Research › Search › Judgment

J&K High Court · body

2004 DIGILAW 155 (JK)

Mohd. Ummar Nizami v. State

2004-05-19

Y.P.NARGOTRA

body2004
Tenders were invited by the respondents for execution of work of widening of NHIB K.Ms.8, 9, &10 vide NIT No. 16 dated 10.7.1979. The petitioner who is a contractor submitted his tender which was accepted, consequently said work came to be allotted to the petitioner vide allotment letter No. NHIB/Contract/23-25/CEJ/Camp Srinagar dated 30.4.1980. After completion of the work payment for the work done was made to the contractor through six bills. As per running claim of the petitioner 7th running bill was also prepared by the Section Officer concerned for an amount of Rs. 10, 98,071.56 but the payment on this bill was not made. As the claim of the petitioner in respect of 7th bill was disputed by the respondents he filed a petition u/s 20 of the Arbitration Act raising a claim under different heads for an amount of Rs. 85,87,071.56. Interest @ 24% per annum was also claimed. As the respondents were disputing the right of the petitioner to recover the said amount from them the petitioner prayed for referring the dispute to the arbitrator in terms of clause 58 of the agreement, which was executed between the parties at the time of allotment of work. After entertaining the petition u/s 20 notices were issued to the respondents who did not appear to contest the petition, as such the respondents were set ex-parte and the petition was disposed of vide order of the court dated 25.10.1991 with a direction to the Advisor to the Governor who was exercising powers of Minister Incharge Works Department to nominate an arbitrator for adjudicating upon the dispute raised by the petitioner. However, arbitrator was not nominated and appointed by the Advisor in compliance to the court order, the petitioner filed CMP No. 47/92 seeking appointment of arbitrator through court. That CMP was allowed vide order dated 1.9.1992 and the then Chief Engineer Sheikh Ghulam Mustafa was appointed as Arbitrator. It was made clear in the order that appointment of Sheikh Ghulam Mustafa as arbitrator shall not be treated as ex-officio. Consequent upon his appointment the arbitrator entered upon the reference in respect of the disputes referred by the court. Parties laid their respective claims before the arbitrator. The arbitrator after examining the record and the evidence tendered made and published his award dated 22.7.1994. Out of the amount claimed by the petitioner the arbitrator award a sum of Rs. Consequent upon his appointment the arbitrator entered upon the reference in respect of the disputes referred by the court. Parties laid their respective claims before the arbitrator. The arbitrator after examining the record and the evidence tendered made and published his award dated 22.7.1994. Out of the amount claimed by the petitioner the arbitrator award a sum of Rs. 10,86,071.56P in favour of the petitioner. Interest @ 12% P.A. with effect from April 1983 on the award amount till payment was also allowed. 2. The award of the arbitrator came to be filed in the court for making it rule of the court, whereupon notices were issued to the parties. The petitioner contractor has not challenged the award and in this behalf it has been prayed that the same be made rule of the court. The respondents however filed an application u/s 30 A.A. for challenging the award inter alia on the ground of misconduct of the arbitrator. Objections to this application were filed by the petitioner-contractor. 3. From the pleadings of the parties following issues were framed:- 1- Whether the arbitrator has misconducted himself as well as the proceedings, if so what is its effect? 2- Relief. 4. Both the parties were called upon to lead their evidence in support and in rebuttal of the issues. The petitioner-contractor has filed his own affidavit whereas on behalf of the respondents affidavit Ch. Allaodin, Executive Engineer R&B Ramban has been filed. 5. I have heard the learned counsel for the parties and perused the record of the case thoroughly. 6. Mr. Kotwal learned counsel for the State has contended that the award of the arbitrator is vitiated because of the reason that the arbitrator was not competent to act as arbitrator as he himself was the Chief Engineer and was a party to the decision taken by his subordinate, Executive Engineer, in respect of the work allotted to the contractor. Learned counsel for the petitioner, Mr. Thakur, however, has argued that the contention of Mr. Kotwal is without any merit for the reason that independent arbitrator was appointed by the court on 1.9.1992. Learned counsel for the petitioner, Mr. Thakur, however, has argued that the contention of Mr. Kotwal is without any merit for the reason that independent arbitrator was appointed by the court on 1.9.1992. This order was never challenged by the State before any forum and this part the State has participated in the proceedings and submitted to the jurisdiction of the arbitrator and therefore it does not lie in the mouth of the State-respondent to say that the arbitrator was not competent to adjudicate upon the disputes. 7. I am in agreement with learned counsel for the petitioner. The respondent-state had not filed any appeal for challenging the appointment of the arbitrator, Sheikh Ghulam Mustafa and had also participated in the proceedings and submitted to the jurisdiction of the arbitrator, therefore, it cannot be allowed to urge that the arbitrator was not competent to conduct the arbitration proceedings. In case titled J.K. Cotton Spg.Mills v. Union of India, AIR 1988 SC 205 it was held as follows:- "Where though a party is aware from the beginning that by reason of some disability the matter is legally incapable of being submitted to arbitration, participates in arbitration proceedings without protest and fully avails of the entire arbitration proceedings and then when he sees that the award has gone against him comes forward to challenge the whole of the arbitration proceedings as without jurisdiction on the ground of a known disability, the same cannot be allowed. This principle applies both before and after making of the award. The principle is that a party shall not be allowed to blow hot and cold simultaneously. Long participation and acquiescence in the proceedings preclude such a party from contending that the proceedings were without jurisdiction." 8. Likewise in case Rajesh Dhar v Chief Engineer, AIR 2000 J&K 100 the court held:- "To the contrary what to talk of objecting to the appointment of the arbitrator on the grounds now being urged to question his engagement, respondents submitted to his jurisdiction, participated in the proceedings regularly from 1990 i.e. date of his appointment till he passed the final award. Thus only when the award has gone against the respondents that the objections have been raised. Impugned award further indicates that time was extended during the currency of the arbitration proceedings before Arbitrator with the consent of the parties as also under the orders of the court. Thus only when the award has gone against the respondents that the objections have been raised. Impugned award further indicates that time was extended during the currency of the arbitration proceedings before Arbitrator with the consent of the parties as also under the orders of the court. This is not a case where respondents were not aware about the Arbitrator having dealt with the matter relating to agreement in question in his capacity as Chief Engineer. Rather they were aware in that behalf. As is evident from the documents attached by them along with affidavit produced as evidence. As already noticed no protest was raised, rather participation was without any demur, muchless any grievance in that behalf." 9. It has been next contended by Mr.Kotwal that whatever work was done by the contractor, he stood paid for the same through six bills. So far as bill CC7 is concerned when it was submitted to the Executive Engineer, he forwarded the same to the Accountant and Head Draftsman for verification but after getting endorsement from the Executive Engineer on the said bill the contractor did not get it verified. He has argued that regarding the work said to have been executed by the contractor for which payment was being claimed through CC7, there was no documentary evidence available to show either that the said work was executed or that the same was covered by the agreement executed between the parties and therefore the claim of the contractor being fictitious could not have been allowed by the arbitrator. 10. The award made by the arbitrator is non-speaking award. The arbitrator has thus not given any reasons for awarding various claims of the petitioner. Learned counsel for the respondent-state has further contended that the arbitrator should have recorded his reasons, especially when counsel for the State had argued the case and requested him to pass a reasoned award. On the other hand the contention of learned counsel for the petitioner is that the contention raised by L.C. for the respondents is contrary to law. The arbitrator as per terms of the agreement was not bound to record reasons; therefore, failure to record reasons in the award cannot invalidate the award. The conclusions of the arbitrator are binding upon the parties for the reason he was the judge of the parties. The arbitrator as per terms of the agreement was not bound to record reasons; therefore, failure to record reasons in the award cannot invalidate the award. The conclusions of the arbitrator are binding upon the parties for the reason he was the judge of the parties. The question as to why he awarded the claims of the petitioner cannot be gone into by this Court in a petition u/s 30 as this Court has not to sit as a court of appeal over the finding returned by the Arbitrator. 11. I am in agreement with the learned counsel for the petitioner-contractor. There is nothing in the arbitration agreement or in the Arbitration Act, which enjoins upon the arbitrator to pass a reasoned award. He could make non-speaking award. He was Judge appointed by the parties for adjudicating upon their disputes. It was the prerogative of the arbitrator to reach on any particular conclusion on the basis of the evidence of the parties. The conclusions of facts, even if erroneous, cannot be upset by this Court u/s 30, as this Court has not to sit as a court of appeal over the finding of the arbitrator. Howsoever wrong the findings of the arbitrator may be when it is based upon appreciation of evidence it has to be respected and is binding upon the parties. The question whether the evidence was sufficient for reaching on a particular conclusion by the arbitrator cannot be addressed by this Court while adjudicating upon a petition u/s 30 A.A. In AIR 2000 SC 100 (supra), in this regard, held as follows:- "In this connection it may be appropriate to notice that Arbitrator is sole judge of quality and quantity of evidence etc. that may be produced by the parties during the course of arbitration proceedings before him. This Court is not required to go into evidence and then assess as to what weighed with him while passing award as in the present case. Simply because this Court would take a different view of the whole matter is no ground to hold that award is liable to be set aside. It is also now well settled that arbitrator is a judge appointed by the parties to adjudicate the disputes between them and court would ordinarily examine the awards with a view to support the same." 12. It is also now well settled that arbitrator is a judge appointed by the parties to adjudicate the disputes between them and court would ordinarily examine the awards with a view to support the same." 12. Mr.Kotwal then contended that on behalf of the respondent-state certain counter claims were made before the arbitrator but the arbitrator has not adjudicated upon said claims and therefore the award is bad in law being incomplete. However, Mr. Thakur, learned counsel for the petitioner has argued that the arbitrator was right in not considering the counter claims of the respondents for the reason that the arbitrator could not go beyond the order of reference and enlarge the scope of reference. He further submits that the State-respondent had not contested the application of the petitioner u/s 20 and thus had not raised any counter claim from the petitioner. The reference which was made by the court pertained only to the claims made by the petitioner and therefore the arbitrator was justified in not considering the counter claims of the respondents. In support of his contention he has relied upon a case reported as Orissa Minding Corporation v. P.V. Rawlley, (AIR 1977 SC 2014) in which the Supreme court held as follows:- "Section 20(1) of the Arbitration Act, 10 of 1940,provides that where a difference has arisen and where any persons have entered into an arbitration agreement they may apply to the court having jurisdiction in the matter to which the agreement relates, that the agreement be filed in court. Sub-section (4) to S.20 provides that the court shall order the agreement to be filed and shall make an order of reference to the arbitrator appointed by the parties. When an agreement is filed in court and order of reference is made, then the claim as a result of the order of reference is limited to a particular relief and the arbitrator cannot enlarge the scope of the reference and entertain fresh claims without a further order of reference from the court." 13. In view of the law laid down by the Apex court in the above said authority the contention of Mr.Kotwal appears to be merit less. The reference was made by order of this Court. In the order of reference there was no mention of reference of the dispute pertaining to the claims of the respondent-State against the petitioner. In view of the law laid down by the Apex court in the above said authority the contention of Mr.Kotwal appears to be merit less. The reference was made by order of this Court. In the order of reference there was no mention of reference of the dispute pertaining to the claims of the respondent-State against the petitioner. The arbitrator therefore could not have entered upon adjudication of those disputes for the reason same having not been referred to him. In this view of the position non-consideration of counter-claims of the respondent-State cannot vitiate the award. 14. Mr. Kotwal further argued that the arbitrator has awarded interest in favour of the petitioner @ 12% P.A. from April 1983 till payment, which according to him could not be awarded for the reason that the arbitrator under law possessed no power to award interest. Mr.Thakur learned counsel for the petitioner-contractor, however, has argued that the Arbitrator possessed the power for granting interest in view of the law laid down by the Supreme Court in case titled Secretary Irrigation Department v. G.C. Roy, reported in AIR 1992 SC 732. 15. The petitioner in his application filed u/s 20 AA claimed interest @ 24% P.A. from April 1983 from the respondents which along with other claims of the petitioner was referred to the Arbitrator by reference order of this Court. Admittedly the Central Interest Act 1978 has no application in the State of J&K. It is also not the case of the respondent-State that there is any clause in the agreement, which prohibits or allows payment of interest on the amounts of arrears, which may be found to be due to the contractor. 16. Generally the question of award of interest awarded arise in respect of three periods namely (i) for the period commencing from the date of dispute till the arbitrator enters upon the reference;(ii) for the period commencing from the date of arbitrators entering upon the reference the date of making of the award and (iii) for the period commencing from the date of making of the award till the date of realization or date of making the award rule of the court, whichever is earlier. A three Judges Bench of the Supreme Court in case titled Executive Engineer Irrigation Galimala v. Abnaduta Jena, AIR 1988 SC 1520 held as follows:- "In cases which arose before commencement of Interest Act 1978 the claimants are not entitled to claim interest either before commencement of the proceedings or during the pendency of the arbitration. They are not entitled to claim interest for the period prior to the commencement of the arbitration proceedings for the reason that Interest Act 1839 does not apply to their cases and there is no agreement to pay interest or any usage of trade having force of law or any other provision of law under which the claimants were entitled to recover interest. They are not entitled to claim pendente lite interest as the arbitrator is not a court nor were the references to arbitration made in the suits." 17. A Constitution Bench of the Supreme Court in the case Secretary Irrigation Department v. G.C. Roy, AIR 1992 SC 732 reconsidered the view expressed in Jenas case (1988 SC 1520) and held:- "Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the parties refer all their disputes-or refer the dispute as to interest as such-to the arbitrator, he shall have the power to award interest. This does not mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light of all the facts and circumstances of the case, keeping the ends of justice in view." 18. Then in another case titled Jugal Kishore v. Vijayendra reported in AIR 1993 SC 864, a Three Judges Bench clarified the ratio of G.C. Roys case (AIR 1992 SC 732) and held:- "That the decision in Secretary Irrigation Department v. G.C. Roay, (AIR 1992 SC 732) was concerned only with the power of the arbitrator to award interest pendente lite. It was not concerned with his power to award interest for the pre-reference period. It was not concerned with his power to award interest for the pre-reference period. Therefore, it would not be correct to read the first of the five principles set out in the case of G.C.Roy as overruling Executive Engineer Irrigation v. Abaduta Jena, (AIR 1988 SC 1520) in so far as it dealt with the arbitrators power to award interest for the pre-reference period." 19. Then again in a case titled, State of Orissa v. B.N. Aggarwal AIR 1997 SC 925 a Three Judges Bench of the Supreme Court considered the judgment rendered in Jenas case and other cases and held that pre-reference interest could not be awarded by the arbitrator where there was no such term in the contract and nor was it established that under any law or usage any interest was payable. Similar view was reiterated by the Supreme Court in case State of Orissa v. B.K. Routray, AIR 1999 SC 1101 and held that interest for pre-reference period cannot be awarded by the arbitrator in respect of the period not covered by Interest Act 1978. The Court observed that:- "Our attention was also drawn to a decision in case State of Orissa v. Niranjan Swain reported in (1989) 4 SCC 269 : (AIR 1990 SC 685) where also this Court said that where reference to the arbitrator was made prior to the commencement of Interest Act 1978 the arbitration is not empowered to grant interest for the period up to the date of submission of the claim to arbitration." 20. In AIR 1999 SC 1614, titled Oil and Natural Gas Commission v. M/S Clelland Engineers a two Judges Bench of the Supreme Court held as follows:- " There cannot be any doubt that the arbitrators has powers to grant interest akin to S.34 C.P.C. which is power of the court in view of S.29 of the Arb.Act 1940. It is clear that interest is not granted upon interest awarded but upon the claim made. The claim made in the proceedings is under two heads (i) absence of the amount under invoices and letter dated February 10,1981and the amount certified and paid by the appellant and (ii) the interest on delayed payment That is how the claim for interest on delayed payment stood crystallized by the time the claim was filed before the arbitrators. The claim made in the proceedings is under two heads (i) absence of the amount under invoices and letter dated February 10,1981and the amount certified and paid by the appellant and (ii) the interest on delayed payment That is how the claim for interest on delayed payment stood crystallized by the time the claim was filed before the arbitrators. Therefore, the power of the arbitrators to grant interest on the amount of interest, which may, in other words, be termed as interest on damages or compensation for delayed payment, which would also become part of the principal. If that is the correct position in law we do not think that Sec.3 of the Interest Act has any relevance in the contest of the matter which we are dealing with in the present case." Relying on the aforesaid judgment of the Supreme Court a learned Single Judge of this Court in CIMA No. 154/2002 titled Union of India v. Smt.Roshni Devi and others has held that" it cannot be disputed that there is component of interest over interest but the same is permissible under law." 21. After the judgment rendered in Clelland Engineers case reported in AIR 1999 SC 1614(supra) another Bench of the Supreme court in a case entitled Superintending Engineer and others v. B. Suba Reddy, AIR 1999 SC 1747 held:- "We find that under claim No. 5 what the arbitrator has given though in the shape of damages is infact interest on the amount of Rs. 85000/- for a period prior to the date of reference of dispute to him. The amount of Rs. 38250/- is nothing but interest for a period prior to the date of reference of dispute to him. Interest for the period prior to the reference could be awarded only if there was an agreement or it was allowable under Interest Act 1978. There is nothing on record to show as to how the respondents could claim interest whether under agreement or under Interest Act. By giving the name of damages when in fact it is claim of interest it cannot be permitted. The award of Rs. 38250/- as damages has to be set aside." 22. Then in case titled Executive Engineer D.M.I. Divn. By giving the name of damages when in fact it is claim of interest it cannot be permitted. The award of Rs. 38250/- as damages has to be set aside." 22. Then in case titled Executive Engineer D.M.I. Divn. Orissa v. N.C.Budharaj a three Judges Bench of the Supreme Court came to the view that there was conflict of opinion expressed in G.C.Roys case, AIR 1992 SC 732 and Jenas case AIR 1988 SC 1520 and Aggarwals case AIR 1997 SC 925 and referred the question to a larger Bench. Pursuant to the reference a Constitution Bench of the Supreme Court considered the question of grant of interest for pre-reference period by the arbitrator in case titled Executive Engineer Dhenkanal Minor Irrigation Division Orissa v. N.C. Budharaj, AIR 2001 SC 626. The majority view of the Bench was as follows:- "The arbitrator appointed with or without the intervention of the court has jurisdiction to award interest, on the sums found due and payable for the pre-reference period, in the absence of any specific stipulation or prohibition in the contract to claim or grant any such interest. As long as there is nothing in the arbitration agreement to exclude the jurisdiction of the arbitrator to entertain a claim for interest on the amounts due under the contract, or any prohibition to claim interest on the amounts due and becomepayable under the contract, the jurisdiction of the arbitrator to consider and award interest in respect of all periods subject only to S.29 of the Arbitration Act 1940 and that too the powers of the court there under, has to be upheld. To say that the arbitrator cannot have jurisdiction to award interest for the period prior to the date of his appointment or entertaining into reference which alone confers him power would be too stale and technical to be countenanced for the simple reason that in every case the appointment of an arbitrator or even resort to court to vindicate rights could be only after disputes have cropped up between the parties and continue to subsist unresolved and that if the arbitrator has the power to deal with and decide disputes which cropped up at a point of time and for the period prior to the appointment of an arbitrator, it is beyond comprehension as to why and for what reason and with what justification the arbitrator should be denied only the power to award interest for the pre-reference period when such interest becomes payable and has to be awarded as an accessory or incidental to the sum awarded as due and payable, taking into account the deprivation of the use of such sum to the person lawfully entitled to the same. AIR 1988 SC 1520 overruled." 23. In view of the law laid down by the Constitution Bench, the position of law regarding power of the arbitrator for granting pre-reference interest, pendente lite interest and future interest stands settled authoritatively. 24. In the present case there is clause 53 in the agreement, which prohibits the granting of interest by the Executive Engineer and not by the Arbitrator. The clause 53 reads as under:- "53 - No claim for interest shall be entertained by the Engineer with respect to any money or balance which may be due, owing to any dispute between him and the contractor with respect to any delay on the part of the Engineer in making interim or final payment or otherwise. In case of over payments in the running bills, the contractor shall be bound to repay the amount on demand or the same may be deducted from any amounts due to him under the contract/this agreement or otherwise." 25. The arbitrator has granted interest from April 1983 @ 12% P.A. till payment. The award is non-speaking award. There is no dispute to the contract. It is not apparent how the arbitrator has construed and interpreted the said clause. The arbitrator has granted interest from April 1983 @ 12% P.A. till payment. The award is non-speaking award. There is no dispute to the contract. It is not apparent how the arbitrator has construed and interpreted the said clause. As the interest claimed has been granted it implies that the arbitrator has considered the scope of the said clause and found the petitioner entitled to interest. The view taken by the arbitrator on the construction of the said clause is a possible view though perhaps not the only correct view. Can the court interfere? 26. In AIR 1989 SC 890 M/s Sudarshan Trading Co. v. The Government of Kerala and anr,the Supreme Court has held:- "Once there is no dispute as to the contract, what is the interpretation of that contract is a matter for the arbitrator and on which court cannot substitute its own decision. 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. Therefore, the High Court had no jurisdiction to examine the different items awarded clause by clause by the arbitrator and to hold that under the contract these were not sustainable in the facts found by the arbitrator." 27. Therefore on the basis of clause 53 this Court is not entitled to take another view by interpreting the said clause differently. Granting of such interest in view of the law laid down by the Supreme court cannot be said to be illegal by any stretch of reasoning. Thus there is no merit in the contention of the learned counsel for the State-respondent. The objections raised by the respondent-State to the award are held to be not tenable. The issues framed in the case are decided accordingly. 28. The application CMP 232/95 u/s 30 A.A. filed by the State-respondent is therefore, dismissed and the award is made rule of the Court. Petition AA 109/94 is accordingly disposed of. The petitioner-contractor shall be entitled to interest @ 12% per annum till date, in terms of the award. He shall also be entitled to interest @ 6% P.A. from today, till the date of realization. Office shall draw a decree sheet accordingly.