Delhi High Court
Delhi Development Authority vs Anant Raj Agencies on 8 August, 2002
Author: Dalveer Bhandari
Bench: Dalveer Bhandari, Vikramajit Sen
JUDGMENT Dalveer Bhandari, J.
1. Adherence to the basic principles of natural justice in the arbitration proceeding is the pivotal question which arises for consideration in this case. This appeal is directed against the judgment of the learned Single Judge dated 7.12.1987 by which he made the award given by the arbitrator rule of the court. The arbitrator assessed the loss on account of idle staff, salaries, wages to labour, artisans and establishment costs, hire charges for shuttering materials and rehandling of materials and dismantling and reconstruction of structures pursuant to revision of labour charges etc to Rs. 6.5 lakhs. The arbitrator directed that the amount of Rs. 6.5 lakhs be paid within one month from the date of making and publishing the award, failing which interest @ 12% per annum will be payable till actual payment or till the award is made rule of the court, whichever is earlier.
2. The appellant DDA is aggrieved by the impugned order of the learned Single Judge. The learned counsel appearing for the appellant submitted that the respondent is not entitled to any amount from the alleged claim because the same has not been proved in accordance with law. The appellant claimed that the claimant (respondent herein) refused to submit the records and the details regarding any loss which has been incurred by them.
3. The appellant submitted that despite the arbitrator's direction the claimant (respondent herein) did not produce the relevant records and vouchers etc. for verification and scrutiny. Only fractional or illustrative records were furnished by the claimant respondent and that too after the conclusion of the arbitration proceedings. The appellant DDA had no opportunity of verifying those records which ultimately formed the basis of the award.
4. The appellant's main grievance against the award is that the learned arbitrator is guilty of misconduct because, in making and publishing the award the arbitrator erroneously and illegally relied on the chartered Accountant's certificate filed after the arbitration proceedings were concluded. The appellant had no notice, chance or opportunity even to scrutinise or rebut the contents of the same. The appellant questions the fairness of the basic procedure adopted by the arbitrator.
5. In the instant case the proceedings before the arbitrator were concluded on 12.6.1985. The certificate of the Chartered Accountant and the photocopy of the Muster Rolls were submitted by the claimant much after the entire arbitration proceedings were concluded.
6. The learned counsel appearing for the appellant submitted that it is quite apparent that the arbitrator was determined to give a heavy award in favor of the respondent. He further submitted that this is clearly evident in the manner in which the arbitrator had conducted himself. The appellant requested the arbitrator for providing an opportunity to check and scrutinize the audited accounts and the original accounts of the claimants but the same were declined to him.
7. The appellant also submitted that it is beyond comprehension as to how could a Chartered Accountant give a certificate of expenditure giving details of the work, when the work did not concern his field by any stretch of imagination? The arbitrator has seriously erred in placing so much reliance on such a certificate.
8. The claimants were admittedly not maintaining separate accounts for the work in dispute. In that event how could such details be provided by the Chartered Accountant? It is also submitted that the certificate of the Chartered Accountant is not based on accounts/audited accounts. On the contrary it is based on some information provided by the claimant. The arbitrator has seriously erred in placing reliance on such a certificate.
9. The appellant submitted that the award suffers from an error apparent on the face of the record and the same is liable to be set aside.
10. According to the appellant, the learned Single Judge was in grave error in making the award rule of the court.
11. The appellant submitted that the judgment of the learned Single Judge suffers from grave legal infirmity as the award is based on no evidence. The appellant also submitted that the learned Single Judge seriously erred in placing undue emphasis on the ground that the arbitrator was the Chief Engineer of the Delhi Development Authority and as such this by itself is an in-built safeguard for proper conduct of the proceedings.
12. The appellant submitted that on scrutinising the Muster Rolls, it became quite evident that the Muster Rolls pertained to some other work of Camp Office 400 MIG Pitampura and not to the work in dispute.
13. The learned counsel for the respondent submitted that the appellant failed to provide the structural and architectural drawing in time and the respondent had to incur heavy expenditure on idle staff, labour, artisan, and hire charges for shuttering materials. The execution of the contract was inordinately delayed on account of the breaches of the appellant and the respondent suffered on account of the increase in the cost of building material etc. The respondent submitted that the learned arbitrator after examining the record and hearing the parties made and published his award.
14. The learned counsel for the respondent submitted that the well-reasoned award of the arbitrator which has been made rule of the court cannot be interfered so lightly. He also submitted that the award of the arbitrator both on facts and law is final and cannot be re-opened. He further submitted that in the instant case, the award has been made rule of the court and no interference by this court is called for.
15. The learned counsel for the respondent in support of his submissions placed reliance on Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar and Anr., . In this case the Court observed that the reasonableness of the reasons given by an arbitrator in making and publishing the award cannot be challenged. The arbitrator is the sole judge of quality as well as quantity of evidence and it will not be for the Supreme Court to take upon itself the task of being a judge of the evidence before the arbitrator. It may be possible that on the same evidence, the Court might have arrived at a different conclusion than the one arrived at by the arbitrator but that by itself is no ground for setting aside the award of an arbitrator.
16. Reliance has also been placed by the learned counsel for the respondent on the celebrated case of the Supreme Court titled Sudarsan Trading Co. v. The Govt. of Kerala and Anr.. The Court observed that it is not open to the court to probe the mental process of the arbitrator and speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. Appraisement of evidence by the arbitrator is never a matter which the court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a judge on the evidence before the arbitrator.
17. Reliance has also been placed on Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Anr. reported as 1999 (3) Arb.LR 350 and a Division Bench judgment of this Court in Delhi Development Authority v. Alkaram . The Court restated the settled position of law that the arbitrator is the final Judge of fact. The Court is bound by the arbitrator's findings of fact and cannot review them unless they are unsupported by evidence and unless it appears from the award itself that there was no evidence to support the finding. It is not open to the Court to examine the adequacy of evidence which led the arbitrator to his findings of facts. His findings are final.
18. In Hindustan Tea Co. v. K. Sashikant & Co. the Court arrived at the conclusion that under the law, the arbitrator is made the final arbiter of the dispute between the parties. The award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion or has failed to appreciate the facts.
19. Reliance has also been placed by the respondent on Food Corporation of India v. Joginderpal Mohinderpal and Anr. .
The Court observed that the arbitrator had construed the effect of a particular clause of the Contract. It cannot be said that such a construction is a construction which is not conceivable or possible. If that is the position, assuming even for the argument that there was some mistake in the construction, such a mistake is not amenable to be corrected in respect of the award by the Court.
20. Reliance has also been placed on B.V. Radha Krishna v. Sponge Iron India Ltd. & K.R. Raveendranathan v. State of Kerala and Anr. reported as (1996) 10 SC 35.
21. There is no quarrel with the proposition of law which has been laid in the aforesaid cases. As a matter of fact, these are settled principles of law which have been crystallised by a number of authoritative judgments of the Apex Court and other Courts. The central question which falls for consideration in this case is entirely different. The Arbitrator had taken the certificate of the Chartered Accountant and the copy of the muster roll after the entire arbitration proceedings were concluded without affording any opportunity to the appellant even to scrutinise those documents which ultimately became basis of the entire award. We have been called upon to examine whether this approach of the Arbitrator amounts to legal misconduct and consequently the award is liable to be set aside.
22. A number of similar cases have come up for consideration before various Courts. In Vinayak Vishnu Sahasrabudhe v. B.G. Gadre and Ors. it has been held that though the Arbitration Act does not provide for the procedure to be followed by the arbitrators, even then, it is well settled that the arbitrators are bound to apply the principles of natural justice. One of the principles is that nothing prejudicial to a party shall be done behind its back or without notice to that party. Therefore, by accepting entries in the account-books which were disputed by a party, after examining the account-books behind his back, the arbitrators contravene the principle of natural justice and are guilty of legal misconduct and the award is liable to be set aside.
23. Their Lordships of the Supreme Court in the case of Payyavula Vengamma v. Payyavula Kesanna and Ors. held that the arbitrator examined the defendant in the absence of the plaintiff and also perused the will without giving an opportunity to the plaintiff to have her say in the matter. The statement which was obtained from the defendant contained several statements of fact, which did not find place in his written statement. The Apex Court observed that the course of proceeding adopted by the arbitrator was obviously contrary to the principles of natural justice. The arbitrator was guilty of legal misconduct and that was sufficient to vitiate the award.
24. A somewhat similar case came up for consideration before the Calcutta High Court. The Court held that a positive act of the arbitrator to communicate with the other side behind the back of one party is a misconduct. On the same reasoning, a communication by the arbitrator to a party behind the back of the other amounts to misconduct, the award was accordingly set aside.
25. A Division Bench of this Court in Union of India v. Mehta Teja Singh & Co. while dealing with the misconduct of the arbitrator, observed, that where the claim of the Government before the arbitrator for recovery of amount from the contractor was based on the report of the technical examiner and the arbitrator did not order production of the report by Government though specifically requested by the contractor to do so, the action of the arbitrator in making the award allowing the claim without himself looking into the report on which the claim was based and without allowing the contractor inspection thereof amounts to misconduct of the arbitration proceedings resulting in denial of natural justice to the contractor and rendering the award liable to be set aside.
26. A Division Bench of the Allahabad High Court in Banwari Lal v. Jagannath Prasad and Anr. observed that it a well established principle of law that an arbitrator ought not to hear or receive evidence from one side in the absence of the other side without giving the side affected by such evidence, the opportunity of meeting and answering it. The Court observed that the course of proceeding adopted by the arbitrator was contrary to the principles of natural justice and he having acted capriciously and arbitrarily in rejecting the higher offer or bid and thereby having come to an erroneous conclusion as to the value of the property, his conduct amounted to legal misconduct which vitiated the award.
27. The Courts have gone to the extent that in cases where no proper hearing has been given to the party or they have not been given opportunity to present their case, the Courts have held that it amounted to misconduct of proceedings vitiating the award. In Krishna Gopal Radhikaprasad v. Chandiprasad Duryodhanprasad (AIR 1953 Nagpur 309) it is mentioned that one of these elementary principles is that an arbitrator must not receive information from one side which is not disclosed to the other, whether the information is given orally or in the shape of documents though the rule has sometimes been ignored by mercantile arbitrators whose awards have on this ground been set aside.
28. In celebrated cases of In Re Brook (1864) 16 C.B.N.S. 403 (E); and - In re Camillo Eitzan and Jewson & Sons (1896) 40 Sol.Jo. 438 (F) the Court observed that the validity of the proceedings in this case must consequently be tested in the light of the well established doctrine that in arbitration proceedings both sides must be heard, and each in the presence of the other; however immaterial the arbitrator may deem a point, he should be very careful not to examine a party or a witness upon it, except in the presence of the opponent. The Court observed that whether it was a mercantile or legal arbitration the first principles of justice must squarely be applied in every case. Mathew, J in Gregson and Armstrong in Re, (1894) 70 LT 106 (G) observed that arbitrators are not merely valuers; they have judicial functions to perform. Though intending no injustice they must observe the fundamental rules which govern judicial proceedings.
29. In a celebrated case of the Privy Council in Amir Begam mt. v. Badr-ud-din Husain (AIR 1914 PC
105) their Lordships observed that if irregularities in procedure can be proved which would amount to no proper hearing of the matters in dispute there would be misconduct sufficient to vitiate the award without any imputation on the honesty or impartiality of the arbitrator.
30. The Courts have gone to the extent that where reasonable opportunities have not been granted to present their case, it would amount to a legal misconduct. A Division Bench of Punjab High Court in Prem Nath L. Harsaran Dass and Anr. v. Om Parkash L. Ram Kishen Dass Aggarwal observed that it is a well known proposition of law that although an arbitrator is allowed considerable latitude in the procedure adopted by him at the hearing it is essential that he should afford the parties a reasonable opportunity of being heard and of presenting their case. If he makes an award without complying with this essential requirement, he does so at the peril of his award being declared invalid and inoperative in the eye of law.
31. The position of law seems to be consistent. In the instant case the hearing before the arbitrator was concluded on 12.6.1985. After the hearing was concluded the Chartered Accountant's certificate was submitted on 5.7.1985. Despite the protest lodged by the appellant herein on 15.7.1985 that the document should be made available for scrutiny so that the appellant can furnish its explanation on the certificate so furnished, no opportunity was granted. Thereafter, on 19.7.1985 copies of a few muster rolls and attendance registers were submitted. Again objection was raised by the appellant on 26.7.1985, but despite that no opportunity was given to the appellant to scrutinise either the Chartered Accountant's certificate or the muster rolls and the attendance registers submitted by the respondent. The award is primarily based on the Chartered Accountant's certificate, muster rolls and the attendance registers. Ordinarily, this Court would make every endeavor to uphold the award given by the arbitrator, but in the facts of this case, the arbitrator totally misconducted himself by accepting the Chartered Accountant's certificate, muster rolls and the attendance registers after the entire arbitration proceedings were concluded without giving notice to the appellant. Despite specific protest of the appellant DDA the arbitrator did not give any opportunity to scrutinise those documents. The learned Single Judge was in error in upholding such an award.
31. On consideration of the totality of facts and circumstances, the appeal filed by the appellant deserves to be allowed with costs, and the award given by the arbitrator is contrary to the fundamental principles of natural justice and is liable to be set aside.
32. In the fats of this case, we deem it appropriate to request Hon'ble Mr. Justice Jaspal Singh, a retired Judge of this Court, to accept this arbitration and conclude the arbitration proceedings as expeditiously as possible. The parties are directed to appear before his Lordship on 7th September, 2002 at 11 a.m. at his residence.