Jharkhand High Court
Senbo Engineering Ltd vs East Central Railway on 29 August, 2022
Author: Ravi Ranjan
Bench: Chief Justice, Sujit Narayan Prasad
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
Commercial Appeal No.4 of 2021
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Senbo Engineering Ltd., a company registered under the
provisions of the Companies Act, 1956, having registered
office at 87, Lenin Sarani, P.O. & P.S. Lenin Sarani, District-
Kolkata-700013, West Bengal ... ... Appellant
Versus
East Central Railway, represented through the General
Manager, Having office at Zonal Office Road, P.O. & P.S.
Hajipur, District-Hajipur, Bihar-844102
... ... Respondent
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CORAM : HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD
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For the Appellant : Mr. Nand Kishore Singh, Advocate
For Respondent : Mr. Pratyush Kumar, C.G.C.
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C.A.V. on 11.05.2022 Pronounced on 29.08.2022
Per Dr. Ravi Ranjan, C.J.
The instant appeal has been preferred under Section 13 of the Commercial Courts Act, 2015 assailing the order/judgment dated 06.01.2021 passed in Commercial Revocation Case No.07 of 2019, by which, an arbitral award dated 23.02.2019 passed by the sole Arbitrator, has been set aside in entirety.
2. The brief facts of the case, required to be considered in this appeal, stand enumerated as under:-
A notice inviting tender was issued by the East Central Railway through its General Manager for construction of seven bridges between Tori to Shivpuri (Km 23.00 to Km 44.00) in connection with construction of Tori Shivpur new BG Rail line project in Latehar district of Jharkhand State and the work was -2- awarded to the respondent vide LOA No.ECR/CAO/Con/WT/S/165/13616 dated 03.06.2014. The value of the work was estimated to the tune of Rs.82,80,54,283.78 and the work was to be completed within 24 months from the date of issuance of acceptance letter i.e., till 02.06.2016. A formal contract/agreement was entered into in between the parties on 31.10.2014. However, the work could not have been completed within the stipulated time. Thereafter, the East Central Railway vide its letter dated 11.07.2016 issued letter for termination of contract. Thus, the dispute arose between the parties and the claimant-respondent-appellant filed an application before this Court for appointment of an Arbitrator to adjudicate upon the dispute and this Court vide order dated 28.07.2017 passed in Arbitration Application No.16 of 2017 has appointed Hon'ble Mr. Justice D.G.R. Patnaik, a Former Judge of this Court as Arbitrator and the dispute was referred for arbitration.
The award was passed in favour of the appellant holding the termination of the contract to be illegal and has passed the order allowing the claim to the extent of Rs.28,45,90,777.56 under different heads as under:-
Sl No. Description Amount Allowed
1 Item No.I:-Refund of encashed Rs.8,59,08,325/-
Bank Guarantees
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2 Item No.2:-Compensation for Rs.2,44,85,062/-
loss of on going work
3 Item No.3:-Compensation for Rs.36,00,000/-
loss suffered on Batching Plant
4 Item No.7:- Loss of profit Rs.9,63,19,088.13/-
5 Item No.11 & 12:- Rs.1,83,38,701.96/-
Compensation for expenses
incurred in purchase, supply
and cutting, bending, fixing
TMT Bars and for procurement,
fabrication of structural steel
as per relevant clause of the
contract
6 Item No.10:-Costs Rs.10,00,000/-
7 Item No.9:- Payment of interest Rs.5,49,39,600.47/-
(I) Interest on Item
No.1=Rs.4,12,35,996/-
(ii) Interest on item nos.2, 10
and 11=Rs.1,37,03,604.47/-
(iii) Interest on item No.7:- it To be calculated shall be calculated @ 12 % per annum from the date of award till the date of actual payment made on the amount of loss of profit to the tune of -4- Rs.9,63,19,088.13 Total Rs.28,45,90,777.56/-
The respondent East Central Railway, being aggrieved with the award, assailed the same by invoking the jurisdiction conferred under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the 'Act'), 1996.
The Court below, after hearing the application filed under Section 34 of the Act, 1996 has considered the aforesaid award to be incorrect, as would appear from paragraphs-26, 27 and 28 of the order passed by the concerned Court. The finding recorded by the concerned court dealing with the application under Section 34 of the Act, 1996 as referred under paragraphs-26, 27 and 28 read as under:-
"26. In the present case award to the extent of Rs.8,59,08,325.00 has been made towards refund of encashed bank guarantee and security deposit vide item no 1 and further vide item no.9 (I) award has been made towards interest on item no.1. In this regard, I find that clause 29 and 30 of the Tender document stipulates, that both the BG and security deposit was to be released only after physical completion of the work where as in the present case only 4 % of the work has been executed by the contractor. Further both these clauses specifically bars payment of interest on BG and Security deposit but interest has been paid on both the items and therefore the claim awarded under item no 1 and item no 9 (I) is in -5- contravention of Clause 29 and 30 of the tender document.
27. Further vide item no 2, 3 and 7 the claim has been awarded towards compensation for loss of on-going work, compensation for loss suffered in batching plant and loss of profit. In this regard I find that clause 51 and 52 of the Tender Document specifically bars this claim wherein it envisages that:-
Clause 51-No claim whatsoever will be entertained by the railway on account of any delay or hold up of the works(s) arising out of delay in approval of drawings, changes, modifications, additions, omissions and site lay out plan or detailed drawings and designs and or late supply of such materials as are required to be arranged by the railway or due to any other factor on railway account.
(Emphasis added) Clause 52 reads-No claim for idle labour, or idle machinery etc on any account will be entertained. Similarly no claims shall be entertained for business loss and any such loss.
28. So far as item no 11 and 12 are concerned, I find that the same has been awarded towards compensation for expenses incurred in purchase, supply and cutting, bending, fixing TMT bars and for procurement of structural steel as per relevant clause of contract. The learned Counsel for the petitioner submitted that even assuming that the contractor has purchases these articles but the articles were never supplied nor were used at the site and therefore no claim could have been granted for the articles which are in the claimants -6- possession. This claim has been dealt with the learned Tribunal at page 45 of the award wherein in the Tribunal has held "From perusal of the documents on record, it appears that the Claimant has filed its Rejoinder to the defence statement submitted by the Respondents and while reiterating the items for its claim for compensation, it has also put forth its claim for the aforesaid two items mentioned at serial no 11 and 12 of the summary of claims. Though the respondents have received a copy of the claimant's rejoinder, they have not controverted this portion of the Claimant's claim. In absence of any denial either specific or even general, it has to be deemed that the claimant has incurred the expenses under these two heads and is therefore entitled to claim payment for the same. In this regard I find that claim under Item no 11 and 12 has been awarded only because the petitioner/respondent did not controverted this claim either specific or in general and there is no discussion as to what was the evidence which was adduced by the claimant in support of this claim. I find that no reasons has been assigned by the Tribunal in awarding this part of the claim save and except that the petitioner respondent did not convert the claim. In Associate Builders case ((2015) 3 SCC 49) it has been held that "if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the 1996 Act, such award is liable to be set aside."
The appellant, being aggrieved with the order/judgment dated 06.01.2021 passed in Commercial Revocation Case No.07 -7- of 2019, has preferred the instant appeal invoking the jurisdiction conferred to this Court under Section 13 of the Commercial Courts Act, 2015.
3. Mr. Nand Kishore Singh, learned counsel appearing for the appellant, made following submissions:-
(i) The Court below has not exercised the power conferred under the Arbitration and Conciliation Act, 1996 in a proper manner, since several issues have been raised by the appellant in support of the finding recorded by the learned sole Arbitrator, but, no finding has been recorded either way i.e., discarding the same, therefore, the Court below has passed the order in a mechanical manner, since, no consideration about the plea raised before it in defence of the award has been answered by recording the finding to that effect on the basis of the ground agitated on behalf of the appellant, therefore, submission has been made that since the judgment has been passed by the concerned Court in exercise of power conferred under Section 34 of the Arbitration and Conciliation Act, 1996 which having not considered the factual aspect agitated on behalf of the appellant and as such, it cannot be said that the judgment has been passed after giving proper consideration of the factual aspect vis-à-vis the legal position as has been agitated on behalf of the appellant and hence, the judgment/order dated 06.01.2021 is not sustainable in the eye of law.
(ii) The submission has been made that the award has -8- been passed by the sole Arbitrator after considering the fact that there was non-cooperation on the part of the respondent which led the appellant in not concluding the work within the time frame. The aforesaid fact has been agitated before the concerned Court dealing with the application under Section 34 of the Act, 1996, but, it would be evident from the bare reading of the judgment/order dated 06.01.2021 (impugned) that no such finding has been recorded about non-cooperation of the respondent, which is the main ground taken by the sole Arbitrator in non-conclusion of the work within the stipulated time, therefore, the order passed by the concerned Court is not sustainable in the eye of law.
(iii) The concerned Court has reversed the finding recorded by the sole Arbitrator, in exercise of power conferred under Section 34 of the Act, 1996, but while doing so, he has exceeded its jurisdiction in reversing the fact finding recorded by the sole Arbitrator in the award.
Submission has been made on behalf of the learned counsel for the appellant that the concerned Court in exercise of power conferred under Section 34 of the Act, 1996 can reverse the fact finding recorded by the sole Arbitrator, but, the same can only be done, if the award is based upon the perverse finding. But, it would not be evident from the order impugned that the concerned Court has considered this aspect of the matter, rather, the Court has travelled into the principle of public policy.
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4. According to the learned counsel for the appellant, it is not a case where the applicability of the principle of public policy is applicable, which led the concerned Court to reverse the finding recorded by the sole Arbitrator in the award.
5. Learned counsel for the appellant has relied upon the judgment rendered by the Hon'ble Apex Court in J.G. Engineers Pvt. Ltd. Vs. Union of India & Anr., (2011) 5 SCC 758 to fortify his argument that the reason shown for reversal of the fact finding recorded in the award by the Court in exercising the power conferred under Section 34 of the Act, 1996 which was based upon the non-consideration of the terms and conditions of the agreement, since, the learned sole Arbitrator has considered the accountability in non-conclusion of the work within the stipulated period and exactly in the similar circumstances, the Hon'ble Apex Court in the aforesaid case, has decided the issue, as to whether the appellant was responsible for the delay in execution of the work, was arbitrable.
The aforesaid aspect of the matter was considered and the matter has finally been settled by the Arbitrator and in such circumstances, the Hon'ble Apex Court has came to the conclusion that once it is held that the issues relating to who committed breach and who was responsible for delay were arbitrable, the findings of the arbitrator that the contractor was not responsible for the delay and that the termination of the contract is illegal, would not be open to challenge.
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It has been submitted that in the case in hand also the appellant was ready to execute the work within time but it is due to non-cooperation on the part of the respondent concerned, the work could not have been completed and as such, the learned Arbitrator after considering this aspect of the matter has passed the award, which cannot be said to suffer from perversity, as has been held by the concerned court in exercising the power conferred under Section 34 of the Act, 1996.
Learned counsel for the appellant has further submitted that once the award has been passed, based upon the reason, the same is not required to be interfered with by the concerned Court in exercise of power conferred under Section 34 of the Act, 1996 that too without taking into consideration the plea agitated before it.
6. Per contra, Mr. Pratyush Kumar, learned C.G.C. appearing for the respondent-East Central Railway has submitted that there is no infirmity in the order passed by the concerned Court under Section 34 of the Act, 1996, reason being that the concerned Court has considered the terms and conditions of the contract, as per which, there is no condition stipulated therein for refund of amount to the extent of Rs.8,59,08,325.00 towards refund of encashed bank guarantee and security deposit.
Since, as per the conditions stipulated under Clause 29 and 30 of the Tender document which stipulates, that both the
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bank guarantee and security deposit were to be released only after physical completion of the work whereas in the present case only 4% of the work has been executed by the contractor.
Further, the concerned Court has considered that there is no condition stipulated in the contract for issuance of direction for payment of interest but even then, the award was passed directing the respondent to pay interest.
7. According to the learned counsel for the respondent-East Central Railway, since the work has not been concluded, rather only 4% of the work could be completed, therefore, this aspect of the matter ought to have been considered by the learned sole Arbitrator, however, without considering this aspect of the matter and without answering the implication of the specific condition stipulated in the agreement, held that the amount of bank guarantee and the security deposit to the extent of Rs.8,59,08,325.00 are to be released since the same was only to be paid, in case of conclusion of the work and as such, the learned sole Arbitrator since has directed for disbursement of the amount contrary to the terms and conditions of the agreement. Therefore, the said order has been considered to be against the public policy by the Court dealing with the application filed under Section 34 of the Act, 1996, as such, the aforesaid finding cannot be said to be incorrect, reason being, when the parties have agreed and came into an agreement, the terms and conditions bind them and once the terms and conditions have been accepted, they cannot be allowed to
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retract back and claim the amount along with due compensation as also that the order for refund of bank guarantee and security deposit amount to be refunded with the interest.
8. Therefore, According to the learned counsel for the respondent-East Central Railway, the Court, dealing with the application under Section 34 of the Act, 1996 has reversed the award on the aforesaid ground as referred in the preceding paragraph, which cannot be said to suffer from any illegality.
9. In the aforesaid backdrop of the facts, he further submits that since an issue has been raised on behalf of the appellant that there point of view was not considered, it would be a fit case to remit the matter before the concerned Court for consideration of the issue raised by passing a fresh order.
10. We have heard the learned counsel for the parties, perused the documents available on record as also considered the finding recorded by the concerned Court dealing with the application filed under Section 34 of the Act, 1996.
11. The undisputed facts in this case are that the agreement has been entered in between the parties for execution of the work for construction of seven bridges between Tori to Shivpuri (Km 23.00 to Km 44.00) in connection with construction of Tori Shivpur new BG Rail line project in Latehar district of Jharkhand State. The work could not have been completed, the same has taken to be a ground for termination of the contract and accordingly, the dispute arose in between the parties.
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The dispute was finally referred before the learned sole Arbitrator by virtue of order dated 28.07.2017 passed by this Court in A.A. No.16/2017, by which, Hon'ble Mr. Justice (Redt.), D.G.R. Patnaik, Former Judge of this Court was appointed as sole Arbitrator for resolution of the dispute.
The said award has been questioned by the respondent- East Central Railway by invoking the jurisdiction conferred to the concerned Court under Section 34 of the Act, 1996.
The concerned Court has passed the order by reversing the award vide impugned judgment dated 06.01.2021 passed in Commercial Revocation Case No.07 of 2019, which is the subject matter of the instant appeal.
12. The submission has been made on behalf of the learned counsel for the appellant that there is no infirmity in the award but without appreciating that aspect of the matter, the award has been reversed, which cannot be said to be proper and therefore, the impugned order is fit to be quashed and set aside.
The sole argument agitated by referring to the impugned order/judgment is that whatever point has been considered by the learned sole Arbitrator and even though the ground in defence of the award was agitated before the concerned Court, it would be evident from the impugned order that there is no consideration at all. Merely the submission of the appellant has been referred but no finding has been recorded either way.
Learned counsel for the appellant, therefore, submits that
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the order impugned is nothing but a cryptic and mechanical order.
Learned counsel, in the backdrop of the aforesaid fact, has submitted that the order/judgment impugned is fit to be quashed and set aside and the award dated 23.02.2019 is fit to be restored.
It has been submitted that so far as the interest part is concerned, the appellant is ready to forgo, since there is no condition to that effect in the agreement. However, so far as the other claims are concerned, as directed to be paid, as would appear from the tabular chart, referred hereinabove, the appellant was legally entitled to get the same. Since, it was the respondent who had come in the way in non-conclusion of the work within the stipulated period, the same was taken as a ground before the sole Arbitrator which has been considered in the right perspective noticing about non-cooperation of the respondent, the award has been passed in favour of the appellant directing the respondent to make payment as per the tabular chart under different heads.
13. On the other hand, learned counsel for the respondent- East Central Railway, has submitted that the learned Arbitrator has not appreciated the terms and conditions of the agreement rather travelled beyond the terms and conditions, interest has been awarded as also the bank guarantee and security deposit have been directed to be refunded, even though, there was specific bar in releasing the said amount. The said amount can
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only be refunded in a case where the work is concluded within the stipulated time.
14. This Court, for appreciating the aforesaid arguments advanced on behalf of the parties, is required to consider the following issues:-
(i) Whether the court having jurisdiction under Section 34 of the Arbitration and Conciliation Act, 1996, is required to consider the ground agitated in defence of the award and what would be its result if there is non-consideration on the said ground by the concerned Court?
(ii) Whether the impugned judgment passed by the Court in exercising the power conferred under Section 34 of the Act, 1996, is held to be not sustainable due to non-consideration of the ground agitated and in case of such decision, will it be appropriate for this Court in exercise of power under Section 13 of the Commercial Courts Act, 2015 to restore the award instead of remanding the matter to the concerned Court to pass a fresh order after consideration of the factual aspect which has been agitated before it?
Since both the issues are intertwined, as such are being considered together and being answered.
15. There is no dispute about the settled position of law that if an opportunity is being provided to the party and the same has been responded, it is the bounded duty of the concerned Court or the authority to deal with such pleading and answer it in either way.
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16. It is in these circumstances only, it can be said that there is proper consideration of the factual aspect placed before the concerned Court or the authority.
17. The meaning of 'consideration' is the active application of mind of the factual aspect, as per the definition of 'consideration' given by the Hon'ble Apex Court in Chairman, Life Insurance Corporation of India & Ors. Vs. A. Masilamani, (2013) 6 SCC 530, wherein, at paragraph-19, it has been held by the Hon'ble Apex Court as under:-
"19. The word "consider" is of great significance. The dictionary meaning of the same is, "to think over", "to regard as", or "deem to be". Hence, there is a clear connotation to the effect that there must be active application of mind. In other words, the term "consider"
postulates consideration of all relevant aspects of a matter. Thus, formation of opinion by the statutory authority should reflect intense application of mind with reference to the material available on record. The order of the authority itself should reveal such application of mind. The appellate authority cannot simply adopt the language employed by the disciplinary authority and proceed to affirm its order. (Vide Indian Oil Corpn. Ltd. v. Santosh Kumar [(2006) 11 SCC 147 : (2007) 1 SCC (L&S) 388] and Bhikhubhai Vithlabhai Patel v. State of Gujarat [(2008) 4 SCC 144 : AIR 2008 SC 1771] ."
18. This Court has considered the finding recorded in the award by the learned Arbitrator and found therefrom that the consideration has been given regarding casting accountability upon the respondent for non-conclusion of the work within the
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stipulated period. That has led the learned Arbitrator to come to the conclusion and passing the award in favour of the appellant. However, the said award was questioned on the ground that the learned Arbitrator had passed the award deviating from the specific terms and conditions of the agreement, wherein, even though, there is no Clause pertaining to payment of interest, the award for payment of interest has been passed.
Further, other amounts have been directed to be paid as per the tabular chart, as quoted and referred hereinabove, inclusive of the refund of bank guarantee and security deposit. But, it is the plea of the respondent that such directions contained in the award is contrary to the terms and conditions of the agreement as per which the amount could only be directed to be paid under the said heads in the case where the work is concluded in entirety whereas records show that only 4% work could be completed.
19. In response to the same, learned counsel for the appellant has taken the ground, referring to the reasons assigned by the learned Arbitrator in passing such direction even contrary to the agreement, that the learned tribunal has came to the conclusion about accountability in not allowing the work to be concluded within the stipulated time.
It appears from the judgment/order impugned that even though, the appellant has raised this specific issue before the Court below and the same has been noticed by it but no finding
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has been recorded and simply on going through the terms and conditions of the agreement, the award has been held to be illegal.
20. The question is that 'what is the meaning of notice and what is the meaning of providing an opportunity of hearing' that too, if any order has been passed in favour of the party, which is the subject matter of consideration by the Higher Forum.
Once the notice is issued to the party, which itself suggests that the opportunity is being given to defend the order which has been passed in favour of the party and if the party appears and takes plea in defence of the impugned order before the Forum, it would be the bounded duty of the concerned Forum to give a specific finding either in discarding or accepting the same. That would be required to be based on reason. Only then, it could be said that there is proper consideration of the factual aspect raised by the parties. Otherwise, if the plea has been taken by the party but no finding discarding the same is available in the order, the same will have to be held to be cryptic and mechanical order.
The plea which is being taken before the concerned Forum is required to be considered and 'consideration' means a proper application of mind, as has been held in Chairman, Life Insurance Corporation of India & Ors. Vs. A. Masilamani (supra).
It is not disputed by the respondent-East Central Railway
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that there is no consideration of the factual aspect pleaded by the appellant before the Court dealing with the application under Section 34 of the Arbitration and Conciliation Act, 1996.
21. So far as the argument advanced on behalf of the learned counsel for the appellant that the issue may be decided on merit by this Court in the appeal itself instead of remitting the matter before the concerned Court, this Court is of the view that since this Court is sitting in an appeal and since the issue of consideration of factual aspects, which were raised before the learned Arbitrator, have been placed before the Court dealing with the issue under Section 34 of the Act, 1996, that Court is required to deliberate upon the same considering the relevant documents or evidence for its proper appreciation, it would not be proper for this Court to exercise such power under the appellate jurisdiction rather this Court deems it fit and proper to remit the matter before the concerned Court.
22. This Court sitting under the appellate jurisdiction is of the view that the order/judgment impugned requires interference.
23. Accordingly, the order/judgment impugned dated 06.01.2021 passed in Commercial Revocation Case No.07 of 2019, is hereby quashed and set aside.
24. In the result, the instant appeal is allowed.
25. In consequence thereof, the matter is remitted to the Court concerned for passing an order afresh in accordance with law preferably within the period of three months' from the date of receipt/production of copy of this order.
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26. Pending interlocutory application(s), if any, also stands disposed of.
(Dr. Ravi Ranjan, C.J.) I agree (Sujit Narayan Prasad, J.) (Sujit Narayan Prasad, J.) A.F.R. Rohit/