Gujarat High Court
Gujarat Water Supply And Sewerage Board vs Saryu Plastics Limited on 11 November, 2022
Author: Sonia Gokani
Bench: Sonia Gokani
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 5012 of 2018
With
R/FIRST APPEAL NO. 5013 of 2018
With
CIVIL APPLICATION (FOR VACATING STAY) NO. 2 of 2019
In R/FIRST APPEAL NO. 5013 of 2018
FOR APPROVAL AND SIGNATURE:
HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
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1 Whether Reporters of Local Papers may be allowed
to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy
of the judgment ?
4 Whether this case involves a substantial question
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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GUJARAT WATER SUPPLY AND SEWERAGE BOARD
Versus
SARYU PLASTICS PVT. LIMITED
==========================================================
Appearance:
MR SUDHIR NANAVATI, SR.ADV. with MR KH BAXI(150) for the
Appellant(s) No. 1
MR. N.L.RAMANI , ADVOCATE for the Defendant(s) No. 1
==========================================================
CORAM:HONOURABLE MS. JUSTICE SONIA GOKANI
and
HONOURABLE MS. JUSTICE NISHA M. THAKORE
Date : 11/11/2022
CAV JUDGMENT
(PER : HONOURABLE MS. JUSTICE SONIA GOKANI) Page 1 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 1 It is the appeal under section 13 of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2015 ("the CC Act"
for short). Being aggrieved by the judgement and order passed by the City Civil & Sessions Court, Ahmedabad in Commercial Review Application NO.4 of 2017 in Civil Miscellaneous Application NO.72 of 2016 dated 25.09.2018, the appellant has preferred this appeal.
Factual Matrix
2 Brief facts leading to the present appeal are as follows:
2.1 Claimant Saryu Plastics Pvt. Ltd, Ahmedabad was a registered private limited firm, which was carrying on business as manufacturer and supplier of PVC pipes with manufacturing unit at Chhatral, Page 2 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Taluka-Kalol, District: Mehsana and the registered office was situated at Ahmedabad. The claimant was registered with Jilla Udyog Kendra, Mehsana as Small Scale industrial Unit and was also registered with Bureau of Indian Standard for production of PVC pipes as per relevant Indian Standard Code.
2.2 The claimant was carrying out business with the Gujarat Water Supply & Sewerage Board ("the Board" for short), the appellant herein, since the year 1989 up to the year 2003 i.e. till the time the Board blacklisted the claimant vide its letter dated 29.08.2003. The dispute arose during the supply contract of years 1998-
99, 1999-2000, 2000-2001 and 2001-2002.
2.3 Major grievances and financial losses had arisen due to act of blacklisting the Page 3 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 claimant. In reference to some supply was made under the rate contract under consideration in the arbitration proceedings, the claimant-respondents, therefore, had raised consequential claim in the very arbitration proceedings. It was the case of the claimant respondents that the dispute had arisen due to illegal actions of the appellant, which are in the breach of the contract and which resulted into heavy financial and adverse implications on them. Even their bill payments were adversely affected and substantial amount remained pending for recovery from the appellant.
2.4 Various committees were appointed by the appellant, but the reports had remained unimplemented so far as the release of the due amount was concerned. Eventually, the Page 4 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 appellant, vide its letter dated 16.03.2012, decided to appoint the sole Arbitrator Mr.K.J. Wadher, a retired Chief Engineer of the Board. This arbitration agreement with the claimant was dated 03.04.2012.
2.5 The appellant Board had preferred to reply to the statement of claim. Both the parties were permitted to produce the bulky records and after considering the pleadings and documentary evidence, the sum awarded by the learned Arbitrator is Rs. 79,98,361/- on account of the payment of outstanding amount and the sum of Rs.21,99,157/- was awarded on account of escalation of price. However, the claim regarding the compensation of cost for legal and administrative proceedings and Page 5 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 cost of arbitration proceedings were rejected.
2.6 All disputes and claims were adjudicated by the process of arbitration after availing the opportunities to the parties, the learned Arbitrator summarized the award thus:
"3.0 In view of the above, I summarize my award as under:
1) Unless otherwise stated in relevant portion of the Award, following actions of the respondent are held arbitrary and not permissible under contractual and legal considerations and therefore I quash and set-aside them. Action of -
i) Recovering, kept in deposit, withholding payments due to audit objections by M/S Pipara and Co..
ii) Recovering, kept in deposit, withholding payments under the alleged reason of so-called quality lapse.
iii) Recovering, keeping in deposit, withholding 'claimant payments' by the Respondent due to any other reason.
iv) No paying due escalation payments to claimant in case of postponement of Supply Orders by Respondent themselves (Kheralu Dvn.)
v) Not considering ' valid supply order issued by Zonal CE' and instead of that, basing price escalation payment on Allotment informed by the GWSSB head office.
vi) Delaying some of the payments beyond 'stipulated 340 days'.
vii) issuing show cause notice for Blacklisting.Page 6 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022
viii) Virtually imposing 'The Unlimited Period Ban of Business with GWSSB' on claimant. When Respondent ordered to take Claimant out from blacklisting after 3 years they further banned Claimant from business with GWSSB till account of GWSSB is settled with claimant. They never settled account with claimant. As such, this illegal action amounted to virtually continuing claimant being blacklisted for all the time. As such as on today also, claimant has been virtually remained blacklisted by the GWSSB.
2) To pay interest as admissible as per above said Act of 1993 (on the awarded sums),
(a) On all outstanding bill/price escalation payments from 31st day of the date of the supply made.
(b) For the late payment i.e. payments released by period later than 30 days on claimant's bill/price escalation payments and for the period from the 31st day of the date of the supply made till the payment is actually made to them by the respondent.
3) The Claimant has further requested to ask the Respondent to continue to pay interest to them on total award amount [ i.e. principle Sum plus Interest up to the date of award until the award amount along with interest is paid to them as monthly-compounded interest at the rate and manner as specified in above referred 1993 act. From SBI web site, the latest benchmark prime lending rate is obtained which is as under:
Effective Prime Lending Interest Date Rate 07.11.2013 14.75 10.04.2015 14.60 08.06.2015 14.45 Therefore, considering likely applicable rate of interest 27th October 2015= 1.5x 14.45= 21.675% per annum to be compounded monthly becomes payable on the Awarded Sum (Principal amount plus interest) from date 27 October, Page 7 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 2015 i.e., after declaration of the Award to the actual payment is paid, by the Respondent to the Claimant.
(c) The Respondent is directed to pay following amounts to the Claimant:
Claim Amount as Claimed
Amount as Amount as Total
Claimed Claimed Interest Claim
Amount as accrued on i.e.
awarded claimed amount Principa
Principal Rs. up to 27-10-2015 l +
Interest
Rs.
Release all 84,46,103/- Simple interest Please
out 79,98,361/- at the rate of Workout
outstanding 1.5 times the
payment prime lending
rates of SBI up
to date of award
Escalation 21,99,157/- Simple interest Please
payments due 21,99,157/- at the rat eof Workout
to extension 1.5 times the
of Supply prime lending
period by the rates of SBI up
respondent in to date of award
Kheralu dvn.
Compensation 24,04,21,990 NOT CONSIDERED
of losses due Nil
to
blacklisting
Cost of legal 5,00,000/- NOT CONSIDERED, BOTH THE
and Nil PARTIES TO BEAR THEIR OWN
administrative COST
proceedings
carried out by
claimant
during pre
Page 8 of 118
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Arbitration
period
Cost of 2,00,000/- BOTH THE PARTIES TO BEAR
present Nil THEIR OWN COST
Arbitration
3 After declaration of the award, if the
payment was to be delayed for the amount of the sum and interest payable, it further directed simple interest at the rate to be 1.5 times the prime lending rate of SBI per annum to be compounded monthly, payable to the respondent claimant up to the date of actual payment.
Further Challenge under Section 34 of Arbitration Act and review application 4 This was challenged before the Commercial Court at City Civil Court, Ahmedabad in Commercial Review Application No.4 of 2017 and Civil Miscellaneous Application No.72 of 2016 filed under sections 33 and 34 of Page 9 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 the Arbitration and Conciliation Act, 1996.
5 The claimant had laid claim under the following heads:
Sr. Claim Principal Amount No. Rs. 1 Claim No.1-On account of non- 84,46,103 release of outstanding due amounts of the claim 2 Claim No.2-On account of 21,99,157 escalation payments which becomes due because of extension of supply period by the GWSSB. 3 Claim No.3- On account of 24,04,21,990 losses occurred due to wrongful and unjustified blacklisting. 4 Claim No.4- On account of cost 5,00,000 of legal and administrative proceedings. 5 Claim No.5- On account of cost 2,00,000 of arbitration proceedings. Total 25,17,67,250 6 Challenge by the Board to the award was on
the ground that no opportunity of hearing had been given and learned Arbitrator had travelled beyond the limit and the award Page 10 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 is alleged to have been vitiated by the breach of the public policy of India. It was argued that due to pre-occupation, the Board officials could not participate and without availing opportunity to the learned Counsel for the Board, the award had been passed. The Court, after availing opportunities to the parties, noted that it is not correct to say that learned Arbitrator had given only three meetings in the entire proceedings, two at Gandhinagar and one at Junagadh. After a detailed hearing of the parties on the strength of the material, which has been made available the Commercial Court, on perusal of the minutes of the meeting and communication exchanged between the parties, the Court held that the Board had delayed the arbitration proceedings at Page 11 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 each and every stage. It had also taken a lot of time to file the reply, which was done on 06.10.2013. About seven meetings were arranged by the learned Arbitrator.
However, at the request of the Board, the same had been postponed. Both the parties were duly intimated by the learned Arbitrator. The date of meeting on 15.10.2015 at 2:00 p.m. also had been conveyed to the parties. The Board had intimated the learned Arbitrator that because of pre-occupation, it was not feasible for the Board officials to remain present. The Court has also concluded that the learned Arbitrator noticed that the proceedings had been pending for more than three years. No error had been committed by the learned Arbitrator in passing the award. It also took note of section 24 of Page 12 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 the Arbitration and Conciliation Act that unless otherwise agreed by the parties, the Arbitral Tribunal shall decide whether to hold early hearing or whether the proceedings can be conducted on the basis of documents and other materials.
7 All issues had been discussed at length, in the end to say that the decision of Apex Court in M/S Navodaya Mass Entertainment vs M/S J.M.Combines,(2015) 5 SCC 698, has held that from the material on record, substitution of its own view by the Court in respect of the Arbitrator's findings is not permissible in absence of perversity, merely because two views are possible. In such an eventuality, the view of the learned Arbitrator would prevail.
Reference is also made to the decision of Swan Gold Mining Ltd vs Hindustan Copper Page 13 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Ltd, (2015) 5 SCC 739, where the proposition is settled that the Court shall not ordinarily substitute the award by its interpretation. Noticing the scope of section 34 of the Arbitration and Conciliation Act, 1996 Act ("the Arbitration Act" for short), the Court held that the learned Arbitrator being the sole Judge of quantity and quality of the evidence in the eventuality of any possibility of two views, view taken by the Arbitrator shall prevail. Accordingly, it had disposed of the pending Civil Applications on 17.10.2018.
8 Review was sought being Commercial Review Application NO.4 of 2017 seeking review of the order dated 31.01.2017 passed by the Commercial Court whereby it disposed of Civil Miscellaneous Application No.72 of Page 14 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 2016. After having considered the rival submissions of the learned counsel for the parties, the Court held that by earlier order the application was disposed on technicalities and not on merits.
Thereafter, the applicant has approached this Court by filing Special Civil Application No.12771 of 2017 which was disposed as withdrawn with permission to revive the proceedings before the Commercial Court, such order came to be passed on 02.08.2017.
9 By then, learned Arbitrator also had expired on 08.09.2016. In peculiar facts, the Commercial Court on merits noted mistake apparent on the face of the record and thus allowed Review Application No.4 of 2017, by order dated 25.09.2018. Thus, challenge by way of both the appeals is to Page 15 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 the rejection of application under section 34 of the Arbitration Act and also the order dated 25.09.2018 allowing the Review Application. Both since arise from the very award rendered by the learned Arbitrator, they are being decided by this common judgement.
10 Mr. Sudhir Nanavati, learned Senior advocate appearing with Mr.H.K.Baxi has urged that under section 34, corrections in the award cannot be made by the Court as it is the function of the learned Arbitrator alone and not of the Court. He further has urged that equity cannot override the legal principles. In the conflict between equality and law, it is the primacy of the law, which would need to be regarded.
11 Mr. N.L.Ramani, learned advocate appearing for the respondent has urged that on 27.10.2015, the award was passed and on Page 16 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 08.11.2015, the corrections were made. The status of the matter was inquired by the learned Arbitrator. According to him, the writ petition before this Court was preferred being Special Civil Application No. 12771 of 2017. Vide order dated 03.08.2017, the petition was permitted to be withdrawn and to prefer the First Appeal. Accordingly, First Appeal No. 5012 of 2018 and First Appeal No. 5013 of 2018 were preferred.
12 In the review application also the Court, after detailed consideration, the Appellate Court has chosen not to entertain the same while correcting the typographical errors. He has relied on the following authorities:-
(1) Delhi Airport metro Express pvt.
Ltd. vs. Delhi Metro Rail Corporation Ltd., 2021 (5) ALR (SC) 1.
(2) Manikaran Power Limited vs Valuhunt Advisors LLP, 2021 (5) ALR 454 (Delhi). (3) M/s. Modern Industries vs. M/s. Steel Authority Of India passed by the Page 17 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Apex Court in Civil Appeal Nos. 3305 of 3306 of 2010 on 15.04.20210.
(4) Ms. Chennai-Ennore Port Road Co.Ltd. vs. M/s. RDS Project Limited, 2016 (2) ALR 155 (Delhi) (5) The Project Director, National Highways No.45E and 220, National Highways Authority of India vs. M. Hakeem & another, 2021 (4) ALR 36(SC).
13 In rejoinder, learned senior advocate Mr. Nanavati has vehemently argued that the Tribunal could not have passed the award on 30.09.2015, even with the consent of the parties, whereas, here, without the consent, the award has been passed under section 29A, which provides for time limit for arbitral award of 12 months, whereas under section 29A(3), the parties are permitted to extend the time for six months. He has lamented that there is no rationale given by the Court in correcting the award from simple to compound interest. Nor does it have the Page 18 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 jurisdiction to so do it and, moreover, as time limit had expired when the award was passed in 2015 and thus, award itself is without jurisdiction and would be a nullity in the eyes of law.
14 Learned Senior advocate for the appellant has relied on the following authorities:
(1) B. Premanand and others vs. Mohan Koikal and others, (2011) 4 SCC 266. (2) Gyan Prakash Arya vs. Titan Industries Limited, 2021 SCC OnLine SC 1100.
(3) ACC Limited vs. Global Cements Limited, (2012) 7 SCC 71.
(4) Associated Engineering Co. vs. Government of Andra Pradesh and another, (1991) 4 SCC 93.
(5) National Highways Authority of India vs. Sri P. Nagaraju @ Cheluvaiah and another, 2022 LiveLaw (SC) 584.
Law on the Subject 15 Having heard both the sides and also having perused the material on record, it is necessary to make a mention at the outset that ordinarily, for the Court to Page 19 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 interfere at an appellate stage, the scope is defined and unless there is a perversity or capriciousness or the Court has acted arbitrarily and contrary to law and order is palpably incorrect, indulgence is not permitted. More particularly, an award passed by the Arbitrator cannot be set aside on the ground of the same being erroneous, as it is not open to the court to interfere with the award, merely because, in the Court's opinion, another view is feasible. If against the fundamental policy of Indian law or public interest, the same can be considered ground to set aside award.
16 Taking firstly the law on the point, the Supreme Court in the case of Delhi Airport metro Express pvt. Ltd. vs. Delhi Metro Rail Corporation Ltd. (supra) (DMRCL)was Page 20 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 considering whether in exercise of its power under section 37 of the Arbitration and Conciliation Act, the Delhi High Court was right in interfering with the award passed by the Arbitral Tribunal in favour of Delhi Airport Metro Express Pvt. Ltd.
(DAMEPL). The Court considered the power to review arbitral award by holding that the interference with the arbitral award by a Court in exercise of its jurisdiction under section 34 of the 1996 Act would only be when there is a patent illegality.
It also held that controversy of the statue, if it is linked to public policy or public interest, is the cause for setting aside the award, as being at the odds with the fundamental policy of the Indian law and, if the arbitral award shocks the conscience of the Court, it can Page 21 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 be set aside for being in conflict with the most basic notions of justice. The Court held that Arbitrator, since is a sole Judge of quality as well as quantity of evidence, the task of being a Judge on evidence before the Tribunal does not fall upon the Court in exercise of its jurisdiction under section 34.
" Contours of the Court's power to review arbitral awards
20. The 1996 Act was enacted to consolidate and amend the law relating to domestic arbitration, international commercial arbitration and enforcement of foreign arbitral awards and also to define the law relating to conciliation and for matters connected therewith, by taking into account the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration and the UNCITRAL Conciliation Rules. One of the principal objectives of the 1996 Act is to minimize the supervisory role of courts in the arbitral process. With respect to Part I of the 1996 Act, Section 5 imposes a bar on intervention by a judicial authority except where provided for, notwithstanding anything contained in any other law for the time being in force. An application for setting aside an arbitral award can only be made in accordance with provisions of Section 34 of the 1996 Act. Relevant provisions of Section 34 (as they Page 22 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 were prior to the Arbitration and Conciliation (Amendment) Act, 2015) read as under:-
"34. Application for setting aside arbitral award. -- (1) 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 subsection (3). (2) An arbitral award may be set aside by the Court only if-- (a) the party making the application furnishes proof that-- (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that-- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India.Page 23 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Explanation.--Without prejudice to the generality of sub-clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81. ..."
21. An amendment was made to Section 34 of the 1996 Act by the Arbitration and Conciliation (Amendment) Act, 2015 (hereinafter, 'the 2015 Amendment Act'). A perusal of the statement of objects and reasons of the 2015 Amendment Act would disclose that the amendment to the 1996 Act became necessary in view of the interpretation of the provisions of the 1996 Act by courts in certain cases which had resulted in delay of disposal of arbitration proceedings and increase in interference by courts in arbitration matters, which had the tendency to defeat the object of the 1996 Act. Initially, the matter was referred to the Law Commission of India to review the shortcomings in the 1996 Act in detail. The Law Commission of India submitted its 176th Report, recommending various amendments to the 1996 Act. However, the Justice Saraf Committee on Arbitration constituted by the Government, was of the view that the proposed amendments gave room for substantial intervention by the court and were also contentious. Thereafter, on reference, the Law Commission undertook a comprehensive study of the amendments proposed by the Government, keeping in mind the views of the Justice Saraf Committee and other stakeholders. The 246th Report of the Law Commission was submitted on 05.08.2014. Acting on the recommendations made by the Law Commission in its 246th Report, amendments by way of the 2015 Amendment Act were made to several provisions of the 1996 Act, including Page 24 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Section 34. The amended Section 34 reads as under: -
"34. Application for setting aside arbitral award. -- (1) 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 subsection (3). (2) An arbitral award may be set aside by the Court only if-- (a) the party making the application furnishes proof that-- (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that-- (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India.Page 25 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Explanation 1. --For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,-- (i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or (ii) it is in contravention with the fundamental policy of Indian law; or (iii) it is in conflict with the most basic notions of morality or justice. Explanation 2. --For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute. (2-A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by re- appreciation of evidence. ..."
22. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the 1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section
34. While deciding applications filed under Section 34 of the Act, courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or re-appreciation of matters of fact as well as law. (See: Uttarakhand Purv Sainik Kalyan Nigam Limited. v. Northern Coal Field Limited. Bhaven Construction Through Authorised Signatory Premjibhai K. Shah v. Executive Engineer Sardar Sarovar Narmada Nigam Ltd. and Another 3 and Rashtriya Ispat Nigam Limited v. Dewan Chand Ram Saran 4 ).
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23. For a better understanding of the role ascribed to courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of this Court in Sangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) 5 wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act. The relevant passages of the judgment in Ssangyong (supra) are noted as under: -
"34. What is clear, therefore, is that the expression "public policy of India", whether contained in Section 34 or in Section 48, would now mean the "fundamental policy of Indian law" as explained in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204] i.e. the fundamental policy of Indian law would be relegated to "Renusagar" understanding of this expression. This would necessarily mean that Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] expansion has been done away with. In short, Western Geco [ONGC v. Western Geco International Ltd., (2014) 9 SCC 263 :
(2014) 5 SCC (Civ) 12] ,as explained in paras 28 and 29 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a)(iii) of the 1996 Act, these continue to be grounds of challenge Page 27 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 of an award, as is contained in para 30 of Associate Builders [Associate 24 | P a g e Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] .
35. It is important to notice that the ground for interference insofar as it concerns "interest of India" has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". This again would be in line with paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49: (2015) 2 SCC (Civ) 204], or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco [ONGC v. Western Geco International Ltd., 25 | P a g e (2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] ,as understood in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , and paras 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now Page 28 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, para 42.1 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's Page 29 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 view is not even a possible view to take.
Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A).
41. What is important to note is that a decision which is perverse, as understood in paras 31 and 32 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , while no longer being a ground for challenge under "public policy of India", would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.
" 24. This Court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by courts while examining the validity of the arbitral awards. The limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well- established principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of courts setting aside arbitral awards, after dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, Page 30 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the object of the 1996 Act and the endeavours made to preserve this object, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this Court would become a dead letter if arbitral awards are set aside by categorising them as perverse or patently illegal without appreciating the contours of the said expressions.
25. Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression 'patent illegality'. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression 'patent illegality'. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair-minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no Page 31 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression 'patent illegality'.
26. Section 34 (2) (b) refers to the other grounds on which a court can set aside an arbitral award. If a dispute which is not capable of settlement by arbitration is the subject-matter of the award or if the award is in conflict with public policy of India, the award is liable to be set aside. Explanation (1), amended by the 2015 Amendment Act, clarified the expression 'public policy of India' and its connotations for the purposes of reviewing arbitral awards. It has been made clear that an award would be in conflict with public policy of India only when it is induced or affected by fraud or corruption or is in violation of Section 75 or Section 81 of the 1996 Act, if it is in contravention with the fundamental policy of Indian law or if it is in conflict with the most basic notions of morality or justice. In Ssangyong (supra), this Court held that the meaning of the expression 'fundamental policy of Indian law' would be in accordance with the understanding of this Court in Renusagar Power Co. Ltd. v.
General Electric Co. 6 In Renusagar (supra), this Court observed that violation of the Foreign Exchange Regulation Act, 1973, a statute enacted for the 'national economic interest', and disregarding the superior courts in India would be antithetical to the fundamental policy of Indian law. Contravention of a statute not linked to public policy or public interest cannot be a ground to set at naught an arbitral award as being discordant with the fundamental policy Page 32 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 of Indian law and neither can it be brought within the confines of 'patent illegality' as discussed above. In other words, contravention of a statute only if it is linked to public policy or public interest is cause for setting aside the award as being at odds with the fundamental policy of Indian law. If an arbitral award shocks the conscience of the court, it can be set aside as being in conflict with the most basic notions of justice. The ground of morality in this context has been interpreted by this Court to encompass awards involving elements of sexual morality, such as prostitution, or awards 6 1994 Supp (1) SCC 644 seeking to validate agreements which are not illegal but would not be enforced given the prevailing mores of the day.
27. In light of the principles elucidated herein for interference with an arbitral award by a court in exercise of its jurisdiction under Section 34 of the 1996 Act, we proceed to consider the questions that arise in these Appeals as to whether the Division Bench of the High Court was right in setting aside the award of the Arbitral Tribunal dated 11.05.2017.
xxx xxx xxx
xxx xxx xxx
35. The Division Bench referred to various factors leading to the termination notice, to conclude that the award shocks the conscience of the court. The discussion in paragraph 97 of the impugned judgement amounts to appreciation or reappreciation of the facts which is not permissible under Section 34 of the 1996 Act. The Division Bench further held that the fact of the AMEL being operated without any adverse event for a period of more than four years since Page 33 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 the date of issuance of the CMRS certificate, was not given due importance by the Arbitral Tribunal. As the arbitrator is the sole judge of the quality as well as the quantity of the evidence, the task of being a judge on the evidence before the Tribunal does not fall upon the court in exercise of its jurisdiction under Section 34.8 On the basis of the issues submitted by the parties, the Arbitral Tribunal framed issues for consideration and answered the said issues. Subsequent events need not be taken into account.
36. For the aforementioned reasons, the conclusion of the Division Bench that the award of the Arbitral Tribunal suffers from patent illegality and shocks the conscience of the court is held to be erroneous. "
16.1 Appeal filed by DAMEPL was allowed and the judgement of the Division Bench was set aside, whereas, the appeal filed by DMRCL was dismissed.
16.2 In the case of M. Hakeem & another(supra), the appeal raised interesting question of law as to whether the power of Court under section 34 of the Arbitration and Conciliation Act, 1996 to set aside the award of Arbitrator would include the power to modify such an award. The Court Page 34 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 held that the powers, as per the UNCITRAL model, are to set aside the award under the provision of the Act on very limited grounds or to remand the matter on account of grounds specified.
16.3 The Division Bench of Madras High Court disposed of large number of appeals filed under section 34 of the Act laying down as a matter of law that deals in so far as arbitral award made under the National Highways Act were concerned, the period under section 34 of the Arbitration Act must be so read as to enhance the compensation awarded by the learned Arbitrator.
"13. Section 34 of the Arbitration Act, 1996 occurs in Chapter VII under the title "Recourse against arbitral award". We are directly concerned with sub-sections (1) and (4) of Section 34 which are set out hereunder. 34. Application for setting aside arbitral award. --
(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-Page 35 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 section (2) and sub-section (3). xxx xxx xxx (4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award. xxx xxx xxx
14. What is important to note is that, far from Section 34 being in the nature of an appellate provision, it provides only for setting aside awards on very limited grounds, such grounds being contained in sub-sections (2) and (3) of Section 34. Secondly, as the marginal 18 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 in accordance with sub-sections (2) and (3).
"Recourse" is defined by P Ramanatha Aiyar's Advanced Law Lexicon (3rd Edition) as the enforcement or method of enforcing a right. Where the right is itself truncated, enforcement of such truncated right can also be only limited in nature. What is clear from a reading of the said provisions is that, given the limited grounds of challenge under sub-sections (2) and (3), an application can only be made to set aside an award. This becomes even clearer when we see subsection (4) under which, on receipt of an application under subsection (1) of Section 34, the court may adjourn the Section 34 proceedings and give the arbitral tribunal an opportunity to resume the arbitral proceedings or take such action as will eliminate the grounds for setting aside the arbitral award.
Here again, it is important to note that it is the opinion of the arbitral tribunal which counts in order to eliminate the grounds for Page 36 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 setting aside the award, which may be indicated by the court hearing the Section 34 application."
16.4 The Court held that section 34 is modeled on UNCITRAL model law on International Commercial Arbitration,1985 and there is no power given to the Court, which hears the challenge to the award, to modify the same. Relevant paragraphs are reproduced as under:
"40. It can therefore be said that this question has now been settled finally by at least 3 decisions of this Court. Even otherwise, to state that the judicial trend appears to favour an interpretation that would read into Section 34 a power to modify, revise or vary the award would be to ignore the previous law contained in the 1940 Act; as also to ignore the fact that the 1996 Act was enacted based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 which, as has been pointed out in Redfern and Hunter on International Arbitration, makes it clear that, given the limited judicial interference on extremely limited grounds not dealing with the merits of an award, the 'limited remedy' under Section 34 is coterminus with the 'limited right', namely, either to set aside an award 41 or remand the matter under the circumstances mentioned in Section 34 of the Arbitration Act, 1996.Page 37 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
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41. A look at the Arbitration Acts of England, the United States, Canada, Australia and Singapore also lead to the same conclusion. In each of those legislative measures, there are express provisions which permit the varying of an award, unlike Section 34 of the present Act. In para 51, the learned Single Judge then refers to recourse to a court against an arbitral award, and argues that a statute cannot be interpreted in such manner as to make the remedy worse than the disease. As has been pointed out by us, the "disease" can only be cured in very limited circumstances thus limiting the remedy as well. Also, to assimilate the Section 34 jurisdiction with the revisional jurisdiction under Section 115 of the Code of Civil Procedure, 1908 [the "CPC"], is again fallacious. Section 115 of the CPC expressly sets out the three grounds on which a revision may be entertained and then states that the High Court may make 'such order as it thinks fit'. These latter words are missing in Section 34, given the legislative scheme of the Arbitration Act, 1996. For all the aforesaid reasons, with great respect to the learned Single Judge, it is not correct in law and therefore stands 42 overruled.
42. Coming to the submission in support of the impugned judgment that the fact that the Central Government appoints an arbitrator and the arbitration would therefore not be consensual, resulting in a government servant rubber stamping an award which then cannot be challenged on its merits, cannot possibly lead to the conclusion that, therefore, a challenge on merits must be provided driving a coach and four through Section 34 of the Arbitration Act, 1996. The impugned judgment is also incorrect on this score.Page 38 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
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43. Col. Balasubramanian, however referred to a passage in Jaishri Laxmanrao Patil v. Chief Minister, 2021 SCC OnLine SC 362 (at paras 412 to 415). He argued that 'purposive construction' referred to by Bennion in his classic on Statutory Interpretation must be applied by us on the facts of this case as in legislations dealing with land acquisition, a pragmatic view is required to be taken and the law must be interpreted purposefully and realistically so that the benefit reaches the masses. We may only add that the judgment cited by Col. Balasubramanian is a judgment dealing with a constitutional provision - Article 342A of the Constitution. We must never forget the famous statement of Chief Justice Marshall in 43 M'Culloch v. State of Maryland, 17 US 316 (1819) that "it is a constitution we are expounding" - and the Constitution is a living document governing the lives of millions of people, which is required to be interpreted in a flexible evolutionary manner to provide for the demands and compulsions of changing times and needs.
44. The distinction between constitutional and statutory interpretation was felicitously put by Justice Aharon Barak, President of the Supreme Court of Israel thus:
"The task of expounding a Constitution is crucially different from that of construing a statute. A statute defines present rights and obligations. It is easily enacted and as easily repealed. A Constitution, by contrast, is drafted with an eye to the future. Its function is to provide a continuing framework for the legitimate exercise of governmental power and, when joined by a Bill or Charter of Rights, for the unremitting protection of individual rights and liberties. Once enacted, its provisions cannot easily be repealed or amended. It must, therefore, be capable of Page 39 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 growth and development over time to meet new social, political and historical realities often unimagined by its framers. The judiciary is the guardian of the Constitution and must, in interpreting its provisions, bear these considerations in mind." This quote has been cited in Rameshwar Prasad (VI) v. Union of India, (2006) 2 SCC 1 (at pages 91,92). "Purposive construction" of statutes, relevant in the present context, is referred to in a recent concurring judgment by Nariman, 44 J. in Eera v. State (NCT of Delhi), (2017) 15 SCC 133, as the theory of "creative interpretation". However, even "creative interpretation" has its limits, which have been laid down in the aforesaid judgment as follows: -
139. A reading of the Act as a whole in the light of the Statement of Objects and Reasons thus makes it clear that the intention of the legislator was to focus on children, as commonly understood i.e. persons who are physically under the age of 18 years. The golden rule in determining whether the judiciary has crossed the Lakshman Rekha in the guise of interpreting a statute is really whether a Judge has only ironed out the creases that he found in a statute in the light of its object, or whether he has altered the material of which the Act is woven. In short, the difference is the well-known philosophical difference between "is" and "ought". Does the Judge put himself in the place of the legislator and ask himself whether the legislator intended a certain result, or does he state that this must have been the intent of the legislator and infuse what he thinks should have been done had he been the legislator. If the latter, it is clear that the Judge then would add something more than what there is in the statute by way Page 40 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 of a supposed intention of the legislator and would go beyond creative interpretation of legislation to legislating itself. It is at this point that the Judge crosses the Lakshman Rekha and becomes a legislator, stating what the law ought to be instead of what the law is.
46. Quite obviously if one were to include the power to modify an award in Section 34, one would be crossing the Lakshman Rekha and doing what, according to the justice of a case, ought to be done. In interpreting a statutory provision, a Judge must put himself in the shoes of Parliament and then ask whether Parliament intended this result. Parliament very clearly intended that no power of modification of an award exists in Section 34 of the Arbitration Act, 1996. It is only for Parliament to amend the aforesaid provision in the light of the experience of the courts in the working of the Arbitration Act, 1996, and bring it in line with other legislations the world over."
xxx xxx xxx
56. As a matter of fact, 7 learned Judges of this Court in Nagpur Improvement Trust v. Vithal Rao, (1973) 1 SCC 500 held as follows:
- 26. It is now well-settled that the State can make a reasonable classification for the purpose of legislation. It is equally well- settled that the classification in order to be reasonable must satisfy two tests: (i) the classification must be founded on intelligible differentia and (ii) the differentia must have a rational relation with the object sought to be achieved by the legislation in question. In this connection it must be borne in mind that the object itself should be lawful. The object itself cannot be discriminatory, for Page 41 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 otherwise, for instance, if the object is to discriminate against one section of the minority the discrimination cannot be justified on the ground that there is a reasonable classification because it has rational relation to the object sought to be achieved. 52 27. What can be reasonable classification for the purpose of determining compensation if the object of the legislation is to compulsorily acquire land for public purposes? 28. It would not be disputed that different principles of compensation cannot be formulated for lands acquired on the basis that the owner is old or young, healthy or ill, tall or short, or whether the owner has inherited the property or built it with his own efforts, or whether the owner is politician or an advocate. Why is this sort of classification not sustainable? Because the object being to compulsorily acquire for a public purpose, the object is equally achieved whether the land belongs to one type of owner or another type.
29. Can classification be made on the basis of the public purpose for the purpose of compensation for which land is acquired? In other words can the Legislature lay down different principles of compensation for lands acquired say for a hospital or a school or a Government building? Can the Legislature say that for a hospital land will be acquired at 50% of the market value, for a school at 60% of the value and for a Government building at 70% of the market value? All three objects are public purposes and as far as the owner is concerned it does not matter to him whether it is one public purpose or the other. Article 14 confers an individual right and in order to justify a classification there should be something which justifies a different treatment to this individual right. It seems Page 42 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 to us that ordinarily a classification based on the public purpose is not permissible under Article 14 for the purpose of determining compensation. The position is different when the owner of the land himself is the recipient of benefits from an improvement scheme, and the benefit to him is taken into consideration in fixing compensation. Can classification be made on the basis of the authority acquiring the land? In other words can different principles of compensation be laid if the land is acquired for or by an Improvement Trust or 53 Municipal Corporation or the Government? It seems to us that the answer is in the negative because as far as the owner is concerned it does not matter to him whether the land is acquired by one authority or the other. 30. It is equally immaterial whether it is one Acquisition Act or another Acquisition Act under which the land is acquired. If the existence of two Acts could enable the State to give one owner different treatment from another equally situated the owner who is discriminated against, can claim the protection of Article 14."
17 In the case of M/s. Mangalwar Filling Station (supra) the appeal had been preferred under section 37 of the Arbitration and Conciliation Act. Relevant paragraphs are reproduced as under:-
"15. Having heard the learned counsel for the parties, we are of the opinion that it is essential to first outline the scope of this Court's jurisdiction under Section 37 of the Page 43 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Act. The Supreme Court in MMTC Ltd. vs. Vedanta Ltd. (2019) 4 SCC 163 while discussing the scope of interference with an arbitral award has held as under:- "11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive FAO (COMM) 75/2021 law of India, contravention of the 1996 Act, and contravention of the terms of the contract. 12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the Page 44 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.
(See Associate Builders v. DDA (2015) 3 SCC
49. Also see ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation (2006) 4 SCC 445 and McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181). xxx xxx xxx xxx 14. 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 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."
16. Consequently, while exercising appellate jurisdiction under Section 37 of the Act, this Court has similar restrictions as prescribed under Section 34 of the Act i.e. this Court can only ascertain whether the exercise of power by the learned District Judge under Section 34 of the Act was lawful or not. Also, once an arbitral award has been confirmed in an application filed under Section FAO (COMM) 75/2021 34 of the Act, the Appellate Court must be extremely cautious in disturbing concurrent findings of the fact and law as they are ordinarily not amenable to interference under Section 37 of the Page 45 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Act. Further, it is settled law that the Appellate Court should generally not interfere unless it is apparent that the perversity of the arbitral award goes to the root of the case, without a possibility of alternative interpretation that might sustain the award. THE CONTENTION THAT THE WIRE OF THE MECHANICAL TOTALIZER HAD SNAPPED DUE TO RESPONDENT'S MISHANDLING IS CONTRARY TO THE VIDEO OF THE INSPECTION [COMPREHENSIVE CD; FILED VIDE DIARY NUMBER 334593] IN FACT, THERE WAS A BLACK TAPE ATTACHED TO THE WIRES, WHICH WAS NOT EXPLAINED BY THE APPELLANT.
CONSEQUENTLY, THIS COURT IS IN AGREEMENT WITH THE FINDINGS OF THE LEARNED DISTRICT JUDGE THAT THE LEARNED ARBITRATOR HAD RIGHTLY CONSIDERED THE EVIDENCE ON RECORD TO CONCLUDE THAT THE TAMPERING OF DISPENSING UNIT, AS EVIDENT FROM THE BLACK TAPE, WOULD AMOUNT TO 'CRITICAL IRREGULARITY'.
17. In the present case, the Appellant has challenged the arbitral award and the order passed by the learned District Judge primarily on the ground that the alleged irregularities committed by the Appellant had not been proved conclusively and that the wire of the mechanical totalizer had snapped due to respondent's mishandling.
18. This Court finds that the said contention is contrary to facts and evidence on record inasmuch as the video of the inspection [Comprehensive CD; filed vide diary number 334593] placed on record by the respondent proves that there was no mishandling of the panel of the Dispensing Unit. In fact, there was FAO (COMM) 75/2021 a Page 46 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 black tape attached to the wires, which was not explained by the Appellant before the learned Arbitrator despite being given due opportunity.
Consequently, this Court is in agreement with the finding of the learned District judge that the learned Arbitrator had rightly considered the evidence on record to conclude that the tampering of Dispensing Unit, as evident from the black tape, would amount to 'critical irregularity'. THE APPELLANT'S NEW PLEA, TO RELY ON THE READINGS OF THE ELECTRONIC TOTALIZER, CAN BE DISREGARDED AS THE FACT THAT THE ELECTRONIC TOTALIZER WAS FULL OF GLITCHES WAS NOT DISPUTED AND THE READINGS OF MECHANICAL TOTALISER WERE ALONE TAKEN AND CONSIDERED BY THE RESPONDENT FOR STOCK VERIFICATION. FURTHER, IN ORDER TO SUBSTANTIATE ITS ARGUMENT, THE APPELLANT HAD PLACED RELIANCE ON NEW DOCUMENTS THAT HAD NEITHER BEEN PRODUCED BEFORE THE LEARNED ARBITRATOR NOR BEFORE THE LEARNED DISTRICT JUDGE.
19. This Court is also of the view that the Appellant's new plea regarding automated/electronic totalizer can be disregarded as the fact that the electronic totalizer was full of glitches was not disputed. In fact, the Officer of the respondent had very clearly stated in his evidence that only the readings of the mechanical totalizer were relevant for stock verification. The relevant portion of evidence of respondent's Officer -Mr. M.E. Zuberi/RW-1 is as under:-
"With respect to the contention of the Claimant that the Respondent Page 47 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Corporation has not provided any guidelines or source to indicate that the Respondent is required to consider the readings from a Mechanical Totaliser and not Electronic Totaliser, the Deponent submits the following, which substantiates the said contention of the Respondent Corporation: FAO (COMM) 75/2021 i. the Respondent Corporation has never ever instructed the Claimant to record the readings of the Electronic Totaliser and/or to maintain a DSR or Electronic Totaliser;
ii. the Respondent Corporation has never conducted even a single inspection of the Claimant's RO on the basis of the Electronic Totaliser readings."
20. Even the Appellant, in his statement of claim as also in his Rejoinder to the Statement of Defence had stated, "on 30.1.2014 before the officials of the Respondent visited the petrol and diesel pump or station of the Claimant for surprise inspection the reading of the mechanical totaliser had already been entered in the Daily Sale Register..........." Consequently, admitting that the readings of mechanical totaliser were taken and considered by the Respondent for stock verification and only the readings of mechanical totaliser were to be recorded in the daily stock register which had to be manually maintained by the dealer.
21. Moreover, reliance placed upon the readings of the automated/electronic totaliser is misplaced for the simple reason that the automation system at Petitioner's Retail Outlet was Page 48 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 admittedly among the first few automation systems and was full of glitches. In this regard, it was admitted by the CW-1 - Rajinder Kumar Patni (dealer) that, "it is correct that our petrol pump was the first one to have been automated. It is correct that our pump was automated in the Phase I Category while as presently Phase VI Category is on. It is correct that automation system installed at our pump was faced with glitches and we had complained to the Respondents number of times" FAO (COMM) 75/2021
22. Further, in his evidence, the officer of the Respondent Mr. M.E. Zuberi/RW-1 had stated that "since admittedly, the Automation system which was used and installed at the Claimant's RO at the relevant point of time, was in its initial phase i.e. Phase-I, it admittedly suffered from several glitches, on account of which, stock verification by the Respondent Corporation by using the electronic totaliser was not possible". Further, it was stated by RW-1 in his cross examination as under:-
"Q.6 Is it correct that when the unit is on automation mode all the data is recorded and updated/uploaded on a server maintained by the Corporation on a daily basis? Ans. Not necessarily as at times certain data is not transferred in the automation server/system even if the unit is on automation mode. The reason for this are technical glitches especially on account of the fact that the system which was doing this job is categorized as Phase 1 system and pertained to Page 49 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 initial period. (Vol.) We keep on improving the system and at presently phase VI is in operation."
18 In the case of Manikaran Power Limited (supra),the appeal was preferred under section 34 of the Arbitration Act.
Considering the scope of interference in respect of arbitral award, which is very limited, as held in plethora of decisions, it was contended before the Delhi High Court that the arbitral award dealt with the issues not falling within the terms of arbitration.
Attention was also invited to the arbitration clause and it was contended that the same did not permit arbitration of claims made after termination of contract. By referring to the decision of South East Asia Marine Engineering and Constructions Limited Vs. Oil India Limited (2020) 5 SCC 164 , it was Page 50 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 contended that arbitral Tribunal had misconstrued the terms of contract.
18.1 However, the Court held that the view taken by the arbitral Tribunal was not even a possible interpretation of the clauses of the contract and the arbitral award held to suffer from perversity, as the same was not found to have applied to the interpretation of the contract between the parties, whereas in the arbitral award, the Court held thus:
"14. We are however unable to agree that the same can apply to the interpretation of the contract between the parties wherein in the subject arbitral award. Under the Clauses of the agreement with the appellant, the respondent remained entitled to its professional fee even in the event of the appellant deciding not to proceed with the sanctions or not involving the respondent in completion of the activities covered by the contract. It cannot be said that the view taken by the Arbitral Tribunal, that the professional fee claimed by the respondent, was indeed due, cannot be said to be such which was not possible on interpretation of terms of the agreement. In fact, hearing the present matter leaves us with an impression that men of trade and commerce, though eager at the time of entering into commercial Page 51 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 relationships to provide for arbitration of disputes, are still unprepared to be bound by the Arbitral Award, if against them. Once faced with an adverse FAO (COMM) 5/2021 arbitral award, they want the same procedure, as available in the judicial system of the country and desire to take the matter till the end. It is about time that men of trade and commerce take a call, whether are willing to be bound by the spirit of arbitration i.e. of being bound by the decision of a Tribunal of their own choice, or want their disputes arising from commercial relationship to be adjudicated in the Courts established in accordance with the legal system of the country. Without making a firm choice, arbitration can never be successful in spirit, in the country and it is high time that commercial men give a serious thought thereto.
15. The counsel for the respondent, besides reminding us of narrow scope of interference in the proceedings under Section 37 of the Arbitration Act, has contended that in the present case there are concurrent findings in both fact and law in favour of the respondent and are not interfereable at this stage. Attention is drawn to paragraphs 8 to 10 of Reliance Industries Ltd. Vs. GAIL India Limited MANU/DE/0491/2020 (DB) and to MMTC Ltd. Vs. Vedanta Limited (2019) 4 SCC 163. Reference is also made to Bharat Sanchar Nigam Limited Vs. Aksh Optifibre Limited (2021) 277 DLT 348 (DB). It is argued that it has been held therein that a plausible view taken by the Arbitral Tribunal is not to be disturbed."Page 52 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 19 In the case of M/s. Modern Industries (supra) the question was about the meaning of expression "amount due from a buyer, together with the amount of interest"
under sub-section (1) of section 6 of the Interest on Delayed Payment to Small Scale and Ancillary Industrial Undertakings Act, 1993 and then, as to whether the Industry Facilitation Council cannot go beyond the scope of interest on delayed payments upon the matter being referred to it by any party to dispute under sub-section (2) of section
6. The Court held that the obligation of payment of higher interest under the Act is mandatory giving meaning to the expression ' amount due from a buyer together with the amount of interest'. The Court held that the reasoning of the High Court is too difficult to accept. The interpretation was held to be Page 53 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 fallacious for reasons indicated in the judgement as under:-
"33. The Full Bench held that the suit is maintainable for recovery of the outstanding principal amount, if any, along with the interest on delayed payments as calculated under Sections 4 and 5 of the 1993 Act. It said :
"The opening words of Section 6(1) "the amount due from the buyer, together with the amount of interest....."
can only mean that the principal sum due from the buyer as well as or along with the amount of interest calculated under the provisions of the Act, are recoverable. The word 'together' here would mean 'as well as' or 'alongwith'. This cannot mean that the principal sum must be due on the date of the filing of the suits. The suits are maintainable for recovery of the outstanding, principal amount, if any, along with the amount of interest on the delayed payments as calculated under Sections 4 and 5 of the Act. We are unable to agree with that if the principal sum is not due, no suit would lie for the recovery of the interest on the delayed payments, which might have already accrued. If such an interpretation is given the very object of enacting the Act would be frustrated. The Act had been enforced to see that small scale industries get the payment regarding supply made by them within the prescribed period and in case of delay in payments the interest would be at a much higher rate (1 1/2 times of lending rate charged by the State Bank of India). The obligation of payment of higher interest Page 54 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 under the Act is mandatory. Sections 4 and 5 of the Act of 1993 contain a non- obstante clause i.e. "Notwithstanding any thing contained in any agreement between the buyer and the supplier". In other words, the parties to the contract cannot even contract out of the provisions of the 1993 Act. Even if such provision that interest under the Act on delay meant would not be chargeable is incorporated in 23 the contract, Sections 4 and 5 of the Act of 1993 would still prevail as the very wording of these sections indicate. Take for instance that the buyer has not paid the outstanding amount of the supply by the due date. After much delay he offers the outstanding amount of the supply to the supplier. If the argument of the learned counsel for the appellant is to be accepted, then, if the supplier accepts entire amount he would be losing, his right to recover the amount of interest on the delayed payment under the Act. Therefore, he would have to refuse to accept the amount of payment and then file a suit for recovery of the principal amount and the interest on the delayed payment under the Act. The Act does not create any embargo against supplier not to accept principal amount at any stage and thereafter file a suit for the recovery or realization of the interest only on the delayed payments under the Act."
34. The word 'due' has variety of meanings, in different context it may have different meanings. In its narrowest meaning, the word 'due' may import a fixed and settled obligation or liability. In a wider context the amount can be said to be 'due', which may be Page 55 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 recovered by action. The amount that can be claimed as 'due' and recoverable by an action may sometimes be also covered by the expression 'due'. The expression 'amount due from a buyer' followed by the expression 'together with the amount of interest' under sub-section (1) of Section 6 of 1993 Act must be interpreted keeping the 24 purpose and object of 1993 Act and its provisions, particularly Sections 3, 4 and 5 in mind. This expression does not deserve to be given a restricted meaning as that would defeat the whole purpose and object of 1993 Act. Sub-section (1) of Section 6 provides that the amount due from buyer together with amount of interest calculated in accordance with the provisions of Sections 4 and 5 shall be recoverable by the supplier from the buyer by way of suit or other proceeding under any law for the time being in force. If the argument of senior counsel for the buyer is accepted, that would mean that where the buyer has raised some dispute in respect of goods supplied or services rendered by the supplier or disputed his liability to make payment then the supplier shall have to first pursue his remedy for recovery of amount due towards goods supplied or services rendered under regular procedure and after the amount due is adjudicated, initiate action for recovery of amount of interest 25 which he may be entitled to in accordance with Sections 4 and 5 by pursuing remedy under subsection (2) of Section 6. We are afraid the scheme of Section 6 of 1993 Act read with Sections 3,4 and 5 does not envisage multiple proceedings as canvassed. Rather, whole idea of Section Page 56 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 6 is to provide single window to the supplier for redressal of his grievance where the buyer has not made payment for goods supplied or services rendered in its entirety or part of it or such payment has not been made within time prescribed in Section 3 for whatever reason and/or for recovery of interest as per Sections 4 and 5 for such default. It is for this reason that sub-section (1) of Section 6 provides that 'amount due from the buyer together with the amount of interest calculated in accordance with the provisions of Sections 4 and 5' shall be recoverable by the supplier from buyer by way of a suit or other legal proceeding. Sub-section (2) of Section 6 talks of a dispute being referred to IFC in respect of the 26 matters referred to in sub-section (1), i.e. the dispute concerning amount due from a buyer for goods supplied or services rendered by the supplier to buyer and the amount of interest to which supplier has become entitled under Sections 4 and 5. It is true that word 'together' ordinarily means conjointly or simultaneously but this ordinary meaning put upon the said word may not be apt in the context of Section 6. Can it be said that the action contemplated in Section 6 by way of suit or any other legal proceeding under sub- section (1) or by making reference to IFC under sub-section (2) is maintainable only if it is for recovery of principal sum along with interest as per Sections 4 and 5 and not for interest alone? The answer has to be in negative. We approve the view of Gauhati High Court in Assam State Electricity Board12 that word 'together' in Section 6(1) would mean Page 57 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 'alongwith' or 'as well as'. Seen thus, the action under Section 6(2) could be maintained for recovery of principal 27 amount and interest or only for interest where liability is admitted or has been disputed in respect of goods supplied or services rendered. In our opinion, under Section 6(2) action by way of reference to IFC cannot be restricted to a claim for recovery of interest due under Sections 4 and 5 only in cases of an existing determined, settled or admitted liability. IFC has competence to determine the amount due for goods supplied or services rendered in cases where the liability is disputed by the buyer. Construction put upon Section 6(2) by learned senior counsel for the buyer does not deserve to be accepted as it will not be in conformity with the intention, object and purpose of 1993 Act. Preamble to 1993 Act, upon which strong reliance has been placed by learned senior counsel, does not persuade us to hold otherwise. It is so because Preamble may not exactly correspond with the enactment; the enactment may go beyond Preamble.
35. In Secur Industries Ltd. v. Godrej & Boyce Mfg. Co. Limited and Another13 , this Court observed that sub-section (2) of Section 6 expressly incorporates the provisions of the Arbitration and Conciliation Act, 1996 and it further creates a legal fiction whereby disputes referred to IFC are to be deemed to have been made pursuant to an arbitration agreement as defined in sub-section (1) of Section 7 of that Act. There is, thus, no reason as to why IFC, which acts as an Arbitrator or Conciliator under the Page 58 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 provisions of Arbitration and Conciliation Act, 1996, cannot deal with the dispute concerning principal amount due to the supplier for the goods supplied or services rendered.
36. The High Court, in the impugned order, however, held that expression 'amount due from a buyer' would be amount admitted to be due in its plain and natural meaning and when admitted due amount is not paid by the buyer, the provisions of Sections 3 to 6 along with other provisions of 1993 13 (2004) 3 SCC 447 29 Act would be applicable. In the opinion of High Court since the buyer has alleged breach of contract by the supplier, there was no amount admitted to be due or settled amount and, therefore, there was no question of delayed payment and reference of the dispute to the IFC under sub-section(2) of Section 6 was without jurisdiction. The High Court in the impugned order held thus :
"16. Therefore, the said matter before the IFC would be limited to the amount due from the buyer together with amount of interest calculated only in accordance with the provisions of Sections 4 and 5 of the Act. Section 4 applies only when Section 3 is applied. Therefore, the ultimate focus in the Act is on Section 3 as already discussed above. Section 3 speaks about the settled amount and not the amount which may be calculated according to the calculations of the supplier disputed by the buyer or where there is dispute regarding delayed supply causing loss to the buyer or defective supply of the materials. Therefore "the amount due from a buyer would be interpreted in its plain and natural Page 59 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 manner i.e. amount admitted to be due"
and when it is not paid by the buyer, the provisions of Section 3 to 6 along with other provisions of the Act would be applicable.
17. In the instant case, the buyer i.e. the petitioner has alleged that the supply was not made by the opposite party No. 2 in time and there was delay in supply of materials which caused loss to the petitioner and by the time of supply of materials, technology has already been changed. Therefore, in nutshell, the petitioner has alleged breach of contract by opposite party No. 2 and therefore, in case of allegation of breach of contract, it cannot be said that there is any amount admitted to be due or settled amount. Hence, there is no question of delayed payment and referring the dispute to the IFC under the provisions of Subsection 2 of the Section 6, to our mind, would be without jurisdiction.
37. We find it difficult to accept the reasoning of the High Court. The interpretation put by the High Court upon the expression 'amount due from the buyer' is fallacious for the reasons indicated above which we need not respect."
20 At this juncture, the decisions sought to be relied upon by the other side would require the reference.
21 In the case of B. Premanand and others (supra), the dispute was about inter se Page 60 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 seniority on the post of Block Development Officer between general category candidate and scheduled caste. The Court held that the Full Bench and the learned Single Judge had relied on equity, justice and good conscience rather than law and that approach is held to be incorrect. When there is conflict between law and equity, it is the law which is to prevail. Equity can only supplement the law when there is a gap in it and it cannot supplant the law. Relevant paragraphs are reproduced as under:
"6.Mr. Shekhar has relied on the decision of this Court in Dalilah Sojah vs. State of Kerala & Others, (1998) 9 SCC 641. That decision, in our opinion, is clearly distinguishable as it makes no reference to Rule 27(c) of the Rules. Moreover, the observation therein that "when two vacancies arose on 6.10.72 the appellant had a right to be appointed against one of the vacancies" is clearly against the settled legal position that even a selected candidate has no indefeasible right to be appointed vide Page 61 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Constitution Bench decision in Shankarsan Dash vs. Union of India, AIR 1991 SC 1612, and several decisions thereafter. In our opinion, Rule 27(c) of the Rules is plain and clear. Hence, the literal rule of interpretation will apply to it. No doubt, equity may be in favour of the respondents because they were selected earlier, but as observed earlier, if there is a conflict between equity and the law, it is the law which must prevail. The law, which CIVIL APPEAL NO. 2684 OF 2007 -5- is contained in Rule 27(c), is clearly in favour of the appellants. Hence, we cannot accept the submission of the learned senior counsel for the private respondents. The language of Rule 27(c) of the Rules is clear and hence we have to follow that language. In M/s. Hiralal Ratanlal vs. STO, AIR 1973 SC 1034, this Court observed:
"22....In construing a statutory provision the first and foremost rule of construction is the literaly construction. All that the Court has to see at the very outset is what does the provision say. If the provision is unambiguous and if from the provision the legislative intent is clear, the Court need not call into aid the other rules of construction of statutes. The other rules of construction are called into aid only when the legislative intent is not clear." (emphasis supplied)
9. It may be mentioned in this connection that the first and foremost principle of interpretation of a statute in every system of interpretation is the literal rule of interpretation. The other rules Page 62 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 of interpretation e.g. the mischief rule, purposive interpretation etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible results or if read literally would nullify the very object of the statute. Where the words of a statute are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule, vide Swedish Match AB vs. Securities and Exchange Board, India, AIR 2004 SC 4219.
10. As held in Prakash Nath Khanna vs. C.I.T. 2004 (9) SCC 686, the language employed in a statute is the determinative factor of the legislative intent. The legislature is presumed to have made no mistake. The presumption is that it intended to say what it has said. Assuming there is a defect or an omission in the words used by the legislature, the Court cannot correct or make up the deficiency, vide Delhi Financial Corporation vs. Rajiv Anand 2004 (11) SCC 625. Where the legislative intent is clear from the language, the Court should give effect to it, vide Government of Andhra Pradesh vs. Road Rollers Owners Welfare Association 2004(6) SCC 210, and the Court should not seek to amend the law in the garb of interpretation.
11. As stated by Justice Frankfurter of the U.S. Supreme Court (see 'Of Law & Men : Papers and Addresses of Felix Frankfurter') :
"Even within their area of choice the courts are not at large. They are confined by the nature and scope of the judicial function in its particular Page 63 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 exercise in the field of interpretation. They are under the constraints imposed by the judicial function in our democratic society. As a matter of verbal recognition certainly, no one will gainsay that the function in construing a statute is to ascertain the meaning of words used by the legislature. To go beyond it is to usurp a power which our democracy has lodged in its elected legislature. The great judges have constantly admonished their brethren of the need for discipline in observing the limitations. A judge must not rewrite a statute, neither to enlarge nor to contract it. Whatever temptations the statesmanship of policy-
making might wisely suggest, construction must eschew interpolation and evisceration. He must not read in by way of creation. He must not read out except to avoid patent nonsense or internal contradiction."
12. As observed by Lord Granworth in Grundy v. Pinniger, (1852) 1 LJ Ch 405:
" 'To adhere as closely as possible to the literal meaning of the words used, is a cardinal rule from which if we depart we launch into a sea of difficulties which it is not easy to fathom."
13. In other words, once we depart from the literal rule, then any number of interpretations can be put to a statutory provision, each Judge having a free play to put his own interpretation as he likes. This would be destructive of judicial discipline, and also the basic principle in a democracy that it is not for the Judge to legislate as that is the task of the elected Page 64 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 representatives of the people. Even if the literal interpretation results in hardship or inconvenience, it has to be followed (see G.P. Singh's Principles of Statutory Interpretations, 9th Edn. pp 45-49). Hence departure from the literal rule should only be done in very rare cases, and ordinarily there should be judicial restraint in this connection.
14. As the Privy Council observed (per Viscount Simonds, L.C.): "Again and again, this Board has insisted that in construing enacted words we are not concerned with the policy involved or with the results, injurious or otherwise, which may follow from giving effect to the language used."(see Emperor v. Benoarilal Sarma, AIR 1945 PC 48, pg. 53).
15.As observed by this Court in CIT vs. Keshab Chandra Mandal, AIR 1950 SC 265:
"Hardship or inconvenience cannot alter the meaning of the language employed by the Legislature if such meaning is clear on the face of the statute".
16. Where the words are unequivocal, there is no scope for importing any rule of interpretation vide Pandian Chemicals Ltd. vs. C.I.T. 2003(5) SCC 590. It is only where the provisions of a statute are ambiguous that the Court can depart from a literal or strict construction vide Narsiruddin vs. Sita Ram Agarwal AIR 2003 SC 1543. Where the words of a statute are plain and unambiguous effect must be given to them vide Bhaiji vs. Sub-Divisional Officer, Thandla 2003(1) SCC 692.
17. No doubt in some exceptional cases departure can be made from the literal rule of the interpretation, e.g. Page 65 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 by adopting a purposive construction, Heydon's mischief rule, CIVIL APPEAL NO. 2684 OF 2007 -9- etc. but that should only be done in very exceptional cases. Ordinarily, it is not proper for the Court to depart from the literal rule as that would really be amending the law in the garb of interpretation, which is not permissible vide J.P. Bansal vs. State of Rajasthan & Anr. AIR 2003 SC 1405, State of Jharkhand & Anr. vs. Govind Singh JT 2004(10) SC 349 etc.. It is for the legislature to amend the law and not the Court vide State of Jharkhand & Anr. vs. Govind Singh JT 2004(10) SC 349.
18. In Jinia Keotin vs. K.S. Manjhi, 2003 (1) SCC 730, this Court observed :
" The Court cannot legislate.....under the garb of interpretation.......".
Hence, there should be judicial restraint in this connection, and the temptation to do judicial legislation should be eschewed by the Courts. In fact, judicial legislation is an oxymoron.
19. In Shiv Shakti Co-operative Housing Society vs. Swaraj Developers AIR 2003 SC 2434, this Court observed:
"It is a well settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent."
20.Where the language is clear, the intention of the legislature has to be gathered from the language used vide Grasim Industries Limited vs. Collector of Customs 2002 (4) SCC 297 and Union of India vs. Hamsoli Devi 2002 (7) SCC 273.
Page 66 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022
21. In Union of India and another vs. Hansoli Devi and others 2002(7)SCC (vide para 9), this Court observed :
"It is a cardinal principle of construction of a statute that when the language of the statute is plain and unambiguous, then the court must give effect to the words used in the statute and it would not be open to the courts to adopt a hypothetical construction on the grounds that such construction is more consistent with the alleged object and policy of the Act."
22. The function of the Court is only to expound the law and not to legislate vide District Mining Officer vs. Tata Iron and Steel Company 2002 (7) SCC 358. If we accept the interpretation canvassed by the learned counsel for the private respondents, we will really be legislating because in the guise of interpretation we will be really amending Rule 27(c) of the Rules.
23. In Gurudevdatta VKSSS Maryadit vs. State of Maharashtra AIR 2001 SC 1980, this Court observed :
"It is a cardinal principle of interpretation of statute that the words of a statute must be understood in their natural, ordinary or popular sense and construed according to their grammatical meaning, unless such construction leads to some absurdity or unless there is something in the context or in the object of the statute to suggest to the contrary. The golden rule is that the words of a statute must prima facie be given their ordinary meaning. It is yet another rule of construction that when the words of the statute are clear, plain and unambiguous, then the Courts Page 67 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 are bound to give effect to that meaning, irrespective of the consequences. It is said that the words themselves best declare the intention of the law-giver. The Courts are adhered to the principle that efforts should be made to give meaning to each and every word used by the legislature and it is not a sound principle of construction to brush aside words in a statute as being inapposite surpluses, if they can have a proper application in circumstances conceivable within the contemplation of the statute". The same view has been taken by this Court in S. Mehta vs. State of Maharashtra 2001 (8) SCC 257 (vide para 34) and Patangrao Kaddam vs. Prithviraj Sajirao Yadav Deshmugh AIR 2001 SC 1121.
24. The literal rule of interpretation really means that there should be no interpretation. In other words, we should read the statute as it is, without distorting or twisting its language. We may mention here that the literal rule of interpretation is not only followed by Judges and lawyers, but it is also followed by the lay man in his ordinary life. To give an illustration, if a person says "this is a pencil", then he means that it is a pencil; and it is not that when he says that the object is a pencil, he means that it is a horse, donkey or an elephant. In other words, the literal rule of interpretation simply means that we mean what we say and we say what we mean. If we do not follow the literal rule of interpretation, social life will become impossible, and we will not understand each other. If we say that a Page 68 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 certain object is a book, then we mean it is a book. If we say it is a book, but we mean it is a horse, table or an elephant, then we will not be able to communicate with each other. Life will become impossible. Hence, the meaning of the literal rule of interpretation is simply that we mean what we say and we say what we mean."
22 On the aspect of continuity of reference the emphasis on the part of the appellant is that even when the Arbitrator passes away, the reference continues. Section 34 (4) provides that the Court can remit the matter back (2) it can confirm the award and (3) it can quash the award. However, no correction is permissible.
23 In the case of Gyan Prakash Arya (supra), the challenge before the Apex Court was to the judgement and order passed by the High Court of Karnataka where the Court had dismissed the appeal preferred by the appellant under section 37 of the Arbitration Act and confirmed the order of Page 69 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 the learned Additional City Civil & Sessions Court dismissing arbitration suit under section 34 of the Act and confirming the arbitral award.
24 The Apex Court noted that the original award passed by the learned Arbitrator was as per the original claim made by the original respondent in the statement of claim. Thereafter, in application under section 33 of the 1996 Act, the respondent prayed to modify the award as per the market value of pure gold instead of Rs.740 per gram and the learned Arbitrator allowed the said application and modified the original award.
24.1 In absence of any arithmetical and clerical error in the original award passed by the learned Arbitrator, the Apex Court held that the order passed by the Page 70 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 learned Arbitrator modifying the award cannot be sustained.
"16. Therefore, the original award passed by the learned arbitrator was as per the original claim made by the respondent in the statement of claim. Thereafter, in an application under Section 33 of the 1996 Act, the respondent prayed to modify the award as per the market value of 3648.80 grams of pure gold at Rs.20,747/- per 10 grams, instead of Rs.740 per gram and the learned arbitrator allowed the said application under Section 33 of the 1996 Act and modified the original award dated 04.12.2010. The modified award is reproduced hereinabove.
17. The original award was passed considering the claim made by the claimant as per its original claim and as per the statement of the claim made and therefore subsequently allowing the application under Section 33 of the 1996 Act to modify the original award in exercise of powers under Section 33 of the 1996 Act is not sustainable. Only in a case of arithmetical and/or clerical error, the award can be modified and such errors only can be corrected. In the present case, it cannot be said that there was any arithmetical and/or clerical error in the original award passed by the learned arbitrator. What was claimed by the original claimant in the statement of claim was awarded. Therefore, the order passed by the learned arbitrator on an application filed under Section 33 8 of Page 71 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 the 1996 Act and thereafter modifying the original award cannot be sustained. The order passed by the learned arbitrator in the application under Section 33 of the 1996 Act is beyond the scope and ambit of Section 33 of the 1996 Act. Therefore, both, the City Civil Court as well as the High Court have committed a grave error in dismissing the arbitration suit/appeal under Sections 34 and 37 of the 1996 Act respectively. The modified award passed by the learned arbitrator allowing the application under Section 33 of the 1996 Act cannot be sustained and the same deserves to be quashed and set aside."
25 In yet another decision of ACC Limited (supra), the Court was considering the arbitration clause in agreement and addressed the issue where the same would outlive the Arbitrator named in the agreement to hold that the arbitration clause subsists so long as any question or dispute or differences between the parties exist, despite the death of named Arbitrator, unless language of the Page 72 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 arbitration clause clearly expresses an intention to the contrary.
25.1 The question that fell for consideration before the Apex Court was that whether on the death of named Arbitrator the arbitration agreement survives or not. The question also arose about as to when the Court is bound to appoint substitute Arbitrator to hold that in absence of any debarment or prohibition on appointment of substitute Arbitrator in arbitration agreement, it is the Court's duty to appoint Arbitrator:
"28. The incident of the death of the named arbitrators has no nexus or linkage with the expression "at any time" used in clause 21 of the Agreement. The time factor mentioned therein is the time within which the question or dispute or difference between the parties is resolved as per the Agreement. Arbitration clause would have life so long as any question or dispute or difference between the parties exists unless the language of the clause clearly expresses an intention to the contrary.Page 73 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022
29. The question may also arise in a given case that the named arbitrators may refuse to arbitrate disputes, in such a situation also, it is possible for the parties to appoint a substitute arbitrator unless the clause provides to the contrary. Objection can be raised by the parties only if there is a clear prohibition or debarment in resolving the question or dispute or difference between the parties in case of death of the named arbitrator or their non-availability, by a substitute arbitrator."
26 In the case of Associated Engineering Co.
(supra), the Court held that if the arbitrator committed an error in the construction of a contract that is an error within his jurisdiction. But, if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. The Arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding the the question other than in the contract. A deliberate departure from the contract Page 74 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award. The Court held that the Arbitrator's sole function is to arbitrate in terms of contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. But, if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the Page 75 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 face of it. Relevant paragraphs are reproduced as under:
"27 An arbitrator who acts in manifest disregard of the contract acts without jurisdiction. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialised branch of the law of agency (see Mustill & Boyd's Commercial Arbitration. Second Edition, p. 641). He commits misconduct if by his award he decides matters excluded by the agreements (see Halsbury's Laws of England, Volume II, Fourth Edition, Para 622). A deliberate departure from contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award.
"25. An arbitrator who acts in manifest disregard of the contract acts without jurisdiction. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialised branch of the law of agency (see Mustill & Boyd's Commercial Arbitration. Second Edition, p.
641). He commits misconduct if by his award he decides matters excluded by the agreements (see Halsbury's Laws of England, Volume II, Fourth Edition, Para
622). A deliberate departure from contract amounts to not only manifest disregard of his authority or a misconduct on his part, Page 76 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 but it may tantamount to a mala fide action. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award.
26. A dispute as to the jurisdiction of the arbitrator is not a dispute within the award, but one which has to be decided outside the award. An umpire or arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. He cannot say that he does not care what the contract says. He is bound by it. It must bear his decision. He cannot travel outside its bounds. If he exceeded his jurisdiction by so doing, his award would be liable to be set aside. As stated by Lord Parmoor:
"....It would be impossible to allow an umpire to arrogate to himself jurisdiction over a question which on the true construction of the submission was not referred to him. An umpire cannot widen the area of his jurisdiction by holding, contrary to the fact, that the matter which he affects to decide is within the submission of the parties... ..."
Attorney-General for Manitoba V/s. Kelly, (1922) 1 AC 268,276.
Evidence of matters not appearing on the face of the award would be admissible to decide whether the arbitrator travelled outside the bounds of the contract and thus exceeded his, jurisdiction. In order to see what the jurisdiction of the arbitrator is, it is open to the Court to see what dispute was submitted to him. If that is not clear Page 77 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 from the award, it is open to, the Court to have recourse to outside sources. The Court can look at the affidavits and pleadings of parties; the Court can look at the agreement itself. Bunge & Co. V/s. Dewar & Webb, (1921) 8 Lloyd's Rep 436 (KB).
27. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdiction error. Such error going to his jurisdiction can be established by looking into material outside the award. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The dispute as to jurisdiction is a matter which is outside the award or outside whatever may be said about it in the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such jurisdictional error needs to be proved by evidence extrinsic to the award."
27 In the case of Sri P. Nagaraju @ Cheluvaiah and another(supra) the Apex Court held that it would not be open for the Court in the proceedings under section Page 78 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 34 or in the appeal under section 37 to modify the award. Appropriate course to be adopted in such an event is to set aside the award and remit the matter. Relevant paragraphs are as under:
"38. In that background a perusal of the award passed by the learned Arbitrator would indicate that the only discussion worth noting, after narration of the facts is contained in para 8 of the award which reads as hereunder:
"8. On perusal of the written statement and documents produced by the applicant as well as the written statement and documents produced by the respondents, it is seen that the land in dispute has been acquired for the purpose of expansion of National Highway-275 and while rendering the Award, the price of the land in question has been arrived at, by considering it as dry land. However, since the land in question, even prior to the issue of 3(A) Land Acquisition Notification, has been converted for residential purpose as per Official Memorandum No.BDS/ALN/SR/89/91-92 dated 20.06.1992 of the Sub-Divisional Officer, Ramanagara SubDivision, proper price has to be fixed by considering the lands in question as residential lands. This procedure has not been adopted. Further, by revising the market price, the Stamps and Registration Department has issued a Notification dated 28.03.2016 in respect of the lands belonging to City Greens Page 79 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 situated in the Sy.Nos. coming under the said Mayaganahalli village wherein, the price of converted sites/sites of layouts approved by competent authority, has been fixed at Rs.15,400/- per Sq.Mtr. That their lands are more developed than the lands of Green City and has hence prayed for grant of compensation at a higher rate than the same. On perusal of the said Notification of the Stamps and Registration Department, it is seen that the price of the applicant's converted lands situated in the survey numbers of Mayaganahalli village is fixed at Rs.8,000/- per Sq. Mtr. and the price of the converted lands of Green City in the same village has been fixed at Rs.15,400/- per Sq. Mtr. Section 26 of the said Act clearly defines the procedure for fixing the market price. Even then, it could be seen that the applicant has not been given the fair price. Therefore, it is opined that instead of the present price fixed for the lands in question, its price has to be fixed on par with the rates fixed by the Stamps and Registration Department on the basis of land conversion value in respect of the similarly situated lands of the same village and that compensation be awarded accordingly. Further, since the Award has been passed by fixing the value of the assets and structures existing on the lands in question as per the assessment of the concerned officers, the prayer of the applicant to enhance compensation for the same has been rejected and the following order is passed."
39. The above extracted portion of the award would demonstrate, prior to said finding being recorded, the learned Page 80 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Arbitrator has not referred to the manner in which the notification dated 28.03.2016 was brought on record and relied upon in the proceedings. The award, except for recording that the notification indicates the value fixed at Rs.8,000/- per sq.mtr in respect of converted land situate in the survey numbers of Mayaganahalli village and stating that the price of the converted lands of the Green City in the same village has been fixed at Rs.15,400/- per sq.mtr has not referred to any evidence relating to the comparability with that land despite noting the guideline value of Rs.8000/- fixed for claimant's land. The very fact that the layout is named as 'City Greens' and 'Zunadu' appears to be that the lands therein are situate in a self-contained and developed lay out with all civic amenities due to which it is separately indicated in the notification for specifically fixing the guideline value. Even if the lands belonging to the claimants is converted for residential purposes, value for the same was fixed in the notification by specifying the survey number. If the value as fixed under the guideline for 'City Greens' and 'Zunadu' was to be adopted as comparable land to the acquired land, necessary reasons ought to have been indicated in the award with reference to the evidence brought on record, with opportunity to NHAI to have their say on that aspect and reasons justifying such comparison should have been recorded. Further the manner in which the notification dated 28.03.2016 has been relied upon and the value fixed under the said notification in respect of two distinct layouts has been automatically Page 81 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 made applicable to the lands in question despite noting the guideline value notified for the same survey number would indicate that the said exercise has been undertaken without sufficient opportunity to NHAI. Further, appropriate reasons have not been indicated by the learned Arbitrator to arrive at the conclusion to uniformly adopt the value of Rs.15,400/- per sq.mtr fixed in respect of lands in a layout which was separately indicated in the notification. As stated above, if there is evidence brought on record in the manner known to law with opportunity to the opposite side, it certainly would be open for the learned Arbitrator to adopt the said value. However, from the pleading in the claim petition and from the portion extracted from the award which is the only basis for the ultimate order made by the learned Arbitrator, it would indicate that the NHAI did not have sufficient opportunity before the learned Arbitrator to controvert the material sought to be relied upon by the learned Arbitrator nor has the learned Arbitrator indicated sufficient reasons which to that extent would indicate patent illegality in the award passed by the learned Arbitrator being contrary to Section28(2) and 31(3) of Act, 1996.
40. That being the fact situation and also the position of law being clear that it would not be open for the court in the proceedings under Section 34 or in the appeal under Section 37 to modify the award, the appropriate course to be adopted in such event is to set aside the award and remit the matter to the learned Arbitrator in terms of Section 34(4) to keep in view these aspects of the matter Page 82 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 and even if the notification dated 28.03.2016 relied upon is justified since we have indicated that the same could be relied upon, the further aspects with regard to the appropriate market value fixed under the said notification for the lands which is the subject matter of the acquisition or comparable lands is to be made based on appropriate evidence available before it and on assigning reasons for the conclusion to be reached by the learned Arbitrator. In that regard, all contentions of the parties are left open to be put forth before the learned Arbitrator"
Period of Arbitration Tribunal and its extension 28 On adverting to the facts of the instant case, in the arbitration agreement dated 03.04.2012 the time limit for completion of Arbitration, proceedings was of six months. The first meeting was held on 22.06.2012 at Gandhinagar, where the Board submitted 12 documents. The claim statement by the claimant was made on 16.07.2012. The Board had given reply on Page 83 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 27.09.2012 and the same had been revised on 29.09.2012. On 11.03.2013, the appellant gave 21 documents to the claimants. The extension of time for arbitration was made up to 31.03.2013. The letter of Arbitrator to extend the time limit was on 21.11.2012. It was consented by the respondent on 16.01.2013 and the Board consented it on 26.12.2012.
Accordingly, the period of arbitration proceedings was extended up to 31.03.2013.
Vide Communication dated 02.03.2013, learned Arbitrator had sought extension of time and both the parties agreed to extend it till 30.06.2013. On 12.06.2013 again a similar request was made by learned Arbitrator for extension of time and both the parties agreed to extend it till 30.09.2013. On 28.09.2013, once again Page 84 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 request was made and the period was extended till 31.12.2013. Request was made on 01.12.2013 for extension and it was extended till 31.03.2014. Likewise, on 28.03.2014, 09.06,2014 and 30.09.2014 extensions were further asked for and respectively time period was extended upto 30.06.2014, 30.09.2014 and 31.03.2015.
29 Proposal on the part of the learned arbitrator, time and again, for the parties to mediate and bring an end to the dispute was not found acceptable by the appellant, which showed its reluctance.
Surprisingly for the said purpose, on 27.03.2015, a communication was made by learned Arbitrator for extension of time till 30.06.2015. On 31.06.2015, once again, the request was made for extending the period till 31.08.2015. However, no Page 85 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 written communication of consent had been given by the appellant, but it continued to participate in the arbitration proceedings. On 26.08.2015, request was made for extending it till 30.09.2015, where expressly the consent was given on 04.09.2015 by the appellant. On 29.09.2015, extension was sought till 15.11.2015. No written communication with a consent was given but the appellant continued to participate.
30 A meeting was scheduled by the learned Arbitrator vide its letter dated 07.10.2015, which was in continuity of its communication dated 29.09.2015. The appellant chose not to remain present because of some pre-engagement. Learned Arbitrator passed an order on 14.10.2015 on account of the communication received Page 86 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 from the Board that the Senior Manager Accounts had confirmed the scheduled meeting and number of points of discussion were also requested for. It had not been received and, hence, it has been presumed that nothing remains to be presented in the arbitration proceedings and, therefore, the matter was treated as closed.
31 On 27.10.2015, learned Arbitrator signed and published and also dispatched the award through courier. It is a matter on record that four times the meetings were cancelled, which were scheduled on 20.02.2013, 7/11.05.2013, 24/25.05.2013 and 15.10.2015. On all occasions, the respondents are said to have remained present.
Page 87 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 32 The submissions made by both the parties run into nearly 5689 pages, where the appellants have submitted 23 volumes containing 2226 pages and the respondents have given 25 volumes of 2463 pages. It is thus, clear that pursuant to the letter of Arbitrator to extend the time limit on 25.08.2015, the same was extended till 30.09.2015 with the consent of both the sides. However, subsequent communication of 29.09.2015 was for extending the period till 15.11.2015. The claimant respondent on 30.09.2015 had given its consent for such extension, but on the part of the appellant, no written communication of consent was given, although it continued to participate. In such backdrop of facts the declaration and publication of the award on 27.10.2015 is seriously Page 88 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 questioned by the appellant, as according to the appellant, the time period extended for the purpose of arbitration had expired on 30.09.2015 and, hence, to declare the award in post 30.09.2015 period, would amount to his not having any authority to decide considering the conduct of the parties, as has been detailed in the chronology of events coupled with the fact that the meeting was lastly scheduled on 15.10.2015 at the GWSSB Inspection Bungalow, Junagadh where parties were asked to prepare brief details for the discussion and, they were to send to each other, certain information in advance. The appellant continued to participate through a communication and, at no point of time, objected to the learned Arbitrator continuing to perform even beyond Page 89 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 30.09.2015. According to us, that aspect, has rightly not been considered by the Court concerned.
Amendment to the Act of Arbitration 33 The parties, since, statutorily can extend the time period by consent for a period not exceeding six months, the contention raised of law not being in favour of the learned Arbitrator and the time having expired under section 29A(4) shall also need to be regarded. The Court is conscious of the fact that section 25A prescribes for the time limit of 12 months for Arbitrator's award to be finalised.
Section 29A(3) permits the parties to extend with consent, the said period for six months. Section 29A was introduced by virtue of Arbitration and Conciliation (Amendment) Act, 2015 with effect from Page 90 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 23.10.2015 for fixing the time limit for arbitral award. This was modified on 09.08.2019 by 2019 (Amendment) Act.
Section 29B also was introduced for conducting arbitration under Fast Track procedure.
34 Section 29A(4) provides for the award to be made within the period specified.
Sections 29A and 29B are reproduced as under:
"29A.Time limit for arbitral award.-- [(1)The award in matters other than international commercial arbitration shall be made by the arbitral tribunal within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23:
Provided that the award in the matter of international commercial arbitration may be made as expeditiously as possible and endeavor may be made to dispose of the matter within a period of twelve months from the date of completion of pleadings under sub-section (4) of section 23.
(2) If the award is made within a period of six months from the date the arbitral tribunal enters upon the reference, the arbitral tribunal shall be entitled to Page 91 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 receive such amount of additional fees as the parties may agree.
(3) The parties may, by consent, extend the period specified in sub-section (1) for making award for a further period not exceeding six months.
(4) If the award is not made within the period specified in sub-section (1) or the extended period specified under sub-
section (3), the mandate of the arbitrator(s) shall terminate unless the Court has, either prior to or after the expiry of the period so specified, extended the period:
Provided that while extending the period under this sub-section, if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral tribunal, then, it may order reduction of fees of arbitrator(s) by not exceeding five per cent. for each month of such delay.
[Provided further that where an application under sub-section(5) is pending, the mandate of the arbitrator shall continue till the disposal of the said application: Provided also that the arbitrator shall be given an opportunity of being heard before the fees is reduced.
(5) The extension of period referred to in sub-section (4) may be on the application of any of the parties and may be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.Page 92 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 (6) While extending the period referred to in sub-section (4), it shall be open to the Court to substitute one or all of the arbitrators and if one or all of the arbitrators are substituted, the arbitral proceedings shall continue from the stage already reached and on the basis of the evidence and material already on record, and the arbitrator(s)appointed under this section shall be deemed to have received the said evidence and material.
(7) In the event of arbitrator(s) being appointed under this section, the arbitral tribunal thus reconstituted shall be deemed to be in continuation of the previously appointed arbitral tribunal.
(8) It shall be open to the Court to impose actual or exemplary costs upon any of the parties under this section.
(9) An application filed under sub- section (5) shall be disposed of by the Court as expeditiously as possible and endeavour shall be made to dispose of the matter within a period of sixty days from the date of service of notice on the opposite party.
29B. Fast track procedure.--(1) Notwithstanding anything contained in this Act, the parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the arbitral tribunal, agree in writing to have their dispute resolved by fast track procedure specified in sub-section (3).
Page 93 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 (2) The parties to the arbitration agreement, while agreeing for resolution of dispute by fast track procedure, may agree that the arbitral tribunal shall consist of a sole arbitrator who shall be chosen by the parties.
(3) The arbitral tribunal shall follow the following procedure while conducting arbitration proceedings under sub- section (1):--
(a) The arbitral tribunal shall decide the dispute on the basis of written pleadings, documents and submissions filed by the parties without any oral hearing;
(b) The arbitral tribunal shall have power to call for any further information or clarification from the parties in addition to the pleadings and documents filed by them;
(c) An oral hearing may be held only, if, all the parties make a request or if the arbitral tribunal considers it necessary to have oral hearing for clarifying certain issues;
(d) The arbitral tribunal may dispense with any technical formalities, if an oral hearing is held, and adopt such procedure as deemed appropriate for expeditious disposal of the case.
(4) The award under this section shall be made within a period of six months from the date the arbitral tribunal enters upon the reference.
(5) If the award is not made within the Page 94 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 period specified in sub-section (4), the provisions of subsections (3) to (9) of section 29A shall apply to the proceedings.
(6) The fees payable to the arbitrator and the manner of payment of the fees shall be such as may be agreed between the arbitrator and the parties."
35 This clearly provides that the mandate of the Arbitrator shall terminate unless the Court has either prior to or after the expiry of the period so specified, extended the time, provided that while extending the period under this sub-
section if the Court finds that the proceedings have been delayed for the reasons attributable to the arbitral Tribunal, then, it may order reduction of the fees of the Arbitrator by not exceeding 5%.
35.1 Sub-section (5) of section 29A provides that extension of period referred to in Page 95 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 sub-section (4) may be on the application of any party and the same to be granted only for sufficient cause and on such terms and conditions as may be imposed by the Court.
35.2 From the said provision it is clear that the award in all matters other than the International Commercial Arbitration would be made by arbitral Tribunal within the period of 12 months from the date of completion of pleadings.
35.3 As per Sub-section (4) of section 29A, the parties would be in a position to extend the time period by consent for making the award for further period not exceeding six months and, if within this time period it is not made, the mandate of the Arbitrator statutorily gets terminated unless, of course, the Court has either prior to or Page 96 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 after the expiry of the period so specified, extended the period. Where the application under sub-section (5) is pending the mandate of the Arbitrator shall continue till the disposal of the application. The mandate of the Arbitrator by virtue of this amendment terminates once the specified period completes, unless, of course, the Court either prior to or after the expiry of the specified period, extends the time period.
36 It is to be noted that this amendment has come in the year 2015 and, thereafter, in the year 2019 the provision had been further modified on 09.08.2019.
37 It is apt to mention that the award has been declared on 27.10.2015, whereas the introduction of section 29A fixing the time limit for arbitral award was Page 97 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 introduced with effect from 23.10.2015.
This necessitated completing the making of award within time limit set for such arbitral award. It is quite apparent from the record that by the very conduct the appellant has allowed the time period to be extended. At no point of time, it has objected to the learned Arbitrator continuing with these proceedings although an express consent given by it was till 30.09.2015. Request on the part of the learned Arbitrator was made prior to the expiry of such period on 29.09.2015 itself, wherein it had sought extension till 15.11.2015 and the same had been already given by the respondent claimant on 13.09.2015. Nobody obviously would be aware of the introduction of these new provisions from 23.10.2015, which would Page 98 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 terminate the mandate of the Arbitrator after the period of twelve (12) months and thereafter with consent of parties for a further period of six months less unless the Court has extended the period either before or after the expiry of the period.
Of course, the Court order is missing but that surely is not fatal for the award in question.
38 Considering the conduct of the parties all through out, in the opinion of this Court even though the law would be applicable from 23.10.2015, it may not be possible to say that the mandate of the Arbitrator would have been terminated when the award was made. Had the appellant expressly extended the period of making the award as asked for by the Arbitrator and permitted by explicit consent by respondent, valid Page 99 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 period would be upto 15.11.20215, instead of that, appellant continued to participate in the process and never objected to its continuity. However, as the same did not result in its favour, it has aimed its gun raising the issue of time limit with the change in law. Had the appellant not participated, it could have raised the plea of mandate of learned Arbitrator being over on 30.09.2015 and its not possessing mandate to make and declare the award. That being not the case as can be culled out from the voluminous record, the Court below rightly held this issue against the appellant and in favour of the respondent.
Challenge to the correction of Award 39 Another issue is with regard to the correction made under section 33(1), which Page 100 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 deserves serious consideration. This challenge raised is arithmetic. The second point is about the correction of the error occurred at page 54 of the award and on invoking the provisions of section 33A, the phrase used was "simple interest"
instead of "compound interest" and, hence, request was made for and on behalf of the respondent on 07.12.2015. Section 33 of the Arbitration Act provides thus:
"33. Correction and interpretation of award; additional award.--
(1) Within thirty days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties--
(a) a party, with notice to the other party, may request the arbitral tribunal to correct any computation errors, any clerical or typographical errors or any other errors of a similar nature occurring in the award;
(b) if so agreed by the parties, a party, with notice to the other party, may request the arbitral tribunal to give an interpretation of a specific point or part of the award. (2) If the arbitral tribunal considers the request made under sub-section (1) to be justified, it shall make the correction or give the interpretation within thirty days from the receipt of the request Page 101 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 and the interpretation shall form part of the arbitral award.
(3) The arbitral tribunal may correct any error of the type referred to in clause (a) of sub-section (1), on its own initiative, within thirty days from the date of the arbitral award.
(4) Unless otherwise agreed by the parties, a party with notice to the other party, may request, within thirty days from the receipt of the arbitral award, the arbitral tribunal to make an additional arbitral award as to claims presented in the arbitral proceedings but omitted from the arbitral award. (5) If the arbitral tribunal considers the request made under sub-section (4) to be justified, it shall make the additional arbitral award within sixty days from the receipt of such request.
(6) The arbitral tribunal may extend, if necessary, the period of time within which it shall make a correction, give an interpretation or make an additional arbitral award under sub-section (2) or sub-section (5).
(7) Section 31 shall apply to a correction or interpretation of the arbitral award or to an additional arbitral award made under this section."
40 Within 30 days from the receipt of the arbitral award, unless another period of time has been agreed upon by the parties, the party with the notice to the other side, may request the arbitral Tribunal to Page 102 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 correct any computational, clerical or typographical errors or any other errors of similar nature occurring in the above if so agreed by the parties, the party with a notice to the other side, may request the arbitral Tribunal to give an interpretation of a specific point or a part of the award. If found justified, the Arbitral Tribunal shall make the correction or give the interpretation within 30 days from the receipt of the request.
41 Sub-section(3) of section 33 also provides for the arbitral Tribunal to correct any error of the type on its own initiative, within 30 days from the date of arbitral award.
42 Here, for correcting the computational error or error of the similar nature Page 103 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 occurred in the award, the party has moved on 07.12.2015 to the arbitral Tribunal.
43 The respondent claimant is the Small Scale Industrial Unit registered with Jilla Udyog Kendra, Mehsana. It is also registered with Bureau of Indian Standard for production of PVC pipes as per relevant Indian Standard Code. The dispute had arisen during the currency of supply contracts to the appellant. The award was passed on 27.10.2015. Thereafter, the correction was issued by the Sole Arbitrator on 08.11.2015 in a table form.
On 9.11.2015 the arbitral Tribunal had mentioned simple interest at two places instead of compound interest as provided under the statute of the Interest of Delayed Payments to Small Scale and Page 104 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Ancillary Industries Undertakings Act, 1993 ( "the Interest Act" for short).
44 The obligation of payment of higher interest is mandatory. In M/s. Modern Industries (supra) it also provided that the claimant being a Small Scale Industrial Unit and specifying requirement of definition "supplier" as stated in section 2(f) of the Act and the appellant being the buyer and having complied with the definition of section 2(c) of section 5 of the Act, which provides for the liability of the buyer to pay compound interest, the provision deserves to be reproduced as under:
"S.2.- Definitions. - In this Act, unless the context otherwise requires, - xxx xxx xxx
(c) "buyer" means whoever buys any goods or receives any services from a supplier for consideration;
xxx xxx xxx Page 105 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022
(f) "supplier" means an ancillary industrial undertaking or a small scale industrial undertaking holding a permanent registration certificate issued by the Directorate of Industries of a State (or Union territory and includes, -
(i) the National Small Corporation, being a Industries company, registered under the Companies Act, 1956 (1 of 1956);
(ii) the Small Industries Development Corporation of a State or a Union territory, by whatever name called, being a company registered under the Companies Act, 1956 ( 1 of 1956).]"
45 Notwithstanding anything contained in any agreement between the supplier and the buyer or in any law for the time being in force, the buyer shall be liable to pay compound interest " with monthly interest"
at the rate mentioned in section 4 on the amount due to the supplier.
46 There is a specific mention in the award made by the arbitral Tribunal that the claimant is a small scale industry and the recovery of the claimed amount and, interest thereon, from the respondent by Page 106 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 the claimant, is governed by the said Act of 1993. It also gives the details as to how sections 4,5 and 10 provide for the interest on the delayed payment. It summarized, therefore, to grant interest in the following manner Claim Amount as Interest Amount Total Claimed as Awarded Award Amount as accured on Amount awarded awarded amount i.e. Principal up to Principal Rs. 27.10.2015 + Interest (Please Workout Rs.
the Amount) Rs.
Release 84,46,103/- Simple interest Please
all our 79,98,361/- at the rate of Workout
outstandin 1.5 times the
g payments prime lending
rates of SBI up
to date of
award
Escalation 21,99,157/- Simple interest Please
payments 21,99,157/- at the rate of Workout
due to 1.5 times the
extension prime lending
of Supply rates of SBI up
period by to date of
the award
respondent
in Kheralu
Page 107 of 118
Downloaded on : Sun Dec 25 06:01:34 IST 2022
C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022
dvn.
Compensati 24,04,21,990 NOT CONSIDERED
on of Nil
losses due
to
blacklisti
ng
Cost of 5,00,000/- NOT CONSIDERED, BOTH THE
legal and Nil PARTIES TO BEAR THEIR OWN
administra COST
tive
proceeding
s carried
out by
claimant
during pre
Arbitratio
n period
Cost of 2,00,000/- BOTH THE PARTIES TO BEAR
present Nil THEIR OWN COST
Arbitratio
n
47 Admittedly, at both the places reference
is of a simple interest at the rate of 1.5 times the prime lending rates, the rate of SBI up to the date of award. Request, therefore, was made to make correction in the award and the words "simple interest"
Page 108 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 was to be replaced by the words "compound interest".
48 It appears that the application was pending and learned Arbitrator, unfortunately, passed away on 08.09.2016.
Matter, thereafter, was in the meantime, challenged before the Commercial Court, which had exercised the powers of correcting the award under section 33. It is emphasized by the Court that those powers are to be exercised by the Arbitrator and not by the Court. Only power the Court has is to confirm the award or remitting the matter to the learned Arbitrator. It is beyond the scope of the learned Presiding officer to change it. No modification can be made and only the statutory scheme needs to be followed.
It has emphasized that there is no Page 109 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 rationale for the Court to have corrected the interest from simple to the compound interest. Neither it has jurisdiction and the period also had expired.
49 As provided in the case of Associated Engineering Co.(supra), if the award is published beyond the limit of contract, the Arbitrator cannot act arbitrarily and this would amount to jurisdictional error.
The reference of Associated Engineering Co.(supra) makes it clear that the Arbitrator cannot act arbitrarily or independent of the contract. Thus, the authority is deprived by the contract and is governed by the Arbitration Act. Here, in order to say what the jurisdiction of the Arbitrator is, it is always open to the Court to see what dispute was submitted to him, If it is not clear from Page 110 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 the award, it is open to the Court to have recourse to outside sources. The Court can look at the evidence, pleadings as also the agreement itself.
50 In the instant case, the Arbitrator has not acted outside his jurisdiction. He has not overstepped the confines of the contract. There are no errors nor has he misread or misconstrued the contract. It is not an error going to the root of the jurisdiction because of his asking the wrong question or having disregarded the contract. The Court under section 34 had rightly appreciated and chose not to interfere with the merits of the matter.
51 The only aspect that had been necessitated was the correction of an error awarded on the part of the Court concerned.
Page 111 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 52 This Court is in complete agreement that when it comes to the compliance of equity and the law, the law always shall have a precedence. The award can be accepted or the remand can be made. No modification, ordinarily, is to be made. What all the Presiding officer has done is to rectify the error which can be also termed as correcting pure and simple typographical error. This was necessitated only on account of the fact that in the body part of the judgement, there is a detailed discussion as to why there is entitlement of the respondent claimant of the interest as provided under section 5 of the Interest Act.
53 It is only because the Arbitrator had unfortunately passed away pending this case and here is not the case of any Page 112 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 ambiguity nor is there any requirement of any adjudication, but merely the correction of the award in the final operative portion, where instead of compound interest, the learned Arbitrator had made a mention of simple interest when in the body part of the judgement, he had already deliberated upon the very issue of entitlement convincingly. If left out, in the operative order, the same required correction pure and simple.
54 In our opinion, in already delayed matter, the remand of the matter after assigning it to the new arbitral Tribunal could not have been made by the Court, as it is quite much easy to decipher by any one with an ordinary comprehensive power as to what arbitral Tribunal had meant when it discussed at length the provisions of Page 113 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 sections 4 and 5 and other provisions of the Interest Act.
55 We do not see any error, much less perversity warranting any interference.
Moreover, we will be required to refer to some of the decisions of the Apex Court, at this stage, that there shall be a restraint by the Court in proceeding under section 37 of the Arbitration Act to interfere unless there is apparent perversity of the arbitral award going to the root of the case. Had there been a material wrong, there could not have been any remedy in section 34, but to set aside the award. Section 34 being in the nature of an appellate provision for setting aside the award, there are limited grounds provided under sub-sections (2) and (3) of this provision.
Page 114 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 56 The Apex Court in its recent decision of M. Hakeem & another (supra) had emphatically held that the question has
now been settled finally by at least three decisions of the Apex Court that the Act of 1996 is based on the UNCITRAL model of law on International Commercial Arbitration, 1985, which makes it very clear of limited judicial interference on extremely limited grounds not dealing with the merits of the award, the limited remedy under section 34 is co-terminus with the limited right, namely either to set aside the award or remand the matter under the circumstances mentioned in section 34 of the Arbitration Act. This decision also provides not to modify the award under section 34 of the Arbitration Act.
Page 115 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 57 We have discussed extensively as to why the making of correction by the Court under its appellate jurisdiction under section 34 would not amount to modifying the award. More particularly, when that was a mere typographical error or a reproduction error in the summing up table as to let the parties undergo the ordeal of appointment of a fresh arbitral Tribunal for it to consider the same under section 33 of the Arbitration Act and that would defeat the very object and reason of speedy disposal of the disputes between the parties under the Arbitration Act.
58 In both the appeals, Mr. Siraj Mansuri, Executive Engineer, has stated that original order was passed on 07.10.2020, where the Court had directed both the parties to submit the respective Page 116 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 calculation of the amount and the amount has been deposited as per the order of the Court. According to him, the award amount is Rs. 1 crore has been already deposited with the Commercial Court in compliance of the order dated 27.12.2018. Let the remaining amount with compounding interest be deposited with the Registry within twelve (12) weeks of by the Appellant Board and that would be paid to the respondents, original claimants through RTGS without any loss of time.
59 In view of the above discussion, both the appeals stand dismissed with the above directions.
Civil Application No. 2 of 2019 in First Appeal No. 5013 of 2018 Page 117 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022 C/FA/5012/2018 CAV JUDGMENT DATED: 11/11/2022 Present Civil Application stands disposed of in wake of the order passed in First Appeal No.5012 of 2018 with First Appeal No. 5013 of 2018.
At this stage, learned advocate Mr.K.H.Baxi for the petitioner has made a request for staying the operation of this judgement and order. Considering the fact that this Court has granted twelve weeks' time for the deposit and for further disbursement of the amount lying with the Commercial Court, the interest is well protected and, therefore, the said request need not be acceded to.
(MS. SONIA GOKANI, J. ) (NISHA M. THAKORE,J) SUDHIR Page 118 of 118 Downloaded on : Sun Dec 25 06:01:34 IST 2022