Manager, Electric (DHP), Kishtwar v. Om Raj Manhas
2000-02-15
G.L.RAINA
body2000
DigiLaw.ai
This appeal is directed against the order and the decree dated 29-8-1998 passed by Additional District Judge, Kishtwar. 2. The Court below accepted, vide the impugned order, the arbitrators award and made it the rule of the Court whereby the claim of respondent, Mr. Om Prakash Manhas, got decreed for the recovery of Rs. 1,55,355/- with 12% interest thereon from 25-4-1992 to 21-7-1998. 3. The reference to the arbitration related to the dispute with respect to the installation of 750 Nos. of fluroescent tube lights, with the necessary fittings, in the premises/work spots identified by the Engineering personnel of the Dulhasti Project, Kishtwar, of the National Hydroelectric Power Corporation Ltd. (hereafter referred to as the Project). The dispute having arisen, request appears to have been made to the Chief Engineer in terms of the agreement of contract, to refer it to the arbitrator. The approach by the contractor to the Chief Engineer for reference did not ex facie fructify with the result that the District Court at Kishtwar was approached by the contractor for issuance of direction to the Chief Engineer of the Project for making the reference of the dispute. 4. The perusal of the record reveals that despite Courts direction, dated 15-12-1995, to the Chief Engineer for appointment of the arbitrator, the controversy/dispute did not get resolved, it appears further from the order of the Court dated 24-11-1997 that the Chief Engineer of the Project appointed Justice Rajinder Sachar (Rtd.) as the arbitrator. The so appointed arbitrator declined to enter upon the reference whereat the Chief Engineer appointed Mr. O. P. Boni, Retired Chief Engineer, as the Arbitrator. This was not acceptable to the contractor, who accordingly approached the Civil Court seeking appointment of an arbitrator for resolving the dispute in reference. The learned District Judge after taking note of the circumstances in which the request for appointment of the Arbitrator was made felt that it would be just and fair for the Court to appoint the Arbitrator. It was thereon that on the consensus of the counsel for the parties that Mr. Om Prakash Chowhan, Superintending Engineer, Electricity, Jammu, was appointed the Arbitrator. 5. The matter thus went to the appointed ¢Arbitrator who on notice to the parties sought their statements about their respective claims and thence raised the relevant issues.
It was thereon that on the consensus of the counsel for the parties that Mr. Om Prakash Chowhan, Superintending Engineer, Electricity, Jammu, was appointed the Arbitrator. 5. The matter thus went to the appointed ¢Arbitrator who on notice to the parties sought their statements about their respective claims and thence raised the relevant issues. The parties adduced oral as well as documentary evidence in support of their respective claims/contentions and the Arbitrator thereafter published the award on 21-7-1998 whereby the contractor was held to be entitled to recover the decreed amount from the project in reference. The award was filed in the Court of Additional District Judge, Kishtwar. The Project filed, through its Manager, Electrical, the objections to the award seeking its setting aside on the grounds: - i) that the Arbitrator had been appointed in contravention of and in derogation to the terms and conditions of the agreement; ii) that the Arbitrator committed misconduct in relation to the proceedings as the necessary issues were not raised; iii) that the award is the result of non-appreciation of the evidence adduced by the respondents; iv) that the award of interest @ 12% per annum from April, 1992 to November, 1997 is bad in law; v) that during the pendency of the arbitration proceedings, the non-petitioner i.e. the Project, came to find that the contractor was related to the Arbitrator so his replacement having been sought, the request was turned down by the Court. 6. Heard. 7. Section 39 of the Arbitration Act permits the filing of an appeal against an order which has refused to set aside the award or an order which sets aside the award. Section 17 of the Act provides, besides other things, that where the Court sees no cause to set aside the award, it shall proceed to pronounce the judgment according to the award and upon the judgment so pronounced, a decree shall follow. This section provides that no appeal shall lie from such a decree except on the ground that it is in excess or not otherwise in accordance with the award. 8. Conjoint reading of these two statutory provisions shows that no appeal can lie against the decree passed on acceptance of the award but Section 39 leaves scope for scrutiny of the order setting aside or refusing to set aside an award. 9.
8. Conjoint reading of these two statutory provisions shows that no appeal can lie against the decree passed on acceptance of the award but Section 39 leaves scope for scrutiny of the order setting aside or refusing to set aside an award. 9. Here in this case the appeal is directed against the order of the learned Additional District Judge who has refused to set aside the award. The appeal is thus competent. 10. The memo of appeal besides other contentions makes the averment that the award suffers from legal infirmity as it has been passed without joining the NHPC as the party though it was a necessary party in that the contract in reference was entered into for and on behalf of the NHPC. This ground was not taken either before the District Court which made the reference or before the Arbitrator. This objection was, not again raised before the Court which made the rule of the Court. It is for the first time that this objection has found reflection in the memo of appeal. The counsel appearing for the appellant perhaps was conscious of the untenability of the objection of the alleged non-joinder of the party and that is why the Court was not addressed on this aspect of the matter. The objection taken as to the non-joinder of the alleged necessary party cannot prevail now as it has been taken belatedly and half-heartedly. Otherwise also there is no force in the contention that the award deserved to be set aside on this count. 11. The appellants have made reference to interim orders passed, after the award had been published and filed, to canvass that the Court faultered as the objections filed against the award were not considered and the matter was heard by the Court before the objections had as a matter of fact been filed. This is not the correct factual position. The orders recorded by the Court on 12-8-1998 and 25-8-1998 show that after the objections had been filed on behalf of the Project and after hearing the counsel appearing for it the learned Judge turned down the objections and refused to set aside the award.
This is not the correct factual position. The orders recorded by the Court on 12-8-1998 and 25-8-1998 show that after the objections had been filed on behalf of the Project and after hearing the counsel appearing for it the learned Judge turned down the objections and refused to set aside the award. It is a total mis-statement of fact that the Court below passed the impugned order in hot haste without following the procedure of giving reasonable opportunity to the aggrieved party to prove the grounds of alleged misconduct of the Arbitrator. 12. The order and the decree are assailed on yet another ground. It is pleaded that the arbitration clause in the contract provided that the Chief Engineer, NHPC, alone was competent to appoint the arbitrator for adjudication of disputes between the Project Management and the contractor. It is averred further that the Court travelled beyond the scope of arbitration clause and appointed the Arbitrator at the request of the contractor. It is in this context pleaded in the memo of appeal that this objection was taken before the Court in support of the request to set aside the award, but it has not been considered. 13. Perusal of the objections filed against the award goes to show that the award was challenged on the ground of being published by the arbitrator who had not validly been appointed. This argument could have perhaps carried the day for the appellants but the minutes of the proceedings in the Court at the pre-reference stage go to show that the arbitrators appointed by the Chief Engineer either refused to enter upon the reference or the appointment was in total disregard of the Court directions issued at the pre-reference stage. In the circumstances the Court felt it to be just and fair to appoint the arbitrator. It was with the consent and on the consensus of the parties, projected through their counsel, that Mr. O. P. Chouhan, Superintending Engineer, was appointed the Arbitrator. This appointment was not questioned by the Project which instead submitted to the jurisdiction of the arbitrator by presenting its case before him. Put in other words the Project acquiesced in the appointment of the arbitrator by the Court.
O. P. Chouhan, Superintending Engineer, was appointed the Arbitrator. This appointment was not questioned by the Project which instead submitted to the jurisdiction of the arbitrator by presenting its case before him. Put in other words the Project acquiesced in the appointment of the arbitrator by the Court. Having submitted to the arbitration proceedings before the Arbitrator appointed by the Court, the Project cannot be permitted to thwart the result of the proceedings by turning about to plead that the Arbitrator had no jurisdiction to enter upon the reference as he was appointed by the Court and not by the Chief Engineer. A party who stands by the arbitrator, knowing him to be not validly appointed, and takes his chance of the award turning about to be favourable to him in spite of such defective appointment cannot be permitted at a subsequent stage to put forward that ground if the award turns out against him. The policy of the law requires that either of the parties to the dispute should at once bring to the notice of the Court the bad appointment of an arbitrator or his partiality so that proceedings before such arbitrator may not be allowed to continue. 14. If the Court had wrongly nominated the arbitrator and made reference of the dispute to him for adjudication that order could have been challenged under Section 39 of the Arbitration Act. Instead of challenging the appointment of the arbitrator by the Court the Project submitted to his jurisdiction perhaps under the expectations that the award will turn out to be in its favour and thus took the chance to put forward Its case before him. It cannot be now allowed to turn round and challenge the appointment of the arbitrator on the score that it was only the Chief Engineer who could have appointed the arbitrator and not the Court. The objection is on the face of it belated and motivated to get rid of the award which has turned out to be in favour of the contractor and against the Project. I am thus not inclined to accept the plea that the award had been published by an arbitrator who was not duly appointed in terms of the contract/agreement between the parties. 15. The order and the decree in reference are challenged on yet another ground; namely that the Arbitrator committed misconduct in not framing all the issues.
I am thus not inclined to accept the plea that the award had been published by an arbitrator who was not duly appointed in terms of the contract/agreement between the parties. 15. The order and the decree in reference are challenged on yet another ground; namely that the Arbitrator committed misconduct in not framing all the issues. On perusal of the record of the arbitration proceedings, as also the award, it transpires that the arbitrator raised as many as five issues which emerged from the claim and the counter-claim. It is not even now shown as to which is that averment about which the necessary issue has not been raised. This objection thus needs only to be noticed. The raising of issues is not the sine qua non for the resolution of a dispute, contours whereof are from the very beginning known to the parties. Law needs hardly to be cited that even in civil proceedings non-raising of the issues does not render the final judgment and decree a nullity unless it is shown that the non-raising of the issues or of the necessary issues has resulted in such a prejudice against the complaining party which has caused miscarriage of justice. 16. Perusal of the objections filed against the acceptance of the award goes to show that the request for recasting of the issues was turned down vide the order dated 6-5-1998 by the Arbitrator. It appears that the grievance projected by the Project was that the onus of proof of the issues had not properly been placed so the request for recasting. This prayer was rightly turned down by the Arbitrator as the issues had been raised in presence of the counsel for the parties and no-objection to their nature or scope was pointed out at that time. 17. The question of burden of proof looses its all significance when the parties adduce evidence on the issues raised. Presuming that the Arbitrator had wrongly placed the burden of proof of the issues yet that question Is of no consequence now as the parties have adduced evidence and on appreciation thereof, the award has come Into existence, 18. The order and the decree in reference are challenged on the ground that they are the result of non-appreciation of evidence.
Presuming that the Arbitrator had wrongly placed the burden of proof of the issues yet that question Is of no consequence now as the parties have adduced evidence and on appreciation thereof, the award has come Into existence, 18. The order and the decree in reference are challenged on the ground that they are the result of non-appreciation of evidence. Having taken this objection, the appellant appears to have subsequently become conscious of its non-maintainability and that is why no arguments were advanced to canvass the alleged non-appreciation and the resultant effect on the award. It is not shown as to where has the Arbitrator faultered in not appreciating the evidence adduced on behalf of the Project. The objection is thus overruled. 19. The Arbitrator has allowed the interest at the rate of 12% per annum from April, 1992 to November, 1997, The question that can arise in this context is whether the Arbitrator could have allowed interest, on the sum found due, for any period prior to the order of reference. 20. Reference to arbitration was made by the Court on 31 -5-1997 and the application on which the reference was made did not make a request for referring the claim to interest for arbitration. Delving on this point it can be contended that in the absence of reference to the Arbitrator for adjudication on the claim of interest for a period prior to the date of reference, the award for interest on the amount found due from any date prior to date of reference is bad in law. Put in short the Arbitrators award granting interest can be challenged. 21. It appears from the award that the contractor had presented on 24-4-1992 the claim for the amount of Rs. 1,66,500/- before the Management of the Project. It thus appears that the Arbitrator has allowed interest from the date when the cause of action accrued, that is the date when the claim was preferred but not paid. The record of the arbitration proceedings gives out that the arbitrator entered upon the reference on 5-1-1998. The application on which the arbitrator was appointed and reference made did not, as said above, make any claim to interest on any amount. The order of reference also does not show it that any claim to interest, prior to the date of reference that is 24-11-1997, was made by the contractor.
The application on which the arbitrator was appointed and reference made did not, as said above, make any claim to interest on any amount. The order of reference also does not show it that any claim to interest, prior to the date of reference that is 24-11-1997, was made by the contractor. Put in other words, no claim to interest was projected either in the application seeking reference to Arbitrator nor was such a reference by the Court. The Arbitrator nonetheless came to award interest at 12% per annum on the amount found due from the date of cause of action. 22. The question that requires to be addressed is whether the arbitrator was competent to award interest for the period prior to the order of reference. This question is settled by the decision in case State of Orissa v. B. N. Agarwal. AIR 1997 SC 925. This has been followed by the Division Bench decision of this Court in CIMA No. 28/1992. 23. The settled law is that the Arbitrator can award interest for the pre-reference period only if such a claim can be based on a substantive law or express contract or on the basis of trade-usage. Admittedly there is no substantive law, as the Interest Act of 1937, applicable so as to empower the Arbitrator to award interest on the adjudged sum for the pre-reference period. No contract is shown to have existed between the parties to this case whereby interest on the adjudged sum from the date of claim till the date of reference could be allowed. It too is not even whispered much less proved that by any trade-usage or practice the interest for pre-reference period could be allowed by the Arbitrator. 24. The Arbitrator has the jurisdiction to award interest for pendente lite period wherefor the only requirement was to show that it was not prohibited by the contract between the parties. Interest for pendente lite period, that is from the date of reference to the date of award can, in the absence of contract to the contrary, be awarded by the Arbitrator. 25.
Interest for pendente lite period, that is from the date of reference to the date of award can, in the absence of contract to the contrary, be awarded by the Arbitrator. 25. On the touch-stone of the legal position it is held that the Arbitrator in the case at hand had no power to grant interest for the pre-reference period as no such right had the basis in any substantive law nor did presumably the agreement provide for payment of interest for that period. The existence of usage to justify the payment of interest for the pre-reference period is nowhere pleaded muchless established. The Arbitrator was therefore wrong to allow the interest from 26-4-1992, that is the date of accrual of the cause of action up to 24-11-1997, that is the date of reference. The award allowing interest at the rate of 12% per annum on the sum adjudged due, that is Rs. 61.845/-, for this period is disallowed. 26. The arbitrators award for payment of interest at the rate of 12% per annum on the sum adjudged that is Rs. 61.845/- @ 12% from the date of reference that is 24-11-1997 to the date of award that is 21-7-1998 is hereby allowed. 27. It is in the above context to be noticed that having assessed and determined the cost of installation of the Installed tube lights and fittings for 665 Nos. at Rs, 1,74.630/- the contractor was paid Rs. 85,785/- and thereby only the amount of Rs. 61,845/- remained due from the Project to the contractor, interest has to be allowed only on this amount and not on the amount of compensation for damages or litigation expenses. 28. The ground taken to assail the impugned order and decree is that the Arbitrator has committed misconduct in that he being related to the contractor ought not to have entered upon the reference and the Court committed error in not replacing the Arbitrator despite written request to that effect having been made. 29. It is pertinent in this context, to refer to the objections that were filed against the award. It came to be averred in para No. 1 of the objections that during the pendency of the proceedings before the Arbitrator, the Project came to know that the contractor and the Arbitrator were related to each other and this relationship resulted in the arbitrators leaning in favour of the contractor.
It came to be averred in para No. 1 of the objections that during the pendency of the proceedings before the Arbitrator, the Project came to know that the contractor and the Arbitrator were related to each other and this relationship resulted in the arbitrators leaning in favour of the contractor. This is projected to be the Arbitrators misconduct, sufficient to set aside the award. 30. It is not in the first place indicated either in the objections or otherwise as to what is the alleged relationship between the contractor and the Arbitrator. The objection has been projected in vague terms. Again it is not shown as to how the Arbitrator exposed himself to the charge of having leaned in favour of the contractor. In the absence of necessary details and particulars either of the alleged relationship or the alleged misconduct in proceedings, it is difficult to countenance the argument that the award of the Arbitrator, to whose jurisdiction parties submitted themselves, deserves to be ignored and set aside. A party which submits to the partial Arbitrator knowing him to be partial but takes the chance of the award coming out to its favour in spite of such partiality cannot be permitted to put forward that ground when the award ultimately turns out against him. An Arbitrator has always to be fair, disinterested and impartial and the law does not permit any speculation or gamble on this basic requisite fundamental of the Arbitrator. If the party does speculate or gamble on that point, it does so at its own peril. 31. The policy as already stated is that the party smelling partiality of the Arbitrator at the proceedings should at once bring it to the notice of the Court so that such proceedings are not allowed to continue or else such a ground cannot be allowed to be projected to set aside the award at a latter stage, 32. If it was a fact that the Arbitrator was related to the contractor and this came to the notice of the Project during the pendency of the Arbitration proceedings, it ought to have brought it to the notice of the Court and sought replacement of the Arbitrator. 33.
If it was a fact that the Arbitrator was related to the contractor and this came to the notice of the Project during the pendency of the Arbitration proceedings, it ought to have brought it to the notice of the Court and sought replacement of the Arbitrator. 33. The record of the Court shows that an application came to be filed on behalf of the Project on 24-3-1998 praying that as the Arbitrator and the contractor were related and hailing from the same area, so the Arbitrator who had expressed his pre-framed opinion as to the genuineness of the contractors claim deserved to be removed. This application remained undecided till 3-8-1998 when it was simply filed by the Court. This means that the application was not allowed by the Court. The minutes of the proceedings before the Arbitrator do show that having on the one hand not perused the application for removal of the Arbitrator, the appellant herein submitted to his jurisdiction. The record shows that the appellant did not press motion for the removal of the Arbitrator as it not only participated in the proceedings but even adduced evidence in support of their contentions before the Arbitrator. This circumstance goes to show that the so-called partiality of the arbitrator, on account of his undisclosed relationship with the contractor, was not taken seriously by the appellant. Having entrusted their fate into the hands of the Arbitrator despite having sought his removal on the ground of his relationship with the contractor, the project cannot be now heard to say that the Arbitrator was not disinterested or impartial. Prayer for his removal on the ground of the alleged relationship has thus in the circumstances to be inferred, to be waived. This is evidenced by the express and intentional act on the part of the management of the Project which, despite the knowledge of such alleged relationship, participated in the proceedings by cross examining the contractor and by adducing their evidence to rebut the claim.
This is evidenced by the express and intentional act on the part of the management of the Project which, despite the knowledge of such alleged relationship, participated in the proceedings by cross examining the contractor and by adducing their evidence to rebut the claim. It can be said in other words that if it was a fact that the arbitrator was related to the contractor and the management came to know about the relationship during the pendency of the arbitration proceedings, then one cannot see any reason as to why did it not press the application for the removal of the Arbitrator and why did they submit to his jurisdiction by participating in the proceedings. Having allowed the arbitrator to carry on with the arbitration proceedings without any serious objection or protest, it can be deduced that the management of the project waived the objection. 34. It appears that the appellant wanted to take the chance of a decision being given by the Arbitrator in its favour and that is why it participated in the proceedings before the Arbitrator. Now as the award has been passed against the appellant, it cannot be allowed to question the award on the alleged ground of relationship of the contractor with the Arbitrator. It can safely be deduced that the appellant accepted the Arbitrator and waived the objection of his relationship with the opposite party with full knowledge of their legal rights. It is indicated by the record that the ground for changing/ removal of the Arbitrator was clearly an after thought attempt aimed at introduction of a ground to avoid the award if it went against the appellant. 35. If the Arbitrator is shown to be partial and have bias it will amount to mis-conduct which in turn will be sufficient to set aside the award. Allegation of mis-conduct must, however, be with necessary particulars and must be explicit. The broad allegation of mis-conduct on account of relationship, the particulars whereof are not disclosed, is not enough. Having not disclosed the particulars of the alleged relationship between the contractor and the Arbitrator, it cannot be countenanced that the relationship was such as could have led to the bias in favour of the contractor.
The broad allegation of mis-conduct on account of relationship, the particulars whereof are not disclosed, is not enough. Having not disclosed the particulars of the alleged relationship between the contractor and the Arbitrator, it cannot be countenanced that the relationship was such as could have led to the bias in favour of the contractor. Having participated in the proceedings before the Arbitrator with full knowledge of the alleged relationship, the award cannot be interfered with on the ground that the Arbitrator has mis-conducted himself or mis-conducted the proceedings. The law is well settled that even an award made by a party itself is valid if the other party has agreed to refer the dispute to it. Viewed from that position, it cannot be said that the grounds exist to interfere with the award on the vague allegation that the Arbitrator was related to the contractor or that the Arbitrator had bias against the appellant. 36. The order of the Court whereby the award has been made rule of the Court permits limited interference in that the interest part of the award has not been dealt with by the Court. The Arbitrator could not have allowed interest on the amount ad-judged due under the contract for any period prior to the date of reference. No prayer was made for reference to arbitration to the claim of interest from the date of reference till the award. Now that the Arbitrator has allowed interest from the date of reference to the date of award on the adjudged amount of Rs. 61.845/-, interest @12% per annum thereon shall be available to the contractor from the date of reference that is 23-11-1997 till the date of award and from the date of decree till realisation. The contractor shall be entitled to the litigation expenses assessed at Rs. 5000/- by the Arbitrator. This is so because the judgment debtor has not thrown any challenge thereto. 37. The appeal thus stands partially allowed. Decree sheet be drawn up accordingly.