Bangalore District Court
Union Of India vs In Ac.1/2004 &) Chennai - 600 009 on 11 July, 2017
IN THE COURT OF THE VI ADDL.CITY CIVIL & SESSIONS JUDGE
BENGALURU CITY
CCH. 11
Dated this the 11th day of July, 2017
PRESENT: Sri.K.M.Rajashekar, B.Sc., LL.B.,
VI Addl. City Civil & Sessions Judge,
Bengaluru City.
A.S.NO:49/2004
C/w
A.C.NO:1/2004
And
A.C.No.6/2004
Petitioner/ : UNION OF INDIA
Plaintiff Represented by Chief Engineer,
(Plaintiff in AS.49/2004 Chennai Zone,
& A.C.6/2004 And Island Grounds,
Defendant in AC.1/2004 &) Chennai - 600 009.
/Vs/
Respondents/ : 1) KALA ENTERPRISES,
Defendants Engineers & Contractors,
(Defendant in AS.49/2004 No.59, IV Block, Jayanagar (West),
& A.C.6/2004 And Bengaluru-560 011.
Plaintiff in AC.1/2004)
2) Sri.M.P.V.Shenoi,
Sole Arbitrator,
3E, Crescent Court Apartments,
No.8, Crescent Road,
High Grounds, Bengaluru-560 001.
---
2 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
COMMON JUDGMENT
All these suits arise out of common award, parties
are common and the relief sought for are similar, hence,
all these suits are taken up together for the convenience
of the court and a common judgment is being passed in
order to avoid conflicting of opinion in judgments.
2) The Plaintiff in AS.49/2004 has got filed this suit
under Section 30 and 31 of the Arbitration Act, 1940, to
set aside the award dated 06.10.2003/21.11.2003
passed by Defendant No.2 in respect of the dispute
with regard to construction of Lecture Assembly Hall for
ADGES Training Institute at T.S.R.Complex, Bengaluru.
The Plaintiffs in AC.No.1/2004 and AC.6/2004
have got filed suits under Section 14 and 14(2) of the
Arbitration Act, 1940 for direction to the Defendant to
file the award passed in respect of the dispute raised in
3 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
construction of Lecture cum Assembly Hall for ADGES
Training Institute at TSR Complex, Bangalore, with
relevant documents.
The Plaintiff in AC.No.1/2004 has also sought for
direction to the 1st Defendant to pay the award amount
of Rs.8,48,718/- together with interest at 18% p.a.
from 3rd May 1990 to 20th September, 1999 and
thereafter 15% p.a. from 21st September, 1999 to 21st
September, 2003, etc.
3) The case in brief is that, the Plaintiff-Union of
India entered into an agreement with Defendant No.1
for construction of 'Lecture-cum-Assembly Hall' for
ADGES Training Institute at TSR complex, Bengaluru,
with schedule to be commenced from 06.09.1986 and
completed on 05.03.1988, which was extended from
time to time and the work was completed on
4 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
03.05.1990. The Defendant No.1 raised certain claims
and on his application, Defendant No.2 was appointed
as sole Arbitrator to decide the disputes raised between
the parties, who entered reference on 20.09.1999 by
giving notice to both the parties to furnish their claims
by 05.10.1999 and also pleadings along with
documents. The Defendant No.1 filed statement of
claims on 05.05.2000, though the terms of the sole
Arbitrator expired much earlier to filing of statement of
claims by Defendant No.1, the Plaintiff has challenged
the appointment and continuation of the Arbitrator.
However, the Defendant No.2 continued the
proceedings and passed award on 06.10.2003.
Subsequently, the Plaintiff filed an application on
17.04.2004 seeking direction to direct the Defendant
No.2 to file an award, which is numbered as
A.C.No.6/2004 and in the meanwhile, the Plaintiff
5 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
received the notice from this court on 16.08.2004 in
respect of the petition filed under Section 14 of
Arbitration Act, by Defendant No.1, which is numbered
as A.C.No.1/2004. Aggrieved by the said award, the
Plaintiff has challenged the award on the following
among other grounds.
The Defendant No.2 has utterly failed to
appreciate the evidence adduced by the Plaintiff before
him by way of documents and has not appreciated the
statement of objections; the award is improperly
procured and is invalid and is in conflict with the public
policy of India. The Arbitrator has utterly failed to
apply his mind while deciding the matter and has
allowed certain claims on presumptions and
assumptions and has completely ignored the clauses of
the agreement. The Arbitrator has allowed the claims
of Defendant No.1 on figment of imagination; since the
6 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
claims are concocted, the Plaintiff is not liable to pay
interest or arbitration charges and sought for setting
aside the award.
4) On service of notice, the Defendant No.1-M/s.Kala
Enterprises marked appearance through his counsel and
filed his objections denying the plaint averments in
general. He has accepted the contract of the Plaintiff
for construction of Lecture cum Assembly Hall and
entering into agreement dated 29.08.1986. He has
contended that even after violation and deviation from
the original contract by the Plaintiff, he has completed
the works and also had finished the rectification works
as pointed by the Plaintiff. He has contended that the
grounds raised by the Plaintiff against the impugned
award are totally vague and bald and the Plaintiff has
failed to demonstrate as to how the Defendant No.2 has
mis-conducted himself in adjudicating the disputes and
7 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
has not explained as to how the award has been
improperly procured and is against the public policy of
India and has failed to make out any grounds for setting
aside of the impugned award. He has contended that
the suit for setting aside the award is barred by
limitation and the impugned award is entitled to be
made Rule of the court in A.C.No.1/2004 and prayed for
dismissal of the suit with exemplary costs.
5) Heard. Perused the written arguments and also
the records.
6) The points that arises for my consideration are :-
1) Whether the Plaintiff in AS.No.49/2004
has made out any of the grounds
under Section 30 and 31 of the
Arbitration Act, 1940, to set aside the
award as sought for?
2) Whether the Plaintiffs in AC.1/2004
and AC.6/2004 have made out
grounds under Section 14 and 14(2) of
8 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
the Arbitration Act, 1940 for grant of
the reliefs as sought for?
3) What Order?
7) My answer to the above points are:-
Point No.1 - In the negative;
Point No.2 & 3 - As per final order,
for the following :
REASONS
8) Point No.1 :- Upon going through the
materials available on record, it is seen that the Plaintiff
has come up with the suit in A.S.No.49/2004 for setting
aside the award dated 06.10.2003/21.11.2003 passed
by Defendant No.2 on the ground that they had entered
into an agreement with Defendant No.1 for construction
of 'Lecture-cum-Assembly Hall' for ADGES Training
Institute at TSR complex, Bengaluru and the work was
completed on 03.05.1990, the Defendant No.1 raised
9 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
certain claims and Defendant No.2 was appointed as
sole Arbitrator to decide the disputes raised between
the parties and passed award on 06.10.2003.
Aggrieved by the said award, the Plaintiff has
challenged the award on the grounds that the Arbitrator
has utterly failed to appreciate the evidence adduced by
them by way of documents and has not appreciated the
statement of objections; the award is improperly
procured and is invalid and is in conflict with the public
policy of India, he has utterly failed to apply his mind
while deciding the matter and has allowed certain
claims on presumptions and assumptions and has
completely ignored the clauses of the agreement and
has allowed the claims of Defendant No.1 on figment of
imagination, etc.
9) At this stage, it is relevant to re-write the
provisions of Section 30 of the Arbitration Act, 1940 :
10 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
" 30. Grounds for setting aside award.-
An award shall not be set aside except on one
or more of the following grounds, namely -
(a) that an arbitrator or umpire has
misconducted himself or the
proceedings;
(b) that an award has been made
after the issue of an order by the
Court superseding the arbitration
or after arbitration proceedings
have become invalid under
Section 35;
(c) that an award has been
improperly procured or is
otherwise invalid."
10) Even though the Plaintiff alleged that the award is
improperly procured and is invalid and is in conflict with
the public policy of India, the learned Arbitrator has
utterly failed to apply his mind while deciding the matter
and has allowed certain claims on presumptions and
assumptions and has completely ignored the clauses of
the agreement and has allowed the claims of Defendant
etc. At this stage, it is significant to note that, in the land
mark judgment rendered by the Hon'ble Supreme Court
11 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
of India in Civil Appeal No.10531/2014 reported in AIR
2015 SC 620 between Associate Builders Vs. Delhi
Development Authority dated 25.11.2014, their Lordships
of Honble Supreme Court extends a wider scope to the
concept of public policy, wherein, it is clearly mandated
that :
"an extent of judicial intervention notwithstanding
anything contained in any other law for the time
being in force, in matters governed by this Part,
no judicial authority shall intervene except where
so provided in this Part. (Section 5)
It is important to note that, the 1996 Act was
enacted to replace the 1940 Arbitration Act in
order to provide for an arbitral procedure which is
fair, efficient and capable of meeting the needs of
Arbitration; also to provide that the tribunal gives
reasons for an arbitral award; to ensure that the
tribunal remains within the limits of its
jurisdiction; and to minimize the supervisory roles
of courts in the arbitral process.
Therefore, in our view, the phrase "public
policy of India" used in Section 34 in context is
required to be given a wider meaning. It can be
stated that the concept of public policy connotes
some matter which concerns public good and the
public interest. What is for public good or in
public interest or what would be injurious or
harmful to the public good or public interest has
varied from time to time. However, the award
which is, on the face of it, patently in violation of
statutory provisions cannot be said to be in public
interest. Such award is likely to adversely affect
the administration of justice. Hence, in our view
12 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
in addition to narrower meaning given to the term
"public policy" in Renusagar case is required to be
held that the award could be set aside if it is
patently illegal. The result would be, award
could be set aside if it is contrary to :
(a) Fundamental policy of Indian law; or
(b) The interest of India; or
(c) Justice or morality, or
(d) In addition, if it is patently illegal.
Illegality must go to the root of the matter
and if the illegality is of trivial nature it cannot be
held that award is against the public policy.
Award could also be set aside if it is so unfair and
unreasonable that it shocks the conscience of the
court. Such award is opposed to public policy and
is required to be adjudged void.
103. Such patent illegality, however, must go to
the root of the matter. The public policy,
indisputably, should be unfair and unreasonable so
as to shock the conscience of the court. Where
the Arbitrator, however, has gone contrary to or
beyond the expressed law of the contract or
granted relief in the matter not in dispute would
come within the purview of Section 34 of the Act.
35. Without meaning to exhaustively enumerate
the purport of the expression "fundamental policy
of Indian law", we may refer to three distinct and
fundamental juristic principles that must
necessarily be understood as a part and parcel of
the fundamental policy of Indian law. The first
and foremost is the principle that in every
determination whether by a court or other
authority that affects the rights of a citizen or
leads to any civil consequences, the court or
authority concerned is bound to adopt what is in
legal parlance called as "judicial approach" in the
matter. The duty to adopt a judicial approach
arises from the very nature of the power exercised
by the court or the authority does not have to be
separately or additionally enjoined upon the fora
concerned. What must be remembered is that the
13 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
importance of a judicial approach in judicial and
quasi-judicial determination lies in the fact that so
long as the court, tribunal or the authority
exercising powers that affect the rights or
obligations of the parties before them shows
fidelity to judicial approach, they cannot act in an
arbitrary, capricious or whimsical manner. Judicial
approach ensures that the authority acts bona fide
and deals with the subject in a fair, reasonable
and objective manner and that its decision is not
actuated by any extraneous consideration.
Judicial approach in that sense acts as a check
against flaws and faults that can render the
decision of a court, tribunal or authority vulnerable
to challenge.
The third juristic principle is that a decision
which is perverse or so irrational that no
reasonable person would have arrived at the same
is important and requires some degree of
explanation. It is settled law that where-
1. a finding is based on no evidence, or
2. an arbitral tribunal takes into account
something irrelevant to the decision which
it arrives at; or
3. ignores vital evidence in arriving at its
decision.
such decision would necessarily be perverse.
A broad distinction has, therefore, to
be maintained between the decisions which
are perverse and those which are not. If a
decision is arrived at on no evidence or
evidence which is thoroughly unreliable and no
reasonable person would act upon it, the order
would be perverse. But if there is some
evidence on record which is acceptable and
which could be relied upon, howsoever
compendious it may be, the conclusions would
14 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
not be treated as perverse and the findings
would not be interfered with.
It must clearly be understood that
when a court is applying the "public policy"
test to an arbitration award, it does not act as
a court of appeal and consequently errors of
fact cannot be corrected. A possible view by
the Arbitrator on facts has necessarily to pass
muster as the Arbitrator is the ultimate master
of the quantity and quality of evidence to be
relied upon when he delivers his arbitral
award. Thus an award based on little
evidence or on evidence which does not
measure up in quality to a trained legal mind
would not be held to be invalid on this score.
A Court does not sit in appeal over the
award of an Arbitral Tribunal by reassessing or
re-appreciating the evidence. An award can
be challenged only under the grounds
mentioned in Section 34(2) of the Act.
The third ground of public policy is, if
an award is against justice or morality. These
are two different concepts in law. An award
can be said to be against justice only when it
shocks the conscience of the court. An
illustration of this can be given. A claimant is
content with restricting his claim, let us say to
Rs.30 lakhs in a statement of claim before the
Arbitrator and at no point does he seek to
claim anything more. The arbitral award
ultimately awards him 45 lakhs without an
acceptable reason or justification. Obviously,
this would shock the conscience of the court
and the arbitral award would be liable to be
set aside on the ground that it is contrary to
"justice".
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 jurisdictional
15 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
error. 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 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 a
jurisdictional error needs to be proved by
evidence extrinsic to the award.
The court while considering challenge
to arbitral award does not sit in appeal over
the findings and decision of the Arbitrator,
which is what the High Court has practically
done in this matter. The umpire is legitimately
entitled to take the view which he holds to be
the correct one after considering the material
before him and after interpreting the
provisions of the agreement. If he does so,
the decision of the umpire has to be accepted
as final and binding."
11) In the background of the above ratios laid down
by their Lordships, if we analyze the case on hand, it is
seen that the main grounds of attacking the arbitration
award by the Plaintiff is that, the learned Arbitrator
failed to appreciate the evidence on record, he has
misconducted himself and also the proceedings, the
award is improperly secured and is opposed to public
16 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
policy, the learned Arbitrator has failed to apply his
mind and proceeded on assumptions and presumptions,
ignored the clauses of agreement, allowed the claims
on figment of imagination, etc. It is significant to note
that, as mentioned above, this case falls within Section
30 of the Arbitration Act, 1940.
12) As rightly argued by the learned counsel
appearing for the Defendant, the scope to set aside the
award under Section 30 of the Arbitration Act, is very
limited. The Plaintiff ought to have made out a case
either about the misconduct of the learned Arbitrator or
it is to be established that the learned Arbitrator has
passed the award after issue of order by the court
superseding the Arbitration or after Arbitration
proceedings has become invalid under Section 35 of the
Act or the award has been improperly procured or
otherwise is invalid. Herein is the case, it is not the
17 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
case of the Plaintiff that the award is passed after issue
of order superseding the Arbitration. Even though in
the grounds the Plaintiff has contended that the award
is improperly procured and misconducted etc., but
absolutely no specific pleading or reasons is established
by the Plaintiff as to how the impugned award is
improperly procured or what act of the learned
Arbitrator amounts to misconduct etc. The Plaintiff fails
to make out any case to accept the misconduct of the
learned Arbitrator as explained under section 30 of the
Act. Even though the Plaintiff has reiterated all the
claims item by item, but failed to make out a case that
this case falls under any of the grounds of Section 30 of
the Arbitration Act, 1940. Even though each and every
claim addressed by the learned Arbitrator is commented
by the Plaintiff in his plaint, but as per the mandate
mentioned above, this court cannot look into the
18 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
minute descriptions of merits of the case; rather, the
power of this court to scrutinize the impugned award is
only under the grounds available under Section 30 of
the Arbitration Act, 1940.
13) Upon careful perusal of the impugned award, it
clearly indicates that the learned Arbitrator has gone in
detail every minute material available on record and
has arrived at a just and fair conclusion. Added to that,
the Honble Supreme Court in Associate Builders Vs
Delhi Development Corporation case referred supra,
lays down the principle that if the Arbitrator commits an
error in the construction of the contract, that is an error
within his jurisdiction. But if he wonders outside the
contract and deals with matters not allotted to him, he
commits a jurisdictional error. But herein is the case,
absolutely no case is made out by the Plaintiff to
establish that the learned Arbitrator had exceeded his
19 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
jurisdiction by wondering outside the contract and dealt
the matter not allotted to him. Added to that, their
Lordships of Honble Supreme Court has specifically
mandated that 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 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 a jurisdictional error needs to be proved by
evidence extrinsic to the award. But herein is the case,
absolutely no evidence is placed by the Plaintiff to
establish such apparent jurisdictional error committed
20 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
by the learned Arbitrator which brings this case under
the contravention of the public policy of India.
14) It is the settled principle of law that, the court
while considering challenge to arbitral award does not sit
in appeal over the findings and decision of the
Arbitrator. The umpire is legitimately entitled to take
the view which he holds to be the correct one after
considering the material before him and after
interpreting the provisions of the agreement. If he does
so, the decision of the umpire has to be accepted as
final and binding. A broad distinction has, therefore, to
be maintained between the decisions which are perverse
and those which are not. If a decision is arrived at on
no evidence or evidence which is thoroughly unreliable
and no reasonable person would act upon it, the order
would be perverse. But if there is some evidence on
record which is acceptable and which could be relied
21 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
upon, howsoever compendious it may be, the
conclusions would not be treated as perverse and the
findings would not be interfered with. Hence, as rightly
pointed out by the learned counsel for the Defendant,
just because the opinion of the Arbitrator expressed
against the interest of the Plaintiff, that itself cannot be
a ground to set aside the award. Herein is the case, the
Plaintiff has not placed any convincing materials to
establish that decision is arrived at on no evidence or
evidence which is thoroughly unreliable and no
reasonable person would act upon it, the order would be
perverse. Apart from that, since the reasoning in the
award is based on the materials available on record, the
learned Arbitrator is legitimately entitled to take the view
which he holds to be the correct one after considering
the materials before him and after interpreting the
provisions of the agreement. Since the learned Arbitrator
22 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
does so, the decision of the learned Arbitrator has to be
accepted as final and binding.
15) Under the facts and circumstances of the case, I
am of the opinion that absolutely no grounds are made
out by the Plaintiff to establish any of the grounds
mentioned in the plaint or any of the grounds available
in Section 30 of the Arbitration Act, 1940. Herein is the
case, the learned Arbitrator has dealt the matter
squarely within the four corners of the matter allotted to
him. Added to that, no act is done by the learned
Arbitrator which could be termed the award as perverse
or unfair and unreasonable so as to shock the
conscience of the court and opposed to the public policy
of India. The Plaintiff has utterly failed to establish that
the learned Arbitrator has gone contrary to law or
beyond the expressed law of the contract or granted
23 AS.NO: 49/2004
C/w
AC.NO.1/2004
&
AC.No.6/2004
relief in the matter which is not in dispute; accordingly, I
answer point No.1 in the negative.
16) Point No.2 : In view of the filing of
A.S.No.49/2004 and receipt of award submitted by the
learned Arbitrator, the suits in A.C.No.1/2004 and
A.C.No.6/2004 become in-fructuous and deserves to be
disposed of accordingly.
17) Point No.3 : In view of the foregoing
reasons and answer to Point No.1 and 2, I proceed to
pass the following :
ORDER
The suit filed by the Plaintiff under Section 30 and 31 of the Arbitration Act, 1940, to set aside the award dated 06.10.2003/ 21.11.2003 passed by Defendant No.2 with regard to construction of Lecture Assembly Hall for ADGES Training Institute at 24 AS.NO: 49/2004 C/w AC.NO.1/2004 & AC.No.6/2004 T.S.R.Complex, Bengaluru; is hereby dismissed with costs.
In view of the filing of A.S.No.49/2004 and receipt of award submitted by the learned Arbitrator, the suits in A.C.No.1/2004 and A.C.No.6/2004 filed under Section 14 and 14(2) of the Arbitration Act, 1940 become infructuous; hence, disposed of accordingly.
Keep the original of this judgment in A.S.No.49/2004 and certified copies in A.C.No.1/2004 and A.C.No.6/2004.
(Dictated to the Judgment Writer, transcribed and computerized by her, transcript thereof corrected and then pronounced by me in open Court, dated this the 11th July, 2017.) (K.M.RAJASHEKAR) VI Addl.City Civil & Sessions Judge Bengaluru City.