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2018 DIGILAW 621 (CAL)

Union of India v. A. K. Mukherjee

2018-08-29

ABHIJIT GANGOPADHYAY, SANJIB BANERJEE

body2018
JUDGMENT : 1. In view of the good grounds shown, the delay of about 145 days in preferring the appeal is condoned. 2. The challenge here is to an order dated November 14, 2017 passed on the appellant’s petition under Section 34 of the Arbitration and Conciliation Act, 1996. The appellant seeks to assail the judgment and order impugned on the ground that the entirety of the challenge to the arbitral award was not addressed by the Single Bench. According to the appellant, the very authority of the arbitrator had been challenged in course of the proceedings under Section 34 of the 1996 Act and such aspect of the matter was completely overlooked by the Single Bench. In addition, the award was challenged on many other heads, but the Single Bench confined the challenge to only four heads. 3. As to the authority of the arbitrator to take up the reference, it is evident that an order was made on a request under Section 11 of the 1996 Act by the Chief Justice or His designate. However, the original order by which the request under Section 11 of the Act was found to be in order, preserved the right of the appellant herein to challenge the authority of the arbitrator to take up the reference before the arbitrator himself. The appellant says that a ground was taken in the counter-statement questioning the authority of the arbitrator, but there was no application under Section 16 of the Act that was filed before the arbitrator. 4. On the challenge to the authority of the arbitrator and the other grounds apparently indicated in the petition under Section 34 of the Act, it must be said that such grounds of challenge were abandoned or are deemed to have been abandoned in course of the proceedings under Section 34 of the Act as would be evident from the second paragraph of the judgment and order impugned dated November 14, 2017: “Although, various grounds are taken in the said application but during argument, Mr. Partha Sarathi Bose, learned Senior Sounsel representing the petitioner has fairly submitted that the petitioner would challenge the award in so far as the Claim Nos.9, 10, 12 and 13 are allowed.” 5. The appellant contends that the appellant had taken several grounds and had not issued any instructions to counsel to abandon any of the grounds. Partha Sarathi Bose, learned Senior Sounsel representing the petitioner has fairly submitted that the petitioner would challenge the award in so far as the Claim Nos.9, 10, 12 and 13 are allowed.” 5. The appellant contends that the appellant had taken several grounds and had not issued any instructions to counsel to abandon any of the grounds. In such circumstances, the appellant submits that all the grounds urged by the appellant in the petition under Section 34 of the Act were liable to be considered. 6. It is not the appellant’s case that advocate who represented the appellant before the Single Bench did not have authority to represent the appellant. Once so much is not in doubt, it has to be seen whether advocate appearing for a party would have the general authority to urge some of the grounds taken and not urge some of the others. When advocate is appointed by a litigant, advocate has the implied authority on behalf of the client to urge several of the many grounds which may have been taken and not urge the other grounds. The very fact that advocate is engaged by a litigant, clothes advocate with adequate authority in such regard. The face before the Court is of advocate and not of the litigant and when advocate having due authority on behalf of a litigant limits the challenge to a few aspects and abandons the challenge in relation to the other aspects, it is not open to the litigant to question the Court’s acceptance of the limited challenge. At any rate, if the appellant herein were really serious about the extent of its challenge and felt betrayed by the manner in which advocate on the appellant’s behalf conducted the matter before the Single Bench, the matter ought to have been carried back to the Single Bench. In course of an appeal from an order, the question which is sought to be raised is impermissible. 7. Accordingly, the recording in the order impugned, to the effect that only four grounds were canvassed, is accepted as the basis of the challenge and the present matter considered in such perspective. 8. The challenge before the Single Bench, as noticed above, was confined to the award made in respect of claim nos. 9, 10, 12 and 13. 7. Accordingly, the recording in the order impugned, to the effect that only four grounds were canvassed, is accepted as the basis of the challenge and the present matter considered in such perspective. 8. The challenge before the Single Bench, as noticed above, was confined to the award made in respect of claim nos. 9, 10, 12 and 13. The Single Bench found that the award on account of idle labour and the like under claim no.9 was impermissible in view of a clause in the contract. There is no challenge by the respondent herein to such finding. Accordingly, such part of the order impugned need not be looked at. 9. As far as the challenge to the award made under claim no.10 is concerned, the Court found that there was no clause in the contract that prohibited such aspect of the award. On such reasoning, the challenge to the award made under claim no.10 was repelled. 10. It is elementary that in receiving a challenge to an arbitral award, the Court does not exercise appellate authority or take up the burden to reappraise the evidence to ascertain whether the award in respect of a particular head was justified. The arbitrator is regarded as a final arbiter on facts and unless the award under a particular head is barred by the agreement between the parties or is patently absurd to the meanest mind, the Court would scarcely interfere therewith. It is evident that the appropriate tests were applied by the Single Bench while assessing the award made under claim no.10 and the Court came to the correct conclusion that such aspect of the award could not be interfered with. 11. Claim nos.12 and 13 pertain to the award of interest. It is not in dispute that clause 16 (2) of the general conditions governing railway contracts was applicable to this case and such clause provided as follows: “16(2) – No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract.” 22. It is not in dispute that clause 16 (2) of the general conditions governing railway contracts was applicable to this case and such clause provided as follows: “16(2) – No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract.” 22. The Single Bench noticed the clause and the possible embargo therein, but was persuaded to hold that notwithstanding such clause, the arbitrator had due authority to consider and award pendete lite interest in view of a judgment reported at (2016) 6 SCC 36 (Union of India vs. Ambica Construction) which was applied in the judgment reported at AIR 2017 SC 2586 (Ambica Construction vs. Union of India). 13. The Single Bench also referred to an unreported Division Bench judgment of this Court of July 24, 2017 passed in APO No.228 of 2017 (Venus Engineering Private Limited vs. Union of India). 14. In the Ambica Construction judgment of 2016, a question was posed as to whether, despite a clause in the agreement providing that no interest would be paid, the arbitral tribunal had any authority to award pendente lite interest. The question arose in the context of the Arbitration Act, 1940 and the question was answered at paragraph 34 of the judgment in Ambica Construction (2016) to the effect that unless the agreement expressly barred the award of interest pendente lite by the arbitral tribunal, the authority of the arbitral tribunal to award interest would remain notwithstanding the agreement otherwise providing for non-payment on account of interest. 15. It was such a rule that was applied in the Ambica Construction judgment of 2017, though it is not clear from the Ambica Construction judgment of 2017 whether the matter involved in that case was governed by the 1940 Act or by the 1996 Act. 16. In a subsequent judgment of the Supreme Court reported at (2017) 9 SCC 611 (Chittaranjan Maity vs. Union of India), the decision in Ambica Construction (2017) was considered and the Supreme Court was of the opinion that there was a distinction between the authority available to an arbitrator under the 1940 Act and the authority of an arbitrator under the 1996 Act. 17. It must first be noticed that both in Ambica Construction (2017) and in Chittaranjan Maity, the relevant clauses in the agreements were virtually the same as in the present case. 17. It must first be noticed that both in Ambica Construction (2017) and in Chittaranjan Maity, the relevant clauses in the agreements were virtually the same as in the present case. Section 31(7) of the 1996 Act makes the award of pendente lite interest subject to any agreement between the parties. Section 31(7)(a) of the 1996 Act opens with the words “Unless otherwise agreed by the parties…” and governs the award of pendente lite interest by the arbitrator. There was no provision in the 1940 Act equivalent to Section 31(7) of the 1996 Act. Thus, the rule as enunciated in Ambica Construction (2016) was that since the authority of the arbitrator under the 1940 Act was not subject to any agreement between the parties on the question of interest, unless a clause in the agreement expressly denuded the arbitrator of authority in such regard, the mere agreement between the parties that no interest would be paid would not affect the power of the arbitrator to grant pendente lite interest. The same rule is completely inapplicable in respect of the 1996 Act by virtue of the opening words in Clause 31(7)(a) of the 1996 Act. Thus, it was held in Chittaranjan Maity that the rule enunciated at paragraph 34 of Ambica Construction (2016) could not be imported into a matter governed by the 1996 Act. 18. A feeble argument is sought to be made on behalf of the respondent herein that it is apparent from the judgment in Ambica Construction (2017) that it was rendered on a matter governed by the 1996 Act and since the judgment in Ambica Construction (2017) was rendered by a three-Judge Bench of the Supreme Court and the later judgment in Chittaranjan Maity was by a two-Judge Bench, it is the opinion of the three-Judge Bench which should prevail. The argument does not appeal. For a start, a judgment may be said to be per incuriam if it is passed in ignorance of any provision of statute or in ignorance of an authority which is binding on the forum but is not noticed. However, when a precedent is noticed and it is interpreted, even if the rule as enunciated in the precedent is read down, it is the rule as interpreted and read down in the later judgment that becomes binding on for a which are inferior to the forum which passes such judgment. However, when a precedent is noticed and it is interpreted, even if the rule as enunciated in the precedent is read down, it is the rule as interpreted and read down in the later judgment that becomes binding on for a which are inferior to the forum which passes such judgment. In other words, if a Supreme Court Bench of equal or inferior strength fails to notice a previous judgment of the Supreme Court of similar or greater strength, it may be open to a High Court to regard the later judgment as per incuriam. But when a Supreme Court Bench of equal or lesser strength notices the previous judgment of the Supreme Court of greater or equal strength and interprets the same, it is the interpretation of such judgment in the later decision which becomes binding on High Courts under Article 141 of the Constitution. 19. In the light of what has been held in Chittaranjan Maity, it can no longer be said that an arbitrator exercising authority under the 1996 Act has any power to grant pendente lite interest if the agreement between the parties prohibits the same, albeit such prohibition not expressly referring to the authority of the arbitrator. In other words, the rule recognised at paragraph 34 of Ambica Construction (2016) is not applicable to the situation covered by the 1996 Act and such rule has to be confined to the 1940 Act. 20. For the reasons aforesaid, the award of pendente lite interest under claim nos. 12 and 13 in the award impugned before the Single Bench was liable to be set aside in its entirety. The judgment and order impugned dated November 14, 2017 is modified accordingly by setting aside the award of pendente lite interest by the arbitrator. However, the award of post-award interest is not interfered with since that is within the exclusive domain of the arbitrator. 21. APO No. 156 of 2018 along with GA No.1489 of 2018 and GA No. 1246 of 2018 are disposed of on the above basis. 22. There will be no order as to costs.