Bangalore District Court
Union Of India vs Sri. K. Venkata Raju on 13 February, 2017
IN THE COURT OF THE XLVI ADDITIONAL CITY CIVIL AND
SESSIONS JUDGE FOR CBI CASES AT BANGALORE CITY
(CCH-47)
HOLDING C/C II ADDITIONAL CITY CIVIL AND SESSIONS
JUDGE AT BANGALORE (C.C.H. No.17)
Dated this the 13th day of February, 2017.
PRESENT:
Shri. G.BASAVARAJA B.A.,LL.M.
XLVI Additional City Civil and Sessions Judge & Special
Judge for CBI Cases, Bangalore City, holding c/c of II Addl.
City Civil and Sessions Judge, Bangalore.
A.S.No.59/2010
PETITIONER:
Union of India,
Represented by the Executive Engineer,
BCD II,
Office of the Executive Engineer, Bangalore
Central Division-II,Central PWD, C-Wing,
Second Floor,
Kendriya Sadan, Koramangala, Bangalore-560
034.
(By Sri. T.M.N. Advocate)
Vs.
RESPONDENT:
1 Sri. K. Venkata Raju, Major,
No.183, 5th cross, Bhadrappa
Layout, Nagashettihalli,
Bangalore-560 094.
2 A.S.59/2010
2 Sri. A.P. Joshi,
Arbitrator,
Ministry of Urban Development,
4th floor, Old CGO Building,
101, M.K. Road,
New Marine Lines,
Mumbai-400 020.
R1 by Sri. Shankar D.,Advocate.
R2-Exparte.
JUDGMENT
The Petitioner has filed this suit u/s 34 of Arbitration and Conciliation Act, 1996 to set aside the award passed by the Arbitrator on 26/4/2010.
2. Brief facts of the petition are as under:
Petitioner is the Union of India,Represented by the Executive Engineer,BCD II,Office of the Executive Engineer, Bangalore Central Division-II,Central PWD, C-Wing, Second Floor,Kendriya Sadan, Koramangala, Bangalore-560 034. It is further stated that, certain disputes and differences arose between the Petitioner and the Respondent No.1 out of contract in writing for the work for c/o office-cum-residential building for SIB Kolar awarded by the 2nd Respondent to the 3 A.S.59/2010 1st Respondent on 30-8-2006 on the basis of item rate tenders submitted by the first Respondent and negotiated for Rs.4100445/- which was 24.83% above the estimated cost of Rs. 3284745/- put to tender. The work was stipulated to commence on 21/9/2006 and was to be completed in 9 months time by 20/6/2007. The work was delayed for various reasons and could only be completed by 3-11-2007. The extension of time was granted by the Petitioner with levy of compensation for the 81 days delay on 3-12-2008. Since the final bill was accepted under protest for various reasons and that the Arbitration clause was invoked within the Limitation period as specified in the Limitation Act the claims are not time barred.
Further it is submitted that the sole Arbitrator published his award on 26/4/2010. On perusal of award, Union of India it is seen that an unfair and biased attitude has been adopted by Arbitrator.
Further it is stated that the payment towards works done but, not paid relating to like TMT for steel, supply and filling good earth, extra for providing TMT bars in 41/2" brick wall, extra for providing and applying wall putty in ceilings 4 A.S.59/2010 and walls, electrical contractors damages patch up plastering works done etc., value of claim about Rs.2,95,000/- plus update amount. The petitioner's defence is that the claim of the first Respondent is totally hypothetical and far from the truth as the first Respondent has never been asked to execute the said work/items. Since none of the claims were genuine hence the Petitioner denied in toto. The first Respondent has not produced any evidence of instruction in this regard. The sub claims are all baseless and the claim of the first Respondent is false, baseless and not tenable in law and the first Respondent has not produced analysis of rates etc., to the Petitioner. The Petitioner submits that the sole arbitrator granting an award of Rs.20,000 in respect of claim No.1 is baseless and the award of Rs.50,000/- is against this claim.
The first Respondent has claimed a sum of Rs.13,85,008/- towards compensation payment towards increased cost of working due to works done in staggered and restricted manner and work done beyond original contract period of 9 months and cost increase on works done beyond ground floor etc., The Petitioner submits that the provision under para8 of CPWD 6, special conditions-2 on page 25 of 5 A.S.59/2010 agreement, clause 7, clause 11, clause 12.4, clause 22 and the claim of first Respondent is baseless. The 2nd Respondent's award in a sum of Rs.2,21,510/- is baseless and no documents proof have been produced by the first Respondent. The delay is only on the part of the first Respondent and he has not completed the said work in time and hence, the Petitioner is not liable to pay any award amount of Rs.2,21,510/-. The claim No.3 is that the first Respondent claimed a sum of Rs.6,45,650/- towards loss suffered on account of idling establishment on workers, staff etc., The Petitioner's defence is that the agreement provisions under clause 11,12.4 and clause 22 may be referred, relevant/appropriate and the Petitioner's defence is not at all considered by the sole arbitrator and lacks bonafides. The claim No.3 is denied in toto by the Petitioner. It is further stated that since the first Respondent is himself responsible for all the delays, hence, no amount can be paid by the Petitioner and it is the Petitioner who has suffered loss on delay on the part of the first Respondent by not utilising the building which was supposed to be completed by June-2007. 6 A.S.59/2010
The Petitioner further submits that the award in a sum of Rs.51,250/- is wrong and one sided and hence, there is no merits whatsoever in passing the award by the 2nd Respondent. It is further submitted that the claim of the first Respondent is Rs.5,75,000/- towards delayed payment of bills etc., The defence of the Petitioner in respect of the claim No.4 is that since the first Respondent has not submitted the final bill, hence, question of delay in final bill payment and release of the security deposit amount does not arise. As per Clause 9 of the agreement, the final bill shall be submitted by the first Respondent within three months of physical completion of the work or within one month of the date of the final certificate furnished by the Engineer-in-charge whichever is earlier. No further claims shall be made by the Contractor after submission of the final bill and these shall be deemed to have been waived and extinguished. The findings given by the sole Arbitrator with regard to claim No.4 is correct.
The first Respondent has claimed a sum of Rs.6,15,067/- for compensation for loss of profit at the rate of 15% on Rs.41,00,445/- and the findings given by the sole 7 A.S.59/2010 Arbitrator with regard to claim No.5 is correct. The Petitioner is not disputing the findings of the 2nd Respondent.
The first Respondent has claimed interest on the value of claim at the rate of 24% p.a. from 21/6/2007. the Petitioner's defence is that all the claims raised are after thought with ulterior motives to have monetary gain and since no payment is due to the first Respondent and all claims are totally hypothetical and liable to be rejected. The award of interest at the rate of 10% per annum from 24-12-2008 is wrong as there is no dues to the first Respondent.
The first Respondent has claimed compensation of Rs.50,000/- plus update amount and plus applicable stamp duty on award. The Petitioner's defence is that the claim put- forward by the 1st Respondent are all false, imaginary and fictitious and the first Respondent has unnecessarily dragged the Petitioner into arbitration and hence, prayed for rejecting the claim of the 1st Respondent. The award of Rs.50,000/- by the 2nmd Respondent is wrong and it is very high.
The first Respondent has claimed compensation by way of liquidated damages for a sum of Rs.5 Lakhs. The Petitioner's defence is that the claim is totally hypothetical 8 A.S.59/2010 without any material facts and it is contract with the terms and conditions of the agreement. It is the first Respondent who has delayed the project, caused huge loss to the Petitioner and sought for rejecting the said claim. The award of Rs.1,62,893/- is baseless and not maintainable in law. The award in a sum of Rs.5,35,653/- plus simple interest at the rate of 10% on the sum awarded is totally wrong and is liable to be rejected in limine.
The Petitioner further urged that the impugned award is liable to be set-aside as it is conflict with the public policy of India in as such as the award is indirect contravention of the laws of India and the decisions of the Hon'ble Supreme Court of India and the various High Courts; the impugned award is liable to be set-aside as it is biased, full of contradictions and not in conformity with Arbitrator's own findings and against the specific agreed conditions of contracts. The impugned order is one sided and not passed on merits. By awarding inspite of the fact that the first Respondent has delayed the contract work and hence he is not entitled for any relief. The stand of the Arbitrator is against the public policy and it has traversed beyond the contract conditions agreed to by the 9 A.S.59/2010 Petitioner and the first Respondent. On all these grounds it is prayed to set-aside the impugned award 26/4/2010 passed by the Respondent No.2 sole Arbitrator with costs.
3. After registering the case, case was registered in the above case and made over to Court Hall No.11 for the disposal in accordance with law by the Prl.City Civil and Sessions Judge, Bengaluru, notice were issued to Respondents and thereafter, in view of notification Prl.City Civil and Sessions Judge, Bengaluru, vide letter No.PPS(CCC) 68/2014 dated:
1/12/2014 case is transferred to this court. Thereafter, notice was issued to Respondent No.2 But, he placed exparte. On 14/10/2015, Respondent No.1 appeared through his counsel. On that day, exparte order was set-aside and Respondent No.1 was permitted to contest the case. Respondent No.1 filed statement of objections with written arguments.
4. The substance of objections is that the application in question is not maintainable in law and facts. Further it is stated that para-1 to 3, 7 to 9 of the Respondent are concerned, the award under challenge is highly sound and the same is in accordance with law and that apart, based on 10 A.S.59/2010 acceptable materials and applicable principles of law and proceedings and as such the learned Arbitrator has not committed any legal mis-conduct as alleged by the Petitioner. Further it is stated that award passed by the Arbitrator is well within the parameters of the contract conditions and also in accordance with Arbitration and Conciliation Act, 1996, other applicable laws and also as per various High Court and Apex Courts orders only. Further it is stated that award passed by the Arbitrator is sound and correct against both parties. except to the extent made in A.S.No.62/2010 that there is no violation of public policy and further it is stated as to the provisions of section 34 of Arbitration and Conciliation Act, 1996. Further they have denied all other averments made in the petition and sought for rejection of petition by Petitioner and further it is sought by the Respondent for rejecting the counter claim passed by the Aribtrator and direct the Petitioner to pay the amount as per award together with interest @ 18% p.a on the entire award( ie., on claim No. 1 to 3, 7 to 9) and sought for modifications in A.S.No.62/2010 from 3-11-2007 upto the actual date of realization to meet the ends of justice.
11 A.S.59/2010
.5. Both parties have filed their written arguments. .6. Having regard to the facts and circumstances of the case, the following points would arise for my consideration;
1) Whether the Petitioner/plaintiff has made out a specified grounds as contemplated under Sub Section 2 of Sec.34 of Arbitration and Conciliation Act, 1996 to set aside the impugned award dated: 26/2/2010 passed by the Arbitrator?
2).What order?
.7. My findings on the above points are as follows:-
Point No.1 : In the Negative
Point No.2 : As per the final order for the
following:-
REASONS
.8. Point No.1: I have gone through the pleadings of both the parties and impugned award passed by the Arbitrator. Before going through the facts of this case, it is necessary to mention here as to the provisions of section 34 of Chapter VII of Arbitration and Conciliation Act, 1996, which reads as under:
12 A.S.59/2010
34. APPLICATION FOR SETTING ASIDE ARBITRAL AWARD (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) 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:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or 13 A.S.59/2010
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
After amendment of Arbitration and Conciliation (amended) Act 2015 the following Sub Section 2(A) also inserted which reads as under:
An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award.
PROVIDED that an award shall not be set aside merely on the ground of an erroneous application of the law or by Respondent-appreciation of evidence.
9. Apart from this, I have gone through the decisions reported in AIR 2009 Delhi 80(Vikesh Chugh v. B.L.B Ltd.,) in which their Lordships have observed as under:
382. Setting aside of arbitral award-Powers of Court- Jurisdiction of Court was not appellate.
Arbitral award could not be scrutinized as if Court was exercising appellate jurisdiction. Award 14 A.S.59/2010 could not be interfered merely because view taken by Arbitrator did not agree with view of Court.
10. Another decision reported in AIR 2010 SC 3400(Sumitomo Heavy Industries Ltd., v. Oil & Natural Gas Company), wherein the Apex Court has held that;
View taken by Arbitrator was possible view of matter, Court should not interfere. Court does not sit in appeal over findings of Arbitrator. I have gone though the decision reported in 2011(103) A/C 675(M.P.H.C)(M.P.Stock Exchange, Indore .v. C.M.C Maintainability of application), in which it is held as under:
Section 34 of the Act provides for setting aside of the award on the ground enumerated therein. It is not in dispute that an application for setting aside the award would not lie on any other ground, which is not enumerated in section 34 of the Act. Another decision of out Hon'ble Apex Court ie., Fiza Developers & Inter-Trade...vs. Amci(I) P.Ltd & Anr. On 27 July 2009, their Lordships R.V.Raveendran, B. Sudershan Reddy have held in para-13 of the judgment as under: 15 A.S.59/2010
13. Before concluding, there is a need to clarify the observation by the High Court that a proceeding under section 34 may not be in the nature of adversarial proceedings. In an adversarial process, each party to a dispute presents its case to the neutral adjudicator seeking to demonstrate the correctness of his own case and the wrongness of the other. [See :
P.Ramanatha Iyer's Advanced Law Lexicon, Third Edition, Vol.I, Page 152]. While an applicant in an application under section 34 is interested in getting an order setting aside an award, his opponent is equally interested in ensuring that it is not set aside, but upheld. While an applicant presents his case to the Judge to prove that the award is liable to be set aside, the respondent puts forth his case to refute the claim of the applicant that the award is liable to be set aside. An application under section 34 in that sense is adversarial in nature. But proceedings under section 34 differ from regular civil suits in a significant aspect. In a regular civil suit, in the event of failure to file a defence, it will be lawful for the court to pronounce the judgment on the basis of facts contained in the plaint [Vide Order VIII Rule 5(2) of the Code]. But in an application under section 34, even if there is no contest, the court cannot on the basis of the averments contained in 16 A.S.59/2010 the application, set aside the award. Whether there is contest or not, the applicant has to prove one of the grounds set out in section 34(2)(a) and
(b). Even if the applicant does not rely upon the grounds under clause (b), the Court, on its own initiative, may examine the award to find out whether it is liable to be set aside on either of the two grounds mentioned in section 34(2)(b). It is perhaps in this sense, the High Court has stated that the proceedings may not be adversarial. Be that as it may.
11. I have also gone through the decisions relied by the learned Counsel for the Respondent No.1 in his written arguments.
(i). AIR 1987 SC 2045( Coimbatore District Podu Thozillar Samgam V. Bala Subramania Foundry and others, in the head note it is proved thus;
"Arbitration Act (10 of 1940) S.30 Award-Setting aside of-Award can be set aside if there is error to law apparent on face of record-Mistake of fact is not amenable to correction"
(ii) In the decision reported in AIR 1987 Supreme Court 81 in the case of M/s Hindustan Tea Coi., V M/s K. Sashikant & Complainant, and another, it is held that, award 17 A.S.59/2010 cannot be set aside on ground that Arbitrator reached wrong conclusion or he failed to appreciate facts.
(iii) In the decision reported in AIR 2003 DELHI 128 in the case of EM and EM Associates Vs Delhi Development Authority and another, in the head Note 'A' it is provided thus:
(A) Arbitration and Conciliation Act(26 of 1996), S.34-award setting aside of-Interpretation of agreement adopted by Arbitrator - cannot be said to be not possible one-Award of Arbitrator would not be liable to be set aside"
(iv) In the decision reported in AIR 2003 Delhi 314 in the case of Govt. of NCT of Delhi V. Khem Chand and another, under Head Note "B" it is provided thus:
" (B) Arbitration and Conciliation Act, (26 of 1996) S.34(2)-Award-Setting aside of-misconduct by Arbitrator-
Neither any allegation of non-adherence of principles of natural justice made not it was a case that Arbitrator acted contrary to any agreement between parties-Award cannot be set aside simply on ground that Arbitrator excluded certain evidence placed before him- such ground or plea does not come under expression 'misconduct'.
(v) In the decision reported in 2002(1) Kar. L.J. 419(DB) in case of Rail India Technical and Economic Services Limited("RITES"). New Delhi Vs. Ravi Constructions, Bangalore and another, it is provided that, court cannot 18 A.S.59/2010 examine the validity of award on any ground other than grounds specified in Section 34, challenge the award that it is erroneous is liable to be rejected.
(vi) In the decision reported in AIR 2002 NOC 30(KANT), in the case of Rail India Technical and Economic Services Ltd., Bangalore Vs Ravi Constructions, Bengaluru and another, it is provided that "Award can be set aside only on the ground provided under section 34 of the Act"
(vii) In the decision reported in (2007) 7 SCC 69, in the case of MARKFED VANASPATI & ALLIED INDUSTRIES Vs. Union of India, it is provided that, Arbitration is a mechanism or a method of resolution of disputes that unlike court takes place in private, pursuant to agreement between the parties.
The parties agree to be found by the decision rendered by a chosen Arbitrator after giving a hearing. The endeavour of the court should be to honour and support the award as far as possible.
(viii) In the decision reported in 2010 AIR SCW 2540 Tarum Chattarjee and Aftab Alam JJ-Union of India Vs. Saraswat Trading Agency and Another-it is provided in the head Note:
a) Arbitration and Conciliation Act, (26 of1996), S.34-
Award-Setting aside of-Dispute arising out of works contract between appellant and Respondent /Contractor-Respondent's claim for enhanced payment towards escalation-Award of enhanced amount by Arbitrator for escalation-Not improper.(Para12).
19 A.S.59/2010
12. In the case on hand, I have gone through the impugned award passed by the Arbitrator. That, the Arbitrator has passed an award that the Respondent do pay the claimants a sum of Rs. 5,35,653/-( Rupees five lakhs thirty five thousand six hundred and fifty three only) plus simple interest @ 10% on the sum awarded against various claim for the period from(the date on which request for referring the disputes to arbitration was made by the Claimants) till the date of payment or decree whichever is earlier.
13. On careful scrutiny of the pleadings of plaintiff, it is crystal clear that there is no pleading in the petition/plaint filed u/s 34(2) of Arbitration and Conciliation Act, 1996 as to the ingredients enumerated in Sub Section 2 of Section 34 of Arbitration and Conciliation Act, 1996 . Both the parties have not adduced any additional evidence by way of affidavit before this court.
14. On careful scrutiny of material placed before this Court, I am of the considered opinion that the Petitioner/plaintiff has not made out grounds to set aside the 20 A.S.59/2010 impugned award passed by the Arbitrator as required under Sub-section 2 of Section 34 of Arbitration and Conciliation Act, 1996. Therefore, the arguments advanced on behalf of Petitioner/plaintiff's counsel cannot be accepted and relying on the aforesaid decisions and also the provisions of Sub- Section 2 of Section 34 of Arbitration and Conciliation Act, 1996, it is held that the Petitioner has failed to made out grounds as contemplated under Sub-Section 2 of Section 34 of Arbitration and Conciliation Act, 1996.
15. The Arbitrator has assigned proper reasons as to the claim of Petitioner/plaintiff. I do not find any illegality in the impugned award passed by the Arbitrator. The finding given by the Arbitrator is in proper perspective manner and in accordance with law. The plaintiff has not placed any materials to discard the reasons assigned by the Arbitrator.
16. The Respondents have also filed a petition before this court u/s 34 of Arbitration and Conciliation Act, 1996 against the present petitioner/plaintiff and same is registered in A.S.No.69/2010. This court has dismissed the said petition filed by the Respondents. Considering the facts and 21 A.S.59/2010 circumstances of this case, there is no need to impose costs on any of the parties. Hence, it is just and proper to pass an order directing the parties to bear their own costs. Hence, I answer Point No.1 in Negative.
.17. Point No.2:- For the aforesaid reasons and discussion made, I proceed to pass the following:-
ORDER The Petition filed under Section 34 of Arbitration and Conciliation Act, 1996 by the Petitioner/plaintiff is dismissed.
Parties are directed to bear their own costs.
(Dictated to the Judgment-Writer, transcribed by her, corrected by me and then pronounced in open Court on this the 13th day of February, 2017.) (G.BASAVARAJA) XLVI ACC & SJ & Special Judge for C.B.I. Holding C/C of II ACC & Sessions Judge, Bangalore.22 A.S.59/2010
23 A.S.59/2010 Case called out, Written arguments filed.
For judgment Call on 13-02-2017 (G.BASAVARAJA) XLVI ACC & SJ & Special Judge for C.B.I. Holding C/C of II ACC & Sessions Judge, Bangalore.
Judgment pronounced in
open court (Vide separate
order)
ORDER
The petition filed u/s 34 of
Arbitration and Conciliation Act,
1996 filed by the
Petitioner/plaintiff is dismissed.
24 A.S.59/2010
Parties are directed to bear
their own costs.
(G.BASAVARAJA)
XLVI ACC & SJ & Special Judge for C.B.I.
Holding C/C of II ACC & Sessions
Judge,
Bangalore.