Rajiv Gandhi National Institute of Youth Development, rep. by its Director v. Saravana Constructions Pvt. Ltd.
2014-11-19
K.K.SASIDHARAN, SATISH K.AGNIHOTRI
body2014
DigiLaw.ai
Judgment 1. This intra court appeal filed under Section 37 of the Arbitration and Conciliation Act 1996 challenges the order dated 11 July 2008 in Original Petition No.716 of 2007, whereby and whereunder the learned Single Judge dismissed the application filed under Section 34(2) of the Arbitration and Conciliation Act challenging the award dated 30 March 2007 on the file of second respondent. The facts: 2. The appellant is an organization established by the Ministry of Youth Affairs and Sports, Government of India. The appellant wanted to put up an institutional building at Sriperumbudur. The appellant floated tender for construction. The bid submitted by the first respondent was accepted. The appellant and the first respondent entered into an agreement, which contain the terms and conditions of the building contract. 3. The first respondent failed to complete the construction within the stipulated period. The application submitted by the first respondent for extension of time to complete the construction was partly allowed. Thereafter the appellant terminated the contract. The termination was on account of the failure on the part of the first respondent to show considerable progress in the work as indicated in the agreement entered into between the parties. The first respondent initiated proceedings for appointment of an Arbitrator to resolve the dispute between the parties. The second respondent was appointed as Arbitrator. 4. The Arbitrator found that the appellant has agreed to extend the period of contract and condoned the delay in completing the construction. The Arbitrator was of the view that the first respondent has made out a case for extension of time besides payment of escalation cost. The contention taken by the appellant before the Arbitrator that the first respondent failed to submit the application before the expiry of the time limit was turned down on the ground that in view of the deliberations of the meeting which concluded that the request for extension of time was genuine and bona fide, it would not be open to the appellant to contend that the request has not been made within the stipulated period and that the appellant would not be entitled to escalation cost. 5. The Arbitrator arrived at a factual finding that the first respondent is entitled to extension of time and as such the contractor is also entitled for escalation of price. The Arbitrator accepted the case of the first respondent and passed the Award. 6.
5. The Arbitrator arrived at a factual finding that the first respondent is entitled to extension of time and as such the contractor is also entitled for escalation of price. The Arbitrator accepted the case of the first respondent and passed the Award. 6. The appellant challenged the award in Original Petition No.716 of 2007. The learned Single Judge considered the matter in extenso and held that there is no justification to interfere with the award passed by the Arbitrator. The Original Petition was dismissed by way of a detailed order. The said order dated 11 July 2008 is the subject matter of this Original Side Appeal. Submissions: 7. The learned Additional Solicitor General appearing on behalf of the appellant contended that clause 5 and clause 10(CC) of the agreement governs the issue. According to the learned Additional Solicitor General, in case the contractor wanted extension of time for completion of work, application in writing should be submitted to the Architect within thirty days of the date of hindrance on account of which he desires such extension of time. By placing reliance on clause 10(CC) of the agreement, the learned Additional Solicitor General contended that compensation for escalation in prices would be available only for the work done during the stipulated period of contract including such period for which the validity of the contract was extended under the provisions of clause 5 of the contract without any action under clause 2. The learned Additional Solicitor General contended that the first respondent failed to submit the application within the stipulated period as provided under clause 5 of the agreement. It was further contended that the case of the first respondent would not come within the meaning of clause 10(CC) of the agreement and this aspect was not taken into account by the learned Arbitrator. The learned Additional Solicitor General wanted the award to be set aside on the ground that it was against public policy. 8. The learned Senior counsel for the first respondent supported the award passed by the Arbitrator and the reasons given by the learned Single Judge. According to the learned Senior Counsel the application submitted by the first respondent for extension of time was discussed at length by the authorities in the presence of the Architect and a decision was taken to accept the reason for extension of time and grant of escalation cost.
According to the learned Senior Counsel the application submitted by the first respondent for extension of time was discussed at length by the authorities in the presence of the Architect and a decision was taken to accept the reason for extension of time and grant of escalation cost. The learned Senior Counsel contended that the appellant having agreed to grant extension of time accepting the recommendation made by the Architect, was not correct in taking up a contradictory view thereafter just for the purpose of avoiding payment of escalation cost. Point for determination: 9. The only point that arises for consideration is whether the award passed by the Arbitrator is liable to the quashed on the ground that the decision was against purported public policy. Discussion: 10. The appellant has entered into an agreement with the first respondent for construction of a building at Sriperumbudur. The agreement contained the essential terms and conditions of contract. 11. Clause 5 of the agreement provides for time extension. The said clause wanted the contractor to apply for extension of time within thirty days of the date of hindrance. The application has to be submitted to the Architect. It is true that application was submitted only after the prescribed period. Even then, the application was considered by the Architect and recommendation was made to the appellant to grant extension of time and to pay escalation cost. The deliberations of the committee on various dates as noted by the learned Arbitrator very clearly shows that a decision was taken to extend the time by invoking Clause 5 of the agreement and to pay escalation cost under clause 10(CC) of the agreement. 12. The moot question is whether the first respondent is disentitled to claim escalation cost solely on account of belated submission of application not withstanding the fact that such an application was entertained by the authorities and a decision was taken tentatively to grant extension of time and to pay escalation cost. 13. Clause 5 of the agreement provides for submission of application for extension of time. It is also very clear that the application should be made within 30 days of the date of hindrance on account of which the contractor desires such extension of time. Even though the application was given after a period of thirty days, still it was entertained by the Architect.
It is also very clear that the application should be made within 30 days of the date of hindrance on account of which the contractor desires such extension of time. Even though the application was given after a period of thirty days, still it was entertained by the Architect. The recommendation made by the Architect was considered at length by the authorities who have been entrusted with the task of taking a decision in the matter. The Arbitrator has extracted extensively the deliberations of the committee on various dates in paragraph Nos.16, 18, 19 and 20 of the award and the decision to grant extension of time. The Arbitrator verified the records and has given a factual finding. The said finding on facts cannot be disturbed either by the Court under Section 34 of the Arbitration Act or in the corresponding intra court appeal under Section 37 of the Act. 14. The scope of an application under Section 34 of the Arbitration and Conciliation Act is very limited. The Court exercising jurisdiction under Section 34 of the Act is not an Appellate Court. The decision taken by the Arbitrator should be given finality. The Arbitrator is expected to interpret the provisions of the contract taking into account the laws of the land. When the Arbitrator gives a finding by interpreting the contractual terms, the same is binding on the parties unless it is shown that the Tribunal exceeded its brief and committed patent illegality. In short, there should be a patent illegality arising from statutory provisions or contractual provisions to set aside the award. It is true that the Court is empowered to set aside the award in case the award shocks the conscience of the Court. However, there is no question of re-appreciating the materials relied on by the Arbitrator for the purpose of taking a different decision on merits. 15. The Supreme Court in Swan Gold Mining Ltd., v. Hindustan Copper Ltd. (2014) 11 Scale 33 considered the scope of Section 34 of the Arbitration and Conciliation Act and held that the Court shall not ordinarily substitute its interpretation for that of the Arbitrator. "12. Section 34 of the Arbitration and Conciliation Act, 1996 corresponds to Section 30 of the Arbitration Act, 1940 making a provision for setting aside the arbitral award.
"12. Section 34 of the Arbitration and Conciliation Act, 1996 corresponds to Section 30 of the Arbitration Act, 1940 making a provision for setting aside the arbitral award. In terms of subsection (2) of Section 34 of the Act, an arbitral award may be set aside only if one of the conditions specified therein is satisfied. The Arbitrator's decision is generally considered binding between the parties and therefore, the power of the Court to set aside the award would be exercised only in cases where the Court finds that the arbitral award is on the fact of it erroneous or patently illegal or in contravention of the provisions of the Act. It is a well settled proposition that the Court shall not ordinarily substitute its interpretation for that of the Arbitrator. Similarly, when the parties have arrived at a concluded contract and acted on the basis of those terms and conditions of the contract then substituting new terms in the contract by the Arbitrator or by the Court would be erroneous or illegal. 13. It is equally well settled that the Arbitrator appointed by the parties is the final judge of the facts. The finding of facts recorded by him cannot be interfered with on the ground that the terms of the contract were not correctly interpreted by him." 16. The award passed by the Arbitrator contained the details of the deliberations of the meeting convened by the appellant to resolve the issue. The recommendation made by the Architect for grant of extension of time and to pay escalation cost were all accepted in principle. The appellant has not produced any material before this Court to arrive at a conclusion that the Arbitrator placed reliance on materials which were not found in the file. In fact the first respondent has marked string of documents before the Arbitrator to show that a conscious decision was taken to grant extension of time and to pay escalation cost. It was only on the basis of such documents, the Arbitrator arrived at a finding that the first respondent has made out a case for extension of time and payment of escalation cost. This aspect was considered by the learned Single Judge once again and a finding was rendered against the appellant.
It was only on the basis of such documents, the Arbitrator arrived at a finding that the first respondent has made out a case for extension of time and payment of escalation cost. This aspect was considered by the learned Single Judge once again and a finding was rendered against the appellant. The said finding cannot be characterized as a finding opposed to public policy and thereby to correct it by invoking the appellate jurisdiction under Section 37 of the Arbitration and Conciliation Act. The point is answered accordingly. 17. We are of the view that none of the grounds urged by the appellant would constitute a valid ground to set aside the award passed by the Arbitrator. We are in full agreement with the views expressed by the Arbitrator and the learned Single Judge. Result: 18. In the upshot, we dismiss the Original Side Appeal. Consequently, the connected MP is closed. No costs.