Telangana High Court
K Naranjan Rao vs Union Of India And 2 Others on 28 September, 2022
Author: P.Naveen Rao
Bench: P.Naveen Rao
HONOURABLE SRI JUSTICE P.NAVEEN RAO
AND
HONOURABLE SRI JUSTICE SAMBASIVA RAO NAIDU
C.M.A.NO.1369 of 2018
JUDGMENT :(Per the Hon'ble Sri Justice SambasivaRao Naidu) Being aggrieved by the Judgment and Decree of I Additional Chief Judge, City Civil Court, Secunderabad, dated 15-03-2018 in Arbitration O.P.No.116 of 2011 by which his request for setting aside the Award dated 09-08-2007 passed by the learned Arbitrator in respect of his Claims No.4 to 6 and 9 of his claim statement was dismissed, the petitioner in the said Arb.O.P.No.116 of 2011, and claimant in Arbitration application No.7 of 2004 filed the present Civil Miscellaneous Appeal on various grounds.
2. Before going into the merits of the appeal and grounds on which the present appeal is filed, it would be necessary to look into the details of said Arbitration Application, Award passed by the learned Arbitrator, petition in the Arbitration O.P., and order therein.
3. Prior to 1990, the Railway Board took a decision to run the trains on a track free from harsh sounds, bumps and jerks which occur at the joints of rails. A policy was evolved to join the 2 PNR,J & SSRN,J CMA.No.1369 of 2018 rails through welding process so that there will not be any joint between the rails, which generally cause sounds, bumps etc., A Transport system consisting stanchion rakes and chute system was required for completing the above task. Therefore, the Railways called for tenders for developing such transport system. The appellant in the appeal participated in the tender and the same was accepted, an agreement was entered into between appellant and respondents No.1 and 2 herein on 05-02-1990 and that appellant has completed the said work.
4. It further shows that in view of the successful completion of the above work, the respondent No.1 herein has entrusted similar work to the appellant on 07-08-1990. He has completed the work and handed over one stanchion rake on 24-11-1990 and another stanchion rake on 02-01-1991 and other equipment on 15-01-1991. The respondents herein proposed the rates quoted in the first agreement dated 05-02-1990, but appellant did not agree, thereby, he was called for negotiations on 07-04-1992. After negotiations, the 1st respondent adopted the same rates as per agreement dated 05-02-1990 and issued acceptance letter. The appellant herein has protested the same but accepted the proposal by his letter dated 24-02-1992 subject 3 PNR,J & SSRN,J CMA.No.1369 of 2018 to review of the rates. It was the grievance of appellant that in spite of his repeated demands, the respondents without any final measurements and without any final bill, sent record of measurements on 09-02-1999. Not satisfied with the said measurements, he got issued a legal notice to the respondents on 15-11-2000 seeking reference to an Arbitrator. The respondents vide letter dated 29-12-2000 refused his proposal for appointment of Arbitrator. The appellant filed A.A.No.296 of 2001 on 07-12- 2001 at Hon'ble High Court, Delhi, on the assumption that since the Railway Board is at Delhi, he should file an application at Delhi. His application was returned by the Hon'ble Delhi High Court for filing before the appropriate Court. Then appellant has filed Arbitration Application vide A.A.No.7 of 2004 before the Erstwhile combined High Court of Andhra Pradesh. By an order dated 13- 01-2004, a learned Single Judge of the said Court appointed the respondent No.3 herein as sole Arbitrator. The appellant had filed his claim statement raising different claims. The claims of appellant were resisted by the respondents herein by way of a counter filed before the Arbitrator. The respondents have submitted their reply to each and every claim raised by the appellant.
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5. The learned Arbitrator having heard both parties and after considering the documents, passed an award on 09-08-2007 holding that the appellant is entitled to Rs.43,11,916-60/- with interest @ 12 % per annum from 15-05-1991.
6. As could be seen from the award, the learned Arbitrator decided to divide first claim of appellant into 2 sub items and held that he is entitled to a sum of Rs.1,58,600/- under sub-item No.1 and to an amount of Rs.33,67,860-76/- under sub- item No.2. The learned Arbitrator allowed the second claim of appellant and awarded a sum of Rs.7,37,387-84/- under claim No.2. The appellant was awarded Rs.48,068/- under claim No.3. The claim Nos.4 to 6 and 9 of appellant herein were rejected.
7. It appears from the Award that the fee of the Arbitrator was fixed as Rs.25,00,000/- to be shared by both parties. By that time, already a sum of Rs.1,00,000/- was paid as such claim was made for Rs.24,00,000/-. The Award further shows that Respondents 1 and 2 herein filed a memo stating that they are not willing to pay any amount except Rs.50,000/- which was already paid, as such Arbitrator directed the appellant herein to pay the balance of Rs.12,00,000/- in terms of the provisions of Arbitration and Conciliation Act. As such the appellant paid the 5 PNR,J & SSRN,J CMA.No.1369 of 2018 remaining amount also. Therefore, the learned Arbitrator directed the respondents 1 and 2 herein to pay the said amount to the appellant. Having not satisfied with the said findings in the Award, the appellant herein challenged the award before the learned I Addl. Chief Judge, City Civil Court in Arb.O.P.No.116 of 2011.
8. The appellant has challenged the order of the learned Addl. Chief Judge on the following grounds.
9. (i) The lower Court committed an error in scrutinizing the Award as it suffers from errors apparent on the face of the Award in respect of Claim Nos. 4, 5, 6 and 9 of the Claim Statement filed by him and from the award it can be inferred that the learned Sole Arbitrator mis-conducted himself and not observed the material facts.
(ii) The court below failed to notice that the Award passed by respondent No.3 is arbitrary and against the principles of natural justice, equity and good conscious. The appellant has claimed that since the Sole Arbitrator failed to appreciate the evidence in support of his Claim Nos.4 and 5, the court below ought to have allowed his petition along with interest.
(iii) He has also claimed that the Court below ought to have agreed with his contention namely the respondent No.3 failed to 6 PNR,J & SSRN,J CMA.No.1369 of 2018 consider the notice issued by him to the respondents/Railways with a demand for payment due to him and not to utilize the Infrastructure developed by him till the payments were made otherwise, the respondents/Railways is liable to pay the transportation charges for using the infrastructure.
(iv) The appellant further claimed that the Court below should have considered the record produced by him since the respondent No.3 failed to appreciate the record in a proper way. According to him, the respondents/Railways are liable to pay transportation charges.
(v) He has also claimed that the Court below should have agreed with his contention in respect of Claim No.6(i) wherein, it is claimed that he incurred heavy expenditure on overheads due to the work prolonged by the respondent/Railways high handedly without any valid reason.
(vi) The appellant further pleaded that he is entitled to Claim No.6 along with interest since he was deprived to utilize the legitimate amounts belonging to him and wrongfully withheld by the respondents thereby, the Court below should have allowed this claim.
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(vii) The appellant further pleaded that the Court below could have considered his claim i.e., Claim No.7 which is for interest on Claim Nos.4, 5 & 6 to the tune of Rs.263,00,00,000/-. He has also claimed that the Court below should have allowed his request for legal expenses by considering the history of the case for which respondents No.1 and 2 are responsible and as they have dragged the appellant into the litigation without making payments invested by him though the respondents have been highly benefited.
(viii) The appellant further pleaded that he suffered mental agony because of unilateral, high handed and arbitrary acts of respondents/Railways, therefore, he is entitled to Claim No.9 but the court below did not allow the said claim.
10. Therefore for all these reasons, the appellant sought for setting aside the order of learned I Add. Chief Judge, City Civil Court in A.O.P.No.116 of 2011 and prayed for allowing his Claim Nos.4, 5, 6, 8 & 9 of the Claim Statement filed before the Arbitrator.
11. The appellant herein is claimant in the original Arbitration application. He has raised 9 different claims out of which the learned Arbitrator negatived claims No.4, 5, 6 and 9 8 PNR,J & SSRN,J CMA.No.1369 of 2018 while passing the award in respect of the other claims. The appellant herein has claimed the learned Arbitrator failed to consider his claims without properly observing the material facts and failed to appreciate the evidence led by him.
12. The learned I Addl. Chief Judge while placing reliance on Judgments in "State of Rajasthan vs. Puri Construction Company Ltd1", "Sarbjit Sing Vs. State2", State of Orissa Vs. Niranjan Swain3", and also on the basis of Sections 5 and 34 of Arbitration and Conciliation Act, opined that the Court while deciding an application under Section 34 of Arbitration and Conciliation Act cannot sit as an Appellate Court to find out any defects and the Court must act within the scope of Section 34 and held that there are no grounds covered under Section 34 of Arbitration and Conciliation Act, dismissed the application filed by the appellant herein.
13. The appellant sought for a sum of Rs.76,19,25,3102.70/- towards compensation from the respondents/railways for the utilization of stanchion racks for transportation of welded rail panels and Claim No.5 is for 1 1994 (6) SCC 485 2 AIR 1985 P 7 H 179 3 AIR 1973 Kerala 262 9 PNR,J & SSRN,J CMA.No.1369 of 2018 Rs.3,25,14,300/- for utilization of chute system for unloading welded panels. He has also claimed loss of profit on business turn over @ 10% establishment and sought for Rs.1,19,55,047.47/-. In addition to this, he has sought for Rs.2,00,000/- towards damages for breach of contract by respondents/railways and Rs.6,00,000/- towards damages for the loss of opportunity.
14. In a Judgment in "Mrs. Ragya Bee vs. M/s.
P.S.R.Constructions4", Division Bench of this Hon'ble High Court observed that when Civil Court/Commercial Court is satisfied that right of the petitioner was affected, within the parameters set out in Section 34 (2), it can only set aside the award but in no circumstance it can amend or alter the award. In the case on hand, the appellant while accepting the award in so far as it relates to its Claims No.1, 2, 3 and 7 filed an application before the learned District Judge questioning the award of the Arbitrator by which his 4 claims were rejected.
15. As could be seen from the application filed before the Court below and even in the present appeal the appellant questioned award in so far as it relates to 4 different claims. As could be seen from the award of the learned Arbitrator with regard 4 2022 (2) ALT 320 (TS) 10 PNR,J & SSRN,J CMA.No.1369 of 2018 to the claim of appellant for utilization of stanchion racks as well as chute system by respondents/railways fabricated by the appellant on the ground that fabrication of stanchion racks and chute system has been undertaken by the appellant with steel etc., supplied by the respondents. Equipment fabricated by the appellant belongs to the respondents and they are entitled to use it as owners thereof as and when it is required. The learned Arbitrator opined that the appellant has no claim on the equipment fabricated by him. He has also held that when once the interest is granted, the appellant is not entitled to other claims.
16. This appeal is filed under Section 37 of Arbitration and Conciliation Act against the order of the Court below on the application filed by the appellant under Section 34 of the said act against the Award of learned Arbitrator only to the extent of his findings against Claim Nos.4, 5, 6 and 9 of the Claim Statement.
17. In view of the said claim, it is relevant to see what Section 34 of Arbitration and Conciliation Act provides.
Section 34 - Application for setting aside Arbitral Award: (i) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and seb-section (3).
18. Therefore, it is quite clear that Section 34 provides for setting aside award on limited grounds as shown in Clause 2 and 11 PNR,J & SSRN,J CMA.No.1369 of 2018 Clause 3 of Section 34. As could be seen from the grounds of appeal, it is very clear that the appellant being not satisfied with the observations of arbitrator for dismissing his four claims filed his application under Section 34 of Arbitration and Conciliation Act, but none of the grounds relied on by the appellant fell under sub- section 2 or sub-section 3 of Section 34.
19. It was not the case of appellant that he was under
some in capacity; it was not his case that the arbitration agreement was invalid. In fact he sought for appointment of arbitrator based on the said agreement. It was not his case that he was denied proper notice. Likewise the application filed under Section 34 does not cover any grounds of 34(2) or 34(3). The contention of appellant before the Court below was the arbitrator failed to appreciate the evidence led by him and failed to consider the notice issued by him to respondent not to use the infrastructures. The award of the learned Arbitrator explained the reasons for allowing or rejecting a particular claim. The appellant while filing his application under Section 34 of the Act sought for setting aside a portion of the Award but not for setting aside the same.
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20. In a Judgment between "MMTC Ltd. Vs Vedanta Ltd.5", it was observed as follows:
"As far as interference with an order made under Section 34, as per Section 37 is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of the power by the Court under Section 34 has not exceeded the scope of the provision. Thus it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings".
21. In a Judgment of Division Bench of this Court between M/S Ragya Bee V. M/S. P.S.R. Constructions 2022 (2) ALT 320 (TS) it was held that when Civil Court or Commercial Court is satisfied that right of the petitioner was affected, within the parameters set out in Section 34(2), it can only set aside the award but in no circumstances it can award or alter the award. Reliance was placed on a Judgment between National Highways 5 (2019) 4 SCC 163 13 PNR,J & SSRN,J CMA.No.1369 of 2018 Authority of India V. M. Hakeem and another reported in (2021) 9 SCC 1 where it was held by Hon'ble Apex Court that Section 34 of Arbitration and Conciliation Act, 1996, provides for setting aside awards on very limited grounds, such grounds being contained in sub-sections 2 and 3 of Section 34. Further as the marginal note of Section 34 indicates "recourse" to a Court against an arbitral award may be made only by an application for setting aside such award. "Recourse" is defined as the enforcement or method of enforcing a right.
22. Therefore in the absence of anything to believe that the Award is liable to be set aside as per Section 34(2) or 34(3) of Arbitration and Conciliation Act, the appellant cannot claim a partial set aside of the award. The appellant could not show any ground by which the Court below can interfere with the award, and similarly he could not show any ground warranting the interference of this Court in the order of learned Addl. District Judge in Arb.O.P.No.116 of 2011.
23. Therefore, as rightly observed by the learned I Addl. Chief Judge, in the Arb.O.P.No.116 of 2011 the Court while deciding the petition filed under Section 34 of Arbitration and Conciliation Act, cannot sit as an appellate Court and a portion of 14 PNR,J & SSRN,J CMA.No.1369 of 2018 the award cannot be amended or modified in a petition under Section 34 of Arbitration and Conciliation Act or in an appeal filed under Section 37(1) of the said Act. Therefore, there are no merits in the appeal; it is liable to be dismissed.
24. In the result, the appeal is dismissed. The parties shall bear their own costs.
Miscellaneous applications, if any pending, shall stand closed.
___________________ JUSTICE P.NAVEEN RAO __________________________ JUSTICE SAMBASIVA RAO NAIDU Date: 28.09.2022 PLV 15 PNR,J & SSRN,J CMA.No.1369 of 2018 16 PNR,J & SSRN,J CMA.No.1369 of 2018