Bharat Sanchar Nigam Limited v. Hind Electric Company (Electrical Engineers and Machinery Merchants)
2023-05-09
RATNAKER BHENGRA, SHREE CHANDRASHEKHAR
body2023
DigiLaw.ai
ORDER : Per Shree Chandrashekhar, J. M/s Bharat Sanchar Nigam Limited (in short, “BSNL”) has challenged the order passed in Commercial (Arbitration) Case No.54 of 2019 by which the objection taken by the BSNL to challenge the arbitral award dated 7th January 2019 through a petition under section 34 of the Arbitration and Conciliation Act, 1996 has been found without any substance. 2. Against the order dated 25th May 2022 passed by the Commercial Court at Ranchi, the present Commercial Appeal has been filed by the BSNL under section 13 (1-A) of the Commercial Courts Act, 2015. 3. The BSNL awarded the subject work to the claimant-company for the “Operation and Comprehensive Maintenance of Electro-Mechanical Service for USOF sites in Giridih and Koderma district under Cluster 26”. The work order dated 20th May 2009 was for Rs.51,85,104/-and the completion period was 24 months starting from 1st July 2009. However, the period for completion of the subject work under Master Agreement No.01A/USO/SLA/TEC/ RCH/2009-10 was extended till 30th April 2012. 4. Since a dispute had arisen between the parties in connection to the aforesaid contracts about payments made to the claimant-company and deductions by the BSNL on various counts, the claimant-company invoked Clause 25 of the Conditions of Contract on 8th June 2015 for appointment of the Arbitrator for resolving the dispute which had erupted between the parties, and the Sole Arbitrator was appointed by the Senior Chief Engineer (Electrical) of the BSNL vide Memorandum dated 26th October 2016. Pursuant to his appointment, the Arbitrator issued letter dated 26th November 2016 to both the parties for their no objection before proceeding further in the matter. Later on, after both the parties submitted their no objection to the appointment of the Sole Arbitrator notice dated 31th January 2017 was issued to them. Subsequently, the claimant-company unsuccessfully approached the High Court of Jharkhand in Arbitration Application No. 17 of 2017 to challenge the appointment of Sri Saurabh Tyagi as the Sole Arbitrator and his appointment was affirmed by the High Court, whereafter a fresh notice was given by the Sole Arbitrator to both the parties for submission of their claim and counter-claim. 5. The Arbitrator commenced the proceedings on 9th January 2018 by directing the parties to submit their respective statement of claim(s) and counter-claim(s).
5. The Arbitrator commenced the proceedings on 9th January 2018 by directing the parties to submit their respective statement of claim(s) and counter-claim(s). On 9th August 2018, the first hearing in respect of all five arbitration cases was held by the Sole Arbitrator at New Delhi. Thereafter, the arbitral proceedings were held on 24th August 2018 and 25th August 2018 and the BSNL was directed to furnish certain documents. 6. The Arbitrator has awarded Rs.31,31,083/-to the claimant-company on account of the claims found admissible and justifiable by him. The awarded sum carried simple interest @ 10% from three months after the date of completion of work for the amount due till 31st December 2018 and future interest on the awarded sum @ 10% from 1st May 2019 till the date of payment or the decree of a competent Court – the interest upto 31st December 2018 has been calculated at Rs.10,88,397/-. 7. By filing a petition under section 34 of the Arbitration and Conciliation Act 1996, the BSNL challenged the aforesaid award on the ground of procedural irregularity committed by the Sole Arbitrator inasmuch as without framing issues and affording an opportunity to the parties to examine witness the Sole Arbitrator has conducted the arbitral proceedings and made the award dated 7th January 2019. 8. The Presiding Officer of the Commercial Court at Ranchi has referred to the judgments in “Navodaya Mass Entertainment Limited v. J. M. Combines” (2015) 5 SCC 698 and “Associate Builders v. DDA” (2015) 3 SCC 49 to fortify his decision that the objections raised by the BSNL in the petition under section 34 of the Arbitration and Conciliation Act, 1996 do not fall under any of the grounds mentioned therein on which an arbitral award can be set-aside. 9. The learned Presiding Officer, Commercial Court at Ranchi has held as under: “17. In view of the various authoritative pronouncements discussed above it is clear that this court is not sitting in appeal against the award passed by the Arbitral Tribunal and the court is not required to re-appreciate or re-evaluate the evidence led before the arbitrator. 19. From perusal of the record and the award reveals that Sri Saurabh Tyagi was appointed as Sole Arbitrator for adjudicating the dispute between the parties. The record clearly shows that the Learned Arbitrator has duly dealt with the matter.
19. From perusal of the record and the award reveals that Sri Saurabh Tyagi was appointed as Sole Arbitrator for adjudicating the dispute between the parties. The record clearly shows that the Learned Arbitrator has duly dealt with the matter. It appears that pursuant to the notice, both the parties appeared before the Arbitral Tribunal and after hearing both the sides award dated 07.01.2019 was passed and after dealing with the matter in detail the Learned Arbitrator has arrived at finding that the Respondent is liable to pay to the claimant a sum of Rs.31,31,087/-together with simple interest @10% from due date (three months after the completion of work) for the amount due up 31.12.2018 of payment. If payment is made beyond 30.04.2019 the rate of simple interest payable shall be 10% from 01.05.2019 till date of payments or decree of competent court, whichever is earlier on amount of award. 20. The objection that the award is bad and illegal, it is contrary to the terms and conditions and in conflict with the public policy are not sustainable. Nothing has been explained for such objection. From perusal of the record as well as the award I find that no where it reflects that it is against the public policy or that there is any bias or the Learned Arbitrator has decided the dispute beyond his jurisdiction. I further find that the entire objections of the Respondent has been meticulously discussed by the Sole Arbitrator by formulating issues and has given finding on the basis of the evidence led by the parties. 21. In the circumstances mentioned above, I am of the view that the impugned award passed by the Learned Arbitrator is a well reasoned award. This court is not required to re-appreciate and reevaluate the finding before the Learned Arbitrator. The Learned Arbitrator has duly explained reasons for arriving at its decision. 22.
21. In the circumstances mentioned above, I am of the view that the impugned award passed by the Learned Arbitrator is a well reasoned award. This court is not required to re-appreciate and reevaluate the finding before the Learned Arbitrator. The Learned Arbitrator has duly explained reasons for arriving at its decision. 22. Therefore, in view of the above said discussion and after considering the contentions of the learned counsels for the parties and in view of the various authoritative pronouncements discussed above and also as this court is not sitting in appeal against the impugned award the court is not required to re-appreciate or reevaluate the evidence led before the Learned Sole Arbitrator, I find that the Respondent/Applicant herein has failed to make out a case for any interference with the impugned award dated 07.01.2019 passed by the Learned Sole Arbitrator Sri Saurabh Tyagi u/s. 34 of the Arbitration and Conciliation Act. 23. Accordingly, I find no merit in the petition, which is hereby dismissed. In the facts and circumstances of the case the parties shall bear their own cost. Judgment pronounced in Open Court.” 10. The BSNL has challenged the decision of the Commercial Court on the ground that ignoring the condition under Clause 25 of the Conditions of Contract the Sole Arbitrator could not have entertained the claim and made award for Rs. 31,31,083/-together with simple interest @10%. The BSNL has set up a plea that the legally payable dues were paid to the claimant-company after statutory deductions and recoveries were made from the claimant-company on account of default, and the payments so made to it were accepted by the claimant-company without any objection or demur. 11. Clause 25 of the Conditions of Contract reads as under: “Clause 25.
11. Clause 25 of the Conditions of Contract reads as under: “Clause 25. Settlement of Disputes & Arbitration: Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs drawings and instructions herein before mentioned & as to the quality of the workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:-i) If the contractor considers that he is entitled to any extra payment or compensation in respect of the works over & above the amounts admitted as payable by the BSNL or in case the contractor wants to dispute the validity of any deductions or recoveries made or proposed to be made from the contract, the contractor shall forthwith give notice in writing of his claim, in this behalf to the Engineer-in-Charge within 30 days from the date of disallowance thereof for which the contractor claims such additional payment or compensation or disputes the validity of any deduction or recovery. The said notice shall give full particulars of the claim, grounds on which it is based & detailed calculations of the amount claimed & the contractor shall not be entitled to raise any claim nor shall the BSNL be in any way liable in respect of any claim by the contractor unless notice of such claim shall have been given by the contractor to Engineer-in-Charge in the manner & within the time as aforesaid. The contractor shall be deemed to have waived & extinguished all his rights in respect of any claims not notified to the Engineer-in-Charge in writing in the manner & within the time aforesaid. (ii) The Engineer-in-Charge shall give his decision in writing on the claims notified by the contractor within 30 days of the receipt of the notice thereof.
The contractor shall be deemed to have waived & extinguished all his rights in respect of any claims not notified to the Engineer-in-Charge in writing in the manner & within the time aforesaid. (ii) The Engineer-in-Charge shall give his decision in writing on the claims notified by the contractor within 30 days of the receipt of the notice thereof. If the contractor is not satisfied with the decision of the Engineer-in-Charge, the contractor may within 15 days of the receipt of the decision of the Engineer-in-Charge submit his claims to the conciliating authority named in Schedule 'F' for conciliation along with all details & copies of correspondence exchanged between him & the Engineer-in-Charge. (iii) The party initiating conciliation shall send to the other party a written invitation to conciliate Conciliation proceedings shall commence when the other party accepts in writing the invitation to conciliate. If the other party rejects the invitation or does not reply within thirty days from the date of invitation there will be no conciliation proceedings. (iv) When it appears to the Conciliator that there exists element of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement & submit them to parties for their observation after receiving the observations of the parties. He may reformulate the terms of a possible settlement in the light of such observations. If the parties reach agreement on settlement of the dispute, they may draw up & sign a written settlement agreement. Parties may request the Conciliator to draw up or assist them in drawing up the settlement agreement. Such settlement agreement shall have the same status & effect as if it were an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under section-30 of Arbitration & Conciliation Act, 1996. If a settlement does not appear possible, the Conciliator, after consultation with the parties will give a written declaration that further efforts at Conciliation are no longer justified & the conciliation proceedings are terminated.
If a settlement does not appear possible, the Conciliator, after consultation with the parties will give a written declaration that further efforts at Conciliation are no longer justified & the conciliation proceedings are terminated. (v) When conciliation proceedings have become in fructuous or have been terminated, the party, which initiated the Conciliation shall, within a period of 30 days of termination thereof shall give a notice, in the form prescribed by the BSNL, to the Chief Engineer, Bharat Sanchar Nigam Limited in-charge of the work or if there be no Chief Engineer, to the Administrative Head of the Bharat Sanchar Nigam Limited for appointment of an arbitrator to adjudicate the notified claims failing which the claims of the contractor shall be deemed to have been considered absolutely barred & waived. (vi) Except where the decisions have become final, binding & conclusive in terms of the contract, all disputes arising out of the notified claims of the contractor as aforesaid & all claims of the BSNL shall be referred for adjudication through the arbitration by the sole arbitrator appointed by the Chief Engineer, Bharat Sanchar Nigam Limited in-charge of the work or if there be no Chief Engineer, the Administrative Head of the Bharat Sanchar Nigam Limited. It will also be no objection to any such appointment that the arbitrator so appointed is a BSNL Employee & that he had to deal with the matters to which the Contract relates in the course of his duties as BSNL Employee. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever, another sole arbitrator shall be appointed in the manner aforesaid by the said Chief Engineer. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each dispute along with the notice for appointment of arbitrator.
Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each dispute along with the notice for appointment of arbitrator. It is also a term of this contract that no person other than a person appointed by such Chief Engineer, Bharat Sanchar Nigam Limited or the administrative head of the Bharat Sanchar Nigam Limited as aforesaid should act as arbitrator & if for any reasons that is not possible, the matter shall not be referred to arbitration at all. The conciliation & arbitration shall be conducted in accordance with the provisions of the Arbitration & Conciliation Act 1996 or any statutory modification or re-enactment thereof & the rules made there under & for the time being in force shall apply to the arbitration proceeding under this clause. It is also a term of this contract that the arbitrator shall adjudicate on only such disputes as are referred to him by appointing authority & give separate award against each disputes & claim referred to him. The arbitrator shall give reasons for the award for each dispute referred to him. It is also a term of the contract that if any fees are payable to the arbitrator these shall be paid equally by both the parties. It is also a term of the contract that the arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties calling them to submit their statement of claims & counter-statement of claims. The venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator shall, if required to be paid before the award is made & published, be paid half & half by each of the parties. The cost of the reference & of the award (including the fees, if any, of the arbitrator) shall be in the discretion of the arbitrator who may direct to any, by whom & in what manner, such costs or any part thereof, shall be paid & fix or settle the amount of costs to be so paid.” 12.
The cost of the reference & of the award (including the fees, if any, of the arbitrator) shall be in the discretion of the arbitrator who may direct to any, by whom & in what manner, such costs or any part thereof, shall be paid & fix or settle the amount of costs to be so paid.” 12. Under Clause 25 of the Conditions of Contract, there is a bar for any other person not appointed by the Chief Engineer of the BSNL or the Administrative Head of the BSNL to act as Arbitrator. It is specifically mentioned therein that this shall be a condition of the contract and if for any reason appointment of an Arbitrator is not made by the Chief Engineer or the Administrative Head of the BSNL the matter shall not be referred to arbitration at all. This has further been provided that all disputes arising out of the claims of the contractor and the BSNL shall be referred for adjudication through the arbitration by a Sole Arbitrator in accordance with the provisions of the Arbitration and Conciliation Act, 1996 and its modification or re-enactment thereof and the rules made thereunder. 13. As per the procedure laid down under Clause 25, if the contractor considers that he is entitled to any extra-payment or compensation in respect of the works done over and above the amounts admitted as payable by the BSNL a notice in writing shall be given to the Engineer-in-Charge within 30 days from the date of “disallowance” thereof for which the contractor claims such additional payment or compensation. In case, the contractor wants to dispute the validity of any deductions or recoveries made or proposed to be made by the BSNL a similar route has been provided for the contractor to give a written notice of his claim to the Engineer-in-Charge within 30 days from the date of “rejection” of its objection. 14. In “Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority” (1988) 2 SCC 338 the Hon'ble Supreme Court has held that a dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under section 8 or a reference under section 20 of the Act.
In “Major (Retd.) Inder Singh Rekhi v. Delhi Development Authority” (1988) 2 SCC 338 the Hon'ble Supreme Court has held that a dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under section 8 or a reference under section 20 of the Act. It has further been held that there should be dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on whatever grounds. Therefore, mere failure or inaction to pay does not lead to the inference of the existence of dispute. 15. In our opinion, the BSNL has misconstrued sub-clause (i) to Clause 25 to mean that the contractor is required to make his claim or raise his objection within 30 days of payment(s) or deduction(s) or recovery made. 16. Sub-clause (i) merely recites and recognises the well-accepted procedure under the Arbitration and Conciliation Act, 1996 that there should be a rejection of the claim or the repudiation of the contract in which event only a dispute shall be considered to have arisen between the parties. Sub-clause(i) therefore carries the expression “30 days from the date of disallowance”. This expression under sub-clause (i) precedes a requirement that the contractor shall give a written notice of his claim and/or objection to any deduction or recovery made or proposed to be made from him. Therefore, sub-clause (i) provides that the contractor shall approach the Engineer-in-Charge within 30 days from the date a dispute is considered to have arisen. 17. The proceedings before the Sole Arbitrator disclose that a bald objection was taken by the BSNL that the claims of the claimant-company were not maintainable in view of Clause 25 of the Conditions of Contract and, therefore, barred by the law of limitation. The affidavit-in-opposition (labelled as counter-rejoinder) filed by the BSNL contains one single sentence, that the claims are time-barred. This objection is not supported by the BSNL through proper pleadings and materials, if any. One possible argument that can be raised by the BSNL is that Memorandum dated 26th October 2016 provides jurisdiction of the Sole Arbitrator to make an award, subject to Clause 25 and the law of limitation. 18.
This objection is not supported by the BSNL through proper pleadings and materials, if any. One possible argument that can be raised by the BSNL is that Memorandum dated 26th October 2016 provides jurisdiction of the Sole Arbitrator to make an award, subject to Clause 25 and the law of limitation. 18. Section 3(1) of the Limitation Act casts a duty upon the Court to dismiss a suit even if limitation is not set-up as defence on the ground that the suit was instituted after the prescribed period of limitation. In “Maqbul Ahmad v. Onkar Pratap Narain Singh” AIR 1935 PC 85 , the Privy Council has held that the Court is bound under section 3 of the Limitation Act (old) to ascertain for itself whether the suit before it is within time and if it fails to do so and entertain a suit or claim which is barred by limitation the Court acts without jurisdiction. Therefore, an award under which a time-barred claim has been allowed would be in conflict with the Public Policy of India. However, the situation in the present case is entirely different and the claims raised by the claimant-company were not time-barred. 19. In the present case, the proceeding held by the Arbitrator on 24th August 2018 records that the BSNL was directed to produce details of various recoveries made from the claimant-company. In the proceeding dated 25th August 2018, it is recorded that the parties decided that no oral evidence is required and, at a later stage, if a party decides to lead oral evidence a liberty was reserved for filing an application for the said purpose. The Arbitrator has recorded that the parties were heard at length and the documents filed by them were considered. The Arbitrator has further recorded that the parties have not denied authenticity of the official documents. This is also recorded in the proceeding dated 25th August 2018 that with the consent of the parties hearing in the arbitration case was concluded. 20.
The Arbitrator has further recorded that the parties have not denied authenticity of the official documents. This is also recorded in the proceeding dated 25th August 2018 that with the consent of the parties hearing in the arbitration case was concluded. 20. In the award dated 7th January 2019 which was made for a sum of Rs.31,31,083/-with simple interest @ 10% from 3 months after the date of completion of the work, the Arbitrator has discussed each of the claims made by the claimant-company under 8 heads and has rendered his opinion that the claim for balance payment for operation and comprehensive maintenance charges (claim no.1), the claim for purchase of diesel (claim no.4), the claim of recovery of Rs.10,64,438/-made by the BSNL without any basis and the claim for interest on the amounts illegally withheld by the BSNL were acceptable. However, the claim for the cost incurred for replacement of batteries, interest pendente lite and the cost for the arbitral proceedings claimed by the claimant-company have been rejected by the Arbitrator. The BSNL has also raised counter-claims under 7 heads for (i) compensation for not handing over DG sets, electrical installations, payment of rent for USO sites, payment to the guards of USO sites, excess payment for diesel and interest on the claim amounts. The counter-claims made by the BSNL have however be rejected by the Arbitrator on the ground that those claims were without any substance, not supported by any evidence and some of them were beyond the period of agreement. 21. Under section 34 of the Arbitration and Conciliation Act 1996, there are limited grounds to lay a challenge to the arbitral award made by the Arbitrator. There are limitations on the powers of the Court to interfere with a speaking award. The central theme of the Arbitration and Conciliation act, 1996 is that sanctity of an arbitral award must be preserved and any judicial interference with the arbitral award must be within the confines of section 34. The expression “only by” in sub-section (1) and “only if” in subsection (2) to section 34 leave no scope for any judicial interference with an arbitral award except on the specified grounds mentioned under sub-section (2) of section 34.
The expression “only by” in sub-section (1) and “only if” in subsection (2) to section 34 leave no scope for any judicial interference with an arbitral award except on the specified grounds mentioned under sub-section (2) of section 34. Therefore, a plausible view of the Arbitrator cannot be substituted by the Court on re-appreciation of the evidence and by substituting its own view or to do what it considers to be just. The proviso to sub-section (2-A) of section 34 specifically provides that the decision of the Arbitrator cannot be turned down on re-appreciation of evidence even where the Arbitrator has wrongly decided a question of law. No doubt if it appears on the face of the award that the arbitrator has proceeded illegally or makes a serious error which is apparent on the face of the records, that is to say, admitting an inadmissible evidence or adopting a principle of construction which in law cannot be countenanced the same can be a ground for setting-aside the award. But this is not the situation here in this case. As noticed above, the BSNL wrongly assumed that the claimant-company was required to raise a claim or make an objection within 30 days of the payment made to or deduction made from the claimant-company. This is also a settled law that the proceedings under section 34 are summary in nature and, notwithstanding that it is civil in nature, there is no requirement in law to frame issues for determination like a regular suit [refer, “Fiza Developers & Inter-Trade Private Limited v. AMCI (India) Private Limited and Anr.” (2009) 17 SCC 796 ]. 22. In view of the aforesaid discussions, we do not find any merit in Commercial Appeal No.16 of 2022 which is dismissed.