Gammon India Limited v. H. P. State Electricity Board Limited
2012-11-27
KULDIP SINGH
body2012
DigiLaw.ai
Judgment Kuldip Singh, J. This petition under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘1996 Act’ unless context is otherwise) has been filed for setting aside award dated 5.7.2006 passed by Arbitral Tribunal in agreement No. SVP-BCC-1/83-III dated 13.5.1983 to the extent denying the claims of the petitioner. 2. The pleaded case of the petitioner is that an agreement dated 13.5.1983 was entered into between the petitioner and respondent for execution of the work of construction of 2.5 M finished dia 5.5. KM long Head Race Tunnel and Surge Shaft of SVP-Bhaba Project at a tendered cost of Rs.8,39,09,435/-. The work was to be completed in six months reckoned from 30th day after the issuance of letter of award. 3. It has been alleged that during the course of execution of work certain disputes had arisen between the parties, the petitioner preferred claims before the Engineer-in-Charge, who rejected the same. The petitioner served notice/letter dated 1.12.1992 to Chief Engineer (Project) of the respondent and annexed the claims. Mr. R.S. Murthy was nominated as Arbitrator under Clause 25 of the agreement, the respondent was called upon to nominate its Arbitrator. The petitioner on 23.12.1992 modified the claims by including some more claims. 4. The respondent on 29.6.1993 conveyed the appointment of Mr. G.K. Mahajan, Chief Engineer (Design), Sundernagar as Arbitrator of the respondent. The Arbitrators were authorized to select umpire by mutual consent. The respondent also preferred counter claim. The parties with their mutual consent appointed Mr. S.P.Sharma, umpire. Mr. G.K.Mahajan after some hearings withdrew from the Arbitral Tribunal. The respondent nominated Mr. S.S. Gupta, Chief Engineer (Operation), North Dharamshala in place of Mr. G.K.Mahajan. 5. On 13.2.1995 the petitioner requested for inclusion of additional claims which was opposed by the respondent. The Arbitrators on 16.3.1996 declined the petitioner to add more claims, even though, it was observed that additional claims were within the purview of determination. The respondent moved the High Court against order dated 16.3.1996. The High Court on 26.6.1997 modified the order dated 16.3.1996 by holding that it would be permissible for the respondent to contest the point at appropriate time before Arbitral Tribunal. 6. On 13.3.1999 the two Arbitrators unable to reach unanimity, the dispute was referred to umpire Mr. S.P.Sharma, who on 16.8.2000 declined to proceed. The High Court on 30.4.2001 appointed Mr.
6. On 13.3.1999 the two Arbitrators unable to reach unanimity, the dispute was referred to umpire Mr. S.P.Sharma, who on 16.8.2000 declined to proceed. The High Court on 30.4.2001 appointed Mr. O.C. Kaushal as umpire, who vide award dated 5.7.2006 allowed the claims No.6, 8 and 17 of the petitioner and made an award of Rs.37,72,982/- alongwith interest at the rate of 12% per annum with effect from 25.5.1994 till actual payment. The counter claim of the respondent was rejected. However, the umpire rejected claims No. 1 to 5, 7, 9, 10 to 14, 15 partly and 16. The rejection of said claims has been assailed in the petition. 7. It has been stated that the umpire has not considered the oral as well as documentary evidence, agreement in right perspective. The rejection of claims is contrary to agreement. The umpire has not passed reasoned award as required under Section 31 of the Act. The award is non-application of mind and complete ignorance of law and facts proved on record. 8. The umpire has acted in biased manner. He considered the version of the respondent as gospel truth. The admissions made by respondent were not considered in declining the various claims of the petitioner. The umpire was not at all well versed with the disputes between the parties and real issues. The documents supporting the claims were ignored illegally. There is apparent error on the face of the award. The award is against public policy of India. 9. The respondent has contested the petition by filing reply in which preliminary objection has been taken that petitioner had requested for implementation of the award through its telex message dated 5.10.2006. The award has been implemented by the respondent, a sum of Rs.93,61,354/- as per award dated 5.7.2006 has been worked out and out of which net amount of Rs.89, 56,128/- has been paid to petitioner vide cheque dated 28.9.2006 after making statutory deductions and outstanding recovery amounting to Rs.4,05,226/- as per detail given in letter dated 28.9.2006. The petitioner has accepted the payment. The petition is after thought with an attitude reflecting complete absence of bonafide on the part of the petitioner. The petitioner is estopped from filing the petition which is not maintainable. 10. On merits, it has been denied that claims No. 1 to 5, 7, 9, 10 to 14 were rejected contrary to law and against public policy.
The petition is after thought with an attitude reflecting complete absence of bonafide on the part of the petitioner. The petitioner is estopped from filing the petition which is not maintainable. 10. On merits, it has been denied that claims No. 1 to 5, 7, 9, 10 to 14 were rejected contrary to law and against public policy. The umpire has considered oral and documentary evidence on record to arrive at conclusion. It has been denied that while rejecting the claims, the umpire has ignored the agreement between the parties. The reasons have been given by the umpire in rejecting various claims. It has been denied that the award is the result of non-application of mind and complete ignorance of law and facts. The submission has been made for rejection of the petition. 11. The petitioner has filed rejoinder. It has been stated that payment made by the respondent does not preclude the petitioner from filing the petition with respect to claims which have been rejected in the award. It has been denied that the petitioner is estopped from filing the petition. On merits, the petitioner reiterated the stand taken in the petition and denied the defence projected in the reply by the respondent. 12. On the pleadings of the parties, the following issues were framed:- 1. Whether the award in question is liable to be set-aside, as alleged? OPA 2. Whether the objection-petitioners are estopped to file the present petition because of the acts and conduct of their functionaries, as alleged? OPR The learned counsel for the parties led no evidence. On 1.6.2007 on behalf of the petitioner it has been stated that the record of the Arbitrator may be read as part of the evidence, whereas on 31.8.2007 on behalf of the respondent, it has been stated that no evidence intended to be led by the respondent. 13. Heard and perused the record. The petitioner has filed written submissions. On behalf of the respondent preliminary submission has been made that the petition under Section 34 of the Act is not maintainable. The award is governed by the Arbitration Act, 1940 (for short ‘1940 Act’). The learned counsel for the respondent has relied Milkfood Ltd. vs. M/s GMC Ice Cream (P) Ltd. AIR 2004 SC, 3145.
On behalf of the respondent preliminary submission has been made that the petition under Section 34 of the Act is not maintainable. The award is governed by the Arbitration Act, 1940 (for short ‘1940 Act’). The learned counsel for the respondent has relied Milkfood Ltd. vs. M/s GMC Ice Cream (P) Ltd. AIR 2004 SC, 3145. The learned counsel for the petitioner has submitted that petitioner is estopped from filing the petition, the award has been implemented on the asking of the petitioner, therefore, on account of omission and commission of the petitioner, the petition is not maintainable. On merits, he has submitted that on the basis of the material on record, the petitioner is not entitled to any other amount over and above already awarded by the umpire in favour of the petitioner. 14. The learned counsel for the petitioner has submitted that umpire on 17.1.2004 has held that Arbitral Tribunal is governed by 1996 Act, such finding was accepted by the respondent. There is no specific objection in the reply of respondent that proceedings before the Arbitrator were to be governed by 1940 Act and not by 1996 Act. The objection of applicability of 1940 Act at belated stage is not available to the respondent. The petitioner has legal right to assail award and mere acceptance by petitioner of amount paid by respondent in pursuance of award is no ground to debar the petitioner from challenging the award for rejecting certain claims. On merits, the learned counsel for the petitioner reiterated the stand taken in the petition. 15. The contention on behalf of the petitioner that respondent did not challenge the order dated 17.1.2004 of the umpire holding applicability of 1996 Act and that respondent has not taken specific objection in reply to the petition under Section 34, therefore, respondent is debarred from taking the plea that petition under Section 34 of the 1996 Act is not maintainable, has no force. The objection is purely legal based upon the record and therefore, the respondent has right to take legal plea which emerges from the material already on record. 16. The preliminary objection of learned counsel for the respondent regarding applicability of 1940 Act instead of 1996 Act is taken first for determination. The respondent herein during pendency of arbitration proceedings had filed OMP(M) No. 34 of 1999 under Sections 15, 16 and 30 of the 1940 Act.
16. The preliminary objection of learned counsel for the respondent regarding applicability of 1940 Act instead of 1996 Act is taken first for determination. The respondent herein during pendency of arbitration proceedings had filed OMP(M) No. 34 of 1999 under Sections 15, 16 and 30 of the 1940 Act. On 30.4.2001, the High Court has passed the following order:- “Learned counsel for the respondent, out of the three suggestive members agrees on behalf of the respondent for appointment of Shri O.C.Kaushal, retired Member, HPSEB, Keleston Estate, Shimla as umpire. In view of the aforesaid submissions, Mr. O.C.Kaushal is appointed as umpire in place of the umpire already appointed who has expressed his inability to act as such. The present petition is disposed of in terms of the above orders. Dasti copy, as prayed for on usual terms.” 17. On 17.1.2004 the umpire has held as follows: “At the outset, the Umpire in his opening statement informed both the parties that before the rejoinder arguments to the reply of respondent Board are taken up by the Claimant Contractor the following issue would need to be settled/decided at this stage. “Whether the instant case is to be governed under the old Arbitration Act, 1940 or the new Arbitration and Conciliation Act, 1996.” The claimant Contractor while presenting their claims had argued that the instant case would be governed under the new Arbitration and Conciliation Act, 1996 and in support of their contention they had cited a judgment of apex court in a case titled “Thyssen Stahlunion GMBH versus Steel Authority of India.” During the course of their reply arguments the respondent Board neither offered any counter to the arguments of Claimant Contractor nor any court/case ruling to prove their point. I have carefully gone through the case judgment of the apex court as also the arguments of the Claimant Contractor and considered the matter and come to the conclusion that the instant arbitration case shall be governed under the new Arbitration and Conciliation Act, 1996 and, as such, I decide the issue in favour of Claimant Contractor.” The umpire in para 11 of the award has observed as follows:- “Initially the proceedings in the case commenced under Arbitration Act, 1940. During 1997, the Arbitration and Conciliation Act, 1996 was enacted and enforced. The contending parties were asked to submit their respective views on applicability of new act on the present proceedings.
During 1997, the Arbitration and Conciliation Act, 1996 was enacted and enforced. The contending parties were asked to submit their respective views on applicability of new act on the present proceedings. The Claimant-Contractors while citing the judgment of the Apex Court in case ALR 1999 (3) 572 titled Thyssen Stahlunion GMBH vs. Steel Authority of India Ltd specially drew the attention of the Umpire to paras 9, 10 & 37 of the judgment and argued that in view of the judgment of apex Court, the instant case would be governed under the new enactment. The respondent Board did not advance any arguments. Accordingly, in view of the aforesaid judgment and provisions of the governing clause 25 of the contract agreement, the Umpire decided in the seventeenth hearing held on 17th January, 2004 that this case would be governed under the Arbitration and Conciliation Act of 1996. This decision of the Umpire was not opposed by either of parties.” 18. The clause 25 of the agreement is of settlement of dispute by arbitration which has not been disputed. The relevant part of Clause 25 is as follows:- “…..Subject to the provisions of the contract to the contrary as aforesaid the provisions of the Indian Arbitration Act, 1940 or any statutory modification or reenactment thereof and the rules made thereunder and for the time being in force shall apply to all arbitration proceedings under this clause.” 19. In the award itself the umpire has noticed that initially proceedings in the case commenced under 1940 Act. On the application of respondent herein under Sections 15, 16 and 30 of the 1940 Act, Mr. O.C. Kaushal was appointed as umpire in place of the umpire already appointed, who expressed his inability to act. Mr. O.C. Kaushal ultimately gave the impugned award dated 5.7.2006. In the order dated 17.1.2004 the umpire has observed that Board neither afforded any counter to the arguments of contractor nor any court/case ruling to prove their point. Thereafter, the umpire held that the arbitration case shall be governed under 1996 Act. In the order dated 17.1.2004, the umpire has not held that Board has given its consent for applicability of 1996 Act instead of 1940 Act. 20. In State of West Bengal vs. Amritlal Chatterjee (2003) 10 SCC 572 on 7.9.1994 arbitrator was appointed.
Thereafter, the umpire held that the arbitration case shall be governed under 1996 Act. In the order dated 17.1.2004, the umpire has not held that Board has given its consent for applicability of 1996 Act instead of 1940 Act. 20. In State of West Bengal vs. Amritlal Chatterjee (2003) 10 SCC 572 on 7.9.1994 arbitrator was appointed. Arbitrator did not enter upon the reference, an application under Sections 5, 11 and 22 of the Arbitration Act, 1940 for removal of the arbitrator and appointment of a new arbitrator was filed in the High Court, which was allowed on 22.8.1996. In the Supreme Court, it was contended that the order passed by the High Court is illegal on account of the fact that Arbitration and Conciliation Act, 1996 came into force on 25.1.1996. The Supreme Court did not find any merit in the contention and held: “7. Thyssen Stahlunion GMBH vs. Steel Authority of India Ltd. (1999) 9 SCC 334 which was passionately relied upon by the learned Senior Counsel for the appellant, has in our view, no application to the facts of the present cases. The Bench concluded: (SCC p. 368, para 22) “1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before the coming into force of the new Act (Arbitration and Conciliation Act, 1996). 2. The phrase ‘in relation to arbitral proceedings’ cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator but would also cover the proceedings before the court and any proceedings which are required to be taken under the old Act for the award becoming a decree under Section 17 thereof and also appeal arising thereunder.” There cannot be any doubt that invoking the arbitration clause by a party and appointment of arbitrator pursuant thereto and in furtherance thereof are proceedings which are required to be taken under the 1940 Act. Such steps are necessary in terms of Chapter II thereof as is evident from the fact that even in terms of sub section (1) of Section 20 of the Act, an application thereunder would be maintainable by a person who does not intend to proceed under Chapter II praying for filing of arbitration agreement in Court.” 21.
Such steps are necessary in terms of Chapter II thereof as is evident from the fact that even in terms of sub section (1) of Section 20 of the Act, an application thereunder would be maintainable by a person who does not intend to proceed under Chapter II praying for filing of arbitration agreement in Court.” 21. In Milkfood (supra), the order dated 13.10.1998 of learned Single Judge and judgment dated 17.2.2003 in LPA were before the Supreme court for consideration. In pursuance of the order dated 3.8.1995 of learned Munsif, the appellant therein sent a notice on 14.9.1995 to first respondent therein and its Managing Director appointed an arbitrator. The order dated 3.8.1995 ultimately came before the High Court in Civil Revision and the High Court on 6.5.1997 with the consent of the parties appointed Arbitral Tribunal consisting of two arbitrators. The two arbitrators appointed third arbitrator. The appellant therein moved an application seeking directions and clarifications that Arbitration Act, 1940 was applicable instead of Arbitration and Conciliation Act, 1996. The majority order of the arbitrators dated 6.4.1998 held that Arbitration and Conciliation Act, 1996 shall apply. An application purported to be under Section 33 of 1940 Act was filed in the High Court. The High Court held that parties are governed by the provisions of the Arbitration and Conciliation Act, 1996. It has been held that parties by agreement gave a good bye to all other proceedings and on 6.5.1997 agreed for reference of their disputes to the arbitrator. The appeal preferred against the judgment of the learned Single Judge was dismissed as not maintainable. 22.
It has been held that parties by agreement gave a good bye to all other proceedings and on 6.5.1997 agreed for reference of their disputes to the arbitrator. The appeal preferred against the judgment of the learned Single Judge was dismissed as not maintainable. 22. In para 82 of the report the Supreme Court has noticed the following arbitration clause in Milkfood (supra) as under: “……All such arbitration proceedings shall be in accordance with and subject to the provisions of the Arbitration Act, 1940, or any statutory modification or re-enactment.” The Supreme Court in para 87 of the report held as follows:- “It is one thing to say that the parties agree to take recourse to the procedure of the 1996 Act relying on or on the basis of tenor of the agreement as regard applicability of the statutory modification or reenactment of the 1940 Act but it is another thing to say, as has been held by the High Court, that the same by itself is a pointer to the fact that the appellant had agreed thereto. If the arbitral proceedings commenced for the purpose of the applicability of the 1940 Act in September, 1995, the question of adopting a different procedure laid down under the 1996 Act would not arise.” The Supreme Court in para 91 further held as follows:- “For the reasons aforementioned, we are of the view that in this case, the 1940 Act shall apply and not the 1996 Act. However, it is accepted at the Bar that the learned arbitrators had already entered into the reference. The proceedings before the arbitrators were not stayed. Only making of the award was stayed. In that view of the matter, in the peculiar facts and circumstances of this case, we are of the opinion that although the old Act would apply, the entire arbitral proceedings need not be reopened and the arbitrators may proceed to give their award. The award shall be filed in the court having jurisdiction whereafter the parties may proceed in terms of the old Act. We hope and trust that the award shall be made and all the legal proceedings shall come to an end at an early date and preferably within a period of four months from the date of the communication of this order.
We hope and trust that the award shall be made and all the legal proceedings shall come to an end at an early date and preferably within a period of four months from the date of the communication of this order. This order has been passed in the interest of justice and in the peculiar facts and circumstances of this case.” 23. In the present case also the proceedings were started under 1940 Act. There is no express consent of respondent in arbitral proceedings to proceed under the 1996 Act. The relevant arbitration clause in the present case is not in substance different from arbitration clause noticed in para 82 of the report in Milkfood (Supra). The Supreme Court in Milkfood (supra) held old Act would apply, the entire arbitral proceedings need not be reopened and allowed to give award and further held that award shall be filed in the court having jurisdiction whereafter the parties may proceed in terms of the old Act. In the present case the award has already been given by the umpire on 5.7.2006. It is not necessary to set aside the award dated 5.7.2006. The petitioner has filed petition under Section 34 of the 1996 Act. In view of above discussion, the present case is also governed by 1940 Act and not by 1996 Act and, therefore, the petition under Section 34 of the 1996 Act is not maintainable. In these circumstances, it is not necessary to decide aforesaid issues No. 1, 2. 24. In view of above, the petition fails and is accordingly dismissed with no order as to costs. OMP No. 590 of 2010 is also disposed of in view of disposal of the main case.