Bangalore District Court
Union Of India vs ) M/S.Balaji Builders on 16 January, 2017
IN THE COURT OF THE VI ADDL.CITY CIVIL & SESSIONS JUDGE
BENGALURU CITY
CCCH. 11
Dated this the 16th day of January, 2017
PRESENT: Sri.K.M.Rajashekar, B.Sc., LL.B.,
VI Addl. City Civil & Sessions Judge,
Bengaluru City.
A.S.NO: 18/2014
PETITIONER/ : UNION OF INDIA
PLAINTIFF Reptd. by -
1) The General Manager,
South Western Railway
Club Road, Hubli.
2) The Chief Administrative
Officer
South Western Railway,
# 18, Millers Road,
Bengaluru-560 046.
3) The Chief Engineer/CN East
South Western Railway,
# 18, Millers Road,
Bengaluru-560 046.
(By Pleader Sri.YT.Abhinay)
/Vs/
RESPONDENTS/ : 1) M/s.Balaji Builders,
DEFENDANTS No.21, 4th Cross, 5th Block,
3rd Phase, BSK 3rd Stage,
Bengaluru-560 085.
Reptd.by its Partner.
(By Pleader Sri.Sampath Bapat)
2 AS.No.18/2014
2) Justice R.Gururajan(Retd.)
Arbitrator
No.504, 5th Floor,
Chitrapur Apartments,
15th Cross, Malleshwaram,
Bengaluru-560 055.
--
JUDGMENT
The Petitioner/Plaintiff has got filed this suit under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the award dated 10.12.2013 passed in reference arising out of CMP.No.93/2011 passed by Defendant No.2 and dismiss claims raised by Defendant No.1 in its entirety and allow the counter claims of the Plaintiff.
2) In nutshell Plaintiff's case is that, pursuant to a tender notification, a contract was finalized between the parties. The Letter of Acceptance (LOA) was issued on 15.02.2008 and formal contract was entered into on 23.06.2008. Under the Contract Agreement the Defendant No.1 had agreed for performance of works "Hospet-Guntkal Section-Proposed construction of ROH steel covered shed 3 AS.No.18/2014 of size approximately 30m x 50m for 250 BOX-N Wagons and other related miscellaneous work including providing of Hubli entry to ROH shed etc., at Hospet Yard". The contract agreement was also governed by the General Conditions of Contract, Special Conditions of contract, the specifications of the Southern Railway and special specifications and in conformity with the drawings. The scope of agreement was soil investigation and complete structural design and other allied services; providing foundation with cast in situ bored piles as per design; supplying, fabrication, erection of MS columns, gantry beams, trusses, purlin, rafters; supplying and fixing of aluminium sheeting, erecting of rails, for the gantry, heavy duty flooring in the shed; transportation of required P.Way materials, laying and linking of tract, points and crossings and shifting of LC, providing of LC wicket gates, paving; extension of Br.No.128 as 1x 1.22 RCC box and earthwork, moorum blanketing and the term for completion of the contract was on or before 14.08.2008. After execution of 4 AS.No.18/2014 the Contract Agreement, the railways by their letter dated 04.03.2008 had instructed Defendant No.1 to adopt the approved drawing of the adjacent ROH shed constructed for 100 Box 'N' wagons. The foundation drawing for the above work was issued to him at site on 29.05.2008, the Plaintiff approved the drawings of Defendant No.1, but the Defendant No.1 was also instructed to attend to few deficiencies in the design calculation and to submit the complete design and drawing duly complying all the deficiencies and complete report of soil exploration and advised to mobilize all resources so as to complete the work within the schedule date. On the request of Defendant No.1, the currency of the contract was extended till 30.10.2008. Despite extension, Defendant No.1 was unable to complete the contract and had stopped the work for last one month. The Plaintiff by notice called upon them to commence the works to make good the progress, failing which the contract would be terminated. On receipt of notice, Defendant No.1 sought extension of currency of 5 AS.No.18/2014 the contract for a further period and the same was extended time and again on his request upto 30.04.2010 and again it was extended till 28.08.2010. The Plaintiff pointed out the short comings and non-completion of the works and called upon Defendant No.1 to furnish bank guarantee. Then, the Defendant No.1 issued No objection certificate dated 07.12.2010 and their final bill has been cleared. Thereafter, Defendant No.1 raised dispute for Arbitration and also filed CMP.No.93/2011, wherein, the Hon'ble High Court by its order dated 15.06.2012 appointed the Defendant No.2 to arbitrate and adjudicate upon the dispute between the parties. The Defendant No.1 filed his claim petition before the Hon'ble Tribunal and the Plaintiff filed its statement of objections and also put-forth counter claim demanding Rs.5,04,00,000/- as compensation for loss due to delay in completing the balance works. After adjudication, the Arbitral Tribunal by its order dated 10.12.2013 passed an award. Aggrieved 6 AS.No.18/2014 by the arbitration award, the Plaintiff has preferred this suit on the following among other grounds.
Under the General Conditions of Contract, not all disputes arising under the contract are arbitrable. The claims put forth by Defendant No.1 are not genuine; the claims are unjust and untenable. The claim being a remote claim, not maintainable, vague and speculative, is liable to be rejected. The Defendant No.1 has not furnished detailed particulars of claim. The Tribunal could not have in the absence of any material to establish the fact that Defendant No.1 had indeed brought the machinery which were idling could not have allowed the said claims. The Tribunal has failed to notice the fact that Plaintiff has periodically made payments to Defendant No.1 for the work and raw materials and the Defendant No.1 being compensated for the raw materials could not be entitled for any relief under this head and accordingly the same ought to have been dismissed. As regards the counter claim of the railways, the Defendant No.1 did not complete the 7 AS.No.18/2014 work within the time fixed and also within the further extension of time granted to them, non completion of balance work caused huge loss to Railways and in view of the loss caused, the Plaintiff were to be compensated for the delayed payment of damages by way of interest.
3) On service of notice, Defendant No.1 entered appearance through his counsel and filed statement of objections contending that the suit is not maintainable since the grounds urged do not meet any of the provisions of Section 34 of Arbitration and Conciliation Act, 1996 and are not in consonance of the provisions of said Section. The award cannot be challenged on any other ground other than as provided in Section 34. Interfering with the award other than available under Section 34 will be a clear violation of law and cannot be sustained. The merits of the case cannot be gone into under Section 34 of the Arbitration and Conciliation Act, as the Court is not sitting in appeal. The learned Arbitrator has passed a reasoned award based on the material placed before him and the 8 AS.No.18/2014 same cannot be re-agitated at this stage. Since the reasoning is based on the evidence placed before him, this court cannot venture to reassess the said evidence as a court of appeal and prayed for dismissal of the suit with exemplary costs.
4) Heard. Perused the records and also written arguments submitted by the parties.
5) The points that arise for my consideration are:
1. Whether Plaintiff proves that the learned Arbitrator had entertained the excepted matter in violation of the agreement?
2. Whether Plaintiff proves any of the grounds under Section 34 of the Arbitration and Conciliation Act, to set aside the Arbitration award?
6) My answer to the above points is in the negative for the following :
9 AS.No.18/2014
REASONS
7) Point No.1 and 2 : Since both the points are inter related to each other, they are taken up together to avoid repetition of facts and for convenience of the court.
Upon going through the materials available on record, it is seen that the Plaintiff has come up with this suit for setting aside the Arbitration award dated 10.12.2013 passed in reference arising out of CMP.No.93/2011 passed by Defendant No.2 on the ground that, pursuant to a tender notification, a contract was finalized between the Plaintiff and the Defendant, the Letter of Acceptance (LOA) was issued on 15.02.2008 and formal contract was entered into on 23.06.2008. The Plaintiff approved the drawings of Defendant No.1 and also instructed to attend to few deficiencies in the design and advised to mobilize all resources so as to complete the work within the schedule date. On the request of Defendant No.1, the currency of the contract was extended till 30.10.2008, despite extension; Defendant No.1 was 10 AS.No.18/2014 unable to complete the contract and had stopped the work for last one month, but Defendant No.1 sought extension of currency of the contract for a further period and the same was extended till 28.08.2010. The Plaintiff pointed out the short comings and non-completion of the works and called upon Defendant No.1 to furnish bank guarantee. Then, the Defendant No.1 issued No objection certificate dated 07.12.2010 and their final bill has been cleared. Thereafter, Defendant No.1 raised dispute for Arbitration and also filed CMP.No.93/2011, wherein, the Hon'ble High Court by its order dated 15.06.2012 appointed the 2nd Defendant as Arbitrator who passed award directing the Plaintiff to pay Rs.4,95,424.71; Rs.22,08,000/-; Rs.22,60,801/-; Rs.2,90,323/-; and Rs.4,02,500/- together with interest at 18% p.a. on various heads.
8) Upon going through the materials available on record, it is seen that the grounds urged by the Plaintiff challenging the award is that, "under the General 11 AS.No.18/2014 Conditions of Contract, not all disputes arising under the contract are arbitrable, the claims put forth by Defendant No.1 are not genuine, the claims are unjust and untenable; the claim being a remote claim, not maintainable, vague and speculative, is liable to be rejected. The Defendant No.1 has not furnished detailed particulars of claim. The Tribunal could not have in the absence of any material to establish the fact that Defendant No.1 had indeed brought the machinery which were idling could not have allowed the said claims. The Tribunal has failed to notice the fact that Plaintiff has periodically made payments to Defendant No.1 for the work and raw materials and the Defendant No.1 being compensated for the raw materials could not be entitled for any relief under this head and accordingly the same ought to have been dismissed. As regards the counter claim of the railways, the Defendant No.1 did not complete the work within the time fixed and also within the further extension of time granted to them, non completion of balance work caused huge loss to Railways and in view 12 AS.No.18/2014 of the loss caused, the Plaintiff were to be compensated for the delayed payment of damages by way of interest etc.
9) At this stage, it is relevant to have a look at the provisions of Section 34 of the Arbitration and Conciliation Act, 1996.
" 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 my be set aside by the Court only if -
(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, 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 13 AS.No.18/2014 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 provisions of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this 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 force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation.- Without prejudice to the generality of sub-clause (ii) it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81."
The Arbitration and Conciliation (Amendment) Act, 2015 provides :
"18. In Section 34 of the Principal Act.-
(I) In sub-section (2), in clause (b), for the Explanation, the following Explanations shall be substituted, namely :-
(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 14 AS.No.18/2014
(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.", (II) after sub-section (2), the following sub-section shall be inserted, namely :-
"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:
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."
10) To add to this, in a land mark judgment rendered by the Hon'ble Supreme Court of India in Civil Appeal No.10531/2014 reported in AIR 2015 SC 620 between Associate Builders Vs. Delhi Development Authority dated 25.11.2014 extends a wider scope to Section 34 of the 15 AS.No.18/2014 Arbitration and Conciliation Act, 1996. Their Lordships have clearly mandated that :
"an extent of judicial intervention notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part. (Section 5) It is important to note that, the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of Arbitration; also to provide that the tribunal gives reasons for an arbitral award; to ensure that the tribunal remains within the limits of its jurisdiction; and to minimize the supervisory roles of courts in the arbitral process.
Therefore, in our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case is required to be held that the award could be set aside if it is patently illegal. The result would be, award could be set aside if it is contrary to :
(a) Fundamental policy of Indian law; or
(b) The interest of India; or
(c) Justice or morality, or
(d) In addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.16 AS.No.18/2014
103. Such patent illegality, however, must go to the root of the matter. The public policy, indisputably, should be unfair and unreasonable so as to shock the conscience of the court. Where the Arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act.
35. Without meaning to exhaustively enumerate the purport of the expression "fundamental policy of Indian law", we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called as "judicial approach" in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of a judicial approach in judicial and quasi- judicial determination lies in the fact that so long as the court, tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a court, tribunal or authority vulnerable to challenge.
The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where-
1. a finding is based on no evidence, or
2. an arbitral tribunal takes into account something irrelevant to the decision which it arrives at; or
3. Ignores vital evidence in arriving at its decision.17 AS.No.18/2014
such decision would necessarily be perverse.
A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with.
It must clearly be understood 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 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. 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.
A Court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or re-appreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act.
The third ground of public policy is, if an award is against justice or morality. These are two different concepts in law. An award can be said to be against justice only when it shocks the conscience of the court. An illustration of this can be given. A claimant is content with restricting his claim, let us say to Rs.30 lakhs in a statement of claim before the Arbitrator and at no point does he seek to claim anything more. The arbitral award ultimately awards him 45 lakhs without an acceptable reason or justification. Obviously, this would shock the conscience of the court and the arbitral award would be liable to be set aside on the ground that it is contrary to "justice".
If the Arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which 18 AS.No.18/2014 arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award.
The court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the Arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding."
11) In the background of above ratio laid down by Hon'ble Apex Court, if we analyze the case on hand, it is seen that the main ground of attacking the arbitration award is that, the 'excepted matters' shall stand specially excluded from the purview of arbitration clause. Since, all the claims put-forth before the tribunal did come under the 'excepted matters', the Arbitrator ought to have not entertained Claim No.2 and 3 which squarely falls within 'excepted matters'. The other grounds of attack is that, the learned Arbitrator could not have in the absence of any materials to establish the fact that Defendant No.1 had 19 AS.No.18/2014 indeed brought the machinery which were idling could not have allowed the claims. The Tribunal failed to notice the fact that the Plaintiff has periodically made payments to Defendant No.1 for the work and raw materials. The Defendant No.1 being compensated for the raw materials could not be entitled for any relief under the head of damages. Since the Defendant No.1 did not complete the work within the time fixed and also within further extension of time granted to them, the non completion of balance work caused huge loss to the railways, the tribunal ought to have allowed the said claim, etc.
12) The learned counsel appearing for the Plaintiff vehemently argued that one of the principal grounds urged before the Tribunal is that, Claim No.1 to 10 are 'excepted matters' and are outside the purview of arbitration. The term 'excepted matters' denotes that, the parties have chosen that certain matters cannot be referred to arbitration. The power of the arbitration is not a process 20 AS.No.18/2014 of adjudication as before a civil court of competent jurisdiction. The power, authority and jurisdiction of an Arbitrator to arbitrate upon the disputes referred, is founded on agreement between the parties to an agreement contained in an arbitration clause. The parties to the agreement are at liberty to agree on which disputes are to be referred to Arbitration. If any dispute or classes of disputes are excluded from the purview of arbitration, arbitration of such excepted matter is excluded and an Arbitrator is denuded of power or authority or jurisdiction to arbitrate upon such areas. The learned counsel relying upon the judgment reported in AIR 2015 SCC 270; AIR 2011 SC 3814; AIR 2002 1272 and AIR 2007 SC 509, highlighted the ratio laid down in the above said judgments which reads thus :
AIR 2015 SCC 270 (M/s.Harsha Constructions Vs Union of India) " 18. Arbitration arises from a contract and unless there is a specific written contract, a contract with regard to Arbitration cannot be presumed. Section 7(3) of the Act clearly specifies that the contract with regard to Arbitration must be in writing. Thus, so far as the 21 AS.No.18/2014 disputes which have been referred to in Clause 39 of the contract are concerned, it was not open to the Arbitrator to arbitrate upon the said disputes as there was a specific clause whereby the said disputes had been 'excepted". Moreover, when the law specifically makes a provision with regard to formation of a contract in a particular manner, there cannot be any presumption with regard to a contract if the contract is not entered into by the mode prescribed under the Act.
19. If a non-arbitrable dispute is referred to an Arbitrator and even if an issue is framed by the Arbitrator in relation to such a dispute, in our opinion, there cannot be a presumption or a conclusion to the effect that the parties had agreed to refer the issue to the Arbitrator. In the instant case, the Respondent authorities had raised an objection relating to the arbitrability of the aforestated issue before the Arbitrator and yet the Arbitrator had rendered his decision on the said "excepted" dispute. In our opinion, the Arbitrator could not have decided the said "excepted dispute".
AIR 2011 SC 3814 (State of Goa Vs. Praveen Enterprises) "11. Reference to Arbitration can be in respect of all disputes between the parties or all disputes regarding a contract or in respect of specific enumerated disputes. Where 'all disputes' are referred, the Arbitrator has the jurisdiction to decide all disputes raised in the pleadings (both claims and counter claims) subject to any limitations placed by the Arbitration agreement. Where the Arbitration agreement provides that all disputes shall be settled by Arbitration but excludes certain matters from Arbitration, then, the Arbitrator will exclude the excepted matter and decide only those disputes which are arbitrable. But where the reference to the Arbitrator is to decide specific disputes enumerated by the parties/court/appointing authority, the Arbitrator's jurisdiction is circumscribed by the specific reference and the Arbitrator can decide only those specific disputes." Relying upon the above said judgments, learned counsel vehemently argued that the learned Arbitrator 22 AS.No.18/2014 ought not to have entertained this dispute as it squarely fall within the excepted matters.
13) On the other hand, the learned counsel appearing for the Defendant vehemently argued that Clause-63 has widest amplitude with some riders. The riders are that, any decision taken in any of the clauses mentioned therein stands excluded from the purview of Arbitration. If the clauses are dealt individually it will be evident that for some clauses there is an in-house-mechanism and for other clauses there is no such mechanism provided. A decision of the authority becomes final and gets excluded from the purview of arbitration only when a final decision is taken after hearing the parties in the first category. If the procedure is not followed, any act of the applicants cannot be brought within the ambit of excepted matter. On the other hand, where there is no in-house-mechanism the decision thereon is final and binding on the parties and any dispute pertaining thereto is excluded from the purview of 23 AS.No.18/2014 arbitration. Thus, any action taken under any of the clauses stated in Clause 63 does not automatically become sacrosanct whereby the jurisdiction of the Arbitrator stands excluded. The learned counsel for the Defendant relied upon the judgments reported in (2005) 8 SCC 618 between SBP & Co., Vs. Patel Engineering Ltd., and another, wherein it reads thus :
" B. Arbitration and Conciliation Act, 1996-S.11(6) and (8) - Preliminary matters to be determined under by Chief Justice or his designate - Appointment of Arbitrator thereupon - Considerations involved -
Nature of adjudication involved - Held (per majority), Chief Justice or his designate while functioning under S.11(6) is bound to decide whether (i) he has jurisdiction, in the sense whether party making motion has approached the right High Court, (ii) there is a valid Arbitration agreement in terms of S.7, (iii) person before him with the request, is a party to the Arbitration agreement, and (iv) there is a dispute/live claim subsisting which is capable of being arbitrated upon (though question whether the live claim made comes under the purview of the Arbitration agreement should be left to be decided by the Arbitral Tribunal on taking evidence, along with merits of the claims involved) - On coming to a conclusion on these aspects, he has to enquire if conditions for exercise of his power under S. 11(6) have been fulfilled; and if Arbitrator has to be appointed, who is the fit person in terms of the provision - Chief Justice is entitled to seek opinion of an institution in matter of nominating an Arbitrator qualified in terms of S.11(8), if the need arises, but order appointing Arbitrator could only be that of Chief Justice or his designate - These are all adjudications which affect the rights of parties, and Chief Justice cannot constitute Arbitral Tribunal without considering these questions - It is for this reason that the power is conferred on the highest 24 AS.No.18/2014 judicial authority in the State or the country under S.11(6), and which has to act judicially thereunder - Per C.K.Thakker.J., dissenting, at stage of exercising powers under S.11(6), though Chief Justice is bound to apply his mind to allegations and counter- allegations of the parties, the satisfaction required is merely of prima facie nature and Chief Justice does not decide a lis nor any contentious issue thereunder."
14) The learned counsel argued that once the superior court entertain the matter under Section 11, it is judicial order regarding the jurisdiction or exclusion, hence, at this stage, the jurisdiction or exclusion cannot be questioned. The learned counsel further relied upon the decisions rendered in (2010) 1 SCC 549 and (2011) 5 SCC 758 and argued that even in a case where an action of the authorities is within the parameters as contemplated in Clause 63, still if the contractor can make out case that it is not an excepted matter the same can be considered by the Arbitral Tribunal. Hence, the claim that decision of the learned Arbitrator is based on solid evidence and sound reasonings, this court has no power to interfere etc. 25 AS.No.18/2014
15) Upon going through the award passed by the learned Arbitrator, it indicates that the learned Arbitrator has considered all the evidence and documents placed before him exhaustively and in his detailed order, out of 10 claims, the learned Arbitrator has passed the award in favour of the Defendant herein in part and awarded approximately Rs.28 lakhs together with interest.
16) It is significant to note that the point of 'excepted matter' was also exclusively raised before the learned Arbitrator. The learned Arbitrator has also framed an issue in that regard which is Issue No.14 which reads as under :
" 14. Whether Respondent proves that claims made by the claimant come within the excepted matters as provided under the General Conditions of the Contract?"
17) At page-61 of the award, the learned Arbitrator has paid due consideration to this point and answered it in the negative. The learned Arbitrator has referred the decision of the Hon'ble Supreme Court in (2007) 2 SCC 453 26 AS.No.18/2014 (Ramnath International Construction (P) Ltd., -Vs- Union of India); (2009) 10 SC 354 (Asian Techs Limited -Vs- Union of India and others); AIR 1980 KANT 92 (Govindanaik G. Kalaghatigi -Vs- West Patent Press Co.Ltd., and another) and rendered a detailed reasoning, wherein, the learned Arbitrator has observed that :
" 85) It is seen that certain claims are deemed as 'excepted matters and these matters are not arbitrable and the decision of the Railways shall be final and binding on the contractor. To understand and appreciate this argument one has to go deep into the contract itself. In terms of the General Conditions of Contract as clause is provided with regard to settlement of disputes. Clause 63 of the GCC is the said clause which has already been culled out in the preceding paragraph. The said clause would provide for demand for Arbitration and it further provides for appointment of an Arbitral Tribunal. In terms of the said clause the contractor has to demand in writing that the dispute or difference be referred to Arbitration. In terms of clause 64(ii (ii) the Railways shall refer the matter to Arbitration. In terms of clause 64(3) Arbitral Tribunal is to be appointed by the Railways. In terms of clause 64(3)(i) where the total value of all claim in question added together does not exceed Rs.10 lakhs, the Arbitral Tribunal shall consist of a sole Arbitrator who shall be a gazette officer of Railway not below JA grade nominated by the General Manager in that behalf. The sole Arbitrator shall be appointed within 60 days from the day when a written and valid demand for Arbitration is received by the General Manager. In cases not covered by clause 64(3)(a)(i), the Arbitral Tribunal shall consist of a panel of three Gazetted Railway Officers not below JA grade or two Railway Officer, retired not below the rank of SAG Officer, as the Arbitrators. A careful reading of the clause pertaining to settlement of disputes would show that excepted matters (matters not arbitrable) would be with reference to Arbitration at the hands of Railway authorities. In fact clause 64 if read carefully would provide for a reference by the Contractor to the General Manager and it further provides for the General 27 AS.No.18/2014 Manager notifying the decisions within 120 days thereafter. At the time of notification certain clauses are to be considered as excepted matters i.e. matters not arbitrable by the General Manager. Therefore, a clear reading of clause 63 would show that the excepted matters i.e. matters not arbitrable would be in the case of Notification by the General Manager. In the case on hand it is seen that this reference is not by the General Manager, but it is by the order of the Hon'ble High Court in terms of Section 11 of the Arbitration and Conciliation Act, 1996. In fact this matter has been considered by various courts in subsequent decisions. The Apex Court in the case of Ramnath International Construction (P) Ltd., -Vs- Union of India, (2007) 2 SCC 453 has held that even if the employer/Union of India is at fault, yet, clauses 11(A) to 11(C) bar the entitlement of the contractor to damages. But in a latter judgment reported in Asian Techs Limited -Vs- Union of India and Others (2009) 10 SCC 354 the Apex Court has ruled that the clauses in question, namely 11(A) to 11(C) prevent only the department from granting damages, but it does not prevent the Arbitrator from awarding damages which are otherwise payable by the employer on account of its breach of contract. The Full Bench of the Hon'ble High Court of Karnataka in the decision reported in Govindanaik G. Kalaghatigi - Vs- West Patent Press Co. Ltd., and another, AIR 1980 KANT 92 has ruled that the latter decision is binding on the Tribunal.
In the latter judgment of the Apex Court in the case of Asian Techs Limited the Apex Court has ruled that such clauses do not bind the Arbitrator. The Apex Court in the case of Madnani Construction Corporation Private Limited - Vs - Union of India and Others, (2010) 1 SCC 549 has ruled in paras 21 and 42 as under :-
" 21. It goes without saying that in order to deny the claims of the contractor as covered under excepted matters, the procedure prescribed for bringing those claims under excepted matters must be scrupulously followed. The clear finding of the Arbitrator is that it has not been followed and the High Court has not expressed any disagreement on that.
Therefore, the finding of the High Court that those items are non-arbitrable cannot be sustained."28 AS.No.18/2014
86) The Supreme Court has ruled that to deny the claims of the contractor as covered under excepted matter the procedure prescribed for bringing those claim must be scrupulously followed.
87) The learned counsel for the respondents relies upon the judgment of the Hon'ble Supreme Court reported in (2012) 12 SCC 581, State of Goa -Vs- Praveen Enterprises to contend that the Tribunal has no jurisdiction to consider the excepted matters. I have carefully gone through the said judgment. The facts in the said case as that on failure to appoint an Arbitrator an application was filed under Section 11 of the Act for appointment of an Arbitrator. One retired Adviser of Konkan Railway Corporation was appointed as a Arbitrator. A counter claim was raised by the respondent. If it is carefully seen that the facts raised in the present case with regard to the procedure etc. was not the facts in that case. It was on the facts of that case the Supreme Court ruled that the Chief Justice or designate is not required to draw up the list of disputes and refer them to Arbitration. The Supreme Court further ruled that where the agreement provides for referring all disputes between the parties (whether without any exceptions or subject to exceptions), the Arbitrator will have jurisdiction to entertain any counter claim, even though it was not raised at a stage earlier to the stage of pleadings before the Arbitrator. The Supreme Court further ruled that where however the Arbitration agreement requires specific disputes to be referred to Arbitration, and provides that the Arbitrator will have the jurisdiction to decide only the disputes so referred, the Arbitrator's jurisdiction is controlled by the specific reference and he cannot travel beyond the reference, nor entertain any additional claims or counter claims which are not part of the disputes specifically referred to Arbitration. In the case on hand it is seen that in terms of Clause 63 of the GCC all disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of work or after its completion and whether before or after the determination of the contract, shall be referred by the contractor to the General Manager. In the light of this clear clause, I am of the view that the contention that only certain matters has to be referred and other excluded cannot be accepted particularly when the respondents have failed to appoint their Arbitrator and the Hon'ble High Court has chosen to appoint an Arbitrator in terms of the order of the High Court. The excepted matters, as mentioned earlier, 29 AS.No.18/2014 would be only in the event of respondents deciding to appoint their Arbitrator and not to an Arbitrator appointed by the High Court. In fact the High Court has chosen to hold in para 12 of its order that the present petition is maintainable in the absence of failure to refer the matter by the respondents. Since the Arbitration provides for all disputes the contention of 'excepted matters' has no fail on the facts of this case."
18) Upon going through the detailed observation of the learned Arbitrator, it is seen that the learned Arbitrator has exhaustively considered the question of 'excepted matters' in detail and arrived at a fair conclusion. It is settled principle of law that this court has very limited jurisdiction to interfere with the arbitral award. Just because there is possibility of taking different view, cannot be a ground to dissent with the observation of the learned Arbitrator. Added to that, the ratios laid down by their Lordships of the Hon'ble Supreme Court of India in the judgments referred supra makes it very clear that this court cannot sit as a appellate court and reconsider the minute evidence and re-appreciate it, rather, this court gets jurisdiction to set aside the award only under Section 34 of the Act, that too, if it is established that any of the grounds under 30 AS.No.18/2014 Section 34 of the Act, is made out. Apart from that, their lordship of the Hon'ble Supreme Court in the above referred judgment clearly mandated that a broad distinction has to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with. Here in the case as narrated above, the learned Arbitrator has based his decisions relying on the decisions of the Hon'ble Supreme Court, hence, the said opinion cannot be termed as perverse to bring it within the ambit of Section 34 of the Act.
19) Under the facts and circumstances of the case, I am of the opinion that absolutely no grounds are made out by 31 AS.No.18/2014 the Plaintiff to establish any of the grounds mentioned in the plaint or any of the grounds available in Section 34(b) of the Arbitration and Conciliation Act, 1996. The judgment referred supra rendered by the Hon'ble Supreme Court in Associate Builders Vs. Delhi Development Corporation makes it very clear that this court cannot sit on an appellate jurisdiction and the arbitral award cannot be set aside on trivial grounds. The Hon'ble Supreme Court consistently mandated that, if the Arbitrator wonders outside the work and deals with the matter not allotted to him, then only it can be termed as judicial error. Apart from that, the Arbitration and Conciliation Act makes provision for review of the arbitral award only to ensure fairness, intervention of the court is envisaged in few circumstances only, like fraud or bias by the arbitrator, violation of natural justice. Court cannot correct the errors of the Arbitrator. Scheme of the provisions aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make 32 AS.No.18/2014 a conscious decision to exclude the courts jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it. Herein is the case, the learned Arbitrator has dealt the matter squarely within the four corners of the matter allotted to him. Added to that, no act is done by the learned Arbitrator which could be termed the award as perverse or unfair and unreasonable so as to shock the conscience of the court. The Plaintiff has utterly failed to establish that the learned Arbitrator has gone contrary to law or beyond the expressed law of the contract or granted relief in the matter not in dispute. Under these circumstances, I hold that the Plaintiff has utterly failed in establishing that the award passed by the learned Arbitrator falls within any of the clauses of Section 34 of the Arbitration and Conciliation Act, 1996, much less, any of the grounds mentioned in the plaint is established, accordingly, I answer the above points in the negative and proceed to pass the following :
33 AS.No.18/2014
ORDER (1) The suit filed by the Plaintiff under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside the award dated 10.12.2013 passed in reference arising out of CMP.No.93/2011 passed by Defendant No.2; is hereby dismissed.
(2) Parties to bear their own costs.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open Court, dated this the 16th January, 2017.) (K.M.RAJASHEKAR) VI Addl.City Civil & Sessions Judge Bengaluru City.