Allahabad High Court
State Of U.P. And Another vs M/S Harveer Singh Bulandshahar on 8 July, 2019
Author: Kaushal Jayendra Thaker
Bench: Kaushal Jayendra Thaker
HIGH COURT OF JUDICATURE AT ALLAHABAD
[A.F.R.]
Reserved On : 23.05.2019
Delivered on : 08.07.2019
Court No. - 33
Case :- FIRST APPEAL FROM ORDER No. - 160 of 1996
Appellant :- State Of U.P. and another
Respondent :- M/S Harveer Singh Bulandshahar
Counsel for Appellant :- Standing Counsel
Counsel for Respondent :-Anil Tiwari, Sharda Prasad Mishra
Hon'ble Dr. Kaushal Jayendra Thaker,J.
1. Heard Sri S.K. Mehrotra, learned counsel for State and Sri Anil Tiwari, learned Advocate assisted by Sri Sharda Prasad Mishra, learned counsel for respondent.
2. This First Appeal From Order has been filed under section 39 of Indian Arbitration Act, 1940 (hereinafter referred to 'Act, 1940') by the appellant, being aggrieved by order dated 1.12.1995 passed by Civil Judge (Senior Division ), Bulandshahar in Original Suits No. 602 of 1994 and 665 of 1994.
3. The parties are referred to as State/Appellant and Contractor/Respondent.
4. Facts of the present case are that dispute arose between the contractor and the State, namely the appellant and one Harish Chandra was appointed as an arbitrator and his appointment was sought to be revoked by the State which was stayed by the Court below and which was pending before this Court. The arbitrator gave his award accepting the demands raised by the contractor. The said arbitral award was sought to be made the Rule of the Court under the Act, 1940 which was opposed by the appellant herein. The Court below accepted the award rejected the objection raised by the appellant herein. The claimant's claims came to be allowed. Full opportunity was given to the appellant both by Arbitrator and Court below.
5. The judgment of the Court below is brought into challenge by the appellant. During the pendency of this litigation the ground that Harish Chandra could not have acted as an arbitrator was given up. Harish Chandra was permitted to act as an arbitrator vide order dated 18.1.1994. Against the said order appeal was preferred before this Court and also a writ was also preferred by State which culminated into orders being passed against the State. The arbitrator thereafter had passed the orders.
6. The arbitrator's award was assailed by the State before the concerned Court which has held against the State and upheld the award and made it Rule of the Court. .
7. Detailed claim petition was filed by the claimants before the arbitrator appointed by the State from the panel it has suggested. However, they were not satisfied with the arbitrator and litigation as herein above mentioned continued. The State filed objection No. 30/33 of the Act, 1940 challenging the award of the arbitrator dated 27.7.1994 before the Court of concerned jurisdiction. However the said objection have been rejected. It is submitted by counsel for appellant that the arbitrator and learned Judge did not consider the contract in its proper prospective and have committed mistake which is an error apparent on the face of the record calling for interference by this Court. The appellant has challenged the same before this Court.
8. While going through the record the principles enunciated for either interference or modifying the award are embodied which will have to be analyzed and looked into.
9. The principles for interfering in arbitral proceedings are time and again enunciated by the High Court and the Hon'bel Supreme Court. Recently in First Appeal From Order No. 714 of 2005 (State of U.P. and others Versus J.M. Construction Company) and in First Appeal From Order No.1237 of 2000 ( Harindra Singh Versus Union of India and another ) decided on 8.7.2019. The facts as shown above have been properly appreciated by the arbitrator and also the Court below and, therefore, unless the contours of interference are proved by the appellant, this Court would be loathe in interfering in the arbitration matter.
10. Learned counsel for the respondent has relied on the judgments of Supreme Court in State of Orissa Versus B.N. Agarwalla, (1997) 1 SCC 469 and Puri Construction Pvt. Limited Versus Union of India for the purposes of pendente life and interest.
Judgments on Arbitration Act, 1940
11. (I) Steel Authority of India Ltd Vs. Gupta Brothers Steel Tubes Ltd. (2009) 10 SCC 63 .
"...... The courts below have currently held that the arbitrator has gone into the issues of facts thoroughly, applied his mind to the pleadings, evidence before him and the terms of the contract and then passed duly considered award and no ground for setting aside the award within the four corners of Section 30 has been made out......... In what we have already discussed above, the view of the arbitrator in this regard is a possible view. Consequently, appeal has no merit and costs."
(ii) Sumitomo Heavy Industries Ltd Vs. Oil & Natural Gas Commission of India (2010) 11 SCC 296 ".... award was not only a plausible one but a well reasoned award. In the circumstance the interference by the High Court was not called for. In that view of the matter we allow this appeal and set aside the judgment of the learned Single Judge, as well as that of the Division Bench...."
(ii) Rashtriya Ispat Nigam Ltd. Vs. M/s Dewan Chand Ram Saran reported as 2012 (5) SCC 306 ".... There was no reason for the High Court to interfere in the view taken by the arbitrator which was based, in any case on a possible interpretation of clause 9.3. The learned single Judge as well as the Division Bench clearly erred in interfering with the award rendered by the arbitrator. Both those judgments will, therefore, have to be set-aside. Accordingly, the appeal is allowed and the impugned judgments of the learned Single Judge as well as of the Division Bench, are hereby set aside...."
(iii) Reported as 2011 (5) SCC 758, in the case of J.G. Engineers Pvt. Ltd. Vs./ Union of India & Anr.
(iv) First Appeal No.137 of 1992, in the case of State of Gujarat & Anr. Vs. Nitin Construction Company, judgment dated 22.03.2013 of the Hon'ble High Court of Gujarat.
(v) First Appeal No.3688 of 2012, in the case of State of Gujarat Vs. Vijay Mistri Construction & Anr., judgment dated 22.03.2013 of the Hon'ble High Court of Gujarat.
(vi) Reported as 2000 (4) GLR 3652 in the case of Oil & Natural Gas Corporation Limited V/s. Essar Steel Limited, (Paragraph-8).
(vii) Reported in 1999(9)SCC 449, Arosan Enterprises Limited V/s. Union of India & Anr.
(vii) Reported in 2003 (8) SCC 4, Continental Construction Limited V/s. State of U.P., Assam State Electricity Board V. Buildworth (P) Ltd., AIR 2017 ,Gujarat Water Supply & Sewerage Board V. Unique Erectors (Gujarat) (P) Ltd., 1989 (1) SCC 532: Irrigation Department, State Of Orissa V. G.C. Roy, 1992 1 SCC 508 : Jugal Kishore Prabhatilal Sharma V. Vijayendra Prabhatilal Sharma, AIR 1993 SC 864 and Smt. Aruna Kumari V. Government Of Andhra Pradesh, AIR 1988 SC 873.
12. This Court in First Appeal From Order No. 714 of 2005 ( State of U.P. and another Versus J.M. Construction Company) decided on 11.4.2019 has summarized the principles for deciding matters under the Arbitration Act, 1940 & 1996 wherein in paragraph no.24 & 25 it is observed as follows :
"24. In Rajasthan State Road Transport Corporation ( supra), the learned counsel for the respondent-Company submitted that in fact there was no material on which the finding was recorded by the Arbitrator. In support thereof, learned counsel invited our attention to a decision of this Court in the case of K.P. Poulose v. State of Kerala & Anr., reported in [1975] 2 SCC 236 wherein it was held that the award can be set aside on the ground of misconduct if relevant documents are not considered by the Arbitrator. Therefore, we asked learned counsel for the appellant- Corporation to substantiate the finding recorded by the arbitrator that it is based on the material on record. In pursuance to the direction given by this Court, learned counsel for the Corporation filed an affidavit on 12.7.2006 and submitted that the document wherein the details on divisionwise average kilometer of new tyres and retreaded tyres along with average short-fall in guaranteed kilometers for the various periods was on record of arbitrator and same was produced before us. The details were given of all the Divisions i.e. Bharatpur, Jaipur, Sikar, Kota, Ajmer, Bikaner, Jodhpur and Udaipur. In all these eight divisions for the various period i.e. from June 1991 to February, 1994 the details have been given to substantiate the allegations that what was the average mileage of the new tyre and what was the average mileage given by the retreaded tyres and on that basis, the short-fall was given and accordingly, the amount of loss was worked out. These details which were placed before us formed part of the record before the arbitrator. The arbitrator in his detailed award has recorded his finding on the basis of the average performance of new vehicle tyres with that of the retreaded tyres of the Company and on that basis he has worked out the assessment in paragraph 17 of the award. Paragraph 17 of the award reads as follows :
"The RSRTC has compared the performance of retreaded tyres with the performance of new tyres in each division. In each division, as mentioned earlier, the road conditions, the vehicles used, the weather conditions, the general driving skills of the drivers and the level of maintenance and upkeep of vehicles were similar for the new tyres as well as retreaded tyres. The retreaded tyres should have given a kilometerage of 46,000 or 95 % of the life of new tyres. Therefore, the assessment of the performance done by the RSRTC is strictly in conformity with the provisions of clause 5 of the agreement. Notwithstanding the acceptance by the respondent of an error of judgment in guaranteeing 46,000 kms for a retreaded tyre, from the Statements enclosed by the claimant with its letters mentioned in para 5 of this order, it is clear that the retreaded tyres performance fell short of the guaranteed level. I, therefore, find claim of the RSRTC to be fully justified."
25. This is the finding of fact given by the arbitrator. As against this, learned Single Judge as mentioned above, has held that there was no assessment in each division in similar conditions. Therefore, the learned Single Judge set aside the award but it is not factually correct. As mentioned above, there was a comparative assessment given by the Corporation and that was part of the record before the arbitrator and on that basis the finding of fact was recorded by the arbitrator. Learned counsel for the respondents strenuously urged before us that the performance of new tyres and of retreaded tyres on roads like Jaipur-Delhi would be better as against the road of Jaipur-Lalsot. Therefore, there was no assessment of performance of the new tyres vis-a-vis the retreaded tyres supplied by the Company in similar conditions. In fact, an average has to be taken of each division. It is not necessary that in each of the divisions of the Corporation, the road conditions will be similar. Once the company has entered into an agreement knowing fully well the conditions obtaining in the State of Rajasthan that all the routes in the State are not the roads of Class `A' category but there are roads of Class `A', Class `B' and Class `C' categories also. Therefore, the average performance has been recorded taking into consideration this aspect. It is unlikely that all over the State of Rajasthan the road condition like Jaipur-Delhi will be available for all other divisions. Therefore, in all the divisions the average performance has been taken into consideration. The assessment has been based on average of similar conditions of the roads i.e. the good quality as well as the poor quality. Therefore, average performance of the new tyres with the retreaded tyres has to be taken on the basis of roads available in Rajasthan. The average running of the new tyres on these road conditions with that of the retreaded tyres was to be compared to find out whether the performance of retreaded tyres was up to 95% average or not. After assessing the comparative assessment and going through the materials on record the arbitrator has recorded his finding. It was for the company if they wanted more information or wanted to allege that the road conditions are not similar or that the performance of the tyres which were fitted in the rear axle or on the front axle would not be the same, all these details if it wanted, it could have obtained from the Corporation but they did not do so and only at this stage the company wants to bring this factual controversy that retreaded tyres were not used in similar conditions. This argument at this belated stage cannot be accepted as all the materials have been considered by the arbitrator and after taking into consideration the average of each tyre in each region of the corporation has worked out that the performance of the retreaded tyres was not to the extent of 95%. This was a finding of fact recorded by the arbitrator and the same was made rule of the court by the District Judge. But the learned Single Judge erroneously took upon himself to sit as a court of appeal and disturbed this finding of fact. In our opinion, the view taken by the learned Single Judge of the High Court cannot be sustained."
13. Therefore in light of decisions of the Apex Court and the discussion the scope of interference with the findings of Arbitrator as confirmed by the District Judge, on the basis of principles enunciated by Apex Court goes to show that the dispute will have to be decided. The objections were not accepted as they did not fall within the purview of the objections which could be raised under the Act and the judgment of this High Court and the Apex Court was relied by the learned Judge. The Arbitrator gave all his reasons for allowing the claim of the present respondent. Just because the name of the arbitrator was revoked by the appellant is judgment could not be assailed under the said fact. Section 34 and 41 of the Specific Relief Act. And therefore the said Act did not apply. The arbitrator was under a duty to decide the lis. The appellants though objected to the appointment of the said arbitrator. The said objection was not considered by this Court also in first appeal from order preferred before this Court. Hence, the said submission has been rightly rejected by the Court below. Even on merits it cannot be said that it is an ex-parte award as they were fully represented and the appellants avail the opportunity of placing their objections both before the Arbitrator as well as the Court below and, therefore, also no interference can be made in the Rule of the Code made by the Court below and the reasoning given would not permit this Court to interfere with the findings in view of the decision in case of Bharat Coking Coal Ltd Vs. Annapurna Construction reported in 2003 (8) SCC 154.
14. Recently, the Apex Court in K.Marappan (Dead) Versus Superintending Engineer T.B.P.H.L.C. Circle Anantapur, 2019 JX(SC) 391 and in Raveechee and Company Versus Union of India, AIR 2018 SC 3109 has interpreted the role of the Courts while hearing matters under the arbitration Act .The judgments go to show that pendente lite interest will depend upon several factors such as ; phraseology used in the agreement clauses conferring power relating to arbitration, nature of claim and dispute referred to arbitrator, and on what items power to award interest has been taken away and for which period. The Court observed:
"34. Thus our answer to the reference is that if contract expressly bars award of interest pendente lite, the same cannot be awarded by the Arbitrator. And that the bar to award interest on delayed payment by itself will not be readily inferred as express bar to award interest pendente lite by the Arbitral Tribunal, as ouster of power of the arbitrator has to be considered on various relevant aspects referred to in the decisions of this Court , it would be for the Division Bench to consider the case on merits."
15. Further, Gujrat High Court considered an identical clause in the contract in the case of Ambica Constructions v. Union of India,(2017) 14 SCC 323, wherein it observed that the Clause of the GCC did not bar the arbitrator from awarding interest pendente lite and affirmed the award passed by the arbitrator. The three Judge Bench of this Court held that the contention raised by the Union of India based on the Clause of the GCC that the arbitrator could not award interest pendente lite was not a valid contention and the arbitrator was completely justified in granting interest pendente lite. Relying on the three Judge Bench judgment in Union of India v. Ambica Construction (supra) and in Irrigation Deptt., State of Orissa (supra), this Court held that the bar to award interest on the amounts payable under the contract would not be sufficient to deny the payment of interest pendente lite.
16. Thus when a dispute is referred to for adjudication to an arbitrator, a term of such a nature as contained in the Clause 16(3) of GCC, that is binding on the parties cannot be extended to bind an Arbitrator. The Arbitrator has the power to award interest pendente lite where justified. We, therefore, set aside the judgment of the High Court and restore the award passed by the Arbitral Tribunal in respect of Claim No. 12."
17. While going through the record and the award it appears that while considering the claim of the contractor, the arbitrator has considered each and every aspect of the claim made by both the parties and has considered each and every item and the arbitral award reflects on the merits of each claim which the arbitrator has considered and it can be culled out from the arbitral award as well as the subsequent yellow cover that it was either purposefully withheld by the officers of respondents and or were not submitted to the court below. It is in the written submissions accepted by the Union of India and it has been submitted as follows:
"It is also most respectfully submitted that the second sealed cover envelope which probably contains the proceedings during arbitration was not summoned by the court below, so it can not be produced and when this Hon'ble Court has summoned, it was produced by the officials. It is also submitted that reasons can not be written separately it should contain in the award itself, therefore non-production of second seal cover envelope which contains proceedings has got no nexus."
18. The only aspect which requires further consideration is whether the interest has been properly granted or not and what should be the rate of interest. The powers of interference of Courts in grant of interest in arbitral matter came up before the Division Bench of Gujarat High Court of which the undersigned was a presiding Judge in First Appeal No. 3256 of 2001 (OIL and Natural Gas Corporation Limited Versus Birla Techneftegas Exploration Limited decided on 7.4.2016 by the High Court of Gujarat wherein the following observations are relevant and are extracted herein below:-
"........28. Therefore in light of decisions of the Apex Court and the discussion hereinabove, the scope of interference with the findings of Arbitrators and confirmed by the District Judge, on the basis of principles, we are not inclined to interfere with the findings, as settled in view of decision in case of Bharat Coking Coal Ltd Vs. Annapurna Construction reported in 2003 (8) SCC 154.
29. The award so far as interest is concerned, reads as follows:
"With regard to contention (a) above, it is contended by the respondent that increase in HSD is not by operation of law but on account of the administrative orders and, therefore, the claim is not maintainable under Article 23.1 which deals only with variation in operating costs on account of change in or enactment of law in India or interpretation of existing law in India after the date of opening of price bid. To examine this contention it is essential to refer to the provisions of Essential Commodities Act, 1955. Section 2 of this Act in subsection (a) defines "Essential Commodity". In sub clause (viii) of clause (a) of section 2, petroleum and petroleum products have also been included as "Essential Commodities Act, Central Government has power to regulate and control the prices at which an essential commodity may be bought or sold. Therefore, increase in prices of HSD being a petroleum product is pursuant to the exercise of powers given to the Central Government under Section 3 of the Essential Commodities Act and is therefore, on account of a change in law."
The Tribunal has relied on the decisions of the Privy Counsel and Apex Court and also relied upon the affidavit of appellant filed before the Tribunal before the Award passed.
The awarding of interest cannot be said to be in any manner, warranting any interference, however, the factum of interest, in our view may be considered, which in our view is on higher side looking to prevalent practice at the relevant time. The quantum of interest, if reduced to 9% from 15%, the same would meet with ends of justice. As a result thereof, we modified the same and factum of interest is ordered to be reduced from 15% to 9%. The rest of the award is not interfered in any manner."
19. While going through the record, it is clear that grounds of appeal were against the continuation of the arbitrator and his removal was stayed and he was authorized to give the arbitral award. Arbitral award cannot be said to be ex-parte award. The objection was also heard by the learned Judge. The judgment and decree cannot be said to be such which would permit this Court to allow the appeal. It cannot be said that the arbitrator misdirected and misconducted himself and, therefore, also the judgment of Court below cannot be interfered with in view of the the settled legal position. The only interference which can be shown is quo the interest and interest shall be at 9% and not 12%.
20. In the final analysis, this appeal is partly allowed. As far as the rate of interest is concerned, the arbitral award and the order of the Court below shall stand modified to the extent that the rate of interest shall be 9% and not 12% as ordered by arbitrator confirm by the Court below. The stay shall stands vacated. If the amount is yet not deposited or partly deposited the said shall recalculated and be deposited within 12 weeks from today before the Court below.
21. The record and proceedings be sent back to the Tribunal.
Order Date :-8.7.2019 Mukesh