State of Orissa, through the Executive Engineer, Bhubaneswar (R&B) Division No. III, Bhubaneswar v. Bhagyadhar Dash
2016-03-16
S.C.PARIJA
body2016
DigiLaw.ai
JUDGMENT S.C.PARIJA, J. - This appeal by the State is directed against the judgment dated 04.12.2004, passed by the learned District Judge, Khurda at Bhubabeswar, in Arb. Misc. Case No. 139 of 2001, dismissing the application of the State-appellant filed under Section 34 of the Arbitration and Conciliation Act, 1996, for setting aside the award passed by the learned Arbitrator. 2.The brief facts of the case is that the State –appellant had floated a tender for the work “construction of Compound Wall and Internal Roads for the Staff Quarters of Director of Technical Education and Training, Orissa at Chandrasekharpur, Bhubaneswar”. The estimated cost of the work was Rs. 13,20,000/- and the respondent-contractor submitted his tender for the said work at the tender value of Rs. 17,50,977/-, which was accepted. Thereafter the respondent-contractor signed the F2 agreement on 21.12.1996 and was issued with the work order. As per the agreement, the respondent-Contractor was required to complete the work within six months from the date of signing of the agreement and as requested by the Chief Engineer, the respondent-Contractor was to complete the work by 31.3.1997. The respondent-Contractor collected materials and completed excavation of foundation trench for laying concrete in foundation for construction of compound wall and had cleared the bushes from the work site and had leveled the ground for construction of internal roads. When the contract work was in progress, on 09.1.1997 another Special Class Contractor came to the site and disturbed the progress of the work. Though the respondent-Contractor intimated the same to the appellant and others on 13.1.1997, they remained silent. On 26.1.1997, one Rohit Kumar Das, on the strength of work order from Orissa Industrial Infrastructure Development Corporation, began laying concrete on the foundation trench which was excavated by the respondent-Contractor. On 27.1.1997, the respondent-Contractor requested the appellant to restrain Rohit Kumar Das from laying foundation but to no effect. Thereafter the respondent-Contractor issued a letter to the Superintending Engineer, Central Circle (R & B), Bhubaneswar, requesting him to enter into reference as per Clause 11 of the F2 agreement, to adjudicate the dispute. As no action was taken by the concerned Superintending Engineer, the respondent-Contractor approached this Court under Section 11 of the Arbitration and Conciliation Act, 1996, and this Court was pleased to appoint Shri Justice S.C. Mohapatra (Retd.) as the sole Arbitrator in MJC No. 361 of 1997.
As no action was taken by the concerned Superintending Engineer, the respondent-Contractor approached this Court under Section 11 of the Arbitration and Conciliation Act, 1996, and this Court was pleased to appoint Shri Justice S.C. Mohapatra (Retd.) as the sole Arbitrator in MJC No. 361 of 1997. 3.The respondent-Contractor filed his claim statement before the learned Arbitrator and the appellant on receipt of notice, appeared before the learned Arbitrator and filed his statement of defence/objection, disputing all the claims raised by the respondent-Contractor. The appellant also pleaded before the learned Arbitrator that there was no arbitration clause in the agreement and therefore, learned Arbitrator has no jurisdiction to entertain the claim. 4.On the pleadings of the parties, learned Arbitrator framed the following issues: “(a) Whether there is a valid contract binding on parties. (b) Whether respondent has committed breach of contract. (c) Whether claimant has executed any work. (d) Whether claimant has sustained loss in procurement of materials labour and maintaining establishment. (e) Whether claimant is entitled to all or any of the claim items in the claim statement. (f) whether arbitrator has jurisdiction to entertain the claims. (g) To what relief the claimant is entitled to.” 5.Considering the materials available on record, both oral and documentary, learned Arbitrator proceeded to pass an award for Rs. 5,87,317/- under different heads in favour of the respondent Contractor, which are as follows: “ (a) Compensation towards payment of Advance to supply materials Rs. 4,400/- (b) Compensation for payment to supply Labourers “ Rs. 10,000/- (c) Loss of profit on account of breach of Contract Rs. 3,82,000/- (d) Interest on Rs. 3,82,000/- from 1.8.97 To 25.12.2000 at 10% per annum 3 years 3 months 25 days Rs. 1,25,717/- (e) Refund of pledged National Saving Certificate deposited for Earnest Money And Initial Security deposit Rs. 35,200/- (f) Cost Rs. 20,000/- Total Rs. 5,78,317/- (Rupees five lakhs, seventy eight thousand three hundred seventeen only) Claimant is awarded interest at the rate of 18 % per annum from the date of the award to the date of payment, as provided in Section 31(7)(b) of the Act.” 6.Being aggrieved by the award passed by the learned Arbitrator, the appellant filed an application before the learned District Judge, Khurda at Bhubaneswar, under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act” for short), to set aside the award passed by the learned Arbitrator dated 26.12.2000.
7.The case of the appellant before the learned District Judge was that as there was no arbitration clause in F2 agreement, learned Arbitrator had no jurisdiction to entertain the claims filed by the respondent and adjudicate upon the same. It was the further case of the appellant before the learned District Judge that the learned Arbitrator had no power to direct payment of compensation in view of the fact that the respondent-Contractor had not executed the contract work. Further the award on different heads is not supported by any reasons. 8.Learned District Judge, on considering Clause-11 of the F2 agreement, has come to find that the same constitutes an arbitral agreement between the parties and this Court having appointed the Arbitrator in exercise of powers under Section 11 of the Act, it cannot be said that the learned Arbitrator did not have jurisdiction to adjudicate the dispute. Learned District Judge has further found that though the appellant had taken a plea in the written statement/objection regarding lack of jurisdiction of the Arbitrator to adjudicate the dispute, the appellant did not press for the same and continued to participate in the arbitral proceeding without any demur. Relevant findings of the learned District Judge is extracted below: “That apart, in para 18 of the written statement a bare plea of lack of jurisdiction of the arbitrator has been taken. But as it appears, the petitioner did not press for the same and continued in participating in the arbitral proceeding by filing counter affidavits and documents and did not press to examine the question of jurisdiction before entering into the merits of the claims. As it appears from the award, only at the time of argument the question of jurisdiction of the arbitrator was raised by the petitioner. As the Superintending Engineer of the Circle did not enter into the reference, the contractor-opposite party filed M.J.C. No. 361 of 1997 u/s. 11(6) of the Act before the Hon’ble High Court for appointment of an arbitrator. The copy of the petition and the counter affidavit filed in that case were filed before the learned Arbitrator. The learned Arbitrator has observed in para 83 at page 56 of his award that in para 16 of the petition the contractor-opposite party averred about the existence of an agreement for arbitration. The petitioner has filed counter affidavit before the Hon’ble High Court.
The learned Arbitrator has observed in para 83 at page 56 of his award that in para 16 of the petition the contractor-opposite party averred about the existence of an agreement for arbitration. The petitioner has filed counter affidavit before the Hon’ble High Court. In para 14 of the counter affidavit the petitioner has stated that the deponent has no comment to offer regarding para 16 of the writ application thereby admitting about the existence of the agreement of arbitration. The copy of the petition and the counter affidavit in M.J.C. No. 361 of 1997 were filed by the contractor-opposite party before the learned Arbitrator and finds place in the record. The petitioner did not press to examine the question before entering into the merit of the case and participated in the arbitral proceeding. Thus, the contention of the petitioner that the arbitrator has no jurisdiction to arbitrate the proceeding is devoid of any merit and it is accordingly rejected. “ 9.As regard the contention of the appellant that the learned Arbitrator erred in awarding compensation when the work had not commenced and the respondent-Contractor had not executed any work, learned District Judge has considered the findings of the learned Arbitrator in that regard and has come to find that admittedly the F2 agreement was executed on 21.12.1996 and the work order was issued to the respondent-Contractor on 23.12.1996 and the contract work was to be completed by 31.3.1997. Referring to Section 56 of the Indian Contract Act, learned District Judge has come to find that F2 agreement was executed with the respondent-Contractor, when no funds were available for execution of the contract work. As per the terms of the agreement, the respondent-Contractor was required to complete the contract work within six months from the date of such agreement. Accordingly, learned District Judge has come to find that the appellant has committed breach of contract and therefore, the respondent-Contractor is entitled to compensation. Relevant findings of the learned District Judge are as follow: “In the instant case, the petitioner knew that when he called for the tender and executed the F2 agreement no fund was available for execution of the work. There is no stipulation in the F2 agreement that the work will commence after allotment of funds. But instead, the petitioner has directed the Contractor- opposite party to complete the work within six months from signing of the agreement.
There is no stipulation in the F2 agreement that the work will commence after allotment of funds. But instead, the petitioner has directed the Contractor- opposite party to complete the work within six months from signing of the agreement. Thus, the petitioner has committed breach of contractor-opposite party is entitled for compensation u/s 56 of the Indian Contract Act. The learned arbitrator has dealt all these aspects in his award at para 36 to 38 and has awarded the amount towards compensation. As regards the quantum of compensation, since this Court is not a Court of appeal to decide about the quantum of compensation, the quantum of compensation fixed by the learned Arbitrator cannot be interfered within U/s 34 (2) of the Act.” 10.Accordingly, learned District Judge has proceeded to dismiss the application of the appellant filed under Section 34 of the Act. 11.The law is well settled that an award can be set aside only if the same comes within the ambit of Section 34 (2) of the Act. In Oil & Natural Gas Corporation Ltd. (supra), the Hon’ble Court has observed that the award could be set aside if it is against the public policy of India, that is to say, if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. 12.It is now well settled that the Court, while considering the question whether an award passed by the Arbitrator should be set aside or not, does not examine the question as an appellate Court. While exercising the said power, the Court cannot re-appreciate the materials on the record for the purpose of recording a finding whether in the facts and circumstances of a particular case, the award in question could have been made. (See-Hindustan Construction Co. Ltd. v. Governor of Orissa, AIR 1995 SC 2189 .) 13.A similar view has been expressed by the apex Court in B.V. Radha Krishna v. Sponge Iron India Ltd., AIR 1997 SC 1324 , wherein it was observed: “Bearing in mind the principles laid down by this Court in the above said cases, if we look into disposal of the matter by the High Court, it would be evident that the High Court has substituted its own view in place of the arbitrator’s view as if it was dealing with an appeal.
That is exactly what is forbidden by the decisions of this Court. Therefore, we have no hesitation to set aside the judgment of the High Court on this issue.” 14.An error of law on the face of the award means that you can find in the award some legal proposition which is the basis of the award and which you can then say is erroneous. The Court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out, whether or not the Arbitrator has committed an error of law. The Court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the Arbitrator had acted contrary to the bargain between the parties. If the view of the Arbitrator is a possible view, the award or the reasoning contained therein cannot be examined. 15. The apex Court in P.R. Shah Shares & Stock Borker (P) Ltd. v. M/s B.H.H. Securities (P) Ltd. and Ors, AIR 2012 SC 1866 , has reiterated the legal position that a Court does not sit in appeal over the award of an Arbitrator by re-assessing or re-appreciating the evidence. An award can be challenged only on the grounds mentioned in Section 34(2) of the Act and in absence of any such ground, it is not possible to re-examine the facts to find out whether a different decision can be arrived at. 16. The aforesaid position of law with regard to the scope and ambit of Section 34(2) of the Act has been elaborately discussed and reiterated by the apex Court in Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49 . 17.Keeping in view the legal position regarding the scope of interference with an award of the Arbitrator, it is seen that in the present case, no material has been produced before this Court and no ground has been made out to show as to how the award is opposed to public or is patently illegal, so as to come within the ambit of Section 34(2) of the Act. The award reveals that the learned Arbitrator has recorded elaborate reasons in support of each of its findings, which are based on materials available on record.
The award reveals that the learned Arbitrator has recorded elaborate reasons in support of each of its findings, which are based on materials available on record. Moreover, it is not a case where the award is based on no evidence and therefore, the sufficiency of the evidence to accept a claim being within the exclusive jurisdiction of the Arbitrator to decide, no interference is warranted with regard to the merits of the award. For the reasons as aforestated, I do not find any infirmity in the impugned order so as to warrant any interference. The appeal being devoid of merits, the same is accordingly dismissed. Appeal dismissed.