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2022 DIGILAW 1897 (ALL)

State v. Gauri Shankar Singh

2022-12-01

K.J.THAKER

body2022
JUDGMENT : 1. Heard Sri Rathor for the appellant-state. 2. The State is aggrieved by the order dated 1.5.1993 passed by VIth Additional District Judge, Gorakhpur, whereby the application for setting aside the award dated 5.2.1993 given by the Arbitrator has aggrieved the State. 3. On hearing the matter, the appellant-State was directed to deposit the amount within 3 months vide order dated 13.8.1993 and which was to be paid to the respondent. 4. The brief facts as culled out from the record, memo of appeal and the judgment are where separate contracts were executed on behalf of Government of U.P. by the Superintending Engineer, Constructions Division, P.W.D., Gorakhpur, for the work which were connected with the constructions of Clinic Block, Academic Block and Hostel Building in the Regional Health and Family Planning Welfare Training Centre at B.R.D. Medical College, Gorakhpur. 5. The litigation began when the respondent instituted a Suit under Section 20 of the Arbitration Act, 1939 and an Arbitrator was appointed so as to dispute the lis between the parties. The court below appointed Sri D.N. Srivastava, Gorakhpur and Sri S.C. Srivastava, Chief Personal Officer, North Eastern Railway, Gorakhpur, as Arbitrator that was also challenged which was number as F.A.F.O. No.746 of 1993. 6. The claim petition came to be filed before the Arbitrator. The appellant also contested the same. The Arbitrator by their award dated 5.2.1993 directed the Contractor -respondent to pay Rs. 4,47,875/-to the Public Works Department, Construction Division, Gorakhpur and Rs. 97,650/-was directed to be paid by the appellant to the respondent and made the award rule of the Court. 7. After the elaborate order of the Arbitrators it was made the award of the Court which is under challenge under Section 39 of the Arbitration Act. There were 5 contract bonds between the parties for performing certain works and the procedure for appointment of Arbitrator, in case of dispute between the parties, was laid down in clause 34 of the conditions of contract and the procedure for appointment of Arbitrator on a suit filed by the plaintiff under Section 20 of the Arbitration Act and the appointment of Arbitrators against the provisions of clause 34 of the conditions of contract, was illegal and without jurisdiction. 8. 8. It is submitted that under Section 34, on a dispute being referred, the Chief Engineer has the jurisdiction to appoint an Arbitrator and the procedure having not been followed in accordance with the terms and conditions of Contract, the appointment of Arbitrators as nominated by the Board was illegal and the award given by such Arbitrators is void. 9. While just submitting that there is misconduct of the Arbitrator, this Court does not find any such argument before the court below. The judgment is a well reasoned judgment of the learned court below on the contors of the arbitration. 10. This is an appeal under Arbitration Conciliation Act, 1940. 11. It is submitted by learned Advocate that judgment of the Apex Court in K.Marappan (Dead) Versus Superintending Engineer T.B.P.H.L.C. Circle Anantapur, 2019 JX(SC) 391 and in Raveechee and Company Versus Union of India, AIR 2018 SC 3109 , has interpreted the role of the Courts while hearing matters under the arbitration Act. The judgment goes to show that pendentelite-interest will depend upon several factors such as; phraseology used in the agreement clauses conferring power relating to arbitration, nature of claim and dispute referred to arbitrator, and on what items power to award interest has been taken away and for which period. The Court observed: "34. Thus our answer to the reference is that if contract expressly bars award of interest pendente lite, the same cannot be awarded by the Arbitrator. And that the bar to award interest on delayed payment by itself will not be readily inferred as express bar to award interest pendente lite by the Arbitral Tribunal, as ouster of power of the arbitrator has to be considered on various relevant aspects referred to in the decisions of this Court , it would be for the Division Bench to consider the case on merits." 12. The decision of Supreme Court in Puri Construction Pvt. Limited Versus Union of India, AIR 1989 SC 777 and State of Orissa Versus B.N. Agarwalla , (1997) 2 SCC 469 and submits that in view of the said judgment, the appeal requires to be allowed as none of the aspects which are needed for upturning the well reasoned arbitral award and the finding of facts and upholding the same do not show that there was any perversity, though it was not proved that any misconduct or that there was breach of any of the provisions under the Arbitration Act which would call for interference by this Court in its appellate jurisdiction. 13. The Apex Court in FCI Versus Joginderpal Mohinderpal, (1989) 2 SCC 347 has held that the objection against an arbitral award can be raised only if it falls within the parameters fixed by the provisions of Section 14, and 33 of the Act, 1940. If the award satisfies that it is based on equity, fair play, principles of natural justice and established practice and procedure then the award should not be interfered. In proceedings of arbitration there must be adherence to justice, equity, law and fair play in action. The proceedings must adhere to the principles of natural justice and must be in consonance with such practice and procedure which will lead to a proper resolution of the dispute and create confidence of the people for whose benefit these processes are resorted to FCI Versus Joginderpal Mohinderpal (supra). 14. Section 30 of the Act, 1940 read as follows : "Section 30. Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely:- (a) that an arbitrator or umpire has misconducted himself or the proceedings (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; (c) that an award has been improperly procured or is other- wise invalid." 15. Section 33 of the Act, 1940 read as follows : "33. Arbitration agreement or award to be contested by application. Section 33 of the Act, 1940 read as follows : "33. Arbitration agreement or award to be contested by application. Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits: Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit." 16. Thus, the judicial review of an award has been circumscribed by Apex Court in FCI Versus Joginderpal Mohinderpal (supra) wherein it has been held that arbitration as a mode for settlement of disputes between the parties, has a tradition in India. It has a social purpose to be fulfilled today. It has a great urgency today when there has been an explosion of litigation in the courts of law established by the sovereign power. It is, therefore, the function of Courts of Law to oversee that the arbitrators act within the norms of justice. Once they do so and the award is clear, just and fair, the Courts should, as far as possible, give effect to the award of the parties and make the parties compel to adhere to and obey the decision of their chosen adjudicator. It is in this perspective that one should view the scope and limit of correction by the court of an award made by the arbitrator. 17. In backdrop of this it will have to be decided as to whether can it be said that the decision of arbitrator upturned by the Court below is bad and was wrongly not made the Rule of Court as per Arbitration Act, 1940. 18. While perusing the award 26.7.1998, it is found that the arbitrator considered each item threadbare and has given his findings. Can it be said that arbitral award does not fulfill the contours of principles which are required to be followed by an arbitrator under the Act, 1940. Item No.5 is taken as illustration so as not to burden the judgment but to come to the conclusion as to show that the Arbitrator and the Judge both had applied the legal acumen. 19. Item No.5 is taken as illustration so as not to burden the judgment but to come to the conclusion as to show that the Arbitrator and the Judge both had applied the legal acumen. 19. This Court in First Appeal From Order No.714 of 2005, State of U.P. and other Vs. J.M. Construction Company, decided on 11.4.2019, has summarised the principles for deciding matters under the Arbitration Act, 1940 & 1996 wherein in paragraph no.24 it is observed as follows:- “In Rajasthan State Road Transport Corporation, the learned counsel for the respondent-Company submitted that in fact there was no material on which the finding was recorded by the Arbitrator. In support thereof, learned counsel invited our attention to a decision of this Court in the case of K.P. Poulose v. State of Kerala & Anr., reported in [1975] 2 SCC 236 wherein it was held that the award can be set aside on the ground of misconduct if relevant documents are not considered by the Arbitrator. Therefore, we asked learned counsel for the appellant-Corporation to substantiate the finding recorded by the arbitrator that it is based on the material on record. In pursuance to the direction given by this Court, learned counsel for the Corporation filed an affidavit on 12.7.2006 and submitted that the document wherein the details on division wise average kilometer of new tyres and retreaded tyres along with average short-fall in guaranteed kilometers for the various periods was on record of arbitrator and same was produced before us. The details were given of all the Divisions i.e. Bharatpur, Jaipur, Sikar, Kota, Ajmer, Bikaner, Jodhpur and Udaipur. In all these eight divisions for the various period i.e. from June 1991 to February, 1994 the details have been given to substantiate the allegations that what was the average mileage of the new tyre and what was the average mileage given by the retreaded tyres and on that basis, the short-fall was given and accordingly, the amount of loss was worked out. These details which were placed before us formed part of the record before the arbitrator. The arbitrator in his detailed award has recorded his finding on the basis of the average performance of new vehicle tyres with that of the retreaded tyres of the Company and on that basis he has worked out the assessment in paragraph 17 of the award. The arbitrator in his detailed award has recorded his finding on the basis of the average performance of new vehicle tyres with that of the retreaded tyres of the Company and on that basis he has worked out the assessment in paragraph 17 of the award. Paragraph 17 of the award reads as follows : "The RSRTC has compared the performance of retreaded tyres with the performance of new tyres in each division. In each division, as mentioned earlier, the road conditions, the vehicles used, the weather conditions, the general driving skills of the drivers and the level of maintenance and upkeep of vehicles were similar for the new tyres as well as retreaded tyres. The retreaded tyres should have given a kilometerage of 46,000 or 95 % of the life of new tyres. Therefore, the assessment of the performance done by the RSRTC is strictly in conformity with the provisions of clause 5 of the agreement. Notwithstanding the acceptance by the respondent of an error of judgment in guaranteeing 46,000 kms for a retreaded tyre, from the Statements enclosed by the claimant with its letters mentioned in para 5 of this order, it is clear that the retreaded tyres performance fell short of the guaranteed level. I, therefore, find claim of the RSRTC to be fully justified." “9. This is the finding of fact given by the arbitrator. As against this, learned Single Judge as mentioned above, has held that there was no assessment in each division in similar conditions. Therefore, the learned Single Judge set aside the award but it is not factually correct. As mentioned above, there was a comparative assessment given by the Corporation and that was part of the record before the arbitrator and on that basis the finding of fact was recorded by the arbitrator. Learned counsel for the respondents strenuously urged before us that the performance of new tyres and of retreaded tyres on roads like Jaipur-Delhi would be better as against the road of Jaipur-Lalsot. Therefore, there was no assessment of performance of the new tyres vis-a-vis the retreaded tyres supplied by the Company in similar conditions. In fact, an average has to be taken of each division. It is not necessary that in each of the divisions of the Corporation, the road conditions will be similar. Therefore, there was no assessment of performance of the new tyres vis-a-vis the retreaded tyres supplied by the Company in similar conditions. In fact, an average has to be taken of each division. It is not necessary that in each of the divisions of the Corporation, the road conditions will be similar. Once the company has entered into an agreement knowing fully well the conditions obtaining in the State of Rajasthan that all the routes in the State are not the roads of Class ‘A' category but there are roads of Class ‘A', Class ‘B' and Class ‘C' categories also. Therefore, the average performance has been recorded taking into consideration this aspect. It is unlikely that all over the State of Rajasthan the road condition like Jaipur-Delhi will be available for all other divisions. Therefore, in all the divisions the average performance has been taken into consideration. The assessment has been based on average of similar conditions of the roads i.e. the good quality as well as the poor quality. Therefore, average performance of the new tyres with the retreaded tyres has to be taken on the basis of roads available in Rajasthan. The average running of the new tyres on these road conditions with that of the retreaded tyres was to be compared to find out whether the performance of retreaded tyres was up to 95% average or not. After assessing the comparative assessment and going through the materials on record the arbitrator has recorded his finding. It was for the company if they wanted more information or wanted to allege that the road conditions are not similar or that the performance of the tyres which were fitted in the rear axle or on the front axle would not be the same, all these details if it wanted, it could have obtained from the Corporation but they did not do so and only at this stage the company wants to bring this factual controversy that retreaded tyres were not used in similar conditions. This argument at this belated stage cannot be accepted as all the materials have been considered by the arbitrator and after taking into consideration the average of each tyre in each region of the corporation has worked out that the performance of the retreaded tyres was not to the extent of 95%. This argument at this belated stage cannot be accepted as all the materials have been considered by the arbitrator and after taking into consideration the average of each tyre in each region of the corporation has worked out that the performance of the retreaded tyres was not to the extent of 95%. This was a finding of fact recorded by the arbitrator and the same was made rule of the court by the District Judge. But the learned Single Judge erroneously took upon himself to sit as a court of appeal and disturbed this finding of fact. In our opinion, the view taken by the learned Single Judge of the High Court cannot be sustained.” 20. During the pendency of this appeal, stay has not been granted. The appellant has seen that the amount awarded by the District Judge is secured by way of bank guarantee or any other security. Clause-9 of contract reads as under:- “(iii) Clause-9 Special Conditions (modified): Plant and Machinery: The plant and equipment procured by the Board shall be made available to the contractor on terms and conditions laid down as under:- (A) Plant/equipment available for the work for exclusive use by the contractor: (i) The plant and equipment as per Annexure-VII, procured by the Board for execution of part of work under the contract to shall have to be taken over by the contractor at the cost occassioned to the Board which has been indicated in Col.4 of the said Annexure. This coast shall be set-off against the total amount of advance for equipment admissible to the contractor under Clause-8 (modified) of the General Conditions of contract and shall be recovered in accordance with Clause-9 of the same condition of the contract.” 21. Clause-9 of the General conditions does not speak about payment of interest is the submission of Sri Khanna as a special condition which is at page 180 of the paperbook. He has further relied on the judgment of the Apex Court in Hind Builders Vs. Union of India, (1990) 3 SCC 338 , K Marappan (Dead) through sole LR Balasubramanian Vs. Superintending Engineer TBPHLC Circle Anantapur, 1019 LawSuit (SC) 977 and State of U.P. and others Vs. J.M. Construction Company, FAFO No.714 of 2005, decided on 11.4.2019 by this High Court., which has interpreted the contract to mean that where there are two interpretations possible, the Arbitrator's view would prevail. Superintending Engineer TBPHLC Circle Anantapur, 1019 LawSuit (SC) 977 and State of U.P. and others Vs. J.M. Construction Company, FAFO No.714 of 2005, decided on 11.4.2019 by this High Court., which has interpreted the contract to mean that where there are two interpretations possible, the Arbitrator's view would prevail. In this case, in fact there was no two views possible. The view taken by the Arbitrator is laud and clear and the Arbitrator's view was such that the first court should not have interfered. Similar view has been reiterated recently by the Apex Court and this Court is the submission of Sri Khanna. 22. It is further submitted by the counsel for the contractor that while reading the aribtral award, it cannot be said that it falls within the parameters as envisaged under Section 30 of Act, 1940. It cannot be said that the arbitrator has misconducted himself and that there is any error apparent on the face of record. The factual errors are not open for correction by a Court. It is submitted that no mistake of fact is justiciable hence in view of the decision of the Apex Court in Dandasi Sahu Versus State of Orissa, (1990) 1 SCC 214 wherein it has been held that the arbitrator, in the case of a reference made to him in pursuance of an arbitration agreement between the parties, being a person chosen by parties and was apprised as the sole arbitrator of all the questions and the parties bind themselves as a rule, to accept, the award as final and conclusive. The arbitrator need not give any reasons and even if he commits a mistake either in law or in fact in determining the matter referred to him, where such mistake does not appear on the face of the award, the same could not be assailed or quashed or upturned. The award could be interfered with only in limited circumstances as provided under Section 16 and 30 of the Arbitration Act, 1940. In this situation the Court has to test the award with circumspection. 23. While considering the factual background and interpreting the arbitral award and the order of the District Judge, the award of the arbitrator is in consonance with clause 8 and 9 of the contract. In this situation the Court has to test the award with circumspection. 23. While considering the factual background and interpreting the arbitral award and the order of the District Judge, the award of the arbitrator is in consonance with clause 8 and 9 of the contract. The District Court seems to have return the judgment as if it was sitting in appeal and deciding the Suit which could not have been done. The authorities were also of the view that no interest could have been charged from the appellant but they reviewed their own decision which became subject matter of arbitration and the arbitrator gave cogent reasons for allowing the appellant's application and held that no interest was payable. This well reasoned arbitral award was interfered by the court on the ground that the finding is bad though he referred to several judgments he himself embarked on fact finding mission and appreciated on the basis that the arbitrator had committed an error and relying on AIR1955SC468inthecaseofThawerDasVs. Union of Indiaand misread the award as if there was an error apparent on the face of record. The modified clause 9 did not permit any interest and the advance was to be given without any interest. The arbitral award also was based on the decision of the Apex Court in 1989(2) SCC 721 , Raipur Development Authority and other Vs. Chokhamaland others. The reasons were well assigned by the arbitrator, thus, the judgment of the District Court reversing the arbitral award is bad in the eye of law and contrary to the contours of arbitral award being set aside by courts. 24. This Court has limited jurisdiction to interfere in the matter. No case is made out to interfere in the well reasoned judgment of the court below. Hence, this appeal stands dismissed. 25. If the amounts are still not deposited, they shall be deposited with interest. 26. Record and proceedings be sent back to the Trial Court.