Karnataka High Court
P Gopal Raju vs The Secretary To Government Of India on 7 August, 2013
Bench: N.K.Patil, B.Manohar
1
IN THE HIGH COURT OF KARNATAKA, BANGALORE
DATED THIS THE 7TH DAY OF AUGUST 2013
PRESENT
THE HON'BLE MR.JUSTICE N.K.PATIL
AND
THE HON'BLE MR. JUSTICE B.MANOHAR
MFA.NO.3752/2009 (AA)
BETWEEN:
P.Gopal Raju,
Proprietor,
Global Engineering Works Syndicate,
Aged about 63 years,
No.56, (R-11)
Guttahalli Main Road,
Malleswaram,
Bangalore - 560 003. ... Appellant
(By Sri.P.Gopal Raju, party-in-person)
AND:
1. The Secretary to Government of India,
Ministry of Urban Development,
New Delhi.
2. The Executive Engineer,
BCD II, C.P.W.D,
'C' Wing, II Floor,
2
Kendriya Sadan,
Koramangala,
Bangalore - 560 034.
3. Sri.K.K.Mutreja
4. Sri.N.S.Narayana,
(Respondents 3 and 4 are deleted
Vide order dated 13.10.2009)
5. The Chief Engineer,
Southern Zone III, CPWD,
Ist Floor, 'A' Wing,
Kendriya Sadan,
Koramangala,
Bangalore- 560 034. .... Respondents
(By Sri.Y.Hariprasad, CGSC for R1 and R2, R3 and R4 are
Deleted vide order dated 13-10-2009, R5 served)
Vide Order dated 17.9.2009, party-in-person has filed
affidavit dated 6.8.2009 and with regard to office objection
this MFA filed U/s.37(1) (B) of the Arbitration and conciliation
Act, 1940, against the order dated 1.9.2003 (12.3.2009)
passed in A.S.No.5/2001 on the file of the Additional City
Civil Judge, Bangalore dismissing the petition filed U/S.34 of
the arbitration and conciliation Act 1996 and Sec.30 of
Arbitration Act, 1940 for set aside the award dated
18/19.10.2000 in view of order passed by the Division Bench
dated 21.8.2006 in MFA.7458/2003.
This MFA having been heard and reserved and coming
on for pronouncement of Judgement this day, B.MANOHAR
J., delivered the following:
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JUDGMENT
The appellant has filed this appeal questioning the legality and correctness of the judgment and order dated 12-3-2009 made in Arbitration Suit.No.5/2001 passed by the VI Additional City Civil Judge, Bangalore, wherein the learned City Civil Judge allowed the Arbitration Suit in part and remanded the matter to the Arbitrator to consider the claims of the appellant in respect of claim Nos.1 to 4, 6, 7 and 9 while confirming the finding on claim Nos.5, 8 and 10.
2. it is the case of the appellant that he was a Class-I Contractor. Pursuant to the tender notification issued by the second respondent for construction of one hundred bedded hostel under Phase-II including internal water supply, sanitation and drainage at the cost of Rs.30,50,660/-, the appellant had submitted his tender. He was the successful bidder and was entrusted with the said work. Accordingly an agreement was entered into between parties. As per the 4 Agreement No.82/BCD II/1989-90, there was time stipulation that the work has to be completed within a period of 12 months from 04-12-1989. However, the work was completed only on 30-6-1993. According to the appellant, the delay was attributable to the second respondent and as such, the second respondent has granted time to complete the construction upto 30th June 1993. In view of the extended period of work, several disputes and differences arose between the appellant and respondents and the same could not be settled between the parties. Clause 25 of the Agreement entered into between the parties provides for reference of any dispute between the parties to the sole Arbitrator to be appointed by the Chief Engineer. Accordingly, the 5th respondent in exercise of his power under Clause 25 of the Agreement appointed one S.S.Juneja as the Arbitrator. Accordingly, the appellant filed a claim petition.
3. In the claim petition, the appellant had claimed ten different claims. The same was referred to the Arbitrator, the 5 respondents have made two counter claims. Subsequently, the said Arbitrator resigned. Accordingly, Dr.Y.P.C.Dangay was appointed as an Arbitrator. The said Arbitrator also tendered his resignation. Accordingly, Sri.K.K.Mutreja was appointed as the sole Arbitrator and he was directed to proceed with the case from the stage, left by the earlier Arbitrator. The Arbitrator, after considering the claims and counter claims, and also the report submitted by the Commissioner has measured the property and drew up the award on 17-10-2000, partly allowing the claim petition in respect of claim Nos.3, 6 and 9. However, he rejected the claim in respect of other claims and awarded a sum of Rs.1,00,500/- with simple interest of 12.5% p.a. w.e.f. 2-8-1994 till the date of payment. The appellant being unsatisfied with the award passed by the sole Arbitrator preferred an Arbitration Suit No.5/2001 under Section 34 of the Arbitration and Conciliation Act, 1996 as also, under Section 30 of the Arbitration Act, 1940 raising several 6 contentions, mainly on the ground of misconduct, incapacity and decision on matters beyond the scope of the submissions and on the ground of 'mistake apparent on the face of the record'. It is further contended that the Arbitrator being an employee of the respondents decided the dispute at the instigation of the respondents, which will constitute bias and sought for setting aside the award passed by the arbitrator by allowing the claims.
4. The respondents entered appearance and filed their objections contending that the grounds raised by the appellant do not come under the purview of Section 34 of the New Act. The appointment of the Arbitrator was made as per Clause 25 of the Agreement. The said clause empowers the Chief Engineer to appoint the Arbitrator who is a Government Servant. Having accepted the clauses in the Agreement, the appellant cannot object for appointment of an Arbitrator. Having taken part in the arbitration proceedings at this length of time, the appointment of an Arbitrator cannot be 7 challenged. The Arbitrator taking into consideration each one of the claims made by the appellant passed the award and sought for dismissal of the suit.
5. The Trial Court, after considering the matter in detail and considering the oral and documentary evidence produced by the parties and also considering Section 34 of the Arbitration and Conciliation Act, by its judgment and order dated 1-9-2003 dismissed the suit, holding that the appellant has not made out a case to interfere with the award passed by the Arbitrator.
6. The appellant being aggrieved by the judgment and order dated 1-9-2003, preferred MFA No.7458/2003 before this Court challenging the judgment and award passed by the Trial Court on various grounds and also contended that application of Section 34 of the Arbitration Act, 1996 is contrary to law and the scope of challenge is very very less. The agreement was entered into between the parties in the 8 year 1989 itself, hence, the Arbitration Act, 1996 ought not to have been made use of to make an application. This Court, by its order dated 21-08-2006 allowed the appeal and set aside the judgment and order dated 1-9-2003 passed by the Trial Court and remanded the matter to the Trial Court to reconsider the same afresh as per Section 30 of the Arbitration Act, 1940 with a direction to pass appropriate orders in accordance with law. The appellant being aggrieved by the order dated 21-08-2006 made in MFA No.7458/2003 preferred SLP No.1269/2007 before the Hon'ble Supreme. The Hon'ble Supreme Court by its order dated 17-12-2008 dismissed the appeal confirming the order passed by this Court. After remand, the matter was reheard by the Civil Court and framed the following points for its consideration:
(i) Whether the plaintiff has made out any of the grounds provided under Section 30 of the Arbitration Act 1940;
(ii) Whether the award shall be made the Rule of the Court;9
(iii) What order?
7. The Trial Court, after considering the arguments addressed by the parties and on considering each one of the claims made by the appellant held issue No.1 partly in the affirmative and as per the judgment and award dated 12-03-2009 allowed the suit in part confirming the finding of the Arbitrator on claim Nos. 5, 8 and 10 and set aside the finding on claim Nos.1 to 4, 6, 7, and 9 and remanded the matter back to the Arbitral Tribunal to try them afresh after affording opportunity to both the parties to adduce further evidence, if any, and also directed the 5th respondent to constitute an Arbitral Tribunal, within a period of one month to try the disputes. Being aggrieved by the judgment and order dated 12-3-2009 passed by the Civil Court remanding the matter on certain claims to the Arbitral Tribunal, the appellant has filed this appeal.
8. Sri.P.Gopal Raju, the party-in-person is challenging the judgment and order passed by the Trial Court insofar as 10 confirming the claim Nos. 5, 8 and 10 and setting aside the claims 1 to 4, 6, 7 and 9 is contrary to law. The Trial Court ought to have re-examined the claims of the appellant. He also contended that due to the defect in preparation of the estimation, defect in design and in view of the changes made in execution of over-all items of work, the appellant had to execute extra work. The work was extended till 30th June 1993. The appellant is entitled for the revised workable rates for all items of the work and also revised workable rates in respect of extra items of work he had done. The Arbitrator has not considered the relevant factors and materials and came to the wrong conclusion. Further, the Arbitrator being the employee in the very same Department and sub-ordinate to the Chief Engineer, he has to work on the dictation of the Chief Engineer. He was biased in the matter. The award has been drawn, only to satisfy his superior officers. The award has not been passed in accordance with law. He has not decided the dispute between the parties with an independent 11 mind which would constitute bias. The construction work of one hundred bedded hostel was completed on 30th June 1993. He made an additional claim of Rs.30,00,000/- whereas the Arbitrator awarded only a meager sum of Rs.65,500/- in respect of unpaid amount, Rs.25,000/- towards the unproductive head and Rs.10,000/- towards the cost of Arbitrator, in all a sum of Rs.1,00,500/-. The appellant had taken loan from the financial institutions at the rate of 24% p.a. and completed the construction work and he is entitled for the interest at 24% p.a. The Arbitrator has not taken into consideration the revised workable rate, extra work that has been carried out, refund of ST, watch and ward charges, damages with regard to delayed payment, rebate on the bill and also interest.
9. The Trial Court without examining all these aspects remanded the matter to the Arbitrator instead of giving a finding on the said issues, which would lead to delay for some more years wherein the fresh Arbitrator has to be appointed 12 and he has to re-examine the matter. Hence sought for setting aside the judgment and order passed by the Trial Court by allowing this appeal.
10. On the other hand, Sri. Y.Hariprasad, learned Central Government Standing Counsel appearing for the respondents 1 and 2 argued in support of the judgment and order dated 12-3-2009 passed by the Trial Court remanding the claim of the appellant to the Arbitration for reconsideration insofar as claim Nos.1 to 4, 6, 7 and 9. The Arbitrator has not considered some of the claims made by the appellant. The Trial Court taking into consideration the limited scope available to challenge the award passed by the Arbitrator under Section 30 of the Arbitration Act, 1940 remanded the matter to the Arbitrator for reconsideration. The conclusion arrived at by the Trial Court is in accordance with law. The non-consideration of some of the claims by the Arbitrator amounts to misconduct. In those circumstances, the Trial Court can set aside the award. Accordingly, for 13 comprehensive consideration of the claims made by the appellant, the Trial Court remanded the matter. The appellant has not made out a case to interfere with the order passed by the Trial Court and sought for dismissal of the appeal.
11. We have carefully considered the arguments addressed by the learned counsel appearing for the parties and perused the judgment and order and other relevant records.
12. Upon hearing the learned counsel for the parties, the only point that arise for out consideration in this appeal is :
Whether the appellant has made out a case to interfere with the impugned judgment and order passed by the Trial Court wherein the Trial Court remanded the matter to the Arbitrator insofar as certain claims are concerned?14
13. The facts clearly disclose that the appellant was the successful bidder for the construction of one hundred bedded hostel under Phase-II, including internal water supply, sanitary and drainage work. Though the Agreement stipulates that the work has to be completed within a period of 12 months, it was completed on 30-6-1993. With regard to the said construction work, several disputes arose between the parties. As per clause 25 of the Agreement entered into between the parties, the dispute was referred to the Arbitrator appointed by the Chief Engineer, though the earlier two Arbitrators commenced the arbitration process, have not completed the same. The 3rd Arbitrator Sri.K.K.Mutreja after considering the matter in detail and after taking into consideration the Commissioner's report, partly allowed the claim in respect of claim Nos.3, 6 and 9 and rejected in respect of other claims. The Arbitration Suit No.5/2001 filed by the appellant on the file of the VI Additional City Civil Judge, Bangalore was also dismissed under Section 34 of the 15 Arbitration Act. MFA No.7458/2003 was filed by the appellant before this Court, this Court remanded the matter to the City Civil Court to reconsider the matter under the Old Arbitration Act, 1940 since the Agreement entered into between the parties; completion of the work and other proceedings has already been completed even prior to the coming into force of New Act, 1996. After remand, the Trial Court had taken up the matter afresh. The appellant has not lead any evidence nor produced any documents except addressing arguments on 2-2-2009 and the defendants 1 to 3 addressed their arguments. The Trial Court examined the claims of the appellant and found that the Arbitrator has not considered the relevant factors and some of the materials produced by the appellant, which amounts to legal misconduct. The Arbitrator has not given cogent reasons to reject some of the claims of the appellant and some of the documents produced by the appellant had not been looked into by the Arbitrator. Further he has also not taken into 16 consideration the position of law on that aspect of the matter and misconducted himself in brushing aside the contention of the appellant. The Trial Court examined each one of the claims made by the appellant and found that, the award suffers from the misconduct of the Arbitrator in conducting arbitration proceedings, in the legal sense, it does not in any way reflect the integrity or impartiality of the Arbitrator. The Trial Court also found that as per clause 25 of the Agreement entered into between the parties, the Chief Engineer is the competent authority to appoint the Arbitrator. The appellant having accepted the said clause in the Agreement, cannot turn round and contend that the Arbitrator being the employee of the very same Department and being the sub- ordinate of the Chief Engineer would be biased in the matter. It is not open to the appellant to contend that the award has been drawn only to satisfy his superior officers and he would not get justice from the Arbitrator. The issues raised by the appellant has been considered by the Hon'ble Supreme Court 17 in AIR 1988 SC 2232 (THE SECRETARY TO THE GOVERNEMNT TRANSPORT DEPARTMENT, MADRAS v/s MUNUSWAMY MUDALIAR AND OTHERS) wherein it is held that appointing a Government Employee as an Arbitrator as per the Agreement would not affect the award passed by him. The appellant having accepted the clause 25 of the Agreement cannot challenge the award on the ground of bias.
14. The Trial Court on considering the oral and documentary evidence and also the award passed by the Arbitrator found that in respect of the first claim, the entrusted work was continued beyond the period of limitation. The appellant is entitled for the revised and workable rates for all the items. The delay for completion of the work cannot be attributed only to the Contractor. There is substantial change in the design and also estimation. Apart from that the second respondent has extended the time till 30th of June 1993 and rejection of the claim made by the 18 appellant has to be reconsidered by the Arbitrator. In respect of change in the design, there will be extra work on the Contractor. As per the Agreement, the Arbitrator ought to have considered the extra items of the work carried out by the appellant. In respect of the 3rd claim is concerned, the appellant is entitled for unpaid amount. The refund of ST was also not taken into consideration by the Arbitrator. With regard to the watch and ward charge is concerned, the said liability cannot be foisted on the respondents as it is the responsibility of the appellant to maintain watch and ward at the work site. There is no infirmity in the order passed by the Trial Court. Further the Arbitrator has not taken into consideration the damages for the delayed payment of bills on various occasions, due to which, the work was withheld. So far as the 8th claim of the appellant with regard to rebate on bills is concerned, the appellant is not entitled to any rebate on the bills since he has not completed the building within the period stipulated in the Agreement. The rebate on the bill 19 is usually given as an incentive. The said benefit cannot be given. Accordingly, the Trial Court rejected the said claim.
15. Insofar as the 9th claim of the appellant with regard to rate of interest is concerned, the Arbitrator has awarded only 12.5% p.a. whereas the appellant had taken loan from the financial institutions at the rate of 24% p.a. The denial of interest at the rate of 24% on the part of the Arbitrator is not correct. The Arbitration cost has been awarded by the Arbitrator. Both parties have not lead any evidence nor produced any document before the court below to that effect. The Trial Court, taking into consideration all these aspects of the matter, remanded the matter insofar as claim Nos. 1 to 4, 6, 7 and 9. The relevant records are available with the Arbitrator. The Trial Court do not have any oral or documentary evidence of the parties to examine the matter. Accordingly, held that non-consideration of relevant factors and material amount to misconduct and Arbitrator has not 20 bestowed his full attention to some of the claims and remanded the matter with a direction to the second respondent to appoint a fresh Arbitrator in terms of clause 25 of the Agreement, within a period of one month and directed the arbitral tribunal to dispose of the matter within a period of 4 months from the date of receipt of a copy of this judgment.
16. We find that there is no infirmity or irregularity in the order passed by the Trial Court. In the absence of relevant materials, the Trial Court cannot decide the issues. Accordingly, it has taken the correct decision of remanding the matter while confirming the claim of the appellant insofar as claim Nos.5, 8 and 10 are concerned.
17. Under Section 30 of the Arbitration Act, 1940 on the ground of legal misconduct by the Arbitrator, the award passed by the Arbitrator can be set aside. In the instant case, 21 we do not find any misconduct of the Arbitrator with regard to the integrity and impartiality. Therefore, the award of the Trial Court is set aside insofar as certain claims are concerned and also insofar as misconduct with regard to non- consideration of relevant factors and materials while conducting arbitration proceedings. Hence, the Arbitrator has to reconsider the matter afresh. The appellant has not made out a case to interfere with the order passed by the Trial Court remanding the matter insofar as claim Nos. 1 to 4, 6, 7, and 9 are concerned. In view of the pendency of the above appeal, the Arbitrator could not proceed with the matter. Hence, the second respondent is directed to appoint a fresh Arbitrator within a period of two weeks from the date of receipt of a copy of this judgment and the said Arbitrator shall dispose off the claims of the appellant as expeditiously as possible, within a period of six months, after giving opportunity to the appellant.
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18. Accordingly, we pass following:
ORDER The appeal is dismissed confirming the judgment and order dated 12-3-2009 made in Arbitration Suit No.5/2001 on the file of the VI Additional City Civil Judge, Bangalore.
Sd/-
Judge Sd/-
Judge mpk/-*