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2013 DIGILAW 521 (UTT)

Narayan Singh Bisht v. Uttaranchal Payjal Nigam

2013-08-08

PRAFULLA C.PANT

body2013
Judgment Prafulla C. Pant, J. This appeal, preferred under Section 37 of The Arbitration and Conciliation Act, 1996, is directed against the order dated 21.12.2005, passed by the District Judge, Pithoragarh, in Suit No. 17 of 2004, whereby said court has set aside the award dated 07.04.2004, passed by the Arbitrator (Sh. C.S. Jain, Superintending Engineer of Uttaranchal Pay Jal Nigam). 2) Heard learned counsel for the parties, and perused the lower court record. 3) Brief facts of the case are that the respondent Uttaranchal Pay Jal Nigam floated a tender for construction of Filter Plant/Settling Plant in Pithoragarh, in the year 1998. In response to said notice, the tender submitted by the appellant was accepted by the respondent. In terms of agreement, the work was to be done by the contractor for Rs. 22,67,500/-, and work was required to be completed by 18.10.1999. The period to compete the work was extended up to 18.01.2000. On 10.01.2001, the Executive Engineer of the respondent rescinded the contract on the ground that the work was not completed in terms of the agreement. During the period of construction work, only Rs. 55,000/- was paid to the contractor (appellant) and the material worth Rs. 9,20,527/- was given for the use in the construction work. The contractor (appellant) submitted claim of Rs. 17,51,387.75/- with 12% interest thereon to the department. On the other hand, the respondent (department who floated the tender) after making deductions agreed to pay only Rs. 5,52,913/-. As such, the dispute was got referred in terms of the Arbitration Clause in the agreement to the Arbitrator, who was none other than Superintending Engineer of Uttaranchal Pay Jal Nigam. The Arbitrator (Sh. S.C. Jain) entered into the arbitration and allowed the parties to submit documents in support of their claims and objections, whereafter, he took statements of the Officers of the respondent and that of the contractor, and gave its award dated 07.04.2004, whereby the claim of the contractor amounting Rs. 17,71,283.73/- was accepted and it was further directed that on said amount 12% interest shall be paid by the respondent to the contractor w.e.f 11.01.2001, apart from Rs. 5000/- towards the costs of arbitration. 4) The award was submitted to the District Judge, Pithoragarh, in whose jurisdiction the work was to be done. 17,71,283.73/- was accepted and it was further directed that on said amount 12% interest shall be paid by the respondent to the contractor w.e.f 11.01.2001, apart from Rs. 5000/- towards the costs of arbitration. 4) The award was submitted to the District Judge, Pithoragarh, in whose jurisdiction the work was to be done. The respondent filed objections under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside the award on the grounds that the Arbitrator has erred in law in delivering the award in favour of the contractor. It is also pleaded that the material used by the contractor was of lower quality. It is also stated in the objections that the respondent had to get the unfinished work competed by engaging another agency. It is also alleged that a round settling tank was constructed by the contractor without the approval of the respondent. The painting work was also not competed by him. The trial court, after hearing the parties set aside the award holding that the same is passed in violation of the public policy. Aggrieved by said order dated 21.12.2005, passed by the District Judge, Pithoragarh, in Suit No. 17 of 2004, this appeal is preferred by the contractor. 5) Before further discussion, this Court thinks it just and proper to mention the grounds on which an arbitral award can be challenged under Section 34 of the Arbitration and Conciliation Act, 1996. Aggrieved by said order dated 21.12.2005, passed by the District Judge, Pithoragarh, in Suit No. 17 of 2004, this appeal is preferred by the contractor. 5) Before further discussion, this Court thinks it just and proper to mention the grounds on which an arbitral award can be challenged under Section 34 of the Arbitration and Conciliation Act, 1996. Sub-Section (2) of Section 34 of the Act, reads as under:- (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), 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), 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. 6) From the above provision of law, it is clear that the award cannot be challenged except on the grounds mentioned in Clause (a) and Clause (b) of sub-Section (2) of Section 34 of the Act. None of the grounds mentioned in Section 34 find place in the objections filed by the respondent before the District Judge, Pithoragarh, for getting the award set aside. What has been stated in the grounds is that the Arbitrator has erred in law, in not considering the documents/record placed by the respondent and award in favour of the contractor was passed. It is not specified, as to what was the material, which was ignored by the Arbitrator. In the second ground, it is mentioned that the material used by the contractor was not up to the mark. This is also a factual dispute, which could not have been raised for setting aside the award. Even otherwise, the said grounds doesn’t appear to be supported by the evidence on the record. Similarly, remaining grounds are also factual in nature, which could not have been examined by the court in its jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996. 7) Though, the District Judge has taken the ground of violation of public policy for setting aside the award, but there is no such ground raised by the respondent before the District Judge stating that the award is against the public policy. The District Judge failed to mention as to what public policy has been violated by the Arbitrator. It is pertinent to mention here that Clause (ii) of Clause (b) of sub-Section (2) of Section 34 of the Act, does not talk of every public policy, rather it talks about ‘public policy of India’. What ‘public policy of India’ was violated is not mentioned in the grounds of appeal, nor mentioned in the impugned order passed by the District Judge. What learned District Judge has discussed is the factual aspect of the dispute in to which he could not have entered. What ‘public policy of India’ was violated is not mentioned in the grounds of appeal, nor mentioned in the impugned order passed by the District Judge. What learned District Judge has discussed is the factual aspect of the dispute in to which he could not have entered. 8) Lower court record which includes the record of the arbitration proceedings, shows that Shri Bhim Sen Dhiraj, Executive Engineer of the respondent has admitted before the Arbitrator that the tender did not contain the full measurements of the construction. Shri S.C. Gupta another Executive Engineer of the respondent admitted that initially settling tank was to be constructed of 75.3 cubic meter, but actually after the design was accepted by the respondent, its capacity was required to be more than 200 cubic meter. Be that as it may the factual questions are neither required to be answered by this Court nor were required to be answered by the court below, particularly when the same are not covered under any of the grounds mentioned in sub-Section (2) of Section 34 of the Arbitration and Conciliation Act, 1996. The crux is that the award could have been set aside only on the grounds mentioned in sub-Section (2) of Section 34 of The Arbitration and Conciliation Act, 1996. 9) On behalf of the respondent, attention of this Court is drawn to the case of Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5 Supreme Court Cases Page 705, in which, expression “public policy of India” has been explained. Having gone through the said case law, this Court is of the view that even said case does not help the respondent in the present case. In said case, the Apex Court has held that the award can be set aside only on the grounds mentioned in Section 34 of the Arbitration and Conciliation Act, 1996, and the award can be said to be against the public policy of India, only when it is patently illegal award. There is nothing on the record in the present case to hold that the award in question is patently illegal. The award can be said to be patently illegal only when it is contrary to the substantive provisions of law, or against the terms of contract, as observed by the Apex Court in the aforesaid case. There is nothing on the record in the present case to hold that the award in question is patently illegal. The award can be said to be patently illegal only when it is contrary to the substantive provisions of law, or against the terms of contract, as observed by the Apex Court in the aforesaid case. 10) For the reasons as discussed above, this appeal deserves to be allowed. Accordingly, the appeal is allowed. Impugned order dated 21.12.2005, passed by the District Judge, Pithoragarh, in Suit No. 17 of 2004, is set aside. The award given by the Arbitrator C.S. Jain, Superintending Engineer of Uttaranchal Pay Jal Nigam, stands affirmed.