State of Rajasthan v. T. C. I. Infrastructure Finance Limited
2018-09-07
P.K.LOHRA
body2018
DigiLaw.ai
JUDGMENT P.K. LOHRA, J. 1. This appeal has been preferred by the Government of Rajasthan, through the Chief Engineer, Public Works Department, represented by Superintending Engineer, Public Works Department, Circle Pali, under Section 37 (1) (B) of the Arbitration & Conciliation Act, 1996 (for short, 'Act'), against order dated 28th of February, 2018 of District Judge, Pali (for short, 'learned Court below'), whereby the learned Court below rejected the application filed by Government of Rajasthan under Section 34 of the Act and refused to set aside or modify arbitral award dated 31st of May, 2016 passed by Arbitral Tribunal. 2. Facts, in brief, are that an agreement came to be executed on 21st of November 1996 between appellant Government of Rajasthan through Chief Engineer and respondent TCI Infrastructure Finance Limited for construction of Pali Bye-pass Road on Build-Operate-Transfer (BOT) basis on NH14 to be completed by 04.12.1998. The amount incurred in construction of bye-pass was to be recovered from toll collection. The respondent Company agreed to construct the said work for Rs. 810 Lakhs and agreed to collect toll in concession period of 179 months with two year construction period. The physical possession of the land was handed over on 4th of December, 1996 and the respondent Company started work on 18th of December, 1996. The respondent Company requested the Chief Engineer to increase the concession period on the ground that the land free from all encumbrances was not allotted in time and as the worked delayed the concession period has to be rescheduled. On refusal of request to extend the concession period by the State Govt., the respondent Company taken up the matter before this Court by way of S.B. Civil Misc. Arbitration Application No.137/2011. Acceding to the prayer of the respondent Company, this Court issued directions to form Arbitral Tribunal. The Arbitral Tribunal on the basis of pleadings formulated issues for determination and after hearing parties passed Award on 31st of May, 2016 in favour of respondent Company. 3.
Arbitration Application No.137/2011. Acceding to the prayer of the respondent Company, this Court issued directions to form Arbitral Tribunal. The Arbitral Tribunal on the basis of pleadings formulated issues for determination and after hearing parties passed Award on 31st of May, 2016 in favour of respondent Company. 3. Against the said arbitral award, State filed an application under Section 34 of the Act before learned Court below raising objection that the learned Arbitral Tribunal ignored documentary evidence and the pleadings of State of Rajasthan while passing the Award and it was also pleaded that burden to prove the issues was wrongly shifted on State of Rajasthan whereas it was the burden of respondent Company to prove its case beyond all probabilities. In reply thereto, the respondent Company supported the Award passed by Arbitral Tribunal and prayed for dismissal of the application. The learned Court below has rejected the application of State of Rajasthan vide order dated 28.02.2018, which has led it to file present misc. appeal under Section 37 of the Act to quash and set aside the arbitral award. 4. Mr. Mukesh Dave, Govt. Counsel, submits that the findings of learned Arbitral Tribunal are not based on sound appreciation of evidence and materials available on record but that aspect has been completely eschewed by the learned Court below in the impugned order. He, therefore, submits that the arbitral award as well as impugned order is vitiated in law. The learned counsel would contend that arbitral award has been passed transgressing the jurisdiction by Arbitral Tribunal, which ought to have been examined by the learned Court below under Section 34 of the Act. Learned counsel for the appellant further submits that the arbitral award is based on complete misreading of the agreement but the same has not been properly considered by the learned Court below in the impugned order, as such, the arbitral award as well as impugned order are per se vulnerable, and therefore cannot be sustained. 5. Per contra, learned counsel for the respondent, Mr. Anil Bhansali, submits that arbitral award is based on sound reasonings covering all the issues, and therefore same has not been tinkered with rightly by the learned Court below in limited scope of judicial review under Section 34 of the Act.
5. Per contra, learned counsel for the respondent, Mr. Anil Bhansali, submits that arbitral award is based on sound reasonings covering all the issues, and therefore same has not been tinkered with rightly by the learned Court below in limited scope of judicial review under Section 34 of the Act. Learned counsel would contend that scope of judicial review under Section 34 of the Act is very limited and circumscribed and none of the grounds set out therein by the appellant were satisfying requirements for modifying or rescinding the arbitral award, therefore, impugned order warrants no interference. Mr. Bhansali, learned counsel for the respondent, further urged that sans any error much less jurisdictional error by the learned Court below, in rejection of application under Section 34 of the Act, appeal is bereft of any merit and devoid of any force. Lastly, learned counsel contends that interpretation of the contract terms is a matter within the discretion of Arbitral Tribunal, and therefore Court cannot trench into this sphere to substitute its own decision. 6. In Support of his above contentions, leaned counsel for the respondent has placed reliance on following judgments: (1) J.G. Engineers Pvt. Ltd. Vs. Union of India & Ors, (2011) 5 SCC 758 (2) Harish Chandra & Company Vs. State of Uttar Pradesh, (2016) 9 SCC 478 (3) Rajasthan State Mines & Minerals Ltd. Vs. Chetak Travel Agency, (2016) 2 RajLW 1545 (Raj.) (4) State of Rajasthan thro Chief Engineer, Public Health & Engineering Department, Jodhpur & Anr. Vs. Gopal Ram Gumani Ram, (2017) 2 DNJ 823 . I have considered the submissions made at Bar and perused the materials available on record. 7. The appellant State of Rajasthan, at the threshold, joined issue with the respondent-Contractor before the Arbitral Tribunal comprising of retired Secretary, Public Works Department, and two retired Chief Engineers. The Arbitral Tribunal, while examining claim of the respondent-Contractor with other allied documents & affidavits and reply/counter claim of the appellant State of Rajasthan with supporting documents as well as affidavits, settled eight issues for determination with further bifurcation of issues No.1 & 4 in three parts. After discussing threadbare the pleadings and the evidence of the rival parties, learned Arbitral Tribunal adjudicated all the issues to partly accept the claim of the respondent-Contractor and completely repudiated Counter Claim of the appellant State. 8.
After discussing threadbare the pleadings and the evidence of the rival parties, learned Arbitral Tribunal adjudicated all the issues to partly accept the claim of the respondent-Contractor and completely repudiated Counter Claim of the appellant State. 8. The Arbitral Tribunal decided issue No.1 including its three sub issues, issue No.2, 7 & 8 in favour of respondent Company but adjudicated issue No.4 including its three sub issues, issues No.5 & 6 against the appellant State. While recording its finding against the appellant State on issues No.4 to 6, the Arbitral Tribunal has found that State has failed to discharge its burden to prove these issues. As regards issues No.1, 2, 7 & 8, the Arbitral Tribunal has concluded that respondent Company has ably discharged its burden to prove them and stand taken by the State-appellant in this behalf is insubstantial falling short to dislodge claim of the respondent Company. The Arbitral Tribunal passed following unanimous Final award:- "The Arbitral Tribunal in final adjudication of this case direct the respondent to pay to claimant 1. A sum of Rs. 27,30,459/- (Rupees Twenty Seven Lakhs Thirty Thousands Four Hundred Fifty Nine Only) towards loss of toll revenue as claimed on a/c delay in handing over land for construction purpose under issue No.1 2. A sum of Rs. 3,14,395/- (Rupees Three Lakhs Fourteen Thousands Three Hundred Ninety Five Only) towards collection charges spent by the claimant toll collection under issue No.2 3. A sum of Rs. 13,79,118/- (Rupees Thirteen Lakhs Seventy Nine Thousands One Hundred Eighteen Only) towards interest under Issue No.7 till the date of award. 4. Thus the total amount of award payable by the respondent to the claimant as on 31.05.2016 (date of award) works out to Rs. 44,23,972/- (Rupees Forty Four Lakhs Twenty Three Thousand Nine Hundred Seventy Two Only) 5. The respondent shall also pay further to claimant interest @ 10% simple rate of interest on award amount of Rs. 44,23,972/- (Rupees Forty Four Lakhs Twenty Three Thousand Nine Hundred Seventy Two only) from 01.06.2016 till the date of actual payment of award amount. 6. Both the parties must meet their own cost of arbitration. 7. No further relief of any kind has been awarded by Tribunal to any party." 9.
44,23,972/- (Rupees Forty Four Lakhs Twenty Three Thousand Nine Hundred Seventy Two only) from 01.06.2016 till the date of actual payment of award amount. 6. Both the parties must meet their own cost of arbitration. 7. No further relief of any kind has been awarded by Tribunal to any party." 9. The appellant State considered the award infirm on some of the issues, and therefore made endeavour to seek relief of setting aside the same, or modifying the same, before the learned Court below by laying application under Section 34 of the Act. The leaned Court below, upon thoroughly examining the arbitral award and the grounds set out in the application under Section 34 of the Act for assailing the same on the anvil of grounds envisaged under sub-section (2) of Section 34 of the Act, turned down plea of the appellant. Therefore, undeniably, efforts made by the appellant State, to thwart claim of the respondent-Contractor before Arbitral Tribunal, have proved abortive despite contesting the same with full gusto. There remains no quarrel that Arbitral Tribunal was headed by Secretary, PWD and two retired Chief Engineers having technical expertise to determine the issues involved in the claim of the respondent-Contractor. 10. Law is trite that any decision taken by the experts in a field is not liable to be interfered with by the Court to substitute its decision while examining an arbitral award founded on the opinion of experts possessing technical expertise with experience of actual day to day working; it would be unwise and undesirable for the Court to make a pedantic and purely idealistic approach as opposed to a pragmatic one. This being the situation, the learned Court below, upon examining the application of the appellant under Section 34 of the Act in the light of grounds set out in sub-section (2) for upsetting or modifying arbitral award, declined to interfere with the same. Now, in the present appeal, the task of the appellant is difficult inasmuch as its endeavour is to call upon this Court to examine concurrent finding of the learned Court below as well as the Arbitral Tribunal. 11.
Now, in the present appeal, the task of the appellant is difficult inasmuch as its endeavour is to call upon this Court to examine concurrent finding of the learned Court below as well as the Arbitral Tribunal. 11. Supreme Court, in J.G. Engineers Pvt. Ltd., examining contractual obligations and rights in the light of exclusion clauses/excepted matters in the agreement, opined that breach of contract and termination of agreement based thereon, including question as to which party had committed breach/delay and whether contract was validly terminated based thereon, can be decided only by an adjudicatory forum, i.e., Court or an Arbitral Tribunal. While examining jurisdiction and scope of review under Section 34 & 28 of the Act, Supreme Court observed that such jurisdiction is supervisory and not appellate. The Court held: "A Civil Court examining the validity of an arbitral award under Section 34 of the Act exercises supervisory and not appellate jurisdiction over the awards of an arbitral tribunal. A court can set aside an arbitral award, only if any of the grounds mentioned in Sections 34(2)(a)(i) to (v) or Section 34(2)(b)(i) and (ii), or Section 28(1)(a) or 28(3) read with Section 34(2)(b)(ii) of the Act, are made out. An award adjudicating claims which are 'excepted matters' excluded from the scope of arbitration, would violate Section 34(2)(a)(iv) and 34(2)(b) of the Act. Making an award allowing or granting a claim, contrary to any provision of the contract, would violate Section 34(2)(b)(ii) read with Section 28(3) of the Act." 12. Likewise, in Harish Chandra & Company Vs. State of Uttar Pradesh, while examining Section 30 of the Arbitration Act, 1940, Supreme Court observed that arbitral award can be set aside only on the grounds specified in clauses (a), (b) and (c) of Section 30 of 1940 Act. The Apex Court further passed a word of caution that Court is precluded from reappraising the evidence. Finally, the Court held: "23. A three-Judge Bench of this Court in State of U.P. v. Allied Constructions, while examining the scope of Section 30 held as under: (SCC p. 398, para 4) "4. The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for the arbitrator to determine (see Sudarsan Trading Co. v. State of Kerala).
The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for the arbitrator to determine (see Sudarsan Trading Co. v. State of Kerala). Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set aside. The arbitrator is a Judge chosen by the parties and his decision is final. The court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference herewith would still be not available within the jurisdiction of the court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once it is found that the view of the arbitrator is a plausible one, the court will refrain itself from interfering 24. S. Mukharji, J. as his Lordship then was, speaking for the Bench in Sudarsan Trading Co. v. State of Kerala, while examining the jurisdiction of the Court under Section 30 held as under: (SCC p. 39) "However, there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the arbitrator to grant a particular remedy. One has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction. The Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid or damages liable to be sustained, was a decision within the competency of the arbitrator in this case. By purporting to construe the contract, the court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction.
Whether a particular amount was liable to be paid or damages liable to be sustained, was a decision within the competency of the arbitrator in this case. By purporting to construe the contract, the court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded, is a possible view though perhaps not the only correct view, the award cannot be examined by the court." The aforesaid view was consistently followed in later decisions by this Court in State of A.P. v. R.V. Rayanim and Ravindra Kumar Gupta & Co. v. Union of India. 25. One cannot, therefore, dispute the legal proposition, which is now fairly settled keeping in view the aforementioned law laid down by this Court that an award can be set aside only on the grounds specified in clauses (a), (b) and (c) of Section 30 of the 1940 Act and on no other grounds. Indeed this is clear from the opening words of Section 30 itself which starts with the words "An award shall not be set aside except on one or more of the following grounds". A fortiori, a reasoned award cannot be set aside unless it falls in any of the three clauses (a), (b) and (c) of Section 30 of the 1940 Act. 26. The grounds such as inadequacy of reasons in support of an award, error committed by the arbitrator on facts, alternate and/or more plausible view could be taken then what is taken by the arbitrator, improper appreciation of evidence done by the arbitrator in recording any finding, etc. are not the grounds on which any award much less a reasoned award can be set aside. In other words, none of these grounds can be made the foundation for setting aside the award because they do not fall within the four corners of any of the three sub-clauses of Section 30 of the 1940 Act. xxxxxx 29. With respect, we can neither agree nor can uphold the approach and the reasoning of the High Court. In our considered view, such approach is wholly against the law laid down by this Court in the decisions quoted supra. 29.1.
xxxxxx 29. With respect, we can neither agree nor can uphold the approach and the reasoning of the High Court. In our considered view, such approach is wholly against the law laid down by this Court in the decisions quoted supra. 29.1. In the first place, the High Court did not apply the law laid down by this Court while deciding the appeal and hence, committed a jurisdictional error. 29.2. Secondly, the High Court acted like an appellate court and virtually treated as if the appeal arose directly against the award and then proceeded to examine all factual findings of the arbitrator by appreciating the evidence. It was not permissible in law. 29.3. Thirdly, the High Court should have confined its inquiry to find out as to whether any legal misconduct was committed by the arbitrator and, if so, how and in what manner. It was, however, not done. 29.4. Fourthly, the High Court went into the factual question by referring to Clause 26 of the agreement for holding that the arbitrator passed an award contrary to Clause 26 and thereby travelled beyond the terms of the agreement which constituted a legal misconduct on his part. This finding, in our view, is, on the face of it, untenable in law for the reason, inter alia, that this objection was neither raised before the arbitrator nor before the trial court in the manner in which it was raised for the first time in the High Court. In any event, in the absence of any finding recorded by the arbitrator and the trial court, such issue could not have been gone into for the first time in appeal by the High Court. That apart, it has otherwise no substance on facts for the simple reason that it being a question of fact, the same could not be examined in appeal. 29.5. Fifthly, the High Court failed to see that Clause 26 only prohibits the appellant from assigning the agreement to any third person. Clause 26, therefore, had nothing to do with the claims filed by the appellants. It was an admitted fact that the appellant did not assign the agreement to any third person.
29.5. Fifthly, the High Court failed to see that Clause 26 only prohibits the appellant from assigning the agreement to any third person. Clause 26, therefore, had nothing to do with the claims filed by the appellants. It was an admitted fact that the appellant did not assign the agreement to any third person. If some work was got done by the appellant by employing some small contractor then it did not constitute a case of assignment of a whole agreement in favour of small contractors within the meaning of Clause 26 so as to empower the State to cancel the agreement on such ground. The finding of the High Court that the award is rendered bad because it was passed in contravention of Clause 26 of the agreement is, therefore, not legally sustainable in law. 29.6. Sixthly, the High Court further failed to see that there was no error apparent on the face of the record in the findings recorded by the arbitrator. 29.7. Seventhly, the High Court also failed to see that the trial court had elaborately gone into all the factual issues and rightly did not find any substance in the objections raised by the respondent; and lastly, the award being a reasoned one (running into 36 pages Annexure P-5, pp. 127-163 of the SLP paper book), the reasoning of the arbitrator could not be said to be perverse to the extent that no man with ordinary prudence could take such view nor was any finding of the arbitrator against any provision of law or in contravention of any of the clauses of the agreement so as to constitute a case of legal misconduct on the part of the arbitrator within the meaning of Section 30 of the Act for setting aside an award." This Court in M/s. Chetak Travel Agency has reiterated the same principle. Upon examining the arbitral award as well as impugned order threadbare, in the backdrop of legal proposition adumbrated supra, I am unable to find any perversity in the arbitral award, nor the same can be categorized as an outcome of wrong proposition of law. Moreover, there is no error apparent on the face of award, nor the award is contrary to law of public policy. Therefore, in totality, the learned Court below has not committed any error of law in nixing application of the appellant under Section 34 of the Act.
Moreover, there is no error apparent on the face of award, nor the award is contrary to law of public policy. Therefore, in totality, the learned Court below has not committed any error of law in nixing application of the appellant under Section 34 of the Act. Resultantly, appeal fails and the same is hereby rejected.