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2023 DIGILAW 1608 (RAJ)

Union Of India v. Girdhari Lal, MES Contractor

2023-08-25

REKHA BORANA, VIJAY BISHNOI

body2023
JUDGMENT : BORANA, J. 1. The present appeal has been preferred against the order dated 03.02.2023 passed by the Commercial Court No.2, Jodhpur (hereinafter referred to as ‘the learned Court below’) in Civil Misc. Case No.21/2022 (NCV No.31/2020) whereby the objections under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act of 1996’) preferred by the appellants against the award dated 23.05.2002 passed by learned Arbitrator have been rejected. Vide the award, the learned Arbitrator had proceeded on to pass an award for an amount of Rs.3,12,010/-in favour of the claimant-firm with past and pendente lite interest from 01.08.1995 to 23.05.2002 on claim Nos.2, 6, 7 & 8. The rate of interest as awarded was @ 15% per annum from 01.08.1995 till 31.03.1998 and @ 12% per annum from 01.04.1998 till the date of award. Future interest has been granted w.e.f. 16.08.2002 @ 12% per annum. Counter-claim qua cost of arbitration as preferred by the non-applicants was rejected. 2. The facts of the case are as under: (A) Agreement No.CEAZ/UTL/06 of 90-91 was entered into between appellant no.3 and respondent no.1 firm for “Provision of work services for CGA Complex, Air Force, Uttarlai”. The stipulated date for commencement of work was 11.06.1990 and for completion of work was 10.12.1990 for Phase-I and 10.10.1991 for Phase-II. However, the same was extended up to 31.08.1992 for Phase-I and 29.10.1994 for Phase-II which was also the actual date of completion. On 06.12.1994, respondent no.1 submitted the final bill under protest. On 30.03.1996, appellants made full and final payment of the said bill. (B) The firm vide letter/notice dated 14.10.1996 invoked arbitration clause i.e., clause 70 of the agreement for adjudication of disputes. The firm raised and annexed therewith two Appendixes of disputes/claims “A” & “B” and prayed for reference of the same to arbitration. However, the disputes/claims as raised vide Appendix-A were only referred to arbitration by the Department. Therefore, in the circumstances, the firm preferred an application under Section 11 of the Act of 1996 before the Designated Authority for reference of the disputes/claims as raised vide Appendix-B also to arbitration. The said application as preferred by the firm went up till the stage of Division Bench of the High Court and ultimately, the disputes/claims raised vide Appendix-B were also referred to the same Arbitrator. The said application as preferred by the firm went up till the stage of Division Bench of the High Court and ultimately, the disputes/claims raised vide Appendix-B were also referred to the same Arbitrator. (C) However, meanwhile, the first Arbitrator as appointed retired and second resigned and therefore, third Arbitrator entered into reference and passed the impugned award. It is also relevant to note that during pendency of the proceedings qua the disputes/claims of Appendix-B before the High Court, the Arbitrator continued with the proceedings qua the disputes/claims raised vide Appendix-A and even passed the award dated 23.05.2002 qua the said disputes/claims. It is this award dated 23.05.2002, which is in question in the present appeal. (D) Against award dated 23.05.2002, Union of India preferred objections under Section 34 of the Act of 1996 which were dismissed vide order dated 03.02.2023 of the Commercial Court No.2, Jodhpur, against which the present appeal has been preferred. 3. Before the learned Arbitrator, ten claims in all were raised by the applicant-firm. A counter-claim for an amount of Rs.30,000/-was raised by the appellants qua the cost of reference. Learned Arbitrator proceeded on to decide claim no.2(a), 4, 6(a), 7, 8 and 9 in favour of the applicant-firm and consequently, passed the award in favour of applicant-firm. The counter-claim as preferred by the Union of India was rejected. 4. A brief detail of the claims as raised and the amount as awarded, is reproduced herein: Claim No. Brief description of Claim Amount claimed Amount Awarded 1 Additional expenditure incurred on pumping water from foundation Rs. 2,50,000/-(revised amount Rs. 2,72,000/-) Nil 2(a) Reimbursement of underpayment due to change in configuration of par building Rs. 65,000/-(revised amount Rs. 2,94,920/-) Rs. 95,350 2(b) Price escalation Rs. 35,000/-(revised amount Rs.1,20,600/-) Nil 3(a) Additional expenditure for working in sub-soil water/mud in SRE, GCA and power house building Rs. 1,50,000/- Nil 3(b) Price escalation Rs. 81,000/-(revised amount Rs. 70,100/-) Nil 4 Reimbursement of losses/damages suffered due to delay in grant of extension of time Rs. 4,80,000/-(revised amount Rs. 2,93,160/-) Rs. 88,000 5(a) Loss of profit/damages suffered due to reduction in fencing work Rs. 50,000/-(revised amount Rs. 50,310/-) Nil 5(b) Price escalation Rs. 27,000 (revised amount Rs. 27,750/-) Nil 6(a) Reimbursement of cost of Tarfelt rendered infructuous due to ordering of seven course fibre glass water proofing Rs. 2,00,000/-(revised amount Rs. 1,28,040/-) Rs. 1,04,060 6(b) Price escalation Rs. 1,08,000/-(revised amount Rs. 88,000 5(a) Loss of profit/damages suffered due to reduction in fencing work Rs. 50,000/-(revised amount Rs. 50,310/-) Nil 5(b) Price escalation Rs. 27,000 (revised amount Rs. 27,750/-) Nil 6(a) Reimbursement of cost of Tarfelt rendered infructuous due to ordering of seven course fibre glass water proofing Rs. 2,00,000/-(revised amount Rs. 1,28,040/-) Rs. 1,04,060 6(b) Price escalation Rs. 1,08,000/-(revised amount Rs. 72,870/-) Nil 7(a) Payment of cost of work done against Schedule ‘A’ part XI (hard standing) Rs. 1,06,000/-(revised amount Rs. 19,600/-) Rs. 4,300 7(b) Price escalation Rs. 57,000/-(revised amount Rs. 10,800/-) Rs. 300 8 Reimbursement of extra expenditure for rectification of seepage in power house building and GCA building in waterproofing treatment carried out by M/s Samlock Ahmedabad Rs. 1,00,000/-(revised amount Rs. 1,09,800/-) Rs. 22,000 TOTAL Rs.312010/- 9 Interest Reimbursement of compound interests on amounts wrongfully detained @24% p.a. Interest on Interest on claim nos.2, 6, 7 & 8 from 01.08.95 to 23.05.02 ; @15% p.a. from 01.08.95 upto 31.03.1998 and @ 12% p.a. from 01.04.1999 till 23.05.02 10 Cost of reference Rs. 20,000/-(revised amount Rs.50,000/-) Nil 5. Only two grounds have been raised before this Court by learned counsel for the appellants. Firstly, the award as passed by the Arbitrator suffers from patent illegality as the same has been passed in gross violation of Clause 65 of the agreement/contract. It has been submitted that in terms of Clause 65, no claim can be raised after submission of Final Bill. In case, any claim remains pending after submission of Final Bill, the same shall be deemed to have been waived and extinguished. Learned counsel submitted that the claims as raised by Appendix-A were never raised by the firm while submitting his Final Bill and therefore, the same could not have been raised after final payment of the Final Bill had been made to him. It has been submitted that the claims as raised vide Appendix-A could not even have been entertained by the Arbitrator, they being in contravention to Clause 65 of the contract. Therefore, the award of the Arbitrator being in contravention to conditions of contract, deserves to be set aside. In support of his submissions, learned counsel relied upon judgments rendered in : i) State of Chhattisgarh and Ors. Vs. Sal Udyog Private Limited, (2022) 2 SCC 275 ; ii) Indian Oil Corporation Ltd. Vs. Therefore, the award of the Arbitrator being in contravention to conditions of contract, deserves to be set aside. In support of his submissions, learned counsel relied upon judgments rendered in : i) State of Chhattisgarh and Ors. Vs. Sal Udyog Private Limited, (2022) 2 SCC 275 ; ii) Indian Oil Corporation Ltd. Vs. M/s Shree Ganesh Petroleum Rajgurunagar, (2022) 4 SCC 463 ; and iii) PSA Sical Terminals Pvt. Ltd. Vs. Board of Trustees of V.O. Chidambranar Port Trust, tuticorin and Ors, AIR 2021 SC 4661 . The next ground has been raised qua the interest as awarded by the Arbitrator. It has been submitted that the interest granted by the learned Sole Arbitrator being totally beyond the terms of the contract and being totally unreasoned deserves to be set aside. Learned counsel submitted that Clause 67(b) of the contract specified that till the claims arising out of the contract is/ are settled or adjudicated upon, the firm will have no claim for interest or damages whatsoever on any account. Therefore, neither the firm could have raised any claim for interest nor learned Arbitrator could have awarded any amount qua interest on the awarded amount. In support of his submissions, learned counsel relied upon the judgment rendered in : i) Garg Builders Vs. Bharat Heavy Electricals Limited, AIR 2021 SC 4751 ; ii) Delhi Airport Metro Express (P) Ltd. Vs. Delhi Metro Rail Corporation, (2022) 9 SCC 286 ; and iii) Executive Engineer (R & B) and Ors. Vs.Gokul Chandra Kanungo (dead), AIR 2022 (SC) 4857 . 6. Per contra, learned counsel for the respondents firstly submitted that the award in question being totally in consonance with conditions of the contract as well as the provisions of law does not deserve any interference within its limited scope of interference. Learned counsel submitted that the scope of the Court to interfere in an arbitral award is very limited in terms of Section 34 of the Act of 1996 and the Commercial Court has rightly declined to interfere with the same within its limited scope of interference. Learned counsel submitted that the interference if any, would not entail the review of the merits of the disputes and interference would only be limited to situation where the findings of the Arbitrator are arbitrary, capricious or perverse. Learned counsel submitted that the interference if any, would not entail the review of the merits of the disputes and interference would only be limited to situation where the findings of the Arbitrator are arbitrary, capricious or perverse. So far as the present award is concerned, none of the findings as arrived to by the learned Arbitrator can be termed to be arbitrary, capricious or perverse. Responding to the ground pertaining to Clause 65 of the contract as raised by learned counsel for the appellants, learned counsel for the respondents submitted that the said ground cannot even be raised before this Court as it was never raised before the Arbitrator or even before the Commercial Court under Section 34 of the Act of 1996. No valid objection in terms of Section 34 having been raised, the appellants cannot be permitted to raise any new ground before this Court in an appeal under Section 37 of the Act of 1996. Replying to the next ground raised by learned counsel for the appellants, learned counsel submitted that it is settled proposition of law that the Arbitral Tribunal is empowered to grant interest qua all three stages i.e. past, pendente lite and future. Section 31(7)(a)(b) of the Act empowers the Tribunal to award interest on the awarded sum and hence the interest as awarded by learned Arbitrator is totally in consonance with law. So far as the present agreement in question is concerned, there is no clause in the agreement which bars the grant of interest. In support of his submission, learned counsel relied upon the judgment passed in Union of India Vs. Susaka Private Limited and Others, (2018) 2 SCC 182 . 7. Heard learned counsel for the parties and perused the material available on record. 8. Before proceeding on to adjudicate on the grounds as raised by the learned counsel for the appellants, it is relevant to note that the ground of disputes/claims as raised by the claimant firm being in contravention to Clause 65 of the Contract was neither raised by the appellants before the Arbitrator nor in the objections under Section 34 of the Act of 1996. The said ground has been raised for the first time before this Court. The said ground has been raised for the first time before this Court. So far as the second ground of award of interest by the learned Arbitrator being in contravention to Clause 67B of the agreement is concerned, the said ground was also not raised either before the Arbitrator or before the learned Court below under Section 34 of the Act of 1996. While dealing with the similar situation in the case of Susaka Private Limited (supra), the Hon’ble Apex Court took into consideration the facts as under : “19. It is not in dispute that the Appellant did not raise the plea based on Clause 13(3) of the GCC against Respondent No. 1 at any stage of the proceedings either in their reply filed before the Arbitral Tribunal or/ and in submissions except raising it, for the first time, before this Court in this appeal. 20. On the other hand, we find that in Section 11(5) proceedings, the appellant did not raise this objection in their reply and instead gave their express consent to refer the issue of award of interest payable on various claims (1 to 17) to Arbitral Tribunal considering the said claim to be arbitrable under the contract. 21. In our opinion, the appellant could have registered their objection before the Single Judge at the time of making a reference to the Arbitral Tribunal by pointing out Clause 13(3) of GCC or could have reserved their right to raise such objection before the Arbitral Tribunal. It was, however, not done. 22. Not only that, we further find that the appellant, in their reply, filed before the Arbitral Tribunal also did not raise this plea and allowed the Arbitral Tribunal to adjudicate the said issue on merits. 23. If the appellant was so keen to place reliance on Clause 13(3) of GCC to defeat the claim of Respondent No. 1 relating to the award of interest on various claims, then it was necessary for the appellant to have raised such plea specifically, in their reply, before the Arbitral Tribunal. No such plea was raised even before the Arbitral Tribunal.” Keeping in consideration the above facts, the Hon’ble Apex Court held as under : “27. If a plea is available, whether on facts or law, it has to be raised by the party at appropriate stage in accordance with law. No such plea was raised even before the Arbitral Tribunal.” Keeping in consideration the above facts, the Hon’ble Apex Court held as under : “27. If a plea is available, whether on facts or law, it has to be raised by the party at appropriate stage in accordance with law. If not raised or/and given up with consent, the party would be precluded from raising such plea at a later stage of the proceedings on the principle of waiver. If permitted to raise, it causes prejudice to other party. In our opinion, this principle applies to this case.” 9. Learned counsel for the appellants in support of his submission relied upon the case of Sal Udyog (supra) wherein it has been held as under : “23. We are afraid, the plea of waiver taken against the Appellant-State on the ground that it did not raise such an objection in the grounds spelt out in the Section 34 petition and is, therefore, estopped from taking the same in the appeal preferred Under Section 37 or before this Court, would also not be available to the Respondent-Company having regard to the language used in Section 34(2A) of the 1996 Act that empowers the Court to set aside an award if it finds that the same is vitiated by patent illegality appearing on the face of the same. Once the Appellant-State had taken such a ground in the Section 37 petition and it was duly noted in the impugned judgment, the High Court ought to have interfered by resorting to Section 34(2A) of the 1996 Act, a provision which would be equally available for application to an appealable order Under Section 37 as it is to a petition filed Under Section 34 of the 1996 Act. In other words, the Respondent-Company cannot be heard to state that the grounds available for setting aside an award Under Sub-section (2A) of Section 34 of the 1996 Act could not have been invoked by the Court on its own, in exercise of the jurisdiction vested in it Under Section 37 of the 1996 Act. Notably, the expression used in the Sub-rule is "the Court finds that". Notably, the expression used in the Sub-rule is "the Court finds that". Therefore, it does not stand to reason that a provision that enables a Court acting on its own in deciding a petition Under Section 34 for setting aside an Award, would not be available in an appeal preferred Under Section 37 of the 1996 Act.” 10. In the opinion of this Court, the above ratio as laid down by the Hon’ble Apex Court would not apply to the present matter because of the most distinguishing factor that in the case of Sal Udyog (supra), the ground as raised under Section 37 of the Act of 1996 but not raised under Section 34 of the Act of 1996, was definitely raised before the Arbitral Tribunal. The fact that the objection was raised before the Arbitral Tribunal and was rejected by the Tribunal has been taken into consideration by the Hon’ble Apex Court in para 22 of the judgment as under : “22. On a conspectus of the facts of the case, it remains undisputed that though the Appellant-State did raise an objection before the Arbitral Tribunal on the claim of the Respondent-Company seeking deduction of supervision charges, for which it relied on Clause 6(b) of the Agreement and the Circular dated 27th July, 1987 to assert that recovery of supervision charges along with expenses was a part and parcel of the contract executed with the Respondent-Company, the said objection was turned down by the learned Sole Arbitrator by giving a complete go by to the terms and conditions of the Agreement governing the parties and observing that there is no basis to admit any such "indirect expenses". xxxxxxxxx” Meaning thereby, therein was a case where an objection which was very much raised before the Arbitral Tribunal and rejected by the Tribunal, was not raised in objections under Section 34 of the Act of 1996 but was again raised in appeal under Section 37 of the Act of 1996. It was in those circumstances, the Hon’ble Apex Court held that the Appellate Court ought to have considered the said objection in terms of Section 34(2A) of the Act of 1996. 11. It was in those circumstances, the Hon’ble Apex Court held that the Appellate Court ought to have considered the said objection in terms of Section 34(2A) of the Act of 1996. 11. It is an admitted position in the present matter that both the grounds as raised on behalf of the appellants in the present appeal were neither raised at the stage of Section 11 of the Act of 1996 i.e. for appointment of Arbitrator nor before the Arbitrator during the arbitration proceedings and also not in the objections raised before learned Court below under Section 34 of the Act of 1996. The ground which was not even raised before the Arbitrator could not have been adjudicated by him and therefore, no finding qua the said objection could have been given by the Arbitrator. It is the settled proposition of law that the ground or objection if required to be taken at a specific point of time/stage, the same has to be adjudicated at that stage and if not taken, the same would be deemed to be waived. Further, it is also settled proposition of law that no party can be taken by surprise. Admittedly, ground of claims as raised by the firm being in contravention to Clause 65 of the Contract was never ever raised by the appellant – Department and therefore, there was no occasion for the respondent firm to have controverted the same. Without any ground/objection having been raised before the Arbitrator and any finding recorded by the Arbitrator qua the same, this Court, in appellate jurisdiction under Section 37 of the Act of 1996, cannot give any new findings in contravention to the settled position of law that the Court in its jurisdiction under Section 34 or 37, does not sit in appeal and cannot reappreciate the evidence. Here is a case where no objection whatsoever had been raised before the Arbitrator and there was no finding of the Arbitrator on record which could even be considered or reappreciated. In the specific opinion of this Court, first ground as raised by learned counsel for the appellants in view of above analysis, does not deserve appreciation or consideration by this Court. In the specific opinion of this Court, first ground as raised by learned counsel for the appellants in view of above analysis, does not deserve appreciation or consideration by this Court. The aforesaid opinion of this Court is substantiated by the judgment of the Hon’ble Apex Court in the case of Harish Chandra & Company vs. State of U.P., (2016) 9 SCC 478 ., wherein it was held as under :- “37...the High Court went into the factual question by referring to Clause 26 of the agreement for holding that the arbitrator passed an award contrary to Clause 26 and thereby traveled beyond the terms of agreement which constituted a legal misconduct on his part. This finding, in our view, is, on the face of it, untenable in law for the reason, inter alia, that this objection was neither raised before the arbitrator and nor before the Trial Court in the manner in which it was raised for the first time in the High Court. In any event, in the absence of any finding recorded by the arbitrator and the Trial Court, such issue could not have been gone into for the first time in appeal by the High Court. That apart, it has otherwise no substance on facts for the simple reason that it being a question of fact, the same could not be examined in appeal”. 12. So far as the award qua the interest amount is concerned, the same also does not deserve any interference by this Court in view of settled law on the point. Hon’ble Apex Court in its latest pronouncements in : i) UHL Power Limited Company vs. State of Himachal Pradesh, (2022) 4 SCC 116 and ii) Indian Oil Corpn. Ltd. vs. U.B. Engineering Ltd., 2022 SCC Online SC 2007. specifically held that award of past interest is within the domain of the Arbitrator; award of compound interest by the Arbitrator is also permissible; as per Section 31(7)(b) of the Act of 1996, the arbitral award shall, unless otherwise the agreement directs, carry interest at the rate of eighteen percent per annum from the date of the award to the date of payment. In view of settled position of law, the award of interest by the Arbitrator cannot be held to be in contravention to any provision of law. In view of settled position of law, the award of interest by the Arbitrator cannot be held to be in contravention to any provision of law. So far as the reliance of the learned counsel for the appellants on Clause 67 of the agreement is concerned, the same is also totally misplaced as Clause 67 of the agreement nowhere bars award of interest. Clause 67 of the agreement in question reads as under : “67. Recovery from Contractor.-(a) Whenever any claim(s) for payment of sum of money arise(s) out of or under this Contract against the contractor, the Contractor shall on demand make the payment of the same or agree for effecting adjustment from any amounts due to him by the Government. If, however, he refuses or neglects to make the payment on demand, or does not agree for effecting adjustment from any amounts due to him, Government shall be entitled to withhold an amount not exceeding the amount of the claim(s), from any sum when due or which at any time thereafter may become due to the Contractor, under this or any other Contract with the Government or from any other sum due to the Contractor from the Government (which may be available with the Government) or from the Contractor"s Security Deposit or Security Bond amount, and retain the same by way of lien till such time, payment is made by the Contractor or till the claim(s) is/are settled or adjudicated upon, or till the Contractor, at his expense furnishes Fixed Deposit Receipt(s) duly endorsed as directed by the Accepting Officer, or a Guarantee Bond from a Scheduled Bank for an amount equal to the amount of the claim(s) in the form as directed by the Accepting Officer. (b) It is an agreed condition of this Contract that the sum of money so withheld or retained as and by way of lien under this condition by the Government, will be kept withheld or retained as such by the Government, till the claim(s) arising out of or under this Contract is/are settled or adjudicated upon and that the Contractor will have no claim for interest or damages whatsoever on any account in respect of such sum so withheld.” A bare perusal of the above clause makes it clear that the same nowhere bars the award of interest by the Arbitrator. It only refers to the amounts recoverable by the Department from the firm and to the amount withheld by the Department qua the said recoveries. Therefore also, the ground as raised by learned counsel for the appellants is not tenable. 13. In view of above observations and above analysis, this Court does not find any ground to interfere with the award dated 23.05.2002 passed by the learned Arbitrator and the impugned order dated 03.02.2023 passed by the learned Court below and the same are hereby, affirmed. 14. The appeal is therefore, dismissed. 15. Stay petition and all pending applications, if any, stand disposed of.