Research › Search › Judgment

Himachal Pradesh High Court · body

2020 DIGILAW 426 (HP)

Union Of India v. Chadha & Company

2020-07-14

JYOTSNA REWAL DUA, TARLOK SINGH CHAUHAN

body2020
JUDGMENT Jyotsna Rewal Dua, J. - The award was passed by the Sole Arbitrator on 30.01.2013 allowing some claims of the respondent-claimant and rejecting all the claims made by the appellant. Learned Single Judge, vide judgment dated 31.07.2018, upheld the impugned award. 2. Facts: 2(i). 'Contract for providing and laying of 75 mm DBM and 40 mm AC as per most specifications including surface cleaning and providing of tack coat between KM 72.000 to KM 83.000 on Manali-Sarchu Road in 38 BRTF Sector under Project Deepak', valuing Rs.4,18,12,230/-, was awarded by the appellant to the respondent. The agreement was accepted on 27.07.2006. The work in question was to be completed within four months from the date of placing of work order. The order of commencement of work was dated 12.08.2006 and 11.12.2006 was the ordered date of completion of work. The agreement was terminated by the appellant on 04.07.2008. By that time, respondent had completed 40.42% of the awarded work. Disputes, which arose between the parties, were referred to the Arbitrator. 2(ii). Before the Arbitrator, the respective claims were made by both the parties. The claims of appellant were rejected, whereas some of the claims of the respondent herein were allowed by the Arbitrator as per following tabulation:- "DETAILS OF ARBITRATION AWARD IN RESPECT OF CA NO.CE(P) DPK- 13/2006-07 Amount awarded in favour of Contractor Amount awarded in favour of Dept S/ No. Amount S/ No. Claim No. Amount 1 Claim No.1- Refund of retention money Rs.8,82,441/- 1 Claim No.1-Risk and cost amount Rs.Nil 2 Claim No.2- Refund of amount illegally recovered from running bills. Rs.Nil 2 Claim No.2- Compensation for delay Rs.Nil 3 Claim No.3- Refund of registration money deposited & transferred against security deposit of work Rs.Nil 3 Claim No.3- Increase in cost of bitumen Rs.Nil 4 Claim No.4-Expenses for plant & machinery i.e. cost of plants & machinery confiscated by the respondents which have become junk during this long period Rs.40,00,000/- 4 Claim No.4- Arbitration cost Rs.Nil 5 Claim No.5 - Cost of materials i.e. bitumen, crushed stone materials, course sand etc. lying at site at the time of cancellation of the contract on 04.07.2008 Rs.46,56,530/- 6 Claim No.6- Rent of machinery deputed in the year 2008 Rs.Nil 7 Claim No.7-Pay of staff/labour wages deputed in the year 2008 Rs.Nil 8 Claim No.8 - 15% profit on balance work of Rs.2,49,13,407/- Rs.24,91,341/- (10% profit on balance work of Rs.2,49,13,407/-) 9 Claim No.9-Idling of claimants machinery (from Aug 2008 to Aug 2012 i.e. 49 months) Rs.1,47,00,000/- 10 Claim No.10-Idling of complete hot mix plant & its machinery, staff and labour Rs.Nil 11 Claim No.11-Rent of land, office, store etc. Rs.14,40,000/- 12 Claim No.12- Loss of advances to staff, labour, material suppliers, machinery owners, equipment owners etc. Rs.Nil 13 Claim No.13-Arbitration cost Rs.Nil 14 Claim No.14 - Loss of interest on the invested amount (a) 12% simple interest p.a. as pendent lite interest on claim 1 to 13 from the date of reference to the date of publication of award. (b) 12% p.a. as future interest on claim 1 to 14(a) from the date of publication of award to date of payment or up to the court decree. Total Rs.2,81,70,312/- Total Rs.Nil ......" 2(iii). A perusal of the award indicates that in support of its claim No.4, the case of respondent before the Arbitrator was that by 04.07.2008, i.e. the date of termination of the agreement, it had completed 40.42% of the total work valuing Rs.1,68,98,823/-. Remaining work could not be completed for the reasons attributable to the appellant. Since the respondent was allowed to carry out the work beyond 11.12.2006 and the appellant had granted it extension of time to complete the work, therefore, it has to be logically deduced that time to complete the work was left at large by the appellant. The final notice dated 29.05.2008, issued by the Accepting Officer, though stated that time was of essence of the contract. However, the respondent was only directed therein to accelerate and complete the work with diligence and in case the state of affairs did not improve for further period of twenty-eight days, then the Accepting Officer could consider cancellation of the contract. This twenty-eight days' period given for accelerating and improving the work ended on 23.06.2008. Respondent had deployed adequate material, men and machinery at the site. This twenty-eight days' period given for accelerating and improving the work ended on 23.06.2008. Respondent had deployed adequate material, men and machinery at the site. It had kept its part of the directions and complied them, however, the work in full swing could not be undertaken due to various lapses on part of the appellant. In any case, even after the expiry of 28 days' period given under the notice dated 29.05.2008, the Cdr. contract issued another letter dated 26/30.06.2008, allegedly received by the respondent on 07.07.2008, asking the latter to speed up the progress of the work. This, according to the respondent, amply shows that time to complete the project was kept at large. Therefore, cancellation of the contract by the Accepting Officer on 04.07.2008 was illegal. It was also contended that the subsequent firm executing the remaining work at risk and cost was given extension of time for completing the work. The respondent had provided videographic evidence to the Arbitrator showing their work at the site and reflecting non-handing over of clear sites at some locations, allegedly because of which, the work could not be executed properly and in time. 2(iv). The Arbitrator concluded that cancellation of contract by the appellant under Clause 54 of the General Conditions of the Contract was not within the provisions of the contract and therefore, it was not valid cancellation. In arriving at this conclusion, the Arbitrator held that time to complete the Project work was left at large by the appellant. He observed that:- (i) in the original agreement, the ordered date of completion of the work was 11.12.2006, however, the work admittedly continued for long time thereafter; (ii) appellant had not fixed a specific date for completion of Project work even in the final Notice dated 29.05.2008. Rather the respondent-claimant was asked thereby to accelerate the progress of work, failing which the contract could be cancelled; (iii) Even the period of 28 days for improving and accelerating the work provided in the notice dated 29.05.2008 expired on 23.06.2008. Rather the respondent-claimant was asked thereby to accelerate the progress of work, failing which the contract could be cancelled; (iii) Even the period of 28 days for improving and accelerating the work provided in the notice dated 29.05.2008 expired on 23.06.2008. Appellant failed to fix a clear date for completion of Project work by giving a reasonable time to the respondent-claimant after considering the ground requirements, thus leaving the time at large in the contract; the arbitrator also considered the videographic evidence adduced by the respondent to the effect that appellant could not handover clear sites to the respondent for the balance work as per contract conditions. The evidence was not refuted by the appellant; (iv) on the expiry of 28 days period set in the final notice dated 29.05.2008, the Cdr. contract addressed another letter to the respondent on 26/30.06.2008, received by the latter on 07.07.2008, directing it to complete the work within next fifteen days. However, in the interregnum, on 04.07.2008, the Accepting Officer terminated the contract. In view of the above, the sole Arbitrator held that since time was kept at large in the contract, therefore, cancellation of the contract in question by the appellant was not valid and not within the provisions of the contract. Further, since cancellation of contract by the appellant was held invalid by the Arbitrator, therefore, on that basis, certain claims of the respondent-claimant were allowed as per above drawn tabulation. 3. The award has been upheld by the learned Single Judge. Feeling aggrieved, instant arbitration appeal under Section 37(C) of the Arbitration and Conciliation Act has been preferred by the appellant on the grounds that:- (a). Award was bereft of reasons, therefore, nonspeaking; (b). Opportunity to lead evidence was not provided to the appellant by the Arbitrator; & (c). Learned Arbitrator exceeded his jurisdiction in passing the impugned award. Appellant also urged that the above grounds were not appreciated properly by learned Single Judge and the award has been upheld by delving certain aspects, which were neither pleaded before the Arbitrator nor were considered by him. 4. Reasoning in the Award We may first examine whether reasons are required to be assigned by the Arbitrator or not. 4(i). Appellant also urged that the above grounds were not appreciated properly by learned Single Judge and the award has been upheld by delving certain aspects, which were neither pleaded before the Arbitrator nor were considered by him. 4. Reasoning in the Award We may first examine whether reasons are required to be assigned by the Arbitrator or not. 4(i). A five Judges Constitution Bench of the Apex Court in the case Rajpur Development Authority vs. Chokhamal Contractors, (1990) AIR SC 1426 , while considering the scope of Section 30 of the Arbitration Act, 1940, held that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons. Relevant para of the judgment is reproduced hereinafter:- "It is now well settled that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the Court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons. The arbitrator or umpire shall have to give reasons also where the court has directed in any order such as the one made Under Section 20 or Section 21 or Section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so." In Som Datt Builders Limited vs. State of Kerala, (2009) 4 ArbLR 13 SC, it was observed by Hon'ble the Apex Court that passing of reasoned award is not an empty formality under the Arbitration Act. 4(ii). The Arbitration and Conciliation Act, 1996, provides following in Section 31(3):- "(3). 4(ii). The Arbitration and Conciliation Act, 1996, provides following in Section 31(3):- "(3). The arbitral award shall state the reasons upon which it is based, unless- (a). the parties have agreed that no reasons are to be given, or (b). the award is an arbitral award on agreed terms under section 30." Therefore, under the Arbitration and Conciliation Act, 1996, the award has to be reasoned unless parties agree otherwise. The parties can agree on reasonless award also. 4(ii)(a). Hon'ble Apex Court in para 35 of Civil Appeal No.2153 of 2010, titled M/s Dyna Technologies Pvt. Ltd. vs. M/s Crompton Greaves Ltd., decided on 18th December, 2019, held that 'the mandate under Section 31(3) of the Arbitration Act is to have reasoning which is intelligible and adequate and, which can in appropriate cases be even implied by the Courts from a fair reading of the award and documents referred to thereunder, if the need be. The aforesaid provision does not require an elaborate judgment to be passed by the arbitrators having regards to the speedy resolution of dispute.' It was further observed in Para-38 of the judgment that in case of absence of reasoning, utility has been provided under Section 34(4) of the Arbitration Act to cure such defects and it is only where there is complete perversity in the reasoning then only it can be challenged under the provisions of Section 34 of the Act. 4(ii)(b). It was further observed in the aforesaid judgment that three characteristics of a reasoned award are that the award should be proper, intelligible and adequate. Relevant para of the judgment is reproduced hereinafter:- "36. When we consider the requirement of a reasoned order three characteristics of a reasoned order can be fathomed. They are: proper, intelligible and adequate. If the reasoning in the order are improper, they reveal a flaw in the decision making process. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. If the challenge to an award is based on impropriety or perversity in the reasoning, then it can be challenged strictly on the grounds provided under Section 34 of the Arbitration Act. If the challenge to an award is based on the ground that the same is unintelligible, the same would be equivalent of providing no reasons at all. Coming to the last aspect concerning the challenge on adequacy of reasons, the Court while exercising jurisdiction under Section 34 has to adjudicate the validity of such an award based on the degree of particularity of reasoning required having regard to the nature of issues falling for consideration. The degree of particularity cannot be stated in a precise manner as the same would depend on the complexity of the issue. Even if the Court comes to a conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. On the other hand, ordinarily unintelligible awards are to be set aside, subject to party autonomy to do away with the reasoned award. Therefore, the courts are required to be careful while distinguishing between inadequacy of reasons in an award and unintelligible awards." It was further observed by Hon'ble Apex Court that even if the Court comes to the conclusion that there were gaps in the reasoning for the conclusions reached by the Tribunal, the Court needs to have regard to the documents submitted by the parties and the contentions raised before the Tribunal so that awards with inadequate reasons are not set aside in casual and cavalier manner. 4(ii)(c). Hon'ble Apex Court in M/s Dyna Technologies Pvt. Ltd.'s case (supra), observed in para 27 of the judgment that 'Courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.' 4(iii). In the instant case, reasons have been assigned by the Arbitrator in passing the award allowing some of the claims of the respondent. In the instant case, reasons have been assigned by the Arbitrator in passing the award allowing some of the claims of the respondent. On the basis of certain grounds (already indicated above), the Arbitrator reached the conclusion that time was kept at large in the contract, therefore, cancellation of the contract by the appellant was held to be invalid being outside contractual provisions. Since cancellation of the contract by the appellant was held invalid, therefore, on this very basis, certain other claims of the respondent/ claimant were allowed and that of the appellant were dismissed. It has not been demonstrated before us that the reasoning of the Arbitrator was not a possible view. The award cannot be interfered with merely because another view on facts and interpretation of the documents is possible. In AIR 1989 SC 890 , Hon'ble Apex Court observed thus:- "9 .............. It has been clearly held that the power of the Arbitrator in respect of the interpretation of the contract in a matter for arbitration, the Arbitrator can pass the Award by taking a particular view of the contract and hence, the Court cannot substitute its own decision. Therefore, this Court cannot reappraise the evidence and substitutes its views and set aside the Award. Also in the case of Tamil Nadu Civil Supplies Corporation Limited v. Albert and Company, (2000) 3 CTC 83 , this Court has held that as per Section 34 of the Act, the Award of the Arbitrator can be set aside only on the limited grounds and the Award cannot be interfered with simply because another view is possible on the available materials. The arbitrator is a Judge of choice of parties and this Court cannot set aside unless it suffers from error apparent on the face of the record. It cannot be set aside even if the Court can come to different conclusion on the same facts. The learned counsel for the petitioner has not pointed out any such ground. It cannot also be said that the Award is perverse or has error apparent on the face of the record. Therefore, the Award passed by the Arbitrator is not illegal or invalid and cannot be set aside. Therefore, the petition is dismissed." Therefore, considering the facts and the legal position, it cannot be said that the Arbitrator had passed a non-speaking award. Therefore, the Award passed by the Arbitrator is not illegal or invalid and cannot be set aside. Therefore, the petition is dismissed." Therefore, considering the facts and the legal position, it cannot be said that the Arbitrator had passed a non-speaking award. Reasons have been assigned in allowed certain claims of the respondent and on that basis, rejecting all the claims of the appellant. The reasons are not required to be substituted in the facts of the case. 5. Non providing of opportunity to lead evidence/exceeding of jurisdiction by the Arbitrator: 5(i). Learned Assistant Solicitor General of India contended that opportunity to lead evidence was not granted to the appellant by the Arbitrator. This contention was forcibly countered by learned counsel for the respondent by submitting that adequate opportunity in every manner was accorded by the Arbitrator. A perusal of the award indicates that final hearing on all the issues raised by both the parties was conducted by the Arbitrator on 07.11.2012, wherein, both the parties agreed that 'they were given full opportunity to present their case and now they have nothing more to say in the matter' and it was thereafter that the proceedings were closed. No pleadings raised by the appellant before the Arbitrator have been brought to our notice, seeking leading of any/further evidence. Once the Arbitrator had ordered on 07.11.2012 that fullest opportunity to present their respective cases were granted to both the parties, then it was incumbent upon the appellant to disprove the same. The appellant has miserably failed to prove that it had though desired but was not granted opportunity to lead evidence. 5(ii). We fail to understand as to how the Arbitrator can be said to have exceeded his jurisdiction in passing the impugned award. The parties had agreed for the adjudication of their inter se dispute in terms of Arbitration Clause No.70 existing in the contract. The appellant has not been able to show that there is any apparent misdemeanour committed by the Arbitrator or that the award was patently in conflict with the public policy or contrary to fundamental policy of India or contrary to the interest of India or contrary to justice or morality or otherwise patently illegal. The appellant has not been able to show that there is any apparent misdemeanour committed by the Arbitrator or that the award was patently in conflict with the public policy or contrary to fundamental policy of India or contrary to the interest of India or contrary to justice or morality or otherwise patently illegal. Learned Assistant Solicitor General for the appellant submitted that award is contrary to the interest of India as the subject matter of the award was for construction of Manali-Sarchu Road, early completion of which was crucial and of strategic importance for the Government. This contention has been raised only to be rejected. It is the award whose legality/illegality is to be adjudged vis-a-vis parameters laid down under Section 34 of the Arbitration and Conciliation Act and not of the subject matter involved in the dispute. 5(iii). The scope of interference in an arbitration appeal preferred under Section 37(c) of the Arbitration and Conciliation act, 1996, is very narrow. The comparison of the present appeal with that of objection petition preferred by the appellant before learned Single Judge makes it evident that pleadings in both are almost verbatim the same. Faced with this, learned Assistant Solicitor General of India pointed out that learned Single Judge, while upholding the impugned award, has given findings in Paras 5 to 7 of the impugned judgment, which are not borne out from the award. In paras 5 to 7 of the judgment, learned Single Judge has referred and considered Clause 11 of the contract, pertaining to 'time, delay and extension', to arrive at the conclusion that 'in terms of above clause, extensions of time to complete the Project work were granted by the appellant to the respondent vide communications dated 05.12.2006 and 10.11.2007'. Learned Assistant Solicitor General of India contended that:- (i) Clause 11 of the Contract had neither been relied upon by the respondent nor referred to in the award and (ii) the appellant had not specifically extended the contract period in favour of the respondent. The award does not per se refer to Clause 11 of the Contract. The award also does not refer to the communications dated 05.12.2006 and 10.11.2007 (sic 01.11.2007) noticed by learned Single Judge. In the impugned award, the Arbitrator held that the time to complete the Project work was kept at large. The award does not per se refer to Clause 11 of the Contract. The award also does not refer to the communications dated 05.12.2006 and 10.11.2007 (sic 01.11.2007) noticed by learned Single Judge. In the impugned award, the Arbitrator held that the time to complete the Project work was kept at large. This conclusion was reached on the grounds that though the ordered date to complete the project work was 11.12.2006, however, the project work was admittedly continued thereafter by the respondent. It was not disputed before the Arbitrator as well as before us that the appellant allowed the respondent to carry on the Project work even after 11.12.2006; no specific date for completion of work was fixed after giving a reasonable time for completing the work; even in its final notice dated 29.05.2008, the appellant had not assigned any fixed date for completion of the work. It had only asked the respondent to speed up the pace of work in next twenty-eight days, failing which the contract could be cancelled; by way of videographic evidence produced before the Arbitrator, the respondent had showed mobilization of its men, machinery and material at the risk and non-handing over of certain locations by the appellant allegedly because of which, balance work could not be undertaken; even after expiry of 28 days period provided in the notice dated 29.05.2008, the work was not cancelled, rather the Cdr. Contract issued another letter dated 26/30.06.2008, directing the respondent to complete the work within next fifteen days. Though before the expiry of fifteen days, the contract was terminated by the Accepting Officer on 04.07.2008. Learned counsel for the appellant contended that no extensions of time were actually granted by appellant to the respondent for completion of the work in question. Therefore, observations of learned Single Judge that the respondent was allowed extension of time to complete the project are factually incorrect. He further submitted that only recommendations by the officers of the appellant for granting extensions of time to complete the project were made in favour of the respondent. Whereas, learned counsel for the respondent contended that the Ground Officers, who had been corresponding with the respondent, had recommended granting extension of time in favour of the respondent to complete the project work. The decision on the same was deferred for reconsideration after satisfactory completion of the project. Whereas, learned counsel for the respondent contended that the Ground Officers, who had been corresponding with the respondent, had recommended granting extension of time in favour of the respondent to complete the project work. The decision on the same was deferred for reconsideration after satisfactory completion of the project. Be that as it may, once it was admitted position before the Arbitrator that appellant had allowed the respondent to carry out the Project work beyond contractual date of 11.12.2006 as well as the fact that the notice dated 29.05.2008 was issued by the appellant requesting the respondent to accelerate and complete the Project work within next twenty-eight days and the fact that another letter was sent by the Cdr. Contract 26.06.2008, after the expiry of twenty-eight days, directing the respondent to complete the work within next fifteen days, coupled with the fact that the contract was actually terminated within this period of fifteen days, i.e. on 04.07.2008 (way beyond 11.12.2006), can lead to the plausible view adopted by the Arbitrator that the time for completing the Project work was kept at large. We have already held earlier that the award passed by the Arbitrator cannot be interfered with, in casual and cavalier manner, that too at the appellate stage, merely because another view could be possible. Following broad principles can be discerned from MMTC Limited V. M/s Vedanta Limited, (2019) 4 SCC 163 ; Parsa Kente Collieries Limited Versus Rajasthan Rajya Vidyut Utpadan Nigam Limited, (2019) 7 SCC 236 ; M/s Navodaya Mass Entertainment Limited Versus M/s J.M. Combines, (2015) 5 SCC 698 ; G. Ramachandra Reddy Versus Union of India, (2009) 6 SCC 414 ; and State of Jharkhand and others Versus HSS Integrated SDN and others, (2019) 9 SCC 798 :- (i). Court does not sit in appeal over the arbitral award and may interfere on merits of the same only on the limited grounds provided under Section 34(2) of the Act. (ii). Court may interfere with an arbitral award in terms of Section 34(2), but such an interference does not entail a review of the merits of dispute. Interference is limited to the situation, where findings of arbitrator are arbitrary, capricious or perverse or when the conscience of the Court is shocked or when the illegality goes to the root of the matter. (iii). Interference is limited to the situation, where findings of arbitrator are arbitrary, capricious or perverse or when the conscience of the Court is shocked or when the illegality goes to the root of the matter. (iii). An arbitral award will not be interfered with if the view taken by the arbitrator is a possible view based on facts. (iv). Arbitrator is the master of evidence and the findings of facts arrived at by him on the basis of evidence on record are not to be scrutinized as if the Court was sitting in appeal. (v). Under Section 34 of the Act, the award can be interfered, where the finding is perverse and/or based on no evidence and/or ignores vital evidence in arriving at its decision and/or the same is against public policy. (vi). Pursuant to insertion of Explanation-I to Section 34(2), the scope of contravention of Indian Public Policy has been modified. Now, it also includes fraud or corruption in making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law and conflict with the most basic notion of justice or morality. Section 34(2-A) provides that in case of domestic arbitration, violation of Indian Public Policy also includes patent illegality appearing on the face of award. The proviso to the same states that an award shall not be set aside on the ground of an erroneous application of law or by re-appreciation of evidence. Error apparent on the face of award does not mean that on the closer scrutiny of the import of documents and material on record, the findings made by the Arbitrator may be held to be erroneous. (vii). Arbitral Tribunal must decide in accordance with the terms of contract, but if an arbitrator construes a term of contract in a reasonable manner, it will not mean that the award can be set aside on this ground. In view of the foregoing discussion, the award in question cannot be held to be non-speaking. Reasons have been assigned in the award. The view taken by the Arbitrator is plausible and does not require substitution. No misdemeanour on part of the Arbitrator has been put forth. The appellant has not been able to bring its challenge to the impugned award within the ambit of Section 34 of the Act. Reasons have been assigned in the award. The view taken by the Arbitrator is plausible and does not require substitution. No misdemeanour on part of the Arbitrator has been put forth. The appellant has not been able to bring its challenge to the impugned award within the ambit of Section 34 of the Act. Therefore, instant challenge under Section 37(C) of the Arbitration and Conciliation Act, 1996 to the judgment passed by the learned Single Judge fails. Accordingly, this arbitration appeal is dismissed alongwith pending miscellaneous application(s), if any.