Secretary to Govt. of J&K PWD (R&B) v. S. C. Associates Engineers and Contractors
2018-11-30
SANJEEV KUMAR
body2018
DigiLaw.ai
JUDGMENT : 1. This petition under Section 34 of the Jammu and Kashmir Arbitration and Conciliation Act, 1997 (‘Act of 1997’ for short) is directed against an arbitral award dated 31st August, 2011, passed by Sh. A.S. Wazir, retired Chief Engineer, J&K PWD (sole arbitrator). 2. The background facts leading to filing of this petition, briefly put, are as under: (a) Vide Agreement 6/OW dated 06th August, 2005 the construction work of road from Rajdhani to Dhar Saroola (L 7.00 Kms) Manjakote District Rajouri being package No. JK 12.06 PMGSY Phase-2, was allotted to respondent for a sum of Rs.164.00 lacs on the terms and conditions detailed in the contract agreement and the connected documents. (b) Owing to the dispute with regard to the allegation of breach of contract having arisen between the petitioners and the respondent, the respondent invoked the arbitral clause contained in the contract agreement and requested for appointment of arbitrator. It appears that the petitioners did not agree to the request of the respondent which made the respondent to file a petition under Section 11 of the Act of 1997. A Bench of this Court in AA No.19/2008 appointed Sh. A.S. Wazir, Chief Engineer retired, as sole arbitrator to resolve the disputes between the parties. The appointment of Sh. A.S. Wazir was on the consensus of the parties as is apparent from the order dated 17th September, 2010 passed by this Court referring the matter to the above said arbitrator. The sole arbitrator entered the reference on 27th September, 2010. Both the parties appeared before the arbitrator and submitted their claims and counter claims. As is apparent from the impugned award, both the parties were given sufficient opportunity to lead their evidence in support of their claims and counter claims, as the case may be. After hearing the parties at length and considering all aspects, the sole arbitrator passed the award, impugned in this petition. (c) The arbitrator allowed the claim Nos.1, 2, 4, 5, 8, 10 and 11 and rejected all the counter claims preferred by the petitioners. The petitioners are aggrieved of the award and have assailed the same primarily on the following grounds:- (i) The award deals with the disputes which are not contemplated by the terms of the contract agreement and the award is, therefore, beyond the terms and conditions of the contract agreement.
The petitioners are aggrieved of the award and have assailed the same primarily on the following grounds:- (i) The award deals with the disputes which are not contemplated by the terms of the contract agreement and the award is, therefore, beyond the terms and conditions of the contract agreement. (ii) The award suffers from error of jurisdiction, in that, the arbitrator delivered the award much after the expiry of four months period from the date he entered the reference. (iii) The award impugned is against the public policy, in that, the arbitrator has taken into account the extraneous matters like the report of Geologist as to the nature of the soil, realignment of the road, measurement, title of land and its acquisition etc. which was beyond the scope of the contract and the terms of reference to the arbitrator. 3. The respondent has filed its objections. In the objections it is stated that in the absence of any ground as laid in Section 34 of the Act of 1997, the validity of the award cannot be challenged on mere errors of facts and law, if committed by the arbitrator. It is submitted that the award of the arbitrator is well reasoned and supported by material and evidence on record. The contention of the petitioners that the disputes decided by the learned Arbitrator and the amounts awarded were not within the scope of arbitration and the terms and conditions of the contract agreement is not supported by any material. It is, thus, submitted that the construction of contract agreement is within the jurisdiction of the arbitrator having regard to the wide nature, scope and ambit of arbitration agreement and that being so, even if the interpretation and consideration of the contract agreement by the arbitrator gives rise to determination of question of law, the Court will not interfere with the award having been passed by the arbitrator who is a judge of the choice of the parties. With regard to the contention of the petitioners that the arbitral proceedings were not concluded within four months, it is submitted that with the change of law, there is no period prescribed for concluding the arbitration proceedings and the mere fact that the petitioners have participated in the arbitral proceedings beyond the period of four months without any protest would disentitle the petitioners to raise such a plea. 4.
4. Having heard learned counsel for the parties and perused the records, it would be necessary to first take note of the scope of interference by the Courts in the arbitral award passed by the Arbitrator chosen by the parties or appointed by the Courts. 5. From the Act of 1997, it is clear that no right of appeal is given to the parties against an arbitral award and this is so because an Arbitrator is a judge appointed by the parties and as such, an award passed by him is not to be lightly interfered with. But this does not mean that there is no check on the Arbitrator’s conduct. In order to ensure proper conduct of the proceedings, the Act of 1997 provides certain remedies against arbitral award. 6. Section 34 is one such provision which provides that the arbitral award may be set aside by a Court on the following grounds:- (i) Incapacity of a party; (ii) Arbitration agreement not being valid; (iii) Party not given proper notice of arbitral proceedings; (iv) Nature of the dispute not falling within the terms of submissions to arbitration; (v) Arbitral procedure not being inconsonance with the agreement; (vi) The dispute is not capable of settlement by arbitral process; and (vii) The award is in conflict with the public policy of India. 7. If the decision on the matters submitted to the Arbitrator can be separated from those not submitted; only that part of the arbitral award which contains decision of the matters not submitted to the arbitration, may be set aside. In other words, if the offending portion of the award is severable, the rest of the portion of the award can still be upheld. The expression “public policy of India” fell for interpretation before the Supreme Court in case of ONGC Ltd. v. Saw Pipes Ltd. ( 2003(5) SCC 705 . The Hon’ble Supreme Court after having comprehensive review of the case law on the point, explained in paragraph 31 of the decision in the following words:- “31. Therefore, in our view, the phrase 'Public Policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest.
Therefore, in our view, the phrase 'Public Policy of India' used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar's case (supra), it is required to be held that the award could be set aside if it is patently illegal. Result would be - award could be set aside if it is contrary to: - (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void.” 8. The expression “Fundamental policy of Indian Law” as was used by the Supreme Court in the case of Saw Pipes Limited (supra) was explained and elaborated by the Hon’ble Supreme Court in the subsequent judgment rendered in the case of Oil and Natural Gas Corporation Limited Vs. Western Geco International Limited reported in 2014 (9) SCC 263 . The scope of interference by the Courts with the arbitral award which was hitherto quite restricted came to be expanded. Under the grounds of challenge enumerated in Section 34 (2) (b) (ii), the expression used “public policy of India” is interpreted to mean that award could be set aside if it is contrary to (i) fundamental policy of Indian law; or (ii) the interest of India; or (iii) justice or morality, or (iv) in addition, if it is patently illegal.
Under the grounds of challenge enumerated in Section 34 (2) (b) (ii), the expression used “public policy of India” is interpreted to mean that award could be set aside if it is contrary to (i) fundamental policy of Indian law; or (ii) the interest of India; or (iii) justice or morality, or (iv) in addition, if it is patently illegal. This is so held by the Supreme Court in the case of Saw Pipes Ltd (supra). The term “Fundamental Policy of Indian Law”, as stated above was further explained by the Supreme Court in the judgment of Western Geco International (supra) and the terms was interpreted to include three distinct and fundamental juristic principles. These principles as elaborated by the Supreme Court are: (a) failure to adopt judicial approach (b) failure to comply with the principles of natural justice and (c) perversity and irrationality of the decisions to be tested on the touchstone of Wednesbury’s principle of reasonableness. All these three principles were held to be the part of expression “Fundamental policy of Indian Law”. The Hon’ble Supreme Court elaborately dealt with these principles and explained them in Paragraph Nos.26 to 29 of the judgment which reads thus:- “26. What then would constitute the ‘Fundamental policy of Indian Law’ is the question. The decision in Saw Pipes Ltd. (supra) does not elaborate that aspect. Even so, the expression must, in our opinion, include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. Without meaning to exhaustively enumerate the purport of the expression “Fundamental Policy of Indian Law”, we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the Fundamental Policy of Indian law. The first and foremost is the principle that in every determination whether by a Court or other authority that affects the rights of a citizen or leads to any civil consequences, the Court or authority concerned is bound to adopt what is in legal parlance called a ‘judicial approach’ in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the Court or the authority does not have to be separately or additionally enjoined upon the fora concerned.
The duty to adopt a judicial approach arises from the very nature of the power exercised by the Court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of Judicial approach in judicial and quasi judicial determination lies in the fact so long as the Court, Tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bonafide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a Court, Tribunal or Authority vulnerable to challenge. In Ridge v. Baldwin [1963 2 All ER 66], the House of Lords was considering the question whether a Watch Committee in exercising its authority under Section 191 of the Municipal Corporations Act, 1882 was required to act judicially. The majority decision was that it had to act judicially and since the order of dismissal was passed without furnishing to the appellant a specific charge, it was a nullity. Dealing with the appellant’s contention that the Watch Committee had to act judicially, Lord Reid relied upon the following observations made by Atkin L.J. in [1924] 1 KB at pp. 206, 207: “Wherever any body of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority, they are subject to the controlling jurisdiction of the King’s Bench Division exercised in these writs.” 27. The view taken by Lord Reid was relied upon by a Constitution Bench of this Court in A.C. Companies Ltd v. P.N. Sharma and anr. ( AIR 1965 SC 1595 ) where Gajendragadkar, C.J. speaking for the Court observed: “In other words, according to Lord Reid’s judgment, the necessity to follow judicial procedure and observe the principles of natural justice, flows from the nature of the decision which the watch committee had been authorised to reach under S.191(4).
( AIR 1965 SC 1595 ) where Gajendragadkar, C.J. speaking for the Court observed: “In other words, according to Lord Reid’s judgment, the necessity to follow judicial procedure and observe the principles of natural justice, flows from the nature of the decision which the watch committee had been authorised to reach under S.191(4). It would thus be seen that the area where the principles of natural justice have to be followed and judicial approach has to be adopted, has become wider and consequently, the horizon of writ jurisdiction has been extended in a corresponding measure. In dealing with questions as to whether any impugned orders could be revised under A. 226 of our Constitution, the test prescribed by Lord Reid in this judgment may afford considerable assistance.” 28. Equally important and indeed fundamental to the policy of Indian law is the principle that a Court and so also a quasi-judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Besides the celebrated ‘audi alteram partem’ rule one of the facets of the principles of natural justice is that the Court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Non-application of mind is a defect that is fatal to any adjudication. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the Court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it can be described as a fundamental policy of Indian Law. 29. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a Court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury’s principle of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a Court of law often in writ jurisdiction of the Superior courts but no less in statutory processes where ever the same are available.” 9.
Perversity or irrationality of decisions is tested on the touchstone of Wednesbury’s principle of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a Court of law often in writ jurisdiction of the Superior courts but no less in statutory processes where ever the same are available.” 9. With regard to the question of construction/interpretation of contract, observations of the Supreme Court in the case of McDERMOTT INTERNATIONAL INC. V. BURN STANDARD CO. LTD. AND OTHERS; (2006) 11 SCC 181 , deserve to be noticed and are reproduced hereunder:- “112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. v. Oil & Natural Gas Commission , (2003) 8 SCC 593 and D.D. Sharma v. Union of India (2004) 5 SCC 325 ]. 113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award.” (See also Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran; (2012) 5 SCC 306 and Sudarshan Trading Company v. Government of Kerala; (1989) 2 SCC 38 and P.R. Shah Shares and Stock Brokers Private Limited v. B.H.H. Securities Private Limited and others; (2012) 1 SCC 594 ). 10. The grounds of challenge urged by the petitioners to assail the impugned arbitral award are, thus, required to be appreciated in the backdrop of the legal position explained above. 11. Mr.
10. The grounds of challenge urged by the petitioners to assail the impugned arbitral award are, thus, required to be appreciated in the backdrop of the legal position explained above. 11. Mr. C.M. Koul, learned Senior Additional Advocate General, appearing for the petitioners, vehemently submitted that the arbitrator while awarding different claims has gone beyond the terms and conditions of the contract agreement. He submitted that the arbitrator committed glaring illegality in taking into consideration the extraneous material like the report of geologist procured by the respondent-claimant which, stated the learned counsel for the State, was a serious misconduct on his part, sufficient enough to vitiate the award. Reference in this regard was invited to the affidavit filed by one Sh. Rajesh Kumar Bhagat, the then Executive Engineer, PMGSY, Rajouri wherein the aforesaid witness of the petitioners has placed on record the report of the department of Geology and Mining, J&K Govt. with regard to soil/rocks and their classification qua the area of construction of the road under PMGSY scheme between Rajdhani to Dhar Saroola. On the basis of aforesaid affidavit of the Executive Engineer and the report prepared by the geologist of the department of Geology and Mining, it was contended that the report of a private geologist, appointed by the respondent, relied upon by the arbitrator was factually incorrect. It may be noted that no such evidence was led by the petitioners before the arbitrator and the report aforesaid has been procured only after passing of the arbitral award, obviously, to carve out a ground to challenge the arbitral award. Any material which was not placed before the arbitrator, who passed the award, cannot be taken into consideration while considering the challenge to the arbitrator’s award under Section 34 of the Act of 1997. 12. Learned counsel for the State, however, miserably failed to demonstrate as to which claim of the respondent, allowed by the arbitrator, goes beyond the terms and conditions of the contract agreement. His whole emphasis was on the manner in which the arbitrator permitted the respondent-claimant to produce the report of a retired geologist with regard to the nature and classification of the soil. 13. I have gone through the record of the arbitrator and find that Sh.
His whole emphasis was on the manner in which the arbitrator permitted the respondent-claimant to produce the report of a retired geologist with regard to the nature and classification of the soil. 13. I have gone through the record of the arbitrator and find that Sh. B.D. Malbarna, retired Director Geological Survey of India, was appointed as expert to visit the site of the work and report about the nature and classification of the soil and this was done with the mutual consent of both the parties. The expert aforesaid after visiting the spot, submitted the report dated 03.01.2011 under his signatures to the arbitrator with copy to both the petitioners and the respondents. Pursuant to the report of the expert, the respondent framed its revised claims. The aforesaid expert was examined and cross-examined during the course of arbitration proceedings. I, therefore, do not find any illegality or infirmity in considering the evidence of the expert who was appointed with the consent of both the parties and subjected to examination and cross-examination before the arbitrator. The subsequent report procured by the petitioners after the delivery of the award is of no consequence, as the same never formed subject matter of adjudication before the arbitrator nor did expert of the department of Geology and Mining depose before the Arbitrator to substantiate its report. 14. Obviously, the report has been prepared by the Department of Geology and Mining at the bidding of the department of Public Works(R&B) to somehow carve out a ground of challenge to the arbitral award. The contention of the learned counsel for the petitioners that the respondent-claimant could not have been permitted to revise its claims and submit fresh claims which were not part of its original submission to the arbitrator also cannot be accepted for the reason that the claimants on account of availability of material which was not in its possession when the claims were submitted, was well within its right to amend the claims and the amendment of the pleadings subject to well known parameters is not unknown to the civil jurisprudence. The principles underlying Order-VI Rule-17 with regard to the amendment of plaint would by analogy apply to the proceedings before the arbitrator. The petitioners had ample opportunity to rebut the amended claims by placing on record the cogent material and substantiating the same by leading evidence. 15.
The principles underlying Order-VI Rule-17 with regard to the amendment of plaint would by analogy apply to the proceedings before the arbitrator. The petitioners had ample opportunity to rebut the amended claims by placing on record the cogent material and substantiating the same by leading evidence. 15. As is evident from the proceedings before the arbitrator, the same has been done by the respondents. Simply because the adjudication has gone against the petitioners, cannot be a reason for grouse against the arbitral proceedings. The learned arbitrator has discussed each and every item/claim in proper perspective. The rival contentions raised on behalf of the parties have been appreciated in the light of the pleadings and the material on record. The conclusion arrived at by the arbitrator, even if, found to be suffering from error of fact and law would not furnish a ground to challenge the arbitral award. The arbitral award, as noted above, can only be challenged on the grounds enumerated in Section 34 of the Act of 1997. The expression “public policy of India” is well explained by the Supreme Court in the case of Western Geco International Limited (supra). 16. The contention of the learned counsel appearing for the petitioners, even if accepted on its face value, would not constitute any of the grounds enumerated under Section 34 of the Act of 1997 for setting aside the arbitral award. 17. Both sides have relied upon several judgments of the Apex Court delivered from time to time on the scope of Section 34 of the Act of 1997. If I discuss each and every judgment referred to by the learned counsel for the parties, it would unnecessarily burden this judgment and increase its volume, which in the facts and circumstances of this case, is avoidable. 18. In view of the very limited and restrictive scope of interference in the arbitral award provided under Section 34 of the Act of 1997, I do not find any case for interference with the impugned arbitral award. The petition is, accordingly, dismissed.