Delhi District Court
Union Of India vs Sagar Electricals & Equipments on 28 February, 2022
DLCT010120552019
IN THE COURT OF DISTRICT JUDGE (COMMERCIAL
COURT)-01,
CENTRAL, TIS HAZARI COURTS, DELHI
PRESIDED BY: MR. BHARAT PARASHAR
IN THE MATTER OF:
OMP (COMM) NO. 88/2019
1. UNION OF INDIA
THROUGH ITS GENERAL MANAGER
NORTHERN RAILWAY, BARODA HOUSE
NEW DELHI.
2. THE DEPUTY CHIEF ELECTRICAL ENGINEER /
CONST. / GC
NORTHERN RAILWAY,
SHIVAJI BRIDGE
NEW DELHI.
.... OBJECTORS / PETITIONERS
VERSUS
1. SAGAR ELECTRICALS & EQUIPMENTS
THROUGH ITS PROPRIETOR SH. P.K. SETH
S-I/200, FIRST FLOOR, LANE NO. 3
OLD MAHAVEER NAGAR, TILAK NAGAR
NEW DELHI-110018.
2. SHRI NARENDER KUMAR VERMA, ADVOCATE
LD. SOLE ARBITRATOR
CH. NO. M-7, M-BLOCK, CIVIL WING,
NEAR RAILWAY RESERVATION COUNTER
TIS HAZARI COURTS
DELHI-110054.
.... RESPONDENTS
OMP (COMM) NO. 88/2019 Page No. 1 of 26
ORDER
1. Vide this order, I propose to dispose off a petition under section 34 of Arbitration and Conciliation Act, 1996 filed by Union of India through its General Manager, Northern Railway and the Deputy Chief Electrical Engineer/Const./GC, Northern Railway New Delhi (herein after referred to as 'Railways') against M/s Sagar Electricals and Equipments (herein after referred to as 'Sagar Electricals') seeking setting aside of order dated 29.04.2019 passed by Ld. Sole Arbitrator Mr. Narender Kumar Verma, who too has been arrayed as respondent No. 2 in the present petition.
2. Briefly stated the necessary facts as stands emanated from the petition are as under:
With respect to award of a contract to respondent no. 1 Sagar Electricals by Railways certain disputes came to be referred to two Ld. Arbitrators Sh. Deepak Krishan, CE/C/NW and Sh. Davinder Rai, Sr. DAO/FZR by General Manager, Northern Railways. While the statement of claim was submitted by Sagar Electricals, the respondent/non-claimant Railways besides submitting its reply to the claim also submitted its counter claim. After hearing the parties, the Ld. Co-Arbitrators passed an award dated 16/08/1996 under Arbitration Act, 1940 and thereby from out of the total claimed amount of ₹ 5 85,688.85 a sum of ₹ 3, 16,002.85 was awarded in favour of Sagar Electricals and from out of ₹ 5, 60,027 as claimed in the counter claim, a sum of ₹ 2, 63,200 was awarded in favour of OMP (COMM) NO. 88/2019 Page No. 2 of 26 Railways.
3. The claimant Sagar Electricals however challenged the said award dated 16/08/1996 before the then court of Sh. G.S. Jugti Ld. ADJ by filing its objections under Section 14 of Arbitration Act, 1940. Vide a detailed order dated 11/03/1997, Ld. ADJ allowed the said objections and accordingly set aside the said award. Ld ADJ further directed the Ld. arbitrators to decide the matter afresh within four months from the date of order and pass a fresh award taking into consideration the claims/objections filed by the objector. Subsequently, on an application moved by the claimant Sagar Electricals under section 14 and 17 Arbitration Act, 1940 submitting that the order dated 11.03.1997 has not yet been complied with by the Ld. Arbitrators, Ld. ADJ Sh. G.S. Jugti, vide order dated 19.02.1998 appointed a new arbitrator namely Sh. G.S.Panesar, retired Chief Engineer, CSIRO. However, Sh. Panesar expressed his non-availability to conduct the arbitration proceedings and accordingly on a petition filed by Sagar Electricals Ld. ADJ Sh. G.S. Jugti vide order dated 16/05/1998 appointed a new arbitrator namely Sh. Suresh Srivastav, Advocate. Railways however challenged the said order dated 16/05/1998 passed by Ld. ADJ before Hon'ble High Court vide CM (main) No. 246/98, but the same was dismissed vide orders dated 05/08/2003.
4. Subsequently, Railways filed an application under section 14 Arbitration and Conciliation Act, 1996 challenging the appointment of Sh. Suresh Srivastav, as an arbitrator. The said OMP (COMM) NO. 88/2019 Page No. 3 of 26 application came to be decided by the court of Ld. ADJ Sh. Arun Sukhija vide order dated 01/10/2018 and the Ld. ADJ while exercising his powers under the old Arbitration Act,1940 appointed Sh. Narender Kumar Verma advocate (respondent No. 2 herein) as an Arbitrator. Sh. Narender Kumar Verma accordingly entered reference and commenced arbitral proceedings. Sagar Electricals thereafter filed its statement of claim before the Ld. Arbitrator and in response thereto the non- claimant Railways filed its reply along with its counter claim as was earlier also filed in the year 1996 before the panel of two Arbitrators. However, Sagar Electricals filed an application before the Ld. sole arbitrator Sh. Narender Kumar Verma seeking dismissal of the counter claim stating that vide orders dated 11.03.1997 Ld. ADJ Sh. G.S. Jugti had remitted the matter back to the Ld. Arbitrators with the directions to consider only the claims/objections filed by Sagar Electricals and not the counter claim as was earlier filed by Railways. It was submitted that as non-claimant Railways had not submitted any objections to the earlier award and even chose to not file any reply to the objections filed by the claimant, so the counter claim of Railways cannot be now considered. Reply to the said application seeking dismissal of counter claim was thereafter filed by Railways and after hearing arguments, Ld. Sole Arbitrator dismissed the counter claim of Railways vide orders dated 29/04/2019.
5. It is the said order of dismissal of counter claim by the Ld. Sole Arbitrator which has been challenged by the Railways in the present petition under section 34 Arbitration & Conciliation Act, OMP (COMM) NO. 88/2019 Page No. 4 of 26 1996. The various grounds on which the said order is sought to be set aside have been mentioned interalia in para 6 of the petition as under:
(a) Because the impugned order dated 29.04.2019 passed by the Ld. Sole Arbitrator is in conflict with the public policy and is liable to be quashed and set aside.
(b) Because the impugned order dated 29.04.2019 is beyond the scope of submissions made by the objector/petitioner to the Ld. Arbitrator while replying the application, hence, the impugned order dated 29.04.2019 is liable to be quashed and set aside.
(c) Because the impugned order dated 29.04.2019 passed by the Ld. Arbitrator is contrary to facts and law applicable thereto.
(d) Because the Learned Arbitrator has acted illegally in exercise of its judicial discretion which has resulted in miscarriage of justice.
(e) Because the Learned Arbitrator has neither discussed nor judicially appreciated the pleadings i.e. application moved by the respondent no. 1 herein and reply thereto filed by the objector / petitioner herein while passing the impugned order dated 29.04.2019.
(f) Because the Learned Arbitrator did not apply their mind judiciously while dismissing the counter claims of the objector / petitioner and the impugned order passed by the Learned Arbitrator is a sheer non application of mind as the Ld. Arbitrator has grossly erred while not correctly and legally/judiciously appreciated the application, reply and documents mentioned therein and relied upon by the objector / petitioner.
(g) Because the impugned order dated 29.04.2019 passed by the Ld. Sole Arbitrator is a non speaking order passed without mentioning the facts contained in the application and reply filed by the parties, hence, the impugned order dated 29.04.2019 passed by the Ld. Arbitrator is liable to be quashed / set aside.
(h) Because the Learned Arbitrator ought to have dismiss the said application moved by the respondent no. 1.
(i) Because the Ld. Arbitrator has dismissed/ rejected the counter claims of the Objectors/petitioners without any OMP (COMM) NO. 88/2019 Page No. 5 of 26 basis, without giving an opportunity of being heard i.e. without evidence which is contrary to the principles of natural justice and rule of "Audi alteram pertem", hence, the impugned order dated 29.04.2019 passed by the Ld. Arbitrator is liable to be quashed / set aside.
(j) Because the Ld. Arbitrator has passed the impugned order dated 29.04.2019 without affording an opportunity to the objector to lead evidence in support their counter claims, hence, the impugned order deserves to be quashed.
(k) Because the Ld. Arbitrator misconducted the arbitral proceedings while passing the impugned order without evidence and the documents filed by the parties.
(l) Because the impugned order dated 29.04.2019 bad in law.
(m) Because the impugned order dated 29.04.2019 is apparently against the facts and without evidence.
(n) Because no Court has restrain the objector/petitioner to file their counter claim before the Learned Sole wArbitrator.
Proceedings before the Court
6. After notice of the petition was issued to respondent Sagar Electricals then reply to the petition was filed wherein all the averments made in the petition were vehemently denied. The petition was also stated to be not maintainable under the Arbitration & Conciliation Act, 1996 as it was stated that all the earlier proceedings in the matter were carried out under the old Arbitration Act, 1940. Petitioner Railways thereafter filed its rejoinder wherein the averments made in the petition were reiterated and stand taken by respondent Sagar Electricals in its reply was vehemently denied. For the sake of brevity, I shall be dealing in detail the averments made by both the parties at a later stage of the present order, as and when required.
At this stage, it will be however pertinent to mention that OMP (COMM) NO. 88/2019 Page No. 6 of 26 subsequent to dismissal of the counter claim of Railways the Ld. Sole Arbitrator proceeded ahead with the arbitration proceedings and passed a detailed award dated 24/12/2019 whereby a sum of ₹2,31,050.47 was awarded in favour of Sagar Electricals, the claimant, beside also awarding in its favour a sum of ₹ 25,000 towards the costs of litigation. The said award was however challenged by Railways by way of a petition under section 34 Arbitration & Conciliation Act, 1996 but the said petition was dismissed by a detailed order dated 29/10/2020 by Ld. District Judge, Commercial Court-04, (Central). Thus, the present petition is confined as regard the challenge to order dated 29/04/2019 only, vide which the Ld. Arbitrator dismissed the counter claim filed by Railways.
7. While Railways has challenged order dated 29/04/2019, as being without any application of mind and devoid of any reasons, but on the other hand, respondent Sagar Electricals while relying upon the order dated 11/03/1997 passed by Ld. ADJ Sh. G S Jugti has asserted that while setting aside the award dated 16/08/1996 under the old Arbitration Act, 1940 the Ld. ADJ had remitted back the reference for fresh arbitration so as to consider the claims/objections filed by petitioner Sagar Electricals only. It has been submitted that at that time Respondent Union of India chose not to challenge the said award dated 16/08/1996 and despite having been given opportunity, it did not even file any reply to the objections raised by the petitioner Sagar Electricals. It has been thus submitted that as only the claims/objections raised by the objector were referred to the Ld. Arbitrator for OMP (COMM) NO. 88/2019 Page No. 7 of 26 reconsideration, so the Ld. Arbitrator was justified in out rightly dismissing the counter claim filed by Railways. It has also been submitted that Railways even did not prefer to press its counter claim before the Court of Ld. ADJ Sh. Arun Sukhija and thus there was no occasion for the Ld. Arbitrator to again adjudicate the counter claim filed afresh by the Railways. It has also been argued that the present challenge to order dated 29/04/2019 cannot be filed under the Arbitration and Conciliation Act, 1996 as all the proceedings in the matter between the parties were conducted under the old Arbitration Act, 1940 only.
8. I have carefully perused the record.
9. Before adverting on to the submissions of Ld. Counsel for both the parties, it will be important to firstdecide as to whether the challenge to the impugned order dated 29.04.2019 passed by the ld. Arbitrator is to be considered under the provisions of Arbitration Act, 1940 (old Act) or under the Arbitration and Conciliation Act, 1996(new Act). This issue also becomes important as not only the grounds of challenge to an Arbitral award under the two Acts are different but also as the present petition has been filed by Union of India under Section 34 of the Arbitration and Conciliation Act, 1996(new Act).
10. In this regard, it will be important to first recapitulate some proceedings which earlier took place between the parties in connection with the arbitration proceedings which has finally culminated into the passing of impugned order dated 29.04.2019.
OMP (COMM) NO. 88/2019 Page No. 8 of 2611. Initially, the arbitration proceedings between the parties undisputedly commenced under the old Arbitration Act, 1940 after the then Ld. ADJ Mr. R.C. Jain vide order dated 10.05.1994 directed General Manager, Northern Railways to refer the disputes to the arbitrator in terms of the arbitration agreement as contained in IRS conditions of contract. Accordingly, the disputes between the parties came to be referred to a panel of two Arbitrators namely Mr. Deepak Krishan and Mr. Devender Rai. The Arbitral panel accordingly commenced the proceedings and the said arbitration proceedings resulted in passing of an award dated 16.08.1996. The said award was however challenged by Sagar Electricals before the Court of the then Ld. ADJ Mr. G.S. Jugti and who vide order dated 11.03.1997 set aside the award and referred the matter back to the arbitrators for reconsideration. Subsequently, certain other proceedings also took place regarding change of arbitral panel and which I shall be dealing in detail at a later stage of the order, but suffice it would be to state that by way of various orders passed on different applications moved by the parties, the earlier arbitrators were ordered to be replaced initially by ld. ADJ Mr. G.S. Jugti and finally by Ld. ADJ Mr. Arun Sukhija. Finally, vide order dated 01.10.2018 Ld. ADJ Mr. Arun Sukhija appointed Mr. Narender Kumar Verma, respondent no. 2 herein, as the Ld. sole Arbirator.
However, it would be pertinent to mention that all such proceedings took place under the old Act i.e. Arbitration Act, 1940 as was specifically also mentioned by Ld. ADJ Mr. Arun Sukhija in his order, for otherwise also there would not have been OMP (COMM) NO. 88/2019 Page No. 9 of 26 any power with the two courts of Ld. ADJ to appoint any new Arbitrator in the matter.
12. It is in the aforesaid factual matrix, that the arbitration proceedings were conducted by Ld. Sole Arbitrator Mr. Narender Kumar Verma and during the course of which the counter claim of Union of India was dismissed by him vide impugned order dated. 29.04.2019. However, Union of India for reasons best known to it, has now challenged the said order by filing the present application under Section 34 of the Arbitration and Conciliation Act, 1966.
13. In these circumstances, it is thus important to first settle the issue as to whether the correctness or otherwise of the impugned order dated 29.04.2019 is to be seen and considered under the provisions of the old Act of 1940 or under the new Act of 1996, for the grounds to challenge an award under the two Acts are undisputedly different.
14. I may however state at the outset,that the law in this regard is no longer res integra. In the case M/s N.S. Nayak and Sons Vs. State of Goa, decided on 08.05.2003 by Hon'ble Supreme Court in Appeal (Civil) No. 97/2002, the Hon'ble Court dealt with at length the provision of section 85 Arbitration and Conciliation Act, 1996 which pertains to repeal and savings of the old Act(s). While interpreting Section 85 of Arbitration and Conciliation Act, 1996 Hon'ble Supreme Court observed as under:
OMP (COMM) NO. 88/2019 Page No. 10 of 26"85. Repeal and saving. (1) The Arbitration (Protocol and Convention) Act, 1937 (6 of 1937), the Arbitration Act, 1940 (10 of 1940) and the Foreign Awards (Recognition and Enforcement) Act, 1961 (45 of 1961) are hereby repealed.
(2) Notwithstanding such repeal,
(a) the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;
(b) all rules made and notifications published, under the said enactments shall, to the extent to which they are not repugnant to this Act, be deemed respectively to have been made or issued under this Act."
Section 85 (2) (a) specifically provides that (1) the provisions of the Old Act shall apply in relation to arbitral proceedings which commenced on or before the New Act came into force, unless otherwise agreed by the parties; (2) it also provides that the New Act shall apply in relation to arbitral proceedings which commenced on or after the New Act came into force. In all these matters arbitrators were appointed prior to 25th January 1996. Arbitral proceedings started before that date and the awards in CA No.97/2002, CA No.99/2002, C.A. No.100/2002 and C.A. No.101/2002 were passed on 20.12.1991, 17.5.1994, 7.5.1992, 3.2.1989 respectively, i.e. prior to 25th January, 1996, and in CA No.98/2002, the award was passed on 30.9.1996, i.e. after 25th January, 1996. On the basis of sub- section 2(a), the provisions of the Old Act would apply to the arbitral proceedings which commenced on or before the New Act came into force.
Further, the part of the arbitration clause which is quoted above also provides that the provisions of Arbitration Act, 1940 which were for time being in force were to apply to the arbitral proceedings between the parties. It nowhere provides that once the arbitral proceedings have commenced under the Old Act, they should be conducted under the New Act as soon as the New Act comes into operation. Hence, in the proceedings where the award is passed under the Old Act, the remedy of filing appeal or petition for setting aside the said award would be as per the provisions of the Old Act.
Further, the complete answer to the contention of the learned counsel for the appellant is in the following paragraph (para
32) of Thyssen's case wherein the Court has specifically held that once the arbitral proceedings commenced under the Old Act, it would be Old Act which would apply in arbitral proceedings and also for enforcing the award:
32. Principles enunciated in the judgments show as to when a OMP (COMM) NO. 88/2019 Page No. 11 of 26 right accrues to a party under the repealed Act. It is not necessary that for the right to accrue legal proceedings must be pending when the new Act comes into force. To have the award enforced when arbitral proceedings commenced under the old Act under that very Act is certainly an accrued right.
Consequences for the party against whom award is given after arbitral proceedings have been held under the old Act though given after the coming into force of the new Act, would be quite grave if it is debarred from challenging the award under the provisions of the old Act. Structure of both the Acts is different. When arbitral proceedings commenced under the old Act it would be in the mind of everybody, i.e., the arbitrators and the parties that the award given should not fall foul of Sections 30 and 32 of the old Act. Nobody at that time could have thought that Section 30 of the old Act could be substituted by Section 34 of the new Act. As a matter of fact appellant Thyssen in Civil Appeal No.6036 of 1998 itself understood that the old Act would apply when it approached the High Court under Sections 14 and 17 of the old Act for making the award rule of the court. It was only later on that it changed the stand and now took the position that the new Act would apply and for that purpose filed an application for execution of the award. By that time limitation to set aside the award under the new Act had elapsed. The appellant itself led the respondent SAIL in believing that the old Act would apply. SAIL had filed objections to the award under Section 30 of the old Act after notice for filing the award was received by it on the application filed by Thyssen under Sections 14 and 17 of the old Act. We have been informed that numerous such matters are pending all over the country where the award in similar circumstances is sought to be enforced or set aside under the provisions of the old Act. We, therefore, cannot adopt a construction which would lead to such anomalous situations where the party seeking to have the award set aside finds himself without any remedy. We are, therefore, of the opinion that it would be the provisions of the old Act that would apply to the enforcement of the award in the case of Civil Appeal No.6036 of 1998. Any other construction on Section 85(2)(a) would only lead to confusion and hardship. This construction put by us is consistent with the wording of Section 85(2)(a) using the terms "provision" and "in relation to arbitral proceedings" which would mean that once the arbitral proceedings commenced under the old Act it would be the old Act which would apply for enforcing the award as well." The highlighted portion in terms emphasizes that in such cases where the arbitral proceedings commenced under the Old Act, it is an accrued right to proceed in accordance with that law and it would be the Old Act which would apply even for enforcing the award.
OMP (COMM) NO. 88/2019 Page No. 12 of 26Learned senior counsel Mr. Desai submitted that in Thyssen's case, the phrase 'in relation to arbitral proceedings' is given wider meaning so as to include arbitral proceedings before the arbitrator as well as the proceedings before the Court and once New Act came into force, further proceedings including appeals are required to be dealt with and decided in accordance with the New Act as per the agreement. For this purpose, he placed reliance on paragraph 22 of the said judgment.
In our view, paragraph 22 nowhere lays down that after the New Act came into force, even appeals filed under the provisions of Old Act are to be decided on the basis of the provisions contained in the New Act. Paragraphs 22 and 23 are as under:
"The Conclusions
22. For the reasons to follow, we hold:
1. The provisions of the old Act (Arbitration Act, 1940) shall apply in relation to arbitral proceedings which have commenced before the coming into force of the new Act (the Arbitration and Conciliation Act, 1996).
2. The phrase "in relation to arbitral proceedings" cannot be given a narrow meaning to mean only pendency of the arbitration proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator but would also cover the proceedings before the court and any proceedings which are required to be taken under the old Act for the award becoming a decree under Section 17 thereof and also appeal arising thereunder.
3. In cases where arbitral proceedings have commenced before the coming into force of the new Act and are pending before the arbitrator, it is open to the parties to agree that the new Act be applicable to such arbitral proceedings and they can so agree even before the coming into force of the new Act.
4. The new Act would be applicable in relation to arbitral proceedings which commenced on or after the new Act comes into force.
5. Once the arbitral proceedings have commenced, it cannot be stated that the right to be governed by the old Act for enforcement of the award was an inchoate right. It was certainly a right accrued. It is not imperative that for right to accrue to have the award enforced under the old Act some legal proceedings for its enforcement must be pending under that Act at the time the new Act came into force.
6. If a narrow meaning of the phrase "in relation to arbitral proceedings" is to be accepted, it is likely to create a great deal of confusion with regard to the matters where award is made under the old Act.
Provisions for the conduct of arbitral proceedings are vastly different in both the old and the new Act. Challenge of award can be with reference to the conduct of arbitral proceedings. An OMP (COMM) NO. 88/2019 Page No. 13 of 26 interpretation which leads to unjust and inconvenient results cannot be accepted.
7. A foreign award given after the commencement of the new Act can be enforced only under the new Act. There is no vested right to have the foreign award enforced under the Foreign Awards Act [Foreign Awards (Recognition and Enforcement) Act, 1961].
23. Section 85(2)(a) of the new Act is in two limbs: (1) provisions of the old Act shall apply in relation to arbitral proceedings which commenced before the new Act came into force unless otherwise agreed by the parties and (2) the new Act shall apply in relation to arbitral proceedings which commenced on or after the new Act came into force. The first limb can further be bifurcated into two: (a) provisions of the old Act shall apply in relation to arbitral proceedings commenced before the new Act came into force, and (b) the old Act will not apply in such cases where the parties agree that it will not apply in relation to arbitral proceedings which commenced before the new Act came into force. The expression "in relation to" is of the widest import as held by various decisions of this Court in Doypack Systems (P) Ltd., Mansukhlal Dhanraj Jain, Dhanrajamal Gobindram and Navin Chemicals Mfg. This expression "in relation to" has to be given full effect to, particularly when read in conjunction with the words "the provisions" of the old Act. That would mean that the old Act will apply to the whole gambit of arbitration culminating in the enforcement of the award. If it was not so, only the word "to" could have sufficed and when the legislature has used the expression "in relation to", a proper meaning has to be given. This expression does not admit of restrictive meaning. The first limb of Section 85(2)(a) is not a limited saving clause. It saves not only the proceedings pending at the time of commencement of the new Act but also the provisions of the old Act for enforcement of the award under that Act."
As stated in paragraph 22, Conclusion1 without any reservation provides that the provisions of Old Act shall apply in relation to arbitral proceedings which have commenced before coming into force of the New Act. Conclusion2, in our view, is required to be read in context with Conclusion1, that is to say, the phrase 'in relation to arbitral proceedings' cannot be given a narrow meaning to mean only pendency of the proceedings before the arbitrator. It would cover not only proceedings pending before the arbitrator but would also cover the proceedings before the court and any proceedings which are required to be taken under the old Act for the award becoming a decree under Section 17 thereof and also appeal arising thereunder. Hence, conclusions1 and 2 are to be read together which unambiguously reiterate that once the arbitral proceedings have started under the Old Act, the Old Act would apply for the award becoming decree OMP (COMM) NO. 88/2019 Page No. 14 of 26 and also for appeal arising thereunder.
Conclusion3 only reiterates what is provided in various Sections of the Arbitration Act, which gives option to the parties to opt for the procedure as per their agreement during the arbitral proceedings before the arbitrator. The phrase 'unless otherwise agreed by the parties' used in various Sections namely, 17, 21, 23(3), 24(1), 25, 26, 29, 31, 85(2)(a) etc. indicates that it is open to the parties to agree otherwise. During the arbitral proceedings, right is given to the parties to decide their own procedure. So if there is an agreement between the parties with regard to the procedure to be followed by the arbitrator, arbitrator is required to follow the said procedure. Reason being, arbitrator is appointed on the basis of the contract between the parties and is required to act as per the contract. However, this would not mean that in appeal parties can contend that appellate procedure should be as per their agreement. Appellate procedure would be governed as per the statutory provisions and parties have no right to change the same. It is also settled law that the right to file an appeal is accrued right that cannot be taken away unless there is specific provision to the contrary. There is no such provision in the New Act. In the present cases, the appeals were pending before the High Court under the provisions of the Old Act and, therefore, appeals are required to be decided on the basis of the statutory provisions under the said Act. Hence, there is no substance in the submission made by the learned counsel for the appellant.
15. Thus in view of the aforesaid position as clearly laid down by Hon'ble Supreme Court, it is clear that present proceedings were in fact in continuation to the initial reference of the disputes between the parties to arbitration. The said proceedings were undoubtedly initiated under the Arbitration Act, 1940 (old Act). As also already mentioned, the subsequent proceedings which took place between the parties and which led to change in the constitution of Arbitral Panel were also undisputedly under the old Act. In fact, Ld. ADJ Mr. Arun Sukhija specifically mentioned in his order that by appointing Mr. Narender Kumar verma as the new Arbitrator, he is exercising his powers under the old Act. The court of Ld District Judge (Commercial)-04 also OMP (COMM) NO. 88/2019 Page No. 15 of 26 while dismissing the application of Railways challenging the final award passed between the parties observed that the same is being decided under the old Arbitration Act. In fact, I may also mention that when an application under Section 14 Arbitration and Conciliation Act, 1996 was moved before the Court of Ld. ADJ Mr. V.K. Dahiya (The predecessor court of Ld. ADJ Sh. Arun Sukhija) by Sagar Electricals seeking appointment of a new arbitrator in place of Sh. Suresh Srivastava then vide order sheet dated 27.08.2016 Ld. ADJ recorded that another application for amendment of the application has been moved submitting that the application may be considered as one under Section 11 and 12 Arbitration Act, 1940. While on behalf of Railways no reply was filed to the said application seeking amendment and it was only stated by Ld. Counsel for Railways that in case application is allowed the issue regarding limitation may be kept open.
16. Ld. ADJ accordingly allowed the application for the reasons mentioned therein and the subsequent proceedings thereafter continued under the old Act. The said amended application was finally disposed of by Ld. ADJ Mr. Arun Sukhija vide order dated 01.10.2018 by specifically observing that he is exercising his powers under the old Arbitration Act, 1940. The parties thereafter participated in the arbitration proceedings so conducted by Mr. Narender Kumar Verma, Ld. Sole Arbitrator, and it is order dated 29.04.2019 passed during the said arbitration proceedings only which is being challenged in the present petition. Furthermore, the parties also at no point of time chose to decide as provided in Section 85(2) (a) that the provisions of the OMP (COMM) NO. 88/2019 Page No. 16 of 26 new Act shall apply to the Arbitration Proceedings. In these circumstances once the parties continued with the Arbitration Proceedings under the old Act, so after passing of the award the right to file an appeal challenging the said award or other orders passed therein cannot be now exercised under the new Act, as has also been observed by Hon'ble Supreme Court in the case M/s N.S. Nayak and Sons Vs. State of Goa (supra).
17. Thus for the aforesaid reasons also, the parties cannot be now permitted to argue as to under which Arbitration Act the present proceedings can be considered as they admittedly consented to all such proceedings to be conducted under the old Arbitration Act, 1940.
18. Thus irrespective of the title of the present application filed by Union of India, the present application seeking to challenge the impugned order dated 29.04.2019 has to be considered under the provisions of Arbitration Act, 1940 (old Act) only i.e. in the light of grounds mentioned in Section 30 of the Act. It is in this background, that I now propose to consider the challenge made to order dated 29.04.2019 passed by the Ld. Arbitrator.
19. The next issue, which now crops up for consideration is as to whether order dated 29/04/2019 passed by the Ld. Sole Arbitrator dismissing the counter claim of Railways can withstand the challenge under section 30 of the Arbitration Act,1940 or not.
OMP (COMM) NO. 88/2019 Page No. 17 of 2620. Before adverting further, it would be however appropriate to first have a glance over the said order dated 29.04.2019 passed by the Ld. Sole Arbitrator. The same read as under:-
"Present: Sh. Prabhakar Pandey (LAC) counsel for claimant alongwith claimant.
Prashant Kaushik proxy counsel for K.D. Sharma counsel for respondent alongwith Mr. Lalit Kumar (Helper). Reply filed on behalf of respondent to the application of the claimant for the dismissal of counter claim and same is taken on record.
As arguments of both the counsel heard on the last date of hearing.
In view of the submission / arguments from both side and carefully reading from the pleading specially the order passed by Sh. G.S. Jugti Ld. ADJ, Delhi and Sh. Arun Sukhija Ld. ADJ, Tis Hazari Courts Delhi.
I am of the opinion that the counter claim of the respondent is not sustainable hence, the same is dismissed. Now the matter is fixed for claimant evidence 8/5/19 at 2 pm. Counsel of claimant is directed to supply advance copy of evidence to the counsel of respondent."
21. Thus, from a bare perusal of the aforesaid order passed by the Ld. Sole Arbitrator, it is clear that primarily the reasons for dismissing the counter claim of Railways were the orders passed by Ld. ADJ Mr. G.S. Jugti and Ld. ADJ Mr. Arun Sukhija. It would be thus appropriate to once again refer to various orders passed by the two Courts at different stages.
22. The first order passed in the matter by Ld. ADJ Mr. G.S. Jugti was dated 11.03.1997. It has been recorded by Ld. ADJ in the very first paragraph that after the award was filed in the Court and notices were issued to the parties for inviting objections to the award, Union of India did not file any objections since the award was operating in their favour. It has been further recorded OMP (COMM) NO. 88/2019 Page No. 18 of 26 that Union of India also did not file any reply to the objections raised by the objector M/s Sagar Electrials and Equipments.
23. Ld. ADJ thereafter went on to deal with various objections raised in the application by Sagar Electricals and recorded his final findings in para 11 of the order as under :-
"In view of the above said case law, the award is hereby set aside and the arbitrators are hereby directed to reconsider the points/claims set up by the objector. The learned arbitrator shall decide the matter afresh with in four months from today and the fresh award passed shall be filed in Court alongwith arbitration proceedings. There shall be no order of costs to any party. File be consigned to the record room."
24. However, from the order dated 11/03/1997 it is also clear that, one of the objection to the award filed by Sagar Electricals was relating to allowing the counter claims of Railways under two heads i.e. for Rs. 2,28,200/- and Rs. 35,000/-. At page 3 of the order dated 11.03.1997, it is mentioned as under:
"Under item no. (h), the arbitrators have alleged to have committed grave error in allowing two counter claims which are as under:-
S. no. 1 for Rs. 2,28,200/-
S. No. 3 for Rs. 35,000/-.
These counter claims have been alleged by the objector as no claim at the time of termination of contract and there is no evidence in support of these claims, no notice of alleged defect in UPS were pointed out, these counter claims were of after thought. If defective UPS were supplied, then these could have been returned to the objector which has not been done at any point of time."
25. Subsequently at a later stage of the order, the Ld. ADJ in para 6 and 7 at page 6 observed as under :
"6. Under item no. 3 of UPS. Hire, this item can be covered OMP (COMM) NO. 88/2019 Page No. 19 of 26 actually under counter claim no. 1. Why this separate claim under counter claim no. 3, not spelt out.
7. From the above said discussions, it is clear that there is non-application of mind to the claims and the counter claims and the award has been passed in a mechanical fashion, without any application of mind."
26. Thus, from a bare perusal of the aforesaid judgment of Ld. ADJ Mr. G.S. Jugti, it is clear that the impugned award dated 16.08.1996 was challenged by Sagar Electricals on various grounds including allowing of counter claims of Railways under two heads by the Ld. Arbitrators. Railways admittedly did not file any objections to the said award as they found the findings to be in their favour. It is however also correct that Railways did not file even any reply to the objections filed by Sagar Electricals. However, in these facts and circumstances the moot question which arises for consideration is can the fate of counter claim of the Railways, so decided in its favour by the Ld. Arbitrators, can be decided solely on the said fact of not filing any reply to the objections by the Railways before Ld. ADJ Mr. G.S.Jugti.
27. In this regard, what is thus required to be seen is the whole cumulative effect of the Judgment dated 11.03.1997 passed by Ld. ADJ Mr. G.S.Jugti. A perusal of order dated 11.03.1997 shows that the Ld.ADJ considered and allowed all the objections raised by Sagar Electricals to the said award and after setting aside the award referred back the matter to the Arbitrators for reconsideration as to the points/claims raised by the objector. Thus, the necessary corollary which follows from the aforesaid directions was that the award dated 11.08.1996 qua all the OMP (COMM) NO. 88/2019 Page No. 20 of 26 findings including the findings on the counter claims of Railways was set aside.
28. A clear and unambiguous effect of the said directions of Ld. ADJ Mr. G.S.Jugti was that the parties were relegated to their original litigating position before the Ld. Arbitrators. This fact also becomes evident from the subsequent proceedings, when before Ld. Arbitrator Mr. Narender Kumar Verma, Sagar Electricals filed a fresh statement of claim.
29. Be that as it may, before dealing with the said aspect any further, it will be also pertinent to refer to other orders passed in the subsequent proceedings between the parties.
30. Order dated 19.02.1998 was yet another order passed by Ld. ADJ Mr. G.S. Jugti whereby on an application moved by Sagar Electricals to appoint fresh Arbitrator outside the Railways that Ld. ADJ appointed Mr. R.S. Panesar Retired Chief Engineer, C.S.I.R as the Arbitrator. However, a perusal of order dated 19.02.1998 shows that the merits or demerits of the dispute as such were neither in issue before the Ld. ADJ in the said proceedings nor he dealt with the same. The only issue being considered was non-compliance by the Arbitrators of the earlier directions passed by the Court vide order dated 11.03.1997 i.e. to decide the matter afresh within four months.
31. Subsequently, when Mr. R.S. Panesar expressed his inability to carry out the arbitration proceedings that Ld. ADJ Mr. OMP (COMM) NO. 88/2019 Page No. 21 of 26 G.S. Jugti vide order dated 16.05.1998 appointed Mr. Suresh Srivastav, Advocate as the new Arbitrator. Thus, once again there was no occasion before the Court to deal with the merits or demerits of the disputes between the parties.
32. Thereafter, Sagar Electricals preferred a fresh petition under Section 11 and 12 of Arbitration Act, 1940 (though initially titled as an application under Section 14 of Arbitration and Conciliation Act, 1946) seeking appointment of a new Arbitrator as certain apprehensions were raised as regard the conduct of Arbitrator Mr. Suresh Srivastav. The said application was allowed by Ld. ADJ Mr. Arun Sukhija vide order dated 01.10.2018 and Mr. Narender Kumar Verma, Advocate, respondent no. 2 herein was appointed as the Sole Arbitrator in place of Mr. Suresh Srivastav, Advocate.
33. It is pursuant to the aforesaid order dated 01.10.2018 of Ld. ADJ Mr. Arun Sukhija, that arbitration proceedings were conducted afresh by Mr. Narender Kumar Verma. It was during the said proceedings that a fresh statement of claim dated 12.11.2018 was filed by Sagar Electricals. In response thereto Railways filed its reply to the claim along with its counter claim dated 21.12.2018.
34. Before adverting further, it will be pertinent to mention that even in the proceedings conducted before Ld. ADJ Sh. Arun Sukhija, the merits and demerits of the disputes between the parties were not under consideration. Ld. ADJ only considered OMP (COMM) NO. 88/2019 Page No. 22 of 26 the conduct of the earlier Arbitrator as alleged in the application and chose to appoint a new Arbitrator in his place.
35. Thus, from the aforesaid detailed chronological sequence of various proceedings and the orders passed therein by the Courts of Ld. ADJ Mr. G.S. Jugti and Mr. Arun Sukjija, it is clear that except for order dated 11.03.1997 passed by Ld. ADJ Mr. G.S, Jugti there were no other proceedings before the Courts wherein the merits and demerits of the disputes between the parties were under consideration or there was any occasion for Railways to press for its counter claim. As already mentioned, the initial proceedings before Ld. ADJ Mr. G.S. Jugti culminated vide orders dated 11.03.1997 and whereby while setting aside the award dated 16.08.1996 the matter was again referred to the two Arbitrators for reconsideration and while doing so the objections filed by Sagar Electricals to the findings of the two Arbitrators even as regard allowing the counter claim of Railways, were also considered. The said findings qua counter claim were also set aside by Ld. ADJ and the Ld. Arbitrators were directed to reconsider the matter afresh in the light of claims/ objections filed by Sagar Electricals.
36. Thus in these circumstances, at the cost of repetition, I may state that the parties in fact were relegated to their initial litigating position before the two Arbitrators and the said order dated 11.03.1997 passed by Ld. ADJ Mr. G.S Jugti can in no way be interpreted as a rejection of the counter claim of the Railways or any direction to the Ld. Arbitrators to not consider the counter OMP (COMM) NO. 88/2019 Page No. 23 of 26 claim henceforth.
37. Accordingly, the cryptic non-speaking order dated 29.04.2019 passed by Ld Sole Arbitrator Sh. Narender Kumar Verma dismissing the counter claim of Railways by simply observing that in the light of orders passed by Ld. ADJ Mr. G.S. Jugti and Mr. Arun Sukhija the counter claim of Railways is not sustainable, certainly cannot hold ground.
38. This is a clear-cut case where the Ld. Arbitrator has faulted in not even considering the merits and demerits of the counter claim of Railways. The reason given for holding the counter claim to be not sustainable is also without any basis, as demonstrated above.
39. In the case M/s. Hindustan Construction Co. Ltd Vs. National Hydro Electric Power Corporation, 2010 SCC OnLine Del 599, Hon'ble Delhi High Court while dealing with a challenge to an award passed under the Arbitration Act, 1940 came to the opinion that the Ld. Arbitrator failed to consider certain relevant documents of the parties and the Hon'ble Court accordingly held that the Ld. Arbitrator had misconducted the proceedings. Para 10 of the said judgment read as under:
10. It was canvassed by Mr. Kailash Vasdev, learned senior counsel for the respondent that the interpretation which is adopted by the Arbitrator cannot be interfered with by this Court while hearing objections under Sections 30 and 33 of the Arbitration Act, 1940. No doubt, while hearing objections under Sections 30 and 33 of the Arbitration Act is well settled that this Court will not interfere when there is one reasonable interpretation, however, when an interpretation is given by an Arbitrator ignoring a document, in that he ignores the relevant OMP (COMM) NO. 88/2019 Page No. 24 of 26 and applicable clauses of a contract, then, the Arbitrator is guilty of clearly misconducting himself and the proceedings for this Court to interfere with the Award under Sections 30 and 33 as held by the Supreme Court in the case of K.P. Poulose referred to by me in the very beginning of that judgment.
Further, by ignoring the relevant applicable clauses there is caused clear perversity of interpretation and conclusions entitling this Court to interfere as per the law as applicable under Sections 30 and 33. In Security Printing & Minting Corp. v. Gandhi Industrial Corp. 2007 (13) SCC 236, under the 1996 Act it has been held that a Court can interfere with the Award when there is a perverse interpretation of a document by an Arbitrator and which will apply equally to the 1940 Act. In view of the above, I accept the objections to the Award and which is therefore set aside.
40. Thus in the light of aforesaid facts and circumstances, I am of the considered opinion that by not considering the merits / demerits of the counter claim of Union of India and by outrightly rejecting the same simply observing that in the light of orders passed by Ld. ADJ Mr. G.S. Jugti and Ld. ADJ Mr. Arun Sukhija, the same is not maintainable amounts to misconducting the proceedings by Ld. Arbitrator.
The impugned order dated 29.04.2019 is thus clearly not sustainable in law and is accordingly set aside.
41. Since I am also exercising my powers under Section 30 of the Arbitration Act, 1940, so the present matter is accordingly remitted back to Ld. Arbitrator for fresh adjudication of the counter claim of Union of India.
The present application accordingly stands disposed off. In the overall facts and circumstances of the case, the parties shall bear their respective costs.
OMP (COMM) NO. 88/2019 Page No. 25 of 2642. File be consigned to the Record Room.
Pronounced in open Court on 28.02.2022 (Bharat Parashar) District Judge (Commercial Court)-01, Central, Tis Hazari Courts,Delhi.
OMP (COMM) NO. 88/2019 Page No. 26 of 26