Bangalore District Court
The Karnataka State Health vs J.N. Constructions on 23 July, 2018
IN THE COURT OF THE XII ADDL. CITY CIVIL AND
SESSIONS JUDGE, AT BANGALORE
PRESENT:SRI.SHUBHAVEER.B, B.Com.,LL.B.,
XII ADDL.CITY SESSIONS JUDGE
(CCH.No.27), BANGALORE
DATED THIS THE 23RD DAY OF JULY, 2018
O.S.No.108/2010
Petitioner: The Karnataka State Health
System Development Project,
1st floor, P.H.I Building,
Seshadri Road,
Bengaluru -560001.
(By Sri.A.V.Vijayabhasker Reddy)
-VS-
Respondents: 1. J.N. Constructions.
No.20, 8th 'B' Main Road,
R.M.V. extension,
Bengaluru
2. N.S.Sangolli,
Sole Arbitrator,
Dist. Judge (Retd.,)
Sahakaranagar,
Bengaluru -560092.
(Deft.1 Sri.P.Harishchandra Reddy
-Deft-2 Sri.M.S.A Advocates)
2 A.S.No.108/2010
Date of Institution of the petition : 09.12.2010
Nature of the petition : To set aside the award
Date of commencement of
recording of the evidence : ------
Date on which the Judgment was
pronounced : 23.07.2018
Total Duration Years Months Days
: 07 07 14
(SHUBHAVEER.B)
XII Addl. City Civil & Sessions Judge,
Bengaluru
J U D G M E N T
The above petition is filed u/s 34 (2) of the Arbitration & Conciliation Act, 1996, praying to set aside the arbitral award, passed by Sri.N.S.Sangolli, Retd. District Judge, Bengaluru, dated 07.09.2010.
2. The brief facts of the case of the petitioner are that the petitioner is the Government of Karnataka entity, is an employer, engaged in renovation and expansion of several hospitals all over Karnataka, under the World Bank assisted project. 3 A.S.No.108/2010 Under the said project, the petitioner invited bids for renovation and expansion of Vanivilas hospital (MCH), at Bengaluru. The tender submitted by the 1st respondent for the above subject work, was entrusted to the 1st respondent on 27.01.2000 and the petitioner and respondent, entered into an agreement for construction of the above said work. Under the above said agreement, the petitioner for completion of work, was agreed at 18 months and stipulated date was fixed as 26.07.2001. The 1st respondent was unable to complete the entire construction work, within the stipulated time, i.e., on 26.07.2001 and certain extension was granted to the respondent No.1 to complete the construction. The petitioner department, during the execution of the work paid all the regular running bills and on 17.09.2003, paid the final bill, to the 1st respondent. There was no dispute with regard to the running bill and final bill, during the execution of the work. The 1st respondent, after completion of said work and after receiving the final bill on 23.10.2013, approached the 4 A.S.No.108/2010 adjudicator with 7 claims, amounting to Rs.24,35,000/-. Since the adjudicator did not respond, termination of the 1st respondent's letter, the 1st respondent, without following the dispute resolution system, as envisaged under the agreement and in violation of the contract, approached the Hon'ble High Court of Karnataka, by filing CMP No.8/2004, for referring the disputes for adjudication to the sole Arbitrator. The petitioner resisted the appointment of the Arbitrator before the Hon'ble High Court of Karnataka. Since the appointment of Arbitrator is not as per the terms of the agreement, Hon'ble High Court of Karnataka, however allowed the above said CMP No.8/2004 and appointed the Sole Arbitrator for resolving the disputes, in the course of the order observed that the plaintiff can raise all questions before the Sole Arbitrator, including the question of validity of the appointment of the Arbitrator and about his jurisdiction to enter upon the dispute. In pursuance of the said order, passed by the Hon'ble High Court of Karnataka, in CMP No.8/2004, the said Arbitration 5 A.S.No.108/2010 proceedings commenced in respect of agreement, dated 27.01.2000, entered into between the petitioner and the 1st respondent.
3. After appointment of Arbitrator, as against their claim of Rs.24,35,000/-, before the adjudicator, the 1st respondent, enhanced the same in their claim statement before the Arbitrator. The petitioner entered appearance and filed a detailed objection to the claims and also raised preliminary objection regarding the validity of appointment of Arbitrator by the Hon'ble High Court of Karnataka and also raised objection so far as the jurisdiction of the Arbitrator to adjudicate the said dispute. The Arbitrator after hearing the contention, without application of mind and without considering the entire materials facts on record, allowed the claim petition and awarded a sum of Rs.1,33,14,995/-, in favour of the 1st respondent.4. Being aggrieved by the said award, dated 07.09.2010, passed by the 6 A.S.No.108/2010 Sole Arbitrator, the above petition is filed, on 09.12.2010, on the following grounds-
a) The arbitral award deals with the matters not within the terms of the Arbitration agreement and /or, is behind the scope of the submission and thus liable to be set aside u/S 34 (2) (a)
(iv) of the Act;
b) The arbitral award is vitiated by jurisdictional errors namely it has decided the matters contrary to the terms of the contract, between the parties and liable to be set aside either u/S 34 (2) (a) (iv), or u/S 34 (2) (b) (ii) of the Act
c) The tribunal has mis-conducted the proceedings and that the award is vitiated by the legal misconduct and on such other grounds.
5. From the facts and circumstances of this case, the following points arise for determination-
1. Whether the above petition is barred by limitation?
7 A.S.No.108/2010
2. Whether the arbitral award, passed by the 2nd respondent, dated 07.09.2010, shall be set aside?
3. What order?
6. Perused the entire file. On behalf of the petitioner and the 1st respondent, written arguments are filed.
7. The answers to the above points are-
Point No.1: In the affirmative Point No.2: In the Negative Point No.3: As per final order, for the following-
R E A S O N S
8. Point No.1 - As per Sec.3 of Limitation Act, every application made after the prescribed period shall be dismissed although limitation has not been set up as a defense. Undisputedly the impugned arbitral award was passed on 07.09.2010. The above petition is filed on 09.12.2010. Therefore, after lapse of 92 days (23 days in September, 31 days in October, 30 days in November and 8 days in December), the 8 A.S.No.108/2010 above petition is filed. The order sheet reveals, at the initial stage, the office has noted with regard to limitation of filing the above petition. On 03.03.2010, it was ordered that it was proper and necessary to hear the other side in that regard. But subsequently, no order in that regard has been passed.
Sub-Sec.3 of Sec.34 of Arbitration & Conciliation Act, 1996 states-
"(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award, or if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:
Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter." 9 A.S.No.108/2010
9. No I.A is filed after lapse of 90 days, either u/s. 34(3) of the Arbitration and Conciliation Act, or u/s. 5 of Limitation Act, by the petitioner.
10. In Sub-Sec.(3) of Sec.34, of the said Act, period of limitation is stated as three months and not 90 days. As per the principles of ruling reported in 2002(6) KLJ 111(b), which states-
"month - it means, space of time between two dates of two contiguous months. Three months will mean, three British calendar months and not 90 days calculated at the rate of 30 days per month, excluding the first day."
11. Therefore, in the present set of facts, within 07.12.2010, or atleast 08.12.2010, the above petition should have been filed. At the cost of repetition, the above petition is filed on 09.12.2018, without showing any reason why there was delay of more than three months. Absolutely there is no reason putforth for filing the same after three months. Hence the above petition is barred by limitation. Hence point No.1 is answered accordingly. 10 A.S.No.108/2010
12. Point No.2 - Undisputedly, there was a written agreement entered into between the petitioner and the 1st respondent herein, for renovation of the century old running hospital building. With regard to validity of appointment of Arbitrator and about the jurisdiction to enter upon the dispute, the learned Arbitrator, in issue Nos. 1 (a) and 1 (b), has discussed the same in detail. As per conditions of contract, clause -24.1 states-
"If the contractor believes that a decision taken by the Engineer was either outside the authority given to the Engineer by the contract, or that the decision was wrongly taken, the decision shall be referred to the adjudicator within 14 days of the notification of the Engineer's decision."
13. Undisputedly, the attempt made by the 1st defendant, for appointment of adjudicator by writing a letter was not responded by the adjudicator and hence he approached the Hon'ble High Court of Karnataka and filed CMP.No.8/2004. The Hon'ble High Court of Karnataka appointed initially Sri.B.S.Ramakanth, Retired District Judge as Arbitrator. Subsequently Sri.N.S.Sangolli, Retired District Judge, as alternative Arbitrator, as per order, dated 18.02.2010. 11 A.S.No.108/2010 Considering the facts and circumstances, the learned Arbitrator has come to the correct conclusion that there was validity of appointment of Arbitrator and about his jurisdiction to enter upon the dispute. In that regard, it appears to this court that interference is not necessary.
14. The work order was issued on 27.01.2000. The date of agreement, entered into between the parties on 27.01.2000. the stipulated date for completion of work was 18 months, i.e., on 27.07.2001 and the date of completion was on 30.06.2002. The consolidated claim letters and final bills were sent to the petitioner on 09.07.2002, 28.03.2003 and 10.04.2003. The learned Arbitrator, in his detailed order has come to the conclusion that the petitioner herein, was responsible for the delay. Because, the petitioner herein did not handover vacant possession of the century old running hospital building to the 1st respondent herein, for carrying out the repair works. 12 A.S.No.108/2010
15. Sec. 34 of Arbitration & Conciliation Act, 1996 (1), (2) and (2-A) states-
Sec.34 Application for setting aside arbitral award -
(1) Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the court only if - (a) 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 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, 13 A.S.No.108/2010 or it contains decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this part from which the parties cannot derogate, or, failing such agreement, was not in accordance with the part; or
(b) the Court finds that -
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in for, or
(ii) the arbitral award is in conflict with the public policy of India.14 A.S.No.108/2010
[Explanation 1. - For the avoidance of any doubt, it is clarified that an award is in conflict with the pubic policy of India, only if,
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2. - For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.] [(2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: 15 A.S.No.108/2010
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law, or by re- appreciation of evidence.]
16. The claim made by the 1st respondent/contractor, under claim No.(1) relates to payment of price adjustment amounting to Rs.17,32,150/- along with interest, at the rate of 24% per annum, from 30.06.2002. But the learned Arbitrator, awarded Rs.17,32,150/- along with interest at the rate of 9% per annum, from 01.07.2002.
17. Claim No.2 relates to payment of equitable enhanced rates for all the work executed beyond 26.7.2001, upto 30.06.2002, was claimed at 50% of Rs.1,85,59,717/- amounting to Rs.92,79,858/-, but the learned Arbitrator has awarded 25% of Rs.1,85,59,717/- i.e., Rs.46,37,929/-, without any interest.
18. Claim No.3 relates to refund of excess Royalty charge recovered form the bills, amounting to Rs.1,21,030/-, along with interest, at the rate of 24% per annum. But the learned 16 A.S.No.108/2010 Arbitrator has awarded Rs.1,21,000/-, along with interest, at the rate of 9% per annum, from the date of claim petition.
19. Claim No.4 relates to payment of unproductive additional overhead charges, both during the period of contract and during extended period of contract, amounting to Rs.38,39,958/-, along with interest at 24% per annum, from 30.06.2002, but the learned Arbitrator, awarded Rs.38,39,958/- along with interest, at 9% per annum, from the date of claim petition.
20. Claim No.5 is with regard to payment of loss of expected profit on the value of work that remained incomplete as an 26.07.2001 at Rs.27,83,958/- and the learned Arbitrator awarded the said amount, without any interest.
21. Interest u/s. 31(7) (a) and (b) of the Arbitration & Conciliation Act, 1996 provides for awarding interest, at the rate of 18% per annum , when the contract is silent in that regard. 17 A.S.No.108/2010
22. On going through the award passed by the learned Arbitrator, meticulously, the arbitral award is on the face of it not erroneous, nor patently illegal, in contravention of provisions of the Act. The words " public policy", or "Opposed to public policy", find reference in Sec.23 of Contract Act, 1872 and also Sec.34 (2) (b) (ii) of the Arbitration & Conciliation Act, 1996. The interpretation of the contract is matter for the Arbitrator, to determine and decide the dispute. Hence this court is precluded from re-appreciating the evidence to be holding that the arbitral award is against the public policy. The Arbitrator's decision is generally considered binding between the parties and therefore, the power of the court to set aside the award would be exercised only in cases where the court finds arbitral award is on the face of it erroneous and arbitral, illegal and in contravention to provisions of the said Act. No party has brought to the knowledge of the court that the Arbitrator has not followed the statutory legal position. Once the Arbitrator has 18 A.S.No.108/2010 applied his mind to the matter before him, the court cannot re- appraise the matter as if it were an appeal and even if two views are possible, the view taken by the Arbitrator would prevail. It is not the case of petitioner that the making of the award was induced or affected by fraud or corruption .
23. Nothing is brought to the knowledge of the court if certain provisions of substantive law, or laws of India are not complied with by the Arbitrator. Each of the claims is taken into consideration separately and good and valid reasons are assigned as to how amounts under various heads have been arrived at. The impugned award has been passed meticulously by going into minutes of contract. In the present case, the learned Arbitrator has explained the reasons for arriving the decision. Awarding of damages is also substantiated by the Arbitrator. Fair assessment has been done by the Arbitrator as to the damages caused to the contract/1st respondent and those damages have been properly quantified. Hence relying the principles of rulings- 19 A.S.No.108/2010
1. 2014 (4) Arb.LR 1 (SC) ( Swan Gold Mining Ltd. Vs. Hindustan Copper Ltd.,),
2. 2014 (3) Arb.L.R 460 (SC) ( Navodaya Mass Entertainment Ltd., Vs. J.M.combines)
3. 2015 (1) Arb. LR 184 ( Karnataka) (DB) -( Bengaluru Water Supply & Sewerage Board Vs. C.N.Krishnamurthy (since dead) by Lrs.and Anr.
5. 2016 (3) Arb. Lr 1 (SC) (National Highways Authority of India Vs. JSC Centrodostroy) And 2018(1) R Arb.LR 12 (SC) ( Union of India Vs. Susaka Pvt. Ltd., & Ors.) and 6.2018 910 Arb. LR 236 (SC) ( Maharashtra State Electricity Distribution Vs. Datar Switchgear & Ors. ), it appears to the court that the impugned award passed by the learned Arbitrator shall not be set aside. Hence point No.2 is answered accordingly.
24. Point No.3- In view of the answers to point Nos.1 and 2, the following-
O R D E R The petition filed u/s. 34(2) of Arbitration & Conciliation Act, 1996, is dismissed with costs, to be paid by the petitioner, to the 1st respondent. 20 A.S.No.108/2010
Draw decree accordingly.
(Dictated to the Judgment Writer, transcript thereof corrected signed and then pronounced by me, in open Court, on this the 23rd day of July, 2018).
(SHUBHAVEER B.) XII Addl. City Civil & Sessions Judge, Bengaluru 21 A.S.No.108/2010 Order pronounced in open court ( vide separate order) The petition filed u/s. 34(2) of Arbitration & Conciliation Act, 1996, is dismissed with costs, to be paid by the petitioner, to the 1st respondent.
Draw decree accordingly.