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2016 DIGILAW 3358 (ALL)

State of U. P. v. Shiv Enterprises

2016-09-30

ANANT KUMAR, NARAYAN SHUKLA

body2016
JUDGMENT (Per: Anant Kumar J.) 1. This first appeal under Section 37 of the Arbitration and Conciliation Act, 1996 has been filed by the State of U.P. and others against the judgment dated 30.04.2012, passed by the learned District Judge, Lucknow in Regular Suit No. 82 of 2007 (State of U.P. & others Vs. M/s. Shiva Enterprises) thereby dismissing the suit filed under Section 34 of the Arbitration and Conciliation Act, 1996 upholding the arbitral award dated 09.05.2010, passed by the learned sole Arbitrator in the matter of arbitration/dispute in arbitration petition No. 27 of 2007. 2. The brief facts, relevant for disposal of this appeal, are that respondent herein is a registered contractor of "C" category in Public Works Department of State of U.P. On various occasions, like national festivals and on other important occasions VVIPs and VIPs who used to visit in the district some functions are organized, which is the responsibility of Public Works Department and for the said purposes barricading of routes, erection of Pandals, arrangement of chairs, tables, fans, coolers, decoration of different stalls and decoration work of stages, etc. is done by the respondent, regarding which various contract bonds were executed between the respondent and the Public Works Department and under the terms and conditions of the contract bond the work was done and the payment was to be made. 3. Between the period from 28.05.2005 to 05.04.2007, 19 such contract bonds were executed between the Public Works Department and respondent no.1 and on execution of such contract bond the work of barricading, erection of temporary structures, Pandals, Stages, etc. was executed by the respondent and the total outstanding dues in this regard was Rs.28,31,968.24. When the said amount was demanded by the respondent from the Public Works Department, respondent was informed that since the work was executed by the Public Works Department on the instructions of Police Department and since the Police Department has not released the funds, so unless the said amount is released by the Police Department, the Public Works Department showed its inability to make the payment. So, a dispute arose. So, a dispute arose. When, for a considerable period of time, amount in question was not paid to the respondent, respondent firm issued a notice dated 22.05.2007 to the appellants through their counsel for appointment of an Arbitrator, which was replied by Executive Engineer, Public Works Department, Provincial Division, Lucknow through letter dated 02.08.2007 that since the fund has not been released by the Police Department, so they are not in a position to make payment. Then, respondent filed a Writ Petition No.6298 (MB) of 2007, before this Court wherein the respondent was directed to approach the proper forum for arbitration proceedings. Thereafter, respondent moved another petition being Arbitration Petition No. 27 of 2007 before this Court for appointment of Arbitrator, which was disposed of by an order dated 22.08.2008, whereby the Hon'ble Chief Justice while disposing of the said arbitration petition appointed Justice K.L. Sharma, former Judge of this Court, as a single Arbitration before whom the respondent filed his claim which was replied by the appellant herein, in which mainly it was contended that Public Works Department, on the instructions and directions issued by the District and Police Administration gets the work done through different contractors. It is only after the verification and measurement by the District and Police administration of the work done, the contractor is paid the amount after allocation and sanction by the State Government. The work executed by the contract is of emergent nature for which there is no budget/funds in hand. These facts are well within the knowledge of contractors who bid accordingly knowing that the payment will be made when the funds will be received. It was further stated that the Public Works Department acts as nodal agency between the District and Police administration on one hand and the contractor on the other hand. It was further stated that the claimant dishonestly states that a sum of Rs.28,31,968.24 is outstanding. So, in sum and substance taking of work from the respondent was admitted by the Public Works Department. 4. After hearing the parties, the Arbitrator allowed the claim and directed the appellants herein to make payment of all the dues of the respondent along with interest. Aggrieved by the said award, a petition under Section 34 of Arbitration and Conciliation Act, 1996 was filed by the appellants for setting aside the arbitral award dated 09.05.2010. 4. After hearing the parties, the Arbitrator allowed the claim and directed the appellants herein to make payment of all the dues of the respondent along with interest. Aggrieved by the said award, a petition under Section 34 of Arbitration and Conciliation Act, 1996 was filed by the appellants for setting aside the arbitral award dated 09.05.2010. The said petition was registered before the District Judge, Lucknow as a Regular Suit No.49 of 2007, the learned District Judge while hearing the Regular Suit had framed as many as four issues for deciding: - (1). Whether the 19 claims made by the claimant in the statement of claim are within the jurisdiction of this Arbitral Tribunal? (2) Whether any of the claims made by the claimant is barred by limitation? (3) Whether the claimant is entitled to get any interest on the claim submitted by the claimant? If so, on what mount and at what rate and for what period? (4) Whether the claimant is entitled to get damages for breakages and the stolen material at the site of the work as stated in clauses (c) (d) and (e) of each claim in the schedule A to the statement of claim? If so, to what extent and amount? (5) To what relief, if any, is the claimant entitled? 5. While disposing of the regular suit, the learned District Judge has held that it was an admitted fact between the parties that there was no tender for supply of material, as such Form No.72 meant for conditions of contract for the supply of materials, was irrelevant and wrongly attached in all the 19 work contracts given to the claimant. The tenders in G.P.W. Form No. 8 was invited and consequently G.P.W. Form No. 9 was to be annexed to every contract bond in the case. The learned District Judge further held that mere signature of the claimant on such Form No. 72 has no significance in view of the provisions in Para 441 of U.P. P.W.D. Manual Volume-I, which requires that the tenders invited in G.P.W. Form 8 shall be supplied with G.P.W.-9 in view of the nature of work in order to complete the contract documents. 6. 6. The learned District Judge has further held that the learned Arbitrator had negatived the contentions of the opposite party-respondent herein that the bond contracts are void or voidable respectively under Section 20 or Section 18 of Indian Contract Act for the reason that both the parties were under a mistake as to the matter of fact qua the relevancy of Form No. G.P.W.-9 or Form No.72. The learned District Judge has further held that since the learned Arbitrator had critically analyze the arguments of the learned counsel for the parties, so issue No.1 was decided in favour of the respondent. After hearing at length to the parties and discussing various case laws, the learned District Judge came to the conclusion that when the petitioners did not dispute the purpose of the work of contract or the rate given to the contractor of 19 work bonds by the contractor, then there cannot be said that the learned Arbitrator had not adopted the principle of fairness and natural justice. So, the learned District Judge had dismissed the regular suit and objection under Section 34 of the Arbitration and Conciliation Act with cost. Hence, this appeal has been filed. 7. We have heard the learned Standing Counsel on behalf of the appellants/State as well Mr. Satya Prakash, learned counsel for respondent. 8. The main plank of argument of the learned Standing Counsel is that the learned court below has failed to consider the fact that the sole Arbitrator has substituted Form G.P.W. 9 in place of Form No. 72, therefore, he exceeded his authority and jurisdiction, who is not supposed to do so. The learned Arbitrator had to decide each contract as per the terms and conditions agreed between the parties and he cannot go beyond the power vested in it. It is further argued that the learned Court below as well as the Arbitrator has grossly erred in holding that the use of Form No. 72 was a result of mutual mistake in view of the fact that the claimant in its pleadings never stated that Form No.72 is a result of mutual mistake. 9. It is further argued that the learned Court below as well as the Arbitrator has grossly erred in holding that the use of Form No. 72 was a result of mutual mistake in view of the fact that the claimant in its pleadings never stated that Form No.72 is a result of mutual mistake. 9. It is further argued by the learned Standing Counsel that the learned court below as well as Arbitrator in its authority have committed significant mistake in holding that 'mere signature of the claimant on Form No. 72 has no significance' and on the said alleged gaffe has blown all the contracts contained in Form No.72 which authority he did not have in the eyes of law. 10. On the other hand, learned counsel for the respondent has argued that the nature of work which was executed was of very emergent nature and sometimes orders to execute the work was issued by the respondents in odd hours and within no time he had to execute the work of barricading, preparation of stage, arrangement of fans, cooler, chairs, etc. and even there was no time given to the contractor to verify the documents on which the signatures were obtained by them. So, merely because Form No. 72 was signed by the respondent which pertains to supply of goods and has no relevance or connection with the work done by the contractor, it cannot be said that the respondent had not executed work or the work executed by the respondent was not satisfactory, especially when the appellants themselves have admitted that they had taken work from respondent but they could not make payment of the same because of the fact that funds were not available or funds were not released by the State Government or by the Police department. 11. It is further stated by the learned counsel for the respondent that the respondent had filed Arbitration Petition No. 27 of 2007 before this Court, the Standing Counsel who appeared on behalf of the State in the said case had admitted that the outstanding amount could not be cleared because the police department is not providing the funds and this admission has been very well recorded by the Hon'ble Court in its order dated 22.08.2008. So, now at this stage the appellants cannot take advantage of their own wrongs, particularly in the situation when it is an admitted fact between the appellants and the respondent that there was no contract for supply of material as envisaged in Form No. 72. 12. It is further argued by the learned counsel for the respondent that this appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 and as per the provisions of said Section, scope of appeal before this Court is very limited and this Court cannot reassess or reappraise evidence adduced before the Arbitrator and the appellate court can look into the order of the District Judge, passed on Section 34 of the Arbitration and Conciliation Act in a very limited compass. Section 37 of the Arbitration and Conciliation Act, reads as under: - "37. Appealable orders.- (1) An appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely: - (a) granting or refusing to grant any measure under section 9; (b) setting aside or refusing to set aside an arbitral award under Section 34. (2) ........................................................................................................ (3) ......................................................................................................." 13. It is stated by the learned counsel for the respondent that though the appeal lies against the order of the District Judge setting aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, the scope is very limited under Section 34 for the District Judge to look into the matter. Section 34 of the Arbitration and Conciliation Act reads as under: - "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). Section 34 of the Arbitration and Conciliation Act reads as under: - "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) 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. (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 the 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." 14. It is further stated by the learned counsel for the respondent that it is a peculiar type of case in which though the appellants have not disputed the liability to pay the outstanding amount but at the same time the same has not been paid on the pretext that they had obtained signature of the respondent on a different Form, though neither the work executed was disputed, nor it was stated that the work was not executed satisfactorily. 15. We have considered the rival submissions raised on behalf of the parties and have perused the record. 16. It is an admitted case between the parties that on the instructions of the appellants work was executed by the respondent and not only this, the appellants had admitted their liability to pay the amount but the same was not paid merely because the police department had not released the funds and when the matter went to the Court, the appellants disputed the liability on the pretext that a wrong Form was executed. The Arbitrator as well as the District Judge, has correctly taken the view that merely because the wrong Form was obtained, the appellants cannot dispute the liability to pay the amount. 17. It is further evident from the record that the learned Arbitral Tribunal had given full opportunity of hearing to the parties and had perused the documents produced before him and after giving a thoughtful consideration to the matter, the learned Arbitrator had concluded that infact the parties were at mistake regarding the Form of the contract which was signed between the parties and because of the fact that the Forms which were signed by the parties were pertaining to the supply of goods; whereas it was an admitted fact between the parties that the respondent had not supplied any goods to the appellants and infact certain works were executed which were emergent in nature and were performed at a very short notice. In these peculiar facts and circumstances of the case, the Arbitrator had given his award in favour of the respondent. This fact has also been considered by the learned District Judge while disposing of the regular suit. The learned counsel for the appellants has failed to show any such case law or to point out any such mistake which may warrant interference in the arbitral award or in the order of the District Judge. 18. In view of the aforesaid observations, to our view there is no mistake either in the order of the Arbitrator or in the order of the District Judge while disposing of the application under Section 34 of the Arbitration and Conciliation Act, particularly in a situation when the appellants themselves have admitted the liability to pay the amount and now they are defenceless to dispute their liability. 19. In view of observations made herein above, to our view this appeal has got no force and is liable to the dismissed, which is hereby dismissed.