Himachal Pradesh High Court
Rajesh Thakur vs State Of Himachal Pradesh And Another on 28 July, 2016
Author: Sanjay Karol
Bench: Sanjay Karol
IN THE HIGH COURT OF HIMACHAL PRADESH,
SHIMLA.
.
Arbitration Case No.50/2009
Decided on : 28.07.2016
Rajesh Thakur ...Petitioner.
Versus
State of Himachal Pradesh and another ....Respondent
Coram:
The Hon'ble Mr. Justice Sanjay Karol, Judge.
of
Whether approved for reporting? No.1
For the Petitioner : Mr. J.S. Bhogal, Senior Advocate with
Mr. Parmod Negi, Advocate.
For the Respondents:
rt Mr. R.S. Verma and Mr. R.M. Bisht,
Additional Advocate Generals.
Sanjay Karol, J. (oral)
In this petition filed under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act), challenge is laid to the award dated 1.5.2009 passed by the Arbitrator-cum-Superintending Engineer, Arbitration Circle, HP PWD, Solan, primarily on the ground that the arbitrator erred in correctly interpreting the principle of law laid down with regard to the question of delay in execution of the work.
2. Noticeably, the apex Court in Vishwanath Sood vs. Union of India and another, (1989) 1 SCC 657, has held Clause 2 to contain a complete machinery for determination of compensation claimed on the ground of delay on the part Whether reporters of Local Papers may be allowed to see the judgment?
::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 2of the Contractor in completing the contract in terms of the agreement. In effect, the question of delay in the light of .
Clause 2 of the Contract was held to be non arbitrable.
Even though, the ratio laid down in the said decision still holds good, but however it is contended on behalf of the petitioner herein, that the said principle stands diluted by a of subsequent decision of a Co-ordinate Bench of the same Court in J.G. Engineers Private Limited vs. Union of India and rt another, (2011) 5 SCC 758.
3. In the given facts and circumstances of the case, this Court cannot be called upon to adjudicate this issue.
And the reason being that the arbitrator has left this issue open to be adjudicated in an appropriate proceeding, if any, which may be initiated by the State against the petitioner herein. This of course is by implication. In any case, today petitioner cannot be aggrieved of the same as the issue remains undecided and certainly not against him.
4. This Court is required to adjudicate the petition within the limited parameters stipulated under Section 34 of the Act. In the instant case, no ground of incapacity stands pleaded or urged. It is also not the petitioner's case that the arbitration agreement is invalid or not valid. The ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 3 principles of natural justice fully stand complied with. The arbitrator has also adjudicated the disputes emanating out .
of the contract in question. The award also cannot be said to be induced or affected by fraud or corruption or in violation of statutory provisions.
5. What is further required to be examined is as to of whether the award is in contravention with the fundamental policy of Indian law or is in conflict with the basic notions of rt morality of justice or not. For examining the same, this Court is required to adjudicate the issue in the light of principles of law laid down by the apex Court in its several decisions as noticed by this Court in Arbitration Case No.60 of 2015, titled as Ashok Kumar Thakur vs. The State of Himachal Pradesh through Secretary HP PWD & another, dated 9.3.2016, wherein it is held as under:-
"4. Courts cannot proceed to comparatively adjudicate merits of the decision. What is to be seen is as to whether award is in conflict with the Public Policy of India. Merits are to be looked into only under certain specified circumstances i.e. being against the Public Policy of India, which connotes public good and public interest. Award which is ex facie and patently in violation of the ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 4 statutory provisions cannot be said to be in public interest.
.
5. In Oil & Natural Gas Corporation Ltd. Vs. Saw Pipes Ltd. (2003) 5 SCC 705 the Court reiterated the principle laid down in Renusagar Power Co. Ltd. vs. General Electric Co., 1994 Supp (1) SCC 644 holding that the award can be set aside if it is contrary to: (a) the fundamental of policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is rt patently illegal. However, such illegality must go to the root of the matter and if it is trivial in nature, then it cannot be said to be against public policy. Only such of those awards which, being unfair and unreasonable, shocks the conscious of the court can be interfered with.
6. The principles continued to be reiterated by the apex Court in McDermott International Inc. vs. Burn Standard Co. Ltd. (2006) 11 SCC 181 and Centrotrade Minerals & Metals Inc. vs. Hindustan Copper Ltd. (2006) 11 SCC 245.
7. Eventually in DDA vs. R. S. Sharma and Co. (2008) 13 SCC 80 the Court culled out the following principles:
"21. From the above decisions, the following principles emerge:
(a) An award, which is
(i) contrary to substantive provisions of law;
or ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 5
(ii) the provisions of the Arbitration and Conciliation Act, 1996; or
(iii) against the terms of the respective .
contract; or
(iv) patently illegal; or
(v) prejudicial to the rights of the parties; is open to interference by the court under Section 34(2) of the Act.
of
(b) The award could be set aside if it is contrary to:
rt (a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality.
(c) The award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.
(d) It is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India."
8. Recently the apex Court in Associate Builders vs. Delhi Development Authority (2015) 3 SCC 49 has further explained the meaning of the words "fundamental policy of Indian law"; "the interest of India"; "justice or morality"; and "patently illegal". Fundamental policy of Indian law has been held to include judicial approach, non violation of principles of natural justice and such decisions which are just, ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 6 fair and reasonable. Conversely such decisions which are perverse or so irrational that no .
reasonable person would arrive at, are held to be unsustainable in a court of law. The court observed that:-
"29. It is clear that the juristic principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the obverse of side, anything arbitrary and whimsical would obviously not be a determination which would rt either be fair, reasonable or objective.
30. The audi alteram partem principle which is undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34(2)(a)(iii) of the Arbitration and Conciliation Act. These sections read as follows:
"18. Equal treatment of parties. - The parties shall be treated with equality and each party shall be given a full opportunity to present his case.
* * *
34. Application for setting aside arbitral award. - (1) * * * (2) An arbitral award may be set aside by the court only if -
(a) the party making the application furnishes proof that -
* * *
(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;"
31. The third juristic principle is that a decision which is perverse or so irrational that ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 7 no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that .
where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or of
(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse."
9. rt Further, in the very same decision, while relying upon Excise and Taxation Officer-cum-
Assessing Authority vs. Gopi Nath & Sons, 1992 Supp (2) SCC 312; Kuldeep Singh vs. Commr. of Police, (1999) 2 SCC 10; and P. R. Shah, Shares & Stock Brokers (P) Ltd. vs. B.H.H. Securities (P) Ltd., (2012) 1 SCC 594, the Court clarified the meaning of the expression 'perverse' so as to include a situation where the Arbitrator proceeds to ignore or exclude relevant material or takes into consideration irrelevant material resulting into findings which are so outrageous, that it defies logic and suffers from the vice of irrationality. What would be "patent illegality"
was clarified in the following terms:-
"42. In the 1996 Act, this principle is substituted by the "patent illegality" principle which, in turn, contains three subheads:::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 8
42.1. (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in .
the sense that such illegality must go to the root of the matter and cannot be a of a trivial nature. This again is really a contravention of Section 28(1)(a) of the Act, which reads as under:
of "28. Rules applicable to substance of dispute. - (1) Where the place of arbitration is situated in India - rt (a) in an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;"
42.2. (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality -
for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside.
42.3.(c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:
"28. Rules applicable to substance of dispute. - (1) - (2) * * * (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 9 the contract and shall take into account the usages of the trade applicable to the transaction."
.
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not of mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless rt the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.
43. In McDermott International Inc. vs. Burn Standard Co. Ltd. (2006) 11 SCC 181, this Court held as under:
"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See: Pure Helium India (P) Ltd. v. Oil and ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 10 Natural Gas Commission, (2003) 8 SCC 593 and D.D. Sharma v. Union of India, (2004) 5 SCC 325].
.
113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award."
44. In MSK Projects (I) (JV) Ltd. v. State of of Rajasthan, (2011) 10 SCC 573, the Court held:
"17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he rt wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. [See: Gobardhan Das v. Lachhmi Ram, AIR 1954 (SC) 689, Thawardas Pherumal v. Union of India, AIR 1955 (SC) 468, Union of India v. Kishorilal Gupta & Bros., AIR 1959 (SC) 1362, Alopi Parshad & Sons Ltd. v. Union of India, AIR 1960 (SC) 588, Jivarajbhai Ujamshi Sheth v.
Chintamanrao Balaji, AIR 1965 (SC) 214 and Renusagar Power Co. Ltd. v. General Electric Co., (1984) 4 SCC 679.]"
::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 1145. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306, the Court held:
.
"43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the of position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation rt accepted by the arbitrator.
44. The legal position in this behalf has been summarised in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63 and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. v.
ONGC Ltd., (2010) 11 SCC 296 to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf.
45. This para 43 reads as follows: (Sumitomo case, (2010) 11 SCC 296, SCC p. 313) '43. ... The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn., (2009) 5 SCC ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 12 142 the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is .
what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire of has to be accepted as final and binding.' " "
6. Now rt in the instant case, the award for construction of retaining wall came to be awarded to the petitioner on 1.11.1999. Since the work could not be completed, contract came to be rescinded on 9.11.2000 by which date petitioner had executed the work so quantified by the department for a sum of `16,30,900/-. This was as against the awarded amount of `18,25,232/-. It is not in dispute that as against the executed work, by way of running bills, petitioner had already received a sum of `15,32,225/-. It is in this backdrop that the matter came to be referred for adjudication of the arbitrator who in terms of the impugned award has held the petitioner entitled to an amount of `98,045/- but however, in the counter claim set up by the State, a sum of `1,76,369/- is directed to be ::: Downloaded on - 15/04/2017 20:54:49 :::HCHP 13 recovered from him. Thus, entitling the State to recover a sum of `85,107/-.
.
7. Undisputedly, as also from the factual matrix emanating from the record, the work came to be measured by the officials of the State only after prior notice came to be issued to the petitioner. The arbitrator has repelled the of petitioner's contention of not having received any such communication. But then this Court finds no reason to rt interfere with such findings, for it cannot be said to be erroneous or not borne out from the record. The findings of fact, rendered by the arbitrator cannot be said to be perverse so as to fall within the parameters laid down by the apex Court in Associate Builders (supra). It cannot be said that the impugned award is in contravention with the fundamental policy of Indian law or is in conflict with the basic notions of morality of justice.
8. No other point urged.
In view of the aforesaid observations, present petition, devoid of merits, is dismissed. Pending application(s), if any, also stand disposed of accordingly.
(Sanjay Karol),
July 28, 2016 (KS) Judge.
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