Bangalore District Court
M/S Ravi Construction Co vs The Union Of India on 2 November, 2022
KABC010289002017
IN THE COURT OF THE LII ADDL. CITY CIVIL & SESSIONS
JUDGE, BANGALORE (CCH-53)
Dated this the 2nd day of November, 2022
PRESENT
Sri.B.G.Pramoda, B.A.L., LL.B.,
LII Addl. City Civil & Sessions Judge,
Bangalore.
A.S.No.164 /2017
Plaintiff: M/s Ravi Construction Co.
No.3358/C, 13th Main, HAL
II Stage, Indiranagar,
Bengaluru - 560008.
Represented by its
Managing Partner,
Sri.M.Appukutty,
S/o Late Muthu Gounder,
Aged about 80 years,
Hindu, Senior Citizen.
(By Sri.P.N., Advocate)
-V/S-
Defendants: 1. The Union of India
(owning South Western Railway)
Represented by its:
1. The Chief Administrative Officer
Construction, South Western Railway,
2 A.S.No.164/2017
18, Basaveshwara Road,
Bengaluru - 560046.
2. The Deputy Chief Engineer
Construction
South Western Railway, Hassan.
3. Sri.C.M.Ranganath
(Joint Arbitrator),
ADRM, South Central Railway
Guntur Division, 2nd Floor, Rail Vikas
Bhavan, Pattabhipuram, Guntur-522 006.
4. Sri.L.V.Dudam
Joint Arbitrator,
Dy. FA & CAO,
Western Railway, Ahmedabad,
(retired after award)
(defendants No.3 and 4 are only
proforma parties)
Now R/at Flat No.301,
Building No.19, Atur Park- 4,
CHS, Naylor Road,
Pune - 411 001.
(R.1 & 2 by Sri.S.R.K., Advocate)
Date of institution of the suit: 24.11.2017
Nature of the suit: Suit for Arbitration and
Conciliation Act
Date of commencement of 16.11.2021
recording of evidence:
Date on which Judgment was 02.11.2022
pronounced:
Duration: Year Months Day
04 11 08
3 A.S.No.164/2017
JUDGMENT
This arbitration suit is filed by the plaintiff u/Sec.34 of Indian Arbitration Conciliation Act 1996 and r/w Arbitration and Conciliation (Amended) Act, 2015, praying to set aside the arbitration award dated 27.05.2017 passed by learned joint arbitrators/ defendants No.3 and 4 and prayed to allow the claim No.2, 3, 4 and 9 made by plaintiff before the joint arbitrators.
2. The brief facts of the case of the plaintiff which leads to file this arbitration suit in nutshell are as follows:-
The plaintiff is the successful bidder in respect to earth work in forming bank and cutting in each 11/from Ch. 26520-35400 (balance works) at Chitradurga/Rayadurga, New MG Line. Since the quoted prices of the plaintiff was competitive and feasible to the defendants No.1 and 2, the tender work was allotted to the plaintiff through letter of acceptance dated 03.04.1988 bearing LOA No.W.496/CR/36. Pursuant to the said letter, a detailed agreement came to be entered into in agreement No.151/CE/BNC/88 dated 03.06.1988. The date of completion of work is for 12 months commencing from 13.04.1988 to 12.04.1989. The total cost of Rs.13,82,557/-. The plaintiff has submitted as many as 9 claims in his request for appointment of arbitration tribunal. The defendants No.1 and 2 have only preferred 7 claims. The claimant again requested the railway administration by recording protest for not including 2 claims in the terms of reference and requested for issue of revised terms of reference including these 2 claims. The competent authority vide 4 A.S.No.164/2017 reference dated 27.05.2017 has constituted the arbitral tribunal with respondents No.3 and 4 and refer the claim of the plaintiff for arbitration. The arbitral tribunal by this order dated 27.05.2017 has not considered the claim No.2, 3, 4 and 9 made by the plaintiff.
The plaintiff being aggrieved by the said impugned arbitral award learned joint arbitrators has filed the present suit.
It is to be noted here that the respondent No.1 and 2 being aggrieved by impugned award so for as claim No.9 is concerned have preferred arbitration suit bearing No.168/2017 before this court. The said arbitration suit is also tried along with this suit and both the matters were heard together and both arbitration suits were passed for judgment on same day.
3. The main grounds urged by the plaintiff in this arbitration suit challenging the award passed by the learned arbitrator in nutshell are as follows:
i) The learned joint arbitrators have failed to follow the procedural aspect regarding passing of the award what is necessary to be required for publishing the award. The learned joint arbitrators have not published the award on non judicial stamp paper which is become essential to challenge the award.
ii) The learned joint arbitrators have miserably failed to give findings regarding which act applicable to the said transaction in question. The learned joint arbitrators have failed to give reasons in respect of the award passed under 1996 act.
iii) The learned joint arbitrators does not exist and survive in the new act of 1996. The impugned order passed by 5 A.S.No.164/2017 the learned joint arbitrators by partly allowing the claims cannot sustain the test of law and also the same is contrary to the materials on record.
iv) The learned joint arbitrators have acted arbitrarily and biased manner. The learned joint arbitrators have virtually ignored and misread the documentary evidence produced by the plaintiff.
v) The learned joint arbitrators have committed a serious legal misconduct and thereby the same requires interference of this court.
vi) The learned joint arbitrators have failed to consider the facts and circumstances of the works allotted to the plaintiff.
As such, learned joint arbitrators have totally failed to consider the Indian Public Policy while passing the award.
vii) The learned joint arbitrators have failed to consider the Sec.18 and 28 of Arbitration and Conciliation Act while passing the award.
ix) The learned joint arbitrators have traversed beyond terms and conditions of contract and failed to appreciate and provide relief, even though laws governing contract, in particular Indian Contract supported by various decisions of hon'ble Apex Court. The impugned order is based on surmises and assumptions.
x) The learned joint arbitrators have tried their best to cover up exercise of respondents/ defendants No.1 and 2 latches, acted as respondent guardian by supportive and soft corner attitude towards them. The learned joint arbitrators have also 6 A.S.No.164/2017 failed to visit work site, call witness, engineer involved in the work at the time of execution.
xi) The Claim No.2 is towards payment of compensation for supply of moorum for a sum of Rs.5,91,200/-. But the learned joint arbitrators have not awarded any amount in respect of this claim. No valid reasons are assigned for not awarding the said claim. The learned joint arbitrators without verifying the spot inspection and without providing an opportunity to examining the witnesses pass the impugned award by rejecting the claim No.2.
xii) Claim No.3 made by the plaintiff for works done in borrow pit under soft rock sum of Rs.1,23,039/-. But the learned joint arbitrators have not awarded any amount in respect of this claim. The learned joint arbitrators have not assigned any valid reasons for not awarding the amount under the claim No.3. Neither the learned joint arbitrators nor the respondents No.1 and 2 have disputed the execution of borrow pit in soft rock in accordance to railways standard specification for works 1969.
xiii) The learned joint arbitrators have not assigned any valid reasons for not awarding the compensation/ payment towards excess quantity of own earth executed beyond 25% of the agreement quantity as claimed in claim No.4. The learned joint arbitrators have committed serious misconduct while rejecting the said claim.
xiv) The learned joint arbitrators have acted beyond terms of agreement conditions. Even though the plaintiff has sought for interest at 24% p.a. from 01.04.1990 to the actual date of 7 A.S.No.164/2017 realization on all the claims made by them, the learned joint arbitrators have awarded meager interest of 10% p.a. upto the date of award on claim No.1 and 6 only and no interest in respect of other claims. The petitioner has borrowed the amount from the nationalized bank at the rate of 18% p.a. to 24% p.a. quarterly compounded. But the learned joint arbitrators have failed to consider the facts and circumstances of the transaction and have awarded meager interest against the claim of the plaintiff.
xv) Viewed from any angle, the impugned award passed by the learned joint arbitrators is opposed to all canons of law, principles of equity and norms of good conscience.
On these among other grounds, the plaintiff has prayed to allow the suit.
4. After filing of arbitration suit, the notice was issued to the defendants. In pursuance of service of notice, the defendants No.1 and 2 have appeared through their counsel. The defendants No.3 and 4 did not appear before the court inspite of service of notice and the defendants No.3 and 4 are shown as only proforma parties. The defendants No.1 and 2 have filed their written statement. The defendant No.1 and 2 have contended in their written statement that the present suit is not maintainable either in law or on facts of the case. The defendants No.1 and 2 have further contended in their written statement that the plaintiff has not raised no substantial grounds as contemplated u/Sec.34 of Arbitration and Conciliation Act of 1996. The defendants No.1 and 2 have further contended in their written statement that the arbitral 8 A.S.No.164/2017 tribunal has followed the procedure as contemplated under the Arbitration and Conciliation act and also considered the terms of the agreement agreed upon between the parties. The arbitral tribunal has determined each of the claim after giving both the parties opportunity of being heard and has passed the reasoned award. The defendants No.1 and 2 have further contended in their written statement that the allegations made in the suit that the arbitral tribunal ignored the documentary evidence produced by the plaintiff and failed to consider Sec.18 and 28 of Arbitration and Conciliation act is not correct. The arbitral tribunal only after hearing both the parties and after appreciating the evidence produced by both the parties, has passed the impugned award. In the absence of any such contract or instructions by the defendant to the plaintiff to supply moorum the arbitral tribunal has rightly rejected the claim of plaintiff claiming compensation of Rs.5,91,202/-. The defendants No.1 and 2 have further contended in their written statement that the arbitral tribunal has rightly declined the claim No.3 of the plaintiff which is contrary to terms and beyond scope of the contract. There is no such negotiation between the plaintiff and the defendant, wherein it was agreed upon by the defendant to make any payment in excess of what is agreed upon under the contact. Hence, the arbitral tribunal has rightly rejected claim No.4 made by the plaintiff. The defendants No.1 and 2 have further contended in their written statement that the GCC does not provides for any payment of interest on any amount due to the plaintiff. As such, arbitral tribunal beyond its 9 A.S.No.164/2017 jurisdiction and contrary to terms of contract awarded interest. The defendant being aggrieved by the award passed by the arbitral tribunal has challenged the said award arbitration suit bearing No.168/2018 which is pending for consideration before the court. The defendants No.1 and 2 have further contended in their written statement that the plaintiff has not made out any case for interference with well considered award passed arbitral tribunal. The award passed by the arbitral tribunal is in any way is patently erroneous or there was any misconduct on the part of arbitral tribunal members so as to warrant any interference at the hands of the court. The defendants No.1 and 2 in their written statement have specifically denied all other averments and allegations made in the suit. On these among other grounds, as contended in the written statement of defendants No.1 and 2 have prayed to dismiss the suit.
5. After filing of the written statement, the matter was posted for arguments. The Learned counsel for the plaintiff filed written arguments.
6. Heard the arguments. Perused the plaint, written statement, impugned award of the learned joint arbitrators, written arguments, grounds urged in the suit and other materials.
7. Having done so, the following points will arise for my consideration:
10 A.S.No.164/2017POINTS
1. Whether the plaintiff proves that the learned joint arbitrators were erred in rejecting claim No.2, 3, 4 and partly allowing claim No.9 made by him in his request for appointment of arbitrator while passing the impugned award dated 27.05.2017?
2. Whether the plaintiff proves that they are entitled for the claim No.2, 3, 4 and 9 made by them before arbitrator.
3. Whether the plaintiff proves that the interference of this court is required with impugned order dated 27.05.2017 passed by learned joint arbitrator?
4. Whether the arbitration suit filed by the plaintiff is deserves to be allowed?
5. What Order or decree?
8. My findings on the aforesaid points are as under:
1. Point No.1 .. In the Negative
2. Point No.2 .. In the Negative
3. Point No.3 .. In the Negative
4. Point No.4 .. In the Negative
2. Point No.5 .. As per final order for the following:
REASONS
9. POINTS NO.1 TO 4: These four points are interrelated to each other and as such, they are taken together for discussion to avoid repetition of facts.
10. Before discussing about the merits of the suit, I am of the opinion that it is necessary to note down some of the admitted 11 A.S.No.164/2017 facts herein. It is an admitted fact that the respondents No.1 and 2 herein have invited limited tender for work of CTA-RDG New MG Line - Earth work in forming bank and cutting in Reach 11- from Ch. 26520-35400-(balance works) at Chitradurga/Rayadurga, New MG Line. It is further admitted fact that the plaintiff company had participated in the aforesaid tender called by the defendants. The plaintiff became the successful bidder. The contract was allotted in favour of plaintiff company and letter of acceptance was issued to the plaintiff company vide letter of acceptance bearing No.LOA No.W.496/CR/36 dated 13.04.1988, with a contract value of Rs.13,82,557/- and security deposit of Rs.1,38,250/-. It is also an admitted fact that the period of completion was 12 months from the date of issuance of LOA i.e., work is to be completed by 12.04.1989. It is also an admitted fact that consequent to the issue of LOA an agreement bearing No.151/CE/BNC/88 dated 03.06.1989 came into existence between the parties. It is also an admitted fact that the work was completed during April 1990.
11. During the progress of the work and after completion of the work claimant has made several correspondences relating to the disputes and claims and requested the respondent to settle the same. Since number of disputes arisen consequent to completion of the work and the claimant requested the respondent to settle the payments due to him by making number of correspondences and Since the defendants No.1 and 2 have not resolved the claim made by the plaintiff, the plaintiff had to approached Hon'ble High Court of Karnataka by filing petition 12 A.S.No.164/2017 No.74/2008. It is also an admitted fact that Hon'ble High Court of Karnataka vide order dated 04.08.2019 had advised railway administration to appoint arbitration tribunal to resolve disputes arisen in present contract by the plaintiff. Accordingly, the respondents No.1 and 2 have appointed learned joint arbitrator to resolve the disputes.
12. The claimant has submitted as many as 9 claims in his request for appointment of arbitration tribunal. However, as per the terms of reference, only 7 claims were referred for adjudication. Further the plaintiff has again requested the railway administration by recording protest for not including 2 claims in the terms of reference and requested for issue of revised terms of reference including those 2 claims.
13. Though there is no further issue of revised terms of reference from the defendants No.1 and 2 side. As such, the learned joint arbitrators have also included the 2 more claims of the plaintiff for adjudication and considered those 2 claims also to meet the ends of natural justice. The learned joint arbitrators after considering the arguments of both the parties and after considering the materials placed by them, were pleased to pass arbitration award on 27.05.2017. Vide the said award the learned joint arbitrators were pleased to reject the claim No.2, 3, 4 and partly allowed the claim No.9 and allowed other claims made by the plaintiff. The plaintiff being aggrieved by the award passed by the learned joint arbitrators by refusing to allow the claim No.2, 3, 13 A.S.No.164/2017 4 and partly allowing claim No.9 has filed this arbitration suit u/Sec.34 of Arbitration and Conciliation Act 2015.
14. The plaintiff has made claim No.2 seeking compensation / payment of Rs.5,19,200/- towards supply of moorum. The plaintiff has contended before the learned joint arbitrators that the rate claimed by him at Rs.910/- (per 10 cum) is justified because the lead in bringing moorum in Reach 11 is much higher and Gounder and Co. has also demanded Rs.823 per 10 cum vide their letter dated 22.08.1989 and also the claimant was also paid Rs.910/- (per 10 cum) in same project for moorum supply in CTA-RDG New MG line-Formation of diversion road for ROB 18 A- AGT No. 8XEN/CTA/89 of 23.10.1989. The learned joint arbitrators have held that on record, it is proved that the claimant was instructed by the respondent to supply moorum and claimant was not able to produce suitable evidence. It is further observed by the learned joint arbitrators that the respondents have categorically mentioned that no such instructions were given for the claimant to take up such work. In the absence of proper facts and records to substantiate this fact, the learned joint arbitrators have refused to allow the said claim made by the plaintiff.
15. Claim No.3 made by the plaintiff is for compensation / payment of Rs.1,23,039/- for the work done in borrow pit under soft rock. The learned joint arbitrators in their award have also considered the said claim made by the plaintiff. The plaintiff before the learned joint arbitrators have contended that earlier agency 14 A.S.No.164/2017 had already exploited all the borrow areas available with the railways. The soft rock ordinary rock can be utilized in formation of embankment which are in the form of hard laterite were extracted and used by the claimant to the extent possible. The plaintiff has further contended before the learned joint arbitrators that the same needed additional efforts, time and cost and hence, they have claimed compensation in the additional efforts, time and cost required for the said work. The defendants No.1 and 2 have contended before learned joint arbitrators that the agreement states that the earth work in forming bank with earth excavation from barrow pits in railway land including excavation in all conditions and including excavation in all conditions and classification of soils. The learned joint arbitrators after considering the contentions of both the sides and the exhibits have come to the conclusion that work done under item No.5 schedule 'A' is in order and the claim made by the contractor is untenable in accordance to respondents exhibit. Hence, learned joint arbitrators have rejected the claim No.3 made by the plaintiff.
16. As per claim No.4, the plaintiff has sought for compensation/ payment of Rs.7,28,900/- towards excess quantity of own earth executed beyond 25% of the agreement quantity. The learned joint arbitrators have also considered the said claim made by the plaintiff. The claimants have contended before the learned joint arbitrators that the fact of executing own earth over and above 25% of the agreement quantity is an admitted issue and only remaining issue towards this claim is that the respondent 15 A.S.No.164/2017 wanted the claimant to reduce his rate from Rs.370/- / 10 cum, since the ranging rate for the period 1988-89 was from Rs.250/- to Rs.300/- per 10 cum. The respondents have contended before the learned joint arbitrators that the claim by the contractor is on a higher side and hence, it was not settled and also argued that the claim is an excepted matter as per clause 39 of GCC. The learned joint arbitrators after considering the contention of both the plaintiff and defendants No.1 and 2 have come to the conclusion that when a claim has been admitted and not paid, the question of excepted or not excepted matter does not arise. The learned joint arbitrators have also come to the conclusion that the rates for quantity more than 125% of agreement are fixed by negotiation and the general trend is reducing the rate for additional scope of work or at the most maintain the originally awarded rate for additional scope work beyond 125% of the agreement quantity. In the present case, the original rate awarded has been justified and paid for quantity in excess of 125% of agreement quantity. As such, compensation rate does not arise and claim does not merit any consideration and hence it was rejected.
17. The plaintiff has challenged the findings of the learned joint arbitrators on claim No.2, 3, 4 mainly on the ground that arbitrator has acted arbitrarily and in biased manner. The learned joint arbitrators have virtually ignored and misread the documentary evidence produced by the plaintiff. The plaintiff has also challenged the arbitrator award on the ground of learned joint arbitrators have committed a serious legal misconduct. The 16 A.S.No.164/2017 learned joint arbitrators have totally failed to consider the Indian Public Policy and natural justice while passing the award. Further the plaintiff has challenged the award on the ground that the learned joint arbitrators not considered the Sec.18 and 28 of Arbitration and Conciliation Act. The learned joint arbitrators have not visited the work site, call witness, engineer involved in the work at the time of execution. It is also contended by the plaintiff that the learned joint arbitrators have acted beyond the terms of agreement conditions.
18. Since the plaintiff has challenged the award of learned arbitrator u/Sec.34 of Arbitration and Conciliation Act,1996, it is for the plaintiff to prove that the grounds urged by him will come within the purview of Sec.34 of Arbitration and Conciliation Act 1996. Sec.34 of Arbitration and Conciliation Act 1996 provides various grounds under which an arbitration award may be set aside by the court. As such, it is relevant to note herein the provision of Sec.34(2) of Arbitration and Conciliation Act 1996.
Sec.34(2) of Arbitration and Conciliation act provides as follows;
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 17 A.S.No.164/2017
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 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 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.18 A.S.No.164/2017
Explanation 1.- For the avoidance of any doubt, it is clarified that an award is in conflict with the public 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:
Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.]
19. Thus from the aforesaid provisions, it is clear that scope of intervention of this court with arbitration award is very limited. Interference of this court with the arbitral award is only limited to the grounds which are mentioned under the aforesaid 19 A.S.No.164/2017 provisions. U/Sec.34 of Arbitration and Conciliation Act, this court has no power to set aside the arbitral award merely on the ground of an erroneous application of law or by reappreciation of evidence. This court acting u/Sec.34 of Arbitration and Conciliation Act cannot re-appreciate the evidence or review the dispute.
20. The Hon'ble Supreme Court of India in the decision of 2019(15) SCC 131 Ssangyong Engineering And Construction Company Ltd. vs National Highways Authority of India and Renusagar Company Ltd. V/s General Electric, has explained the meaning of public policy of India. In the aforesaid case the Hon'ble Supreme Court of India has discussed the scope of various grounds mentioned u/Sec.34 of Arbitration and Conciliation Act. The Hon'ble Supreme Court of India in the aforesaid judgment has clarified that under no circumstance can any Court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, as we have seen, is contrary to the ethos of Sec.34 of the 1996 Act.
21. In the aforesaid decisions, the Hon'ble Supreme Court of India has also discussed the grounds of breach of principles of natural justice as contend u/Sec.18 and 34(2) (a) (3) of the Act. It is held that a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. It is held that if the arbitrator gives no reasons 20 A.S.No.164/2017 for an award and contravenes Sec.31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award. But in the present case, the learned arbitrator has given valid reasons for disallowing the 3 claims made by the plaintiff by appreciating the materials on record and by considering the contention of both the plaintiff and the defendants No.1 and 2. As such, it cannot be come to the conclusion that there is patent illegality on the face of the award so as to set aside the same.
22. Hon'ble Supreme Court of India, in the aforesaid case has observed that u/Sec.18 of the 1996 act, each party is to be given a full opportunity to present the case. U/Sec.24(3), all statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the arbitral tribunal may rely in making its decision shall be communicated to the parties. From the impugned arbitration award, it is clear that the plaintiff was represented by his advocate during the arbitration proceedings. Further it is also clear from the arbitration award that an ample opportunity was given to the parties to submit their case. In the arbitration award there is specific reference in page No.1 that both the respondents and claimant have indicated that they have been given full opportunity to present their case, they have been fully heard and no more material is there for submission. Thus it is clear that the plaintiff has submitted all the relevant documents and materials before the learned joint arbitrators at the time of hearing.
21 A.S.No.164/2017The learned joint arbitrators have given full and fair opportunity to both the parties to defend their case. As such, I do not find any merits in the contention of the plaintiff that the learned arbitrators have not considered Sec.18 of Arbitration and Conciliation Act.
23. The Hon'ble Supreme Court of India has further held that interest of India must construed taking India as a member of the world community in its relations with foreign powers. It is further held that only when it shocks conscience of court it can be held that the award is against justice or morality. It is further held that interference on the ground of justice does not include what the court things is on the facts of a case for which it then seeks to substitute its view for the Arbitrator's view and does what it considers to be "justice". Court u/Sec.34 does not act as first appellate court and cannot interfere with errors of facts either in passing of perversity.
24. The Division Bench of Hon'ble Supreme court of India in the recent decision reported in 2021 SCC online SC 473 (Project Director, National Highway Authority of India V/s M.Hakeem and another) has explained the scope of Sec.34 of Arbitration Act and held that it provides only for setting aside awards on very limited grounds. The Hon'ble Apex Court has held that it is settled law that when an arbitral award is challenged u/Sec.34 of Arbitration and Conciliation Act, no challenge can be made on merits of arbitral award.
22 A.S.No.164/201725. In the aforesaid case, the Hon'ble Supreme court of India has relied upon another judgment of Hon'ble Supreme court of India reported in 2019 (4) SCC 163 (MMTC Ltd. V/s Vedanta Ltd.) wherein the court held that "the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Sec.34 has not exceeded the scope of the provision." In view of this decision, it is clear that this court cannot independently assess the merits of the award.
26. Hon'ble Supreme court in the decision reported in MC Dermott international Inc V/s Burn - Standard company Ltd., has held that the arbitration act 1996 had only created a supervisory role to courts for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The Hon'ble Apex court has clearly held that in the aforesaid judgments that the court cannot correct the errors made by the arbitrator and it can only set aside the award, keeping supervisory role of the court at minimum level. It is further held that the rationality is that parties voluntarily choose to opt, arbitration excluring the jurisdiction of courts because they want expediency and finality.
27. The Hon'ble Supreme Court of India in the recent decision in Crl.A.No.5627/2021 (Arising out of SLP © No.4115/2019) (Delhi Airport Metro Express Pvt. Ltd. V/s.
23 A.S.No.164/2017Delhi Metro Rail Corporation Ltd.) dated 09.09.2021 has considered all the earlier judgments passed u/Sec.34 pf Arbitration and Conciliation Act which are referred above and Hon'ble Supreme Court of India has held that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of the said Associate Builders case. The Hon'ble Supreme Court of India in the aforesaid judgment has also clarified that insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. It is further held that there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter. But which does not amount to mere erroneous application of the law. The Hon'ble Supreme Court of India in para No.38 has clearly held that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the fact of the award. The Hon'ble Supreme Court has further clearly held that a mere contravention of the substantive law of India, by itself, is no longer a ground available to be set aside an arbitral award. It is further held that if an arbitrator given no reasons for an award and contravenes Sec.31(3) of the 1996 Act, that would certainly amount to a patent 24 A.S.No.164/2017 illegality on the face of the award. It is also held that if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Sec.34(2-A). In para No.25 of the judgment, Hon'ble Supreme Court of India has held that patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. Likewise, erroneous application of law cannot be categorised as patent illegality. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. It is further held that the permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair- minded or reasonable person would.
28. Thus the grounds urged by the plaintiff in the present suit to set aside the impugned arbitration award will not come within the grounds as mentioned in Sec.34(2)(A) and ground No.I to V of Sec.34(2)(A) of Arbitration and Conciliation Act. The plaintiff has not taken any ground that the party making the application was under some incapacity or the arbitration agreement is not valid under the law or party making application was not given proper notice of the appointment of an arbitrator or deals with a 25 A.S.No.164/2017 dispute not contemplated by or not failing within the terms of the submission to arbitration or the arbitral tribunal arbitral procedure was not in accordance with the agreement of the parties.
29. Further grounds urged by the plaintiff in this arbitration suit will also not come within the purview of Sec.34(4)(2)(1) of the Arbitration Act as no ground is taken by the plaintiff that subject matter of the dispute is not capable of settlement by arbitration under the law for time being in force. But the plaintiff in the present suit has contended that the arbitral award is in conflict with the public policy of India as mentioned in Sec.34(2)(b)(2) of Arbitration and Conciliation Act.
30. Explanation-I to the said section clarified that an award is in conflict with the public 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 of the Arbitration and Conciliation Act. The plaintiff has not pleaded anything in the ground about the award was induced or affected by fraud and corruption. Further the plaintiff has also not contended that award was passed in violation of the Sec.75 and 81 of the act. Further explanation to the aforesaid section provides that the award is in conflict with the public policy of India if it is contravention with the fundamental policy of India. In order to clarify what is fundamental policy of Indian Law, explanation-2 provided that 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. If 26 A.S.No.164/2017 the arbitration award is challenged on its merits, it would not amounts to contravention of fundamental policy of Indian Law.
31. Further explanation-I provides that an arbitral award is conflict with the public policy of India and it is in conflict with the most basic notions of morality or justice. The plaintiff in this case, has alleged that the principles of natural justice is violated by the learned joint arbitrators while passing impugned arbitration award. But the learned joint arbitrators has given sufficient opportunity to both the parties to adduce their oral and documentary evidence. Further the learned joint arbitrators have passed the impugned order after giving sufficient opportunity to both the parties to address their arguments and they have passed the impugned oder after hearing the plaintiff and after considering all the contentions taken by the plaintiff before the learned joint arbitrators. In the impugned award, the learned joint arbitrators have mentioned all the claim made by the plaintiff and learned joint arbitrators have also mentioned the grounds urged by the plaintiff before them and also mentioned the grounds urged on behalf of the respondent and given their findings about the claim. Though there is no further revised terms of reference about two claims of the plaintiff, the learned joint arbitrators have also considered the same. On perusal of the arbitration award, it cannot be considered that the learned joint arbitrators have violated the principles of natural justice and it cannot be come to the conclusion that the learned joint arbitrators have failed to hear the plaintiff. Under these facts and circumstances, I am of the opinion that the impugned 27 A.S.No.164/2017 arbitration award cannot be considered as against to the principles of natural justice or to the basic notions of morality as contended by the plaintiff. As such, on the said impugned arbitration award cannot be set aside.
32. Sec.34(2)(A) of the Arbitration and Conciliation Act, 2015 provides that 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. The proviso to the said section provides that the award cannot be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
33. As it is mentioned earlier, Hon'ble Supreme Court of India in Delhi Airport Metro Express Pvt. Ltd. Case has considered the scope and in Sec.34(2)(A) of Arbitration and Conciliation Act and clearly explain what is patent illegality and how the award is appreciated by patent illegality appearing on the face of the awarding. The learned joint arbitrators have considered all the documents produced on behalf of the plaintiff and defendants and considered the contentions of both parties on the claims and also given proper reasons for their conclusion on the claim made by the plaintiff. The Hon'ble Supreme Court of India in the aforesaid judgment has also clearly held that erroneous application of law cannot be categorized as patent illegality. Every error of law committed by the arbitral tribunal would not fall within the 28 A.S.No.164/2017 expression 'patent illegality'. As such, the contention of the plaintiff that the learned joint arbitrators have virtually ignored and mislead the documentary evidence adduced by plaintiff cannot be considered as a grounds to set aside the award under the expression of patent illegality.
34. From the decision of the Hon'ble Supreme Court of India as stated above, it is clear that this court has not power to decide the merits of arbitration award and this court has no jurisdiction to independently assess the merits of award. Further this court cannot re-appreciate the evidence on record to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. This principle of law is clearly held by the Hon'ble Supreme Court of India in many cases as referred above. All the grounds urged by the plaintiff in the appeal memorandum would amounts re-appreciation of evidence adduced by both the parties before the learned joint arbitrators. All the ground urged by the plaintiff in the suit amounts to considering the merits of the impugned arbitration award by re-appreciating the evidence adduced before the learned joint arbitrators which is not permissible u/Sec.34 of Arbitration and Conciliation Act or which is against to the principles laid down by the Hon'ble Supreme Court of India in such decisions.
35. The learned joint arbitrators in the impugned award have given proper reasons for rejecting the claim No.2, 3 and 4 made by the plaintiff and partly allowing the claim No.9 made by 29 A.S.No.164/2017 the plaintiff. In view of catena of judgments of Hon'ble Supreme Court of India, this court cannot sit in appeal against arbitration award and can be come to contrary conclusion against the conclusion arrived at by learned arbitrator by re-appreciating the materials placed before learned arbitrators. Reappreciation of evidence placed before learned arbitrator on the grounds urged in this arbitration suit would amount to review of the arbitration award on merits which is not permissible u/Sec.34 of Arbitration and Conciliation Act and also which is not permissible decision of Hon'ble Supreme Court of India referred above. There are no sufficient materials on record to show that the learned arbitrators have committed patent illegality while passing the impugned order. The plaintiff has failed to produce any sufficient materials to show that the learned joint arbitrators have not taken into account the terms of contract and trade usage applicable to the transactions as provided u/Sec.28(c) of Amended Act. There is no violation of Sec.18 of the Arbitration and Conciliation Act. Under these facts and circumstances, I do not find any merits in the arbitration suit and on the grounds urged in the arbitration suit so as to set aside the impugned award by exercising power u/Sec.34 of the act. All the ground urged by the plaintiff would amounts to considering the merits of the arbitration award by re-appreciating the materials placed before the learned joint arbitrators. The plaintiff has failed to prove that the learned joint arbitrators have erred in rejecting the claim No.2, 3 and 4 and partly allowing claim No.9 made by him. For the discussions made above and on the grounds urged by the 30 A.S.No.164/2017 plaintiff, this court cannot exercise jurisdiction u/Sec.34 of the Arbitration and Conciliation Act and to set aside the impugned arbitration award by allowing the claim No.2, 3, 4 and 9 made by the plaintiff before learned joint arbitrators. As such, the interference of this court is not required with the impugned award of the learned joint arbitrators. As such, the arbitration suit filed by eh plaintiff is deserves to the dismissed. Accordingly, I answer Points No.1 to 4 in Negative.
36. POINT NO.5: In view of my findings on Points No.1 to 4, I proceed to pass the following:
ORDER The arbitration suit filed by plaintiff u/Sec.34 of Indian Arbitration and Conciliation Act 1996 and r/w Arbitration and Conciliation (Amended) Act, 2015 is hereby dismissed.
The arbitration award passed by learned joint arbitrators dated 27.05.2017 is hereby confirmed. No order as to cost.
(Dictated to the Stenographer, transcribed by her, corrected and then pronounced by me in the open court on this the 2nd day of November, 2022). Digitally signed PRAMODA by G PRAMODA B BG Date: 2022.11.04 15:54:48 +0000 (B.G.Pramoda) LII Addl. City Civil & Sessions Judge, Bangalore.31 A.S.No.164/2017