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2022 DIGILAW 1788 (RAJ)

United India Insurance Co. Ltd. v. Heera Watch Service, Through Sadanand S/o Late Sh. Hansanand

2022-05-26

ANOOP KUMAR DHAND

body2022
JUDGMENT : 1. A challenge has been made to the order dated 20.07.2007 passed by the Court of learned District and Sessions Judge, Alwar (Raj.) (for short ‘the Appellate Court’) in Civil Misc. Appeal No. 142/2006 by which the application filed by the appellant under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act of 1996’) for setting aside the award dated 21.03.2006 has been dismissed. 2. Learned counsel for the appellant-Insurance Company submits that the respondent filed a complaint No. 274/2022 against the Insurance Company before the District Consumer Protection Forum, Alwar with the averments that in the night of 17.10.2001, certain goods having worth of Rs. 2,80,000/-was stolen from his shop. Learned counsel further submitted that said the shop was insured with the Insurance Company. The Insurance Company assessed the loss of stolen goods as Rs. 44,368/-which was not acceptable to the respondent. Looking to the provisions contained under the policy, the Presiding Officer of the District Consumer Protection Forum appointed one Advocate as an Arbitrator to settle the dispute arose between the parties. In pursuance of the directions issued by the Presiding Officer of the District Consumer Protection Forum, the Arbitrator proceeded with the arbitral proceedings and issued notice to the Insurance Company. Counsel for the appellant further submits that the Insurance Company authorized the Advocate to appear on its behalf and submit the relevant documents, but the Advocate did not submit the same before the Arbitrator and the Arbitrator passed an ex-parte award on 21.03.2006. Counsel further submits that during pendency of the case before the Presiding Officer of the District Consumer Protection Forum, a Surveyor was appointed who inspected the shop of the respondent and prepared a report with regard to the loss suffered by the respondent but this report was not placed before the Arbitrator by the respondent. The respondent was supposed to submit the same before the Arbitrator and the respondent deliberately suppressed the report and in absence of that report, the Arbitrator has relied on the claim petition and the documents submitted by the respondent and passed the award. The respondent was supposed to submit the same before the Arbitrator and the respondent deliberately suppressed the report and in absence of that report, the Arbitrator has relied on the claim petition and the documents submitted by the respondent and passed the award. Counsel further submits that when the objections were submitted before the Appellate Court under Section 34 of the Act of 1996, the same were not considered in terms of the mandatory provisions contained under Sections 28 (1)(a), 28 (3) and 34(2)(iii) but without considering the aforesaid mandatory provisions, the Appellate Court rejected the objections raised by the appellant-Insurance Company. Counsel further submits that the Hon’ble Supreme Court in the case of Oil and Natural Gas Corporation Ltd. Vs. SAW Pipes Ltd., reported in 2003 (5) SC 705 has held that if the Arbitral Tribunal has not followed the mandatory provisions contained under Sections 24, 28 and 31(3) of the Act of 1996 then the award passed by the Arbitral Tribunal is liable to be quashed and set aside. Counsel further submits that the Hon’ble Supreme Court in the case of Gopal Krishnaji Ketkar Vs. Mohamed Haji Latif and Ors. reported in AIR 1968 SC 1413 has held that whenever a party is in possession of best evidence which could throw light on the issue in controversy and if the document is withhold, the Court ought to have drawn an adverse inference against him. Counsel further submits that in the instant case the respondent was in possession of the report of Surveyor but he deliberately did not place the same before the Arbitrator and the impugned arbitral award was passed against the Insurance Company. Lastly, counsel for the appellant submits that all these material aspects were not considered by the Appellate Court while rejecting the objections taken by the appellant. Hence, the impugned order and impugned arbitral award is liable to be quashed and set aside by this Court. 3. Per contra, learned counsel for the respondent opposed the arguments raised by the counsel for the appellant and submitted that even before the Appellate Court the appellant-Insurance Company has not submitted this objection that the Surveyor report was in possession of the respondent and intentionally and deliberately, he did not place the same before the record of the Arbitral Tribunal. Per contra, learned counsel for the respondent opposed the arguments raised by the counsel for the appellant and submitted that even before the Appellate Court the appellant-Insurance Company has not submitted this objection that the Surveyor report was in possession of the respondent and intentionally and deliberately, he did not place the same before the record of the Arbitral Tribunal. Counsel further submits that the scope of Section 34 of the Act of 1996 is confined to the grounds mentioned therein and the scope of Section 34 of the Act of 1996 cannot be enlarged. Counsel submitted that the Hon’ble Apex Court in the case of Haryana Tourism Limited vs. M/s Kandhari Beverages Ltd. in Civil Appeal No. 266 of 2022 has dealt with and decided the similar issue in a detailed manner. Counsel further submits that sufficient time was granted to the appellant-Insurance Company to submits its defence before the Arbitral Tribunal and in spite of getting sufficient opportunity the appellant-Insurance Company chose not to appear before the Arbitral Tribunal and submit its defence, so the Arbitral Tribunal has not committed any illegality in passing the impugned award. Counsel further submits that all the objections taken by the appellant-Insurance Company were dealt with by the Appellate Court and those were rightly turned down in view of the scope of Section 34 of the Act of 1996, so no interference of this Court is required. 4. Heard. Considered the arguments raised by counsel appearing for the parties and perused the record of the case. 5. Perusal of the record clearly indicates that when the matter was referred to the Arbitral Tribunal, notices were issued to the appellant-Insurance Company. After receipt of notice, the appellant-Insurance Company sought time by way of writing letters and thereafter, neither any reply nor any documentary evidence was produced on the record of the Arbitral Tribunal and on the basis of the documents and evidence submitted by the respondent, the Arbitral Tribunal passed the award in favour of the respondent, against which the appellant-Insurance Company submitted the objections under Section 34 of the Act of 1996. The Hon’ble Apex Court has held in catena of judgments that the scope of Section 34 of the Act of 1996 is very limited. The Hon’ble Apex Court has held in catena of judgments that the scope of Section 34 of the Act of 1996 is very limited. The Hon’ble Apex Court in the case of Haryana Tourism Ltd. (supra) has observed and held in para 8 as under:- “As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to, (a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial Court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment and order passed by the High Court is hence not sustainable.” 6. Similarly, in the case of MMTC Limited Vs. Vedanta Limited, reported in (2019) 4 SCC 163 , the Hon’ble Apex Court has observed and held as under:- “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 Section 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. 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 v. DDA, (2015) 3 SCC 49 ). Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 ;Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4SCC 445; and McDermott International v. 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. Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 ;Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4SCC 445; and McDermott International v. 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 beset 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 are view of such a construction cannot be made in terms of re-assessment 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. v. Burn Standard Co. Ltd. (supra); Pure Helium India (P) Ltd. v. ONGC, (2003) 8 SCC 593 , D.D. Sharma v. Union of India, (2004) 5 SCC 325 ).” 7. Even while deciding the case of McDermott International Inc. Vs. Burn Standard Co. Ltd. & Ors., reported in (2006) 11 SCC 181 , the Hon’ble Apex Court has held in para 112 and 113 as under:- “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. 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.” 8. The objections raised by the counsel for the appellant that the award is based on no evidence, suffice it to say, that perusal of the award passed by the Arbitrator clearly indicates that sufficient opportunity was afforded to the appellant -Insurance Company to lead the evidence and even time sough by the Insurance Company was granted by the Arbitrator and on the basis of the evidence led by the respondent, the Arbitral Tribunal has passed the impugned award. 9. This Court finds that the scope of interference in appeal under Section 37 of the Act of 1996 is very limited as per the parameters laid down by the Hon’ble Apex court in the above cases. The case of the appellant does not fall in any of the categories contained under Section 34 of the Act of 1996, where this Court can exercise its power to interfere with the award. 10. This Court finds that the scope of Section 37 of the Act of 1996 is like exercising power under Section 100 CPC for 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 realm of power provided under Section 37 of the Act of 1996. 11. The judgments relied by the counsel for the appellant are not applicable in this case looking to the facts of this matter. 12. Accordingly, the present appeal is having no force and the same is hereby dismissed. 13. Stay application and all pending application(s), if any, also stand dismissed. 14. Registry is directed to send back the record of the case to the Court concerned forthwith.