Bangalore District Court
That Sought Adjudication Of Disputes By ... vs Has Submitted His Written Arguments On on 29 November, 2021
1
Com.A.S.No.31/2014
IN THE COURT OF LXXXII ADDL.CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH.83)
This the 29th DAY OF NOVEMBER 2021
PRESENT:
SRI.DEVARAJA BHAT.M., B.COM, LL.B.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.AS.No.31/2014
BETWEEN:
Hubli Electricity
Supply Company
Limited, A Government
of Karnataka
Undertaking, haivng
its registered office at
Navanagara, PB Road,
Hubli - 580 025,
represented by its
Managing Director.
: PETITIONER.
(Represented by Sri.
B.C. Thiruvengadam -
Advocate.)
AND
2
Com.A.S.No.31/2014
SPML INFRA LIMITED,
(Formerly Subhas
Projects and
Marketing Limited), A
company incorporated
under Companies Act,
1956, having its
registered office at
NO. F-27/12 Okhle
Industrial Area Phase-
II, New Delhi - 110
026.
And
Having its regional
office at Mfar
Silverline Tech Park,
Plot No. 180, EPIP II
Phase, 2nd Floor,
Whitefield, Bengaluru
- 560 066, represented
by its Executive Vide
President - Power.
: RESPONDENT
(Represented by Sri.
L.M. Chidanandayya
-Advocate)
3
Com.A.S.No.31/2014
Date of Institution of the 29.03.2014
suit
Nature of the suit (suit on
pronote, suit for Petition for setting aside Arbitral
declaration & Possession, Award
Suit for injunction etc.)
Date of commencement of
recording of evidence - Nil -
Date on which judgment 29.11.2021
was pronounced
Date of First Case - Not held -
Management Hearing
Time taken for disposal 13 days
from the date of
conclusion of arguments
Total Duration Year/s Month/s Day/s
07 08 00
(DEVARAJA BHAT.M),
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
This is a Petition filed under Section 34 of the Arbitration & Conciliation Act, 1996 for setting aside the Arbitral Award dated 30.12.2013 passed in A.C.No.2/2013 by the learned Sole Arbitrator.
4Com.A.S.No.31/2014
2. The Respondent "SPML INFR LIMITED" had invoked the Arbitration Agreement and preferred certain Claims against "Hubli Electricity Supply Company Limited" the Petitioner.
3. The Brief facts leading to the case are as follows:-
The Petitioner is a Public Sector Company, owned by the Government of Karnataka, and is a deemed licensee under Electricity Act, 2003, established for the purpose of distributing electricity, and the company came into existence with geographical jurisdiction comprising of seven Districts of Dharwad, Belgaum, Gadag, Haveri, Uttar Kannada, Bagalkot and Bijapur with an objective to carry on the business of distribution and supply of electricity more efficiently and economically and more in public interest, that the Petitioner in order to improve the Rural Distribution System envisaged "Rural Load Management System", that the said project was initiated to fulfill the statutory obligation towards rural electrification cast upon the State Government by the Electricity Act, 2003, that the Respondent was the successful bidder and it was resolved in the 24th meeting of the Board of Directors of HESCOM held on 22.11.2006 to issue LOI/DWA for execution of RLMS works in Ranebennur O & M division in favour of the Respondent, that the work entrusted to the Respondent had three portions, that it 5 Com.A.S.No.31/2014 involved supply of material, erection and commissioning and also maintenance of the installation for a period of five years, that three separate letters of intent were issued in this regard on 17.02.2007, that each letter of intent specified the scope of work and also the value of the work contemplated, that the contract between the parties included, apart from the contract agreement, bidding documents, general and special conditions of contract, information to bidder, technical specifications, detailed work award etc., schedule-IV of the detailed work award provided the schedule for completion and delivery, that the work in question was to be completed within 12 months from DWA including monsoon months, that it specifies that payment for the work undertaken is linked to the PERT Chart furnished by the Respondent and it specifically provided that in the first instance 25 % of the total number of 11 KV feeders had to be taken up for execution, that it provided that material required for completion of 25% works had to be procured in the first Phase, that payment of 80% for the materials supplied was to be on certification that material is on site and balance 20% on successful completion, that the Respondent as per Schedule IV of DWA was required to finish the work awarded to it within a period of 12 months, including Monsoon months from the date of issue of DWA, that the Respondent was to complete the work as per the PERT Chart and that the schedule accepted by the 6 Com.A.S.No.31/2014 Respondent shall be followed strictly to achieve the required progress, that the Respondent was very well aware of the fact that execution of contract was divided into four phases and the payment schedule was also linked to the phase wise execution of the contract, that the Respondent failed to execute the project within the period of 12 months, that the project work was prolonged beyond a period of 12 months on account of the several breaches committed by the Respondent and only phase I and Phase II were completed on 30.04.2009, that the entitling the Petitioner to levy liquidated damages for the delay in execution of the project in accordance with the contract, that the Respondent, contending that it was prevented from completing the work due to delays purportedly caused by the Petitioner, that sought adjudication of disputes by arbitration and the same was accepted by the Petitioner, that the Tribunal was constituted and both the parties were heard by the Tribunal, that the Tribunal passed the award on 30.12.2013.
4. Being aggrieved by the said Arbitral Award, the Petitioner has challenged the same on several grounds, which will be discussed later in the body of the Judgment.
5. The Respondent has filed detailed objections to the said Petition on 18.10.2014 and prayed to dismiss the said Petition.
7Com.A.S.No.31/2014 The Respondent has also produced the records of the Arbitral Tribunal in Volume No. I and II along with the said objections. The Learned Advocate for the Petitioner has submitted his written arguments on 08.09.2021. The Learned Advocate for the Respondent has submitted his written arguments on 18.10.2021. Thereafter I have also heard oral arguments of both advocates.
6. Based on the above contentions of both parties, following Points arise for my consideration:-
1. Whether there are grounds to set aside the Impugned Award under Section 34 of the Arbitration & Conciliation Act?
2. What Order?
7. My findings on the above points are as follows:-
Point No.1:- In the Negative.
Point No.2:- As per the final Order for the following reasons.
REASONS
8. Point No.1: - The Respondent has preferred a Claim Petition before the Learned Arbitral Tribunal for several reliefs. The Learned Arbitral Tribunal has partly allowed the said claims.
8Com.A.S.No.31/2014
9. The Petitioner has challenged the said Impugned Award in this proceeding. Since, I have narrated the facts leading to the dispute in the earlier portion, I need not reproduce the same at this juncture. The Hon'ble High Court in the Judgment dated 17.04.2021 in Com.A.P.No.25/2021 (Union of India vs. M/s Warsaw Engineers), has laid down certain guidelines/principles about the writing of Judgments in a Petition filed under Section 34 of the Arbitration & Conciliation Act. Keeping in my mind the said guidelines, I now propose to examine each and every ground urged by the Petitioner specifically with reference to the submissions made by both Advocates.
10. The First ground is that the Impugned Award in its entirety is bad in law as the same is opposed to public policy and stems out of the gross irregularity in the conduct of the proceedings by learned Arbitral Tribunal.
10.a. In fact, the Petitioner has not explained which part of the Award is opposed to public policy and which portion is affected by gross irregularity. Only bald allegation in general is made by the Petitioner. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the 9 Com.A.S.No.31/2014 challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
11. The Second ground is that apart from lack of application of mind, the Tribunal has conducted itself in a prejudicial manner, without appreciating the pleadings and the evidence in entirety.
11.a. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
12. The Third ground is that the Tribunal has failed in its duty to properly frame issues. Furthermore, after framing the issues wherein it is seen from the impugned award the entire 10 Com.A.S.No.31/2014 burden of proof was on the shoulders of the Respondent, the Tribunal has acted in a manner as if the Petitioner has failed to prove its defence. The Petitioner craves the indulgence of this court to highlight few such findings, with reference to the impugned Award.
12.a. The Petitioner has not pointed out any such irregularities except making bald allegations at Para No. 15 of the Petition. Though he has mentioned that he has highlighted few such findings, no such details of the irregularities mentioned at Para No. 15 of the Petition. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
11Com.A.S.No.31/2014
13. The Fourth ground is that the Hon'ble Tribunal, as can be seen form Para 14 of the Impugned Award, has framed 13 issues. The said 13 issues clearly places the burden on the claimant to prove all the said issues and no onus has been placed on the Petitioners, who were the Respondents before the Hon'ble Tribunal, to prove anything, that being the case, the entire award has been passed in such a manner as if this Petitioner has failed to substantiate its defense by not leading proper evidence, that such a presumption on the part of the Tribunal is erroneous and misconceived and the proceedings of the Tribunal have been conducted improperly, that in order to substantiate this, the Petitioner draws the attention of this Court to Para 39 of the Award.
13.a. I have perused the Para No. 39 of the Award. In the said Para, the Arbitral Tribunal has held that by pleading that Ex.C.23 & C.25 are concocted documents, the Respondents (i.e., the present Petitioner) contend that the stipulation has to examination of the work in phase wise manner was accepted by the Claimant (i.e., the present Respondent) without any demur, that the Claimant (i.e., the present Respondent) is estopped from such stipulation, that this contention looses sight of the aspect that in absence of Respondents (i.e., the present 12 Com.A.S.No.31/2014 Petitioner) having released the feeder wise work details/vendor approval etc., for the entire work in one go; the Claimant (i.e., the present Respondent) had no option but to continue the work in phase wise manner, that if by doing so any delay occurs, the Claimant (i.e., the present Respondent) cannot be held responsible, that the similarly the Claimant (i.e., the present Respondent) cannot forego entitlement for compensation such delay to which otherwise entitled, that thus even assuming that the Claimant (i.e., the present Respondent) has accepted the work in a phase wise manner, it does not estop the Claimant from either seeking extension of time or damages from the resultant delay. The said finding of the Arbitral Tribunal cannot be read in isolation. In the subsequent paragraphs, after referring the case law on the subject they have discussed about the said finding in detail. The said finding cannot be considered as perverse and illegal if the award is read in its entirety. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) 13 Com.A.S.No.31/2014 and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
14. The Fifth ground is that the Para No. 43 and 44 of the Award implies that the Tribunal has come to a decision not on the basis of the evidence laid by Claimant but that of cross - examination of RW.1, which is improper and contrary to the issues that were framed. The first principle involved is that evidence cannot be fished by the Tribunal but should be forthcoming from the claimant itself.
14.a. There is no provision in the Indian Evidence Act or any other law which prohibits reliance on the evidence of Respondent's witnesses in the cross-examination while passing the award. Before proceeding further, I deem appropriate to reproduce Section 18 and 19, nestled under Chapter V - Conduct of Arbitral Proceedings of the Act, which reads as under:
"CHAPTER V Conduct of arbitral proceedings
18. Equal treatment of parties: - The parties shall be treated with equality and each party 14 Com.A.S.No.31/2014 shall be given a full opportunity to present his case.
19. Determination of rules of procedure:-
(1) The arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 (5 of 1908) or the Indian Evidence Act, 1872 (1 of 1872).
(2) Subject to this Part, the parties are free to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.
(3) Failing any agreement referred to in sub-section (2), the arbitral tribunal may, subject to this Part, conduct the proceedings in the manner it considers appropriate.
(4) The power of the arbitral tribunal under sub- section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence."
14.b. I am of the considered view that the aforesaid challenge flanked by the respondent to the arbitral award is on a very thin ice. In the decision reported in 2002 - S.C.C. OnLine - Bom - 983 (Maharashtra State Electricity Board vs. Datar Switchgear Ltd.), it is observed that sub-section (1) of Section 19 of the Act has prescribed that the arbitral tribunal shall not be bound by the Code of Civil Procedure, 1908 or by the Evidence Act, 1872. The paragraph No. 41 of the said 15 Com.A.S.No.31/2014 decision is reproduced verbatim, as under: -
"41. In sub-section (1) of Section 19, the Act has prescribed that the Arbitral Tribunal shall not be bound by the Code of Civil Procedure, 1908 or by the Evidence Act, 1872. These are words of amplitude and 30 not of restriction. These words no not prohibit the Arbitral Tribunal from drawing sustenance from the fundamental principles underlying the Civil Procedure or Evidence Act, but free the Tribunal from being bound, as would a Civil Court, by the requirement of observing the provisions of the Code and the law relating to evidence with all its rigour. Sub-section(2) of Section 19 preserves the consensual nature of the arbitral proceedings by laying down that subject to the provisions of Part-I, the parties are free to agree on the procedure to be followed by the Arbitral Tribunal in conducting its proceedings. The freedom which is conferred upon the parties to agree on the procedure to be followed by the Arbitral Tribunal is regulated by Part-I but subject to that regulation parties are otherwise free to agree on arbitral procedure and the conduct of proceedings. In the event that parties are not agreed on the procedure to be followed in the conduct of proceedings, the Arbitral Tribunal is against, subject to Part-I, free to conduct the proceedings in a manner which it considers appropriate. Sub-section (4) of Section 19 provides some indication of the contents of sub- section (3). Sub-section (4) lays down that the power of the Arbitral Tribunal under sub-section (3) includes the power to determine the admissibility, relevance, materiality and weight of any evidence. Sub-section (4) is of course not exhaustive of the 16 Com.A.S.No.31/2014 content of sub-section (3) but provides an instance of the power conferred by sub-section (3)."
14.c. In Paragraph No. 52 of the said decision, the Hon'ble Bombay High Court has eloquently reiterated the concept of an arbitral tribunal. The relevant extract of the same is as under: -
"52. The jurisprudential concept of an Arbitral Tribunal is that it is a private forum which is chose by the parties as a means of a speedy and expeditious resolution of disputes between them. The Arbitral Tribunal is not akin to a Court of law which has ordinarily a jurisdiction in general and an existence in perpetuity. The existence of an Arbitral Tribunal arises out of an arbitral agreement between the parties and upon the invocation of arbitration. The adjudicatory powers of an Arbitral Tribunal extend to such matters as parties have referred to it. The Arbitration and Conciliation Act, 1996 is a regulatory statute which has consolidated and amended the law of arbitration. The legislature in its wisdom has conferred power upon the Arbitral Tribunal to terminate its proceedings or to suspend its hearings in situations envisaged in the statute. It would, in my view, be impermissible for an Arbitral Tribunal to transcend the ambit of the powers which the parties have conferred and what the legislature has envisaged."
14.d. In this case, the parties have not agreed any specific rule of procedure to be followed before the learned Arbitral Tribunal. Hence, this ground is not available for the Petitioner 17 Com.A.S.No.31/2014 under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
15. The Sixth Ground is that the Para 46 to 48 of the Award is purportedly on the basis of the pleadings of the Petitioner, that the Tribunal cannot draw any inference from the pleadings without casting any issues that need to be proved or established by the Petitioner, that had the Tribunal applied its judicial mind and cast pleadings, it would have created an opportunity for the Petitioner to focus on the issues that need to be proved by it. This Petitioner would have focused its attention and been better equipped with such evidence that may have been required to establish its defence. In the absence of any issued framed by the Tribunal that would have called upon the Petitioner to prove it, the Tribunal has committed a serious procedural error in conducting the arbitral proceedings.
15.a. On perusal of the Para 46 and 48 of the Award, there is no such irregularities forthcoming from the same. In Para No. 46 to 48 of the Award, the Arbitral Tribunal has discussed about phase wise execution of the contract, Ex.C.24 relied on by the Claimant and ultimately held that the imposition of several 18 Com.A.S.No.31/2014 restrictions by the present Petitioner contributed to the overall delay in execution of the project work. The said observations, discussions and findings of the Arbitral Tribunal at Para No. 46 to 48 cannot be considered as perverse and illegal. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
16. The Seventh ground is that the Rule 5 of Order XIV of Civil Procedure Code empowers the court to amend issues or frame additional issues at any stage of proceedings if it was necessary to do so. When the question of competence of the Tribunal to take into consideration the amended claim is in issue, as evident from Para 18 of the impugned Award, the same should have been framed as an issue as to whether the Tribunal has competency to consider the amended claim of the parties. But the Tribunal has failed to frame any issues in this regard causing serious prejudice to the Petitioner. The Tribunal has adopted only a superfluous approach, thus the impugned award not be a meaningful and effective adjudication of the dispute.
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16.a. There is no law which prohibits the Arbitral Tribunal to consider the amendment of the claim and to frame issues with respect to the amended claim and further in fact the Petitioner has filed its additional statement of objections for the amendment of the claim petition made by the Respondent and the Arbitral Tribunal has considered all the pleadings made by both parties and has framed issues and appropriately applied its mind and after considering all the materials on record has passed a well-reasoned award. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub- Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
17. The Eighth ground is that the Tribunal's conduct is not appreciating the evidence in favour of the Petitioner is improper.
17.a. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings under Section 34 of the Act is summary in nature as held in the 20 Com.A.S.No.31/2014 decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
18. The Ninth ground is that the Tribunal failed to realize that the Petitioner is a Public Sector undertaking and that the project that was to be executed by the Respondent is for public purpose and granting of huge award with interest thereon, without appreciating the evidence in its favour, is opposed to public policy and public interest.
18.a. Awarding interest against the company owned by the Government does not go against the public policy that the law does not provide any special privilege for the government undertakings and Government Companies. The Hon'ble Supreme Court has considered the similar issue in the decision reported in (2019) 8 - S.C.C. - 112 (Pam Developments Pvt. Ltd. vs. State of West Bengal). In the said case, the agreement was between the parties pertained to repair of different stretches of Hooghly Highway Division in Hooghly 21 Com.A.S.No.31/2014 District, West Bengal. Disputes arose between the parties; appellant raised various claims before executive engineer of public works, when claims remained unpaid, the matter was referred to arbitration. Arbitration proceedings went on for around seven years. Pursuant to which an award was passed, allowing some of appellant's claims. As per the award appellant was entitled to Rs. 2,87,11,553/- with interest @18% p.a. While the respondent State challenged the award, during the intervening period, the 1996, Act was amended, thereby making it necessary for respondent to file a stay application under Section 36. Respondent's stay application was dismissed for default and the executing court passed an order attaching sum of Rs. 2.75 Crores lying to the credit of the respondent State with Reserve Bank of India. Interestingly, the respondent instead of filing an application seeking to recall the aforesaid order filed a fresh stay application. The impugned order granted an unconditional stay. The Hon'ble Supreme Court held that it was not the legislature's intent that, when judgment debtor is the government, the award would become unenforceable immediately on filing of an application under Section 34 as the award would be stayed merely as a matter of course, that while Civil Procedure Code may provide for differential treatment of government in certain cases, the Arbitration & Conciliation Act is a special act which mandates that parties to arbitration are 22 Com.A.S.No.31/2014 treated equally, no special treatment can be given to the government when considering an application for stay of award. The same principle is applicable to award interest also. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
19. The Tenth ground is that the Tribunal acted in a biased manner while appreciating the evidence, by giving undue weightage to the evidence produced by the Respondent, whereas the evidence produced by the Petitioner was not given the due weightage, which ought to have been given. By doing so, the Tribunal grossly erred not only on the ground of bias but also misconduct.
19.a. The Learned Advocate for the Respondent has argued that the Petitioner except making bald allegations has not pointed out where the Arbitral Tribunal has committed bias or misconduct in passing the award and where the evidence of the Petitioner has not been considered by the Arbitral Tribunal, that the said contention of the Petitioner is without any basis and more particularly does not constitute a ground for interference 23 Com.A.S.No.31/2014 in the award under Section 34 of the Arbitration & Conciliation Act and hence is liable to be rejected. There is some merit in his contentions. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
20. The Eleventh ground is that the Petitioner humbly submits that the evidence submitted by the Petitioner was grossly underappreciated which led to the entire award being passed in favour of the Respondent.
20.a. I have discussed about this fact also while discussing the other grounds. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub- Section (2-A) of Section 34 of the Arbitration & Conciliation Act.
24Com.A.S.No.31/2014 Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
21. The Twelfth ground is that the Tribunal has grossly erred in awarding interest to the Respondents, which was not contemplated in the Agreement. It is contended that the Arbitral Tribunal is barred from awarding any interest, unless there is express stipulation by the parties to the contract in this regard, that the Tribunal has gone beyond its mandate and grossly erred by awarding interest, when the same is neither contemplated nor intended in the contract between the parties.
21.a. On a perusal of the records, there is no bar under Clause 2.26.07 of the Contract to award interest and as per the said Clause there is no absolute bar on the power of the Arbitrator to grant interest and the said Clause is subject to stipulation under Clause 2.26.04, that the Arbitral Tribunal after considering the contention of both the parties in this regard at Para 156 to 165 of the award after interpreting both the said clauses and has given the finding, that the said interpretation of Clause 2.26.07 of the GCC made by the Arbitral Tribunal is a possible interpretation and cannot be interfered under Section 34 of the Arbitration & Conciliation Act. Hence, this ground is 25 Com.A.S.No.31/2014 not available for the Petitioner under Sub-Section (2) and Sub- Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
22. The Thirteenth ground that the Tribunal also erroneously interpreted various clauses of the contract disregarding the intention of the parties and giving its own interpretation to the contract, which was not contemplated by the parties at the time of its conclusion.
22.a. I shall discuss about this fact while discussing the Ground No. 17, wherein a similar attack is made by the Petitioner about the interpretation of the terms of contract by the Arbitral Tribunal.
23. The Fourteenth ground that the Tribunal has erroneously accepted the contentions of the Respondent, which have either not been supported by substantial evidence or are based on inaccurate evidence. This clearly shows the Tribunal acted with prejudice against the Petitioner.
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23.a. The Petitioner has not pleaded at which portion of the award has been passed based on inaccurate evidence. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
24. The Fivteenth ground that the tribunal has erred by extending the time for completion of the project without imposing liquidated damages, as it is beyond its scope/ mandate. Further the tribunal has erred in directing the refund of a sum of Rs. 97,56,886/- that was imposed by the Plainitff as liquidated damages on account of delay by the Defendant.
24.a. The Learned Advocate for the Respondent has argued that the Arbitral Tribunal at Para 132 to 135 of the award has elaborately considered various provisions of contract and has come to the conclusion that having regard to Clause 2.30.02 for extension of time in the present case the imposition of liquidated damages is impermissible and that the Petitioner has committed breach in not extending time for completion and in levying liquidated damages, that it has considered Clause 2.29.0 which provides for grant of extention of time without 27 Com.A.S.No.31/2014 levy of penalty and held that the delay is on the part of the Petitioner. On perusal of the records, I find some merit in the contentions of the Respondent. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub- Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
25. The Sixteenth ground that the Petitioner as explained supra, the Tribunal acted beyond its scope by imposing simple interest rate of 15% on the above amounts, from the respective dates of deduction till the date of the award.
25.a. Though the Petitioner has not taken such contention in this ground, the Learned Advocate for the Petitioner has argued that the Arbitral Tribunal has erred in awarding interest in the form of damages and has relied on a decision reported in A.I.R. - 1961 - S.C. - 990 ( Mahabir Prasad vs. Durga Dutta). However, the Learned Advocate for the Respondent has drawn my attention to a recent decision of the Hon'ble Supreme Court reported in 2021(6) -S.C.C. - 150 (M/s Oriental structural Engineers Pvt. Ltd. vs. State of Kerala) , wherein the Hon'ble Supreme Court has held that the 28 Com.A.S.No.31/2014 Arbitral Tribunal could have awarded the interest as a compensatory or equitable measure due to the absence of an exclusion clause, while addressing the question of if the Tribunal can assign such interest, the Hon'ble Supreme Court relied on the earlier decision reported in 1992(1) - S.C.C. - 508 ( Secretary, Irrigation Department, Government of Orissa & Others vs. G.C.Roy), where interest payment was held to be essentially compensatory in nature. It is further held that the same was broadly incorporated under Section 31(7) (a) of the Act. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
26. The Seventeenth ground that the tribunal erred by directing the Plaintiff to pay the Claimants a sum of Rs. 2,49,38,387/- with interest at the rate of 15% per annum towards purported cost of surplus material claimed to be procured by the Defendant. The tribunal has also erred by the directing the Plaintiff to pay Rs. 90,17,000/- and Rs. 13,93,072/- towards balance payment against Running account bills with interest at the rate of 15% per annum from the date of deduction.
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26.a. The Learned Advocate for the Petitioner has argued that there is no time period for payment of RA Bills specified in any of the applicable contracts and consequentially there is no provision for interest for delay in payment of RA Bills and has relied on a decision reported in 1999 (8) - S.C.C. - 122( Steel Authority of India Ltd vs. J.C.Budhiraja), wherein it is held as follows :-
"15.... It is settled law that arbitrator derives the authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be arbitrary one. This deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action. In the present case, it is apparent that awarding of damages of Rs. 11 lakhs and more for the alleged lapses or delay in handing over work site is, on the face of it, against the terms of the contract.
....
17. It is to be reiterated that to find out whether the arbitrator has travelled beyond his jurisdiction and acted beyond the terms of the agreement between the parties, agreement is required to be looked into. It is true that interpretation of a particular condition in the agreement would be within the jurisdiction of the arbitrator. However, in cases where there is no question of interpretation of any term of the contract, but of solely reading the same as it is and still the arbitrator ignores it and awards the amount despite the prohibition in the agreement, the award would be arbitrary, capricious and without jurisdiction. Whether the arbitrator has acted beyond the terms of the 30 Com.A.S.No.31/2014 contract or has travelled beyond his jurisdiction would depend upon facts, which however would be jurisdictional facts, and are required to be gone into by the court. Arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error. For this limited purpose reference to the terms of the contract is a must."
26.b. Per contra, the Learned Advocate for the Respondent has argued that it is for the arbitrator to appraise the evidence adduced by the parties, by relying on the decision reported in 2009(6) - S.C.C. - 414 (G.Ramachandra Reddy & Company vs. Union of India & another), wherein it is held that the interpretation of a contract will fall within the realm of arbitrator, that the Court while dealing with an award would not re-appreciate the evidence, that an award containing reasons may not be interfered unless they are found to be perverse or based on a wrong proposition of law. He has also relied on a decision reported in 2009 (10) - S.C.C. - 63 ( Steel Authority of India Limited vs. Gupta Brothers Steel Tubes Limited) wherein it is held that once the arbitrator has constructed Clause 7.2 in a particular manner and such construction is not absurd and appears to be Plausible, it is not open to the Count to interfere with the award of the arbitrator.
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26.c. Therefore, the power to interpret the contract also lies with the Arbitrator. If the Arbitrator interpreted the terms of contract in a particular way based on the material before him and the evidence adduced before him, even if another view is possible to be taken on the same materials and evidence, the Court cannot interfere the said findings of the learned Arbitrator as held by the Hon'ble Supreme Court in 2019 (7) - S.C.C. - 236 (Parsa Kenta Collieries Limited vs. Rajasthan Rajya Vidyut Utpadan Nigam Limited). Once the courts reach to the conclusion that the Arbitrator has acted within its jurisdiction, even if the courts are of the view that the opinion of the arbitrator is wrong the same cannot be disturbed unless it is against the public policy. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected. For the same reasons, the Ground No. 13 is also rejected.
27. The Eighteenth ground that the tribunal acted beyond its jurisdiction by imposing interest at rate of 15% per annum for the purported delay in releasing the running account bills. Further, it is submitted that the tribunal grossly 32 Com.A.S.No.31/2014 misconducted itself by awarding a sum of 1,12,64,480/- towards purported loss of profit to the Defendant.
27.a. I have discussed about this fact also while discussing the earlier grounds. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub- Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
28. The Nineteenth ground that the Tribunal erred by awarding a sum of Rs. 10,00,000/- towards storage and maintenance and security charges and interest at the rate of 15% per annum which was beyond its scope.
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28.a. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
29. The Twentieth ground that the tribunal erred by awarding a sum of Rs. 63,97,845/- towards purported escalation cost during prolongation of the contract. The tribunal also committed a serious error by imposing Rs. 15,00,000/- towards on-site overhead on account of purported prolongation of contract.
29.a. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings 34 Com.A.S.No.31/2014 under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
30. The Twenty First ground that the Tribunal committed a serious error by releasing all performance guarantees which is contrary and inconsistent with Claim No.1 the Respondent, which was decided as Issue No.1 in the impugned award, wherein the tribunal has unilaterally extended the contract and also directed the Petitioner to return the liquidated damages collected by it from the Respondent on account of its delay. The Hon'ble tribunal could not have taken contrary stands on the issue extention of the contract and the consequential return of the liquidated damages by the Petitioner, while also directing the Bank Guarantees to be returned to the Respondent, on the premise that the contract itself does not subsist.
30.a. This ground is in the nature and tenor of appeal. The position in law is well settled that this court while exercising 35 Com.A.S.No.31/2014 power under Section 34 of the Arbitration & Conciliation Act does not sit as a court of appeal. The nature of proceedings under Section 34 of the Act is summary in nature as held in the decision reported in (2019) - S.C.C. Online - S.C. - 1244 = (2019) 9 - S.C.C. - 462 (Canara Nidhi Limited vs. M. Shashikala). Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
31. The Twenty Second ground that the Tribunal committed an error by imposing future interest and it has also erred by awarding cost as against the Petitioner.
32. I have discussed about this aspect also while discussing the earlier grounds. Hence, this ground is not available for the Petitioner under Sub-Section (2) and Sub-Section (2-A) of Section 34 of the Arbitration & Conciliation Act. Thus, the challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
33. The scope of this court is limited with regard to Section 34 of the Act. The position of law stands crystallized 36 Com.A.S.No.31/2014 today, that findings, of fact as well as of law, of the arbitrator/arbitral tribunal are ordinarily not amenable to interference under Section 34 of the Act. The scope of interference is only where the finding of the Tribunal is either contrary to the terms of the contract between the parties, or, ex facie, perverse, that interference, by this court, is absolutely necessary. The arbitrator is the final arbiter on facts as well as in law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Section 34 of the Act. The Hon'ble High Court of Delhi in the decision reported in 2015 - S.C.C. OnLine - Del - 13192 (P.C.L. Suncon (JV) vs. NHAI), in Paragraph No. 24 has held as follows :-
"24. As a postscript, this Court believes that it is imperative to sound a word of caution. Notwithstanding the considerable jurisprudence advising the Courts to remain circumspect in denying the enforcement of arbitral awards, interference with the awards challenged in the petitions before them has become a matter of routine, imperceptibly but surely erasing the distinction between arbitral tribunals and courts. Section 34 jurisdiction calls for judicial restraint and an awareness that the process is removed from appellate review. Arbitration as a form of alternate dispute resolution, running parallel to the judicial system, attempts to avoid the prolix and lengthy process of the courts and presupposes parties consciously agreeing to 37 Com.A.S.No.31/2014 submit a potential dispute to arbitration with the object of actively avoiding a confrontation in the precincts of the judicial system. If a court is allowed to review the decision of the arbitral tribunal on the law or on the merits, the speed and, above all, the efficacy of the arbitral process is lost."
34. The Hon'ble Supreme Court in the decision reported in (2006) 11 - S.C.C. - 181 ( McDermott International Inc. vs. Burn Standard Co. Ltd. and Ors.), has held as follows :-
"52. The 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."
35. Thus, it is observed and held that the arbitral award is not marred by any patent illegality, as there is no contravention 38 Com.A.S.No.31/2014 of the substantive law of India, which would result in the death knell of an arbitral award. It is also observed that there is no patent illegality in the arbitral award, which must go to the root of the matter. The arbitral award is also a well reasoned and a speaking award. The arbitral award is also held to not be in contravention of Section 28(3) of the Act, which pertains to the terms of the contract, trade usages applicable to the nature of contract and substance of dispute.
36. Further, as per Rule 4 (c) of the High Court of Karnataka Arbitration (Proceedings before the Courts) Rules, 2001, the Arbitrator/Arbitral Tribunal should be joined as Respondent in this proceedings. Since the Petitioner has not made the Learned Arbitrator as a party to the proceedings, this Petition is liable to be dismissed on the said ground also.
37. In my humble opinion, it cannot be said, in the present matter, that finding recorded by the Arbitral Tribunal is based on no evidence or it has ignored vital evidence before arriving at the decision. A bare perusal of the award passed by the Learned Arbitral Tribunal shows that evidence of both the parties have been considered in detail and the Learned Arbitral Tribunal has taken into account each and every submissions 39 Com.A.S.No.31/2014 advanced by the parties before him, including appreciation of evidence in proper manner before arriving at the decision to pass the impugned award.
38. For the said aspect, I wish to refer a recent decision of the Hon'ble Apex Court reported in (2021) 3 - S.C.C. - 308 (Anglo American Metallurgical Coal Pty. Ltd. vs. MMTC Limited), wherein it has laid down the parameters of judicial review and Courts have been permitted to interfere only if there is a ground of patent illegality or violation of fundamental policy of Indian law and if a possible view is based on oral and documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence and as such, no interference is permissible. The relevant portion of the judgment is reproduced hereunder:-
"48. Given the parameters of judicial review laid down in Associate Builders, it is obvious that neither the ground of fundamental policy of Indian law, nor the ground of patent illegality, have been made out in the facts of this case, given the fact that the majority award is certainly a possible view based on the oral and documentary evidence led in the case, which cannot be characterized as being either perverse or being based on no evidence."40
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39. Therefore, I answer this Point in Negative.
40. Point No. 2 :- Therefore, I proceed to pass the following Order.
ORDER The Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is dismissed.
The Arbitral Award dated 30.12.2013 is hereby upheld.
The Petitioner shall pay the cost of this proceeding to the Respondent.
The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
(Dictated to the Stenographer typed by her, corrected and then pronounced by me in open Court on this the 29th day of November 2021.).
(DEVARAJA BHAT.M), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.
41 Com.A.S.No.31/2014 The Judgment is pronounced in Open Court. The operative portion of the said Judgment is as follows :-
ORDER The Petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, is dismissed.
The Arbitral Award dated 30.12.2013 is hereby upheld.
The Petitioner shall pay the cost of this proceeding to the Respondent.
The Office is directed to send copy of this judgment to both parties to their email ID as required under Order XX Rule 1 of the Civil Procedure Code as amended under Section 16 of the Commercial Courts Act.
(vide my separate detailed
Judgment dated 29.11.2021 ).
(Typed to my dictation)
LXXXII ACC&SJ, B'LURU.