Delhi High Court
Walchand Nagar Industries Ltd. vs Cement Corpn. Of India Ltd. on 16 May, 2002
Equivalent citations: 2002VAD(DELHI)184, 2002(3)ARBLR585(DELHI), 99(2002)DLT316, 2002(63)DRJ633
JUDGMENT Vijender Jain, J.
1. Letter of Intent dated 31st March, 1983 was issued in favor of the petitioner/Walchand Nagar Industries Ltd. (hereinafter referred to the 'WIL') for supply, erection and Commissioning of a Clinkerisation package for 3000 tonnes per day at respondent/objector's/Cement Corporation of India's (hereinafter referred to the 'CCI') Plant at Yerraguntla Distt. Cuddapah Andhra Pradesh. Disputes arose between the parties and parties appointed Sh.Y.V. Chandrachud, retired Chief Justice of India as the sole Arbitrator. The Sole Arbitrator awarded a sum of Rs. 6,50,74,341/= along with interest @ Rs. 12 per annum w.e.f. 3.1.1989 until payment. The Arbitrator made his Award on 26th April, 1995.
2. Mr. V.R. Reddy, learned counsel appearing for CCI has contended that the Arbitrator has not made any reference to the additional counter claim filed by CCI for Rs. 143.29 crores on account of discontinuance of the work by the will during the arbitration proceedings. Arbitrator during the course of arbitration proceedings held on 3rd March, 1992 made reference to the additional counter claim filed by the CCI and observed that he would take up the issue of additional counter claim at the time of the hearing of the entire matter. It was contended by Mr. Reddy that in the award the arbitrator had not discussed the additional counter claim of the CCI that clearly demonstrates non-application of mind and error apparent on record. It was contended that on this ground alone, the impugned Award is liable to be set aside or in the alternative be remitted back to the Arbitrator for considering the same.
3. Mr. Reddy contended that non-consideration of the counter claim by the arbitrator amounts to legal mis-conduct. In support of his contention, learned counsel for CCI has cited K.V. George v. Secretary to Government, Water & Power Deptt. Trivandrum and Anr. , Union of India v. Jain Associates and Anr. , Indian Oil Corporation Ltd. v.
Amritsar Gas Service and Ors. 1990 (3) SCR Suppl. 196.
4. Secondly, Sh. Reddy assailed the Award on the ground that the learned Arbitrator awarded an amount of Rs. 2,66,97,341/- against CCI relying on the Valuation Report of Mr. A.L. Kochar. Mr. Reddy contended that as per the Valuation Report of Mr. Kochar, the value of unadjusted advance allegedly paid by will to its suppliers and sub contractors was assessed at Rs. 97,41,613/- whereas the very amount which will claimed separately under its item No. 2 of annexure 1 to the statement of claim filed by will was rejected by the Arbitrator on the ground that there was no privity o contract between CCI and the persons to whom will is stated to have paid such advances. What has been contended before me by Mr. Reddy is that the said amount of Rs. 97,41,613/- having been denied on account of no privity of contract between CCI and the persons to whom such advances were paid, award of the said amount on the basis of the report of the Valuer Mr. A.L. Kochar was patently erroneous and inconsistent with its own finding and, therefore, the Arbitrator has committed legal misconduct in awarding a sum of Rs. 97,41,613/- and award be set aside.
5. Mr. Reddy has contended that the Arbitrator in paragraph 32 of the impugned Award has clearly mentioned that Valuer Mr. A.L. Kochar was appointed for assessing and valuing the finished equipment work in progress, material and components in the stock lying at Walchand Nagar and to verify certain other claims in connection with Yerraguntla project. Therefore, allowing a sum of Rs. 97,41,613/- with was on account of payment made to suppliers and sub contractors was not proper and was unwarranted. In support of his contention, Mr. Reddy relied upon K.P. Poulose v. State of Kerala and Anr. , State of Kerala v. Poulose 1988(2) Arbitration Law Reporter 15, Ishwar Singh & sons v. D.D.A. 1994 (1) Arbitration Law Reporter 526, Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises and Anr. .
6. Mr. Reddy took objection to the award under item No. 7.1 to the claim statement of the claimant will on account of dismantling infrastructure to the extent of Rs. 93.32 lakhs. It was contended that said claim would be manifestly beyond the scope of the contract as it was observed by the arbitrator in para 7 of the award that the cost of overall infrastructure at site was to be borne by the CCI. It was a contended that neither the claim statement nor the affidavit contained any particular with respect to the so called dismantling of the infrastructure. It was contended that even affidavit of Mr. S.C. Bhagwat cannot remotely support any claim for dismantling since infrastructure referred to is not something to be dismantled by incurring cost and on that score has assailed the award of Rs. 93.32 lakhs towards cost of dismantling infrastructure. He says that it shows non-application of mind by the arbitrator and in support of his contention has cited Dandasi Sahu v. State of Orissa , State of Orissa v.
Orient Paper & Industries Ltd. .
7. The next objection of Mr. Reddy was to the award of a sum of Rs. 2 crores towards loss of profit due to non-execution of orders in given period. Mr. Reddy contended that the award does not disclose the basis on which this figure has been arrived at. Mr. Reddy has contended that no basis has been given in the award as to why from a claim of Rs. 4 crores which was claimed by the claimant on loss of profit, the arbitrator has awarded a sum of Rs. 2 crores. Lastly, it was contended by Mr. Reddy that the unadjusted advance recoverable from will was substantial sum of Rs. 4.87 crores which was the advance paid on the will under the contract and the same remained unadjusted and any amount which was found payable to WIL by CCI was to be adjusted towards the said advance and payment of the balance to CCI ought to have been provided for. Mr. Reddy took exception to the reasoning given by the arbitrator on the plea of will that will has not diverted the said amount for any other purpose and items worth more than the amount given as unadjusted advance were manufactured by WIL, its vendors and sub-contractors and advance paid by the CCI was utilised by will for procurement of services, establishing infrastructural facilities, incidental and related outlays like travel, office expenses and overheads.
8. Controverting the arguments of Mr. Reddy, Mr. Arun Mohan, learned counsel for the will argued that argument of the CCI regarding award of Rs. 93.52 lakhs was not based on any evidence, is not correct as far as Award under item No. 7.3.1 is concerned. The said amount was granted by the arbitrator based on the evidence which was filed on behalf of will by Mr. V.K. Heblikar and Mr. Bhagwat who had deposed in their affidavits that the aforesaid sum of Rs. 93.52 lakhs was spent by will as dismantling cost of infrastructure. It was contended by Mr. Arun Mohan that opportunity was given by the Arbitrator to cross examine the said deponents which was not availed by the CCI.
9. Learned counsel for will has contended that the arbitrator was the best judge to adjudicate upon the disputes as letter of contract was issued on 31.3.1983 and the project completion date was 31.7.1986. Import license was to be obtained by the CCI but it could not obtain the same till August, 1985. As per the contract in October, 1985 letter of credit was to be opened and opening of letter of credit was condition precedent to the fulfillment of the obligation under letter of intent. As back as 22.2.1986, will informed CCI that all the activities relating to the project has come to a stand still since CCI lacked necessary funds. On 17.3.1987 CCI informed that project was re-scheduled for commissioning in October, 1989. However, in August, 1987, i.e. 2 & 1/2 years after the contractual date partial LC was opened. Requirement of the LC was for Rs. 22 crores . CCI could only opened partial LC for Rs. 2.75 crores and in this background the arbitrator entered upon the reference on 3.3.1989.
10. will claimed Rs. 19 crores on the ground that CCI was in breach of the contract. Mr. Arun Mohan contended that CCI in turn contended that will was in breach. Objector CCI filed a counter claim of Rs. 68 crores and later on they made an additional claim of Rs. 143 crores. Learned counsel for the non-objector contended that the disputes was one of pure fact and the question before the arbitrator was who was in breach and what was the extent of loss and to whom.
11. Mr. Arun Mohan contended that in order to understand the award, one cannot pick and choose one para of the award as award runs into 66 pages and if one goes to the layout of the award after giving the history of the matter, the award begin with the process of fact finding from para 18 and after discussing the same till para 21, arbitrator returned its finding in para 22 read with para 20.34 that it was CCI who was in breach of the contract and responsible for the delay. Counsel for non-objector contended that it was wrong on the part of CCI to say that the non-consideration of the additional counter claim would vitiate the award. It was contended by Mr. Arun Mohan that one has to understand as to what was additional counter claim. The additional counter claim was filed on the basis of the averment made by the CCI that they were ready and willing to go ahead with the work but the contractor was not working. Same was based on the hypothesis that failure of the contractore to continue to irk caused CCI a loss of Rs. 143 crores. It was contended by Mr. Arun Mohan that additional counter claim was nothing but sequel to the fact finding as to who was in breach.
12. It was contended that the additional counter claim of the CCI related to the same items at same rates which found part of the original counter claim. The additional counter claim was for an extended period up to january, 1992. It was contended by Mr. Arun Mohan that since the contractual relationship between will and CCI ended on 7th March, 1987 as has been observed in the award, claims for period from Objector, 1988 to January, 1992 are irrelevant and without any basis. He relied upon the observation of the arbitrator in para 30 of the award that after 17th March. 1987 contractual relationship between the parties came to an end and on the basis of the above observation it was contended before me that the additional counter claim pertained for a period after October, 1987 to January, 1992 during which time there was no contractual relationship between WIL and CCI. It was contended by Mr. Arun Mohan that para 39 of the award dealt with various counter claims and in para 39.6 each of the nine counter claims stood rejected. Therefore, there was no need for the Arbitrator to again dwell on the additional counter claim which was rejected as the additional counter claim was nothing than the original counter claim. The award was to be read in entirety. In support of his contention, learned counsel for will has relied upon J.G. Engineering v. Calcutta Improvement Trust .
13. Repelling the contention of Mr. Reddy, counsel for WIL contended that the valuation report of Mr. A.L. Kochar was perfectly in order and valuation as such was agreed by CCI. He has contended that Mr. Kochar was appointed by the arbitrator at the instance of CCI his name was also supplied by CCI. It was contended by Mr. Arun Mohan that there was no need for the arbitrator to specifically direct CCI to take the semi-finished or finished equipment as per the report of Mr. Kochar as in para 38.8 of the award it was specifically mentioned "CCI will take charge of the project on as is where is basis".
14. Controverting the argument of the learned counsel for CCI that the arbitrator could not have allowed cost on account of dismantled infrastructure it was contended that in answer to the claim of the claimant/WIL, there was no denial in CCI's written statement on this claim. It was further contended that on the aforesaid claim evidence was given by Mr. S.C. Bhagwat, who was not cross-examined at all as also by Mr. Heblikar who also made a statement, even he was not cross-examined. It was contended that for such a large project there had to be an infrastructure. The work remained idle for 69 months and had to be dismantled and Rs. 1.35 lakhs per months awarded by the arbitrator was only a pittance as compared to what the CCI spent on its own infrastructure for that kind of project. It was also contended that what was allowed by the arbitrator was not for dismantling of any infrastructure but the claim pertained to creation of infrastructure by WIL, comprising of experts, necessary office accommodation and reserving manufacturing facilities for execution of this large size one million ton per annum turkey project which was to be completed on a time bound schedule and was subject to stringent liquidated damages. Learned counsel for will contended that the claim on this head was for Rs. 366.84 lakhs which was totally justified by Mr. Bhagwat in his affidavit. The arbitrator only awarded a sum of Rs. 93.32 lakhs on this score and even otherwise this finding of the arbitrator was a finding of fact and this Court would not interfere in the said finding.
15. Mr. Arun Mohan further contended that the claim towards loss of profit and award of Rs. 2 crores towards loss of profit cannot be considered in any way an error apparent on the record of the arbitrator. It was contended that all the claims were duly supported by an affidavit of Mr. S.C. Bhagwat and the amount claimed under this head was Rs. 495.63 lakhs plus interest at the rate of 18% per annum from 1.1.1988 till the date of payment and the loss of profit and the particular of the same was given in Annexure marked as 'Exhibit Q' of the affidavit. It was contended before me that the project was abandoned in mid stream and contractor lost an opportunity to earn profit on the contract as well as earn bonus of 5% of contract value (Rs. 185 lakhs) if it had been allowed to execute the job without delay from CCI.
16. Lastly it was contended that unadjusted advance amounting to Rs. 97.42 lakhs given by the arbitrator cannot be faulted with as the award has its own layout and its own feature and if the award is read as whole in its entirety, the sum of Rs. 97.42 lakhs awarded in favor of the claimant are correctly awarded by the arbitrator. The refusal to award the same in para 38.3(d) of the award cannot be read in isolation. It was contended that after returning finding in para 33, the arbitrator in para 33.1 dealt with the CCI's contention regarding adjustment of advance which is reiterated in specific words at the end of para 33.1. It was contended that even after para 38.3(d), the arbitrator in para 38.6 reiterated that said amount had to be paid to the contactor. It was contended that the formal award was contained in para 38.7 and there was no ambiguity of any kind in the operative portion of the award and, therefore on that basis it was contended that the award being a reasoned award, mental process of the arbitrator cannot be gone into or examined in reaching the conclusion. In the judicial mind it was the sum total that matters and if there was error of expression for one small point, the award cannot be set aside. He relied upon a judgment of Supreme Court in Arosan Enterprises v. UOI and Anr. in support of his submission, where Supreme Court held :-
"The common phraseology 'error apparent on the face of the record' does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The Court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined."
17. I have given my careful consideration to the arguments advanced by learned counsel for both the parties. In Union of India v. A.L. Rallia Ram , Supreme Court held as under :
"In order to make arbitration effective and the awards enforceable, machinery was devised by the Arbitration Act for lending the assistance of the ordinary courts. The Court was also entrusted with the power to modify or correct the award on the ground of imperfect form or clerical errors, or decision on questions not referred, which were severable from those referred. The Court had also power to remit the award when it had left some matters referred undetermined, or when the award was indefinite, where the objection to the legality of the award was apparent on the face of award. The Court might also set aside an award on the ground of corruption or misconduct of the arbitrator, or that a party had been guilty of fraudulent concealment or willful deception. But the Court could not interfere with the award if otherwise proper on the ground that the decision appeared to it to be erroneous. The award of the arbitrator was ordinarily final and conclusive, unless a contrary intention was disclosed by the agreement."
18. Similarly in Sudarsan Trading Co. v. Govt. of Kerala Court observed as under :
"A Court of competent jurisdiction has both right and duty to decide the lis presented before it for adjudication according to the best understanding of law and facts involved in the lis by the judge presiding over the Court. Such decision even if erroneous either in factual determination or application of law correctly, is a valid one and binding inter parties. It does not, therefore, stand to reason that the arbitrator's award will be per se invalid and inoperative for the simple reason that the arbitrator has failed to appreciate the facts and has committed error in appreciating correct legal principle in basing the award. An erroneous decision of a Court of law is open to judicial review by way of appeal or revision in accordance with the provisions of law. Similarly, an award rendered by an arbitrator is open to challenge within the parameters of several provisions of the Arbitration Act. Since the arbitrator is a judge by choice of the parties and more often than not a person with little or no legal background, the adjudication of disputes by an arbitration by way of an award can be challenged only within the limited scope of several provisions of the Arbitration Act and the legislature in its wisdom has limited the scope and ambit of challenge to an award in the Arbitration Act. Over the decades, judicial decisions have indicated the parameters of such challenge consistent with the provisions of the Arbitration Act....."
19. It is in these parameters I have to examine the objections filed by the objector. Broadly speaking the challenge to the award by CCI is five fold. First, non-consideration of the additional counter claim filed by the CCI on 3.3.1992: second, award on account of cost of dismantled infrastructure; third, claim towards loss of profit and fourth, accepting the report of the valuer/assessor, which has two parts (i) report as a whole and (ii) where it discusses award of Rs. 97,41,613/- towards payment made by will to its sub-contractors.
20. Mr. Reddy took great pain in contending that as the additional counter claim was not decision by the arbitrator, even though the arbitrator had recorded in its order dated 3.3.1992 that same will be decided at the time of making the award but in the award nothing has been said about additional counter claim which was filed on 3.3.1992, therefore award be set aside. The award runs into 66 pages. The arbitrator was Justice Y.V. Chandrachud. The award is not only a reasoned award but the same is exhaustive in all respects. up to paragraph 17 of the award arbitrator discused in detail the respective contentions of the parties and took up issue No. 4 which was an issue as to whether at the materia; time CCI was ready and willing to perform its obligation at the time specified in the LOI particularly regarding the opening of the LC in favor of will and in favor of other foreign and local suppliers and regarding obtaining the import license for imported equipments. In para 20.3 of the award the arbitrator returned its finding as under:
"20.3 These facts and circumstances show that supplying funds to will against the L/C to enable it to manufacture or purchase equipments was a vital term of the LOI. The opening of the L/C by CCI was in the nature of a pre-condition to the fulfillment by WIL of its obligations under the LOI.
20.4 Under Clause 6 of the LOI, CCI had to arrange for the import license for the imported equipments within 6 months of the date of acceptance of LOI by WIL. CCI opted under Clause 7.1. of the LOI to place the purchase orders of foreign vendors and pay the price thereof.
20.5 The correspondence between the parties shows that though import licenses were to be arranged by CCI within 6 months, no such arrangement was made until June, 1986 in regard to supplies from a foreign supplier M/s. Hazemaag. In relation to supplies from M/s Pfeiffer, the L/C was not opened till June, 1987. In so far as the foreign vendors are concerned, CCI did not open the L/Cs or pay the advance until the end of 1985 and the middle of 1986. The L/Cs in respect of some of important foreign items were opened by CCI in 1987. Thus, CCI made it impossible by its conduct to enable will to commission the Plant by July, 1986. The relevant letters in this behalf are dated 5.6.1984, 22.10.1984, 29.1.1985, 13.3.1985, 5.4.1985, 13.8.1985, 14.9.1985, 14.12.1985 and 21.7.1986.
20.6 In paragraph 11 of its written submissions CCI has raised a new point to the effect that thee was no need to open the L/C as provided for in the LOI because "the parties understood that even before opening the L/C the payments could be made for the supplies of the equipments made directly to the parties on presentation of bills". Such is not the evidence, the correspondence belies the argument and such a stand was taken for the first time in the written submissions. In paragraph 9 of his affidavit (Examination-in-chief) dated 20.5.1991, WIL's witness Shri V.K. Hablikar, has stated that CCI had to establish the L/C one or two months prior to 1.4.1985. The so-called understanding between the parties which is referred in paragraph 11 of the written submissions was not even put to the witness in his cross-examination."
21. Then the arbitrator after discusing in many sub-paras returned the finding in following terms in para 20.12 which is as under :
"These facts and circumstances show that will was disabled from performing its part of the contract on account of the failure of CCI to perform its obligations under the contract. The financial constrains which faced CCI constituted a stumbling block in its commitment to perform its obligations under the contract."
22. And after exhaustively discussing all the aspects of the controversy and the issues raised before him, the arbitrator returned its finding that it was CCI and not will which was responsible for the delay in completing the project on Schedule. An application was filed before the arbitrator by the CCI during the pendency of the arbitration proceedings the during the pendency of the arbitration proceedings will be directed to continue to perform its obligation under the letter of intent and that should be treated as a preliminary issue. The arbitrator had declined this prayer. CCI preferred an appeal to the High Court, the same was dismissed. Thereafter, CCI filed an SLP before Supreme Court and the same was also dismissed. Arbitrator, therefore, returned the finding in para 29 that if the letter of intent itself is no longer in operation in its original form and if CCI treated it by its own conduct as non-existent by altering a material term thereof, will cannot be asked to continue to work under the original term of the work under LOI in existence any longer and, therefore, WIL's obligation under it have come to an end.
23. This observation has bearing on the objection of CCI once the arbitrator held that will was under no obligation to pay any amount to CCI on the basis of the counter claim, there was no question of not returning a specific finding on additional counter claim which was filed much later in 1992. As the additional counter claim of CCI related to the same item which formed part of the original claims, the only difference being that the counter claim first filed by the CCI was against WIL in respect of period prior to commencement of arbitration proceedings and the additional claim were extended version of the counter claim from 1989 till the year 1992.
24. In para 30 the arbitrator gave a finding that on 17.3.1987 CCI deferred the date of completion of the project from July, 1986 to October, 1989 which was not acceptable to WIL. Thus after 17th March, 1987 the contractual relationship between the parties came to an end.
25. Once counter claim was rejected by the arbitrator in view of what is stated above, the additional counter claim, as a matter of fact, was also rejected as the same was based on the counter claim except for extension of a period as I have stated earlier. The award was a decision of the arbitrator chosen by the parties. Wrong or right decision was binding if the same was reached fairly after giving adequate opportunities to the parties to place their grievances. By not specifically rejecting the additional counter affidavit it cannot be said that there has been a legal misconduct or an error which is apparent on the award. The award, if read, as a whole in its entirety dealing with the discussions on he counter claim filed initially by the arbitrator leaves no scope for any doubt that the additional counter claim also stands rejected by the arbitrator.
26. In Food Corporation of India v. Joginderpal Mohinderpal Supreme Court observed that:
".....We should make the law of arbitration simple, less technical and more responsible to the actual realities of the situations but must be responsive to the canone of justice and fair play and make the arbitrator adhere to such process and norms which will create confidence, not only by doing justice between the parties, but by creating sense that justice appears to have been done..... It is necessary to find whether the arbitrator has misconducted himself or the proceedings legally in the sense whether the arbitrator has gone contrary to the terms of reference between the parties or whether the arbitrator has committed any error law apparent on the face of the award. It is necessary to emphasis that these are grounds for setting aside the award but these are separate and distinct grounds. Halsbury's Laws of England Vol.2, 4th Edn., para 623 reiterates that an arbitrator's award may be set aside for error of law appearing on the face of it. Though this jurisdiction is not to be lightly exercised, the award can also be set aside if, inter alia, the arbitrator has misconducted himself or the proceedings. It is difficult to give an exhaustive definition what may amount to misconduct on the part of the arbitrator. This is discussed in Halsbury's Laws of England (supra). It is not misconduct on the part of an arbitrator to come to an erroneous decision, whether his error is one of fact or law, and whether or not his findings of fact are supported by evidence. See the observations of Russell on Arbitration, 20th Edn., page 422."
27. The authority of Indian Oil Corporation (supra) is of no help to the case of CCI in the facts and circumstances of this case.
28. That brings me to the next objection of CCI with regard to award of cost of dismantled infrastructure. I do not see there is any merit in this objection. The total contract was for Rs. 37 crores including all taxes, dues, customs etc. The tender inquiry was floated on 28th August, 1981 for setting of a clinkerisation unit. will submitted its tender in response to the said inquiry on 12.8.1982. Same was revised on 14.1.1983. CCI issued a letter of intent dated 31.3.1983 in favor of will for the supply, erection and commissioning of a clinkerisation packages for 3000 tonnes per day at CCI's plant at Yerranguntla.
29. Arbitration in para 5 of the award took note that out of the said amount of Rs. 37 crores, Rs. 607 lakhs was for machinery/equipment to be manufactured by will in its own Works, selected sub-contractors' works and at the site, Rs. 1726 lakhs for machinery/equipments to be procured by will from indigenous suppliers, Rs. 738 lakhs for imported equipment to be procured by will from foreign vendors being the value according to the exchange rate prevailing on 15.1.1983, and Rs. 625 lakhs for the cost of engineering, designs, drawings and services such as erection, commissioning, transportation, insurance and storage at site. This amount was sub-divided into Indian component of Rs. 517 lakhs and foreign component of Rs. 108 lakhs, the conversion value being as of January, 1983.
30. Learned counsel for CCI took the stand that as there was no material on record to show t hat any expenses towards infrastructure was incurred and contended that this part of the award was based on merely conjectures and surmises. Why I have reproduced the above figures from the award of the arbitrator is to show that the arbitrator was aware of the enormity of the project taking that into consideration that the work which was to be done within 40 months and the same was extended for 69 months, the work remained idle. The award of Rs. 1,39,000/- per month cannot be said to be excessive by the arbitrator. In para 38.3 (i), the arbitrator has returned the finding in the following words :
"I allow the claim at Item No. 7.1 for cost of dismantling the infrastructure in the sum of Rs. 93.32 lakhs. I also allow the claim under Item No. 7.3 for cost of material testing, in the sum of Rs. 3 lakhs. I, however, disallow the claim under Item No. 7.2 in the sum of Rs. 38.99 lakhs for expenses incurred by will for "traveling for project".
Thus CCI will pay to will a sum of Rs. 96.32 lakhs for claims under Item Nos. 7.1 and 7.3."
31. This finding of allowing a sum of Rs. 96.32 lakhs is taking into consideration the whole project and taking into consideration that in order to start the work of this magnitude the infrastructure is to be created and office accommodation, manufacturing facilities were created and therefore, it cannot be said that the award of said amount is without any basis. I find force in the arguments of Mr. Arun Mohan that Mr. Bhagwat and Mr. Heblikar who have given evidence on this claim were not cross-examined by the CCI. In any event of the matter this finding of the arbitrator as a matter of fact is a finding of fact. Supreme Court in Sudarsan Trading Co.'s case (supra) observed as follows :
"..... By and large the Courts have disfavored interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the materials on record and have shown definite inclination to preserve the award as far as possible. As reference to arbitration of disputes in commercial and other transactions involving substantial amount has increased in recent times, the Courts were impelled to have fresh look on the ambit of challenge to an award by the arbitrator so that the award does not get undesirable immunity. In recent times, error in law and fact in basing an award has not been given the wide immunity as enjoyed earlier, by expanding the import and implication of "legal misconduct" of an arbitrator so that award by he arbitration does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decision of the lis between the parties to arbitration. Precisely for the aforesaid reasons, the erroneous application of law constituting the very basis of the award the improper and incorrect findings of fact, which without closer and intrinsic scrutiny, are demonstrable on the fact of the materials on record have been held, very rightly, as legal misconduct rendering the award as invalid. It is necessary, however, to put a note of caution that in the anxiety to render justice to the party to arbitration, the Court should not reappraise the evidences intrinsically with a close scrutiny for finding out that the conclusion drawn from some facts, by the arbitrator is, according to the understanding of the Court, erroneous. Such exercise of power which can be exercised by an appellate Court with power to reverse the finding of fact, is alien to the scope and ambit of challenge of an award under the Arbitration Act....."
32. From the perusal of the discussions in the award, the award of Rs. 1.39 lakhs per month under this claim, keeping in view the time frame in which the project was to be completed, the volume of the contract and the various factors which I have detailed above, it cannot be said that the decision of the arbitrator was based on no evidence and, therefore, constituted legal misconduct or was based on an error which was apparent on the record.
33. That takes me to the next objection, i.e. award of Rs. 2 crores towards los of profit in favor of WIL. Reading the award in its entirety and keeping the fact into consideration that the claim of will under this heading was Rs. 499.66 lakhs plus interest at the rate of 18% p.a. from 1.1.1988 till the date of payment and affidavit of Mr. Bhagwat having been filed giving justification for the claim under loss of profit and specific finding by the arbitrator that it was CCI who was responsible for not performing its obligation under the contract s it was always cash starved and clear finding of the arbitrator that non-objector/WIL was to be compensated on loss of profit as it lost an opportunity to earn profit on the project. The learned arbitrator in para 38.3(1) held as under :
"The claim under Item No. 10 is in the sum of Rs. 400 lakhs for "Loss of profit due to non-execution of orders in given period".
Considering the oral and documentary evidence on the record, this claim in the sum of Rs. 4 crores seems to me to be exaggerated. I allow a sum of Rs. 2 crores only for this claim. Accordingly, I direct that CCI will pay to will a sum of Rs. 2 crores for the claim under item No. 10."
34. The arbitrator in the instance case has come to a conclusion on a closer scrutiny of the evidence in the matter and repraisal of evidence by the Court is not permissible in proceedings under Section 30 of the Arbitration Act. The award has to be considered in its entirety and on its proper appreciation of the intent and purport it would be seen the arbitrator as a best judge awarded the sum of Rs. 2 crores after taking into consideration all the material facts before him and this Court merely on the ipse dixit of any party would not like to lightly interfere in the said finding of the learned arbitrator.
35. In Trustees of the Port of Madras v.
Engineering Construction Corpn. Ltd., , Court observed as under :
"The proposition that emerges from the above decisions is this; in the case of a reasoned award, the Court can interfere if the award is based upon a proposition of law which is unsound in law. The erroneous proposition of law must be established to have vitiated the decision. The error of law must appear from the award itself or from any document or note incorporated in it or appended to it. It is not permissible to travel beyond and consider material not incorporated in or appended to the award."
36. The next objection of Mr. Reddy is award of a sum of Rs. 2,66,97,341/- based on the report of Mr. Kochar. Mr. Reddy has contended that the same ought not to have been accepted as learned arbitrator did not allow the claim of Rs. 97,41,613/- which was the value of unadjusted advances paid by will to its supplier and sub-contractors was rejected by the arbitrator on the ground that there was no privity of contract between CCI and the persons whom will is stated to have paid such advances. This argument I will deal in the last as as last objection.
37. Report of Mr. A.L. Kochar, valuer was also objected by the learned counsel for the CCI on the ground that same could not have been accepted by the arbitrator without proper scrutiny. How Mr. Kochar was appointed by the arbitrator? Mr. Kochar was appointed by the arbitrator with the consent of the parties and during the course of arguments before this Court it was conceded by Mr. Reddy that name of Mr. Kochar was given by the CCI to the arbitrator. He was appointed as valuer as CCI had refuted valuation as given by will on the following claims:
"(a) Claim relating to finished equipments lying at Walchandnagar as mentioned in the Affidavit of Shri S.C. Bhagwat and as further clarified in the affidavits of Shri D.V. Vairagkar and Shri D.K. Nagarseth...
Rs. 59,70,000.
(b) Claim relating to Work-
in-Progress at Walchandnagar as mentioned in Exhibit C of Shri Bhagwat's affidavit and as further clarified in the affidavit of Shri D.K. Nagarseth.
Rs. 1,14,01,379.
(c) Claim relating to material and components lying in stock at Walchandnagar as mentioned in Shri S.C. Bhagwat's affidavit.
Rs. 39,23,718.
(d) Claim relating to unadjusted advances paid by WIL to sub-suppliers and sub-
contractors as mentioned in Exhibit H of Shri Bhagwat's affidavit.
Rs. 97,41,613.
(e) Claim relating to Storage, Handling and Insurance charges as mentioned in Exhibit I of Shri Bhagwat's affidavit.
Rs. 31,94,264.
-------------
TOTAL: Rs. 3,42,30,974.
============="
38. In support of the aforesaid claim, will has also filed the affidavits of Mr. S.C. Bhagwat and affidavit of Mr. D.V. Vairagkar and Mr. D.K. Nagarseth. CCI disputed the quantum of work as mentioned in Ex.C of Mr. Bhagwat's affidavit, claim relating to material and components lying in stock at Walchandnagar as mentioned in Mr. Bhagwat's affidavit and claim relating to unadjusted advances paid by will to sub-suppliers and sub- contractors as mentioned in Ex. H of Mr. Bhagwat's affidavit and claim relating to storage, handling and insurance changes as mentioned in Ex.I of Mr. Bhagwat's affidavit.
39. CCI did not cross-examine Mr. Vairagkar and Mr. Nagarseth but asked for appointment of an independent assessor. In para 15 of the award the learned arbitrator has recorded that when the witnesses were offered for cross-examination the counsel for the CCI stated that CCI cannot cross-examine the witnesses unless they had an opportunity to verify those facts which are stated by the witnesses in their affidavits. Therefore, after having agreed for appointment of Mr. Kochar in para 32.2 the arbitrator has recorded that Mr. Kochar camped at Walchandnagar for about 12 days, 5 officers of the WIL and 3 officers of CCI were present at the site along with Mr. Kochar when he made verification and assessment. Then in para 32.4. arbitrator again recorded that during the course of hearing held at Delhi on 20.8.1994, counsel for both the parties stated that they accept the report of Mr. Kochar, however, with the rider that the advance given by CCI be adjusted. On that the arbitrator has recorded its finding in the award that that cannot be done. Out of the aforesaid amount as claimed by will amounting to Rs. 3,42,30,974/- for claims (a) to (e), Mr. Kochar has assessed the value of the items from (a) to (e) as follows :
"(a) For claim mentioned as
(a) above ... Rs. 48,08,830
(b) For claim mentioned as
(b) above ... Rs. 80,04,100
(c) For claim mentioned as
(c) above ... Rs. 38,62,504
(d) For claim mentioned as
(d) above ... Rs. 97,41,613
(e) For claim mentioned as
(e) above ... Rs. 02,80,294
-------------
Total : Rs. 2,66,97,341
============="
40. Therefore, there is no merit in the objections of CCI that the report of the valuer/assessor was only to lend assistance to the parties and the report of the assessor/valuer was not to be accepted without scrutiny.
There can be no end to litigation. If I agree with the submission of learned counsel for CCI that in view of the objections filed by CCI to the report of the valuer, report was not a final report on valuation. There is no force in the arguments of objector that arbitrator has not considered the objection of CCI. The argument of the objector that report of Mr. Kochar was accepted on the erroneous premises that the report was to be accepted without a demur is without merit. The arbitrator was conscious of the claims of both the parties. After taking into consideration the rival contentions, arbitrator recorded in para 32.5 of the award that both the parties have filed further written submissions in respect of the matters relating to or arising out of Mr. Kochar's report. It has also taken into consideration that will has filed written submissions dated 6.7.1994 and has claimed escalation by way of price variation and interest on the valuation made by Mr. Kochar and in para 32.4 it has been observed by the arbitrator that CCI has accepted the report with the rider that advance amount given by the CCI to will be set off against the value assessed by Mr. Kochar which found mention in para 32.6 of the award. But how the arbitrator has recorded its finding? Para 33 is reproduced below :
"33. Having considered the submissions made by the parties as regards Mr. Kochar's report and having taken into account all the relevant aspect of the matter into consideration, including CCI's contention regarding non-inspection of the equipment and component, I am of the opinion that Shri Kochar has arrived at an acceptable value approximating to the realities of the situation, as best as is possible in the circumstances of the case. CCI's chronic failure to inspect equipment was the result of its lack of finances. To inspect was to pay. And so, CCI was driven to postpone the evil day."
41. In para 33.1 again the arbitrator has rejected the rider of the CCI that the value determined by Mr. Kochar should be adjusted against the advance of Rs. 4.67 crores given by the CCI to WIL. In said paragraph the arbitrator has returned a reasoned finding. Para 33.1 is to the following effect :
"The submission of CCI's learned counsel that the value determined by Shri Kochar should be adjusted against the advance of Rs. 4.67 crores given by CCI to will cannot be accepted. The amount advanced by CCI to WIL was used by will for purpose of the instant project. It was not diverted by WIL to any other purposes, as contended by CCI. WIL, its vendors and sub-contractors had manufactured items worth much more than Rs. 4.87 crores. Besides, the advance paid by CCI was utilised by will for procurement of services, establishing infrastructural facilities, incidental and related outlays like, travel, office expenses and overheads. In addition, expenses on several other counts must have gone up involving will in a larger commitment on account of the delays caused by CCI. That is why, the valuation made by Shri Kochar cannot be adjusted against the advance of Rs. 4.87 crores paid by CCI to WIL."
42. Therefore, K.P. Poulose v. State of Kerala's case (supra) cited by learned counsel for CCI that the arbitrator has committed a legal misconduct is not applicable to this case.
43. Court cannot interfere with the award if otherwise proper on the ground that the decision appeared to be erroneous. The award of the arbitrator was final and conclusive. Law is well settled. It is not the case that the arbitrator has not considered the rider of the CCI or the objection of the CCI. After considering the same he has formed an opinion. This court cannot substitute its opinion for that of the arbitrator.
44. Even otherwise, it is not the case of the counsel for CCI that the arbitrator has made an award which is contrary to the terms of reference.
45. Let me now deal with the last objection of Mr. Reddy regarding grant of Rs. 97,41,613/- towards unadjusted advance paid by will to its sub-suppliers and sub-contractors. Mr. Reddy contended that will had claimed under Item No. 2 of Annexure I under same head which was rejected by the arbitrator on the ground that there was no privity of contract between CCI and the persons to whom will was stated to have paid such advances. It was contended that said amount of Rs. 97,41,613/- having been denied to will on account of non-privity of contract between CCI and the persons to whom such advance were paid but award of the said amount on the basis of the report of Mr. A.L. Kochar whereby the arbitrator has awarded a total amount of Rs. 2,66,97,341/- was patently erroneous and inconsistent with the finding of the arbitrator.
46. Mr. Arun Mohan had argued that if the award is read as a whole, at one place in paragraph 32.1 of the award, the arbitrator has discussed all the claims and in para 32.3 has assessed the value of the items based on the valuer's report at Rs. 2,66,97,341/- and had recorded in para 38.3(d) in which the arbitrator has stated that he was not accepting the claim as there was no privity of contract between CCI and the persons to who will had stated to have paid the advances, same could not be read in isolation. Mr. Arun Mohan took great pain in explaining that the award of the arbitrator has to be read in para 38.6 in which the arbitrator has held in the following word :
"38.6 The result of the aforesaid discussion, in regard to monetary claims made by WIL, is that it will be entitled to receive the following amounts from CCI:-
a) Under the report of Shri Kochar as held in para 34 above ... Rs. 2,66,97,314.
b) Under the ten sub-items of Item No. 1 as held in para 38.3(e) above Rs. 87,45,000.
c) Under the two sub-items of Item No. 7 as held in para 38.3(i) above Rs. 96,32,000.
d) Under claim No. 10 as held in para 38.3(1) above Rs. 2,00,00,000.
--------------
Total : Rs. 6,50,74,341 =============="
47. In para 38.7 the arbitrator has directed that the aforesaid amount be paid with interest at 12% per annum with effect from 3.1.1989 until payment as the arbitrator has entered upon the reference on 3.1.1989.
48. I unable to persuade myself with the contention of Mr. Arun Mohan. As a matter of fact, arbitrator had returned finding in para 38.3.(d) that the amount of Rs. 97,41,613/- cannot be awarded to the will as there was no privity of contract between CCI and sub-suppliers and sub-contractors to whom will has paid the amount, award of the same amount subsequently was an error. There is an error to that extent on the face of the record. I hold so. However, the award of the said amount of Rs. 97,41,613/-, is severable from the rest of the award, I modify the award to that extent. The result is that award of the arbitrator is modified instead of an amount of Rs. 6,50,74,341/-, will shall be entitled to an amount of Rs. 5,53,32,728/- (Rs. 6,50,74,341/- minus Rs. 97,41,613/-). There is no merit in other objections of CCI. The same are dismissed.
49. Award of the arbitrator is made rule of the Court as modified above. A decree in terms thereof is passed. will shall be entitled to interest at the rate of 12% per annum from the date of decree till realisation.
50. Petition stands disposed of. Pending applications also stand disposed of accordingly.