Gauhati High Court
M/S G And T Beckfield Drilling Services ... vs Oil And Natural Gas Corporation Ltd on 8 March, 2019
Equivalent citations: AIR 2019 GAUHATI 64, (2019) 3 GAU LT 61 (2019) 4 ARBILR 410, (2019) 4 ARBILR 410
Author: Suman Shyam
Bench: Suman Shyam
Page No.# 1/16
GAHC010019622007
THE GAUHATI HIGH COURT
(HIGH COURT OF ASSAM, NAGALAND, MIZORAM AND ARUNACHAL PRADESH)
Case No. : Arb.A. 3/2007
1:M/S G and T BECKFIELD DRILLING SERVICES PVT. LTD.
A COMPANY REGISTERED UNDER THE COMPANIES ACT 1956 HAVING ITS
REGISTERED OFFICE AT F-04 and 05 TRIVENI COMMERCIAL COMPLEX
SHEIKH SARAI PHASE I NEW DELHI 110017 THROUGH ITS MANAGING
DIRECTOR
VERSUS
1:OIL and NATURAL GAS CORPORATION LTD.
A COMPANY REGISTERED UNDER TEH COMPANIES ACT 1956 HAVING ITS
REGISTERED OFFICE AT JEEVAN BHARATI BUILING TOWER II 124
CONNAUGHT CIRCUS NEW DELHI 110001 THEROUGH ITS CHAIRMAN
ALSO AT EASTERN REGION BUSINESS CENTER TECHNICAL BUSINESS
GROUP NAZIRA ASSAM
Advocate for the Petitioner : MR. R DUGGAL
Advocate for the Respondent : MR. A HASSAN
BEFORE HONOURABLE MR. JUSTICE SUMAN SHYAM JUDGMENT AND ORDER (CAV) Date : 08-03-2019 This appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996( here- in-after referred to as the "Act of 1996") assailing the judgment and order dated 15.11.2007 passed by the learned District Judge, Sivasagar in Misc Arb Case No.26 of 2005, setting aside the arbitral award Page No.# 2/16 dated 21.11.2004.
2. The basic facts are not in dispute in this case. The facts essential for disposal of this appeal, shorn of un-necessary details, are that the respondent/ ONGC had floated an NIT on 06.02.1995 inviting offers for carrying out Horizontal Drain Hole Drilling in respect of 4 (four) of its designated oil wells situated in the Upper Assam. In response to the NIT dated 06.02.1995, M/S Beckfield Drilling Services, USA, a company incorporated in the United States of America, had made its offer on 12.03.1995 which was accepted by the respondent on 23.05.1995. On 25.07.1995, a Letter of Intent (LoI) was issued in favour of M/S Beckfield Drilling Services, USA. However, by the letter dated 30.07.1995, while acknowledging the acceptance of the LoI, M/S Beckfield Drilling Services, USA had made a request to the respondent for assignment of the contract in favour of its Joint Venture (JV) partner in India viz. M/S G & T Beckfield Drilling Services (Pvt.) Ltd. i.e. the appellant here-in. On 07.08.1995, the Government of India had conveyed its approval with regard to the collaboration between Beckfield, USA and the appellant, whereafter, by the communication dated 20.10.1995, the respondent had also accepted the request for assignment of the LoI in favour of the appellant. On 17.08.1996, a contract agreement was signed by and in between the respondent on one hand and M/s Beckfield Drilling Services, USA as well as the representatives of the appellant on the other hand. Thereafter, execution of the work commenced with effect from 17.08.1996 with due approval from the respondent. However, on 14.03.1997, the respondent had issued a notice of termination of contract giving 15 days' notice to the appellant. In the meantime, on 07.10.1996, the appellant had raised its first invoice demanding payment for the work already executed by it followed by another 9 (nine) invoices involving a total amount of $11,85,939.98 (U.S. Dollar).It appears that the respondent had made payment in respect of the first 4 (four) invoices raised by the appellant for a sum of $ 4,71,754.19 (US Dollar) but it had refused to make payment in respect of the remaining 6 (six) invoices. When the legal notice dated 10.04.1998 sent on behalf of the appellant demanding payment in respect of the balance amount was not responded to nor any payment made by to the appellant, a dispute had arisen between the parties. As such, by the legal notice dated 06.06.1998, the appellant had invoked the arbitration clause seeking adjudication of its claim by an arbitral tribunal and accordingly appointed Hon'ble Justice K.N.Saikia, a former Judge of the Supreme Court of India( here-in-after referred to as the First Arbitrator for the sake of convenience ) as its arbitrator under clause 25 of the agreement dated 07.08.1995 and called upon the respondent to appoint its arbitrator. On 18.08.1998, the respondent had appointed Hon'ble Justice M.M.Dutt, a former Judge of the Supreme Court of India ( here-in-after referred to as the Second Arbitrator for the sake of convenience) to act as an arbitrator on its behalf.
Page No.# 3/16 Both the arbitrators had thereafter, appointed Hon'ble Justice A.N.Sen, Former Judge of the Supreme Court of India ( here-in-after referred to as the Presiding Arbitrator) to act as the Presiding Arbitrator. The first sitting of the arbitral tribunal was held on 24.10.1998.
3. It appears from the record that after the filing of claims and counter-claims, the respondent had filed an application under Section 16(3) of the Act of 1996 questioning the maintainability of the arbitration proceeding on the ground that the contract agreement was void. It further appears that since the application under Section 16(3) was filed after the submission of the statement of defence by the respondent, hence, the arbitral tribunal, while dealing with the application in its sitting held on 25.04.2003 had decided to keep the application on record. The said application was eventually considered at the stage of passing the final award on 21.11.2004 and the arbitral tribunal had rejected the objection raised by the respondent as to the maintainability of the arbitral proceeding.
4. The arbitral ward dated 21.11.2004 was challenged by the respondent by filing an application under section 34 of the Act of 1996 before the court of District Judge, Sivasagar which was numbered and registered as Misc (Arbitration) case No 26 of 2005. By the impugned judgment and order dated 15.11.2007, the learned District Judge, Sivasagar has set aside the arbitral award dated 21.11.2004 on two grounds. Firstly, that the arbitral award did not record any reason. Secondly, the arbitral tribunal having failed to give a decision on the application filed by the respondent under section 16(3) of the Act of 1996, had acted in contravention of section 16(5) of the Act.
5. Mr. Raman Duggal, learned senior counsel appearing for the appellant, has argued that in this case the three Arbitrators had written out separate awards recording reasons for their decisions based on which, the final arbitral award was passed. Therefore, it would be factually incorrect to conclude that the arbitral award signed by all the three Arbitrators did not disclose any reason. As regards the observation made by the learned District Judge pertaining to non-disposal of the application filed by the respondent under Section 16(3) of the Act of 1996, Mr.Duggal submits that the learned Arbitrators had not only dealt with the objection as to the maintainability of the arbitration proceeding but each of them had also given reasons for rejecting the said objection. As such, submits Mr.Duggal, the two grounds on which the learned District Judge had set aside the arbitral award are non-existent and therefore, the impugned judgement and order dated 15.11.2007 is vitiated by complete perversity and non-application of mind.
6. Referring to the various provisions of the Act of 1996, more particularly Section 5, Mr.Duggal submits that in a number of judicial pronouncements, the Hon'ble Supreme Court has held that an Page No.# 4/16 arbitral award is not to be interfered with except in accordance with the provisions of the Act of 1996. By referring to the decision of the Supreme Court in the case of Associate Builders Vs. Delhi Development Authority reported in (2015)3 SCC 49 Mr.Duggal has submitted that an arbitral award would be un-assailable unless the same is found to be in conflict with the public policy of India. In the present case, submits Mr.Duggal, since the respondent had failed to assail the award by taking any valid ground under section 34 of the Act of 1996, the learned District Judge had clearly acted without jurisdiction in interfering with the arbitral award.
7. Responding to the above submissions, Mr. K. P. Pathak, learned senior counsel appearing for the respondent submits that the respondent had raised a specific plea under Section 16(3) of the Act of 1996 questioning the maintainability of the arbitration proceeding on the ground that the contract agreement, which contained the arbitration agreement, was void and hence, the claims raised by the appellant/claimant could not have been entertained by the learned arbitral tribunal before deciding the said application under 16(3). According to Mr.Pathak, a decision on the objection raised under section 16(3) would come within the purview of Section 29(1) of the Act of 1996 and therefore, the learned tribunal was under an obligation to give a decision on the said application under section 16(5) prior in point of time, which it had failed to do. Contending that failure to render a decision on the said application within the meaning of section 29(1) had led to violation of the procedure prescribed under Part-I of the Act 1996 having a vitiating effect on the arbitral award, Mr.Pathak has argued that the omission on the part of the arbitral tribunal to decide on the question of maintainability of the proceeding would have a fatal bearing on the final award. Therefore, the arbitral award 21.11.2004, according to the learned senior counsel, would be assailable under section 34(2) (v) of the Act of 1996 for contravening the provisions contained in part -I of the Act.
8. By referring to Section 31 of the Act of 1996, Mr.Pathak has further argued that since it was a three member arbitral tribunal, hence, it is only an award which is signed by all the three members of the Tribunal that can be treated as a valid arbitral award. Mr.Pathak has argued that every award is a decision but all decisions in course of an arbitral proceeding is not an award. Since the arbitral award signed by all the three members of the Tribunal does not contain any reason, hence, according to the learned senior counsel, the award dated 21.11.2004 is in clear conflict with section 31(3) of the Act of 1996, and hence liable to be set aside on such count alone. To sum up his arguments, the learned senior counsel submits that the arbitral award is in conflict with the public policy in India and therefore, the impugned judgement and order dated 15.11.2007 passed by the District Judge, Sivasagar does not suffer from any infirmity.
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9. I have considered the submissions advanced by the learned counsel for both the parties and have also gone through the materials available on record.
10. As noticed above, the decision of the learned District Judge, Sivasagar has been assailed by the appellant taking the plea of perversity, inter-alia contending that both the grounds on which the arbitral award had been set aside by the learned court below are non-existent in the eye of law. The respondent's counsel, on the other hand, has strenuously argued that the contract agreement was void but the arbitral tribunal had failed to decide the question of maintainability of the arbitral proceeding in a proper manner. In order to appreciate the controversy raised in this appeal, it would be necessary to briefly refer to the factual matrix of the case.
11. From the facts alluded to above, it is clear that respondent had not only issued an LoI to the Principal Company i.e. M/S Beckfield Drilling Services, USA but had also acceded to its request to assign the LoI to the appellant. Not only that, the respondent had also signed a contract agreement with M/S Beckfield Drilling Services, USA and the appellant on 17/08/1996 paving the way for execution of the work. It is also not in dispute that the respondent has accepted the performance of the contract from the appellant without raising any objection. The appellant company was admittedly in existence on the date of signing the contract agreement. What is however, to be noted here-in that before the signing of the agreement dated 17.08.1996, M/S Beckfield Drilling Services, USA, had been taken over by another company i.e. M/S Phoenix Drilling Services, USA on 20.11.1995. Having learnt about the fact that M/S Beckfield Drilling Services, USA, was no longer in existence, an addendum to the contract agreement dated 17.08.1996 was signed by and between the parties wherein M/s Phoenix Drilling Services, USA was one of the signatories. On 18.04.1997, the appellant had also submitted a notarized deed of under taking before the respondent to the effect that along with the appellant, M/S Phoenix Drilling Services, would also be responsible for execution of the contract. It appears from the record that notwithstanding such undertaking given by the appellant, the respondent had refused to release the payment to the appellant by taking the plea that the contract agreement was void.
12. From a perusal of the minutes of the 148th sitting of the arbitral tribunal held on 10.04.2004, it appears that the hearing had concluded on the said date and award was reserved. The learned tribunal had also directed the respondent to furnish stamp paper worth Rs 150/- on behalf of the claimant for publishing the award. Accordingly, one set of stamp paper worth Rs 150/- was furnished on behalf of the claimant. However, in its 152nd sitting held on 20.08.2004 the learned tribunal had observed that there was possibilities of four awards, including the majority award, being published in this case.
Page No.# 6/16 Therefore, the respondent's counsel was asked to furnish 3 (three) more sets of stamp papers at the cost of the claimant.
13. In the 153rd sitting of the arbitral tribunal held on 21.11.2004, it was decided that each of the learned arbitrators would make his individual award and accordingly 3 (three) separate awards had been prepared in the proceeding by the three arbitrators expressing divergent views and opinion on the various issues raised in the proceeding. Taking into consideration of the views and opinions expressed by the individual arbitrators, the final arbitral award dated 21.11.2004 was published based on the majority opinion of the panel of arbitrators .The final award was not only signed by all the three arbitrators but was also to be treated as the award of the tribunal. The individual awards given by each of the arbitrators and the arbitral award signed by all three of them on 21.11.2004, are available in the record.
14. From a perusal of the individual awards written separately by the learned arbitrators, it is apparent that there were serious differences in opinion amongst them on a number of contentious issues and therefore, in their respective awards dated 21.11.2004, the learned arbitrators have recorded their individual views giving reasons for their opinion. Therefore, the individual awards were nothing but judgements written by each of the arbitrators expression their opinion forming the basis of the final award.
15. It is no doubt correct that the final award dated 21.11.2004 signed by all the three arbitrators does not contain reasons but it is equally true that the reasons and opinions of the individual arbitrators in support of the final award had been duly published on 21.11.2004 itself. Therefore, the present is clearly not a case where the arbitral tribunal had failed to assign any reason in support of the arbitral award.
16. In the above context, It would be pertinent to mention herein that the first arbitrator in his judgement had not only dealt with the plea raised by the petitioner under Section 16(3) of the Act of 1996 but the learned arbitrator had also given elaborate reasons justifying the award made in favour of the claimant / appellant. The learned arbitrator was of the view that the plea raised by the respondent to the effect that the contract dated 17.08.1996 was void was unsustainable in the eye of law for the reasons stated therein. Having held as above, the learned Arbitrator had gone on to deal with the claims and counter-claims of the parties in detail by referring to the materials brought on record. After a threadbare discussion of the merit of the respective cases projected by both the sides, the learned Page No.# 7/16 Arbitrator had passed the following awards :-
"22. We have found the arbitration proceeding to have commenced from 15.6.1998. However after the claimant's letter of request for arbitration the respondent appointed its arbitrator, and the two appointed arbitrators appointed the Presiding arbitrator when the constitution of the tribunal was complete. The effective commencement therefore could be when after the first sitting of arbitral tribunal was held on 24.10.98 and the claim statement was filed on 15.12.98 which may reasonably be taken as date of the actual commencement of arbitration for the purpose of calculating interest on the award. The tribunal under the law has its discretion to fix this starting date of actual commencement for the purpose. The precise facts, relevant statutory case law, and reasons for the award have been discussed above. As agreed by the parties, we have treated each of the ten pending bills/invoices as claim/issue and decided. The question of deduction of the performance bond amount from the operational charges instead of availing the Bank guaranty having also been referred, it is also decided as claim with interest. The following is the operative part of the AWARD ::
Claim/Issue No.1 Claim of $3,600 as interest on delayed payment is disallowed. Claim/Issue No.2 Claim of $20,729.17 being outstanding balance is allowed with interest. Claim/Issue No.3 Claim of $1,26,536.44 being outstanding balance is allowed with interest. Claim/Issue No.4 Claim of $30,401.05 being outstanding balance is allowed with interest. Claim/Issue No.5 Claim of $14,321.87 being outstanding balance is allowed with interest. Claim/Issue No.6 Claim of $167,960.43 being outstanding balance is allowed with interest. Claim/Issue No.7 Claim of $87,523.37 being outstanding balance is allowed with interest. Claim/Issue No.8 Claim of $60,000 being outstanding balance is allowed with interest. Claim/Issue No.9 Claim for $78,750.00 being 75% of tools lost in hole is allowed with interest. Claim/Issue No.10 Claim of $15,000 being outstanding balance is allowed with interest. Claim of Performance bond amount $55,050.00 improperly deducted is allowed with interest.
The total award amounts to US $6,56,372.33 with interest at the rate of 12% (Twelve per centum) per annum pendentelite from 15.12.98 till date of the award and at the same rate of interest from expiry of two weeks from date of the award to the date of payment/recovery in full.
Page No.# 8/16 The pendentelite interest will be calculated from the date of effective commencement of the arbitral proceeding, that is, 15.12.98, at the rate of 12% (twelve per centum) per annum till the date of the award and the post-award interest from the date the expiry of two weeks from the date of the award at the same rate till payment/recovery of the awarded amounts in full.
23. Costs of the proceedings. Sub-section (8) of Section 31 of the Arbitration and Conciliation Act, 1996 provides that unless otherwise agreed by the parties.--(a) the costs of an arbitration shall be fixed by the arbitral tribunal; (b) the arbitral tribunal shall specify - (1) the party entitled to cost, (ii) party who shall pay the costs, (iii) the amount of costs or method of determining that amount, and (iv) the manner in which the costs shall be paid. Explanation -
For the purpose of clause (a), "costs" means reasonable costs relating to - (1) the fees and expenses of the arbitrators and witnesses, (ii) the legal fees and expenses, (iii) any administration fees of the institution supervising the arbitration, and (iv) any other expenses incurred in connection with the arbitral proceedings and the arbitral award. The question of costs deserves careful consideration in view of nearly six years duration of the proceedings with high market rate of interest. The Claimant has shown an expenditure of around Rs.70,00,000 (Seventy lacs rupees). There is no doubt that the respondent must have also incurred about the same amount, if not more. However, in economic strength the respondent has enormously higher endurance than the claimant. The respondent may have elongated the proceedings with more renovative points for determination. Considering all the relevant aspects, the respondent is directed to pay as costs Rs.5,00,000 (five lac rupees) to the claimant as costs, over and above what is due as award, with interest at the same rate (12%) from the expiry of two weeks from the date of the award on costs."
17. The learned second arbitrator, in his judgment/award delivered on 21.11.2004, had also dealt with the objections raised by the respondent as to the maintainability of the arbitral proceeding whereby it was held that the contract dated 17.08.1996 was a void contract. However, having held as above, the learned arbitrator had gone on to examine the various documents exchanged by and between the parties so as to come to a conclusion that although the contract agreement, which had contained the arbitration clause was void and inoperative in the eye of law, yet, in view of the documents exchanged by and between the parties, an arbitral agreement had come into existence and therefore, the arbitral proceeding was maintainable. The operative part of the judgment and order passed by the second Page No.# 9/16 arbitrator is quoted herein below for ready reference :-
"In view of the aforesaid reasons, I make the following AWARD
a) The claim of the claimant for six bills being bills Nos.1134/96-97/05, 1134/96-97-
06, 1134/96-97/07 , 1134/96-97/08, 1134/96-97/09 and 1134/96-97/10 dated respectively 5.11.96, 5.11.96, 31.1.97, 19.3.97 and 25.4.97 is disallowed.
b) The respondent shall pay to the claimant 78,750 US$ being the price of equipment lost in the hole.
c) The respondent shall also pay to the claimant 15,000 US$ being the fees for demobilisation of equipment.
d) Therefore, the net result is that the respondent shall pay to the claimant 78,750 US$ Plus 15,000 US $, that is 93,750 US$ within three months from date, in default the said amount shall carry interest at the rate of 9% per annum from the date of default till realisation.
e) The counter-claim of the respondent is dismissed.
Each party shall bear its own cost."
18. The Presiding Arbitrator, had also written a separate award on 21.11.2004 recording reasons for rejecting the objection raised by the respondent as to the maintainability of the arbitration proceeding. While recording his own views on the issue, the learned Presiding Arbitrator had also dealt with the views expressed by the other two members of the arbitral tribunal and overruled the objection raised under Section 16(3). The relevant portion of the observations made by the learned Presiding Arbitrator in his award dated 21.11.2004 in support of the arbitral award dated 21.11.2004 are extracted herein below for ready reference :-
"I may indicate that Justice M. M. Dutt, one of the Co-Arbitrators, has in the Award prepared by him taken the view that the contract is void, although he has held that the Arbitration clause is valid and the arbitration proceeding which has gone on the basis of the Agreement between the parties is lawful and valid. As Justice Dutt has held that the Arbitration proceeding is valid and maintainable and Justice Saikia, the Page No.# 10/16 other Co-Arbitrator, has expressed the view that the arbitration agreement is valid and binding and has over-ruled this preliminary objection, it has to be held that the unanimous decision is that the present Arbitration is valid and the preliminary objection raised as to the validity and maintainability of the Arbitration Proceeding has been unanimously rejected by all the 3(three) Arbitrators, though it may be for different reasons. Accordingly, it is held unanimously that the preliminary objection with regard to the maintainability of the arbitration proceeding cannot be entertained and is over- ruled."
19. Having held as above, the learned Presiding Arbitrator had given his verdict on the merit of the claim of the appellant company in the following manner :-
"On the basis of my above findings, I, therefore, pass an Award for the total amount of $6,56,272.34 in respect of claims made in the proceeding. I, however, wish to make it clear that though I have not allowed any interest on the claim made as aforesaid, the Claimant will be entitled to claim interest on the total sum of $6,56,272.34 at the rate of 12% p.a. on and from 12/12/1998, the day on which the statement of Claim was affirmed till recovery of the said amount awarded in favour of the Claimant.
I agree with the direction given by Justice Saikia that the Respondent should pay a sum of Rs.5(five) lakhs on account of costs of the proceeding and I accordingly direct the Respondent to pay as costs of the Proceeding Rs.5 (five) lakhs to the Claimant together with the sums awarded. The counter-claim stands dismissed."
20. Based on the majority opinion expressed by the individual arbitrators, the three member arbitral tribunal had published the final arbitral award on 21.11.2004 which was not only published in a stamp paper but was also duly signed by all the three Members of the arbitral tribunal. The final arbitral award dated 21.11.2004 is re-produced here-in below for ready reference :-
"AWAR D
1. Preliminary objection as to maintainability of the present Arbitration Proceeding raised on behalf of the Respondent, ONGC, is rejected.
2.(i) Claim No.2 relating to the 2nd invoice or $20,729.17 being the outstanding balance is allowed rejecting the claim for interest thereon.
2(ii) Claim No.3 in respect of invoice No.3 for $126536.44 being unpaid balance is allowed Page No.# 11/16 without interest.
2(iii) Claim No.4 relating to invoice No.4 for $30401.05 being the outstanding balance is allowed. Claim for interest on the same is, however, rejected.
2(iv) Claim No.5 in respect of invoice No.5 for $14,321.68 being the outstanding balance is allowed without interest.
2(v) Claim No.6 being invoice No.6 of $1,67,960.43 being outstanding balance is allowed but no interest is allowed.
2(vi) Claim No.7 in relation to invoice No.7 for $87,523.37 being the unpaid balance is allowed and the claim for interest on the said amount is disallowed.
2(vii) Claim No.8 refers to invoice No.8 for $60000 is allowed without interest.
2(viii) Claim No.9 in respect of invoice No.9 for $78,750 being 75% of the tools lost in hole is allowed but without any interest.
2(ix) Claim No.10 vide invoice no.10 for $15,000 in respect of charges for demobilisation is allowed without any interest.
2(x) Claim of performance-bond amount of $ 55,050 is allowed as the said sum was deducted improperly without any justification.
3. Accordingly, an Award for the total amount of $6,56,272.34 is passed in favour of the Claimant G & T BecField Drilling Services (P) Ltd. against the Respondent, Oil & Natural Gas Corporation Ltd.
4. The said sum will carry interest at the rate of 12% per annum on and from 12/12/1998, the date when the Statement of Claim was affirmed, till recovery of the said amount and an Award for interest on the said amount is made accordingly.
5. The Claimant will be entitled to Costs of the Proceeding assessed at Rs.5(five) lakhs only from the Respondent, ONGC, and an Award for Rs.5 (five) lakhs for Costs is accordingly passed. Counter-Claims are dismissed.
Sd/- illegible Sd/- illegible Sd/- illegible
(M. M. Dutt) (A. N. Sen) (K. N. Saikia)
CO-ARBITRATOR. PRESIDING ARBITRATOR CO-ARBITRATOR
Page No.# 12/16
21.11.2004 21.11.2004 21.11.2004"
21. From the facts noted above, it would be established beyond reasonable doubt that the learned arbitrators had not only assigned reasons in support of the final arbitral award dated 21.11.2004 but had also given their decision on the application filed under section 16 (3) questioning the maintainability of the arbitral proceeding.
22. Section 16(5) of the Act of 1996 lays down that the arbitral tribunal shall decide on a plea referred to in sub-section (2) or sub-section (3) of section 16 and where the arbitral tribunal takes a decision rejecting the plea, continue with the arbitral proceeding and make an arbitral award. From the above, it is clear that the arbitral tribunal would be required to decide as per sub-section (5), a plea that the arbitral tribunal does not have the jurisdiction, provided such a plea is raised not later than submission of the written statement of defence or a plea raised under sub-section (3) that the arbitral tribunal is exceeding the scope of its authority.
23. In this case, the application stated to have been filed by the respondent under section 16(3) of the Act of 1996 is not available on record. However, from the materials available on record, it appears that the objection as to the maintainability of the arbitral proceeding was raised by the respondent on the ground that the contract agreement was void and not on the ground that the arbitral tribunal had exceeded the scope of its authority. It further appears that on 25.04.2003 the said application was taken on record by the arbitral tribunal and put up for decision at the stage of passing the final award. There is nothing on record to show that the respondent had ever objected to the minutes of the arbitral proceeding dated 25.04.2003 or had pressed for a decision on the said application as a preliminary issue.
24. Further, section 16(1)(b) of the Act of 1996 provides that a decision by the arbitral tribunal that the contract is null and void shall not entail ipse jure the invalidity of the arbitration clause. If that be so, then it can be safely presumed that even if the plea raised by the respondent was answered in the affirmative, even then the same would not have any material bearing on the question of maintainability of the arbitral proceeding.
25. Section 29 of the Act of 1996, lays down the manner in which decision is to be made by a panel of Arbitrators. As per section 29(1) of the Act, unless otherwise agreed to by the parties, any decision in an arbitral proceeding with more than one arbitrator shall be made by a majority of all the members of Page No.# 13/16 the arbitral tribunal. There is no dispute about the fact that in the present case there is no agreement requiring the arbitral tribunal to act in a manner contrary to section 29(1).Therefore, in this case the majority decision of the panel of arbitrators, on all contentious issues involved in the proceedings can alone be treated as the decision of the arbitral tribunal.
26. Section 31 of the Act of 1996 lays down the form and content of arbitral award. Sub section 3 of section 31 provides that the arbitral award shall state the reasons upon which it is based, unless the parties have agreed that no reasons are to be given, or the award is an arbitral award on agreed terms under section 30. A plain reading of Section 31(3) leaves no room for doubt that an arbitral award would have to state the reasons upon which it is based, unless the parties have agreed to otherwise.
27. Law is well settled that the arbitrator would be obliged to state the reason in support of an award unless the parties have agreed to the contrary. Due emphasis on the mandatoriness of giving reasons for an arbitral award had been laid by the Apex Court in the cases of Konkan Rly Corpn Ltd. Vs Mehul Construction Co. (2000) 7 SCC 201.
28. In the case of Anand Bros. (P) Ltd. Vs Union of India reported in (2014) 9 SCC 212 the Supreme Court has observed that section 31(3) of the Act of 1996 seeks to achieve the twin objectives of obliging the arbitral tribunal to give reasons for its award and also reducing the supervisory roles of the courts in arbitration proceedings. It was further held that the expression "conclusion" or "decision"
are terms that are interchangeably used by the legal profession and the court with reference to determinations made by a Judge, jury, administrative agency, arbitrator or a referee.
29. In the case of SomDatt Builders Ltd. Vs. State of Kerala reported in (2009) 10 SCC 259 the Apex Court has observed that the requirement of section 31(3) to give reasons in support of an award is not an empty formality. It guarantees fair and legitimate consideration of the controversy by the arbitral tribunal. While observing that the arbitral tribunal is not expected to write a judgement like a court nor is it expected to give elaborate reasons in support of its findings, the Apex Court has held that to satisfy the requirement of section 31(3), the reason must be stated by the arbitral tribunal upon which the award is based.
30. From an analysis of the above decisions of the Supreme Court it is clear that an arbitral award must state reasons unless the parties to the agreement have agreed to otherwise. The necessity to state reason, as embodied in Section 31(3) of the Act of 1996 is to avoid any element of arbitrariness and bring in fairness and transparency in the decision making process. However, there is nothing in Section 31 which requires that in case of a panel of arbitrators having divergent views on any issue, the reasons Page No.# 14/16 recorded by each of the arbitrators must also be signed by all the members of the panel. Section 31 of the Act of 1996 does not also make it mandatory that the reasons in support of an arbitral award must be incorporated in the final award itself. On the contrary, section 31 merely provides that the arbitral award must be signed by the members of the Tribunal and shall state the reasons upon which it is based. Therefore, as long as a decision of the arbitrators backed by the reasons upon which the arbitral award is based, is available on record, the same can be treated as reasons in support of the award even if such reason is not incorporated in the final award itself. In such cases there would be substantive compliance of section 31(3) of the Act 1996.
31. In the present case, as noted above, the arbitrators have recorded their conclusions or findings stating reasons. Whether the individual reasons given by each of the arbitrators is called an award or a judgment, the fact remains that they have given their decisions and conclusions on the controversy based on the materials available on record. Therefore, it is clear that the learned arbitrators had made their determination of the contentious issues involved in the proceedings. As such, it is held that the arbitral award dated 21.11.2004 satisfies the requirement of section 29(1) and 31(3) of the Act of 1996. That part, the arbitral tribunal had also given its decision on the application filed under section 16(3) of the Act of 1996. There is nothing on record to show that the impugned arbitral award was in any manner, perverse, contrary to the substantive law of the land or in conflict with the public policy of India.
32. In the case of Associate Builders (supra)the Supreme Court had the occasion to interpret the expression "Public Policy of India" and laid down the various heads and sub-heads for applying the test of " public policy" . It has been held that none of the grounds in Section 34(2)(a) of the Act of 1996 deals with the merit of the decision rendered by the arbitral tribunal. Therefore, while exercising jurisdiction under Section 34 the Court does not act as a Court of appeal and hence, interference would be permissible only when findings of Arbitrator are arbitrary, capricious or perverse or when conscience of court is shocked but not otherwise.
33. In the present case, the respondent has not only agreed to assign the LoI in favour of the appellant but has also accepted performance of the contract from the appellant. That apart an undertaking from M/S Phoenix Drilling Services, USA accepting its obligation under the contract has also apparently been submitted to the respondent. Under the circumstances, I am of the view that the learned arbitral tribunal, by recording its unanimous opinion, has rightly held that arbitral proceeding was maintainable in law. Further, the award passed on the basis of majority opinion of the panel of Page No.# 15/16 arbitrators determining the entitlement of the appellant to receive payments in respect of its pending invoices also appears to be just and reasonable and as per the terms of contract agreement.
34. In a number of judicial pronouncements the Hon'ble Supreme Court has time and again observed that scope of judicial intervention with an arbitral award is extremely limited. The Court should not interfere with an arbitral award except in the manner provided by the Act. In the case of Steel Authority of India vs. Gupta Brothers Steel Tubes Limited reported in (2009) 10 SCC 63 the Supreme Court has held that if the view taken on a construction of the contract is a possible view and if possible view and not absurd, then irrespective of its correctness such a view shall not be subject to judicial review. It was also held that if the conclusion of the arbitrator is based on a possible view of the matter, the Court would not interfere with the award. While dealing with the question as to the scope of interference by the court on the ground that the view of the arbitrator was perverse, the Supreme Court has held in the case of Sumitomo Heavy Industries Ltd. Vs. Oil and Natural Gas Commission of India reported in (2010) 11 SCC 296that the umpire is legitimately entitled to take a view which he holds to be the correct one after considering the materials 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 and the findings cannot be said to be perverse unless some relevant evidence is not considered or certain inadmissible materials are taken into consideration of it is entirely against evidence.
35. Again In the case of McDermott International Inc vs. Burn Standard Co. Ltd. And Others reported in(2006) 11 SCC 181it has been held that construction of a contract agreement would be within the jurisdiction of the arbitrators and that conduct of the parties would also be a relevant factor in the matter of construction of a contract.
36. From the various judicial pronouncements noticed above, it would be apparent that the scope of interference with an arbitral award by the court is extremely limited. While exercising jurisdiction under section 34 of the Act, the court would have to confine its considerations to the grounds mentioned there-in and refrain from interfering with the award unless there is an error apparent on the face of the award or the award is found to be in conflict with section 34 of the Act. In the present case, in view of what has been stated above, I am of the considered opinion that there was no ground available for the learned District Judge, Sivasagar to set aside the arbitral award dated 21.11.2004.
Consequently, the impugned judgment and order dated 15.11.2007 is held to be unsustainable in law and the same is accordingly set aside.
Page No.# 16/16 The arbitral award dated 21.11.2004 stands affirmed.
The appeal stands allowed.
Parties to bear their own cost.
Send back the LCR.
JUDGE Comparing Assistant