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2009 DIGILAW 423 (HP)

H. P. STATE ELECTRICITY BOARD v. MADAN LAL GULATI

2009-05-06

SANJAY KAROL

body2009
JUDGMENT Sanjay Karol, J-Himachal Pradesh State Electricity Board, has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) assailing the award dated 7.9.2007 passed by Shri S.C.Mahajan, Arbitrator. 2. Himachal Pradesh State Electricity Board (hereinafter referred to as the Board) awarded contract to M/s Madan Lal Gulati, House No.646, Sector 8-B, Chandigarh, (hereinafter referred to as the Contractor) for construction of underground works comprising of Head Race Tunnel and Desilting Chambers of Thirot Hydel Project vide Executive Engineer, Thirot Construction Division No.1 letter no. TCD-I/DB-14-5/89-90-531418 dated 21.11.1989. 3. The approximate value of the contract was Rupees one crore and fifteen lakhs and the date of completion as per agreement was 31.8.1991. 4. The contractor could not complete the work within the stipulated period, as such, his contract stood rescinded by the Board on 23.3.1992 and in terms of the agreement the work was got executed through other agencies at the contractor’s risk and consequences. The work was completed in June, 1996. The Board invoked Clause 25 of the agreement containing the arbitration clause and also got issued notice dated 16.10.1998. The Arbitrator was appointed on 9.9.1999 and the claims were filed before him by the Board. Initially the Contractor did not join the arbitral proceedings but subsequently participated and filed a counter-claim on 26.8.2002. The Board objected to the maintainability of the counter-claims, inter alia, on the ground that the same were time barred. Based on the pleadings of the parties, the Arbitrator framed the following issues:- Issue No.1 – Whether the claim filed by the claimant is within time limit. Issue No.2.- Whether the counter claim filed by the respondent is within time limit. Issue No.3.- Whether there has been a breach of contract by the respondent. Issue No.4-Whether the claim of the claimant is justified. Issue No.5-Whether the counter claim of the respondent is justified. 5. The Arbitrator adjudicated the disputes inter se between the parties and as against the Board’s claim of Rs.39,12,870/-, he awarded Rs.12,00,000/-. 6. While adjudicating the counter-claim filed by the Contractor as against a total claim of Rs.1,99,41,497/- the Arbitrator awarded different amounts under different heads as shown in Summary of Award. Interest @15% was also awarded on the respective amounts awarded to the parties.. 7. The Contractor has accepted the award. 8. 6. While adjudicating the counter-claim filed by the Contractor as against a total claim of Rs.1,99,41,497/- the Arbitrator awarded different amounts under different heads as shown in Summary of Award. Interest @15% was also awarded on the respective amounts awarded to the parties.. 7. The Contractor has accepted the award. 8. The challenge to the award is primarily on two grounds (i) while deciding issue No.4, the Arbitrator exceeded his jurisdiction inasmuch as Clause 3 of the contract was non-arbitrable and hence the Arbitrator could not have reduced the claim from Rs.39,12,870/-to Rs.12,00,000/-. In any event, it is a non speaking award as no reasons have been assigned while doing so (ii) finding on Issue No.2 is illegal and erroneous as the contractor’s counter-claim is barred by law of limitation. 9. Mr.Bhogal, learned senior counsel has referred to the decisions in Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd., (2003) 5 SCC 705 and O.N.G.C. Ltd. vs. Garware Shipping Corporation Ltd., AIR 2008 SC 456. 10. Per Contra, Mr.Dhaulta, has supported the award for the reasons set out therein. He has argued that even error apparent on the face of record by itself would not be a ground for interfering with the impugned award; keeping in view the limited scope of interference under Section 34 of the Act, the Court cannot appreciate the evidence nor can it question the reasoning given by the Arbitrator. The Arbitrator’s interpretation is final and binding. 11. In his support, he has referred to the following decisions rendered by various Courts:- Rawla Construction Co. vs. Military Engineers Services, 2001(2) Arb.L.R. 469 (Delhi); Municipal Corporation of Delhi vs. Ramey and another, 2002 (2) Arb.L.R.672 (Delhi); Bright Food Industries vs. N.D.M.C., 2001 (3) Arb.LR 550 (Delhi); Balbir Singh vs. Anil Kumar, 2003 (3) RCR (Civil) 116 (P&H). Union of India vs. Shibboo Mal & Sons, 2003(1) Arb.L.R. 629; Pure Hejium India Pvt. Ltd. vs. Oil & Natural Gas Commission, 2003(4) RCR (Civil) 791 (S.C.) and Indu Engineering & Textiles Ltd. vs. Delhi Development Authority, 2001(2) Arb.L.R. 486 (S.C.). 12. I have heard the learned counsel for the parties and also perused the record. While deciding Issue No.2, the findings of the Arbitrator on Issue No.2, in toto, are reproduced as under:- “Issue No.2: Counterclaim of the Respondent is admissible in view of the permission granted by the Arbitrator Er.S.R.Khitta. 12. I have heard the learned counsel for the parties and also perused the record. While deciding Issue No.2, the findings of the Arbitrator on Issue No.2, in toto, are reproduced as under:- “Issue No.2: Counterclaim of the Respondent is admissible in view of the permission granted by the Arbitrator Er.S.R.Khitta. In case the claimant had any objection to grant of permission by the Arbitrator to the Respondent, it should have been filed before the Arbitrator at that time itself. This was done. This issue has not been contested even during the proceedings. This counter claim has been objected to only in the written arguments. As such I allow the counter claim of the Respondent.” 13. The Limitation Act, 1963, Schedule I, Part-II, prescribes period for recovery of money to be three years. Section 3 of the Limitation Act, 1963 prescribes that every suit instituted after the prescribed period shall be dismissed even though limitation has not been set up as a defence. It clarifies that claim by way of set off or a counter claim, shall be treated as a separate suit and shall be deemed to have been instituted in the case of counter claim on the date on which the counter claim is made in the Court. 14. The Apex Court in Saw Pipes Ltd. (supra) has held as under:- “31. Therefore, in our view, the phrase `Public Policy of India used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term `public policy in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, it is required to be held that the award could be set aside if it is patently illegal. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term `public policy in Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, it is required to be held that the award could be set aside if it is patently illegal. Result would be - award could be set aside if it is contrary to :- (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) in addition, if it is patently illegal. 15. Illegality must go to the root of the matter and if he illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void. 16. The cause of action for recovering the amount, in favour of the Contractor, arose in the year 1992 when the work stood rescinded. It is a matter of record that between the year 1992 and August, 2002 the Contractor did not take any steps for enforcement of his right and/or adjudication of his claims in accordance with law. 17. The findings of the Arbitrator that since the earlier Arbitrator Er.S.R.Khitta had granted permission are thus fallacious and untenable in law. The plea of limitation could have been raised at any point in time. In fact the Board got a specific issue framed and hence the Board could not have said to have acquiesced on the said point. The contractor’s counter claims were barred by limitation. They ought to have been rejected. 18. I have minutely examined the decisions referred to and relied upon by Mr.Dhaulta. There cannot be any dispute that Arbitrator’s interpretation to the agreement entered into between the parties, is final and the Court would not ordinarily interfere unless and until the findings are perverse or palpably false or that the award is so unfair and unreasonable that it shocks the conscience of the Court. There also cannot be any dispute that the Court cannot reappreciate the evidence or go into the reasons unless and until they are perverse. There also cannot be any dispute that the Court cannot reappreciate the evidence or go into the reasons unless and until they are perverse. The labour put in by Mr.Dhaulta is appreciable, but, however, regretfully the judgments referred to do not apply to the facts of the present case. 19. As has been noticed hereinabove, the findings returned by the Arbitrator are not only erroneous, perverse and palpably illegal but there is error apparent on the face of record inasmuch as the Arbitrator has not even considered the provisions of the agreement and the laws of the land, what to talk of appreciation thereof. 20. The Apex Court in Garware Shipping Corporation (supra), has held that the award passed on wrong basis and with perverse conclusion is liable to be interfered under Section 34 of the Act. 21. Clause 3 of the contract, according to the Board, was non-arbitrable. The plea taken by the Board in fact is in contradiction to its action of seeking recourse to arbitral proceedings. The amount of Rs.39,12,870/- was determined under Clause 3 by the Board itself. Where was the need for the Board to have invoked the arbitration clause. The Arbitrator also had no jurisdiction to arbitrate the dispute with respect thereto. The claim petition itself was misconceived and the Board could not have invoked the arbitration clause to seek recovery of the amount determined under clause 3. The Arbitrator while adjudicating the Board’s claim reduced the amount from Rs.39,12,870/- to Rs.12,00,000/-. No reasons have been assigned for the same. According to the EBoard, the Arbitrator had no jurisdiction to reduce the same as the said clause by itself was non-arbitrable. That the dispute covered under the said clause is non-arbitrable is not in dispute. That being the position the Board’s petition claiming Rs.39,12,870/- by itself was misconceived and the remedy to recover the same lied elsewhere and not before the Arbitrator. 22. Therefore, in my considered view, the Arbitrator has seriously erred in adjudicating the disputes inter se between the parties as they stood barred both under the terms of the Contract as also the law of the land. Hence, the petition warrants interference under Section 34 of the Act. The award as such is set aside. 23. 22. Therefore, in my considered view, the Arbitrator has seriously erred in adjudicating the disputes inter se between the parties as they stood barred both under the terms of the Contract as also the law of the land. Hence, the petition warrants interference under Section 34 of the Act. The award as such is set aside. 23. Liberty is, however, given to the Board to take recourse to such remedies as may be available to them, in accordance with law, for recovery of the amount claimed before the Arbitrator. If such proceedings are initiated, then the question of limitation, if raised, shall be considered keeping in view the pendency of proceedings both before the Arbitrator as well as in this Court.