Rajasthan High Court - Jaipur
State Of Rajasthan vs M/S Parmanand Contractor And Another on 16 February, 2012
Author: Bela M. Trivedi
Bench: Bela M. Trivedi
IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR SB CIVIL MISC. APPEAL NO.1358/10 STATE OF RAJASTHAN APPELLANT. VS M/S. PARMANAND CONTRACTOR & ANR. RESPONDENTS. AND SB CIVIL MISC. APPEAL NO. 1357/10 EXECUTIVE ENTINEER, PWD, DIVISION BARAN APPELLANT VS PARMANAND RESPONDENT DATE OF JUDGMENT : 16TH FEBRUARY, 2012. PRESENT HON'BLE MS. JUSTICE BELA M. TRIVEDI Mr. Hari Barath, Dy.Govt. Counsel for the appellants. Mr. G.C. Mittal for the respondents. BY THE COURT :
REPORTABLE
1. Both these appeals have been filed by the State of Rajasthan through Executive Engineer, Public Works Department, Division Baran, District Baran challenging the orders dated 30th January, 2010 passed by the District & Sessions Judge, Baran (hereinafter referred to as 'the lower court') in Civil Misc. Case No.51/09 and 35/03 respectively.
2. The short facts giving rise to these two appeals may be narrated as under:
(i) The appellant had issued NIT for the construction of link road of Bilasgarh District Baran. The bid of the respondent No.1 M/s. Parmanand Contractor being the lowest one, an agreement bearing No. 29/97-98 was entered into between the appellant and respondent No.1. The respondent No.1 was also issued the work order for the construction of the road, however, according to the appellant, the work was not completed by the respondent No.1 within the stipulated time limit of 15 months from the date of commencement. As against that, according to the respondent No.1, the work could not be completed due to various hindrances created by the appellant and due to the extra additional work which the appellant had directed to carry out. Thus, the differences and disputes arose between the parties and on 30th March, 2000 the respondent No.1 made an application, invoking Arbitration Clause No. 23 of the agreement, for referring the disputes to the Standing Committee. The said application remained pending with the appellant. According to the respondent No.1 he had sent various reminders but the appellant did not refer the dispute to the Standing Committee.
(ii) Ultimately, the respondent No.1 moved an application under Section 11 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as 'the said Act') for the appointment of the sole arbitrator before the High Court. The said application was registered as SBCMA (Arbitration) No. 11/02. This court vide order dated 10.5.02 appointed Shri C.B. Lokwani, (Retd. Addl. Chief Engineer, Irrigation Department, Baran) as the sole arbitrator to adjudicate upon and decide the disputes between the parties. The said order was passed after hearing the learned counsels for the parties and following observations were made in the said order :-
Notice for appointment of the Arbitrator in terms of Clause 23 of the agreement alongwith the cheque dated 31.3.2000 was given by the applicant on 30.3.2000. Mr. Hanuman Choudhary submits this cheque was immediately encashed, may be in April,2002. Despite this the Engineer-incharge did not refer the dispute to the Committee for arbitration. Thereafter, this application was filed on 6.11.2001. Even if it is taken that the Engineer-incharge has referred the dispute to the Committee after the filing this application, it is clear that the respondents lost the right to refer the dispute to the Committee for arbitration in view of the law laid down by the Supreme Court in the case of Datar Switchgears Ltd. vs. Tata Finance Ltd. and another reported in 2000(3) Arb. LR 447 (SC). The meeting of the Committee for arbitration was fixed for 5.4.2002 vide notice dated 16.3.2002 i.e. after the expiry of period of 30 days computed from 30.3.2000.
Therefore, an independent Arbitrator is required to be appointed.
(iii) Pursuant to the said order dated 10.5.02, the sole arbitrator was appointed by the High Court. It appears that during the pendency of the proceedings before the High Court, the counsel for the appellant had referred the dispute between the parties to the Standing Committee and the Standing Committee issued notices to the respondent No.1 contractor but the contractor did not remain present before the said Standing Committee. The said Standing Committee thereafter passed the order dated 10.5.02 rejecting the claims of the respondent-contractor. It is pertinent to note that the Standing Committee passed the order dated 10.5.02, despite the fact that the High Court had appointed the sole arbitrator to adjudicate upon and to decide the disputes between the parties, after hearing the counsels for the parties.
(iv) The respondent-contractor therefore being aggrieved by the said order dated 10.5.02 passed by the Standing Committee, filed the objections under Section 34 of the said Act before the lower court which was registered as Civil Misc. Application No. 35/03. The lower court vide the judgment and order dated 30.1.10 allowed the said application and set aside the order dated 10.5.02 passed by the Standing Committee. Being aggrieved by the said order passed by the lower court, the appellant has preferred SBCMA No. 1357/10.
(v) It further transpires that pursuant to the appointment of the sole arbitrator by the High Court, the arbitration proceedings had commenced before the said arbitrator, in which the appellant also participated and also submitted their counter-claims. The arbitrator vide award dated 3.9.03 partly allowed the claim of the respondent-contractor to the extent of Rs. 6,50,458/- out of claim of Rs. 22,10,553/-. Being aggrieved by the said award the appellant filed the objection application under Section 34 of the said Act before the lower court, which was registered as Civil Misc. Application No. 51/09. The lower court vide the order dated 20.1.2010 dismissed the said application and confirmed the award made by the arbitrator. Being aggrieved by the said order, the appellant has preferred the SBCMA No. 1358/10.
3. It has been sought to be submitted by the learned Dy. Govt. Counsel Mr. Hari Barath, for the appellant in both the appeals that the arbitrator could not have proceeded further while the disputes were referred to the Standing Committee in view of Clause 23 of the agreement and in view of the fact that the Standing Committee had passed the order dated 10.5.02 rejecting the claims of the respondent-contractor. He also submitted that the lower court also could not have entertained the application of the respondent-contractor under Section 34 of the said Act, when the case did not fall under any of the grounds mentioned under Section 34(2) of the said Act. Relying on the decision of the Supreme Court in case of BSNL & Anr. Vs. Dhanurdhar Champatiray (2010) 1 SCC 673, the learned Govt. counsel has submitted that the right of the parties to appoint arbitrator would not automatically cease after the expiry of 30 days of receiving the request to appoint arbitrator from the other party, but will continue till the application under Section 11(6) was filed by the other party. According to him, in the instant case, the High Court should not have appointed the arbitrator as per the order dated 10.5.02 by holding that the appellant had lost the right to refer the dispute to the Standing Committee. The learned Govt. Counsel has also relied upon the judgment of the Supreme Court in case of State of Rajasthan & Anr. Vs. Ferro Concrete Construction Pvt. Ltd. (2009) 12 SCC 1 to submit that the sole arbitrator appointed by the High Court had committed legal misconduct and error apparent on the face of record by awarding certain claims of the respondent-contractor though there was no evidence adduced by him and therefore, such an award was liable to be set aside under Section 34(2) of the said Act. The Govt. Counsel has also argued that the arbitrator appointed by the High Court was known to the respondents and therefore, he could not be said to be an independent arbitrator.
4. Per contra, the learned counsel for the respondents Mr. G.C. Mittal, has submitted that the lower court has rightly considered the scope of Section 34(2) of the said Act and rejected the application of the appellant, the application of the respondent-contractor. According to him, the respondent had moved the High Court for the appointment of the arbitrator under Section 11(6) of the said Act as the appellant had failed to refer the disputes between the parties to the Standing Committee within the prescribed time limit and that the High Court after hearing the learned counsels for the parties had appointed the arbitrator for adjudicating upon the disputes between the parties. The appellant having not challenged the order of the High Court appointing the sole arbitrator and having participated in the arbitration proceedings before the sole arbitrator was estopped from raising the contention regarding the appointment of the said arbitrator. He has also submitted that the High Court considering the decision of the Apex Court in case of Datar Switchgears Ltd. Vs. Tata Finance Ltd. & Anr. 2000(3) Arb. LR 447 (SC) had made the appointment of the sole arbitrator and the arbitration proceedings having been conducted in the legal and proper manner, the award made by the said arbitrator could not be set aside.
5. In the instant appeals, at the outset it is required to be stated that the order dated 10.5.02 passed by the High Court in SBCMA (Arbitration) No. 11/02 appointing Mr. C.B. Lokwani, Retd. Addl. Chief Engineer, Baran, as the sole arbitrator to adjudicate upon and decide the disputes between the parties was not challenged by the appellant. It is also not disputed and is transpiring from the impugned award made by the said arbitrator that the appellant had also participated in the said arbitration proceedings and had also submitted the counter-claims, meaning thereby the appellant had submitted to the jurisdiction of the said arbitrator. Under the circumstances it does not lie in the mouth of the appellant to say that the High Court should not have appointed the arbitrator for adjudicating the disputes between the parties. It is needless to say that the said order having been passed after hearing the learned counsel for the parties and the High Court having specifically observed that the appellant had lost the right to refer the dispute to the Standing Committee for arbitration in view of the decision of the Supreme Court in case of Datar Switchgears (supra), the Standing Committee had become functus officio and could not have passed any order. However, it is very significant to note that on the very date i.e. on 10.5.02 when the High Court appointed the arbitrator, the Standing Committee rejected the claim of the respondent-contractor. This court fails to understand as to how the claims of the respondent-contractor could have been rejected when he had not submitted any statement of claims before the Standing Committee. The very fact that the Standing Committee had passed the order on 10.5.02 rejecting the claims of the respondent-contractor, on which date the High Court had appointed the arbitrator, speaks volumes as regards the conduct of the members of the said Standing Committee. Under the circumstances, such an order passed by the Standing Committee, was illegal, without authority of law and non est, which the lower court has rightly set aside vide the impugned order.
6. So far as the legality and validity of the award dated 3.9.03 passed by the sole arbitrator is concerned, it is settled legal position that such an award can be challenged under Section 34(2) of the said Act only on the grounds specified therein. The lower court after considering in detail the legal and factual aspects of the matter has dismissed the application of the appellant on the ground that there was no ground made out by the appellant under Section 34(i) of the said Act. The learned Govt. Counsel has also failed to point out from the record as to how the arbitrator had misconducted himself and how he had committed any error on the face of record and therefore, the decision of the Supreme Court in case of State of Raj. Vs. Ferro Concrete Construction (supra) relied upon by him is not helpful to him. There being no illegality or perversity in the order passed by the lower court rejecting the application of the appellant under Section 34 of the said Act, this court is not inclined to interfere with the said order.
7. In that view of the matter, both the appeals being devoid of merits deserve to be dismissed and are accordingly dismissed.
(BELA M. TRIVEDI) J.
MRG.
All corrections made in the judgment/order have been incorporated in the judgment/order being emailed.
M.R. Gidwani PS-cum-JW