Delhi High Court
Anand Brothers Private Ltd. vs Union Of India on 21 January, 1998
Equivalent citations: 1998IAD(DELHI)811, AIR1998DELHI196, 1998(1)ARBLR290(DELHI), 71(1998)DLT698, 1998(44)DRJ736, AIR 1998 DELHI 196, (1998) 1 ARBILR 290, (1998) 44 DRJ 736, (1998) 71 DLT 698
ORDER C.M.Nayar, J.
1. This judgment will dispose of the objections filed by the respondent Union of India under Sections 30 and 33 of the Indian Arbitration Act, 1940.
2. The parties entered into Agreement regarding the works of providing and installing of wet riser system at NIHFWF,New Delhi vide Agreement No.27/EE/ED-XV/90-91. Clause 25 of the Agreement provides for settlement of disputes by Arbitration and the same reads as follows:
"CLAUSE 25. Settlement of disputes by Arbitration Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs drawings and instructions herein before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter or thing whatsoever, in any way arising out of or relating to the contract designs drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, C.P.W.D. in charge of the work at the time of dispute or if there be no Chief Engineer, the administrative head of the said C.P.W.D. at the time of such appointment. It will be no objection to any such appointment that the arbitrator so appointed is a Government servant, that he had to deal with the matters to which the contract relates and that in the course of his duties as Government servant he has expressed views on all or any of the matters in dispute or difference. The arbitration to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Chief Engineer or administrative head as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such persons shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Chief Engineer or administrative head of the CPWD, as aforesaid should act as arbitrator and, if for any reason that is not possible, the matter is not to be referred to arbitration at all. In all cases where the total amount of all the claim in dispute is Rs. 75,000/-(Rupees Seventy five thousand) and above, and arbitrator will give reasons for the award.
Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or reenactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause.
It is a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amounts claimed in respect of each such dispute.
If the contractor(s) do/does not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the Government that the bill is ready for payment, the claim(s) of the contractor(s) will be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims.
The arbitrator(s) may from time to time with the consent of the parties enlarge the time for making and publishing the award.
The decision of the Superintending Engineer regarding the quantum of reduction as well as justification there of in respect of rates for sub standard work which may be decided to be accepted will be final and would not be open to arbitration."
3. The disputes and differences arose between the parties which fell within the purview of Clause 25 and were referred to Arbitration. The Arbitrator entered upon the reference and pronounced the Award dated June 10, 1994. The claims which were dealt with by the Arbitrator may now be stated as under:
"Claim No.1: Short Payment: The Department approved arbitrary rates in respect of Extra Items, Substituted Items and for quantities of agreement items executed beyond deviation limit resulting in all round short payments-Rs.1,50,000/-.
Claim No.2: Nonpayment The Department failed to make payment in respect of jobs executed strictly outside the scope of the contract and totally extraneous to the nomenclature of the item of work as enunciated in the schedule of quantities appended with the agreement-Rs.95,000/-.
Claim No.3: Unjustified Deductions Wrongful recoveries were effected illegally without any basis- Rs.27,000/-.
Claim No.4: Prolongation of contract: a)Due to prolonged period of execution of the work, the claimants had to incur uncontemplated expenditure on idle site staff,managerial expenses, conveyance charges and other incidentals expenditure-Rs.2,10,000/-.
b) Expenditure incurred on watch and ward staff due to belated taking over of the system physically-Rs.3,600/-.
Claim No.5: Nonreimbursement of additional expenditure defrayed due to statutory increase in cost of material/wages payable under provisions of Clause 10(c) of the Agreement. The actual claim payable shall be exhibited and included in the statement of facts.
Claim No.6: Claim of hire charges in respect of Machinery and Plant for the idle period- Rs.11,000/-.
Claim No.7: Claim for interest Pursuit and pendentelite:
The claimant claims interest on aforesaid claims totalling Rs.5,00,000/- Approx. at the commercial rate of interest of 18% per annum to retrieve the losses due to commercial borrowing as per general business practice.
Claim No.8: Cost of arbitration proceedings. The claimants claim a sum of Rs.10,000/- as costs against respondents for creating avoidable disputes which forced the claimants to seek arbitration.
Counter Claim No.1: Respondents claim an amount of Rs.10,000/- as cost of arbitration proceedings.
4. Claim No.1 was allowed to the extent of Rs.48,700/-. The reading of the Award will indicate that the learned Arbitrator considered the documents as well as other evidence produced by the parties on record and after analysing the same arrived at the figure. In respect of claim No.2 the Arbitrator gave detailed calculations after appreciation of documents and evidence on record and awarded a sum of Rs.39,400/-. Similarly, in respect of claims 3 and 4 the amounts of Rs.15,668/- and Rs.36,000/- respectively were awarded after due appreciation of material and evidence produced by the parties. Claims No.5 and 6 were rejected. Claim No.7 was allowed and the claimants were awarded simple interest at the rate of 12 per cent per annum on the amounts awarded against claims No.1,2 and 3 from November 5, 1992 to the date of publishing of the Award as pendente lite interest. In respect of claim No.8 the arbitrator awarded a sum of Rs.2,000/- as costs in favour of the claimants. The total amount as referred to in the Award is stated in the last paragraph which may be reproduced as follows: "NOW THEREFORE, on consideration of the claims of the claimants counter claim of the Respondents and my findings above, I do hereby make this award that the respondents to pay to the claimants a sum of Rs.1,41,768/- (Rupees one lakh forty one thousand seven hundred and sixty eight only). If the payment is not made by the Respondents to the claimants within 2 months of publishing the award, the claimants shall be entitled for payment of the awarded amount along with interest at the rate of 14% per annum (except on amount of pendente lite interest) from the date of award to the date of its payment or decree whichever is earlier. This is in full and final settlement of all the claims and counter claims above."
5. The learned counsel for the claimants has argued that an Award can only be set aside for error of law appearing on the face of it and cannot be set aside. This jurisdiction is not to be lightly exercised. Reference is made to the following judgment as reported in Food Corporation of India v. Joginderpal Mohinderpal and another from the judgment may be referred to as follows:
"When power came to the East India Company, they framed Regulation in exercise of the power vested in them by the British Government. Some of these Regulations were touching arbitration. Bachawat gives description of the evolution of the Arbitration Act, 1940. Therefore, arbitration as a mode for settlement of disputes between the parties, has a tradition in India. It has a social purpose to fulfill today. It has a great urgency today when there has been an explosion of litigations in the courts of law established by the sovereign power. New rights created, or awareness of these rights, the erosion of faith in the intrinsic sense of fairness of men, intolerant and uncompromising attitudes are all the factors which block our courts. The courts are full of litigations, which are pending for long time. Therefore, it should be the endeavour of those who are interested in the administration of justice to help settlement by arbitration, if possible. It has also a social efficacy being the decision by the consent of the parties. It has greater scope of acceptance today when there is a certain erosion of faith in view of the failure to appreciating the functions of the courts of law. It has also the advantage of not quickness of decision but of simplicity of procedure. But in proceedings of arbitration there must be adherence to justice equity, law and fair play in actions. However, the proceedings of arbitration must adhere to the principles of natural justice and must be in consonance with such practice and procedure which will lead to a proper resolution of the dispute and create confidence of the people for whose benefit these processes are resorted to. It is, therefore, the function of courts of law to oversee that the arbitrators act within the norms of justice. Once they do so and the award is clear, just and fair, the courts should, as far as possible give effect to the award of the parties and make the parties compel to adhere to and obey the decision of their chosen adjudicator. It is in this perspective that one should view the scope and limit of correction by the court of an award made by the arbitrator. We should make the law of arbitration simple, less technical and more responsible to the actual realities of the situations but must be responsive to the canons of justice and fair play and make the arbitrator adhere to such process and norms which will create confidence not only by doing justice between the parties, but by creating sense that justice appears to have been done. Sections 30 and 33 of the Act provide for the grounds on which an award of the arbitrator can be set aside. These were mainly, until recent changes made by the statutory laws in England, in consonance with the English principles of Common Law as adopted in India. So far as the material of the present purpose is concerned, an award of the arbitrator can only be interfered with or set aside or modified within the four corners of the procedure provided by the Act. It is necessary to find whether the arbitrator has misconducted himself or the proceedings legally in the sense whether the arbitrator has gone contrary to the terms of reference between the parties or whether the arbitrator has committed any error of law apparent on the face of the award. It is necessary to emphasis that these are grounds for setting aside the award but these are separate and distinct grounds. Halsbury's Laws of England Vol.2,4th Edn., para 623 reiterates that an arbitrator's award may be set aside for error of law appearing on the face of it. Though this jurisdiction is not to be lightly exercised, the award can also be set aside if, inter alia, the arbitrator has misconducted himself or the proceedings. It is difficult to give an exhaustive definition what may amount to misconduct on the part of the arbitrator. This is discussed in Halsbury's Laws of England (supra). It is not misconduct on the part of an arbitrator to come to an erroneous decision, whether his error is one of fact or law, and whether or not his findings of fact are supported by evidence. See the observations of Russell on Arbitration. 20th Edn. page 422."
6. Paragraph 15 from the judgment as reported in Trustees of the Port of Madras v. Engineering Constructions Corporation Limited reads as follows:
"The above decisions make it clear that the error apparent on the face of the award contemplated by Section 16(1)(c) as well as Section 30(c) of the Arbitration Act is an error of law apparent on the face of the award and not an error of fact. It is equally clear that an error of law on the face of the award means an error of law which can be discovered from the award itself or from a document actually incorporated therein. A note of clarification may be appended viz., where the parties choose to refer a question of law as a separate and distinct matter, then the Court cannot interfere with the award even if the award lays down a wrong proposition of law or decides the question of law referred to it in an erroneous fashion. Otherwise, the well settled position is that an arbitrator " cannot ignore the law or misapply it in order to do what he thinks is just and reasonable" (see Thawardas Perumal v. Union of India )."
The operative portion of paragraph 22 may also be stated as under: "22. The proposition that emerges from the above decisions is this : in the case of a reasoned award, the Court can interfere if the award is based upon a proposition of law which is unsound in law. The erroneous proposition of law must be established to have vitiated the decision. The error of law must appear from the award itself or from any document or note incorporated in it or appended to it. It is not permissible to travel beyond and consider material not incorporated in or appended to the award.
7. From the judgment as reported in State of Rajasthan v. Puri Construction Co. Ltd. and another 1995(1) Arb.L.R. page 1 the following passage as contained in paragraph 25 is of relevance and may be referred to as below:
"25. The arbitrator is the final arbiter for the dispute between the parties and it is not open to challenge the award on the ground that the arbitrator has drawn his own conclusion or has failed to appreciate the facts. In M/s. Sudarsan Trading Co. vs. Government of Kerala and another, it has been held by this court that there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the arbitrator to grant a particular remedy. One has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction. Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid is a decision within the competency of the arbitrator. By purporting to construe the contract the court cannot take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the court. Where the reasons have been given by the arbitrator in making the award the court cannot examine the reasonableness of the reasons. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of 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."
8. The learned Single Judge of this Court in the judgment reported as Shri Mohd. Rafi v. Union of India 1995 III AD (DELHI) 429 similarly held that it was not open to the Court to reassess evidence over the findings of the arbitrator when there was no error apparent on the face of the Award.
9. Faced with the settled position of law the learned counsel for the respondents has not been able to point out any infirmity, illegality or error of law in the Award which will call for interference in the present proceedings. The learned Arbitrator has given reasoned Award after duly appreciating evidence on record and due consideration of documents and no cogent grounds have been cited to hold otherwise. This Court cannot reappraise evidence as no acts of misconduct have been established nor any error of law is indicated from the reading of the Award.
10. In view of the above, there is no merit in this petition and the objections filed by the respondents are, accordingly, dismissed. The Award is made Rule of the Court. The respondents had deposited a cheque in this Court for the amount of Rs.2,20,000/- as directed by Order dated February 24,1997. The same has been returned to learned counsel for the respondents who will get the same revalidated and return to the petitionerclaimants within four weeks from today. In case the same is not paid within that period the claimants shall also be entitled to interest at the rate of 12 per cent per annum from the date of decree till realisation. The decree shall be drawn accordingly. There will be no order as to costs.