Gauhati High Court
Union Of India vs M/S Raitani Engineering Works(Pvt.) ... on 23 May, 2022
Author: Parthivjyoti Saikia
Bench: Parthivjyoti Saikia
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GAHC010167572019
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : Arb.A./2/2021
UNION OF INDIA
REP. BY THE GENERAL MANAGER/CON, NORTH EAST FRONTIER
RAILWAY, MALIGAON, GUWAHATI, PIN- 781011, ASSAM
VERSUS
M/S RAITANI ENGINEERING WORKS(PVT.) LTD
M.M. CHOUDHURYS COMPOUND (EX. CM ASSAM), P. B. ROAD,
REHABARI, GUWAHATI- 781008.
Advocate for the Petitioner : MR S CHAKRABORTY
Advocate for the Respondent : MRS. S ROY
BEFORE HONOURABLE MR. JUSTICE PARTHIVJYOTI SAIKIA JUDGMENT AND ORDER 05.05.2022 Heard Mr. S. Chakraborty, learned counsel representing the appellant as well as Mr. R. Hussain, learned counsel appearing for the respondent.
2. This is an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against the judgment dated 02.01.2019 passed by the learned Page No.# 2/9 District Judge, Kamrup (Metro) in Misc. (Arb.) Case No. 27/2013.
3. The respondent was given a contract to build a bridge in the Lumding-Silchar Gauge Conversion Project. The total value of the contract was Rs.17,48,23,500/-. The date of completion of the project was 06.12.2007.
4. The respondent claimed that it submitted the bridge drawing on 09.08.2007 for approval. On that day, the drawing of the box girder was also submitted. The respondent claimed that due to law and order situation in the period 2006 to 2008 in the N.C. Hills area, the entire construction works were affected. During that period, government failed to restore law and order and to stop militant activities. It was further claimed that one of its employees was hit by a stray bullet while he was travelling with railway officials and other personnel of another company. The employees of the respondent company were scared and were reluctant to go to the site. In this way, construction works remained suspended for a period of 180 days. Therefore, the respondent invoked the force majeure clause on 17.11.2008 whereby the contract was terminated according to the agreement.
5. At this stage, the force majeure clause of the agreement may be quoted. Clause 17 reads as under:
"Clause 17 Force Majeure Clause: If at any time during continuance of this contract, the performance in whole or in part by either party of any obligation under this contract shall be prevented or delayed by reason of any war, hostility, acts of public enemy, civil commotion, sabotage, serious loss or Page No.# 3/9 damage by fire, explosions, epidemics, strikes, lockouts or acts of God (hereinafter referred to 'events) provided, notice of the happening of any such event is given by either party to the other within seven days from the date of occurrence thereof, neither party shall by reason of such event, be entitled to terminate this contract nor shall either party have any claim for damages against the other in respect of such nonperformance or delay in performance, and works under the contract shall be resumed as soon as practicable after such event has come to an end or ceased to exist, and the decision of the Engineer as to whether the works have been so resumed or not shall be final and conclusive, PROVIDED FURTHER that if the performance in whole or in part of any obligation under this contract is prevented or delayed by reason of any such event for a period exceeding 180 (one hundred eighty) days, either party may its option terminate the contract by giving notice to the other party."
6. So, the dispute arose accordingly. The matter went to arbitration.
7. The respondent had terminated the contract on 17.11.2008 pursuant to Clause 17 of the agreement by invoking Force Majeure Clause and before that on 16.05.2008, the respondent had issued a notice to the present appellant stating that they had stopped work from 11.05.2008. The contract was, thereafter, was terminated by the present appellant by issuing 7 (seven) days' notice on 06.11.2008. The appellant also issued a 48 hours notice on 19.11.2008 and on 26.11.2002 issued a Page No.# 4/9 termination letter at the risk and cost of the present appellant.
8. Under the aforesaid circumstances, the Tribunal held that both sides simultaneously took actions and that proved that no work was going on at the site due to valid reasons. Therefore, the Tribunal further held that the termination of the contract at the risk and cost of the present respondent was not logical and it is not liable for the same. The Tribunal held that though the contract was terminated at the risk and cost of the respondent, no subsequent tender was finalized with the same terms and conditions, which is essential in case of risk and cost tender.
9. Finally, the Arbitrator directed the present appellant Union of India to pay a sum of Rs.36,20,766.00 only to the present respondent and directed to release BG of Rs.60,00,000/-, Rs.9,50,000.00 and Rs.2,50,000.00. The award carried a simple interest of 7%.
10. The present appellant Union of India filed the appeal under Section 34 of the Act of 1996 and the learned court below dismissed the appeal. The court below held that the case of the appellant did not come within the provision of law as laid down under Section 34 (2) of the Act of 1996.
11. I have given anxious consideration to the submissions made the learned counsels for both the sides.
12. Section 34 of the Act of 1996 is based on Article 34 of the UNCITRAL Model Law and the scope of the provisions for setting aside the award is far less than it was under the Sections 30 or 33 of the 1940 Act. The new Act was brought into being with the express Parliamentary objective of curtailing judicial intervention. Section 34 significantly reduces the extent of possible challenge to an award.
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13. Section 34 provides that an arbitral award may be set aside by a court on certain grounds specified therein. These grounds are:
1. Incapacity of a party
2. Arbitration agreement not being valid
3. Party not given proper notice of arbitral proceedings
4. Nature of dispute not falling within the terms of submission to arbitration
5. Arbitral procedure not being in accordance with the agreement
14. Section 34(2)(b) mentions two more grounds which are left with the Court itself to decide whether to set aside the arbitral award:
1. Dispute is not capable of settlement by arbitral process
2. The award is in conflict with the public policy of India.
15. Thus the powers of the court U/S. 34 is limited and courts should not expand their own powers granted by the statute. Any such attempts by the courts while exercising their powers under S.34 of the Arbitration and Conciliation Act, 1996 shall frustrate the purpose of the above said Act itself.
16. In P.R. Shah, Shares & Stock Broker (P) Ltd. V. B.H.H. Securities (P) Ltd. (2012) 1 SCC 594 it was held that a Court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating evidence and an award can be challenged only under the grounds mentioned in Section 34(2) and in the absence of any such ground it is not possible Page No.# 6/9 to re examine the facts to find out whether a different decision can be arrived at.
17. The Apex Court in Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd.( AIR 2003 SC 2629) has held ---
"54. It is true that if the Arbitral Tribunal has committed mere error of fact or law in reaching its conclusion on the disputed question submitted to it for adjudication then the court would have no jurisdiction to interfere with the award. But this would depend upon reference made to the arbitrator: (a) if there is a general reference for deciding the contractual dispute between the parties and if the award is based on erroneous legal proposition, the court could interfere; (b) it is also settled law that in a case of reasoned award, the court can set aside the same if it is, on the face of it, erroneous on the proposition of law or its application; and (c) if a specific question of law is submitted to the arbitrator, erroneous decision in point of law does not make the award bad, so as to permit its being set aside, unless the court is satisfied that the arbitrator had proceeded illegally."
18. Referring to Section 34(2)(b) of the Act of 1996, in ONGC Vs Western Geo International Ltd (2014) 9 SCC 263, the Apex Court has expanded the scope of "Public policy" by including reasonableness, fundamental principles providing a basis for administration of Justice and enforcement of law in addition to the principles laid down by the above said Saw pipes judgment (supra). Hence the term public policy as per the Western Geo Judgment includes all the following aspects:
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(i) Judicial Approach (Judicial approach ensures the authority to act in a fair, reasonable and objective manner and not based on some extraneous considerations
(ii) Application of mind and recording reasons
(iii) Decision should not fall out of reasonableness if tested on the touch stone of Wednesbury principle of reasonableness
19. In Associate Builders v. Delhi Development Authority AIR 2015 SC 620, the Hon,ble Supreme Court has explained what constituted the fundamental policy of Indian law. In that process, it extracted certain passages from its earlier decision in ONGC Ltd. v. Western Geco International Ltd (supra).In para 40 of that judgment, it was observed as under:
"40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest."
20. In Associate Builders (supra) the Apex Court also referred to the Page No.# 8/9 decisions in P.R. Shah, Shares & Stock Brokers (P) Ltd. (supra) where it was reiterated that the Court does not sit in appeal over the Award of an Arbitral Tribunal by reassessing or re-appreciating the evidence. It was reiterated that the Award could be challenged only on the grounds mentioned under Section 34(2) of the Act.
21. Arbitration is intended to be a faster and less expensive alternative to the courts. If this is one's motivation and expectation, then the finality of the arbitral award is very important. The remedy provided in Section 34 against an arbitral award is in no sense an appeal. The legislative intent in Section 34 was to make the result of the annulment procedure prescribed therein potentially different from that of an appeal. In appeal, the decision under review not only may be confirmed, but may also be modified. In annulment, on the other hand, the decision under review may either be invalidated in whole or in part or be left to stand if the plea for annulment is rejected. Annulment operates to negate a decision, in whole or in part, thereby depriving the portion negated of legal force and returning the parties, as to that portion, to their original litigating positions. Annulment can void, while appeal can modify. Section 34 is found to provide for annulment only on the grounds affecting legitimacy of the process of decision as distinct from substantive correctness of the contents of the decision. A remedy of appeal focuses upon both legitimacy of the process of decision and the substantive correctness of the decision. Annulment, in the case of arbitration focuses not on the correctness of decision but rather more narrowly considers whether, regardless of errors in application of law or determination of facts, the decision resulted from a legitimate process.
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22. The cumulative result of all these is that under Section 34 of the Act of 1996, the scope of interference by a court in an arbitration award is very limited. The court does not sit in appeal against an arbitral award. In the case in hand, the respondent has complied with Clause 17 of the agreement. I don't find any wrong in the impugned judgment passed by the court below. The impugned judgment is a well reasoned one and does not require any interference of this court.
23. Under the said premised reasons, the appeal is found to be devoid of merit and stands dismissed accordingly.
24. Send back the LCR, if any.
JUDGE Comparing Assistant