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2012 DIGILAW 5 (SIK)

Shiv Shankar Dhakal v. Mukti Nath Adhikari

2012-05-10

PERMOD KOHLI

body2012
JUDGMENT This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, the Act) arises out of a judgment dated 24-09-2011 passed by the learned District Judge, Special Division-II, East Sikkim at Gangtok in Suit (Arbitration) No. 01/2010, Mukti Nath Adhikari v. Shiv Shankar Dhakal. Brief resume of the facts relevant for the purpose of the present appeal is noticed hereinafter. 2. The appellant herein submitted tender for allotment of work of construction of Truckable Road from Lingee to Payong Government Junior High School, South Sikkim being an enlisted contractor with the Sikkim Public Works Department (for short, SPWD). Even before the work could be allotted to him, he entered into an Agreement on 26-12-2002 to sub-let the work for one kilometer of stretch of road construction to the respondent herein in the event the work is allotted to him. This agreement also contains an arbitration clause, being clause No. 10, making a provision for settlement of disputes through arbitration. The work in question was allotted to the appellant vide Work Order dated 15-02-2003. It is the case of the appellant that out of two kilometer stretch of road, one kilometer was allocated to the respondent for execution in terms of agreement dated 26-12-2002. However, he did not execute the entire work. The appellant further claims to have paid an amount of Rs. 3 lakhs to the respondent out of the payment received by him from SPWD on completion of the work, being proportionate amount for the work executed by the respondent. He has further stated that Rs. 1 lakh was also paid to one Abimanyu Thapa who was a partner of the respondent for which a separate receipt was executed by him. The respondent claiming breach of the agreement dated 26-12-2002 executed between him and the appellant, filed an application for appointment of an Arbitrator under Section 11 of the Act. The then Honble Chief Justice appointed two Arbitrators, namely Shri D. G. Shandarpa and Shri G. R. Sharma in CMA (Arbitration) No. 04 of 2004. One of the appointed Arbitrators, Shri D. G. Shandarpa died, however, the Award signed by only one out of two Arbitrators was filed before the learned District Judge, East & North, who set aside the Award in Title Suit (Arbitration) No. 01/2005 vide order dated 31-03-2006. Another CMA (Arbitration) No. 71/2006 was filed by respondent before this Court. One of the appointed Arbitrators, Shri D. G. Shandarpa died, however, the Award signed by only one out of two Arbitrators was filed before the learned District Judge, East & North, who set aside the Award in Title Suit (Arbitration) No. 01/2005 vide order dated 31-03-2006. Another CMA (Arbitration) No. 71/2006 was filed by respondent before this Court. This Court appointed Shri Lal Bahadur Chettri, retired Chief Engineer of PWD and Shri D. P. Deokota, retired Addl. Chief Engineer of PWD as Arbitrators with the consent of the learned counsel for the parties vide order dated 25-05-2007. The Arbitrators were directed to complete the process within a period of four months from the date of reference. It was further observed that in the event of any difference of opinion between the two Arbitrators in the matter of giving their decision, the parties were allowed liberty to appoint a third Arbitrator. Pursuant to the aforesaid order the Arbitral Tribunal entered upon reference and made their Award dated 30-09-2007 awarding the claims of the respondent to the extent of Rs.7,75,155/- with interest @ 10% from the date of Award till full recovery. 3. Arbitral Tribunal filed its Award before the learned District Judge (East & North) at Gangtok. 4. Aggrieved of the Award, the appellant herein filed his objections under Section 34 of the Act. These objections were heard by the learned District Judge, Special Division-II, East Sikkim and rejected vide the impugned judgment dated 24-09-2011. While rejecting the application/objections under Section 34 of the Act, the Court ordered to make the Award Rule of the Court. It is against this judgment the present appeal has been preferred. 5. I have heard the learned counsel for the parties at length and perused the impugned judgment and the record of the Arbitral Tribunal. 6. Apart from various other grounds to challenge the Award, one of the arguments advanced by the appellants counsel is that the Arbitral Tribunal passed the Award in violation of principles of natural justice. It is alleged that the Arbitral Tribunal did not provide any opportunity to lead evidence to the appellant in respect to his claim/plea. It is further contended that the appellant had filed two applications during the course of arbitration proceedings dated 28-07-2007 for inspection of site of construction and dated 04-09-2007 for summoning of the departmental witnesses and for Measurement Book, etc. It is further contended that the appellant had filed two applications during the course of arbitration proceedings dated 28-07-2007 for inspection of site of construction and dated 04-09-2007 for summoning of the departmental witnesses and for Measurement Book, etc. However, the Arbitral Tribunal did not pass any order on the applications and thus no opportunity was provided to the appellant to lead any evidence. Learned counsel for the appellant has referred to the Award passed by the Arbitral Tribunal wherein the Arbitral Tribunal has recorded about inspection of site in presence of both the parties and the officers of the Public Works (Roads & Bridges) Department. Learned counsel for the appellant submits that even though the application was made by the appellant for inspection of the site, however, that application was never considered. The submission is that at no time the Arbitral Tribunal inspected the site and even if they visited the site, the appellant was never informed nor the appellant was present at the time of such inspection. The further contention is that the Arbitral Tribunal did not record any note of the inspection, at least no such note is available on the record of the Arbitral Tribunal submitted to the Court. 7. It is a settled law that the Arbitral Tribunal is not required to conduct the arbitration proceedings as a Civil Court nor provisions of Code of Civil Procedure and the Evidence Act stricto sensu apply in conduct of arbitration proceedings. That does not mean that the Arbitral Tribunal is not required to adopt any procedure. The Arbitral Tribunal is entitled to devise its own procedure which should conform to the principles of rationality and fairness. The Arbitral Tribunal is bound to observe the principles of natural justice which is the foundation of every adjudicatory process including the domestic tribunal like arbitration. As a matter of fact this has been the public policy, every adjudicatory process/law inheres. 8. I have perused the record produced by the Arbitral Tribunal before the trial Court along with the Award. There are two note-sheets signed by the learned Arbitrators constituting the Arbitral Tribunal. No date is mentioned when the Arbitrators first entered upon the reference. The first recorded date is 14-06-2007 when both the parties were summoned for settlement with mutual agreement out of Court. But it is recorded that the parties did not agree for settlement out of Court. There are two note-sheets signed by the learned Arbitrators constituting the Arbitral Tribunal. No date is mentioned when the Arbitrators first entered upon the reference. The first recorded date is 14-06-2007 when both the parties were summoned for settlement with mutual agreement out of Court. But it is recorded that the parties did not agree for settlement out of Court. One more date was given to them for settlement out of Court on 16-06-2007. The arbitration proceedings were held at the residence of one of the Arbitrators namely, Shri L. B. Chettri. Since no mutual settlement was made on the said date, claims were invited from the parties. Claimant (respondent herein) was asked to file his claims before 10-07-2007 with a copy to the other side and the appellant (respondent before the Arbitral Tribunal) was allowed time to file his counter claim by 18-07-2007. The second note-sheet contains only three orders. Vide first order dated 19-07-2007 the respondent (appellant herein) was granted extension of time for filing the reply to the statement of claims for 15 days from 19-07-2007 to 02-08-2007. The second order is passed on 28-07-2007 showing the receipt of the reply from the respondent on 28-07-2007 forenoon and final Award is made on 30-09-2007. No other record is maintained by the Arbitral Tribunal. It is true that the Arbitrators are not obliged to record the proceedings like a Court but they are definitely under an obligation to adopt the fair and transparent procedure. Nothing is revealed from the record maintained by the Arbitral Tribunal that the parties were allowed any opportunity to lead their evidence in respect of their claims/counter claims. There is specific averment in the objection made under Section 34 of the Act for summoning the departmental witnesses. Neither there is any mention in any of the record of proceedings by the Arbitral Tribunal about the application allegedly filed by the appellant nor it is revealed that the parties were provided an opportunity to lead evidence. Nothing is recorded about the inspection of the site or the arguments made by the parties. In absence of any such record averments made in the Application/objections under Section 34 of the Act on affidavit that no opportunity was allowed to lead the evidence needs to be accepted. This aspect has not been considered by the learned District Judge, Special Division-II, East Sikkim while passing the impugned judgment. In absence of any such record averments made in the Application/objections under Section 34 of the Act on affidavit that no opportunity was allowed to lead the evidence needs to be accepted. This aspect has not been considered by the learned District Judge, Special Division-II, East Sikkim while passing the impugned judgment. Therefore, the award and judgment are liable to be set aside for non-observance of principles of natural justice, without going to other aspects of the matter. 9. For the reasons, I set aside the Award and consequently the impugned judgment dated 24-09-2011 passed by the learned District Judge, Special Division-II, East Sikkim at Gangtok. 10. As a consequence of setting aside the Award for gross violation of principles of natural justice, the matter is required to be remitted back to the Arbitral Tribunal. In view of the serious allegations of judicial misconduct by the Arbitral Tribunal, it is deemed appropriate that the matter be referred to another Arbitral Tribunal. Otherwise also Clause 10 of the Agreement dated 26-12-2002 provides for appointment of one common Arbitrator and not two Arbitrators. 11. In this view of the matter, the learned counsel appearing for the parties seek sometime to nominate a common Arbitrator. At the request of learned counsel for the parties, the matter to come up on 18-05-2012 for nomination of a new Arbitrator by the parties. Order accordingly.