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2009 DIGILAW 213 (DEL)

GIAN CHAND MEHTA v. UNION OF INDIA

2009-02-17

RAJIV SAHAI ENDLAW

body2009
Judgment RAJIV SAHAI ENDLAW, J. 1. The suit was filed under Sections 14 and 17 of the Arbitration Act, 1940. The case has a longer history than would appear from the year of the suit. Disputes and differences arising out of the works contract dated 19th August, 1986 awarded by the respondent (Railways) to the petitioner were on 22th August, 1990 referred for arbitration of Ms S Chauhan and Mr S.D. Sharma, officers of the Railways. Claims were filed by the petitioner before the said arbitrators in 1991. The arbitrators published an award dated 11th February, 1992. The petitioner herein filed suit No. 3356A/1992 in this court under Sections 14 and 17 of the Arbitration Act for filing of the said award in the court. Upon the award being filed in this court in the aforesaid suit and notice of filing being issued, neither the respondent (Railways) nor the petitioner filed any objections thereto save that the petitioner herein filed a petition under Sections 15(b) and 16 of the Arbitration Act, 1940. 2. The award rendered on 11th February, 1992 is a non speaking award without any reasons. The award merely directed that against the – (A) Claim of the petitioner (i) of Rs 1,55,963.78 for compensation/damage for breach of contract by railways, nil amount was awarded (ii) of Rs 88,183 for refund of security deposit, the amount awarded was Rs 88,183/- iii) of Rs 20,000/- for release of FDR of the said value, the amount awarded was Rs 20,000/- (B) Claim of the railways for liquidated damages of Rs 4,66,240/- the amount awarded was Rs 88,183/-. 3. The award thus directed that the petitioner be paid by the railways a sum of Rs 20,000/- in full and final settlement of all claims referred to the arbitrators. The railways were also directed to pay interest at 16% per annum on the amount awarded, if the payment was not made within 60 days from the date of the publication of the award. 4. The railways were also directed to pay interest at 16% per annum on the amount awarded, if the payment was not made within 60 days from the date of the publication of the award. 4. The petitioner in its application under Sections 15(b) and 16 of the Act contended that if the arbitrators had really arrived at a conclusion that the petitioner was liable to pay to the railways liquidated damages of Rs 4,66,240/- or any other sum, their award could have been anything else but not exactly Rs 88,183/- which was the security deposit of the petitioner and the refund of which had been awarded in the petitioner’s favour; it was further contended that there was no justification and basis for the award of damages to the railways equivalent to the security deposit of the petitioner. The petitioner also drew attention to the arbitration agreement which, inter alia, provided that where the claims were of more than Rs 3 lacs, intelligible award i.e., with reasons is to be given. It was submitted that since the total amount of claims was in excess of Rs 3 lacs, the award without reasons was illegal. The petitioner therefore prayed that the award be modified by deleting the award of Rs 88,183/- as liquidated damages to the railways and by correcting the amount awarded to the petitioner from Rs 20,000/- to Rs 1,08,183/- i.e., inclusive of Rs 88,183/-. Alternatively it was pleaded that the award be remitted to the arbitrator. 5. The respondent (Railways) filed a reply to the aforesaid petition opposing the same. It was, however, not disputed that as per the agreement of the parties, the award was required to be intelligible and with reasons. It was contended that the award was self explanatory and thus could not be said to be non speaking. The respondent (Railways) thus supported the award. 6. The aforesaid CS(OS)3356A/1992 was disposed of vide order dated 15th April, 2005. It was recorded therein that neither of the parties could throw light as to how the sum of Rs 88,183/- awarded by the arbitrators to the railways against their claim of liquidated damages of Rs 4,66,240/- could be worked out. The respondent (Railways) thus supported the award. 6. The aforesaid CS(OS)3356A/1992 was disposed of vide order dated 15th April, 2005. It was recorded therein that neither of the parties could throw light as to how the sum of Rs 88,183/- awarded by the arbitrators to the railways against their claim of liquidated damages of Rs 4,66,240/- could be worked out. The contention of the petitioner was that the award be corrected in exercise of power under Section 15(b) of the 1940 Act by removing the portion adjusting Rs 88,183/- towards liquidated damages held to be payable to the Railways. This court held that Section 15(b) was not applicable and the only recourse open was to proceed under Section 16 of the Act. It was further held that “Since the award in favour of the petitioner pertaining to refund of security deposit and award pertaining to counter claim of the Railways is in identical sum and it cannot be asserted (sic, ascertained) as to how sum towards liquidated damages have been arrived at, possibility of a typographical error cannot be ruled out, for the reason it is highly unlikely that an odd figure would match pertaining to refund of security deposit and liquidated damages.” This court thus remitted the award with the direction that “learned arbitrators would reconsider the award in light of the observations made in the present order and would clarify as to how the sum of Rs 88,183/- awarded to the railway authorities as liquidated damages has been worked out.” 7. The arbitrators, pursuant to the aforesaid directions vide “Revised award” dated 23rd November, 2006 made clarifications to the original award dated 11th February, 1992. The arbitrators have, inter alia, clarified that in the original award they had allowed the railways claim for liquidated damages to the extent equivalent to refund of security deposit. The arbitrators, pursuant to the aforesaid directions vide “Revised award” dated 23rd November, 2006 made clarifications to the original award dated 11th February, 1992. The arbitrators have, inter alia, clarified that in the original award they had allowed the railways claim for liquidated damages to the extent equivalent to refund of security deposit. The arbitrators have further explained that, during the course of hearing for reconsideration, it has come to light that there was no free access at all to the locations where the petitioner was to make the supplies; that the petitioner completed partial supplies to the places where the access was available and could not supply the balance quantity; that the railways after termination of the contract of the petitioner did not take supply of balance quantities at the same locations as mentioned in the contract with the petitioner and where the petitioner could not effect the supplies but took the supplies from another contractor at another location. The arbitrators held that this proved that the petitioner was not to blame for the non supplied quantities and against which the railways had claimed liquidated damages of Rs 4,66,240/-. The arbitrators on reconsideration held that the railways, to be entitled to liquidated damages, should have taken the balance supplies at the same locations and on the same methodology as in the contract with the petitioner and having failed to do, so were not entitled to levy liquidated damages. 8. The arbitrators further clarified that at the time of making of the original award on 11th February, 1992 it was not brought to their attention that the balance supplies had been taken by the railways at a different location. 9. The arbitrators, in view of the new facts brought out post remission and which facts the arbitrators recorded, were also agreed by the respondent (railways) during the course of hearing, amended the award and granted nil damages (instead of damages of Rs 88,183) to the railways against their claim for liquidated damages. The arbitrators further held that the railways having already paid Rs 20,000/- with interest earlier awarded, directed the railways to pay an amount of Rs 88,183/- to the petitioner towards refund of security deposit alongwith simple interest at 16% per annum on Rs 88,183/- w.e.f. the date of original award i.e., 11th February, 1992 till publication of the revised award on 23rd November, 2006. It was further awarded that if the amounts were not paid within 60 days from the publication of “revised award”, the petitioner shall be entitled to future interest at 9% per annum till the date of payment. 10. The petitioner instituted this CS(OS) 1463A/2007 on 24th May, 2007, under Sections 14 and 17 of the Act for direction to the arbitrators to file the “revised award” in this court and for making the same the rule of court. This court vide order dated 14th August, 2007 directed the arbitrators to file the award alongwith arbitral proceedings in this court and upon receipt of the same on 13th December, 2007, notice of the filing of the award was issued. The railways have filed written statement cum objections under Section 30 of the 1940 Act against the revised award. Two objections have been raised – firstly it is contended that the suit is barred by time inasmuch as the “revised award” was published on 23rd November, 2006 and the suit has been instituted on 24th May, 2007. Secondly, it is contended that the arbitrators while rending the revised award have ignored the directions in the order dated 15th April, 2005 remitting the award and have, in fact, chosen to publish altogether new award and have rejected the entire claim of the respondent (railways) for liquidated damages and which was earlier partly allowed to the extent of Rs 88,183/-. 11. As far as the objection of limitation is concerned, Article 119(a) of Schedule I to the Limitation Act prescribes the time of 30 days from service of the notice of the making of the award, for instituting a suit/application under Sections 14 and 17 of the 1940 Act as the present proceeding is. The respondent, in the present case, has, in reply to the objections, not even stated that the present suit was filed within the aforesaid time. On the contrary, it is contended that the said time is not applicable since the present suit is merely a continuation of the earlier suit being CS(OS)3356A/1992. The correctness of the said plea of the petitioner is to be tested. If not, the suit is admittedly barred by time. 12. Suit CS(OS)3356A/1992 was disposed of by exercising power under Section 16 of the Act. Section 16 empowers the court to, from time to time, remit the award. The correctness of the said plea of the petitioner is to be tested. If not, the suit is admittedly barred by time. 12. Suit CS(OS)3356A/1992 was disposed of by exercising power under Section 16 of the Act. Section 16 empowers the court to, from time to time, remit the award. Sub-section (2) requires the court to, while remitting the award, fix the time within which the arbitrator shall submit his decision to the court. The proviso thereto empowers the court to extend the time at any time. Sub-section (3) provides that an award remitted under sub-Section (1) shall become void on the failure of the arbitrator to reconsider it and to submit his decision within the time fixed. The limitation of 30 days under Article 119 (supra) is for an application for filing in court of “an award” and commences from the date of service of the notice of “making of the award”. Section 14 also requires the arbitrator to give notice in writing to the parties of the making and signing of the award. Thus, the limitation of 30 days applies only to an award. What is to be determined is, the status of the “decision” of the arbitrator post remission. If the said “decision” has the status of the award, then the aforesaid limitation of 30 days shall apply and not otherwise. The arbitrators in the present case have, of course, while submitting their decision post remission called the same “revised award”. 13. Section 16 does not use the expression “award” in relation to the post remission findings. Rather it uses the expression “decision”. This is indicative of the fact that the decision/findings of the arbitrator post remission are not an award but merely a decision or a clarification. This is also borne out from the requirement of Section 16 of the court fixing the time within which the arbitrators are to submit their decision “to the court”. In fact, upon non submission of the decision within the prescribed time, the award which is remitted, become void. From this, it appears that post remission it is duty of the arbitrators to submit their decision to the court and the arbitrators are not required to give notice to parties of the making of the decision and the party is not required to take any step for having the said decision filed in the court. From this, it appears that post remission it is duty of the arbitrators to submit their decision to the court and the arbitrators are not required to give notice to parties of the making of the decision and the party is not required to take any step for having the said decision filed in the court. Once the legislature has used a separate terminology for the post remission findings and has placed the obligation for submitting the said finding/decision to the court on the arbitrators themselves, it cannot be said that the said findings have a status of an award and it is the duty of the party seeking to enforce the award in the light of the said findings/decisions to have the same filed in the court. Thus, the limitation of 30 days does not apply. I have been unable to find any precedent on the subject. 14. However, the fact remains that in the present case, this court did not fix any time for the arbitrators to submit the decision post remission. It was nevertheless the duty of the arbitrators to submit the post remission decision in this court. The suit CS(OS) 1463/2007 though titled as under Sections 14 and 17 of the Act, in fact, is in the nature of an application for directions in the original suit No.3356A/1992. Merely, because the petitioner has quoted the wrong provision while applying to the court would not attract provisions of limitation applicable thereto. The plea of the respondent (Railways) of limitation is thus rejected. 15. In my opinion, the non fixing of time by this court, as mandatorily required under Section 16(2) would also not be of any effect. I find a divided opinion in this regard. While the High Court of Madhya Pradesh in State of Madhya Pradesh Vs. Vijay Raj Kankariya 1988 M.P. LJ 60 and the Division Bench of Andhra Pradesh in M.R. Reddy & Co. Vs. State of A.P. MANU/AP/0080/1978 have taken a view that the non fixing of time by the court while remitting the award does not make the award void, the Punjab High Court in H.L. Jain Vs Punjab State ILR (1964) XVII (1) Punjab Series 816 has held that the order of remittal not fixing time renders the award void. 16. In the present case the order remitting the award has attained finality and has already acted itself out. 16. In the present case the order remitting the award has attained finality and has already acted itself out. I am unable to hold that an order of the court not in accordance with law could make an award void. No party can suffer owing to an act of the court. At best it can be said that the order of remittal is bad or void, but the effect thereof would only be to restore the position as existing prior to remittal and cannot still make the original award void. The language of Section 16 shows that the court, even after remitting the award remains seized of the matter. If that were not so, Section 16 would not have provided for the arbitrator, post remission, submitting his decision to the court. Section 16 of 1940 Act is akin to Order 41 Rule 25 of CPC. Rule 26 there expressly provides that the Appellate Court shall after receipt of findings post remand, proceed to determine the appeal. Thus for any defect in order of remand/remission cannot invalidate the original decree/award. Moreover, the Division Bench of this court has, not withstanding absence of express power to this effect in Section 16, held in U.O.I. Vs. K.L. Bhalla ILR (1973) Delhi 160 that the time can be extended by the court even after the expiry of time earlier fixed and after the decision has been submitted by the arbitrator to the court. In fact the Division Bench also noticed the difference between making of award and decision of arbitrator under Section 16. I, therefore, tend to respectfully agree with the M.P. High Court and the Division Bench of the Andhra Pradesh High Court and in my view the non-fixing of the time would be of no avail. 17. This brings me to the second objection raised by the respondent (railways). There is merit in this objection. The award dated 11th April, 1992 was remitted because this court entertained a doubt that there was a mistake in the award in adjusting Rs 88, 183/- awarded to the petitioner inasmuch as it was felt that the grant of liquidated damages could not be of the exact amount as the security deposit, refund whereof was ordered to the petitioner, specially as no reasons were given. The award was, therefore, remitted for the arbitrators to confirm whether there was such a mistake and if not, what were the reasons for awarding liquidated damages to the railways in the sum of Rs 88,183/-. The arbitrators post remission have confirmed that there is no mistake in their awarding liquidated damages as aforesaid to the petitioner and have further clarified that they had in their wisdom awarded liquidated damages to the extent of the security deposit only, after having found that the railways were entitled to liquidated damages in terms of the contract. However, the arbitrator did not stop on that. They proceeded to reverse their decision for award of liquidated damages to the railways while confirming that in the award dated 11th April, 1992 they had intended to give liquidated damages to the extent of the security deposit. They have, however, said that on discovery of new facts they now find that the railways are not entitled to liquidated damages. 18. Under Section 16 of the Act the award is remitted on terms as the court may think fit. In this case this court while remitting the award fixed the terms for the arbitrators to clarify whether the award of liquidated damages in the same amount as the security deposit was a mistake and if not to state the reasons for the identical amounts. This court did not direct the arbitrators to reconsider whether the railways were at all entitled to liquidated damages or not. It was, therefore, not open to the arbitrators to post remission come to the conclusion that the railways were not at all entitled to the liquidated damages. The arbitrators post award were functus officio and their power post remission was circumscribed by the terms of the order remitting the award. The decision could not be beyond the scope of said terms. Thus, the decision of the arbitrators to that effect cannot be considered. 19. However, that is still not the end of the matter. As aforesaid, the court remitting the award remains seized of the matter, awaiting the decision of the arbitrator. Even if the said decision of the arbitrators is to be ignored for not being in terms of order remitting, the court still has to decide whether the award is to be set aside or modified or made rule of the court. 20. Even if the said decision of the arbitrators is to be ignored for not being in terms of order remitting, the court still has to decide whether the award is to be set aside or modified or made rule of the court. 20. In the present case, as aforesaid, the agreement of the parties was for a reasoned award. There are no reasons given by the arbitrators in the award dated 11th February, 1992 for award of liquidated damages in the sum of Rs 88,183/- to the railways. In my view in the present case non giving of reasons for award of liquidated damages to railways coupled with what has transpired post remission and with respect whereto no objection/ denial has been filed, the award for grant of Rs 88,183/- as liquidated damages to the railways cannot be upheld. 21. I, therefore, set aside that part of the award dated 11th April, 1992. The effect thereof would be that the petitioner shall be entitled to the recovery of the said amount. 22. The next question is as to the interest. The arbitrators had granted interest at 16% per annum on the sum of Rs 88,183/- to the petitioner w.e.f. the date of the original award i.e., 11th February, 1992. However, in view of the interest rates having fallen in the interregnum, I deem it appropriate to grant simple interest on the said amount of Rs 88,183/- to the petitioner w.e.f. the date of the institution of the suit No. 3356A/1992 i.e.,. w.e.f. 2nd September, 1992 till the date of payment @ 9% per annum. The judgment in terms of the award so modified is pronounced. The decree sheet be drawn up. The parties are however left to bear their own costs.