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2006 DIGILAW 202 (PAT)

G. S. D. Construction v. State of Bihar

2006-02-27

body2006
ORDER The appeal was listed under the heading for hearing under Order 41 Rule 11 of Code of Civil Procedure (In short "CPC") when, with the consent of both the parties, it was heard for final disposal of this appeal at that stage itself, therefore, this appeal is being disposed of finally by this order. 2. The appellant has filed this appeal against the order dated 26.07.2000 passed by Subordinate Judge, Bhabhua in Title Suit No. 49 of 1987 Setting aside the award dated 28.04.1989 of an Arbitrator on the ground of misconduct. 3. Brief facts of the case are that appellant filed an application under section 20 of the Arbitration Act, 1940 (in short "the Act") for appointment of an Arbitrator stating therein that in response to a notice dated 01.02.1986 of Irrigation Department, Government of Bihar, inviting tenders, appellant submitted tender for the work of construction of river water approach channel, pump house and delivery vat for Bahura Canal Scheme. Tender of appellant was accepted by respondents and the work was allotted to the appellant and agreement was signed and executed by parties on 26.05.1986. Clause 23 of agreement is an Arbitration Clause. According to appellant, in the original agreement, an estimated amount of Rs. 79,878/- was provided for execution of work of dewatering and this estimate was made on the basis of sub soil water level at a much lower strata than it was actually found after the commencement of the work of contract. The Engineers of the Irrigation Department who had prepared the estimate and plan had not bored the site before preparing the plan and estimate and thereby they had not realised the velocity of the water which would be required to be pumped out and appellant on the assurance of respondents and on their belief submitted the tender and accepted the work. When the work commenced, the actual state of water level of sub soil came to light and matter was reported and brought to the knowledge of respondents who assured that the work was important one which was to be completed and they assured the appellant that Government would pay all the costs which will occur due to wrong plan and estimate. Appellant also lodged a claim before respondents because he had already invested a sum of Rs. Appellant also lodged a claim before respondents because he had already invested a sum of Rs. 42,00,000/- for ejecting the water and the respondents also seeing the emergency had put into services of several other pumps through department for dewatering and although the work was found to be an uphill task but anyhow the water could be controlled after huge investment by the appellant. Appellant, thereafter, submitted claims to the department on 29.04.1987, 19.05.1987 and 03.06.1987 for payment for the work of dewatering and other incidental works done during the period directly under the supervision, consent and concurrence of Engineer-in-charge on spot and respondent No 4 who was also the Engineer-in-Charge on the spot admitted all these facts in writing by his letter No.363 dated 01.06.1987 but in spite of all these facts, the respondents did not make payment to the appellant and thereby they committed breach of agreement, assurance and wrong preparation of plan and estimate gave rise to a dispute which was to be referred to Arbitrator in terms of Arbitration Clause in the agreement. Appellant wrote letters to respondents for referring the dispute to Arbitrator but respondents did not do so compelling the appellant to file application before the Court. The appellant prayed for referring the dispute to Shri S.D.N. Verma, another Superintending Engineer or in case of this agreement to an Arbitrator appointed by the Court because according to appellant, respondent No. 3 who per terms of agreement was to act as Arbitrator is himself a party and interested in the matter. Alongwith the petition under Section 20 of the Act, appellant also filed a petition praying for an interim injunction restraining the respondents from making any deduction from his running bills. The petition under Section 20 of the Act filed by the appellant was registered as Title Suit and by its order dated 24.06.1987, the Court below directed the respondents to maintain status quo ante and by its order dated 31.08.1987 made this order final restraining the respondents from deducting any costs incurred by the appellant for dewatering and other expenses incurred as mentioned in the petition under Section 20 of the Act. It further directed both the parties to settle the matter in dispute within two months of the date of order. It further directed both the parties to settle the matter in dispute within two months of the date of order. The lower Court record shows that, thereafter, the matter was adjourned on a number of dates and on 22.06.1988, the Court below referred the dispute to arbitration by appointing Shri Shiv Shanker Singh, Superintending Engineer as Arbitrator. On 06.05.1989, award from Arbitrator was received by Court below. By this order dated 24.02.1990, it set aside the award on the ground that it was given beyond the statutory period which was not extended by Court at any stage. The appellant preferred MA No. 43 of 1990 before this Court against the order of Subordinate Judge to set aside the award but that appeal was dismissed by this Court on 27.07.1995. The appellant, thereafter, filed civil appeal No. 6256-6257 of 1997 before Supreme Court after special leave in Petition for Special Leave to Appeal (Civil) No. 11244-11245 of 1996 was granted. The Supreme Court, by its order dated 12.09.1997 enlarged the time till the date the award was actually made by the Arbitrator and modified the order of this Court to that extent and remitted the matter back to the lower Court for proceeding further towards making the award the rule of Court after deciding such other issues as may have arisen. The court below by its impugned order has set aside the award on the ground of misconduct. 4. Appellant has challenged the impugned order of the Court below on the grounds that the Court below has not come to a finding that Arbitrator exceeded authority, Court below has not come to a finding that any error of law and fact have been committed by the Arbitrator and it has also not come to a finding that the award is fake and uncertain. The case of appellant is that Arbitrator was appointed by mutual consent of parties. Arbitrator has given his award on the basis of admitted dues of the claim of appellant. The case of appellant is that there was no ground as envisaged under Section 30 of the Act for setting aside the award. 5. The case of respondents is that the Court below, after giving reasons in the impugned order, has rightly set aside the award on the ground of misconduct and appeal is liable to be dismissed. 6. The case of appellant is that there was no ground as envisaged under Section 30 of the Act for setting aside the award. 5. The case of respondents is that the Court below, after giving reasons in the impugned order, has rightly set aside the award on the ground of misconduct and appeal is liable to be dismissed. 6. From the impugned order, I find that the Court below has set aside the award on the ground of misconduct observing that the award dated 28.04.1989 given by Arbitrator is indicative of misconduct. The ground for setting aside the award as given by Court below are that in a decision dated 12.12.1987 of Superintending Engineer, Rohtas on the claims of appellant had directed the appellant if he had any claim not considered in aforesaid decision, he may produce those claims for referring the same to arbitration but appellant did not produce any fresh claim, since award was made after much delay, it is indicative of misconduct and Arbitrator has allowed interest exceeding a sum of Rs.1,000/-. I further find that on the point of interest, the Court below in its impugned order, has referred decisions of Supreme Court reported in AIR 1988 Supreme Court 1530. 7. So far the first ground on which the award has been set aside by Court below, I find that in the impugned order, Court below accepted the arguments advanced on behalf of respondents that Superintending Engineer Rohtas who was an Arbitrater as per clause 23 of the agreement had given his award on 12.12.1987 and this award was binding on appellant. It is not clear that when the Court below by its order dated 22.06.1988 appointed Shri Shiv Shanker Singh, Superintending Engineer as an Arbitrater and referred the dispute to him how it accepted the submissions made on behalf of respondents that much prior to it on 12.12.1987, Superintending Engineer, Rohtas had already given his award on claims of appellant and this award was binding on appellant. It is true that when appellant filed petition under Section 20 of the Act, the Court below by its order dated 31.08.1987 while issuing ad interim inunction order, directed the parties to settle the matter under dispute within two months from the date of order but because nothing happened thereafter for a considerable length of time the Court below then on 22.06.1988 appointed an Arbitrator. Under these circumstances, again going back by court below to a stage of 12.12.1987 when respondent No.4 is said to have given award is against the own order of court below which was passed on 22.06.1988 appointing an Arbitrator. The another ground that because award was made by Arbitrator after much delay is an indicator of misconduct, I find that when the Supreme Court, by its order dated 12.09.1997 enlarged the time till the date the award was actually made by the Arbitrator and it modified the order of this Court passed is M.A. No. 43 of 1990 to that extent, the Court below was not justified in holding that because award had been given after much delay by Arbitrator, therefore, it is an indication of misconduct particularly when Court below was fully aware of the order of Supreme Court which it has mentioned in its impugned order itself. 8. The last ground that Arbitrator has given interest, as stated above, the Court below in its impugned order has relied upon decision of Supreme Court reported in AIR 1988 Supreme Court 1530. Learned counsel of appellant, by relying upon a decision of Supreme Court reported in AIR 1992 Supreme Court 732, has submitted that when agreement is silent on the payment of interest, it has to be presumed as implied term of agreement and Arbitrator has power to award pendente lite interest. After going through the judgment reported in AIR 1992 SC 732 which has been relied upon by the learned counsel of appellant, I find that the decision reported in AIR 1988 Supreme Court 1530 has been overruled. In this case, the Supreme Court held that : "It is an implied term in every arbitration agreement that the Arbitrator will decide the dispute according to Indian Law. Though section 34 of the Civil Procedure Code does not expressly apply to Arbitraters, its principle applies, just as the principle of several other provisions (e.g. Section 3 of the Limitation Act) has been held applicable to the Arbitraters. Inamuch as the Arbitrater is an alternative forum for resolution of disputes, he must be deemed to possess all such powers as are necessary to do complete justice between the parties. The power to award interest pendente lite is a power which must necessarily be inferred to do complete justice between the parties. Inamuch as the Arbitrater is an alternative forum for resolution of disputes, he must be deemed to possess all such powers as are necessary to do complete justice between the parties. The power to award interest pendente lite is a power which must necessarily be inferred to do complete justice between the parties. The principle is that a person who has been deprived of the use of money should be compensated in that behalf. In short it is based upon the principle of compensation or restitution, as it may be called. In every case where the arbitration agreement does not exclude the jurisdiction of the Arbitrater to award interest pendente lite such power must be intered." 9. Since, in the present case, respondents have not come up with a plea that the arbitration agreement excluded the jurisdiction of Arbitrater to award interest pendente lite, I find that the observation of Court below that award of interest by Arbitrater is an indicater of misconduct is without any merit. 10. Considering the entire material on record, I find that respondents have not been able to point out any grounds as mentioned in Section 60 of the Act for setting aside the award. 11. In the result this appeal is allowed and the impugned order of Court below setting aside the award on the ground of misconduct is hereby set aside. The award submitted by Arbitrator is made rule of Court.