Calcutta High Court
Union Of India vs A.K. Mukherjee on 14 November, 2017
Author: Soumen Sen
Bench: Soumen Sen
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
BEFORE:
THE HON'BLE JUSTICE SOUMEN SEN
AP No.423 of 2009
UNION OF INDIA
VERSUS
A.K. MUKHERJEE
For the Petitioner : Mr. Partha Sarathi Bose, Sr. Adv.,
Mrs. Aparna Banerjee, Adv.
For the Respondents/Award-holder : Mr. Amitava Ghosh, Adv.
Hearing Concluded On : 10.11.2017 Judgment On : 14th November, 2017
Soumen Sen, J.:- This is an application for setting aside of an award passed by the sole arbitrator on 11th February, 2009.
Although, various grounds are taken in the said application but during argument, Mr. Partha Sarathi Bose, learned Senior Counsel representing the petitioner has fairly submitted that the petitioner would challenge the award in so far as the Claim Nos.9,10,12 and 13 are allowed.
The said claims are:-
"Claim No.9:- Claim for the cost of idleness of labour, equipment, tools & tackles which remained unutilised and underutilised at the site for non-availability of decision from the respondent authorities = Rs.1,00,000/-.
Claim No.10:- Claim for reimbursement of the cost of guarding the buildings with effect from 1-5-2002 @ Rs.10,000/- per month till the date of taking over of the buildings = Rs.80,000/-.
Claim No.12:- Claim for payment towards interest @ 18% per annum on Rs.18,51,695/- from 20-07-01 to 08-03-2002 =1,99,983/-.
Claim No.13:- Claim for payment towards interest @ 18% per annum on the retained amount till final payment = As accrued."
The arbitrator has allowed Claim No.9.
The arbitrator considered Ext.C-58 and Ext.C-59 which relate to payment made towards machine hire charges and observed that since the said documents were marked as exhibits without any objection and there has been no effective cross-examination which could shake the evidence unless it is an admitted position that the work remained closed due to the laches of the respondent for three months the claimant is entitled to the said amount.
Mr. Bose, learned Senior Counsel refers to Clause 17(3) of the General Conditions of Contract and submits that the said Clause clearly prohibits the claimant to make any payment for the aforesaid period and the arbitrator being a creature of the agreement cannot travel beyond the scope of the contract. In other words, it is argued that the arbitrator acted without jurisdiction in awarding the said sum.
The arbitrator allowed the Claim No.10 which is a claim relating to guarding of the building after completion of the work. This was also challenged by Mr. Bose on the ground that Clause 40(1) of the General Conditions of Contract prohibits granting of any amount for the aforesaid period. The arbitrator has acted without jurisdiction in granting such payment. In so far as Claim Nos.12 and 13 are concerned, Mr. Bose in all fairness has submitted that the objection is limited only to the extent that the award for pendente lite interest should have been awarded from 11th February, 2014 when the sole arbitrator had entered reference and not for any period prior thereto.
Per contra, Mr. Amitava Ghosh representing the Award-holder submits that neither Clause 17(3) nor Clause 40(1) of the General Conditions of Contract curtails the right of the arbitrator to allow all or any of such claims. In so far as the Claim Nos.12 and 13 are concerned which is a claim on account of pendente lite interest, it is submitted that in view of Section 21 of the Arbitration and Conciliation Act, 1996 which is a clear departure from the 1940 Act, the arbitrator was competent to grant pendente lite interest from 12th July, 2002 when the notice was served upon the petitioner requesting the said petitioner to appoint an arbitrator in terms of the arbitration clause. Mr. Ghosh in all fairness, however, submits that the commencement date for calculation of the pendente lite interest should be 12th July, 2002 and not 20th July, 2001 as mentioned in the award. The objection with regard to Claim No.9 is considered first.
The Arbitrator derives its authority from the contract and it appears that the learned Arbitrator has acted in disregarding the terms of the contract and has allowed the claim No.9 when there is a clear prohibition.
Although in the counter-statement, there is a bare denial and the respondent does not appear to have argued before the arbitrator that Clause 17(3) of the General Conditions of Contract prohibits allowing any such claim and the claimant is not entitled to make any such claim towards idle labour for three months but having regard to the fact that an arbitrator is bound by the restrictive and exclusion clause in the contract cannot award a sum prohibited by the contract. The Clause 17(3) of the General Conditions of Contract reads:-
"17(3). Extension of time on Railway Account.
In the event of any failure or delay by the Railway to hand over to the Contractor possession of the lands necessary for the execution of the works or to give the necessary notice to commence the works or to provide the necessary drawings on instructions or any other delay caused by the Railway due to any other cause whatsoever, then such failure or delay shall in no way affect or vitiate the contract or alter the character thereof or entitle the Contractor to damages or compensation therefor but in any such case the Railway may grant such extension or extensions of the completion date as may be considered reasonable."
Moreover, it is well-settled that the arbitrator derives authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be an arbitrary one as it would be deliberate departure from the contract.
The arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error. The role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record.
An arbitral Tribunal is not a court of law. Its orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its power ex debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject-matter of reference. (See Oil & National Gas Corporation Ltd.
- versus- Saw Pipes Ltd. reported at (2003) 5 Supreme Court Cases 705; M/s. Rashtriya Chemicals & Fertilizers Ltd. -versus- M/s. Chowgule Brothers & Ors. reported at AIR 2010 Supreme Court Cases 3543 and Ramnath International Construction Pvt. Ltd. - versus- Union of India & Anr. reported at 23006 (4) Arb. LR 385(SC).
Accordingly, the objection of Mr. Bose in so far as Claim No.9 is concerned, is allowed.
In so far as Claim No.10 is concerned which is a claim for reimbursement of the cost of guarding the building, the objection raised in the counter-statement is that the building was handed over on 4th October, 2002 and, accordingly, the period for which the claim was made, namely, 16th May, 2002 to 20th January, 2003 are incorrect. The arbitrator on examination of oral and documentary evidence came to the conclusion that the work was completed on 30th April, 2002 up to the extent that it was allowed, the arbitrator has referred to Ext.34 being a letter dated 6th May, 2002 wherein the claimant had put forward its claim for guarding the said building and set a deadline up to 16th May, 2002 but notwithstanding such request, the petitioner did not take over possession of the building. The evidence in this regard adduced by the claimant has remained unshaken. The arbitrator, however, recorded the objection of the respondent with regard to the maintainability of the claim in view of Clause 40(1) of the G.C.C., 1969 and was of the opinion that the said clause is not a bar to allow such claim. Clause 40(1) of the G.C.C. reads:-
"40(1) Handing over of works:- The Contractor shall be bound to hand over the works executed under the contract to the Railway Engineers in all respect to the satisfaction of the Engineer. The Engineer shall determine the date on which the work is considered to have been completed, in support of which his certificate shall be regarded as sufficient evidence for all purposes. The Engineer shall determine, from time to time, the date on which any particular section of the work shall have been completed and the Contractor shall be bound to observe any such determination of the Engineer."
The arbitrator in rejecting such objection has recorded that the said clause is of no avail to the petitioner particularly when the claimant by a notice dated 6th May, 2002 set a deadline up to 16th May, 2002 for the respondent to take over works executed and there is no rebuttal to the same by the petitioner. The award also refers that the petitioner has admitted the date of completion and delay in taking over of the completed work. However, the arbitrator did not allow the entire claim for eight months and has reduced the claim for six months. The said award was passed on examination of the documentary and oral evidence.
Although, no elaborate reason is given in the award for not accepting the said submission but it appears that Clause 40(1) does not prohibit the arbitrator in allowing such claim. Mr. Bose tried to persuade me to hold that Clause 17(3) of the G.C.C. and Clause 40(1) of the G.C.C. are having the same effect but I am unable to accept the said submission. The two clauses are separate and operate on different fields. The delay contemplated in Clause 17(3) of the G.C.C. cannot be stretched and extended to include the situation contemplated being Clause 40(1) of the G.C.C. It is trite law that unless the finding of the arbitrator is perverse and without jurisdiction the Court shall not interfere with an award just because on the same set of facts and evidence the Court could have come to a different finding. The interpretation of a clause in the contract falls within the exclusive domain of the arbitrator. A possible view by the arbitrator on facts has necessarily to be accepted as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon, when he delivers his arbitral award. Thus, an award based on little evidence or no evidence, which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators' approach is not arbitrary or capricious then he is the last word on facts. (See Associate Builders Vs. Delhi Development Authority, 2015 (3) SCC 49) When the view taken by the arbitrator was a possible or a plausible one, on his analysis of evidence and interpretation of contractual and/or statutory provisions and did not suffer from any manifest error, it was not open to the Court to interfere with the award. (See Indu Engineering & Textiles Ltd. Vs. Delhi Development Authority, 2001 (5) SCC 691) On such considerations, the objection raised in respect of Claim No.10 is not accepted.
In respect of the claim towards pendente lite interest, the only dispute raised in this proceeding is the date from which the arbitrator ought to have allowed such interest. The jurisdiction of the arbitrator to award pendente lite interest in view of the decision of the Hon'ble Supreme Court in Ambika Construction Vs. Union of India reported at AIR 2017 SC 2586 is no more res integra. The award of interest in the present case is governed by Clause 16(2) of the General Conditions of Contract. Similar clause was construed in Ambika Construction (supra) and subsequently in a Division Bench judgment of this Court in M/s. Venus Engineering Concern Pvt. Ltd. Vs. Union of India on 24th July, 2017 being G.A. No.1838 of 2017, APO No.228 of 2017, upholding the power of the arbitrator to allow pendente lite interest. In view thereof, the petitioner cannot resist an award for pendente lite interest.
The disagreement is with regard to the commencement date of the pendente lite interest. It appears that the notice under Section 21 of the Arbitration and Conciliation Act, 1996 was issued on 12th July, 2002 requesting the authority concerned to appoint an arbitrator. Since the authority did not appoint an arbitrator within the stipulated period, an application for appointment of an arbitrator was carried to Court. On 29th September, 2003 an order was passed appointing a former Judge of this Court as sole Arbitrator. The first sitting of arbitration was held on 11th February, 2004. Mr. Bose submits that the pendente lite interest should be calculated from 11th February, 2004 whereas Mr. Ghosh submits that it should be from the date of notice under Section 21 of the Arbitration and Conciliation Act, 1996 and in any event, not later than September, 2002 when with the expiry of the statutory period the valuable right had accrued in favour of the petitioner to move the Court for appointment of an arbitrator.
Under the 1940 Act, under Clause 3 of the First Schedule, an arbitrator was required to make award within four months after entering on the reference or after having called upon to act by notice in writing from any party to the arbitration agreement or within such extended time as the Court may allow. However, no such concept of entering reference could be found in the 1996 Act. Section 21 of the Arbitration and Conciliation Act, 1996 relates to commencement of arbitration proceeding. Mr. Ghosh argued that commencement is analogous or synonymous to reference. This submission is perhaps based on an interpretation of Section 31(7) of the Arbitration and Conciliation Act, 1996 where the arbitral tribunal is authorized to award interest on the whole or any part of the money for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made. In my view, a conjoint reading of Section 21 and Section 31(7) of the Arbitration and Conciliation Act, 1996 permits the arbitrator to grant pendente lite interest from 12th July, 2002 till realization.
Under such circumstances, the objection with regard to the pendente lite interest to the extent aforesaid is allowed. Accordingly, the interest for Claim Nos.12 and 13 should be calculated from 12th July, 2002 instead of 20th July, 2001 till realization.
The application for setting aside of the award is partly allowed and the award stands modified to the extent indicated above.
However, there shall be no order as to costs.
Urgent Photostat certified copy of this judgment, if applied for, be given to the parties on usual undertaking.
(Soumen Sen, J.)