Andhra HC (Pre-Telangana)
State Of A.P. vs Y. Shiva Shankar And Anr. on 4 August, 2003
Equivalent citations: 2003(6)ALD444, 2003(5)ALT829
JUDGMENT G. Yethirajulu, J.
1. This appeal is preferred by the State of Andhra Pradesh against the judgment of the V Additional Judge, City Civil Court, Hyderabad in OP No. 296 of 1987 filed under Sections 30 and 33 of the India Arbitration Act, 1940 ('the Act' for brevity) requesting to set aside the arbitration award dated 14-8-1986.
2. The first respondent is a contractor and the second respondent is the sole arbitrator in this appeal. The contractor entered into an agreement with the State of Andhra Pradesh on 11-8-1980 for forming a road from Naidupet, Durgarajapatnam road to Sriharikota with a link road to Armagoan Light House at Wadapalem covering a distance of 6 km. for a sum of Rs. 17,42,759/-. As per the terms and conditions of the agreement, the matter is referable to arbitration. The contractor contended that he suffered various losses in execution of the work due to various delays and defaults on the part of the department. The arbitrators identified by both parties failed to give the award, therefore, the contractor filed O.P. No. 366 of 1983 on the file of the II Additional Judge, City Civil Court, Hyderabad to appoint a sole arbitrator. Accordingly, Sri Justice M. Krishna Rao, a retired Judge of the A.P. High Court was appointed as the sole arbitrator. The arbitrator after entering into reference and concluding the hearing, passed an award on 14-8-1986 and filed O.S. No. 1076 of 1986 on the file of the V Additional Judge, City Civil Court, Hyderabad under Sections 14(2) and 17 of the Act to make the award as the rule of the Court. The department while contending that the suit is not maintainable on various grounds also filed O.P. No. 296 of 1997 under Sections 30 and 33 of the Act to set aside the award dated 14-8-1986. The arbitrator mentioned in the plaint that he considered all the documents filed by both parties and rightly passed the award in favour of the contractor for a sum of Rs. 1,81,184/-together with interest at 15% per annum till the date of decree or payment, whichever is earlier from 9-11-1985.
3. The department contended that the award passed by the arbitrator is illegal, unjust, arbitrary and contrary to the facts and circumstances of the case. The department further alleged that the contractor misconducted the proceedings by not considering the entire material placed before him and by coming to an erroneous conclusion allowed the claim referred by the contractor wrongfully. There is no justification on the part of the arbitrator to award Rs. 725/- towards compensation for seizure of lorry of the contractor. There is no material to award Rs. 30,456/- towards the cost of the work done in respect of claim No. 6. The arbitrator is not entitled to collect half of the fees payable by the petitioner behind the back of the department and it amounts to misconduct and the award is liable to be set aside on that ground. The arbitrator has no power to direct the State to pay interest at 15% from the date of default till the date of payment or decree. There is no justification for the arbitrator to direct refund of deposits to a tune of Rs. 20,000/-as Earnest Money Deposit (EMD) and Rs. 35,723/- regarding claim No. 6. The State therefore requested to dismiss the suit filed by the arbitrator and to allow the petition by setting aside the award dated 14-8-1986.
CRP No. 2754 of 1997:
4. This revision petition is filed by the State of Andhra Pradesh being aggrieved by the order of the V Additional Judge, City Civil Court, Hyderabad in O.S. No. 1076 of 1986 filed by the Arbitrator requesting the Court to make the award a rule of the Court.
5. The averments in the suit are similar to the averments made in O.P. No. 296 of 1987, therefore, there is no necessity to repeat the averments of the parties.
6. Since both the suit and the O.P. relate to the same award between the same parties, the lower Court on the basis of the documentary evidence placed by both parties and after taking into consideration the contents of the award and the contents of the material papers filed by the arbitrator through its common judgment dated 7-3-1989 decreed the suit covered by O.S.No. 1076 of 1986 making the award dated 14-8-1986 as rule of the Court with a modified rate of interest at 12% per annum from the date of the award i.e., 14-8-1986 till the date of realization and dismissed O.P. No. 296 of 1987 filed by the State.
7. The State being aggrieved by the dismissal of O.P. No. 296 of 1987 preferred C.M.A. No. 929 of 1990 challenging its validity and legality. The State also preferred CRP No. 2754 of 1997 against the judgment and decree in OS No. 1076 of 1986.
8. Since the issue raised in the appeal and the revision petition and the parties in both the matters are one and the same, they are clubbed together and are being disposed of by this common judgment.
9. The point for consideration is whether the award passed by the arbitrator dated 14-8-1986 which was made as the rule of the Court is liable to be set aside?
Point
10. Ex.A-1 is the award passed by the sole arbitrator. The material papers relating to the proceedings before the arbitrator are marked as Ex.A-2. It is an undisputed fact that both parties entered into an agreement on 1-8-1980. They did not dispute the terms of the agreement, including a clause to refer the matter to named arbitrators. The State referred the disputes raised by the contractor during the course of execution of the work to the named arbitrators on 29-5-1983, but, since the arbitrators failed to give the award, the arbitrator, who is the plaintiff in O.S. No. 1076 of 1986 was appointed. It is an undisputed fact that the arbitrator passed the award on 14-8-1986. The State alleged that the arbitrator did not consider the scope of reference and failed to give sufficient reasons in support of the award. It was further contended by the State that the award passed by the arbitrator is not based on any evidence and it is only on imaginary lines. The award passed by the arbitrator is a non-speaking award, therefore, it is liable to be set aside. The learned Counsel for the appellant relied on some judgments of the Supreme Court in support of his contention.
11. In 1988 (2) Supreme Views and Law Reporter (SC) 88 the Supreme Court held that the proceedings before the arbitrator are quasi-judicial, therefore, they must be conducted in accordance with the principles of natural justice. It was therefore obligatory to give reasons.
12. The learned Counsel for the contractor relied on a decision of the Supreme Court in State of Orissa v. Dandasi Sahu, , wherein the Supreme Court held as follows:
The law as it stands today is that the award without reasons can be set aside only on the ground of misconduct or on an error of law apparent on the face of the award.
13. In the above decision the Supreme Court further held as follows:
It is well settled that when the parties choose their own arbitrator to be the Judge in dispute between them, they cannot, when the award is good on the face of it, object to the decision either upon law or on facts. Therefore, an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, where such mistake does not appear on the face of the award and the documents appended to are incorporated so as to form part of it, the award will neither be remitted nor set aside.
14. In V.G. George v. Indian Rare Earths Ltd., , the Supreme Court held that if an award contains not only the sum awarded but also case of parties, issues and findings on each issue, the findings of the arbitrator on the issues form part of the award and the Court can look into those findings.
15. In the present case also it is noticed that the arbitrator mentioned the claim of the contractor and the objections raised by the State in respect of each item of claim and passed the award giving findings on all the claims. On the basis of the principle laid down by the Supreme Court in the above case, it can be safely concluded that the award is a speaking award, therefore, it is not liable to be set aside.
16. In Grid Corporation of Orissa Ltd. v. Balasore Technical School, , the Supreme Court while considering the scope of Section 30 of the Act held that where the dispute is within the scope of the arbitration clause, the Court cannot enter into the merits of the dispute. The Supreme Court further held that where no reasons are given by the arbitrator to arrive at his conclusion it is not open to the Court to speculate. If the dispute is within the scope of the arbitration clause it is no part of the province of the Court to enter into the merits of the dispute. If the award goes beyond the reference or there is an error apparent on the face of the award, it would be certainly open to the Court to interfere with such an award.
17. In the case on hand, it is not the contention of the State that the arbitrator went beyond the scope of reference and it is also not the case of the State that there is error apparent on the face of the award, therefore, the principle laid down by the Supreme Court in the above judgment is also applicable to the facts of the case on hand.
18. In a decision of this Court in N. Pola Reddy v. S. Ramalingam, (1988) 2 Arbitration Law Reporter 421, a learned Single Judge of this Court while dealing with the provisions of Section 30 of the Act held that the award can be set aside only when it is bad on its face on account of error of law. I concur with the view expressed by the learned Single Judge in this regard.
19. The learned Counsel representing the State reiterated the points, which were raised before the lower Court and did not add any new points for consideration. Except making a general slogan that the award of the arbitrator is unlawful and arbitrary, the learned Counsel representing the State could not specifically point out as to what are the instances of arbitrariness committed by the arbitrator. While considering the facts placed before him and awarding the amounts under the respective heads to the contractor, the arbitrator considered the contentions of both parties in respect of each and every item of claim. He extracted them in the prescribed form and ultimately awarded reasonable amounts under claim Nos. 1, 3, 6, 7, 8, 9 and 11. He disallowed the claims covered by item Nos. 2,4 and 5. When the contractor claimed a total sum of Rs. 2,62,500/- the arbitrator awarded Rs. 1,84,334/- including costs of Rs. 3,150/-.
20. The lower Court after taking into consideration the pleas of both parties in respect of each item of claim held that the amounts awarded by the arbitrator are quite reasonable. After going through the record. I am convinced that the arbitrator did not commit any illegality in fixing the amounts payable or any arbitrariness in awarding the amounts payable to the contractor. I am therefore inclined to confirm the judgment of the lower Court regarding the amounts fixed by the arbitrator payable to the contractor by the State.
21. So far as the rate of interest is concerned, the arbitrator awarded 15% but the lower Court after considering that it is on higher side reduced the same to 12% per annum, which is my view is just and reasonable. I therefore find no grounds to interfere with the judgment of the lower Court.
22. In the result, CMA No. 929 of 1990 and CRP No. 2754 of 1997 are dismissed by confirming the common judgment and decree of the lower Court dated 14-8-1986 in OP No. 296 of 1987 and OS No. 1076 of 1986. Each party to bear their own costs.