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2020 DIGILAW 605 (KER)

Union of India, Rep. by the General Manager, Southern Railway v. Prime Habitats Pvt. Ltd.

2020-07-16

DEVAN RAMACHANDRAN

body2020
JUDGMENT : DEVAN RAMACHANDRAN, J. 1. This appeal has been filed by the Union of India and the Deputy Chief Engineer of the Southern Railway impugning the order of the II Additional District Judge, Thalassery, in an original petition filed by the respondent herein, as per which, an Arbitration Award - issued consequent to the terms of a contract between the parties - has been set aside, with a resultant order to the Arbitral Tribunal to pronounce a fresh Award. 2. The appellants have edificed this appeal primarily on three grounds, namely: (a) the learned District Judge obtained no jurisdiction to remand the arbitration proceedings to the Arbitral Tribunal and they rely on the judgment of the Hon'ble Supreme Court in Kinnari Mullick and Another vs. Ghanshyam Das Damani, 2018 (11) SCC 328 , in substantiation. (b) the learned District Judge could not have set aside the Award after having found that none of the ingredients under Section 34 of the Arbitration and Conciliation Act (hereinafter referred to as ‘the Act’ for short) had been attracted. (c) the respondent has already accepted the amounts under the impugned Award without protest and therefore, that a challenge against the same was not maintainable. 3. In response to the afore contentions made on behalf of the appellants by their Standing Counsel, Shri Dinesh Rao A. the learned counsel appearing for the respondent, Smt. N. Sudha, asserted that the order of the learned District Judge is irreproachable, since it has categorically found therein that the Arbitral Tribunal had issued an Award contrary to the specific directions of the Hon'ble High Court of Madras in O.P. No. 166 of 2009. She says that, therefore, the Award was rightly construed by the learned District Judge to be opposed to public policy and hence, it will fall within the parameters of Section 34 of the Act. 4. As regards the contention that her client had accepted the payments under the impugned Award, Smt. Sudha submitted that this only under protest and without prejudice to their contentions in the proceedings pending before the learned District Judge. 5. 4. As regards the contention that her client had accepted the payments under the impugned Award, Smt. Sudha submitted that this only under protest and without prejudice to their contentions in the proceedings pending before the learned District Judge. 5. Finally, Smt. Sudha submitted that as regards the challenge of the appellants against the impugned Award on the ground the learned District Judge obtained no power of remand, and even though this may be the normal Rule, in this case there is a difference because, as has been found by the said Court, the Arbitral Tribunal had mis-conducted itself in having issued an Award in egregious violation of the specific directions of the Hon'ble High Court of Madras. She says that, therefore, in this case the order of remand to the Arbitral Tribunal was completely justified. 6. When I assess the submissions made before me by the learned counsel as afore and test them against the pleadings and materials available, it is without doubt that the controversy between the parties arose in the year 2006. The disputes between the parties had its genesis in an agreement dated 21.01.2003 and since they were not able to resolve them otherwise, the 1st appellant constituted a three member Arbitral Tribunal as per the terms of the said agreement. The records reveal that the Arbitral Tribunal was constituted with Shri P.K. Sanal Kumar, Senior Divisional, Signal and Telecommunications Engineer of the Southern Railway, as the Presiding Arbitrator; along with Shri R. Nandakumar Senior Divisional Engineer of Southern Railway and Shri K. Ramadoss, Deputy Financial Advisor and Chief Accounts Officer, Southern Railway. 7. The files show that this Arbitral Tribunal conducted certain hearings but that before it could deliver the Award, the 1st appellant reconstituted the Tribunal by replacing the Presiding Arbitrator, Shri P.K. Sanal Kumar, with Shri R. Nandakumar, who was originally one of the Arbitrators and added a certain Shri Anand Golhani, Deputy Chief Signal, Telecommunication Project, Southern Railway, as the 3rd Arbitrator. 8. 8. At this time, the respondent approached the Hon'ble High Court of Madras by filing O.P. No. 166 of 2009, assailing reconstitution of the Tribunal and asserting, on the basis of a letter dated 05.08.2008 - which they said they received from the afore mentioned Shri P.K. Sanal Kumar - that the earlier Tribunal had already prepared an Arbitral Award which was signed by two among the Arbitrators, however, without naming who they were. The original petition was filed in the year 2009, which was disposed of by the Hon'ble High Court of Madras through judgment dated 23.02.2015, upholding reconstitution of the Tribunal; however, directing that the new Tribunal ‘pronounce’ the earlier Award, which had been signed by the two Arbitrators in the Panel headed by Shri P.K. Sanal Kumar. 9. The specific observations, findings and holdings of the Madras High Court will require to be kept in mind when I tread forward, for which purpose, I deem it appropriate to extract Paragraphs 5, 6, 10 to 13 of it for ease of reference:- “5. The appellants then received a copy of the purported award dated 18.06.2013 passed by the Arbitral Tribunal. The arbitrator allowed the claim of the Respondent and directed the Appellants to execute and register appropriate deed and/or deeds as proposed by the Respondent vide its Advocate's letter dated 29.06.2009 and further directed that conveyance and/or conveyances was/were to be executed and registered by the appellants, costs and expenses thereof were to be borne by the Respondent within a period of 30 days from the date of the award irrespective of any intervening holiday and/or holidays. The said award, however, did not contain any reason for allowing the claim of the Respondent. 6. Being dissatisfied with the interim award dated 27.08.2010 and final award dated 18.06.2013 passed by the Arbitral Tribunal, the Appellants filed an application under S.34 of the Act, for setting aside of the said awards. The learned Single Judge was pleased to allow the said application on the finding that the impugned award did not disclose any reason in support thereof. The impugned award was accordingly set aside and the parties were left to pursue their remedies in accordance with law. The learned Single Judge was pleased to allow the said application on the finding that the impugned award did not disclose any reason in support thereof. The impugned award was accordingly set aside and the parties were left to pursue their remedies in accordance with law. The relevant portion of the decision of the learned Single Judge reads thus: “Since the present award is completely lacking in reasons and is littered with the unacceptable expressions like “I feel that the claim is justified” “I find no basis” and the like which cannot be supplement for reasons that the statute demand, A.P. No. 1074 of 2013 is allowed by setting aside the award dated June 18, 2013. The parties are left free to pursue their remedies in accordance with law.” 10. The Respondent, on the other hand, submits that ample power is bestowed upon the Court to relegate the parties to the award under challenge back to the Arbitral Tribunal to eliminate the ground for setting aside of the arbitral award, in terms f S.34 of the Act. It is submitted that no jurisdictional error has been committed by the Division Bench in exercising that power for sending the award back to the Arbitral Tribunal with a direction to assign reasons in support of the award. It is submitted that the dismissal of the appeal preferred by the Respondent against the judgment of the learned Single Judge will not come in the way of the Respondent muchless to participate in he proceedings before the Arbitral Tribunal as has been remitted by the Division Bench for the limited purpose of assigning reasons in support of the award. It is submitted that no interference is warranted with the concluding part of the judgment of the division bench which intends to facilitate rectification of the deficiencies in the award already pronounced by the Arbitral Tribunal. 11. We have heard the learned counsel for the parties. At the outset, we may note that, if the plea taken by the Appellants in relation to the concluding part of the impugned judgment - of sending the award back to the Arbitral Tribunal for recording reasons - was to be accepted, we may not be required to dilate on any other argument. At the outset, we may note that, if the plea taken by the Appellants in relation to the concluding part of the impugned judgment - of sending the award back to the Arbitral Tribunal for recording reasons - was to be accepted, we may not be required to dilate on any other argument. Inasmuch as the learned single Judge allowed the application under S.34 of the Act for setting aside of the award preferred by the appellants and the Division Bench has already affirmed the conclusion recorded by the learned Single Judge while dismissing the appeal preferred by the Respondent has not challenged that part of the impugned judgment and has allowed it to become final. 12. In this backdrop, the question which arises is: whether the highlighted portion in the operative part of the impugned judgment of the Division Bench can be sustained in law? For that, we may advert to S.34(4) of the Act which is the repository of power invested in the Court. The same reads thus: “S.34.......(4) On 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.” 13. On a bare reading of this provision, it is amply clear that the Court can defer the hearing of the application filed under S.34 for setting aside the award on a written request made by a party to the arbitration proceedings to facilitate the Arbitral Tribunal by resuming 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. The quintessence for exercising power under this provision is that the arbitral award has not been set aside. Further, the challenge to 'the said award has been set up under S.34 about he deficiencies in the arbitral award which may be curable by allowing the Arbitral Tribunal to take such measures which can eliminate the grounds for setting aside the arbitral award. Further, the challenge to 'the said award has been set up under S.34 about he deficiencies in the arbitral award which may be curable by allowing the Arbitral Tribunal to take such measures which can eliminate the grounds for setting aside the arbitral award. No power has been invested by the Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose mentioned in Sub-S.4 of S.34. This legal position has been expounded in the case of McDermott International Inc. (supra). In paragraph 8 of the said decision, the Court observed thus: “8....parliament has not conferred any power of remand to the Court to remit the matter to the arbitral tribunal except to adjourn the proceedings as provided under sub-section (41 of S.34 of the Act. The object of sub-section (4) of S.34 of the Act is to give an opportunity to the arbitral tribunal to resume the arbitral proceedings or to enable it to take such other action which will eliminate the grounds for setting aside the arbitral award.” 10. Subsequent to the judgment of the Hon'ble High Court of Madras, it appears that the Arbitral Tribunal met for a formal hearing, as directed by the said Court on 10.09.2015 and an Award, dated 25.09.2015, was issued, a copy of which has been produced by the appellants as Annexure A2. It was this Award that was challenged by the respondent before the learned District Judge. 11. As seen above, the primary contention of the respondent before the learned District Judge was that the Award of the present Tribunal is contrary to the directions in the judgment of the Hon'ble High Court of Madras, since, even though they were directed to ‘pronounce’ the earlier Award signed by the two Arbitrators, who were members of the first Arbitral Panel headed by Shri P.K. Sanal Kumar, the present Arbitral Tribunal issued a totally different Award, after assessing each of the issues on their own. 12. 12. It is in this context that Smt. Sudha, learned counsel for the respondent, vehemently submitted that no fault can be attributed to the learned District Judge in having issued the impugned order because the present Arbitral Tribunal could not done nothing more than to ‘pronounce’ the earlier Award, which had been prepared and signed by two of the Arbitrators, who were part of the Arbitral Panel headed by Shri P.K. Sanal Kumar. 13. I notice that this argument of the respondent found favour with the learned District Judge and he consequently went on to allow the original petition invoking Section 34 of the Act, holding that the impugned Award has been issued contrary to public policy, since violation of the directions of the Madras High court would come within the confines of such a concept. 14. When I now proceed to consider the dialectical contentions of the parties in this case, I must say upfront that it is rather difficult to comprehend how the learned District Judge has entered into a finding that the impugned Award is contrary to the alleged Award prepared and signed by two of the Arbitrators in the Panel headed by Shri P.K. Sanal Kumar. I say this because, evidently, from the order of the learned District Judge, the alleged Award signed by the two members of the Arbitral Panel headed by Shri P.K. Sanal Kumar has never been produced on record, nor has it been seen by the said Court. Therefore, the conclusions that the present impugned Award is contrary to the Award prepared by the earlier Panel certainly cannot find my favour. 15. That apart, it is baffling how the respondent can assert that the present Award is contrary to the one earlier signed by the two Arbitrators in the Panel headed by Shri P.K. Sanal Kumar, since admittedly, they have not seen the said Award. This assumes some significance because, when applications - numbered as I.A. Nos. 15. That apart, it is baffling how the respondent can assert that the present Award is contrary to the one earlier signed by the two Arbitrators in the Panel headed by Shri P.K. Sanal Kumar, since admittedly, they have not seen the said Award. This assumes some significance because, when applications - numbered as I.A. Nos. 999 of 2017, 1970 of 2017 and 1971 of 2017 - had been filed by the respondent before the learned District Judge seeking that the Award, alleged to have been signed by two of the Arbitrators in the Panel headed by Shri P.K. Sanal Kumar, be brought on record, an affidavit was filed by the appellants that no such Award was forthcoming on the files and therefore, that they are not in a position to produce the same. The learned District Judge, thereupon, closed all these I.As without any further orders. 16. It is thus indubitable that the learned District Judge did not have the opportunity of seeing the alleged Arbitral Award signed by two members in the Panel headed by Shri P.K. Sanal Kumar, but it still went on to hold affirmatively that the present Award is contrary to it. 17. While doing so, it is obvious that the learned District Judge was swayed by the submissions of the respondent that the impugned Award has been signed on 25.09.2015 by the Arbitrators and therefore, that it can only mean that it is not the same Award as the one which was allegedly signed by the two members in the earlier Panel. However, it is also without doubt that the District Court would not have concluded that the contents of the present Award are any way different from the contents of the alleged Award signed by the two members in the earlier Panel, since it is admitted that it had not seen the latter. 18. Be that as it may, the axiomatic question is, even if the learned District Judge could be seen to be without error in having concluded that the impugned Award is contrary to public policy, whether it could have ordered a remand of the proceedings to the Arbitral Tribunal to ‘pronounce’ the Award as per the directions of the Hon'ble High Court of Madras. 19. 19. When I consider this issue, which is inter-layered with the aspects regarding the contents of the alleged Arbitral Award signed by the earlier Panel, I must record certain additional facts that are without dispute between the parties. 20. The pleadings of both sides show that the first Tribunal headed by Shri P.K. Sanal Kumar was constituted on 16.02.2006 and that it was reconstituted on 14.07.2008, by substituting Shri P.K. Sanal Kumar by a person by name Shri Anand Golhani. As I have already seen above, the Madras High Court was only aware of this and not of any further developments thereafter. This is crucial because it is admitted before me, even by Smt. Sudha, that while the petition was pending before the Hon'ble High Court of Madras, the Arbitral Panel was again reconstituted by removing Shri Anand Golhani and substituting him by a person by name Shri Vivek Chaurasia. 21. Subsequently, after the judgment was delivered by the Hon'ble Madras High Court, since Shri Ramadoss had retired, a person by name Shri Mohammed Faizal was brought in his place. This is evident from the impugned Award, which has been signed by Shri Nandakumar, Shri Vivek Chaurasia and Shri Mohammed Faizal. Obviously, the panel that was constituted on 16.02.2006 underwent atleast four changes over the years and the present Panel had only Shri Nandakumar as common throughout. The other members kept on changing and as matters now stand, the Panel which issued the impugned Award is completely different from the one that was constituted on 16.02.2006. 22. Manifestly, therefore, the learned District Judge could not have remanded the matter to the Arbitral Tribunal to “pronounce the Award prepared by the Arbitrators Shri P.K. Sanal Kumar, Shri R. Nandakumar and Shri K. Ramadoss as directed by the Hon'ble High Court of Madras within two weeks from the date of this order (sic).” It requires no further expatiation that among the three names afore mentioned, only Shri R. Nandakumar is available and ineluctably, therefore, an Award cannot be ‘pronounced’ by the present Panel, which has atleast two other names included therein. The problem is exacerbated because it is now submitted before me by the learned counsel on both sides that Shri R. Nandakumar has since passed away and he is also not available. 23. The problem is exacerbated because it is now submitted before me by the learned counsel on both sides that Shri R. Nandakumar has since passed away and he is also not available. 23. That said, the forensic question whether the Trial Court could have ‘remanded’ the matter to the Arbitral Tribunal is no longer res novo, because it is without doubt that going by the various judgments of the Hon'ble Supreme Court, including in Kinnari Mullick (supra), such a power has not been invested in any Court by the Parliament. The learned District Judge, unfortunately, has not adverted to any of these binding precedents; and I am thus of the firm opinion that the impugned order cannot obtain the imprimatur of this Court for this reason also. 24. Before I conclude this judgment, I certainly must also record that there is a clear question of fact which is in dispute between the parties at this time. While the appellants assert even in their pleadings that the amounts under the Award have been already paid by them and accepted by the respondent; the latter, while admitting the receipt, contends that it was accepted only under protest. However, no document has been brought on record, even before this Court, by either sides to show the payment or the receipt, which alone can guide this Court to decide whether it was done under protest or otherwise. 25. I am, resultantly, of the view that the Award must go and that the learned District Court must reconsider the original petition, taking note of my observations above afresh and in terms of law. 26. In conspectus, I allow this Arbitration Appeal and set aside the order of the Additional District Judge-II, Thalassery, in O.P. (Arb) No. 55 of 2016; with a consequential direction to the said Court to reconsider the said original petition, taking note of the afore observations of this Court and adverting to the binding precedents, after affording necessary opportunity to both sides, as expeditiously as is possible. 27. 27. I reiteratingly clarify that since I have not entered into the merits of the contentions of the parties affirmatively, it will be up to the learned District Judge to consider each issue on its merits, assessing the additional evidence and materials that may be brought on record by the parties - for which purpose an opportunity will be afforded to them – thus leading to a final order in the original petition. 28. I am granting an additional opportunity to the parties to lead evidence because the question of payment of the amounts under the Award and its receipt are relevant for the purpose of adjudication of the original petition, which will certainly require the parties to bring on record relevant materials and evidence. 29. In order to enable the learned District Judge to expeditiously comply with the directions in this judgment, I direct the parties to mark appearance before the said Court on 18.08.2020. 30. In the nature of the peculiar circumstances seen in this appeal, I make no order as to costs and direct the parties to suffer their respective costs. 31. The Registry is directed to re-transmit the Lower Court Records at the earliest.