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2004 DIGILAW 1324 (PNJ)

Union of India v. Suman Construction Company

2004-12-07

M.M.KUMAR

body2004
JUDGMENT M.M. Kumar, J. - This petition filed under Section 115 of the Code of Civil Procedure, 1908 prays for quashing judgment and decree dated 16.3.2004 passed by the learned Addl. District Judge, Chandigarh making the award dated 1.2.1994 as the Rule of the Court. 2. On the basis of certain differences which have arisen between the parties a Chief Engineer, Chandigarh Zone was appointed as a sole arbitrator in terms of arbitration Clause contained in a contract bearing No. CWE/PAT-10/899-90 dated 7.7.1989 duly entered between the parties. The contract was for making provision of Mosquito proofing for OTM and marriage accommodation at Nabha. On reference the arbitrator entertained the reference on 28.8.1993. Under the various heads of claim, the arbitrator had awarded a total amount of Rs. 1,58,000/- along with 12% interest for pre-reference period @ 12% per annum pendente lite interest from 29.8.1993 to the date of award @ 12% per annum on all amounts awarded in favour of the contractor and future interest @ 12% per annum till the payment of the awarded amount. The petition under Section 14(2) read with Section 17 of the Arbitration Act, 1940 (for brevity the Act) was filed by the Contractor-respondent. The Civil Judge sustained the objections raised by the petitioner and the award dated 1.2.1994 was set aside. The case was remitted to the Arbitrator under Section 16 of the Act to decide the claim of the parties afresh. However, the contractor filed an appeal before the learned Addl. District Judge. After examining the whole record and hearing learned counsel for the parties, the learned Addl. District Judge concluded that there was no legal infirmity in the award as sufficient reasons have been recorded by the arbitrator as per the requirement of amendment No. 41 of IAFW 2249. The learned Addl. District Judge has placed reliance on a judgment of the Supreme Court delivered by a Constitution Bench in the case of Goa, Daman and Diu Housing Board v. Ramakant V.P. Darvetkar, (1991)4 Supreme Court Cases 293. The view taken is that the Supreme Court in that judgment had sustained a similar type of award overruling the objections. In this regard, para 12 of the judgment of the learned Addl. The view taken is that the Supreme Court in that judgment had sustained a similar type of award overruling the objections. In this regard, para 12 of the judgment of the learned Addl. District Judge is relevant and deserves to be quoted which reads as under :- "After examining the impugned award and the impugned order passed by lower Court, I am constrained to hold that the award does not suffer from any infirmity and lower Court erred in setting aside the same. The approach of lower Court in holding the award to be without reasons is erroneous on the face of it. The arbitrator in this case was of the rank of Chief Engineer. The whole material pertaining to the contract was before him when he was dealing with the reference. Having dealt with the contentions raised by the parties he appraised the same in the light of the material on file and then formed his opinion as to what extent the claim was correct. Before reaching the conclusion he had specifically mentioned in the award itself that having examined the aspects including the evidence put forth before him during hearing both the parties by way of oral submissions and documents he had given the award. Taking up claims and counter-claims one after other he analyzed [to ? sic] the contentions raised by both the parties in support of their claims and counter-claims and, thereafter, gave his findings. He did not endorse the contentions as they (? sic)) were rather applied his mind after going through the evidence on file and then awarded the amount under each claim. The arbitrator was not required to give detailed reasoning as the Courts do while deciding the case. In the case in hand, there is nothing to show that the arbitrator misconducted himself or the proceedings in any other manner, nor there is anything to show that the award has been improperly procured. There is no allegation, far less, any finding, that the arbitrator was biased or unfair or he has not heard both the parties or he has not fairly considered the submissions of the parties while making the award in question. It is evident from the award that the arbitrator has considered all the specific issues raised by the parties in the arbitration proceedings and came to his finding after giving cogent reasons. It is evident from the award that the arbitrator has considered all the specific issues raised by the parties in the arbitration proceedings and came to his finding after giving cogent reasons. The award cannot under any circumstances be considered to be made by the arbitrator without recording any reasons in the same. In such circumstances, it is not proper to hold that the arbitrator has misconducted himself in the proceedings in the matter of giving the award. The award cannot be said to be bad for non-recording of the reasons. The reference in this regard can also be made to the authority of the Apex Court reported Goa, Daman & Diu Housing Board v. Rama Kant V.P. Darvetkar 1991(4) Supreme Court Cases 293, where in a similar case the award was sustained." 3. Mr. M.S. Guglani, learned counsel for the petitioner has argued that the Additional District Judge has reversed the well reasoned judgment passed by the Civil Judge, who recorded the finding that no reason has been recorded by the arbitrator by erroneously holding that the reasons have been recorded and, therefore, the award is sustainable. Referring to the award, learned counsel has pointed out that no reasons whatsoever are forthcoming from the reading of the award which is obligatory upon the arbitrator to record as per amendment No. 41 of Clause 17 of the general conditions of the contract that the award has to be speaking and reasoned one. In support of his submission, learned counsel has placed reliance on the judgment of the Supreme Court in the case of Pure Helium India Private Limited v. Oil and Natural Gas Commission, 2003(1) Supreme Court Weekly 5274 and Food Corporation of India v. Jagdish Chandra Saha, AIR 1994 Supreme Court 219. Learned counsel has also submitted that the amount awarded under & claim No. 2 is wholly arbitrary as only Rs. 6989.72 could have been awarded whereas an amount of Rs. 37,500/- has been awarded. 4. Mr. S.P. Gupta, learned counsel for the contractor has supported the view taken by the learned Addl. District Judge by submitting that a perusal of the opening para of the award would show that the arbitrator has examined all aspects including the evidence put forth before him during the hearing by way of oral submissions and documents. 4. Mr. S.P. Gupta, learned counsel for the contractor has supported the view taken by the learned Addl. District Judge by submitting that a perusal of the opening para of the award would show that the arbitrator has examined all aspects including the evidence put forth before him during the hearing by way of oral submissions and documents. The learned counsel has further pointed out that if award is examined claim-wise, various claims have been considered and awarded after due consideration of the contention raised before the arbitrator. The arbitrator is a person of high credentials being a Chief Engineer and the amounts awarded are modest and well considered. The learned counsel has referred to the judgment of the Constitution Bench in the case of Ramakant V.P. Darvetkar (supra) and argued that there is not even a whisper by the petitioner that the arbitrator has misconducted himself or the contractor has procured the award by some unfair practice. In the absence of such allegations and the presence of reasons given by the arbitrator, no exception could be taken to the view of the learned Addl. District Judge. 5. I have thoughtfully considered the respective submissions made by the learned counsel for the parties and regret my inability to accept the arguments raised by the learned counsel for the petitioner. It is well settled proposition of law that scope of interference in an award passed by the Arbitrator is limited to the grounds specified by Section 30 of the Act. Accordingly, the Courts are well within their jurisdiction to interfere by setting aside the award on the grounds : (a) that the Arbitrator has misconducted himself or the proceedings : (b) or that an award has been made after issuance of the order by the Court superseding the arbitration or after arbitration proceedings have become invalid by virtue of Section 35 of the Act; and (c) or that an award has been improperly procured or is otherwise invalid. 6. A limited and restricted scope has been carved out for interference on account of the fact that the parties have voluntarily agreed by their contract for a reference of their dispute to the Arbitrator. 6. A limited and restricted scope has been carved out for interference on account of the fact that the parties have voluntarily agreed by their contract for a reference of their dispute to the Arbitrator. In the case of Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and another, (1999)9 SCC 283, their Lordships of the Supreme Court considered the plethora of case law and then concluded in para 44 as under : 44. From the resume of the aforesaid decision, it can be stated that : (a) It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. (b) It is not open to the Court to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award. (c) If the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his adjudication then the Court cannot interfere. (d) If no specific question of law is referred, the decision of the arbitrator on that question is not final, however, much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. In a case where a specific question of law touching upon the jurisdiction of the arbitrator was referred for the decision of the arbitrator by the parties, then the finding of the arbitrator on the said question between the parties may be binding. (e) In a case of non-speaking award, the jurisdiction of the Court is limited. The award can be set aside if the arbitrator acts beyond his jurisdiction. (f) To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. The arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award. (g) In order to determine whether the arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant could raise a particular claim before the arbitrator. The arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award. (g) In order to determine whether the arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant could raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or give the arbitrator the power to decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim then the award passed by the arbitrator in respect thereof would be in excess of jurisdiction. (h) The award made by the arbitrator disregarding the terms of the reference or the arbitration agreement or the terms of the contract would be a jurisdictional error which requires ultimately to be decided by the Court. He cannot award an amount which is ruled out or prohibited by the terms of the agreement. Because of a specific bar stipulated by the parties in the agreement, that claim could not be raised. Even if it is raised and referred to arbitration because of a wider arbitration clause such claim amount cannot be awarded as the agreement is binding between the parties and the agreement is binding between the parties and the arbitrator has to adjudicate as per the agreement. This aspect is absolutely made clear in Continental Construction Co. Ltd. by relying upon the following passage from Alopi Parshad v. Union of India which is to the following effect : (SCC p. 88, para 5) "There it was observed that a contract is not frustrated merely because the circumstances in which the contract was made, altered, express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the Courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous." (i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action. (j) The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks just and reasonable; the arbitrator is a tribunal selected by the parties to decide the disputes according to law. (emphasis added) The afore-mentioned view has been approved and followed by the Supreme Court in the case of Pure Helium India Private Limiteds case (supra). 7. If the above principles are applied to the facts of the present case, non-recording of reasons in any case would not constitute a ground to set aside the award because it would not amount to misconduct on the part of the Arbitrator nor it would result into misconducting the proceedings. It can also not be accepted that the award was improperly procured or is even otherwise invalid. 8. Even otherwise, I find that the ld. Addl. District Judge has rightly placed reliance on a judgment of the Supreme Court in the case of Goa Daman and Diu Housing Board v. Rama Kant V.P. Darvotkar, 1991(4) SCC 293, by recording the finding that there was nothing on the record to show in the instant case that the Arbitrator misconducted himself or the proceedings in any manner nor there is anything to establish that the award was arbitrarily procured. There is not even a whisper that the Arbitrator was biased or unfair or he did not furnish opportunity of hearing to both the parties or has failed to consider their submissions in framing his award. The conclusions reached by the ld. Addl. District Judge and based on adequate reasons. There is not even a whisper that the Arbitrator was biased or unfair or he did not furnish opportunity of hearing to both the parties or has failed to consider their submissions in framing his award. The conclusions reached by the ld. Addl. District Judge and based on adequate reasons. The award has been pronounced after examining the whole record, respective submissions of the learned counsel for the parties, the oral as well as documentary evidence. Therefore, no legal flaw warranting admission of this petition could be found. 9. The argument of the learned counsel that in claim No. 2 the amount of Rs. 37,500/- had been arbitrarily awarded would not require any detailed consideration because (a) an error of fact in recording his conclusion on the disputed question submitted for the adjudication of the Arbitrator cannot be rectified by the interference of the Court. Reference in this regard may profitably be made to the observations of the Supreme Court in Rajasthan State Mines and Minerals Ltd.s case (supra); (b) it has further been observed by the Supreme Court that it would not be open to the Court to speculate in cases where no reasons are given by the arbitrator as to what impelled the Arbitrator to arrive at his conclusion as it is impermissible to probe the mental process by which the Arbitrator has reached the conclusion; whereas in the present case it has factually been found that specific reasons have been recorded by the Arbitrator. Therefore, there is no substance in the arguments raised and I have no hesitation in rejecting the same. For the reasons recorded above, this petition fails and the same is hereby dismissed. Petition dismissed.