Bangalore District Court
Sri.K.Raghava Reddy vs The Union Of India on 1 July, 2019
IN THE COURT OF THE XIX ADDL. CITY CIVIL & SESSIONS
JUDGE AT BANGALORE CITY: (CCH.18)
Dated this the 1st day of July, 2019.
Present
Present SRI.DINESH HEGDE, B.A.,LL.B.,
XIX ADDL. CITY CIVIL & SESSIONS JUDGE,
BANGALORE CITY.
A.S.NO.65/2010
PLAINTIFF : Sri.K.Raghava Reddy
S/o Late Sri.K.V.Venkata Subba Reddy
Aged about 72 years,
Engineers and Contractors,
Residing at G-1, Block-1, Royal Residency,
No.8, Brunton Road, off. M.G.Road,
Bangalore - 560 025.
(By Sri.N.B., Advocate)
-VS-
DEFENDANTS : 1.The Union of India
Represented by the
Chief Administrative Officer-Construction,
South Western Railway,
Bangalore.
2. South Western Railway
Represented by its Chief Engineer,
Construction, West,
South Western Railway,
Bangalore.
(By Sri.K.P.M., Advocate)
RESPONDENTS : 1. Sri.J.N.Lal Das
Presiding Arbitrator
CE/Construction/East,
South Western Railway,
Bengaluru cant.
2. Sri.A.Selvaraj
Co-Arbitrator
FA&CAO/WST,
South Western Railway,
Hubli.
3. Sri.Ramesh Pinjani
Co-Arbitrator
Chief Engineer/Const/North,
South Western Railway,
Bengaluru Cant.
(Absent)
JUDGMENT
The plaintiff has filed this petition under Section 34 of Arbitration & Conciliation Act (hereinafter referred as the Act) to set-aside the arbitral award dated 12-05-2010 and for such other reliefs.
2. The case of the plaintiff that, he has secured a tender by the second defendant for carrying out earth work for forming an embankment and construction of minor bridges for the proposed Direct Entry to MNGT yard from Hassan side. The plaintiff accepted the tender under letter No.W.496/MYHS/432 dated 22.04.2003. The total value of the contract was Rs.2,86,01,592.55. As required under the terms of the tender the plaintiff executed and entered into a contract with the defendant and a Contract Agreement dated 19.02.2004 was executed between the plaintiff and the defendants. The plaintiff was ready to commence work under the aforesaid contract. However, for over five months the defendants failed to handover or make available the land required to enable the plaintiff to execute the jobs undertaken by him. It is relevant that even till date the land has still not been acquired. The plaintiff also faced multiple and varied obstacles in the execution of the work which were beyond the reasonable and anticipation or control of the plaintiff. Notwithstanding that the plaintiff had materialized adequate men and material, as the defendant had failed to handover the land required for execution of the contract work, the period of the contract was periodically extended from the original time of nine months to a total period of twenty six months. As execution of the project within nine months became impossible on account of the failure of the defendant to handover the required land the plaintiff was able to complete approximately 90% of the work awarded to him while the balance 10% incomplete work has been re-tendered at a escalated price of over Rs.6 crores.
3. Upon the Defendant failure to handover land as stated, resulting in the plaintiff incurring huge expenditure and costs in mobilizing machineries, men and material, the plaintiff was compelled to incur losses and costs in respect of which the plaintiff made a claim against the defendant for payment of the following amounts :
a) Claim No.1 : For revision of rates for work executed beyond contract period, totally amounting to Rs.
b) Claim No.2: Release of security deposit amounting to Rs.15,00,000/-
c) Claim No.3: For payment of an amount of Rs.2,88,15,600/- as compensation damages/expenses for the men and machinery of the plaintiff remaining idle due to the failure of the defendant in handing over the required lands to the plaintiff and thereby preventing the plaintiff from discharging his obligations.
d) Claim No.4: Payment of the pending Final Bill amount of Rs.2,00,000/-
e) Claim No.5 : Loss of profit calculated at 15% amounting to Rs.38,00,000/-.
f) Claim No.6: Payment of interest on the aforesaid amounts at 25% per annum.
g) Claim No.7: Payment of costs of Arbitration amounting to Rs.2,00,000/-.
4. Upon the defendant disputing their liability to pay the aforesaid amounts, an Arbitral Tribunal was constituted purportedly under the terms of the aforesaid contract between the plaintiff and the defendants. The Arbitral Tribunal comprised of the following:
(1) Sri.J.N.Lal Das, (2) Sri.A.Selvaraj and (3) Sri.Ramesh Pinjani The plaintiff was not afforded an opportunity to determine the composition of the Arbitral Tribunal as under the General Terms of Contract relating to the work the defendant was arbitrarily vested with an arbitrary power to choose members of the Arbitral Tribunal. As the plaintiff had no option but to accept the decision of the defendants, the plaintiff was compelled to submit to the jurisdiction of the aforesaid Arbitral Tribunal. The plaintiff and the defendant filed their claims and objections respectively before the Arbitral Tribunal. In addition thereto the plaintiff filed several documents in support of his claim while the defendant also filed registers, books that infact supported the case of the plaintiff. After hearing the parties, but however, without recording evidence, the Arbitral Tribunal passed its Award dated 12.05.2010 rejecting claims No.1, 3, 5, 6 and 7 made by the plaintiff. However, the Arbitral Tribunal, by its Award, allowed claims No.2 and 4.
5. The Award of the Arbitral Tribunal is totally without jurisdiction and opposed to the public policy of India, as under the prevalent public policy the plaintiff was entitled to a fair, unprejudiced and unbiased hearing and adjudication at the hands of an impartial tribunal constituted in accordance with law. The public policy prevalent in India postulates that no person could be a Judge in his own cause. This is also a principle recognized under the prevalent jurisprudence in the country. The right to a fair trial or adjudication under law is also a fundamental right of the plaintiff. In this perspective the construction of the Arbitral Tribunal itself was ab-initio in violation of the public policy in India and opposed to the constitutional principles of fairness and equity.
6. The Presiding Arbitrator was equivalent in rank to the person who has signed the contract with the plaintiff from which the present dispute has arisen. The co-Arbitrators were officials subordinate to the Principal Presiding Arbitrator. All the three Arbitrators are subordinate officers of the South Western Railway. The contract, out of which the arbitration arose, had been entered into by the plaintiff with the South Western Railway. It is therefore, apparent that the Arbitral Tribunal comprised only of persons who were under the supervision, administrative and disciplinary control of the defendants. It would, therefore, amount to a person being a Judge in his own cause, which is violative of the public policy prevalent in India. The constitution of the Aritral Tribunal has caused serious prejudice to the plaintiff in that the plaintiff has been deprived of a fair, unprejudiced, unbiased and equitable adjudication of the dispute. The Award is liable to be set aside on the specific ground that constitution of the Arbitral Tribunal has been illegal, opposed to the public policy prevalent in India and has resulted in the defendant sitting in Judgement over their own cause. It has resulted in vitiation of the entire Award as it has deprived the plaintiff of an unprejudiced adjudication of the dispute. The Award, therefore, suffers from the vice of bias against the plaintiff and is opposed to the public policy of India. It is also violative of the Constitutional principles of fairness.
7. It is further the Award is also opposed to the prevalent law in India as it is directly in violation of and contrary to the law laid down by the Hon'ble Supreme Court of India in (2010) 6 Supreme Court Cases 394 (Denel (Proprietary) Limited vs. Bharat Electronic Limited and another). The Award is, therefore, vitiated and is liable to be set aside on this ground alone. At the time of entering into the contract, from which the arbitration dispute arose, the plaintiff did not have any effective or meaningful choice but was compelled to sign and execute the contract and thereby accept the provisions relating to the appointment and constitution of an Arbitral Tribunal in the manner specified in the contract. The plaintiff was, by virtue of the inequal bargaining power and predominant powers of the defendant without being relating to constitution of the Arbitral Tribunal. Consequently, such terms of the contract that provided for constitution of an Arbitral Tribunal comprising the employees of the defendant as Arbitrators without any representation or an Arbitrator from the side of the plaintiff would be rendered unconstitutional, unjustified, illegal and opposed to the public law of India. Such a clause would be void and unenforceable. Resultantly, the Award passed by such Arbitral Tribunal is wholly arbitrary, unfair, inequitable and suffers from the vice of bias to the detriment of the plaintiff. The Award is, therefore, liable to be set aside.
8. It is further stated that, award suffers from the serious vice of non-application of the mind as the Arbitral Tribunal has failed to determine the fundamental question regarding the cause for delay and the consent seeking extension of time by the plaintiff under the contract. The Arbitral Tribunal has ignored evidence placed before it as also the admission of the defendant to the effect that the land required for effective execution and completion of the work awarded to the plaintiff under the contract had not been handed over to the plaintiff for over 5 months, even after which only a portion was handed over. The Arbitral Tribunal failed to notice that under the public policy and law prevalent in India it would be impermissible for the defendant to have executed a contract and thereafter rendered performance of such contract impossible due to the acts of omission from its own side. The Arbitral Tribunal failed to notice that the defendant themselves rendered the contract impossible of performance by their conduct. The Arbitral Tribunal failed to notice or consider that the party to a contract could not be allowed to take advantage of its own wrong and thereby make unlawful gain from such contract. The Arbitral Tribunal failed to notice that admittedly the defendant had failed to handover the land required for completion of the project within the time required and had thereby made it impossible for the plaintiff to commence or continue or complete the work awarded to it. Consequently, the Arbitral Tribunal ought to have recognized that the defendants, having failed to discharge their fundamental obligations under the contract could not have been allowed to take advantage of their own wrong and derive benefit at the cost and expense of the plaintiff. The Arbitral Tribunal ought to have noticed that by rejecting the claim of the plaintiff it would virtually amount to allowing the defendant to unjustly enrich themselves at the cost and expenses of the plaintiff. The Arbitral Tribunal ought to have allowed the claim of the plaintiff. The Award is, therefore liable to be set aside.
9. It is also averred that the Arbitral Tribunal has ignored in not considering and not taken cognizance of the documentary material placed before the Arbitral Tribunal to clearly establish that the defendant had failed to handover the land required for commencing/completion of work by the plaintiff. The Arbitral Tribunal has failed to consider the admission of the defendant themselves that men and material were lying idle at the site as confirmed by the Hindrance Register maintained by the defendants. The Arbitral Tribunal has failed to recognize that the agreemental quantity that had been tendered purportedly for 1.75 Kms was itself inaccurate as such quantity was exhausted in approximately 650 meters itself. The Tribunal failed to recognize that the tender and consequent agreement was unworkable and the contract was inherently incapable of being performed. The Arbitral Tribunal failed to recognize or notice that the tender called for by the defendant itself was, therefore, erroneous. The Tribunal also failed to recognize that in the minutes of the proceedings held on 08.06.2009 this crucial aspect had been submitted by the plaintiff and the defendant to which the response of the defendant had been to merely state that they had "no comments at the stage". The Arbitral Tribunal ought to have noticed that by virtue of the defendant's failure to dispute the aforesaid claim of the plaintiff, it comments at the stage". The Arbitral Tribunal ought to have noticed that by virtue of the defendant's failure to dispute the aforesaid claim of the plaintiff, it had been clearly established that the tender itself was erroneous and incapable of performance. Consequently, the claim for revision or rates was not only justified but also essential and inevitable.
10. It is further stated that the Award dated 12.05.2010 is received by the plaintiff on 15.05.2010. The Application is, therefore, within the time stipulated under Law. Wherefore, the plaintiff prays that this Hon'ble Court may pleased to set aside the Award dated 12.05.2010 passed by the Arbitration Tribunal and grant such other or further reliefs as this Hon'ble Court may deem fit to grant, including an order as to costs, in the interests of justice and equity.
11. The defendants No.1 and 2 filed their objections stating that the petitioner is not entitled for any of the reliefs sought for and the petition is liable to be dismissed in limine. The present application is to be dismissed for non-joinder of proper parties. It is submitted that the law requires the arbitrator/arbitrators who have made the award shall also be joined as respondent/respondents to the application. It is submitted that in the present application the petitioner has not arrayed the arbitrators as respondents and in the absence of necessary and proper parties this application needs to be dismissed in limine. The period for completion of the contract was 9 months, i.e. the original date of completion was 21.01.2004. However, since, the work was not completed and at the request of the petitioner, the validity/currency of the contract was extended to 31.08.2004 as per clause 17(2). The validity was further extended till 31.12.2004, 31.03.2005 and 30.06.2005 as per clause 17(2). However after 30.06.2005 the contract was not extended. The respondents by their letter dated 21.11.2006, telegram dated 28.11.2006, 10.01.2007 and 10.05.2007 called upon the petitioner to appear taking final measurements. Finally on 03.06.2007, the final measurement recorded.
12. It is further stated that since, certain disputes arose between the petitioner and respondents, the petitioner by his letter dated 03.01.2008 invoked clause 64(1) of the GCC. Clause 64 of the GCC deals with the appointment of arbitration tribunal. Clause 64(3) (a) (ii) provides that in the event the total claim is not covered by clause 63(3)
(a)(i) (i.e. total claim exceeds Rs.10,00,000/-) the arbitration tribunal shall consist of 3 gazetted railway officers not below the JA grade or 2 railway gazetted officers not below the rank of JA grade and one retired railway officer not below the rank of SAG officer. It further provides for the contractor to suggest to the General Manager 2 names out of the panel of appointment as the contractors nominee and the General Manager shall appoint at least one out of them as the contractor's nominee and will also simultaneously appoint the balance number of arbitrators either from the panel or from outside the panel, duly indicating the presiding arbitrator from amongst the 3 arbitrators so appointed.
13. It is also stated that the petitioner in accordance with clause 63(3) (a) (ii) has by his letter dated 26.05.2008 has suggested the name of Sri J N Laldas and Sri Ramesh Pinjani. The two nominees of the contractor i.e., Sri J.N. Laldas and Sri Ramesh Pinjani has been included in the arbitration tribunal and the arbitration tribunal constituted with Sri J N Laldas as Presiding Arbitrator and Sri A Selvaraj and Ramesh Pinjani as Co-Arbitrators. Thus, the petitioner have suggested the name, have participated in the arbitration proceedings cannot now challenge the validity of the constitution of the arbitration tribunal. It was the case of the petitioner that since, the contract was extended beyond initial period of 9 months and that it was extended till 30.06.2005 the cost of the input for the work has gone up and since, 90% of the work was executed by him was done in this extended period, he is entitled to be compensated. It was further the case of the petitioner that out of the total 1750 M of land, only 650 M length of land was made available from 05.09.2003 and hence, he could not complete the work in time. It was also the case of the petitioner that hindrance register along with his letter dated 16.04.2009 establish that certain encumbrances/discontinuities in execution of work such as non- availability of land, approach road heavy rain, repairing of machines and quarry problems have constituted in idling of machines. The machines were idling from 01.05.03 to 05.09.03, 05.02.05 to 15.01.06 and has also submitted certain vouchers in the name of "Raghava Reddy & Associates" claimed by him to be pertaining to the above contract.
14. It is further stated that the extension of the validity of a contract is governed by the provisions of clause 17(2) of GCC which reads as under:
"If in the opinion of the Engineer the progress of work has any time been delayed by any act or neglect of Railway's employees or by other contractor employed by the Railway under sub-clause(4) of clause 20 of these conditions or in executing the work not forming part of the contract but on which Contractor's own default etc., or by the delay authorized by the Engineer pending arbitration or in consequences of the contractor not having received in due time necessary instructions from the Railway for which he shall have specially applied in writing to the Engineer or his authorized representative then upon happening of any such event causing delay, the contractor shall immediately give notice thereof in writing to the Engineer within 15 days of such happening but shall nevertheless make constantly his best Endeavour's to bring down or make good the delay and shall do all that may be reasonably required of him to the satisfactory of the Engineer to proceed with the works. The contractor may also indicate the period for which the work is likely to be delayed and shall be bound to ask for necessary extension of time. The Engineer on receipt of such request from the contractor shall consider the same and shall grant such extension of time as in his opinion is reasonable having regard to the nature an period of delay and the type an quantum of work affected thereby. No other compensation shall be payable for works so carried forward to the extended period of time, the same rates, terms and conditions of contract being applicable as if such extended period of time was originally provided in the original contract itself". It is submitted that it is quite clear that every extension specified that if the currency was extended the contractor shall not demand any revised rate for work executed during the extended period which is agreed by both the parties.
15. It is also stated that as per clause 19 of GCC, the contractor is deemed to have satisfied himself after careful examination of the prevailing condition and all other matter which can in any way affect the works under the contract. Thus, it was the duty of the contractor to make his own arrangements for making approach road for movement and the respondents cannot be held responsible for the inaction of the petitioner. The petitioner had inadequate mobilization of resources at site of work for tackling that area, which had handed over to him, i.e., 650 M out of 750M. Since the petitioner was not in a position to complete the work on the handed over land of 400 m, petitioner was not in a position to complete the work on the handed over land of 400 m, petitioner cannot claim that the entire land was not handed over to him in time and hence he could not complete the work in time. The total contract value was Rs.2,86,01,593/- against which the petitioner has completed the work for Rs.2,26,62,669/- (79.24%). This work was carried out on the stretch of 650 m length and for completing this work itself, the petitioner has taken 1 year 7 months against 9 months stipulated as per the contract. It shows that the resources mobilized by the petitioner were insufficient. Hence handing over of complete land has no effect on the contractor's performance as well as earnings. Thus the petitioner's claim is totally incorrect and liable to be quashed. The contractor was handed over the land for a length of 650m and the bridge works spots and drawings were also handed over well in time. The cost of these bridge works and earth works in this 650 m stretch itself worked out to Rs.2.26 cr. against Rs.2.86 cr. of total agreement value. For completion of this Rs.2.26 cr. of work, it took 1 year and 7 months for the contractor though the original completion period was only 9 months. Had there been proper resource planning and proper mobilization of resources by the contractor, the work of Rs.2.26 cr. could have been completed well within the original completion period of 9 months.
16. It is further stated that in the award the Hon'ble Tribunal has stated that "a man of common prudence would not increase the resources under the uncertainty of balance site availability. Hence any idling of resources arising out of additional mobilization on this account is not acceptable". Hence it is very clear that the contractor did not mobilize adequate resources and there was no idling of resources due to non-availability of land. The contractor has obtained extension of work completion period on four occasions and in all the 4 occasions; the contract period extended on account of petitioner. The contractor had certified that he will carry out the work in these extended periods and will not claim any additional money for the work against the balance quantities. Since the contractor has already certified that he will not have any additional claim for executing the work in the extended period, he cannot claim the Arbitral Tribunal has not considered his idling of men and machinery at site. It is found that the contractor K Raghava Reddy has submitted the vouchers in support of his claim to the Tribunal, but these vouchers are in the name of "M/s.Raghava Reddy and Associates" and not in the name of K.Raghava Reddy. Hence the claimant has submitted vouchers, which are not related to the present contract. Hence should not be considered. Thus the claim of the petitioner that his men and material were idled is totally incorrect. Hence the petitioner's claim should be quashed. Vide clause 30(b) of Special conditions of contract of the present tender, it is mentioned that "the quantities of various items given in the schedule for the work to be executed are only approximate and are only for the guidance of the contractor. As far as possible, they have been assessed correctly but are likely to vary during the execution of the work". The original contract was Rs.2.86 cr. and the contractor executed the work for Rs.2.26 cr (79.24%) on the land handed over to him. Thus it is very clear that the variation in quantities at the time of execution has not affected the contractor in any way. In fact, due to inadequate resource mobilization by the contractor, the work execution was delayed and the Railway's work has suffered. Hence the petitioner's claim totally incorrect and should be quashed. The contractor has to submit his monthly statement of claims, but the contractor did not submit any claim during the 1 year 7 months period and carried out the work to the tune of Rs.2.26 cr. in the extended period duly certifying that he will not have any claim for the executed in this extended period hence the claims of the petitioner are totally incorrect. The petitioner was given enough opportunity to carry out the work within the reasonable period and he has carried out the work up to Rs.2.26 cr. against Rs.2.86 crores of total agreement value, but the contractor has failed to complete the work within the stipulated period of 9 months and has taken 1 year 7 months. Thus the claim of the petitioner that he has incurred substantial expenditure and cost on the salaries etc., and his men and machinery were idled is totally incorrect. Due to improper planning of work the contractor could not complete the work in time even though sufficient scope of work was given to him. Release of security deposit amount of Rs.15,00,000/- since, this claim has been partly allowed and the respondents have already deposited the said amount before this Hon'ble court. Hence the same does not survive for consideration. Claim has been partly allowed and the respondents have already deposited the amount before this Hon'ble court. Hence the same does not survive for consideration. Court has no jurisdiction to adjudicate the merits of the award.
17. Based on the above rival contentions, the following points arise for determination:-
1) Whether the arbitral award dated 12-05-2010 passed by the Arbitration Tribunal is to be set aside?
2) What Award?
18. Heard the arguments and perused the records.
19. My answer to the above points are as follows:
Point No.1 :- Affirmative Point No.2 : - As per the final order for the following:
REASONS
20. Point No.1 :- The plaintiff has filed the above application under Section 34 of the Arbitration & Conciliation Act (herein after referred as the "Act"), on various grounds to set-aside the award dated 12-05-2010. It is not in dispute that the plaintiff and respondent entered into a tender by carrying out earth work forming an embankment and construction of minor bridges for the proposed directory entry to MNG yard from Hassan side. The plaintiff accepted the tender and entered into the contract with the defendant No.2 under a contract agreement dated 19-02-2004. The business value of the contract was at Rs.2,86,01,592.55/-.
21. Work contract and the documents relied before the Arbitration Tribunal was placed before this Court for perusal. The claim of the plaintiff were mentioned at claim No.1 for revision of rates for the work executed beyond contract period at Rs.1,47,30,000/-. According to the climate before the tribunal he quoted a particular rate assuming the contract period for 9 months but due to various reasons the work had appreciably gone up and 90% of work executed by him was in the extended period of the currency. He wrote several letters to the defendants for compensating him, but the defendants failed to provide any relief.
22. Under Section 15(1) of the Commercial Division and Commercial Appellant Division of High Courts Act 2015, All suits and applications including applications under the Arbitration and Conciliation Act 1986, relating to a commercial disputes of a specified value pending in a High Court where commercial division has been constituted, shall we transfer to the commercial division. Under Section 15(2) of the Commercial Division and Commercial Appellant Division of High Courts Act 2015 all suits and applications including applications under the Arbitration and Conciliation Act 1986, relating to a commercial dispute of a specified value pending in any civil Court in any district or area in respect of which a commercial Court has been constituted shall be transferred to such commercial court :
Provided that no suit or application where the final judgement has been reserved by the Court prior to the constitution of the commercial division of the commercial Court shall be transfer either under sub- Section (1) or (2).
23. On perusal of the records, after hearing both the sides argument, my predecessor in office reserved the above case for pronouncement of judgement on 20-10-2018. Therefore, as on the date of constitution of the commercial Court, this case was posted for judgement. Hence, this Court has got jurisdiction to dispose of the case as per the proviso to Section 15 of the Commercial Division and Commercial Appellant Division of High Courts Act 2015.
24. It is admitted fact that a dispute arose between South Western Railway and the plaintiff. It is also not in dispute that a tribunal was constituted by the South Western Railway by naming Sri.J.N.Laldas, Sri.A.Selvaraj and Sri.Ramesh Pinjani as the presiding arbitrator and the co-arbitrator, who are none other than the Subordinate Officers of the South Western Railway, i.e. the defendant No.2 herein. This fact is also not denied by the defendant. Under such circumstances, whether appointment of the employees of the defendant No.2, South Western Railway as Arbitrators to Adjudicate the dispute between the plaintiff and the defendants is prejudicial to the interest of the plaintiff has to be adjudicated in the present application filed under Section 34 of the Arbitration and Conciliation Act 1996 by the plaintiff.
25. Under Section 12 of the Arbitration and Conciliation Act 1996 when a person is approach in connection with his possible appointment as an arbitrator, he shall disclose in writing any circumstances, such as existence either direct or indirect, of any past or present relationship with or interest in any of the parties or in relation to subject matter in dispute, whether financial, business, professional or other kind which is likely to be give rise to justify doubts, as independence or impartiality.
26. Under Section 34 of the Arbitration and Conciliation Act 1996, an arbitral award may be set aside by the Court only if the party making the application furnishes proof that a party was under some incapacity, the arbitration agreement is not valid under the law, the party making the application was not given proper notice of the appointment of the arbitrator or unable to present his case, the arbitral award deals with a dispute not contemplated within the terms of the arbitration, the composition of the arbitral tribunal was not in accordance with the agreement of the parties, unless such agreement was conflict with a provision of this part from which the parties cannot derogate or failing such agreement was not in accordance with his part or the Court finds that the subject matter is not capable of settlement by arbitration under the law for the time being the course or a arbitral award is in conflict with the public policy of India. The awarding conflict with the public policy of India only if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 85 or in contravention with the fundamental policy of Indian Law or in conflict with the most basic morality or justice.
27. On perusal of the material placed on record, the claims were refer for adjudication by the tribunal consisting of Sri.J.N.Laldas, Sri.A.Selvaraj and Sri.Ramesh Pinjani. On perusal of the records, the defendant extended the completion period on 4 occasion. under (17) (2) of GCC which reads as follows:
"If in the opinion of the Engineer the progress of work has any time been delayed by any act or neglect of Railway's employees or by other contractor employed by the Railway under sub-clause(4) of clause 20 of these conditions or in executing the work not forming part of the contract but on which Contractor's own default etc., or by the delay authorized by the Engineer pending arbitration or in consequences of the contractor not having received in due time necessary instructions from the Railway for which he shall have specially applied in writing to the Engineer or his authorized representative then upon happening of any such event causing delay, the contractor shall immediately give notice thereof in writing to the Engineer within 15 days of such happening but shall nevertheless make constantly his best Endeavour's to bring down or make good the delay and shall do all that may be reasonably required of him to the satisfactory of the Engineer to proceed with the works. The contractor may also indicate the period for which the work is likely to be delayed and shall be bound to ask for necessary extension of time. The Engineer on receipt of such request from the contractor shall consider the same and shall grant such extension of time as in his opinion is reasonable having regard to the nature an period of delay and the type an quantum of work affected thereby. No other compensation shall be payable for works so carried forward to the extended period of time, the same rates, terms and conditions of contract being applicable as if such extended period of time was originally provided in the original contract itself".
28. Therefore, it is clear that the defendant did not get the possession of the land in its entirety and therefore extended the completion period expense of plaintiff seeking no extra rate or compensation for working in extended period. There is no finding in the award on handing over of the land by the defendant in specified periods. The Arbitration and Conciliation Act 1996, empowers the arbitrators to award interest from the date of award on amounts payable to the applicant. The tribunal has not considered payment of interest on amount awarded.
29. Admittedly, all the three arbitrators are the employees of the defendant South Western Railway. Though the defendants have contended that the plaintiff himself had suggested the name of the arbitrators, there is no materials produced by the defendants in this regard. The defendants have not placed any materials to determine the delay in execution of the work under contract due to delay on the part of the plaintiff. The entire award does not dispose the opportunity given to the plaintiff to explain under what circumstances and why he sought for extension time for completion of contractual work. Admittedly, the arbitrators are the employees of the Railway department is not in dispute. In the contract between the plaintiff and the defendant No.2 it is mentioned as to who are to be the arbitrators. The defendant No.2, the South Western Railway has appointed its own employees as arbitrator and that itself shows that they are related to the defendant and their interest in the involve in the arbitration procedure. The material produced by the plaintiff is sufficient to hold that no independent arbitrators were appointed to adjudicate to dispute between the plaintiff and the defendants. Appointment of the employees of the defendants itself as arbitrator itself is against the natural justice and against public policy as contemplated under Section 34 the Arbitration and Conciliation Act 1996.
30. For the above reasons, the plaintiff has made out grounds to set aside the Arbitration award dated 12-05-2010. Hence, I answer above point in the Affirmative.
31. Point No.2 :- For the above reasons, I pass the following:
ORDER The suit / application filed by the plaintiff under Section 34 of the Arbitration Conciliation Act is allowed.
The Arbitration Award dated 12-05-2010 passed by the Arbitrators is hereby set aside.
The defendants are directed to appoint a fresh independent arbitrator/s to adjudicate the dispute arising out of the contract between the plaintiff and the defendant No.2 within a period of 8 weeks.
There is no order as to cost.
(Dictated to the Stenographer, transcribed and computerized by her, corrected by me in computer and then pronounced by me in the open Court on this the 1st day of July, 2019).
(Dinesh Hegde) XIX ADDL.CITY CIVIL & SESSIONS JUDGE, BANGALORE CITY.