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2022 DIGILAW 775 (HP)

Himachal Pradesh Housing & Urban Development Authority v. Ajay Kumar

2022-12-01

SANDEEP SHARMA

body2022
JUDGMENT : Sandeep Sharma, J. Being aggrieved and dissatisfied with award dated 15.9.2015, passed by sole arbitrator in respect of dispute between the parties relating to the “work of construction of Bus Stand at Chamba including Water Supply and Sanitary installation”, whereby a sum of Rs. 39.71 Lakh alongwith interest at the rate of 7% per annum from the date of award till realization, came to be awarded in favour of the respondent/claimant, besides awarding Rs. 1.50 Lakh as litigation cost, the petitioner has approached this Court in the instant proceedings under S.34 of the Arbitration and Conciliation Act, 1996. 2. Briefly stated the facts of the case are that the work of construction of Bus Stand at Chamba including Water Supply and Sanitary installation was entrusted to HIMUDA by the Chief Executive Officer, Himachal Pradesh Bus Stand Management and Development Authority, Shimla-3. The new bus stand was to be constructed on the site, where District Jail Chamba was situated. Tender documents were invited on 30.5.2011 and work was allotted to the respondent/claimant being lowest tenderer on 18.7.201 vide award letter dated 18.7.2011. 3. Pursuant to awarding of work in favour of the respondent, both the parties entered into agreement No. 24 of 2011-2012, whereby work was to be completed within 18 months i.e. on or before 2.2.2013. Since the site on which construction of bus stand was to be raised was not made available to the respondent-claimant, he was unable to start the construction. Since after awarding of work in his favour, respondent had already collected material and had arranged for machinery on the spot, he suffered losses on account of delay in commencement of the work, which was neither cancelled by the Department nor site other than District Jail was ever allotted to the respondent to start the work. On account of delay in handing over the site to the respondent, dispute arose inter se parties and as such, respondent invoked arbitration clause of the agreement requesting the petitioner to appoint an arbitrator. Since the petitioner failed to appoint any arbitrator, respondent approached this court under S.11 of the Act for appointment of an arbitrator and this court, having taken note of the arbitration clause, appointed Shri Kapil Dev Sood, learned Senior Advocate as arbitrator to adjudicate the dispute inter se parties 4. Since the petitioner failed to appoint any arbitrator, respondent approached this court under S.11 of the Act for appointment of an arbitrator and this court, having taken note of the arbitration clause, appointed Shri Kapil Dev Sood, learned Senior Advocate as arbitrator to adjudicate the dispute inter se parties 4. Learned Arbitrator entered into reference and on the basis of pleadings as well as evidence collected on record by parties, held the respondent entitled to Rs. 39.71 Lakh on account of loss of profit. Besides this, learned arbitrator also directed the petitioner to return the FDR amounting to Rs.4,11,100/- furnished by the respondent as earnest money. 5. Being aggrieved and dissatisfied with aforesaid award passed by learned Arbitrator, petitioner has approached this court in the instant proceedings filed under S. 34 of the Arbitration and Conciliation Act, praying therein to set aside aforesaid award. 6. Primarily, the grounds as have been raised in the instant petition for challenging award are qua factual aspects of the matter and there is no challenge to award on the grounds as are available to the objector under S.34 of the Arbitration and Conciliation Act. In nutshell grounds as have been taken by petitioner are that learned Arbitrator while passing award has failed to appreciate the facts as well as material available before him in its right perspective, as a consequence of which, finding contrary to record and to the detriment of the petitioner have come to the fore. 7. It has been stated in the petition that since petitioner successfully proved on record that during period qua which respondent has claimed loss of profit, respondent was working on other site, there was no occasion for the learned Arbitrator to award amount on account of loss of profit. Apart from above another ground, as has been taken is that delay in execution of contract was on account of delay in commencement of work by the respondent/claimant. Apart from aforesaid, grounds as have been taken note above, Mr.C.N. Singh, learned counsel for the petitioner has not been able to raise any legal ground, which can give handle to this court to interfere in the award passed by learned Arbitrator. 8. Mr. Apart from aforesaid, grounds as have been taken note above, Mr.C.N. Singh, learned counsel for the petitioner has not been able to raise any legal ground, which can give handle to this court to interfere in the award passed by learned Arbitrator. 8. Mr. Suneet Goel, learned counsel for the respondent /claimant, while making this court peruse impugned Award, vehemently argued that it is own case of the department that work at proposed site could not be commenced for the reason that same was not vacated by Jail authorities as such, there was no occasion for the respondent to start work. He submitted that as and when some portion of site became available to the respondent, he stacked construction material and apart from that also started work by using some machinery. He submitted that at no point of time, decision taken by the petitioner not to pursue the work on selected site ever came to be communicated to the respondent, which is evident form letter addressed by the petitioner to the learned Arbitrator, which stands reproduced in the impugned Award. He submitted that though the agreement qua execution of work in question was entered in July 2011 but letter, expressing therein intention of department not to commence work on the proposed site was sent to the learned Arbitrator on 13.7.2015 i.e. after four years of execution of agreement. 9. Having heard learned counsel for the parties and perused the material available on record, this court finds that though respondent was awarded work to construct bus stand at Chamba on the site to be vacated by Jail Authorities but since said site was never vacated by jail authorities, work could not commence on the site. Though the petitioner /objector claimed before learned Arbitrator that delay in execution of work was on the part of the respondent /claimant but no document, worth credence ever came to be placed on record before learned Arbitrator to suggest that immediately after execution of agreement, site was made available to the respondent/claimant enabling him to commence the work, rather as has been taken note herein above, department after four years of execution of agreement directly wrote to learned Arbitrator that the department has decided not to execute work in question on proposed site. Most importantly such communication never came to be addressed to the respondent, meaning thereby he remained under impression for four years that he is to execute work as per agreement on the proposed site. 10. Though having perused the grounds raised by the petitioner/department vis-à-vis the reasoning assigned by learned Arbitrator, this court sees no illegality in the same but even otherwise, there is no legal ground raised in the petition enabling this court to interfere in the impugned award, which is based on proper appreciation of facts as well as law. 11. Needless to say, scope of interference by court under S. 34 of the Act is very limited. In terms of aforesaid provision of law, as has been repeatedly held by Hon'ble Apex Court, jurisdiction conferred upon the court under S.34 of the Act is stated to be fairly narrow and when it comes to the scope of an appeal under S.37 of the Act, jurisdiction of the appellate court to examine an order setting aside or refusing to set aside an award is said to be all the more circumscribed. 12. Repeatedly, it has been held by Hon'ble Apex Court and this court that high court while exercising power under S. 34 of Act does not sit in appeal over the arbitral award and may interfere on merits on the limited grounds provided under S.34((2)(b)(ii) i.e. if the award is against the public policy of India. Hon'ble Apex Court held that as per legal position clarified through decision of Hon'ble Supreme Court prior to the amendments to the 1996 Act in 2015, a violation of Indian Public Policy, in turn, includes a violation of fundamental policy of Indian law, a violation of interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Hon'ble Apex Court further held that 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. Hon'ble Apex Court has further held that ‘patent illegality’ 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. 13. Hon'ble Apex Court has further held that ‘patent illegality’ 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. 13. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corporation Ltd., (2020) 12 SCC 539 where it has been observed that 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. Hon'ble Apex Court held 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.” 14. In Dyna Technologies Private Limited Versus Crompton Greaves Limited, (2019) 20 Supreme Court Cases 1, Hon’ble Supreme Court in Para-24 has been pleased to hold as under:- “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. In Dyna Technologies Private Limited Versus Crompton Greaves Limited, (2019) 20 Supreme Court Cases 1, Hon’ble Supreme Court in Para-24 has been pleased to hold as under:- “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.” 15. Similarly, in Parsa Kente Collieries Limited Versus Rajasthan Rajya Vidyut Utpadan Nigam Limited, (2019) 7 Supreme Court Cases 236, Hon’ble Supreme Court has reiterated 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. Hon’ble Court further held that 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. Hon’ble Court has also held that an award based on little evidence or no evidence, which does not measure up the quality to trained legal mind would not be held to be invalid on this score. 16. Hon’ble Court has also held that an award based on little evidence or no evidence, which does not measure up the quality to trained legal mind would not be held to be invalid on this score. 16. Similarly, in Dyna Technologies Private Limited (supra), Hon’ble Supreme Court also held that the Court should not interfere with an award merely because an alternative view on facts and interpretation of contract exists and 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. 17. Recently, Hon'ble Apex Court in Welspun Specialty Solutions Limited v. Oil and Natural Gas Company Limited, (2022) 2 SCC 382 , has held that The purpose of Section 34 is to strike a balance between Court’s appellate powers and integrity of the arbitral process. While interpreting public policy of India in the aforesaid judgment, Hon'ble Apex Court held that it cannot be said that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. It has been held as under: “23. The limited grounds provided under Section 34 of the Act, has been interpreted by this Court on numerous occasions. In this case at hand, the challenge of award is based on the fact that the same is against the public policy and patent illegality. Public policy as a ground of challenge has always been met with certain scepticism. The phrase ‘public policy’ does not indicate ‘a catch-all provision’ to challenge awards before an appellate forum on infinite grounds. However, the ambit of the same is so diversely interpreted that in some cases, the purpose of limiting the Section 34 jurisdiction is lost. This Court’s jurisprudence also shows that Section 34(2)(b) has undergone a lot of churning and continue to evolve. The purpose of Section 34 is to strike a balance between Court’s appellate powers and integrity of the arbitral process. 24. This Court’s jurisprudence also shows that Section 34(2)(b) has undergone a lot of churning and continue to evolve. The purpose of Section 34 is to strike a balance between Court’s appellate powers and integrity of the arbitral process. 24. The first case, which expounded on the scope of ‘public policy’ was Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644, which inter alia provided that a foreign award may not be enforced under the said Act, if the court dealing with the case is satisfied that the enforcement of the award will be contrary to the public policy. After elaborate discussion, the Court arrived at the conclusion that public policy comprehended in Section 7(1)(b)(ii) of the Foreign Awards (Recognition and Enforcement) Act, 1961 is the “public policy of India” and does not cover the public policy of any other country. 25. For giving meaning to the term “public policy”, the Court observed thus: “66. Article V(2)(b) of the New York Convention of 1958 and Section 7(1)(b)(ii) of the Foreign Awards Act do not postulate refusal of recognition and enforcement of a foreign award on the ground that it is contrary to the law of the country of enforcement and the ground of challenge is confined to the recognition and enforcement being contrary to the public policy of the country in which the award is set to be enforced. There is nothing to indicate that the expression ‘public policy’ in Article V(2)(b) of the New York Convention and Section 7(1)(b)(ii) of the Foreign Awards Act is not used in the same sense in which it was used in Article I(c) of the Geneva Convention of 1927 and Section 7(1) of the Protocol and Convention Act of 1937. This would mean that ‘public policy’ in Section 7(1)(b)(ii)has been used in a narrower sense and in order to attract the bar of public policy the enforcement of the award must invoke something more than the violation of the law of India. Since the Foreign Awards Act is concerned with recognition and enforcement of foreign awards which are governed by the principles of private international law, the expression ‘public policy’ in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Since the Foreign Awards Act is concerned with recognition and enforcement of foreign awards which are governed by the principles of private international law, the expression ‘public policy’ in Section 7(1)(b)(ii) of the Foreign Awards Act must necessarily be construed in the sense the doctrine of public policy is applied in the field of private international law. Applying the said criteria it must be held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law; or (ii) the interests of India; or (iii) justice or morality.” 25. In ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 , the scope of Section 34 was expanded to include patent illegality as a ground for challenging the award and held as under : “31. Therefore, in our view, the phrase ‘public policy of India’ used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term ‘public policy’ in Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal. The result would be—award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void. (…) 74. In the result, it is held that: (A)(1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that: (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration. (2) The court may set aside the award: (i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, (b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act, (ii) if the arbitral procedure was not in accordance with: (a) the agreement of the parties, or (b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act. However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate. (c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract. (c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract. (3) The award could be set aside if it is against the public policy of India, that is to say, if it is 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. (4) It could be challenged: (a) as provided under Section 13(5); and (b) Section 16(6) of the Act.” 18. Hon’ble Supreme Court in UHL Power Company Limited Versus State of Himachal Pradesh, (2022) 4 Supreme Court Cases 116, while reiterating the above mentioned legal position has reiterated that under Section 34 of the Act, the High Court cannot re-appreciate the findings returned by learned Arbitral Tribunal and take a different view in respect of interpretation of relevant clauses of the agreement governing the parties. Hon’ble Court has observed that the High Court cannot act as a Court of appeal and the powers conferred under Section 34 of the Act are fairly narrow. While placing reliance upon MMTC Limited Versus Vedanta Limited, (2019) 4 Supreme Court Cases 163, Hon'ble Apex Court has held that jurisdiction conferred upon court under S.34 is squarely narrow. 19. Having taken note of the aforesaid law laid down by Hon'ble Apex Court from time to time, this court finds that the scope while exercising power under S.34 of the Act is very limited. Court can interfere if award is against public policy of India. Public Policy has been further defined in number of judgments as taken note herein above. Precisely, violation of public policy would mean contravention of fundamental laws and statutes. 20. In the instant case, save and except grounds as have been noticed above, which are more or less on factual aspects, no ground as is available under S.34 of the Act has been raised. Otherwise also, careful perusal of the impugned award reveals that the grounds raised in the present petition have been taken note by the learned arbitrator, while passing the impugned award, this court may not be justified in interfering with the impugned award by re-appreciation of evidence, as the same is not permissible in law, as discussed herein above. 21. Otherwise also, careful perusal of the impugned award reveals that the grounds raised in the present petition have been taken note by the learned arbitrator, while passing the impugned award, this court may not be justified in interfering with the impugned award by re-appreciation of evidence, as the same is not permissible in law, as discussed herein above. 21. Accordingly, this court finds no merit in the present petition which is accordingly dismissed.