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2024 DIGILAW 446 (TS)

Goel Road Carriers, Hyd. v. Tecumseh Products India Ltd. ,

2024-07-05

M.G.PRIYADARSINI

body2024
JUDGMENT : M.G.Priyadarsini, J. This Civil Miscellaneous Appeal is filed under Section 37(1)(B) of the Arbitration and Conciliation Act (for short ‘the Act’) by appellant aggrieved by the Order dated 04.03.2011 in Arbitration Original Petition No.2171 of 2005 (impugned Order) passed by the learned Chief Judge, City Civil Courts, Hyderabad (for short ‘learned Chief Judge’) wherein application filed by M/s.Goel Carriers (hereinafter referred as ‘respondent’) against claimant, to set aside Award dated 17.02.2005 passed by learned Sole Arbitrator-respondent No.2 herein, was dismissed. 2. For the sake of convenience, hereinafter, the parties will be referred as per their array before the learned Sole Arbitrator. 3. Claimant entered an Agreement dated 16.01.2001 with respondent for transportation of consignments such as hermetically sealed compressors and other ancillary parts from Hyderabad to Delhi, Noida and other places. Some consignments transported during January, May, June and August, 2001 were damaged due to accidents. Claimant incurred Rs.29,01,021/- for repairing the damaged compressors. Respondent withheld consignments worth of Rs.10,76,685/- towards freight charges. Therefore, disputes arose between claimant and respondent. 4. As per Clause No.14 of the Agreement, the Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI) appointed respondent No.2 as Sole Arbitrator vide Letter dated 12.04.2002 for settlement of disputes, in terms of Agreement. 5. Notices were issued to the parties. After giving reasonable opportunities to both sides and after duly considering the facts and consequences of the case, the learned Arbitrator passed an Award dated 17.02.2005 and awarded a sum of Rs.24,71,621/- along with interest at the rate of 18 percent per annum from the date of Award till realization in favour of Claimant. 6. Aggrieved by the same, respondent filed Arbitration Original Petition No.2171 of 2005 before the learned Chief Judge, City Civil Courts, Hyderabad and the same was dismissed vide impugned Order dated 04.03.2011. Aggrieved by the same, respondent has filed this Civil Miscellaneous Appeal to set aside the impugned Order. 7. Heard Sri D. Srinivas Prasad, learned counsel for appellant and Sri Bakaraju Venkat Rama Rao, learned counsel for respondent No.1 and perused the record available before this Court. 8. Now the point for consideration is: Whether the impugned Order dated 04.03.2011 passed in Arbitration Original Petition No.2171 of 2005 by the learned Chief Judge, is liable to be set aside? POINT : 9. 8. Now the point for consideration is: Whether the impugned Order dated 04.03.2011 passed in Arbitration Original Petition No.2171 of 2005 by the learned Chief Judge, is liable to be set aside? POINT : 9. The contentions of learned counsel for appellant is that claimant invoked the jurisdiction of Civil Court under Order VII Rule 1 and 2 read with Section 26 of the Code of Civil Procedure (for short ‘C.P.C.’) and committed breach of the alleged agreement between the parties to refer the matter to arbitration; that there is settlement of all claims between parties; that there is no arbitration agreement between the parties; that no notice was issued to appellant for settlement of alleged disputes and prayed this Court to allow this Civil Miscellaneous Appeal by setting aside the impugned Order as well as Award passed by the learned Sole Arbitrator. 10. Learned counsel for respondent No.1 submitted that the learned Sole Arbitrator has passed the impugned Award after considering all the aspects and gave detailed reasons for arriving at a right conclusion and the same does not require any interference by this Court and prayed to dismiss this Civil Miscellaneous Appeal. 11. It is to be noted here that claimant filed a suit in O.S.No.1119 of 2001 on the file of the learned Principal Senior Civil Judge, Rangareddy District and vide Orders dated 19.12.2001 passed in I.A.No.2189 of 2001 obtained an injunction restraining respondent from alienating the consignments, wherein it is specifically stated that interim order will be in force till claimant’s remedy of Arbitration of disputed claims is resolved and the said Order deemed to be under Section 9 of the Act. Therefore, it does not amount to submission of respondent to the jurisdiction of the Civil Court in breach of arbitration agreement between the parties. It appears that claimant sought for injunction pending remedy under Arbitration and it does not amounts to submission of matter to Civil Court. Moreover, respondent did not explain as to what kind of prejudice was caused to him when the civil jurisidcaiton was invoked by claimant. 12. Subsequently, the matter was referred to the Arbitration. Arbitrator was appointed and notices were sent to both the parties. Appellant has filed his counter before the learned Sole Arbitrator. Therefore, appellant cannot take a plea that he was not served with the notice for settlement of disputes before the learned Arbitrator. 13. 12. Subsequently, the matter was referred to the Arbitration. Arbitrator was appointed and notices were sent to both the parties. Appellant has filed his counter before the learned Sole Arbitrator. Therefore, appellant cannot take a plea that he was not served with the notice for settlement of disputes before the learned Arbitrator. 13. As seen from the impugned Award, respondent has taken a plea that there was no arbitration agreement between the parties, for which the learned Arbitrator has discussed in detail and gave a finding that there exists arbitration clause in Agreement at clause No.14 and upheld the jurisdiction of the Arbitral Tribunal and validity of constitution of Arbitral Tribunal. It was also held by learned Arbitrator, after due consideration of evidence, that one Manoj Bansal was authorized signatory on behalf of appellant company. 14. Further, it is the case of appellant that the parties have settled the matter and the question of claim of alleged damages will not arise under Arbitration Agreement. This aspect of settlement was raised before the learned Sole Arbitrator. It is evident from the impugned Award that the settlement is with regard to payment of pending bills towards freight charges, release of goods withheld by respondent and withdrawal of Court case. Therefore, the settlement is limited only to the payment of pending bills towards freight charges, release of goods withheld by respondent. The above said civil suit was withdrawn subsequently to the settlement. The aspect of damages and loss caused to the goods for carriage and delivery remained unsettled. The learned Sole Arbitrator also limited his jurisdiction to extent of unsettled disputes only. 15. It is pertinent to state here that the learned Sole Arbitrator has given detailed reasons and the decision arrived by him cannot be found fault as he considered all the aspects raised by both sides and justified all the claims with valid and cogent reasons. Therefore, award passed by the learned Sole Arbitrator is a well-reasoned one. Moreover, the material on record would not give any scope to doubt that the learned Sole Arbitrator has acted beyond his jurisdiction or was biased and that he violated the principles of natural justice. Equal opportunity given to the parties is evident from the correspondence made by the learned Sole Arbitrator and the manner in which the proceedings were conducted. 16. Equal opportunity given to the parties is evident from the correspondence made by the learned Sole Arbitrator and the manner in which the proceedings were conducted. 16. The scope of interfering with the arbitration award is very limited until and unless there is error apparent on the face of the record and there is perversity in the award. The expression public policy was of wider amplitude and hence, where award passed by the learned Arbitrator was against the terms of the contract or against the law of land for the time being in force, such an award is against the public policy of India and is liable to be set aside under Section 34 of the Act. 17. The Honourable Supreme Court in NTPC Limited v. Deconar Services Private Limited 2021 SCC OnLine SC 498 , held as under: “12. Further, it is also a settled proposition that where the arbitrator has taken a possible view, although a different view may be possible on the same evidence, the Court would not interfere with the award. This Court in Arosan Enterprises Ltd.v. Union of India, (1999) 9 SCC 449 held as follows: ‘36. Be it noted that by reason of a long catena of cases, it is now a well – settled principle of law that reappraisal of evidence by the Court to reappraise the evidence is known to proceedings under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. IN the event, however, there are reasons, the interference would still be not available within the jurisdiction of the court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. IN the event however two views are possible on a question of law as well, the Court would not be justified in interfering with the award. 37. The common phraseology “error apparent on the face of the record” does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The Court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. 37. The common phraseology “error apparent on the face of the record” does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The Court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined…’ From the above pronouncements, and from a catena of other judgments of this Court, it is clear that for the objector/appellant in order to succeed in their challenge against an arbitral award, they must show that the award of the arbitrator suffered from perversity or an error of law or that the arbitrator has otherwise misconducted himself. Merely showing that there is another reasonable interpretation or possible view on the basis of the material on the record is insufficient to allow for the interference by the Court.” 18. Even in the case on hand, there is no material to show that there is an error apparent on the face of the record or that there is perversity in award. Moreover, when two views are possible on a question of law as well, the Court would not be justified in interfering with the award. In the case on hand, there is no question of law involved in this case. In fact, all the grounds raised by the learned counsel for appellant are based on questions of fact and they are not based on question of law. Furthermore, even for the sake of arguments, if any questions of law are involved in the case on hand, as held above, when two views are possible, there is no justification on the part of the Court to interfere with the award. 19. It is apt to mention here that in Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited 2022 Live Law (SC) 452, the Honourable Supreme Court held as under: “23. For a better understanding of the role ascribed to Courts in reviewing arbitral awards while considering the application under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Ssangyong Engineering and Construction Co. For a better understanding of the role ascribed to Courts in reviewing arbitral awards while considering the application under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Ssangyong Engineering and Construction Co. Limited v. National Highways Authority of India (NHAI) MANU/SC/0705/2019: (2019) 15 SCC 131 where R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant passages of the judgment in Ssangyong (supra) are noted as under; “34. What is clear, therefore, is that the expression “public policy of India”, whether contained in Section 34 or in Section 48, would now mean the “fundamental policy of Indian law” as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to “Renusagar” understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in para 30 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . 35. It is important to notice that the ground for interference insofar as it concerns “interest of India” has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the “most basic notions of morality or justice”. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the “most basic notions of morality or justice”. This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground. 36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . 37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within “the fundamental policy of Indian law”, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality. 38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award. 39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. 39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award. 40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A). 41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.” 24. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.” 24. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by courts while examining the validity of the arbitral awards. The limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions. 25. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression ‘patent illegality’. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression ‘patent illegality’. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression ‘patent illegality’. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression ‘patent illegality’. 26. Section 34 (2) (b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression ‘public policy of India’ and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice.” 20. In the above said authority, it was elaborately discussed with regard to patent illegality and public policy. In the above said authority, it was elaborately discussed with regard to patent illegality and public policy. It was held that the contravention of a statute not linked to public policy or public interest, which cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality. 21. It was also made clear that re-appreciation of evidence cannot be permitted under the ground of patent illegality appearing on the face of the award. The expression ‘public policy of India’ and its connotations for the purposes of reviewing arbitral awards were made clear in the 2015 Amendment Act, from which it can be culled out that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice. But in the instant case on hand, it is not brought to the notice of this Court about any fraud or corrupt practice adopted during the course of transaction between the parties in violation of Section 75 or Section 81 of the 1996 Act. 22. Even appellant failed to bring to the notice of this Court that there is any patent illegality on the face of the record or that the learned Arbitrator has committed illegality or irregularity while passing the impugned arbitral award. In such circumstances, this Court is of the considered view that the learned Arbitrator after adjudicating all the aspects has rightly passed the impugned award and the interference of this Court in the impugned award is unwarranted, more particularly, when the scope of interference in the arbitral awards passed under Sections 34 and 37 of the Arbitration and Conciliation Act, is very minimum. 23. In view of the above facts and circumstances, viewed from any angle, this Court is of the opinion that the learned Arbitrator after considering all the aspects has passed the impugned Award and there is no illegality or irregularity in the proceedings conducted by the learned Sole Arbitrator. The tests laid down by the Honourable Apex Court with regard to public policy are very much fulfilled by the learned Sole Arbitrator. The tests laid down by the Honourable Apex Court with regard to public policy are very much fulfilled by the learned Sole Arbitrator. There is no violation with regard to the fundamental policy of Indian Law. Therefore, appellant failed to make out any of the grounds to set aside the impugned Award, which was confirmed by way of impugned Order passed by the learned Chief Judge. There are no merits in this Civil Miscellaneous Appeal and accordingly, the same is liable to be dismissed. 24. Accordingly, Civil Miscellaneous Appeal is dismissed. There shall be no order as to costs. As a sequel, pending Miscellaneous applications, if any, shall stand closed.