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2004 DIGILAW 156 (JK)

Om Parkash Nargotra v. Union Of India

2004-05-20

PERMOD KOHLI

body2004
Challenge to the award dated 26.7.1991 passed by the the sole arbitrator Brig. V.K. Sawhney( Rtd.), has been made by invoking the provision of sections 30 and 33 of the J&K Arbitration Act, 1940. Briefly stated the facts leading to the passing of the award as indicated in the petition are, that the work contract was allotted to the respondent-contractor in the year 1978 and Contract Agreement No. CEJK/14/78-79 entered into between the contractor and the Union of India.The execution of the contract was delayed. Both the parties attributed delay to each other. Hence, dispute arose between the parties, which was required to be referred to the arbitrator in terms of contractual stipulations as contained in General Conditions of Contract No. I AFW-2249. The contractor approached the High Court, seeking appointment of an arbitrator for adjudication of the dispute raised by him.Vide order dated 21.5.1987 passed in Arbitration Application No. 99 of 1987, a direction was issued by the High Court for appointment of arbitrator by the appointing authority in accordance with the contractual stipulation and consequently, one Shri P.D. Gujrati C.S.W. was appointed as sole arbitrator vide letter dated 29.7.1987. The said arbitrator resigned his appointment on 8.3.1988 and thereafter the appointing authority appointed Shri A.J. Kumaresan - CSW as new arbitrator vide letter dated 3.5.1988 to replace Shri P.D. Gujrati. The contractor again approached the High Court seeking removal of the arbitrator on the ground that the said arbitrator was not an Engineering Officer, the qualification to be possessed by an arbitrator under the terms of contract. The said arbitrator was consequently removed vide letter dated 2.11.1989 with a direction to the Union of India to appoint an Engineering Officer as the arbitrator in place of Shri A.L. Kumaresan . 2. It appears that there was delay in appointment of the new arbitrator pursuant to the direction of the court and the contractor again approached the High Court seeking appointment of an independent arbitrator. While his application was pending, the appointing authority appointed one Shri A.V. Gopalakrishanan as the Sole Arbitrator.High court on consideration of plea of the contractor, appointed Brig. V.K. Sawhney ( Rtd.) as independent arbitrator while removing Shri A.V. Goipalakrishanan to decide the dispute between the parties. This arbitrator entered upon the reference and both the parties appeared before him. 3. While his application was pending, the appointing authority appointed one Shri A.V. Gopalakrishanan as the Sole Arbitrator.High court on consideration of plea of the contractor, appointed Brig. V.K. Sawhney ( Rtd.) as independent arbitrator while removing Shri A.V. Goipalakrishanan to decide the dispute between the parties. This arbitrator entered upon the reference and both the parties appeared before him. 3. In the meanwhile, the Union of India filed Special Leave Petition before the Apex Court, challenging appointment of Shri V.K. Sawhney by the High Court. Though the Special Leave Petition was entertained but neither the judgment of the High Court nor the proceedings before the arbitrator were stayed. The arbitrator continued to proceed with the arbitration proceedings.Parties appeared before the arbitrator on 14.2.1991 and agreed for the schedule of hearing and also consented for enlargement of time for making and publishing the award upto 31.7.1991. As per the schedule, arbitrator fixed hearing from 8th to 11th July, 1991. The Union of India approached the arbitrator for postponement of the proceedings on the ground of pendency of SLP before the Apex Court. The arbitrator declined the prayer and proceeded with the arbitration proceedings and finally made and published the award on 26.7.1991, whereby certain claims of the contractor have been awarded with interest.It is this award, which is sought to be set aside . 4. On being put to notice of this petition, respondent-contractor appeared and filed his reply. On the basis of the pleadings of the parties, the court framed the following issues on 5.3.1992: "1. Whether the arbitrator mis-conducted himself and the proceeding while making the award? OP Union of India 2. Whether the award is liable to be set aside on any other ground? OP Union of India 3. Relief." 5. Union of India produced evidence in the form of affidavit as envisaged under section 33 of the J&K Arbitration Act. Union of India filed affidavit of Col. B. Srinivasan, Commander Works Engineers HQ 135, whereas the contractor has filed his own affidavit in rebuttal . 6. OP Union of India 3. Relief." 5. Union of India produced evidence in the form of affidavit as envisaged under section 33 of the J&K Arbitration Act. Union of India filed affidavit of Col. B. Srinivasan, Commander Works Engineers HQ 135, whereas the contractor has filed his own affidavit in rebuttal . 6. The misconduct of the arbitrator is sought to be established on the following grounds: (i) the award has been passed ex parte without affording an opportunity of being heard to the petitioner in as much as request for postponement of the proceedings on account of pendency of SLP before the Apex Court, was rejected arbitrarily ; (ii) the arbitrator procured the stamp papers from the contractor of appropriate value which show that the contractor was aware of the amount of award and the contractor and arbitrator were hand in glove ; (iii) Claim Nos. 2(B), 2(C), 2(E) and 2(H) awarded by the arbitrator, were beyond the scope of the contract agreement ; and (iv) the arbitrator has failed to take into consideration the Claims of the Union of India payable by the Contractor. The Arbitrator was under an obligation to ask for the record from the union of India before passing the award. 7. It is admitted position that Shri V.K. Sawhney was appointed as arbitrator by the High Court vide its order dated 30.8.1990 .Union of India had informed the arbitrator vide their letters dated 4.12.1990 and 3.1.1991 that SLP is pending before the Apex Court. The said arbitrator after entering upon reference, summoned the parties. Both the parties appeared before him on 14.2.1991and agreed for the schedule of hearing as also consented for enlargement of time for making the award upto 31.7.1991. The Union of India being dissatisfied with appointment of Shri V.K. Sawhney as the arbitrator, challenged the order of the High Court before the Apex Court in SLP. It is accepted position of both the parties that no direction was issued by the Apex Court either staying the judgment or the proceedings before the arbitrator. The Union of India again attempted for postponing the hearing before the arbitrator on 8.7.1991, which request was rejected by the arbitrator. Thereafter, petitioner did not appear before the arbitrator. It is accepted position of both the parties that no direction was issued by the Apex Court either staying the judgment or the proceedings before the arbitrator. The Union of India again attempted for postponing the hearing before the arbitrator on 8.7.1991, which request was rejected by the arbitrator. Thereafter, petitioner did not appear before the arbitrator. Petitioner did not file any pleadings either in defence or as counter claim to the statement of claim filed by respondent -contractor.The arbitrator proceeded to hear the contractor and passed the final award on 26.7.1991. SLP which was filed by the petitioner before the Apex Court in the year 1991, came to be decided on 19.11.1993, when the arbitrator had already made and published the award.Neither the appointment of the arbitrator was set aside by the Apex Court nor the final award was interfered.The arbitrator has allowed certain claims of the respondent-contractor and disallowed some. While passing the award, the arbitrator also allowed claim of interest at the rate of 18% per annum for the period 30.4.1981 to 13.2.1991 on all the claims except on Claim Nos. 6, 9(A), 10 and 11. He further allowed future interest on the awarded amount from the date of award upto the date of actual payment or date of the decree which ever is earlier @ 18% if the award amount is not paid within 60 days. No doubt the award has been passed in absence of the petitioner. However, the absence of the petitioner from the proceedings before the arbitrator is on account of fault and default of the petitioner alone.After appointment of the arbitrator by the High Court, Union of India has attempted to challenge his appointment by filing SLP before the Apex Court. They failed to obtain any interim direction for stay of the appointment/judgment or the proceedings before the arbitrator. The arbitrator was not under any obligation to stay his hands for indefinite period. The Union of India having failed to obtain any order from the Apex Court, did appear before the arbitrator on 14.2.1991, agreed for the schedule of hearing and also for extension of time for making the award till 31.7.1991. It was known to the petitioner that arbitrator has to conclude the proceedings by the extended time. The Union of India having failed to obtain any order from the Apex Court, did appear before the arbitrator on 14.2.1991, agreed for the schedule of hearing and also for extension of time for making the award till 31.7.1991. It was known to the petitioner that arbitrator has to conclude the proceedings by the extended time. Not only this, the arbitrator had also approached the High Court for extension of time for making award and CMP No. 134/92 was disposed of vide order dated 1.5.1991, whereby the time for making award was extended upto 31.7.1991, the period upto which the parties had also agreed for extension in time for making the award. Nothing has been brought on record to show that any attempt has been made by the Union of India for stay of proceedings before the arbitrator between the period from 14.2.1991 to 8.7.1991. It was in- appropriate for the Union of India to have approached arbitrator for postponement of the proceedings on 8.7.1991, the schedule which was fixed with concurrence of the parties. It is the admitted case of the petitioner that arbitrator rejected their request for postponement of proceedings. Despite this, they chose not to appear before the arbitrator for the hearing fixed by him. This resulted in passing of the award against the petitioner. 8. Under the given facts and circumstances, the contention of the petitioner that he has been denied opportunity of being heard in arbitrary and illegal manner, cannot be accepted. There is no scope of interference in the award on this ground. 9. Second ground, which has been projected to establish the alleged misconduct of the arbitrator is, that the arbitrator procured stamp papers from the contractor of the appropriate value.There is no denial to this effect. Merely because the arbitrator asked the contractor to provide stamp papers, does not itself establish any misconduct.The arbitrator could have procured the stamps of requisite value himself or asked any of the parties. Union of India was not represented before the arbitrator and therefore, asking the contractor to provide stamp papers does not establish misconduct on the part of the arbitrator, unless it is proved that the arbitrator had conveyed to the contractor in respect to the final award proposed to be passed..There is nothing on record to establish this. Union of India was not represented before the arbitrator and therefore, asking the contractor to provide stamp papers does not establish misconduct on the part of the arbitrator, unless it is proved that the arbitrator had conveyed to the contractor in respect to the final award proposed to be passed..There is nothing on record to establish this. From the letter written by the arbitrator to the contractor, it appears that the contractor was asked to procure stamps as per the law prevalent in the State of Jammu and Kashmir. Stamps duty is payable on the award on the basis of the claims made and not the award irrespective of the fact, whether claims are allowed or rejected. Therefore, this fact cannot be said to be sufficient to set aside the award on the ground of misconduct or otherwise. Similar question came up for consideration before the Bombay High Court in Municipal Corporation of Greater Bombay v. Girjashankar R. Singh, reported in AIR 1996 Bombay 361, wherein it has been held: " Moreover, the arbitrator has recorded in the minutes of the meeting held before him on 23rd March, 1995, had directed the respondent to supply the stamp paper of Rs. 100/- to make his award. The arbitrator was a tribunal of the choice of the parties to decide the disputes referred to him for arbitration. After hearing the parties and on deciding to make the award in favour of the respondent, the arbitrator justifiably called upon the respondent to furnish the stamp paper of requisite value for making the said award thereon. Merely because the said award has been made on the sheet of paper with impressed stamp of Rs. 100/-issued in the name of the firm of the respondent, a party to the reference, the said award is made neither in contravention of the said section 34 as amended nor is inadmissible in evidence nor invalid nor bad in law. By and large it is always an obligation of either of the parties to the reference to arbitration and preferably of the party in whose favour the award is to be made to furnish the stamp paper of requisite value to the arbitrators or umpire, as the case may be, for making the award thereon. In the instant case, this having been done, I find no infirmity in the procedure followed by the arbitrator in making the said award. In the instant case, this having been done, I find no infirmity in the procedure followed by the arbitrator in making the said award. I any event, this cannot be a ground for setting aside the said award under the provisions of Section 30 of the Act." 10. Next contention of Mr. N.P.Kotwal, learned counsel for respondents is, that Claim Nos. 2(B), 2(C), 2(E) and 2(H) awarded by arbitrator are beyond the scope of contract. 11. With view to buttress his argument, it is stated that these claims are not permissible under the Contract Agreement.On being asked by the court as to which clause of the Contract Agreement has been contravened, he has not been able to show contravention of any specific condition of the contract.Irrespective of this, it is settled proposition of law that to interpret the terms of contract, is within the exclusive domain of the arbitrator, unless it is established that the arbitrator had no jurisdiction to arbitrate upon any of the claims awarded by him. The Apex Court in P.V. Subba Naidu and others v. Government of A.P. and Others reported as ( 1998) 9 Supreme Court Cases 407, held as under:- " The entire thrust of the judgment is on examining the terms of the contract and interpreting them. The terms of the arbitration clause, however, are very wide.The arbitration clause is not confined merely to any question of interpretation of the contract.It also covers any matter or thing arising thereunder. Therefore, all disputes which arise as a result of the contract would be covered by the arbitration clause. The last two lines of the arbitration clause also make it clear that the arbitrator has power to open up, review and revise any certificate, opinion, decision, requisition or notice except in regard to those matters which are expressly excepted under the contract, and that the arbitrator has jurisdiction to determine all matters in dispute which shall be submitted to the arbitrator and of which notice shall have been given. In the present case all the claims in question were expressly referred to arbitrator and were raised before the arbitrator. The High Court was, therefore, not right in examining the terms of the contract or interpreting them for the purpose of deciding whether these claims were covered by the terms of the contract." 12. In the present case all the claims in question were expressly referred to arbitrator and were raised before the arbitrator. The High Court was, therefore, not right in examining the terms of the contract or interpreting them for the purpose of deciding whether these claims were covered by the terms of the contract." 12. The Apex Court further in State of U.P. v. Allied Constructions reported as (2003) 7 Supreme Court Cases 396, held as under: " Any award made by an arbitrator can be set aside only if one or the other term specified in Sections 30 and 33 of the Arbitration Act, 1940 is attracted. It is not a case where it can be said that the arbitrator has misconducted the proceedings.It was within his jurisdiction to interpret clause 47 of the agreement having regard to the fact- situation obtaining therein. It is submitted that an award made by an arbitrator may be wrong either on law or on fact and error of law on the face of it could not nullify an award. The award is speaking one.The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter of the arbitrator to determine (see Sudarsan Trading Co. v. Government of Kerala.." 13. In view of the settled position of law, this argument also fails.It is lastly submitted by Mr. N.P.Kotwal that the arbitrator has failed to take into consideration the claim of the Union of India payable by the contractor.I am unable to appreciate this contention of the learned counsel for the simple reason that the Union of India chose not to contest the case before the arbitrator. Neither statement in defence nor any counter claim were filed before the arbitrator. Therefore, the arbitrator had no occasion to consider the claims of the Union of India.Faced with this situation, learned counsel stated that arbitrator should have summoned the record from Union of India, even if Union of India chose not to be present.Suffice it to say that the arbitrator was under no obligation to summon the record and consider counter claims of the Union of India.It was the duty of the Union of India being a party to the arbitration to have lodge its claims /counter claims before the arbitrator, if it was so interested. That having not been done, there is no question of arbitrator considering the counter claims of the Union of India by summoning the record. 14. On consideration of the totality of the circumstances, there is no merit in this application of the Union of India for setting aside the award. The application is accordingly rejected. The award dated 26.7.1991 passed by the Sole Arbitrator, Brig. V.K. Sawhney (Rtd.), is made rule of the court. Claimant shall be entitled to interest at the ate of 6% from the date of decree till the payment s made.Let decree be drawn in terms of the award.