Delhi High Court
Larsen & Toubro Ltd. vs State Of Rajasthan on 18 January, 1994
JUDGMENT Sat Pal, J.
1. In this case after the awards were received from the arbitrators, notice of filing of the awards was issued to the parties on 18th November, 1987. On receipt of notice, the State of Rajasthan, respondent herein, filed objections under Sections 33, 30, 16 and 15 of the Arbitration Act, 1940 for setting aside/remitting the majority award date 12th September, 1987 passed by Shri Chela Ram Chopra and Shri (Dr.) C. P. Gupta arbitrators and also the minority award dated 3rd October, 1987 passed by Shri S. K. Gupta arbitrator. The averments made in the objections were controverter by M/s. Larsen & Toubro, petitioner herein in their reply dated 12th December, 1988. Thereafter the respondent filed rejoinder on 26th April, 1989. The following issues were framed an 3rd May, 1989 :
(1) Whether this court has jurisdiction to entertain the suit ?
(2) Whether the two awards given by the arbitrators, are not valid, and liable to be set aside ? (3) Whether the arbitrators have misconducted themselves and the proceedings ? (4) Whether extension of time was necessary in the facts and circumstances of the case ? (5) Whether the parties gave their consent to the extension of inadequate, inasmuch as the court had not been moved for extension of time ? (6) Whether the non-speaking award given in the instant case is valid ? (7) Whether the time taken by the arbitrators in giving the award, in the facts and circumstances of the case, has vitiated the award ? (8) Relief.
On the same date the parties were directed to lead oral evidence in the court. Thereafter statement of Shri Jagdish Chand and Shri Sudarshan Singh (PW 1 and PW 2) was recorded on 1st August, 1989 and 8th September, 1989.
2. Vide order dated 14th December, 1990 it was directed that issue No. 1 which pertains to the jurisdiction of this court to entertain the suit, be heard as a preliminary issue. Vide order dated 19th February, 1991 the said preliminary issue was decided in favor of the petitioner and it was held that this court has jurisdiction to entertain the present suit.
3. By order dated 25th September, 1992 passed in IA 3097/92 the application filed on behalf of the petitioner was allowed and the petitioner was permitted to amend its objections filed with regard to pendente lite interest as awarded by the arbitrator. Vide order dated 15th February, 1993, the respondent/objector was given liberty to file its evidence by way of affidavits within six weeks and the petitioner was given liberty to file counter affidavit within three weeks thereafter. Pursuant to this order on 29th March, 1993 the respondent/objector filed affidavit of Shri Shyam Lal Mathur, Executive Engineer and Shri S. K. Gupta, who was one of the arbitrators appointed by the respondent in terms of the arbitration clause. On 7th August, 1993, the petitioner filed the affidavit of Shri Sudarshan Singh, who was the sales manager of the petitioner at the relevant time.
4. During the pendency of the case the petitioner served a notice on the respondent asking them to file the copies of the letters referred to by Shri S. K. Gupta in his affidavit. Thereafter the respondent/objector filed IA 8388/93 under Section 151 of the Code of Civil Procedure seeking permission of the court to file copies of the letters mentioned in the affidavit of Shri S. K. Gupta and for which the respondent had received a notice from the petitioner to produce the same in the court. In this application it was, however, stated that the respondent had contacted Shri S. K. Gupta, the learned arbitrator, and he had informed them that the copy of the letter dated 27th August, 1987 which was referred to by him in his affidavit, was not traceable. This application was not opposed by the learned counsel for the petitioner. Accordingly, by my order dated 6th January, 1994 I allowed this application and the copies of the letters annexed with this application were taken on record.
5. New I proceed to deal with the various issues framed in this case. As stated hereinabove issue No. 1 has already been disposed of vide order dated 19th February, 1992.
Issue No. 2 & 36. Mr. Purohit, the learned counsel appearing on behalf of the respondent/objector submitted that in the present case the arguments were concluded on 27th February, 1986 and thereafter joint deliberation did not take place amongst three arbitrtors. He further submitted that after the lapse of more than one and a half years the learned arbitrator, namely, Shri C. R. Chopra and Dr. C. P. Gupta without holding the deliberation with the third arbitrator Shri S. K. Gupta gave their award on 12th September, 1987 at New Delhi and Shri S. K. Gupta, the third arbitrator, gave his award on 3rd October, 1987 at Bikaner. The learned counsel, therefore, contended that the arbitrators have misconducted themselves and the proceedings and the awards given by the learned arbitrators were not valid and were liable to be set aside. In this connection he drew my attention to the affidavit of Shri S. K. Gupta, who was one of the arbitrators, and submitted that in this affidavit it has clearly been stated that the last hearing in this case was held on 27th February, 1986 and thereafter no joint deliberations amongst the three arbitrators ever took place. He also draw my attention to the copies of the letters annexed with IA 8388/93 and submitted that these letters also showed that there had been no joint deliberations and application of mind by the learned arbitrators. He, therefore, contended that the absence of joint deliberation has the effect of rendering the awards invalid. In support of his contention the learned counsel has placed reliance on a judgment of the Madhya Pradesh High Court in Magan lal Gangaram Tomar and another v. Ramaji Bondarji and others , and a judgment of Bombay High Court in Bhogilal Purshottam v. Chimanlal Amritlal (AIR 1928 Bom 49).
7. Mr. Watel, learned Senior Counsel appearing on behalf of the petitioner submitted that up to the last date of hearing all the three arbitrators had been conducting the proceedings together and during the course of proceedings all kinds of discussion used to take place on the facts of the case. He further submitted that there was no requirement of law that after the conclusion of the proceedings all the arbitrators must meet to discuss the matter. Learned counsel also drew my attention to the affidavit of Shri Sudarshan Singh filed on behalf of the petitioner wherein he has stated that from February 1986 to July 1987, whereabouts of one of the arbitrator, namely, Shri S. K. Gupta were not known due to change of place of posting/leave or absence from duty and this fact had not been controverter by the respondent/objector. He also submitted that the respondent/objector had not produced the letter dated 27th August, 1987 referred to by Shri S. K. Gupta in his affidavit and this letter could have shown that the said arbitrator was avoiding to have a joint deliberation with the other two arbitrators though admittedly the other two arbitrators had been writing to him to ascertain his availability in New Delhi for joint deliberation. The learned counsel submitted that the delay in making the award was also due to the non-availability of Shri S. K. Gupta who was appointed as an arbitrator by the respondent/objector themselves. In support of his contention the learned counsel placed reliance on a recent judgment of the Supreme Court in Reserve Bank of India v. S.S. Investments and others (AIR 1992 SC 1982).
8. I have given my thoughtful consideration to the submissions made by the learned counsel for the parties and have perused the record. In the present case, in terms of the arbitration clause, the petitioner had appointed Shri Chela Ram Chopra as its arbitrator while the respondent/objector appointed Shri S. K. Gupta, the then Additional Chief Engineer as their arbitrator and the Institution of Engineers of India appointed Dr. C. P. Gupta, who was a professor Civil Engineering, University of Roorkee as their arbitrator. Shri S. K. Gupta one of the arbitrators has filed his affidavit as respondent/objector's evidence. As a matter of principle the arbitrator should not have filed his affidavit in support of the case of one of the parties but if at all he had chosen to file such an affidavit, the arbitrator ought to have annexed the copies of various letters referred to in his affidavit. In para 4 of the affidavit of Shri S. K. Gupta it has been stated that, "I once wrote to Dr. C. P. Gupta suggesting him to hold a meeting at Delhi of all the three arbitrators to discuss the case and finalize the award in mid July. 1987." Shri S. K. Gupta has not even mentioned the date of the letter written by him to Dr. C. P. Gupta. Again in para 5 of the affidavit it has been mentioned by Shri S. K. Gupta that he received a letter dated 22nd August, 1987 asking him to intimate as to when he would be in Delhi so that a meeting of the arbitrators could be held at Delhi to finalize and this letter was duly replied by him on 27th August, 1987. But it has not been mentioned in the affidavit as to whether by letter dated 27th August, 1987 Shri S. K. Gupta had suggested any date when he would be in Delhi, nor a copy of this letter was annexed with the affidavit. Even in IA 8388/93 it has been admitted by the respondent/objector that a notice was received from the learned counsel for the petitioner to produce various letters referred to by Shri S. K. Gupta in his affidavit and in this application it has been stated that the copy of the letter dated 27th August, 1987 was not traceable with Shri S. K. Gupta. Further in his affidavit Shri S. K. Gupta had admitted the receipt of the copy of the letter dated 11th July, 1987 addressed by Dr. C. P. Gupta to Shri C. R. Chopra and copy endorsed to him but it is not mentioned as to whether he had sent any reply to Dr. C. P. Gupta as to whether he would be available in Delhi during the period 10th August, to 21st August, 1987. It may also be pointed out here that after the copy of the joint award dated 12th September, 1987 passed by Dr. C. P. Gupta and Shri C. R. Chopra was sent to Shri S. K. Gupta, he passed his own separate award on 3rd October, 1987 and in his separate award he awarded in favor of the petitioner a sum of Rs. 3,15,000/- against a sum of Rs. 4,95,900/- awarded by the other two arbitrators. But he had not mentioned anything that there had been no joint deliberations. In view of these facts I am of the view the affidavit filed by Shri S. K. Gupta does not inspire any confidence. Besides it has been held by the Supreme Court in the case of S.S. Investment (supra) that it is not imperative that arbitrators should meet upon the conclusion of the hearings to discuss the matter.
9. As regards the delay in passing the award, Shri Sudarshan Singh in his affidavit has stated that the whereabouts of Shri S. K. Gupta, one of the arbitrators were not known during the period February 1986 to July 1987 and this fact has not been controverter by the respondent/objector. The letter dated 11th July, 1987 written by Dr. C. P. Gupta to Shri C. R. Chopra, copy of which was also endorsed to Shri S. K. Gupta, also shows that Shri S. K. Gupta for the first time had suggested that a meeting to finalise the award should be held at Delhi in mid July 1987. The letter dated 22nd August, 1987 written by Shri C. R. Chopra to Shri S. K. Gupta further shows that Shri C. R. Chopra was not even aware of the telephone number of Shri S. K. Gupta at Jaipur. Further letter dated 14th July, 1987 written by Shri C. R. Chopra to Dr. C. P. Gupta, copy of which was also endorsed to Shri S. K. Gupta, also shows that it was not possible for Shri C. R. Chopra to contact Shri S. K. Gupta. As stated hereinabove Shri S. K. Gupta in his affidavit has not mentioned anything as to whether he had suggested any date of August 1987 when he could be available in Delhi for joint deliberations. From these facts it is clear that the delay in making the award was also because of the non-availability of Shri S. K. Gupta, who was appointed by the respondent/objector as their arbitrator. As the delay has been satisfactorily explained, the ratio of the judgment in the case of Bhogilal (supra) is not applicable to the present case.
10. For the foregoing reasons I do not find any merit in the objections raised by the respondent/objector and accordingly Issues No. 2 and 3 are decided in favor of the petitioner and against the respondent.
Issues No. 4 & 511. As regards Issues No. 4 and 5, Mr. Purohit, the learned counsel appearing on behalf of the respondent/objector, submitted that the parties had given their consent for extension of time "till the conclusion of proceedings". He further submitted that the proceedings in the present case were concluded on 27th February, 1986 and the majority award was made on 12th September, 1987 and the award by the third arbitrator was made on 3rd October, 1987. He, therefore, contended that the awards have not been made within the stipulated period and as such the awards were liable to be set aside.
12. Mr. Watel, learned Senior Counsel, appearing on behalf of the petitioner, however, submitted that the proceedings shall conclude only when the award is made. He, therefore, contended that since the parties had extended the time by consent till the conclusion of the proceedings, the petitioner was not required to approach this court for extension of time though by way of caution, the petitioner has filed an application IA No. 5367/89 for enlargement of time in making the award till 3rd October, 1989. In support of his contention the learned counsel placed reliance on two judgments of the Supreme Court Hari Krishna Wattal v. Vaikunth Nath Pandya and Nagar Palika, Mirzapur v. The Mirzapur Elect. Supply Co. Ltd. .
13. As held by the Supreme Court in the case of Hari Krishna Wattal (supra), the arbitrator is entitled to enlarge the time if after entering upon the reference the parties to the arbitration consent to such enlargement. In the present case admittedly the parties had agreed for extension of time till the conclusion of the proceedings. The proceedings shall stand concluded only after the award has been made by the learned arbitrators. In view of this I do not find any merit in the objection raised on behalf of the respondent/objector on this aspect of the matter. Accordingly, Issues No. 4 and 5 are decided in favor of the petitioner and against the respondent.
Issue No. 614. The learned counsel for the respondent/objector did not press this issue. Accordingly, Issue No. 6 is decided in favor of the petitioner and against the respondent.
Issue No. 715. In view of my findings given on Issues No. 2 and 3. I hold that the time taken by the arbitrators in giving the award has not vitiated the award.
16. Lastly, Mr. Purohit, the learned counsel for the respondent/objector submitted that the learned arbitrators who rendered majority award have illegally awarded interest on the sum awarded by them during the pendency of the arbitration proceedings. Learned counsel submitted that the arguments before the arbitrators were concluded on 27th February, 1986 and the majority award was rendered on 12th September, 1987 i.e., after more than one and a half years from the date the arguments were heard. He, therefore, contended that no interest could be awarded in such a belated award. Mr. Watel, learned Senior Counsel on the other hand drew my attention to a judgment rendered by a Constitution Bench of the Supreme Court in Secretary, Irrigation Department, Government of Orissa v. R. C. Rai . In this judgment it was held that where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute is referred to the arbitrator, he shall have the power to award interest pendente lite.
17. Having given my anxious consideration to the submissions made by the learned counsel for the parties, I am of the view that the arbitrators had the power to award interest pendente lite in view of the law laid down by the Supreme Court in Secretary, Irrigation Department, Government of Orissa (supra).
18. As regards the delay in making the award. I have already held that the delay was mainly on the ground that the arbitrator appointed by the respondent/objector was not available from February, 1986 to July 1987. In view of this the respondent/objector is not entitled to any relief against awarding of interest on the ground that the majority award is belated one.
19. In view of the above discussion the objections against the award are dismissed and the majority award dated 12th September, 1987 is made a rule of the court. Let a decree be drawn in terms of the award. The award will form part of the decree. I further grant interest at the rate of 18% per annum in favor of the petitioner and against the respondent from the date of award till realisation. The parties are, however, left to bear their own costs.