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2009 DIGILAW 410 (CAL)

UNION OF INDIA v. Mahesh Murarka

2009-06-12

INDIRA BANERJEE

body2009
Judgment :- (1) This application under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as the 1996 Act, filed by Union of India, is for setting aside an award dated 29th April, 2008 made and published by an Arbitral Tribunal of three Senior Railway Officials, named by the General Manager, South Eastern Railway. (2) A notice inviting Tender No. RS/TPKR/WC/PA 2484 dated 15th September, 2000 was floated by the petitioners for installation of a driver guard communication system, along with passenger announcement system in 16 EMU rakes, each comprising 9 coaches at the EMU Carshed at Tikiapara, Howrah in West Bengal under the South Eastern Railway. (3) The respondent submitted his tender along with the requisite earnest mpney. The respondent being the lowest tenderer, his offer was accepted by a letter dated 20th April, 2001. (4) An agreement in writing was duly executed, in terms whereof, the tender work was to be completed within 120 days from 20th April, 2001, being the date of issue of the letter of acceptance of the tender. (5) On or about 5th May, 2001, the first rake was offered to the respondent for installation of the driver guard communication system along with the passenger announcement system. (6) Even though the initial time granted for completion of the contract work was 120 days from the date of issuance of the letter of acceptance, the time was extended from time to time, the last extension being upto 30th September, 2003. Admittedly as per the averments in the petition, rakes were offered in piecemeal and rakes were withdrawn midway before installation of the communication system could be completed. (7) The petitioner issued a notice terminating the contract of the respondent, whereupon the respondent invoked the arbitration agreement and sought reference of the disputes that had arisen between the parties to arbitration. (8) An application was filed under Section 11 (6) of the Arbitration and Conciliation Act, 1996, requesting that an Arbitrator be appointed by the Honble Chief Justice. (9) Pursuant to an order dated 8th June, 2007 of the Honble Chief Justice, the General Manager, South Eastern Railway constituted the Arbitral Tribunal, comprising three very senior railway officials, namely, Sri Girish Kumar, Chief Rolling Engineer (Freight), Sri R. Rajamoni, Chief Commissioner of Railway Safety (Retired) and Sri H.K. Sahoo, Senior BDBM, South Eastern Railway. (9) Pursuant to an order dated 8th June, 2007 of the Honble Chief Justice, the General Manager, South Eastern Railway constituted the Arbitral Tribunal, comprising three very senior railway officials, namely, Sri Girish Kumar, Chief Rolling Engineer (Freight), Sri R. Rajamoni, Chief Commissioner of Railway Safety (Retired) and Sri H.K. Sahoo, Senior BDBM, South Eastern Railway. (10) According to the petitioners, the Arbitral Tribunal entered into reference on 1st October, 2007 and issued directions o the parties to file their respective pleadings. The respondent being the claimant before the Arbitral Tribunal, filed its statement of claim on 31st August, 2007 making a claim of Rs. 96,01,534/- particulars whereof are as follows:- (11) The petitioner filed its counter statement denying the allegations made in the statement of claim and making a counter claim of Rs.1.59 crores. (12) In support of its claim, the respondent filed volumes of documents including:-(i) Copies of the Bills paid for procurement of the materials required for the 16 rakes, (ii) Copies of vouchers of labour payments, (iii) Copies of legal expenses paid, (iv) Bank statement from their bank account to show the interests levied on them by the bank for the over-draft taken for the work, (v) Copies of the joint inspection report in respect of 2nd and 3rd rake, (vi) Statement showing the days they were able to work on the rake/coaches and days when work was not possible. (13) The petitioners also relied on documents and in particular letters to the respondent for expediting the work, letters of extension of time, internal departmental notes and internal records of the Shed regarding movement of rakes. (14) After hearing the parties at length and considering the respective pleadings and materials-on-record, the Arbitral Tribunal made and published its award dated 29th April, 2008 impugned in this application, allowing the claim of the respondent to the extent of Rs.23,47,088/- and rejecting the counter claim of the petitioner. (15) The breakup of the item-wise claim of the respondent and the amount awarded by the Arbitral Tribunal in respect of the aforesaid claim is set out herein below for convenience:- (16) The award is reasoned. The verdict in respect of each item of claim has been explained. The reasons for the award are sufficiently detailed. The findings are apparently based on evidence. The verdict in respect of each item of claim has been explained. The reasons for the award are sufficiently detailed. The findings are apparently based on evidence. The Arbitral Tribunal upon examination of materials placed before it, found that there was undue delay in making rakes available to the petitioner for execution of the contract work and coaches were often withdrawn half-way through work. Furthermore, the Arbitral Tribunal acted within the four corners of law in drawing adverse inference against the defendants for non-traverse of the contentions of the respondent. (17) Mr. Jayanta Banerjee appearing on behalf of the petitioners submitted that the Arbitral Tribunal had ignored the fact that there had been delay of over 200 days on the part of the respondent in execution of the work. Mr. Banerjee further submitted that the Arbitral Tribunal erred in awarding compensation to the petitioner for loss of profits. (18) The petitioners have, in effect, invited this Court to sit in appeal over the impugned award of the Arbitral Tribunal, which this Court does not do in an application for setting aside of an award. (19) It is not the case of the petitioners that the arbitrators lacked jurisdiction to make and publish the award impugned or any part thereof. The arbitrability of the disputes referred to the Arbitral Tribunal has not been questioned. The award is apparently based on evidence. (20) The Arbitral Tribunal considered the materials-on-record, including the subject file of the Railway, where there were internal notings to the effect that delay was due to non-submission of rakes and confusion in specification and that the Railways had not suffered any loss for the delay. (21) The Arbitral Tribunal, comprised of Senior Officials of the Railways, appointed by the Railway authorities, pursuant to orders of the Honble Chief Justice, has made a speaking award giving reasons in details for each item of claim. There is no such infirmity in the award that calls for interference of this Court under Section 34 of the 1996 Act. (22) In an application under Section 34 of the 1996 Act, the scope of intervention of Court is limited. The Court does not sit in appeal over an award. Nor can the Court correct errors of arbitrators. (23) As held by the Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd. and Ors., reported in 2006 (11) SCC 181 cited by Mr. The Court does not sit in appeal over an award. Nor can the Court correct errors of arbitrators. (23) As held by the Supreme Court in McDermott International Inc. v. Burn Standard Co. Ltd. and Ors., reported in 2006 (11) SCC 181 cited by Mr. Samit Talukdar, the 1996 Act makes provisions for the supervisory role of Courts or review of the arbitral award, only to ensure fairness, and intervention of the Court is envisaged in a few circumstances as specified in the said section. (24) There can be no doubt that an arbitral award can also be set aside if the same is contrary to public policy. However, in McDermott (supra) the Supreme Court held as follows:- "Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the Court. Where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merits of the matter." (25) Mr. Talukdar also cited M/s. A. T. Brij Paul Singh and Bros. v. State of Gujarat, reported in AIR 1984 SC 1703 where the Supreme Court approved 15% of the value of the contract as damages. In the instant case, in Arbitral Tribunal has taken the damages at 15% of the value of the balance work. (26) There is, in my view, no illegality in the award, not to speak of such patent illegality that is unreasonable or unfair or otherwise shocks the conscience of this Court. (27) There are no grounds at all for interference with the award impugned. The application is thus dismissed.