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2021 DIGILAW 1668 (RAJ)

State of Rajasthan v. Geo Millers & Company Ltd.

2021-09-08

ASHOK KUMAR GAUR

body2021
JUDGMENT : Ashok Kumar Gaur, J. 1. The instant Misc. Appeal has been filed by the appellants u/Sec. 37 of the Arbitration and Conciliation Act, 1996 (hereinafter shall be referred to as 'the Act of 1996') against the order dated 10.09.2012, passed by the Additional District Judge No. 2, Ajmer in Civil Misc. Case No. 157/2008 (142/2003) whereby the appeal, filed under Section 34 of the Act of 1996 by the appellants, has been partly allowed by reducing the interest and the award dated 15.01.2003, passed by the Sole Arbitrator, has been upheld. 2. The facts, in nutshell, are that a work order was issued to the respondent-claimant for construction of 132 MLD Water Treatment Plant at Kekri, District Ajmer for supply, erection of mechanical equipments, civil works and electrical works under Bisalpur Project. The total value of contract was fixed at Rs.4,37,33,250/-, as lump-sum turnkey project and the work was to be completed till 13.03.1993 and after the grant of provisional extension of time to the claimant, the work was ultimately completed on 29.11.1996. The claimant had not received payment from appellants and as such, there was a dispute between the parties. 3. This Court, vide order dated 01.02.2002, appointed Mr. D.P. Jain as Sole Arbitrator to adjudicate the dispute between the parties. The respondent-claimant filed its claim petition before the Sole Arbitrator and made a claim of Rs.2,56,15,119.57 p. The appellants filed reply to the claim petition. 4. The Sole Arbitrator, after considering the pleadings of the parties, framed as many as 12 issues, which are reproduced hereunder:- "1. Whether the claimant is entitled to get the various amounts on various counts as mentioned in the statement of claim in para nos. 1 to 5 at page no. 61? OPC 2. Whether excess payment was made by the respondent to the claimant" OPR 3. Whether the decision of the respondents during the pendency of arbitration proceedings and communicated by the respondents to the claimant vide letter dated 16.3.2002 is tenable in the eyes of law, as to whether imposing of the LD to extend of 4.1% of the contract value is sustainable? OPC/OPR 4. Whether the respondents are entitled to get the counter claim as mentioned on page 26 of the counter claim filed by respondent? OPR 5. Whether the claim of the claimant is time barred or not? OPR 6. OPC/OPR 4. Whether the respondents are entitled to get the counter claim as mentioned on page 26 of the counter claim filed by respondent? OPR 5. Whether the claim of the claimant is time barred or not? OPR 6. Whether the time period was essence of the contract or not? OPR 7. Whether delays in submissions of drawings and designs of various units in the light of clause 106 of special conditions of contract are attributable to the claimant or not? OPR 8. Whether delay in supply and installation of flow meter was attributable to the claimant or not? OPR 9. Whether delay in supply and installation of electrical and mechanical equipment are attributable to the claimant or not? OPR 10. Whether delay in construction of whole treatment plant is attributable to the claimant or not? OPR 11. Whether delay in part commissioning in Feb. 1995 and full commissioning in Dec. 1996 are attributable to the claimant or not? OPR 12. Relief." 5. The Sole Arbitrator, while allowing the claim of the respondent-claimant, passed the award dated 15.01.2003 of sum of Rs.1,25,55,232/- along with interest @ 15% from 01.03.2002 till its realization. 6. The appellants, felt aggrieved by the award dated 15.01.2003, passed by the Sole Arbitrator, filed an application under Section 34 of the Act of 1996 before the District Judge, Ajmer and the case was later on transferred to the court of Additional District Judge No. 2, Ajmer for adjudication. 7. The Additional District Judge No. 2, Ajmer, vide its order dated 10.09.2012, partly allowed the application filed by the appellants and the interest of Rs.28,44,951/- was reduced from the total award of Rs.1,25,55,232/- and it was held that the respondent-claimant will be entitled for an amount of Rs.97,10,241/- with interest @ 15% w.e.f. 01.03.2002 to 15.01.2003 along with interest @ 12% p.a. from the date of passing of the award till realization. 8. The appellants have assailed the order passed under Section 34 of the Act of 1996 dated 10.09.2012 as well as the award dated 15.01.2003 passed by the Sole Arbitrator. 9. Mr. Yashodhar Pandey, counsel for the appellants, has made following submissions to assail the order passed under Section 34 of the Act of 1996 and the award dated 15.01.2003 passed by the Sole Arbitrator:- 9A. 9. Mr. Yashodhar Pandey, counsel for the appellants, has made following submissions to assail the order passed under Section 34 of the Act of 1996 and the award dated 15.01.2003 passed by the Sole Arbitrator:- 9A. The respondent-claimant has filed an exaggerated claim and as per the correspondence, which took place between the parties before the matter being referred to the Sole Arbitrator, i.e. letters dated 06.08.1997 and 12.11.1997, the claimant had shown total outstanding amount of Rs.24 Lakhs (approx.) against the appellants. The letters/communications, addressed by the respondent-claimant, estopped him to claim higher amount than the amount which was due, as per the correspondence. 9B. The Sole Arbitrator has wrongly awarded Rs.54,71,551/- for breach of contract and there was no basis to calculate the said amount for breach of contract. Counsel further submitted that breach of contract did not take place at all and in spite of such fact, not proved against the appellants, any amount paid under the head of 'breach of contract' is not legally sustainable. 9C. While passing the impugned award dated 15.01.2003, there was no evidence before the Sole Arbitrator to decide the issues in favour of the respondent-claimant and in absence of evidence, no claim could be allowed in favour of the respondent-claimant. 9D. The Sole Arbitrator has wrongly recorded a finding with regard to issue of delay in starting the project on account of submission of approval of designs and drawings. The wrong inference has been drawn that there was delay on the part of the appellants to approve the designs and drawings of the project. 9E. The finding recorded by the Sole Arbitrator of price variation adjustment was also not correct and price escalation was only upto the date of stipulation i.e. 13.03.1993 and not upto 29.11.1996. 9F. The finding of the Sole Arbitrator with regard to undertaking test on completion of work is also erroneous, as the Contractor had completed only five Filter Beds out of ten and as such, till the required Filter Beds were completed, the respondent-claimant was not entitled for any compensation. 9G. The order, passed under Section 34 of the Act of 1996, dated 10.09.2012 has not considered the legal issue raised by the appellants and as such the award dated 15.01.2003 passed by the Sole Arbitrator has wrongly been upheld by the Additional District Judge No. 2, Ajmer. 10. 9G. The order, passed under Section 34 of the Act of 1996, dated 10.09.2012 has not considered the legal issue raised by the appellants and as such the award dated 15.01.2003 passed by the Sole Arbitrator has wrongly been upheld by the Additional District Judge No. 2, Ajmer. 10. Counsel for the appellants has placed reliance on a recent judgment rendered by the Apex Court in the case of PSA Sical Terminals Pvt. Ltd. vs. The Board of Trustees of V.O. Chidambaranar Port Trust, Tuticorin and Ors. 11. Mr. S.D. Singh, learned counsel appearing for the respondent-claimant has made following submissions:- 11A. The scope of Section 37 of the Act of 1996 is limited and any appeal under Section 37 of the Act of 1996 cannot enlarge the scope of objections, which has already been decided, while exercising the jurisdiction under Section 34 of the Act of 1996 and this Court, under Section 37 of the Act of 1996, cannot act as an appellate body and the Arbitral Tribunal is the sole judge of quality and quantity of evidence and this Court would not like to take a task of judging the evidence, which has been adduced before the Sole Arbitrator. 11B. The re-appreciation of evidence is not permissible within the ambit of Section 37 of the Act of 1996 and this Court is not sitting as a Court of appeal. 11C. The interpretation of contract falls within the ambit and jurisdiction of the Arbitrator and the same is not open for re-consideration by this Court under Section 37 or Section 34 of the Act of 1996. 11D. The award passed by the Sole Arbitrator dated 15.01.2003 and upheld by the Additional District Judge No. 2, Ajmer vide order dated 10.09.2012 makes it clear that the Sole Arbitrator has considered the facts and evidence on the record within the scope of reference made to him in accordance with law and interpreted the terms of contract and arrived at conclusion, after considering the evidence led by both the parties, that the respondent-claimant is entitled to get the amount. The Sole Arbitrator has recorded findings on each issue, after considering the evidence and has given reasons in support thereof. 11E. The issue of escalation of price, decided by the Sole Arbitrator, is well supported by the judgments passed by the Apex Court. The Sole Arbitrator has recorded findings on each issue, after considering the evidence and has given reasons in support thereof. 11E. The issue of escalation of price, decided by the Sole Arbitrator, is well supported by the judgments passed by the Apex Court. The findings, recorded by the Sole Arbitrator in the award, are not patently illegal and contrary to the policy of India and in absence of error apparent on the face of record, interference by this Court is not required. 11F. The issue, with regard to liquidated damages, has also been dealt with by the Sole Arbitrator and the law is well settled on the issue that liquidated damages cannot be awarded in absence of any sufferance of loss to the appellants. 12. Counsel for the respondent-claimant has placed reliance on the following judgments:- (i) MMTC Limited vs. Vedanta Limited reported in (2019) 4 SCC 163 . (ii) McDermott International Inc. vs. Burn Standard Co. Ltd. & Ors. reported in (2006) 11 SCC 181 . (iii) Jhang Cooperative Group Housing Society Ltd. vs. Pt. Munshi Ram and Associates Pvt. Ltd. reported in ILR (2013) II Delhi 1632. 13. I have heard learned counsel for the parties and with their assistance perused the material available on record. 14. Before dealing with the submissions made by the learned counsel for the parties, it would be appropriate for this Court to first address the issue of the scope of interference by the Courts u/Secs. 34 and 37 of the Act of 1996. 15. This Court finds that the Apex Court in the case of MMTC Ltd. (supra) has laid down the law relating to the scope of interference under Sections 34 and 37 of the Act of 1996. The portion of the judgment, relevant for the present purpose, is reproduced hereunder:- "10. Before proceeding further, we find it necessary to briefly revisit the existing position of law with respect to the scope of interference with an arbitral award in India, though we do not wish to burden this judgment by discussing the principles regarding the same in detail. Such interference may be undertaken in terms of Sec. 34 or Section 37 of the Arbitration and Conciliation Act, 1996 (for short, "the 1996 Act"). Such interference may be undertaken in terms of Sec. 34 or Section 37 of the Arbitration and Conciliation Act, 1996 (for short, "the 1996 Act"). While the former deals with challenges to an arbitral award itself, the latter, inter alia, deals with appeals against an order made under Section 34 setting aside or refusing to set aside an arbitral award. 11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii), i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract. 12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders vs. DDA, (2015) 3 SCC 49 ). Also see ONGC Ltd. vs. Saw Pipes Ltd., (2003) 5 SCC 705 ; Hindustan Zinc Ltd. vs. Friends Coal Carbonisation, (2006) 4 SCC 445 ; and McDermott International vs. Burn Standard Co. Ltd., (2006) 11 SCC 181 ). 13. (See Associate Builders vs. DDA, (2015) 3 SCC 49 ). Also see ONGC Ltd. vs. Saw Pipes Ltd., (2003) 5 SCC 705 ; Hindustan Zinc Ltd. vs. Friends Coal Carbonisation, (2006) 4 SCC 445 ; and McDermott International vs. Burn Standard Co. Ltd., (2006) 11 SCC 181 ). 13. It is relevant to note that after the 2015 amendments to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the 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 notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. 14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings. 15. Having noted the above grounds for interference with an arbitral award, it must now be noted that the instant question pertains to determining whether the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. 15. Having noted the above grounds for interference with an arbitral award, it must now be noted that the instant question pertains to determining whether the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. However, this question has been addressed by the Courts in terms of the construction of the contract between the parties, and as such it can be safely said that a review of such a construction cannot be made in terms of reassessment of the material on record, but only in terms of the principles governing interference with an award as discussed above. 16. It is equally important to observe at this juncture that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is within the arbitrator's jurisdiction to consider the same. (See McDermott International Inc. vs. Burn Standard Co. Ltd. (supra); Pure Helium India (P) Ltd. vs. ONGC, (2003) 8 SCC 593 , D.D. Sharma vs. Union of India, (2004) 5 SCC 325 )." 16. This Court further finds that the law relating to construction of contract agreement has also been dealt with by the Apex Court in the case of McDermott International Inc. (supra). The extract of the judgment, being relevant for the present purpose, is 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. vs. Oil & Natural Gas Commission, (2003) 8 SCC 593 and D.D. Sharma vs. Union of India (2004) 5 SCC 325 ]. 113. 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. vs. Oil & Natural Gas Commission, (2003) 8 SCC 593 and D.D. Sharma vs. 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." 17. This Court also finds that the Delhi High Court in the case of Jhang Cooperative Group Housing Society Ltd. (supra) has also dealt with the scope of considering the objections under Section 34 of the Act of 1996 and held that Court does not sit as a court of appeal to re-appreciate the entire evidence and re-assess the case of the parties. The relevant portion of the judgment is quoted hereunder:- "15. The law is no longer res integra and is settled that where the Arbitrator has assessed the material and evidence placed before him in detail, the court while considering the objections u/Sec. 34 of the said Act does not sit as a court of appeal and is not expected to re-appreciate the entire evidence and reassess the case of the parties. The jurisdiction under Section 34 is not appellate in nature and an award passed by an Arbitrator cannot be set aside on the ground that it was erroneous. It is not open to the court to interfere with the award merely because in the opinion of the court, another view is possible. The duty of the court in these circumstances is to see whether the view taken by the Arbitrator is a plausible view on the facts, pleadings and evidence before the Arbitrator. Even if on the assessment of material, the court while considering the objections u/Sec. 34 is of the view that there are two views possible and the Arbitral Tribunal has taken one of the possible views which could have been taken on the material before it, the court would be reluctant to interfere. The court is not to substitute its view with the view of the Arbitrator if the view taken by the Arbitrator is reasonable and plausible. 16. The court is not to substitute its view with the view of the Arbitrator if the view taken by the Arbitrator is reasonable and plausible. 16. If the Arbitrator has taken a view which the court finds reasonable and plausible, the court would certainly not interfere. 17. The extent of judicial scrutiny under Section 34 of the Arbitration Act 1996 is limited and scope of interference is narrow. Under Section 37, the extent of judicial scrutiny and scope of interference is further narrower. An appeal under Section 37 is like a second appeal, the first appeal being to the court by way of objections under Section 34. Where there are concurrent findings of facts and law, first by the Arbitral Tribunal which are then confirmed by the court while dealing with objections under Section 34, in an appeal under Section 37, the Appellate Court would be very cautious and reluctant to interfere in the findings returned in the award by the Arbitral Tribunal and confirmed by the court under Section 34. 18. As laid down by the Apex Court, the supervisory role of the court in arbitration proceedings has been kept at a minimum level and this is because the parties to the agreement make a conscious decision to exclude the courts jurisdiction by opting for arbitration as the parties prefer the expediency and finality offered by it." 18. The objection of learned counsel for the appellants, that the letters written by the respondent-claimant had made claim of certain amount and later on statement of claim before the Sole Arbitrator included exaggerated claim and the same could not have been granted, this Court finds that the said objection is liable to be rejected as the communication, even if has been addressed by the parties to each other, before arbitration and evidence is produced before the Arbitrator regarding claim of the claimant or any evidence in rebuttal of the other side, then it is the sole prerogative of the Arbitrator to consider the evidence and to arrive at an independent finding on the basis of the evidence led before him. This Court finds that the Sole Arbitrator has framed specific issues, in the present case, and after taking into account the clauses of agreement and evidence, documentary and oral, he has recorded finding that the claimant is entitled for certain amount, the same cannot be termed to be a finding which is not based on evidence. 19. The plea of the appellants that there has been no breach of contract and Rs.54,71,551/- have wrongly been awarded under this head, suffice it to say by this Court that the actual claim, made by the respondent-claimant towards breach of contract, was for Rs.1,22,85,406.64p and after considering the clauses of agreement, the Sole Arbitrator came to the conclusion that certain amount is required to be given to the claimant for breach of contract. This being the interpretation and construction of agreement between the parties and after considering the entire evidence, if a finding has been recorded by the Sole Arbitrator for breach of contract, this Court would not like to substitute its finding on the said issue. 20. The objection of learned counsel for the appellants that award is based on no evidence, suffice it to say by this Court that a bare perusal of the award passed by the Sole Arbitrator shows that both the parties were afforded opportunity to lead evidence and both the parties have led their evidence on various dates and after taking into account the entire evidence, the Sole Arbitrator has recorded his finding and has passed the award dated 15.01.2003. This Court does not sit as court of appeal and cannot re-appreciate the evidence which has been recorded before the Sole Arbitrator and further cannot substitute its finding and the view of the Sole Arbitrator is absolutely logical and plausible, based on reasoning. 21. This Court according finds that the scope of interference in appeal u/Sec. 37 of the Act of 1996 is very limited, as per the parameters laid down by the Apex Court and the case of the appellants does not fall in any of the categories, where this Court can exercise its power to interfere with the award. 22. This Court finds that scope of Section 37 of the Act of 1996 is like exercising power under Section 100 CPC of entertaining civil second appeal. The substantial question of law can be examined by the Court, as is examined in civil second appeal. 22. This Court finds that scope of Section 37 of the Act of 1996 is like exercising power under Section 100 CPC of entertaining civil second appeal. The substantial question of law can be examined by the Court, as is examined in civil second appeal. The facts or appreciation of evidence will not be in realm of power provided under Section 37 of the Act of 1996. 23. As far as reliance placed by counsel for the appellants on the recent judgment of the Apex Court in the case of PSA Sical Terminals Pvt. Ltd. (supra) is concerned, the Apex Court has held that a decision, which is perverse, though may not be a ground for challenge under public policy of India, however, the same can certainly amount to a patent illegality appearing on the face of the award. The Apex Court has further held that a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision, would be perverse and liable to be set aside. 24. In the humble opinion of this Court, it cannot be said, in the present matter, that finding recorded by the Sole Arbitrator is based on no evidence or it has ignored vital evidence before arriving at the decision. A bare perusal of the award passed by the Sole Arbitrator shows that evidence of both the parties have been led in detail and the Sole Arbitrator has taken into account each and every submissions advanced by the parties before him, including appreciation of evidence in proper manner before arriving at the decision to pass the impugned award and as such, the judgment cited by the learned counsel for the appellants, is of little assistance to him. 25. This Court further finds that the Apex Court in the case of Anglo American Metallurgical Coal Pty. Ltd. vs. MMTC Limited reported in (2021) 3 SCC 308 has laid down the parameters of judicial review and Courts have been permitted to interfere only if there is a ground of patent illegality or violation of fundamental policy of Indian law and if a possible view is based on oral and documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence and as such, no interference is permissible. The relevant portion of the judgment is reproduced hereunder:- "48. The relevant portion of the judgment is reproduced hereunder:- "48. Given the parameters of judicial review laid down in Associate Builders, it is obvious that neither the ground of fundamental policy of Indian law, nor the ground of patent illegality, have been made out in the facts of this case, given the fact that the majority award is certainly a possible view based on the oral and documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence." 26. Accordingly, the present appeal, having no force, is hereby dismissed. This Court upholds the order dated 10.09.2012 passed by the Additional District Judge No. 2, Ajmer. The interim order passed by this Court dated 21.02.2014 is vacated and the Registrar (Judl.) is directed to release the FDR to the appellant. Registry is directed to send the original record back to the Court Below.