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2013 DIGILAW 3189 (MAD)

S. P. Periyasamy & Co. Chennai v. Superintending Engineer PWD WRO Cuddalore

2013-09-05

P.R.SHIVAKUMAR

body2013
JUDGMENT : 1. The respondent has entered appearance in the stage of admission itself. 2. As the matter involves a pure question of law regarding the scope of authority conferred on the Court under Section 34 of the Arbitration and Conciliation Act, 1996, the appeal can be disposed of at the stage of admission itself. Hence, the learned counsel for the appellant and the learned Special Government Pleader appearing for the respondent have been asked to make their submissions on the above said question and accordingly, they have made their submissions. 3. Pursuant to a dispute regarding the settlement of bills between the appellant and the respondent, as per the arbitration clause in the contract, the matter was referred for arbitration and the arbitrator passed an award on 03.06.2006 holding the respondent herein liable to pay a sum of Rs.2,01,35,803/- together with an interest at the rate of 18% p.a. Aggrieved by the said award, the respondent herein filed an application under Section 34 of the Arbitration and conciliation Act before the learned Principal District Judge, Cuddalore in Arbitration O.P.No.93 of 2006 to set aside the arbitral award. 4. The learned Principal District Judge, after hearing and consideration of the materials, referring to Clause 43.1 of the General Conditions of contract, held that the contract provided for payment of interest at the rate of 10% p.a alone on belated settlement of bills and the award of interest at the rate of 18% by the arbitrator was not only against the said contractual clause but also against the public policy. Consequent to such a finding, the learned Principal District Judge, Cuddalore chose to pass the impugned order modifying the award regarding the amount payable to the appellant herein. The operative portion of the order of the learned Principal District Judge reads as follows: "Therefore the amount of award of claims arrives at Rs.9506748.00. The serial No.4 and 5 at page 81 of the award is struck down. Hence the sum arrived under Column I and III is Rs.7367491.00 and this amount only shall bear interest at 10% per annum from the date of claim till the date of payment/realization. The point is answered accordingly as indicated above. The serial No.4 and 5 at page 81 of the award is struck down. Hence the sum arrived under Column I and III is Rs.7367491.00 and this amount only shall bear interest at 10% per annum from the date of claim till the date of payment/realization. The point is answered accordingly as indicated above. In the result the petition is partly allowed without costs." It is pointed out that the operative portion of the award as found in the order of the lower Court as found in Paragragh 12 of its order is extracted, as it is, without any correction. 5. A reading of the above said order of the Court below will show that the Court below has assumed appellate / revisional power over the award of the arbitrator. What is contemplated under Section 34 of the Arbitration and Conciliation Act, 1996 is that the Court may set aside the arbtiral award on the grounds specified in the said section. It does not contemplate exercise of any appellate or revisional power, apart from considering whether the award has to be set aside on any one of the grounds enumerated in Section 34 of the Act. It is trite that an application under Section 34 should not be construed to be an appeal and the Court dealing with an application under Section 34 of the Arbitration and Conciliation Act, 1996 should not be construed to be an appellate Court or revisional Court. As such, the question that arises for decision in this appeal is "whether the Court which is seized of an application under Section 34 of the Arbitration and Conciliation Act can set aside the arbitral award in part?." In other words, "whether the Court can modify the arbitral award?" 6. A plain reading of Section 34 will make it clear that the answer shall be in the negative. Nowhere in the Section it has been contemplated that the Court in which an application under Section 34 has been filed shall have any of the powers of the appellate Court, especially to set aside the award in part or to modify the award. On the other hand, the power conferred on the Court is to see whether the award has to be set aside on specified grounds. On the other hand, the power conferred on the Court is to see whether the award has to be set aside on specified grounds. If an award is found to be vitiated by any one of the grounds set out in Section 34, it has to be set aside in its entirety. It does not contemplate partly setting aside of the award or modification of the award. 7. Support for the above view can be had from the judgment of a Division Bench of this Court in Mekala Traders Vs. Tamil Nadu Civil Supplies Corporation Ltd., reported in 2010-3-L.W.731. After referring to several decisions of the Apex Court, the Division Bench has expressed a similar view by holding that the Court dealing with an application under Section 34 ought not to have reduced the interest awarded by the arbitral Tribunal from 18% to 9%. For better appreciation Section 34 is reproduced herein: 34. Application for setting aside arbitral award – (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). For better appreciation Section 34 is reproduced herein: 34. Application for setting aside arbitral award – (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if - (a) the party making the application furnishes proof that - (i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that - (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation. - Without prejudice to the generality of sub-clause(ii) of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. Explanation. - Without prejudice to the generality of sub-clause(ii) of clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. (3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal: Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter. (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award." 8. Nowhere in the said section it has been stated that the Court dealing with an application under Section 34 can set aside the award partly and confirm it partly. On the other hand, one can get a clue from sub-clause (4). Sub-clause (4) is to the effect that the Court may, where it is appropriate and it is so requested by a party on receipt of an application under subsection (1), adjourn the proceedings for a period of time determined by it in order to give the arbitral Tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award." The said sub-clause meant for adjournment of the hearing in the application to give an opportunity to the arbitral Tribunal to eliminate the ground which would entitle a party to seek the award set aside under Section 34. This will make it clear that the Court, dealing with an application under Section 34, can either set aside the award in entirety or dismiss the application and it cannot set aside the award in part, in other words modify the award. 9. In view of the above said observation, this Court comes to the conclusion that the order of the Court below is infirm and defective and the same is liable to be interfered with and set aside. At the same time, this court is also of the view that the matter shall be remitted back to the Court below for passing an order in line with the observation made by this Court supra. The learned Principal District Judge is directed to dispose of the application within two months from the date of receipt of a copy of this order. 10. Accordingly, the Civil Miscellaneous Petition is allowed and the order of the Principal District Court, Cuddalore made in O.P.No.93 of 2006 dated 30.03.2012 is set aside. The matter is remitted back to the lower Court for fresh consideration and to pass an award in line with the observation made by this Court. No costs.