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2012 DIGILAW 125 (GUJ)

EXECUTIVE ENGINEER v. RAJKAMAL CONSTRUCTION COL.

2012-02-21

J.C.UPADHYAYA, JAYANT PATEL

body2012
ORDER JAYANT PATEL This appeal under Section 39 of the Indian Arbitration Act, 1940 is at the instance of original respondent in proceedings under Section 14 of the Arbitration Act, and is directed against judgment and order passed by learned Civil Judge (Senior Division) Valsad dated 15th October, 1994, and thereby making the award of the Arbitrator the rule of the Court. The Arbitrator awarded a sum of Rs. 23,62,750/- in favour of respondent herein - original claimant and simultaneously rejected the counter claim of the State Government i.e. the appellant herein, to the tune of Rs. 41,88,549/-. 2. Shortly stated facts leading to filing of this appeal are as under:- 3. The appellant floated a tender for the work of constructing Acqueduct across river Damanganga Left Bank Main Canal in the district of Valsad. The tender was filled-in by the respondent herein, who is engaged in the business of construction, and the tender of the respondent herein being lowest, came to be accepted by the appellant. Some of the key points relating to the work of contract are as under. Name of work : Construction of Acqueduct across River Damanganga Left Bank Main Canal. Tender cost : Rs. 61,53,273/- Estimated cost : Rs. 52,49,100/- Contract Agreement : No.LCB/5 of 1981-92. Date of work order : 19.11.1981 Stipulated period of : 24 months completion Stipulated date of : 10.11.1983 completion Actual date of : 30.4.1990 completion Final Bill payment released : 12.6.1991 Extension of Time : Extension granted upto 30.4.1990 without levying Liquidated damages. 4. It appears that certain disputes with regard to the contract agreement cropped up between the appellant herein and the respondent as a result of which the dispute was referred for arbitration, as the terms of the agreement provides for appointment of Arbitrator in the event of dispute between the parties. 5. One Mr. M.H. Vakharia came to be appointed as the Sole Arbitrator by the parties on 8th July, 1991 and after adjudicating the claims and counter claims, the Arbitrator published his award on 11th October, 1993 in presence of the parties. Thereafter, the sole Arbitrator submitted the said award in the Court of Civil Judge (S.D), Valsad for making award a rule of the Court. On submitting the award the same came to be registered as Civil Misc. (Arbitration) Application No. 60 of 1993. 6. Thereafter, the sole Arbitrator submitted the said award in the Court of Civil Judge (S.D), Valsad for making award a rule of the Court. On submitting the award the same came to be registered as Civil Misc. (Arbitration) Application No. 60 of 1993. 6. The appellant herein filed objections against the award under Section 30 of the Arbitration Act, 1940. 7. The trial Court adjudicated the objections against the award and made the award rule of the Court. The award of the Arbitrator came to be modified to a certain extent, in so far as claim of the respondent herein to recover Rs. 76,138/- under the additional claim No.1 is concerned, was rejected. To that extent the award dated 11th October, 1993 came to be set aside. Rest of the award came to be confirmed and was made rule of the Court. 8. Record reveals that the appellant herein raised counter claims amounting to Rs. 41,88,549/- for the first time before the Arbitrator though the Government had already released payment in favour of the respondent towards the final bill. 9. Being aggrieved by the order passed by the trial Court making award of the Arbitrator the rule of the Court, the appellant herein has come up with this appeal under Section 39 of the Arbitration Act, 1940. 10. Contentions of appellant: 10.1 Learned AGP vehemently submitted that the Court below has committed a serious error in law as well as on facts in passing an order making an award of the Arbitrator as rule of the Court and whereby the Arbitrator has awarded payment of Rs. 23,62,750/- in favour of the respondent claimant against the regular claim and rejected the counter claim of the State Government to the tune of Rs. 41,88,549/-. 10.2 Learned AGP also submitted that the Court below ought to have held that the Arbitrator has wrongly awarded certain amount though the claimant has not chosen to avail remedy under the contract as contemplated under Section 53 of the Contracts Act. 10.3 Learned AGP submitted that the award published by the Arbitrator is a non-reasoned award and the same, on the face of it, is arbitrary and illegal. Learned AGP further submitted that the Arbitrator has materially erred in awarding Rs. 10 lac for idle men and machinery without any basis or evidence on record. 10.3 Learned AGP submitted that the award published by the Arbitrator is a non-reasoned award and the same, on the face of it, is arbitrary and illegal. Learned AGP further submitted that the Arbitrator has materially erred in awarding Rs. 10 lac for idle men and machinery without any basis or evidence on record. Learned AGP also submitted that the Court below ought to have held that the Arbitrator has misconducted himself by awarding Rs. 80,000/- for the subsequent work at a rate much higher than the rate as prescribed in the tender and thereby committed an error apparent on the face of the record. Learned AGP also submitted that the Court below ought to have held that the Arbitrator has not taken into consideration the fact that the water was released after due intimation for the same to the respondent claimant and that there was no progress in the work after 20th April, 1987 and in spite of this Arbitrator awarded a sum of Rs. 4 lac without any evidence in support of the same. 11. Contentions of respondent claimant: 11.1 Learned Advocate Mr. G.T. Dayani appearing for the respondent claimant vehemently submitted that there is no merit in this appeal as the Arbitrator in his reasoned award justified the reasons for rejecting the counter claims and the trial Court while deciding the objections very rightly did not interfere with the arbitral award in view of settled legal position. 11.2 Mr. Dayani further submitted that none of the contentions as canvassed by learned AGP fall under the limited scope of appeal under Section 39 of the Indian Arbitration Act, 1940, more particularly keeping in mind Section 30 of the Arbitration Act, 1940. He submitted that the trial Court has dealt with all the issues and has referred to various judgments and modified the award to the extent as stated above. He therefore, submitted that the appeal deserves to be dismissed. 12. Analysis: As regards the award of an arbitrator under the Act, the law is well settled that the Arbitrator's adjudication is generally considered binding between the parties for he is a Tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30 of the Act, viz. Analysis: As regards the award of an arbitrator under the Act, the law is well settled that the Arbitrator's adjudication is generally considered binding between the parties for he is a Tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30 of the Act, viz. (a) if the Arbitrator has misconducted himself or the proceedings; or (b) when the award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35; or (c) when the award has been improperly produced or is otherwise invalid. 13. Under clause (c) of Section 30, the Court can set aside the award which suffers from an error on the face of the award. It is, however, not open to the Court to speculate, where no reasons are given by the Arbitrator, as to what impelled the Arbitrator to arrive at his conclusion. The jurisdiction of the Arbitrator is limited by the reference and if the Arbitrator has assumed jurisdiction not possessed by him, the award to the extent to which it is beyond the Arbitrator's jurisdiction, would be invalid and liable to be set aside. This position of law has been well settled by the Constitution Bench of the Supreme Court in Raipur Development Authority Vs. Chokhamal Contractors and ors. reported in 1989 (2) SCC 721 . In Raipur Development Authority (supra) it has been held that an Arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or the deed of submission he is required to give such reasons, and if the Arbitrator or umpire chooses to give reasons in support of his decision it is open to the Court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons, and an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitral agreement or the deed by submission requires him to give reasons. 14. 14. The position of law as aforesaid answers one of the main contentions of the appellant that the Arbitrator has failed to assign reasons while passing the award. As a matter of fact, on perusal of the award we find that the arbitrator in his own way has assigned reasons and we are convinced by the reasons assigned by the Arbitrator. 15. The scope and extent of examination by the Court of an award made by the Arbitrator has been laid down in various decisions. We may profitably quote decision of the Supreme Court in Gujarat Water Supply & Sewerage Board Vs. Unique Erectors (Gujarat) (P) Ltd. - AIR 1989 SC 972, wherein the Bench held in para 9 as under:- "It has to be noted that there is a trend in modern times that reasons should be stated in the award though the question whether the reasons are necessary in ordinary arbitration awards between the parties is pending adjudication by the Constitution bench of this Court. Even,however, if it be held that it is obligatory for the arbitrator to state reasons, it is not obligatory to give any detailed judgment. An award of an arbitrator should be read reasonably as a whole to find out the implication and the meaning thereof. Short intelligible indications of the grounds should be discernible to find out the mind of the arbitrator for his action even if it be enjoined that in all cases of award by any arbitrator reasons have to be stated. The reasons should not only be intelligible but should also deal either expressly or impliedly with the substantial points that have been raised. Even in a case where the arbitrator has to state reasons, the sufficiency of the reasons depends upon the facts and the circumstances of the case. The Court, however, does not sit in appeal over the award and review the reasons. The Court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusion or if the award is based upon any legal proposition which is erroneous. See the observations of this Court in Indian Oil Corporation Ltd. v. Indian Carbon Ltd., [1988] 3 SCC 36. In MCD Vs. The Court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusion or if the award is based upon any legal proposition which is erroneous. See the observations of this Court in Indian Oil Corporation Ltd. v. Indian Carbon Ltd., [1988] 3 SCC 36. In MCD Vs. M/s. Jagan Nath Ashok Kumar (1987) 4 SCC 497 , the Supreme Court observed thus:- "In this case, there was no violation of any principles of natural justice. It is not a case where the arbitrator has refused cogent and material factors to be taken into consideration. The award cannot be said to be vitiated by non-reception of material or non-consideration of the relevant aspects of the matter. Appraisement of evidence by the arbitrator is ordinarily never a matter which the court questions and considers. The parties have selected their own forum and the deciding forum must be conceded the power of appraisement of the evidence. In the instant case, there was no evidence of violation of any principle of natural justice. The arbitrator in our opinion is the sole judge of the quality as well as quantity of evidence and it will not be for this Court to take upon itself the task of being a judge of the evidence before the arbitrator. It may be possible that on the same evidence the court might have arrived at a different conclusion than the one arrived at by the arbitrator but that by itself is no ground in our view for setting aside the award of an arbitrator." and further concluded: "After all an arbitrator as a judge in the words of Benjamin N. Cardozo, has to exercise a discretion informed by tradition, methodized by analogy, disciplined by system, and subordinated to "the primordial necessity of order in the social life". In P.M. Paul Vs. Union of India, reported in (1989) Supp 1 SCC 368, the Supreme Court held as under:- "It was submitted that if the contract work was not completed within the stipulated time which it appears was not done then the contractor has got a right to ask for extension of time, and he could claim difference in price. This is precisely what he has done and has obtained a portion of the claim in the award. This is precisely what he has done and has obtained a portion of the claim in the award. It was submitted on behalf of the Union of India that failure to complete the contract was not the case. Hence, there was no substance in the objections raised. Furthermore, in the objections raised, it must be within the time provided for the application under Section 30 i.e., 30 days during which the objection was not specifically taken, we are of the opinion that there is no substance in this objection sought to be raised in opposition to the award. Once it was found that the arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the respondent, the respondent was liable for the consequences of the delay, namely, increase in prices. Therefore, the arbitrator had jurisdiction to go into this question. He has gone into that question and has awarded as he did." In one of the recent pronouncement of the Supreme Court in the case of Ravindra Kumar Gupta and Company Vs. Union of India - (2010) 1 SCC 409 , the Supreme Court has considered the law with regard to the scope and ambit of the jurisdiction of the Courts to interfere with an arbitration award after taking note of catena of judgments. The relevant paragraphs are quoted below:- 9. The law with regard to scope and ambit of the jurisdiction of the courts to interfere with an arbitration award has been settled in a catena of judgments of this Court. We may make a reference here only to some of the judgments. In the case of State of Rajasthan v. Puri Construction Company Limited and Anothers (1994) 6 SCC 485 : (1994 AIR SCW 5061), this Court observed as follows. "The arbitrator is the final arbiter for the dispute between the parties and it is not open to challenge the award on the ground that the arbitrator has drawn his own conclusion or has failed to appreciate the facts. In Sudarsan Trading Co. v. Govt. of Kerala 1989 Ind law SC 463 : ( AIR 1989 SC 890 ) it has been held by this Court that there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised. In Sudarsan Trading Co. v. Govt. of Kerala 1989 Ind law SC 463 : ( AIR 1989 SC 890 ) it has been held by this Court that there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the arbitrator to grant a particular remedy. One has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction. Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid is a decision within the competency of the arbitrator. By purporting to construe the contract the court cannot take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the court. Where the reasons have been given by the arbitrator in making the award the court cannot examine the reasonableness of the reasons. If the parties have selected their awn forum, the deciding forum must be conceded the power of appraisement of evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator. In the case of Municipal Corpn. of Delhi v. Jagan Nath Ashok Kumar 1987 (4) SCC 497 : ( AIR 1987 SC 2316 ), it has been held by this Court that appraisement of evidence by the arbitrator is ordinarily never a matter which the court questions and considers. It may be possible that on the same evidence the court may arrive at a different conclusion than the one arrived at by the arbitrator but that by itself is no ground for setting aside the award. It has also been held in the said decision that it is difficult to give an exact definition of the word 'reasonable'. It may be possible that on the same evidence the court may arrive at a different conclusion than the one arrived at by the arbitrator but that by itself is no ground for setting aside the award. It has also been held in the said decision that it is difficult to give an exact definition of the word 'reasonable'. Reason varies in its conclusions according to the idiosyncrasies of the individual and the time and circumstances in which thinks. In cases not covered by authority, the verdict of a jury or the decision of a judge sitting as a jury usually determines what is 'reasonable' in each particular case. The word reasonable has in law prima facie meaning of reasonable in regard to those circumstances of which the actor, called on to act reasonably knows or ought to know. An arbitrator acting as a judge has to exercise a discretion informed by tradition, methodized by analogy disciplined by system and subordinated to the primordial necessity or order in the social life. Therefore, where reasons germane and relevant for the arbitrator to hold in the manner he did, have been indicated, it cannot be said that the reasons are unreasonable." 10. In the case of Arosan Enterprises Ltd. v. Union of India, (1999) 9 SCC 449 : (1999 AIR SCW 3872), this Court upon analysis of numerous earlier decisions, held as follows:- "36. Be it noted that by reasons of a long catena of cases, it is now a well-settled principle of law that re-appraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the court to reappraise the evidence is unknown to proceedings under section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the Court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. In the event however two views are possible on a question of law as well, the court would not be justified in interfering with the award. 37. In the event however two views are possible on a question of law as well, the court would not be justified in interfering with the award. 37. The common phraseology "error apparent on the face of the record" does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The Court as a matter of fact cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the, arbitrator is a possible view the award or the reasoning contained therein cannot be examined." 11. This view has been reiterated by this Court in the case of Oil and Natural Gas Corporation Ltd. v. SAW Pipes Ltd. (2003 AIR SCW 3041. "53. In the light of the aforesaid decisions, in our view, there is much force in the contention raised by the learned counsel for the appellant. However, the learned senior counsel Mr. Dave submitted that even if the award passed by the arbitral tribunal is erroneous, it is settled law that when two views are possible with regard to interpretation of statutory provisions and or facts, the Court would refuse to interfere with such award. 54. It is true that if the arbitral tribunal has committed mere error of fact law in reaching its conclusion on the disputed question submitted to it for adjudication then the Court would have no jurisdiction to interfere with the award. But, this would depend upon reference made to the arbitrator : (a) if there is a general reference for deciding the contractual dispute between the parties and if the award is based on erroneous legal proposition, the Court could interfere; (b) It is also settled law that in a case of reasoned award, the Court can set aside the same if it is, on the face of it, erroneous on the provision of law or its application; (c) If a specific question of law is submitted to the arbitrator, erroneous decision in point of law does not make the award bad, so as to permit of its being set aside, unless the Court is satisfied that the arbitrator had proceeded illegally." 12. In the M/s. Kwality Manufacturing Corporation v. Central Warehousing Corporation it was held : "10. In the M/s. Kwality Manufacturing Corporation v. Central Warehousing Corporation it was held : "10. At the outset, it should be noted that the scope of interference by courts in regard to arbitral awards is limited. A court considering an application under Section 30 or 33 of the Act, does not sit in appeal over the findings and decision of the arbitrator. Nor can it re-assess or re-appreciate evidence or examine the sufficiency or otherwise of the evidence. The award of the arbitrator is final and the only grounds on which it can be challenged are those mentioned in Sections 30 and 33 of the Act. Therefore, on the contentions urged, the only question that arose for consideration before the High Court was, whether there was any error apparent on the face of the award and whether the arbitrator misconducted himself or the proceedings." 13. Again it is reiterated in the judgment of Madhya Pradesh Housing Board v. Progressive Writers and Publishers (2009) 5 SCC 678 : (2009 AIR SCW 2484) as follows : "28. The finding arrived at by the arbitrator in this regard is not even challenged by the Board in the proceedings initiated by it under Section 30 of the Act. It is fairly well settled and needs no restatement that the award of the arbitrator is ordinarily final and the courts hearing applications under Section 30 of the Act do not exercise any appellate jurisdiction. Reappraisal of evidence by the court is impermissible." 14. In this case, the Supreme Court notice the earlier judgment in the case of Ispat Engineering and Foundry Works, B.S. City, Bokaro v. Steel Authority of India, B.S. City, Bokaro [ (2001) 6 SCC 347 ] : (2007 AIR SCW 2723) wherein it was held as follows : "4. Needless to record that there exists a long catena of cases through which the law seems to be rather well settled that the reappraisal of evidence by the court is not permissible. This Court in one of its latest decisions [Arosan Enterprises Ltd. v. Union of India (1999) 9 SCC 449 : (1999 AIR SCW 3872)] upon consideration of decisions in Champsey Bhara and Co. v. Jivraj Balloo Spg. and Wvg. Co. This Court in one of its latest decisions [Arosan Enterprises Ltd. v. Union of India (1999) 9 SCC 449 : (1999 AIR SCW 3872)] upon consideration of decisions in Champsey Bhara and Co. v. Jivraj Balloo Spg. and Wvg. Co. Ltd. [AIR 1923 PC 66], Union of India v. Bungo Steel Furniture (P) Ltd. [ (1967) 1 SCR 324 ] : ( AIR 1967 SC 1032 ) N. Chellappan v. Secy., Kerala SEB [ (1975) 1 SCC 289 ] : ( AIR 1975 SC 230 ), Sudarshan Trading Co. v. Govt. of Kerala [ (1989) 2 SCC 38 ], State of Rajasthan v. Puri Construction Co. Ltd. [ (1994) 6 SCC 485 ] : (1994 AIR SCW 5061) as also in Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan [ (1999) 5 SCC 651 ]: (1999 AIR SCW 1831) has stated that reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under Section 30 of the Arbitration Act, 1940. This court in Arosan Enterprises categorically stated that in the event of there being no reason in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, interference would still be not available unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. This Court went on to record that in the event, however, two views are possible on a question of law, the court would not be justified in interfering with the award of the arbitrator if the view taken recourse to is a possible view. The observations of Lord Dunedin in Champsey Bhara stand accepted and adopted by this Court in Bungo Steel Furniture to the effect that the court had no jurisdiction to investigate into the merits of the case or to examine the documentary and oral evidence in the record for the purposes of finding out whether or not the arbitrator has committed an error of law. The court as a matter of fact, cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties." 16. The court as a matter of fact, cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties." 16. Taking into consideration the settled position of law as stated above and having gone through the entire materials on record, we are of the view that the Court below duly scrutinized the evidence and has justifiably made award of the Arbitrator rule of the Court. With regard to the claims and question, the Arbitrator has given elaborate reasons. Therefore, findings recorded by the Arbitrator cannot be said to be either perverse or based on no evidence. In exercise of our powers under Section 39 of the Arbitration Act, it is not permissible for us to substitute the view of the Court below with our own opinion on appreciation of evidence. Such a course is not permissible to the High Court while examining objections to the award under Section 30 of the Arbitration Act, 1940. 17. In our opinion, the impugned judgment of the Civil Court does not fall within the limited jurisdiction available to the Court for interference in the award of an Arbitrator. 18. For the aforesaid reasons, the appeal is dismissed. However, there shall be no order as to costs.