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Madhya Pradesh High Court · body

2015 DIGILAW 717 (MP)

Seth Mohanlal Hiralal v. State of M. P.

2015-07-13

ALOK ARADHE

body2015
ORDER : ALOK ARADHE, J. 1. In these appeals preferred under section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the "Act") the parties have assailed the validity of the judgment dated 23-1-2006 passed by trial Court, by which the objections preferred by the appellant as well as respondent under section 34 of the Act against the award passed by the Arbitrator dated 28-7-2004, have been rejected. Since common questions of law and facts arise in these appeals, therefore, the appeals were heard analogously and are being decided by this common order. In order to appreciate the challenge to the impugned judgment, few facts need mention which are stated infra. M/s. Seth Mohanlal Hiralal (hereinafter referred to as the "appellant") was awarded contract of construction of 'Sukha' acquaduct under Agreement No. 2/1977-78. A dispute arose between the parties, pursuant to which, the appellant made a request for appointment of an Arbitrator on 14-1-1980 to the Superintending Engineering. Thereafter, the appellant filed an application for appointment of an arbitrator under section 8 read with section 20 of the Arbitration Act, 1940 (for short "1940 Act") before the District Judge, Hoshangabad on 26-9-1984. In the meantime, the State Legislature enacted Madhya Pradesh Madhyastham Adhikaran Adhiniyam, 1983 (for brevity "1983 Act") with a view to establish a Tribunal to adjudicate the disputes, to which, the State Government or the Public Undertaking is the party. The 1983 Act came into force with effect from 12-10-1983 land on 1-3-1985 the M.P. Arbitration Tribunal was constituted. The District Judge, Hoshangabad decided the application submitted by the appellant under section 8 read with section 20 of 1940 Act by order dated 18-8-1998 and one Mr. K.S. Inaamdar, Retired Chief Engineer was appointed as an Arbitrator to adjudicate the dispute between the parties. 2. It is not disputed that the order dated 18-8-1998, by which the Arbitrator was appointed, was not challenged by the State Government (hereinafter referred to as the "respondent") before any higher forum. The Arbitrator with the consent of the parties directed that the claims of the respective parties shall be adjudicated as per the provisions of 1996 Act. It is also not in dispute that both the parties appeared before the Arbitrator without raising any objection and participated in the proceeding which was held under the 1996 Act. The Arbitrator with the consent of the parties directed that the claims of the respective parties shall be adjudicated as per the provisions of 1996 Act. It is also not in dispute that both the parties appeared before the Arbitrator without raising any objection and participated in the proceeding which was held under the 1996 Act. The Arbitrator passed an award on 28-7-2004 under the 1996 Act to the tune of Rs. 2,80,980/- in favour of the appellant. However, rest of the claims filed by the appellant were rejected. The award passed by the Arbitrator was challenged by the parties under section 34 of the 1996 Act. The trial Court by judgment dated 23-1-2006 partially allowed the objection of the respondent and rejected the claim No. 8(ii) of the appellant which was allowed by the Arbitrator and upheld the award for rest of the claims i.e. claims No. 1, 2 and 4. In the aforesaid factual background the appellant has challenged the aforesaid award in M.A. No. 1820/2006, whereas the respondent has challenged the validity of the same in M.A. No. 2870/2006. 3. Learned counsel for the appellant submitted that since prior to constitution of the Tribunal i.e. 1-3-1985 the appellant had filed an application for appointment of an Arbitrator before the District Judge, therefore, the proceeding initiated by the appellant under the provisions of 1940 Act was saved in view of section 20(2) of 1983 Act. In support of aforesaid submission reliance has been placed on the decision of Full Bench of this Court in the case of State of Madhya Pradesh and Others Vs. Chahal and Company, (1995) 40 MPLJ 885 : (1995) MPLJ 885. It is further submitted that respondent all along had participated in the proceeding which was conducted by the Arbitrator under 1996 Act and at no point of time, raised an objection that provisions of 1983 Act would apply. It is also pointed out that no such objection has either been taken in objection filed by respondent under section 34 of the Act or in the memo of appeal. It is further submitted that the order passed by the District Court has attained finality and binds the parties. It is also urged that the trial Court grossly erred in interfering with the award of the Arbitrator insofar as it pertains to claim No. 8(ii). It was also pointed out that a sum of Rs. It is further submitted that the order passed by the District Court has attained finality and binds the parties. It is also urged that the trial Court grossly erred in interfering with the award of the Arbitrator insofar as it pertains to claim No. 8(ii). It was also pointed out that a sum of Rs. 2,80,000/- was awarded to the appellant by the Arbitrator on account of extra item of de-watering which was not included in the contract. It was further pointed out that witness of the respondent had admitted in the cross-examination that the work of de-watering was executed by the appellant. It was argued that the finding recorded by the Arbitrator that an award of Rs. 1 lakh has been awarded to the appellant contrary to the terms and conditions of the contract is perverse and the judgment passed by the trial Court deserves to be set aside to the extent it interferes with the award passed by the Arbitrator. 4. On the other hand, learned Government Advocate submitted that since the contract in question is works contract, therefore, section 7 of the 1983 Act, which is a non-obstante provision, would apply. It is further submitted that the respondent had raised an objection in this regard before the Arbitrator as well as in proceeding under section 34 of the 1996 Act. However, the aforesaid objection was not properly dealt with, either by the Arbitrator or by the trial Court. 5. I have considered the submissions made by learned counsel for the parties and have perused the award. Admittedly, 1983 Act came into force on 12-10-1983 and the Tribunal was constituted under the 1983 Act on 1-3-1985. It is also not in dispute that prior to constitution of the Tribunal under the 1983 Act, the appellant had moved an application under section 8 read with section 20 of the Arbitration Act, 1940 for appointment of an Arbitrator before the District Judge on 26-9-1984. Section 20(2) of the 1983 Act, which is relevant for the purpose of controversy involved in the instant case, reads as under:-- "20(2). Section 20(2) of the 1983 Act, which is relevant for the purpose of controversy involved in the instant case, reads as under:-- "20(2). Nothing in sub-section (1) shall apply to any arbitration proceeding either pending before any arbitrator or umpire or before any Court or authority under the provisions of Arbitration Act, or any other law relating to arbitration, and such proceedings may be continued, heard and decided in accordance with agreement or usage or provisions of Arbitration Act or any other law relating to arbitration in all their stages, as if this Act had not come into force." 6. Section 20(2) of 1983 Act was interpreted by Full Bench of this Court in the case of M/s. Chahal and Company, New Delhi (supra) wherein it has been held that the bar contained in 1983 Act with regard to jurisdiction of the civil Court applies only from the date of constitution of Arbitration Tribunal i.e. 1-3-1985 and the reference made under Arbitration Act, 1940, which is pending before the Civil Court prior to constitution of Tribunal is saved bisection 20(2) of 1983 Act. Thus, it is evident that the application which was filed by the appellant for appointment of an Arbitrator under section 1940 Act was saved under section 20(2) of the 1983 Act which was pending on the date of constitution of Tribunal and, therefore, the District Judge had the jurisdiction to appoint the arbitrator in view of enunciation of law laid down by the Full Bench. For yet another reason, since no challenge to the order, by which arbitrator was appointed and which was passed inter-parties, was made by the respondent before the higher forum, therefore, the same binds the parties. [See: Collector of Central Excise, Hyderabad etc. etc. Vs. M/s. Vazir Sultan Tobacco Company Limited, Hyderabad Etc. Etc., (1996) 3 SCC 434 ] 7. The Supreme Court in Thyssen Stahlunion GMBH vs. Authority of India Limited while dealing with section 85(2)(a) of the Act has held that there is nothing in the language of section 85(2)(a) of the Act which bars the parties from agreeing to the applicability of the new Act. The aforesaid decision has been followed by the Supreme Court in the case of M/s. Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., (2001) 6 SCC 356 as well as in the case of Vishwant Kumar Vs. The aforesaid decision has been followed by the Supreme Court in the case of M/s. Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd., (2001) 6 SCC 356 as well as in the case of Vishwant Kumar Vs. Madan Lal Sharma and Another, (2004) 4 SCC 1 and Udai Singh Dagar and Others Vs. Union of India (UOI) and Others, (2007) 10 SCC 306 . 8. In the backdrop of aforesaid well settled legal position the facts of the case in hand may be examined. From paragraph 3 of the award passed by the Arbitrator as well as the proceeding before the Arbitrator, it is evident that Arbitrator with the consent of parties had decided to adjudicate the dispute under the procedure prescribed under the 1996 Act. The appellant as well as respondent, without any demur or objection, participated in the proceeding before the Arbitrator. The Arbitrator rejected the contention raised on behalf of the respondent with regard to his jurisdiction to adjudicate the dispute, on the ground that the order by which the Arbitrator was appointed has attained finality, which even otherwise was provided under section 20(2) of 1983 Act. 9. It is pertinent to mention here that being aggrieved by the award, the appellant as well as the respondent filed objections under section 34 of the 1996 Act, which have been dealt with by the trial Court. Even in proceeding before the trial Court, the respondent did not take any objection that arbitration cannot be conducted in accordance with the provisions of 1996 Act. 10. The Supreme Court in the case of Associate Builders Vs. Delhi Development Authority, (2015) 124 CLA 318 : (2015) 1 SCJ 42 has dealt with the scope and ambit of section 34 of the Arbitration Act and after taking note of various previous judgments rendered by it with regard to scope of inference with the arbitral award held that none of the grounds contained in section 34(2)(a) of the Act deals with the merits of the decision rendered by an arbitrator. It is only when the award is in conflict with the public policy of India as prescribed in section 34(2)(b)(ii) of the Act that the merits of the arbitral award are to be looked into under certain specified circumstances. It is only when the award is in conflict with the public policy of India as prescribed in section 34(2)(b)(ii) of the Act that the merits of the arbitral award are to be looked into under certain specified circumstances. It has further been held that Court would interfere with an award passed by an arbitrator, if it is in violation of statute, interest of India, justice or morality, patent illegality, contravention of the Act or terms of the contract. It was also held that the Court hearing an appeal does not act as a Court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once the arbitrator has applied his mind to the matter before him the Court cannot re-appraise the matter as if it were an appeal and even if two views are possible the view taken by the arbitrator would prevail. [See: Bharat Coking Coal Ltd. Vs. L.K. Ahuja, (2004) 5 SCC 109 , Ravindra and Associates Vs. Union of India (UOI), (2010) 1 SCC 80 , Madnani Construction Corporation (P) Ltd. Vs. Union of India (UOI) and Others, (2010) 1 SCC 549 , Associated Construction Vs. Pawanhans Helicopters Pvt. Ltd., AIR 2008 SC 2911 and Satna Stone and Lime Co. Ltd., M.P. etc. Vs. Union of India (UOI) and Another etc., AIR 2008 SC 2928 11. In the backdrop of well settled legal position, the facts of the case may be seen. In the instant case, the trial Court has interfered with the award, passed by the Arbitrator and has disallowed the claim of Rs. 1 lakh awarded by the Arbitrator in respect of the claim No. 8(ii) on the ground that there was no provision of de-watering in the contract and, therefore, the Arbitrator could not have awarded the amount of Rs. 1 lakh under the aforesaid award. 1 lakh awarded by the Arbitrator in respect of the claim No. 8(ii) on the ground that there was no provision of de-watering in the contract and, therefore, the Arbitrator could not have awarded the amount of Rs. 1 lakh under the aforesaid award. From perusal of the record it is evident that the witness of the respondent, namely, S.S. Patel in his cross-examination has admitted that the work of de-watering was executed by the contractor as an extra item. The Arbitrator has further held that since the aforesaid amount was not included in the award, therefore, the same was admittedly included by the Arbitrator as an extra item and, therefore, the same has rightly been awarded by the Arbitrator. The Arbitrator has applied its mind to the matter before him and the Court cannot re-appreciate the matter as it was exercising the appellate jurisdiction, and if two views are possible, the view taken by the Arbitrator has to prevail. The trial Court, therefore, in the facts of the case has grossly erred in interfering with the claim awarded by the Arbitrator. 12. In view of aforesaid preceding analysis, I am inclined to quash the impugned judgment insofar as it interferes the claim awarded to the appellant and the award of the Arbitrator is restored. For the aforementioned reasons, the appeal preferred by the appellant is allowed to the extent indicated above, whereas the appeal preferred by respondent is dismissed with costs.