Gauhati High Court
Page No.# 1/28 vs M/S Kooltech Systemassam on 17 March, 2025
Page No.# 1/28
GAHC010005922014
2025:GAU-AS:2821
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : Arb.A./2/2014
THE UNION OF INDIA
REPRESENTED BY THE COMMANDER WORKS ENGINEER AIR FORCE,
BORJHAR, GUWAHATI 781015
VERSUS
M/S KOOLTECH SYSTEMASSAM
G.S. ROAD, OPPOSITE ULUBARI MAJID, GUWAHATI 781007, P.O. ULUBARI,
P.S. PALTANBAZAR, DIST. KAMRUP M, ASSAM.
Advocate for the Petitioner : MR.T ISLAM, C.G.C.
Advocate for the Respondent : MR.A DHAR, MRS. A GAYAN,MR.K N CHOUDHURY,MR.M
MAHANTA
BEFORE
HONOURABLE MR. JUSTICE ROBIN PHUKAN
JUDGMENT (CAV)
17.03.2025 Heard Ms. A. Gayan, learned Central Government Counsel (CGC) for the appellant. Also heard Mr. K.N. Choudhury, learned Senior Counsel, assisted by Mr. A. Dhar, learned counsel for the respondent.
2. This appeal, under Section 37 of the Arbitration & Conciliation Act, 1996, is directed against the judgment and order dated 18.06.2012, so passed by the Page No.# 2/28 learned District Judge, Kamrup (M), Guwahati, in Misc. (Arbitration) Case No. 388/2003.
3. It is to be noted here that vide impugned judgment and order dated 18.06.2012, the learned District Judge, Kamrup(M), Guwahati had upheld the arbitral award pertaining to C.A. No. GE/BOR/20 of 1996-97, passed on 15.03.2003, modified on 20.04.2003, by Lt. Col. Harikant, SO-1 E/M, Chief Engineer (Air Force), Shillong Zone, Shillong.
Factual Matrix:-
4. The background facts, leading to filing of the present appeal, are briefly stated as under:
"A contract agreement between M/s Kooltech System (Assam) and GE(A/F), Borjhar was signed for 'Repair to Central Type Air Conditioning at Base OPS Borjhar', bearing CA No. GE/BOR/20 of 96-97. Thereafter, the contractor physically completed the work within the period of extension. But, within two months, various defects developed in the plant and ultimately stopped functioning completely as the contractor defaulted within the defect liability period of 12 months, for which the repairing was done by another agency at the 'risk and cost' of the opposite party/respondent herein under Clause 46 of 1AFW2249, the general terms and conditions of the contract and the final cost under 'risk and cost' comes to Rs. 3,47,825/-, which the opposite party was liable to pay. It is to be noted here that the initial value of the contract was Rs. 2,53,110/- and after completion of work, a provisional completion certificate, dated 28.02.1997, was issued by the petitioner/appellant herein to the opposite party, after physical completion of the work on 15.02.1997. But, in spite of Page No.# 3/28 asking, the opposite party failed to remove the defects within the defect liability period, and therefore, he is liable to compensate by making payment of the amount of expenditure incurred in removing such defects through other agency. It is also to be noted here that the cause of defects in the execution of the contract works were pointed out by the petitioner to the opposite party and the opposite party had failed to rectify the defects in spite of request and the final notice dated 21.02.1998. The defects were removed by M/s BEE PEE & Co. who was assigned to repair the air conditioning plant vide another contract agreement dated
16.09.2000, for which a sum of Rs. 3,47,825/- was paid by the petitioner and the opposite party was paid an amount of Rs. 1,48,000/- during the continuance of the contract. However, as the opposite party did not co- operate in preparing the final bill of the work done by the petitioner, the final bill was drawn by the petitioner on the basis of the "measurement book" entries endorsed by the opposite party. The balance due was accordingly, worked out to be Rs. 23,708/-, being the amount of final bill which was adjusted against the payment made by the petitioner to M/s BEE PEE & Co., and a sum of Rs. 3,24,117/- was deducted from the final bill drawn against the opposite party under the clause 'risk and expense'. Thereafter, on the prayer being made by the opposite party for appointment of an Arbitrator to adjudicate the dispute, the learned sole Arbitrator was appointed, who had passed the award dated 15.03.2003. The award dated 15.03.2003 was modified on 20.04.2003, in terms of Section 33 of the Arbitration and Conciliation Act, 1996 ('Act of 1996', for short).
Thereafter, the appellant herein preferred an application under Section Page No.# 4/28 34 of the Act of 1996 before the learned District Judge, Kamrup(M), Guwahati and thereafter, hearing both the parties, the learned District Judge, vide judgment and order dated 18.06.2012, dismissed the petition."
Grounds:-
5. Being aggrieved by the impugned judgement and order dated 18.06.2012, the appellant has preferred the present appeal under Section 37 of the Act of 1996, on the following grounds:-
(i) That, the learned District Judge had erred in law and on facts in refusing to set aside the arbitral award.
(ii) That, the learned District Judge had failed to appreciate the fact that the contract agreement was for a period of 12 calendar months after the work was handed over to the Government is a defect liability period, and the contractor shall be liable to rectify any defect and the Arbitral Tribunal had failed to appreciate the said fact and wrongly awarded the claim Nos. 4 and 5.
(iii) That, the learned District Judge had failed to take note of the fact that the learned Arbitral Tribunal is bound to act within the four corners of the contract agreement and it has exceeded its jurisdiction.
(iv) That, the learned District Judge had also failed to take note of the fact that the learned Arbitral Tribunal without any justification, granted a sum of Rs. 88,228/- against the claim No. 1 and the learned Arbitrator had also overlooked the fact that the quantum of work whatsoever executed at the site had been entered in to the measurement book No. 275 and the contractor had signed on Page No.# 5/28 serial page Nos. 17, 19 and 20 of the measurement book as token of his acceptance of measurement. But, the learned Arbitrator very arbitrarily and without any speaking order, awarded Rs.
88,228/- in favour of the contractor without going into the details and thereby, failed to exercise its jurisdiction.
(v) The learned Arbitrator had failed to give any reason and also failed to appreciate that the contractor handed over the air conditioning plant on 15.02.1997, after completion of the work subject to satisfactory summer, winter and monsoon tests and the 12 months defect liability period was up to 14.02.1998, and that only thereafter, removal of defects and tests of the air conditioning plant was done by risk and expenses of the contractor through the agency and as such, the question of breach of contract by the Union of India does not arise and the learned Arbitrator had acted absolutely without jurisdiction and against public interest in giving award of Rs. 2,00,000/- in favour of the contractor. This aspect assuaged consideration of the learned District Judge.
(vi) The learned Arbitrator had failed to appreciate the fact that the air conditioning plant after physical completion of the work, could not withstand the temperature of summer season and within 2 months, the air conditioning plant completely stopped and remained non-functional for whole of the defect liability period and thereby, huge loss and inconvenience was caused to the department. But, the learned Arbitrator had awarded 'Nil' under the claim No. 1, which was not considered by the learned District Judge.
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(vii) The learned Arbitrator had ignored the condition No. 46 of IAFW 2249, General Condition of Contract forming part of the subject contract agreement, contractor is contractually liable to rectify the defects developed during currency of works and defect liability period as well as his own cost, and the extra amount of expenditure of Rs. 3,24,179/-, which the contractor is bound to pay as per condition No. 46 of IAFW 2249,and the learned District Judge had failed to appreciate this fact that the award is against the express condition of contract agreement.
(viii) That, the award is contrary to the substantive provision of law and against the terms of contract and as such, it is patently illegal and liable to be interfered with by invoking Section 34 of the Act of 1996, and the learned District Judge had failed to appreciate this aspect.
(ix) That, the respondent had violated the condition of the contract and on such count, the security deposit is liable to be forfeited and this aspect assuaged consideration of the learned District Judge, and under such circumstances, it is contended to set aside the impugned judgment and order.
Submissions:-
6. Ms. Gayan, learned CGC for the appellants submits that the appellant and respondent herein, both, had filed their claim and counter claim and while adjudicating the same, the sole arbitrator had made contradictory and inconsistent award, especially in respect of the award point Nos. 5.1 and 6.1 and that the same was not considered by the learned District Judge. Ms. Gayan Page No.# 7/28 also submits that the sole arbitrator had awarded nothing while the respondent herein had failed to complete the work within the stipulated period and the arbitrator had gone beyond the terms of the contract and that awarding of Rs.
88,220/- is also erroneous. Ms. Gayan also submits that the final bill prepared was not based on the measurement book. However, the learned Arbitrator did not consider this aspect and that the award is contradictory and beyond the terms of the contract and as such, the impugned award is liable to be set aside. In support of her submission, Ms. Gayan has referred to the following decisions:
(i) Associate Builders vs. Delhi Development Authority, reported in (2015) 3 SCC 49.
(ii) J.G. Engineers Private Limited vs. Union of India and Anr., reported in (2011) 5 SCC 758.
7. On the other hand, Mr. Choudhury, learned Senior Counsel for the respondent submits that the appellant herein has failed to make out a case for attracting any of the provisions of Section 34 of the Act of 1996 and there is no pleading as well as material to lay the foundation of any of those grounds in the application, under Section 34 of the Act of 1996 by the appellant.
7.1. Secondly, Mr. Choudhury submits that an arbitral award can be made only by filing an application for setting aside an award in accordance with sub-section (2) of Section 34 of the Act of 1996, which enumerates the ground on which the arbitral award can be set aside and the Court has no jurisdiction to entertain an application which does not disclose any of the grounds in sub-section (2), nor it can set aside any award on any ground not specifically provided in sub-section (2).
7.2. Thirdly, the application filed under Section 34 of the Act of 1996 is clearly Page No.# 8/28 barred by limitation and it was as being filed after expiry of the statutory period of limitation described under Section 34(2)(3) of the Act of 1996. The award was admittedly published on 15.03.2003 and the application was filed on 18.07.2003, and the order dated 20.04.2003 was not made on the application of the appellant or the respondent nor it is under challenge in the proceeding under Section 34 of the Act of 1996, and therefore, the benefit under Section 33 of the Act of 1996 will not be available to the appellant and in support of his submission, Mr. Choudhury has referred to a decision of Hon'ble Supreme Court in the case of Union of India vs. Popular Construction Company, reported in (2001) 8 SCC 470.
7.3. Fourthly, Mr. Choudhury submits that the learned sole Arbitrator had considered the claim and counterclaim of both the parties and on the materials placed on record arrived at a finding and this Court cannot sit in appeal against the finding arrived at and views expressed by the learned sole Arbitrator and this Court is not entitled to re-appreciate the evidence in deciding an appeal under Section 37 of the Act of 1996 since the jurisdiction vested under Section 34(2) is not an appellate jurisdiction and the Arbitrator belongs to the department and he is expert in the field of controversy between the parties. In support of his submission, Mr. Choudhury has referred to the following decisions:
(i) P.V. Subba Naidu vs. Govt. of A.P., reported in (1998) 9 SCC 407.
(ii) H.P. State Electricity Board vs. R.J. Shah and Co., reported in (1999) 4 SCC 214.
(iii) Union of India vs. B.K. Construction (M/s), reported in Page No.# 9/28 2003 (3) GLT 712.
7.4. Fifthly, Mr. Choudhury submits that the dispute involved in the case having been referred to the arbitration, the arbitral award cannot be questioned by the appellant.
7.5. Sixthly, Mr. Choudhury submits that the application filed by the appellant under Section 34 of the Act of 1996 is nothing, but a mere delaying tactic prompted by the sole objective of depriving the respondent of the fruits of the impugned arbitral award, and therefore, it is contended to dismiss the appeal.
8. Having heard the submissions of learned Advocates of both sides, I have carefully gone through the memo of appeal and the grounds mentioned therein, and also gone through the decisions relied by learned Advocates of both the parties.
Discussion:-
9. The jurisdiction of this Court under Sections 34 and 37 of the Act of 1996 is well settled by a catena of decisions of Hon'ble Supreme Court. In the case of Oil and Natural Gas Corporation Ltd. vs. Saw Pipes Ltd., reported in (2003) 5 SCC 705, has held as under:-
(A) (1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for Page No.# 10/28 the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.
(2) The court may set aside the award:
(i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act.
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act.
However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or Page No.# 11/28 illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate.
(c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged:
(a) as provided under Section 13(5); and
(b) Section 16(6) of the Act.
9.1. In the case of J.G. Engineers (P) Ltd. (supra) so referred by Ms. Gayan, Hon'ble Supreme Court had quoted with approval its earlier decision in Saw Pipes Ltd. (supra) wherein it was held that a court can set aside an award under Section 34(2)(b)(ii) of the Act, as being in conflict with the public policy of India, if it is ( a) contrary to the fundamental policy of Indian law; or Page No.# 12/28
(b) contrary to the interests of India; or ( c) contrary to justice or morality; or (d) patently illegal. Thereafter, it has been held that to hold an award to be opposed to public policy, the patent illegality should go to the very root of the matter and not a trivial illegality. It is also observed that an award could be set aside if it is so unfair and unreasonable that it shocks the conscience of the court, as then it would be opposed to public policy.
9.2. In the case of Associate Builders (supra), while dealing with the issue of patent illegality has held that it comprises of three requirements:-
42. In the 1996 Act, this principle is substituted by the "patent illegality" principle which, in turn, contains three subheads:
42.1. (a) A contravention of the substantive law of India Would result in the death knell of anarbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is really a contravention of Section 28(1) (a)of the Act which reads as under:
"28.Rules applicable to substance of dispute.-
(1)Where the place of arbitration is situated India-
(a) in an arbitration other than an international commercial arbitration, the Arbitral Tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;"
42.2.(b) A contravention of the Arbitration Act itself Page No.# 13/28 would be regarded as a patent illegality -for example if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside.
42.3.(c) Equally, the third subhead of patent illegality is really a contravention of Section28(3) of the Arbitration Act, which reads as under:
"28. Rules applicable to substance of dispute,-(1) - (2) *** (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.
9.3. Again in the case of Haryana Tourism Ltd. v. Kandhari Beverages Ltd., reported in(2022) 3 SCC 237, Hon'ble Supreme Court has held as Page No.# 14/28 under:-
"9.As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to:
(a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial court.
Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment and order [Kandhari Beverages Ltd. v. Haryana Tourism Ltd., 2018 SCC OnLine P&H 3233] passed by the High Court is hence not sustainable.
9.4. In the case of UHL Power Co. Ltd. v. State of H.P., reported in (2022) 4 SCC 116,Hon'ble Supreme Court has held that:-
16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in Page No.# 15/28 examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Ltd. v. Vedanta Ltd. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163], the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the Arbitration Act have been explained in the following words : (SCC pp. 166-67, para 11) "11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, "patent illegality" itself Page No.# 16/28 has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract."
17. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corpn.
Ltd. [K. Sugumar v. Hindustan Petroleum Corpn. Ltd., (2020) 12 SCC 539], wherein it has been observed as follows: (SCC p. 540, para 2) "2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34 of the Act indicates the highly constricted power of the civil court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum.
Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator."
18. It has also been held time and again by this Court Page No.# 17/28 that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1], the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus : (SCC p. 12, para 24) "24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the Page No.# 18/28 commercial wisdom behind opting for alternate dispute resolution would stand frustrated."
19. In Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd. reported in (2019) 7 SCC 236, adverting to the previous decisions of this Court in McDermott International Inc. v. Burn Standard Co. Ltd. reported in (2006) 11 SCC 181 and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran reported in (2012) 5 SCC 306], wherein it has been observed that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if a term of the contract has been construed in a reasonable manner, then the award ought not to be set aside on this ground, it has been held thus: [Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236] "9.1. ... It is further observed and held that construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. It is further observed by this Court in the aforesaid decision in para 33 that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be Page No.# 19/28 corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. It is further observed that thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. 9.2. Similar is the view taken by this Court in NHAI v. ITD Cementation India Ltd. [NHAI v. ITD Cementation India Ltd., (2015) 14 SCC 21 (para 25) and SAIL v. Gupta Brother Steel Tubes Ltd. [SAIL v. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63 para 29]"
(emphasis supplied)
20. In Dyna Technologies [Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1], the view taken above has been reiterated in the following words:
"25. Moreover, umpteen numbers of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied Page No.# 20/28 unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act."
9.5. The proposition of law, which can be crystallized from the aforesaid discussion, is that the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow. And when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. The apparent reason behind this is that when parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum. However, the same can be interfered only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator if the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. The jurisdiction under Section 34 cannot be equated with a normal appellate jurisdiction. The mandate under this section is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. Interference with the arbitral award in the usual course by the courts on factual aspects would frustrate the commercial wisdom behind opting for alternate dispute resolution by the parties. Under Section 34, the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. A violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict Page No.# 21/28 with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract. Construction of the terms of a contract is primarily for an arbitrator to decide and unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do, the court should not interfere. If there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned arbitrator proceeds to accept one interpretation as against the other.
10. A careful perusal of the award of the sole arbitrator indicates that there was as many as six claims of the respondent contractor, and upon the said claim the appellant herein is aggrieved in the award made in respect of claim No.1 and also in respect of claim No.4 and 5, which are indicated below:-
(1) Claim for payment of work executed but not paid by the Union of India, and the claim finally revised to Rs.
88,228/-
Award:- Rs. 88,228/-
(2) Claim for release of security deposit of Rs. 5,400/-
Award:- Rs. 5,400/-
(3) Claim for extra expenditure incurred on A/C of repairs of BER plant, amount Rs.1.10,000/-
Page No.# 22/28 Award:- Nil (4) Claim on account of damage and loss as a consequence of breach of contract by Union of India, amount claimed Rs. 7,50,000/-
(5) Claim on account of illegal termination of contract by Union of India,, amount claimed Rs. 2,50,000/-
Awards:-Rs. 2,00,000/- under both the claims No.4 and 5;
(6) Interest @ Rs. 18.5% on all the claims from 1 to 5, from the date of illegal termination of contract till date of payment;
Award:- 12% simple interest on the awarded amount, from 15th February 1997 up to the date of award and future interest @ 12% simple interest till date of actual payment.
10.1. Further, perusal of the award indicates that the appellant herein i.e. the Union of India, had also made as many as five claims and while adjudicating the same the sole arbitrator had held as under:-
(1) Cost of extra expenditure incurred by the Govt. for risk and cost contract and the amount claimed Rs.3,24,117/-
Award:- Nil. However, it had awarded 10% of the contract sum, approximately equal to Rs. 25,000/- to Union of India, for failing to fulfil the defect liability period.
Page No.# 23/28 (2) Cost of reference. Amount claimed Rs. 20,000/-
Award:- Nil.
(3) Non-refund of classified documents, Amount claimed:-
Rs.300/-
Award:- Classified documents shall be returned by the contractor. Within 90 days.
(4) Amount due on account of compensation for delay in completion of work. Amount claimed Rs.25,311/-
Award:- Nil.
(5) Interest @ Rs. 18% on claims No.1 to 4.
Award:-12% simple interest on the awarded amount, from 15th February 1997 up to the date of award and future interest @ 12% simple interest till date of actual payment.
11. A careful perusal of the impugned judgment and order reveals that the learned District Judge, Kamrup(M), Guwahati has held that it is a settled position of law that award passed by the learned Arbitrator cannot be lightly interfered with as the Arbitrator is a judge appointed by the parties and the award can be set aside only on the grounds set forth under Section 34 of the Act of 1996, and when an Arbitrator has applied his mind to the pleadings and evidence adduced before him, and the terms of the agreement, there is no scope for the Court to re-appreciate the matter as if it is an appeal.
11.1. The learned District Judge has found that the learned Arbitrator had decided the claim Nos. 1 to 5 on the basis of the materials on record put Page No.# 24/28 forwarded by the parties and after hearing both sides. And although the petitioner had contended that the provisions of the contract agreement and the materials on record were ignored by the learned Arbitrator in passing the arbitral award, yet, nowhere it has been specifically stated as to which material was overlooked or which provisions of the contract agreement had not been considered to the detriment of the petitioner resulting in an erroneous award and none of the grounds enumerated in Section 34(2) of the Arbitration and Conciliation Act are found to have been urged by the petitioner.
11.2. The learned District Judge also found that the sole arbitrator had considered the claims of both the parties and passed the arbitral award on the basis of the materials, oral and documentary placed before him by the parties and there is also no material placed before the court by the petitioner, even to indicate distantly as to how the learned sole arbitrator had not considered material piece of evidence, which, if considered, would have reversed the decision of the arbitrator and in absence of such materials as well as in absence of definite claim of the petitioner mere statement that the sole arbitrator overlooked curtained provisions of contract agreement as well as evidence on record and there exist no such ground which invalidates the award passed by the learned sole arbitrator requiring interference of the court.
11.3. Further, the learned District Judge has found that the impugned award therein was passed on 15.03.2003 and a modification thereon was made on 23.04.2003 (SIC) in fact on 20.04.2003. There is no instance in the record to show that the petitioner is entitled to any benefit of exceptions provided in Section 33 of the Act of 1996 to file the case after three months. But, the case was admittedly filed after three months of the award was made (the date on which the award was modified has not been taken into account as the record Page No.# 25/28 does not suggest that it was done at the behest of the petitioner under the provision of Section 33 of the Act of 1996).
11.4. Thereafter, the learned District Judge had arrived at the finding that even if it is accepted that the petition u/s 34 of the Arbitration & Conciliation Act was filed within the prescribed period of limitation, yet, there is nothing on record that the arbitral award is contrary to any substantial law or public policy as indicated in the foregoing discussions.
Finding:-
12. Having examined the finding, so recorded by the learned District Judge within the limited scope and jurisdiction of this Court, under Section 37 of the Act of 1996, and in the light of the proposition of law discussed herein above, this Court is of the view that the learned District Judge had rightly refused to interfere with the finding of the sole arbitrator in exercise of the power conferred under Section 34 of the Arbitration & Conciliation Act.
13. Though Ms. Gayan, learned CGC submits that the learned sole Arbitrator had gone beyond the terms of the contract by awarding an amount of Rs. 88,228/- yet, it appears that the learned District Judge had gone into that aspect and arrived at a finding that nowhere it has been specifically stated as to which material was overlooked or which provisions of the contract agreement had not been considered to the detriment of the petitioner resulting in an erroneous award.
14. Under the given facts and circumstances on the record, this Court is unable to record concurrence with the submissions, so advanced by Ms. Gayan, the learned CGC for the appellant. It is to be noted here that the learned sole arbitrator had discussed the Exhibit- Folio 19, contract agreement, the log sheet Page No.# 26/28 of the plant, and found that the contractor had genuinely carried out the items of repair for which he had not been paid for. Therefore, it had awarded a sum of Rs. 88,228/- under the claim No.1. It also appears that the learned sole arbitrator had found that defect liability period for one year has not been fulfilled by the contractor which is judged to be approximately 10% of the contracted sum (equal to Rs. 25,000/-) only.
15. Thus, in the finding, so record by the learned District Judge, in respect of award, so made by the learned sole arbitrator in respect of awarding a sum of Rs. Rs. 88,228/-, appears to be justified and reasonable and the same cannot be interfered with while the scope of interference of this Court is circumscribed by plethora of decisions of Hon'ble Supreme Court.
16. In the instant appeal, from the materials on record, Ms. Gayan, the learned CGC, had failed to demonstrate that the award is contrary to the following i.e.-
(a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal, so laid down in point No. A (3) in the case of Saw Pipe Ltd. (supra) and also in the case of Kandahari Beverage Ltd.(supra).
16.1. It is well settled that trivial illegality in the award, which never goes to the very root of the matter cannot be held to be opposed to public policy and on the given facts and circumstances on the record the award cannot be said to be so unfair and unreasonable that it shocks the conscience of the court. Therefore, the submission of Ms. Gayan left this Court unimpressed.
17. It also appears that the appellant herein had filed the application under Section 34 of the Act of 1996 on 18.07.2003, while, admittedly, the award was published on 15.03.2003. The order, dated 20.04.2003, was not made on the Page No.# 27/28 application of the appellant or the respondent nor was it under challenge in the proceeding under Section 34 of the Act of 1996. Therefore, the benefit under Section 33 of the Act of 1996 will not be available to the appellant as held by Hon'ble Supreme Court in the case of Union of India vs. Popular Construction Company, reported in (2001) 8 SCC 470. Thus, the application under Section 34 (2) of the Act of 1996 appears to be barred by limitation for being filed after expiry of the statutory period of limitation of three months as prescribed under Section 34(3) of the Act of 1996.
18. Thus, no interference of the finding of the learned District Judge as well as the learned sole Arbitrator is warranted here in this appeal. Mr. Choudhury, learned Senior Counsel for the respondent has rightly pointed this out during argument and the decisions referred by him also strengthened his submission. In the case of P.V. Subba Naidu (supra), Hon'ble Supreme Court has held that the High Court was not right in examining and interpreting the contract to see whether the claim was sustainable under the terms of the contract. In the case of H.P. State Electricity Board (supra) it has been held that by purporting to construe the contract the court could not take upon itself the burden of saying that the award was contrary to the contract and as such the arbitrators had acted beyond their jurisdiction. In the case of B.K. Construction (M/s) (supra), a Division Bench of this Court has held that if the arbitrator dealt with the matter in details in the award and took into consideration the relevant clauses of the agreement and coming to the conclusion, which is a conceivable and possible view of the matter, the Court should not be justified in interfering with the same.
19. In the result, I find this appeal devoid of merit and accordingly, the same stands dismissed.
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20. Send down the record of the learned District Judge, Kamrup (M), Guwahati along with a copy of this judgment and order.
21. The parties have to bear their own costs.
JUDGE Comparing Assistant