State of Rajasthan through Chief Engineer R-II PWD v. Trilok Chand Thekedar
2022-10-10
ANOOP KUMAR DHAND
body2022
DigiLaw.ai
JUDGMENT : 1. This appeal has been filed by the State of Rajasthan by which challenge to the award dated 29.02.2000 passed by the sole Arbitrator as well as the order dated 23.05.2002 passed by the Court of learned District Judge, Kota (Raj.) has been made. 2. Brief facts necessary for adjudication of the matter are that the appellants invited tenders for construction of 13 km of road in Kota vide their notice dated 22.05.1995 and as per the Notice Inviting Tenders (for short, ‘the NIT’) tenders were opened on 22.07.1995 and the tender submitted by the respondents were found to be lowest and the same was accepted. The project was supposed to commence from 08.12.1995 and completed by 07.12.1997. When the work was not completed within the stipulated time and the payment was not released then a dispute arose between the parties and the matter was referred to the Arbitrator for settlement of the dispute as per the terms of contracts/agreements executed between the parties. The respondents submitted a statement of claim, claiming an amount of Rs. 79,18,229/-. The appellant-State submitted its reply to the statement of the claim along with counter-claim for liquidated damages for the work not completed by the respondents. It was pleaded in the counter-claim that around 70% of the work was done by the respondents and the rest of the work was completed by some other agencies, hence the loss was caused to the respondents. 3. After considering the documents, statement and the counter -claim, the Arbitrator passed an award of Rs. 7,22,699/-in favour of the respondents with an interest @ 18% till the date of decree or till the date of payment of actual amount, whichever is earlier. 4. Feeling aggrieved and dissatisfied by the award dated 29.02.2000 passed by the Sole Arbitrator, the appellant-State submitted objections under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, the Act of 1996). After hearing counsels for both the sides, learned District Judge, Kota rejected the objections vide judgment and order dated 23.05.2002. 5. Feeling aggrieved by the aforementioned order and by the Arbitral award dated 29.02.2000, the instant appeal has been preferred. 6.
After hearing counsels for both the sides, learned District Judge, Kota rejected the objections vide judgment and order dated 23.05.2002. 5. Feeling aggrieved by the aforementioned order and by the Arbitral award dated 29.02.2000, the instant appeal has been preferred. 6. Counsel for the appellants submits that the respondent was supposed to complete the work within the stipulated time i.e 240 days but only 70% work was done and the rest of the work was completed by the other agencies due to which the appellant State has suffered losses, hence the counter-claim was filed before the Arbitrator for getting liquidated damages to the tune of Rs. 109.30 lacs. Counsel submits that without considering the averments and submissions, the counter claim was rejected and the statement of the claim of the respondent was allowed by the Arbitrator and the Arbitrator has gone straight ahead in awarding an amount of Rs. 4,57,200/-for providing diversion for running traffic. Counsel submits that there was no running traffic for which any diversion was required without any basis. Thus, the Arbitrator has passed the award. Counsel submits that under these circumstances interference of this Court is warranted. 7. Per contra, counsel for the respondents has opposed the arguments raised by the counsel for the appellant and submitted that the respondents themselves have failed to honor their fundamental contractual reciprocal promises, because 100% of the land required for road work and the same was not made available to the respondent. Hence, the delay was caused by the department for which the respondents cannot be blamed. Counsel submits that even payment for 70% work was not made to the respondents. Hence, under these circumstances no option was left with the respondents other than to stop the work. Counsel submits that counter-claim filed by the appellants was rejected by the sole Arbitrator with the same award, which was passed in favour of the respondents but the State was under an obligation to submit two different appeals before the Court of learned District Judge. Counsel submits that the scope of interference of this Court under Section 37 of the Act of 1996 is very limited. Counsel for the respondent has placed reliance on the judgments of this Court passed in the case of State of Rajasthan through Executive Engineer Vs. Murari Lal Singhal: reported in 2018 (2) WLN 417 , State of Rajasthan through Chief Engineer Vs.
Counsel for the respondent has placed reliance on the judgments of this Court passed in the case of State of Rajasthan through Executive Engineer Vs. Murari Lal Singhal: reported in 2018 (2) WLN 417 , State of Rajasthan through Chief Engineer Vs. M/s. Gopal Ram Gumani: reported in 2017 (2) DNJ 823 , Rajasthan State Road Development and Construction Vs. Five Star Builders and Contractor: reported in 2015 (3) DNJ 1207 . Counsel submits that in view of the submissions made hereinabove, no interference of this Court is warranted. 8. Heard and considered the rival submissions made at the Bar and gone through the material available on record. 9. Before proceeding further in the matter, this Court reminds itself of the limited scope and ambit of a challenge under Sections 34 and 37 of the Act of 1996 which are pithily set out inter alia in the judgments of the Hon’ble Apex Court in the case of PSA SICAl Terminals Pvt. Ltd. Vs. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin: reported in AIR 2021 SCC Online SC 508 and MMTC Vs. Vedanta Limited reported in 2019 (4) SCC 163 wherein it has been held as under: "41. It will be relevant to refer to the following observations of this Court in the case of MMTC Limited (supra): "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 [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 K.B. 223 (CA)] reasonableness.
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 [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 K.B. 223 (CA)] 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 : (2015) 2 SCC (Civ) 204]. Also see [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 ]; [Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445 ]; and [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181 ]) 13. It is relevant to note that after the 2015 Amendment 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.
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." 10. On perusal of the facts, it becomes apparent that the sole Arbitrator as well as the learned District Judge, Kota has taken into consideration the fact that the appellant-State itself was responsible for causing the delay in not providing the 100% land to the respondents within the stipulated time and that’s why the work could not be completed within 240 days as per the terms and conditions of the contract/agreement. Under these circumstances, the respondents completed the appellant’s 70% work within the stipulated time and when some of the payments were not duly made, the respondents were left with no other option except to stop the work. While deciding claim No.9, the Arbitrator has noticed that during the course of execution of road work, there was traffic which was diverted by constructing service road to connect other villages. The Arbitrator has considered this aspect that construction of service road is at least 6 km length in a total package of 13 km road must have been executed. Accordingly, cost of diversion of 6 km service road was granted to the respondent including escalation and interest. The Arbitrator has taken into consideration all the facts, documents and material on record and passed the award by recording a finding which has been confirmed by the District Judge, Kota while rejecting the objections filed by the appellant. 11. Hon’ble Apex Court has held in the case of Project Director, National Highway No. 45 E and 220 National Highways Authority of India Vs.
11. Hon’ble Apex Court has held in the case of Project Director, National Highway No. 45 E and 220 National Highways Authority of India Vs. M. Hakeem and Anrs. reported in (2021) 9 SCC 1 that modifying an award under Section 34 of the Act 1996 would amount to crossing “Lakshman Rekha” and it was observed in para 48 as under:- “Quite obviously if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be done. In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996. It is only for Parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the Arbitration Act, 1996, and bring it in line with other legislations the world over.” 12. Recently the Hon’ble Apex Court in the case of UHL Power Company Ltd. Vs. State of Himachal Pradesh: reported in 2022 (4) SCC 166 has held that scope of the appeal under Section 37 of the Act of 1996 and the jurisdiction of the Appellate court is fairly narrow and it was held in para 16 to 22 as under:- 16. As it is, the jurisdiction conferred on Courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an Appellate Court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Limited v. Vedanta Limited, the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the Arbitration Act has been explained in the following words: “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 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 [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] 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.” 17. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corporation Ltd., where it has been observed as follows: “2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34 of the Act indicates the highly constricted power of the civil court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator.” 18. It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other.
It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. V. Crompton Greaves Ltd. , the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus : “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.” 19. In Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited, adverting to the previous decisions of this Court in McDermott International Inc. v. Burn Standard Co. Ltd. And Others and Rashtriya Ispat Nigam Ltd. V. Dewan Chand Ram Saran, wherein it has been observed that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if a term of the contract has been construed in a reasonable manner, then the award ought not to be set aside on this ground, it has been held thus: “9.1 ………..It is further observed and held that construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.
It is further observed by this Court in the aforesaid decision in paragraph 33 that when a court is applying the “public policy” test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the Arbitrator on facts has necessarily to pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. It is further observed that thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. 9.2 Similar is the view taken by this Court in NHAI v. ITD Cementation (India) Ltd. (2015) 14 SCC 21 , para 25 and SAIL v. Gupta Brother Steel Tubes Ltd. (2009) 10 SCC 63 , para 29.” 20. In Dyna Technologies (P) Ltd. (supra), the view taken above has been reiterated in the following words : “25. Moreover, umpteen number of judgments of this Court have categorically held that the 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.” 21. An identical line of reasoning has been adopted in South East Asia Marine Engg. & Constructions Ltd. [SEAMAC Limited] V. Oil India Ltd. and it has been held as follows: “12. It is a settled position that a court can set aside the award only on the grounds as provided in the Arbitration Act as interpreted by the courts.Recently, this Court in [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLine SC 1656] laid down the scope of such interference. This Court observed as follows : (SCC pp. 11-12, para 24) “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts.
This Court observed as follows : (SCC pp. 11-12, para 24) “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.” 13. It is also settled law that where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. This Court in Dyna Technologies observed as under : (SCC p.12, para 25) ‘25. Moreover, umpteen number of judgments of this Court have categorically held that the Court 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.’” 22. In the instant case, we are of the view that the interpretation of the relevant clauses of the Implementation Agreement, as arrived at by the learned Sole Arbitrator, are both, possible and plausible. Merely because another view could have been taken, can hardly be a ground for the learned Single Judge to have interfered with the arbitral award. In the given facts and circumstances of the case, the Appellate Court has rightly held that the learned Single Judge exceeded his jurisdiction in interfering with the award by questioning the interpretation given to the relevant clauses of the Implementation Agreement, as the reasons given are backed by logic.” 13.
In the given facts and circumstances of the case, the Appellate Court has rightly held that the learned Single Judge exceeded his jurisdiction in interfering with the award by questioning the interpretation given to the relevant clauses of the Implementation Agreement, as the reasons given are backed by logic.” 13. Looking to the limited scope of interference contained under Section 37 of the Act of 1996, this Court finds no merit in the submissions made by the counsel for the appellants and this appeal is found to be devoid of merit and the same is hereby dismissed. 14. Consequent thereupon, the stay application and all pending application(s) if any also stand dismissed. 15. The Registry is directed to send back the record of the case to the concerned Court forthwith.