the contention by Counsel for the petitioner, that there was non-application of mind by the joint arbitrators, apparent on the face of the award, or that the award was perverse or beyond the scope of the agreement. 6. In considering matters, which did not concern the agreement dated July 27,1984, according to Counsel for the petitioner, there was an error of law on the face of the award. The disputes between the parties in this application would appear to be whether in fact the joint arbitrators had arbitrated and made their award in respect to matters which were outside the scope of the contract dated July 27, 1984, and in respect to matters which had not been referred to them by the parties. Three pertinent questions would arise. How was the contract phrased? The short title of the contract would seem to be "Contract dated 27.7.84 For Modernization and Development of Infrastructure Facilities At Rajabagan Dockyard Nos. 3 & 4 and Other Related Works". It was contended by Counsel for the petitioner that "Other Related Works" meant other works related to the contract. There was no records before this Court to prove that submissions on behalf of the petitioner in that respect had been made before the joint arbitrators, nor was there any averment to that effect in the petition, nor was any submission in that respect made on behalf of the petitioner, before this Court. Therefore, assuming the joint arbitrators interpreted the phrase, "And Other Related Works" to mean other works which had been executed by the respondent in respect to the same Dockyards, which in all probability they did, then I am afraid that was their interpretation and I am not inclined to sit in appeal, and reverse their considered interpretation even if I was of the view that I would have given a different interpretation. The second question would be what was the scope of the arbitration clause? In Clause 67 of the agreement, the arbitration clause has been set out and I quote certain portions of the clauses which would, in my view, be relevant for a decision in this application :- "Clause 67: Settlement of Disputes. The second question would be what was the scope of the arbitration clause? In Clause 67 of the agreement, the arbitration clause has been set out and I quote certain portions of the clauses which would, in my view, be relevant for a decision in this application :- "Clause 67: Settlement of Disputes. If any dispute or difference of any kind whatsoever shall arise between the Employer and/or the Engineer and the Contractor in consecution with or arising out of the contract of carrying out of the works, ............ it shall in the first place be referred to and settled by the Engineer who........... shall give written notice of his decision to the Employer and the Contractor ............ if either the Employer of the Contractor be dissatisfied wit h any such decision then and in such case either the Employer or the Contractor may......... require that the matter or matters in dispute be referred to arbitration....... All disputes or differences in respect of which the decision (if any) of the Engineer shall be finally settled within the meaning of the Arbitration Laws of the country. The said Arbitrator shall have full power to open up review and revise any decision, opinion, direction, certificate or valuation of the Engineer and neither party shall be limited in the proceedings before such Arbitrator to the evidence or arguments put before the Engineer for the purpose of obtaining his said decision." Therefore, the joint arbitrators in terms of the agreement between the parties were to arbitrate and finally settle, if the occasion arose, as it did in this case, those disputes in respect to which the Engineers had made their decision. Item No. 5(b) and (c) of the settled claims were in fact disputes which had been referred to and decided by the Engineers. There was every reason for the joint arbitrators, therefore, in terms of Clause 67, to allow the parties to make their submissions in that respect, which admittedly had been done. The allegation by Counsel for the petitioner, that in so doing, the joint arbitrators had traveled outside the agreement which had been referred to them, and that such conduct constituted an error of law apparent on the face of the award, I would be inclined to find was wholly unfounded and the principle of law sought to be relied upon was quite inapplicable in the circumstances. 7. 7. In his decision reported in AIR 1994 Ca1131, the Hon'ble Judge had referred to certain observations of Lord Dnnedin, in (8) Champsey Bhara & Co. v. Jivraj Balloo Spinning & Weaving Co. Ltd. reported in (1923) 50 Ind App 324 : AIR 1923 PC 66, whereafter expressing his disapproval of attempts to extend the scope of Courts' interference in awards, the Hon'ble Judge had observed :- "An error in law on the face of the award means, in their Lordship's view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the Arbitrator stating the reasons for this Judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party, that opens the door to seeing first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound. Here it is impossible to say, from what is shown on the face of the award, what mistake the Arbitrators made. The only way that the learned Judges have arrived at finding what the mistake was is by saying: "Inasmuch as the Arbitrators awarded so-and-so, and inasmuch as the letter shows that the buyer rejected the cotton, the Arbitrators can only have arrived at that result by totally misinterpreting Rule 52". But, they were entitled to give their own interpretation to Rule 52 or any other article, and the award will stand unless, on the face of it, they have tied themselves down to some special legal proposition which then, when examined appears to be unsound." Similarly, in the present facts and circumstances the award being a non-speaking award, it was impossible to say, from a plain reading of the award, what mistake the joint arbitrators had made. The matters contained in Item No. 5(b) and (c) of the settled claims were decided by the Engineers and had been included by the parties in the reference before the joint arbitrators. The parties had made their submissions and had consciously allowed the joint arbitrators to make the award. Hence, there was no scope of there being any error apparent on the face of the award, or the joint arbitrators exceeding their powers or jurisdiction. The parties had made their submissions and had consciously allowed the joint arbitrators to make the award. Hence, there was no scope of there being any error apparent on the face of the award, or the joint arbitrators exceeding their powers or jurisdiction. The award could neither be considered to have been based on any unsound principle of law. In the decision reported in AIR 1997 SC 3603 , the joint arbitrators were unable to agree on the issue of the arbitrability of certain claims, and they had referred the matter to the Umpire and it was in relation to the finding of the Umpire, by a non-speaking award, that the Supreme Court had deliberated that the Umpire was required to express in writing with regard to the arbitrability in making of the award. I would thing the dictum in the decision was not applicable in the present circumstances, because neither the joint arbitrators were in any disagreement nor was there any issue raised in the reference with regard to arbitrability of any of the disputes which were before them. The Supreme Court further deliberated on the question of the Arbitrators making awards in respect to claims not covered by the agreement in the decision reported in AIR 1992 SC 232 . It was the finding of the apex Court in very clear terms that "The Arbitrator cannot act arbitrarily, irrationally, capriciously or indepently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has traveled outside the bounds of the contract, he has acted without jurisdiction. But, if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it". The joint arbitrators, in the present facts and circumstances, had arbitrated on matters in respect to which the Engineers had given a decision, and that was precisely what had been envisaged in the agreement between the parties. The joint arbitrators, in the present facts and circumstances, had arbitrated on matters in respect to which the Engineers had given a decision, and that was precisely what had been envisaged in the agreement between the parties. As I have observed earlier there was no issue raised by the parties before the Arbitrator in respect the arbitrability of Item No.5 (b) and (c) of the settled claims, and Counsels for the parties had made their respective submissions in that respect before the joint arbitrators. It would appear to me that the petitioner urged the question today, in Court, was because the award made was not to the satisfaction of the petitioner. I am of the firm view that the joint arbitrators made their award having arbitrated on the issues referred to them by the parties, and there was no reason to assume that they had traveled out of the parameters of the contract. The petitioner was unable to substantiate, in any manner whatsoever, that there was an error apparent on the face of the non-speaking award, or that the joint arbitrators had relied on an incorrect principle of law in making of the award. 8. For those reasons this application is dismissed. The petitioner shall pay costs of this application assessed at 500 GMs. A xerox of this judgment duly signed by the Assistant Registrar of this Court shall be made available to the parties upon their Advocates-on-record undertaking to apply for and obtain certified copy of this judgment on payment of the usual charges.