Delhi District Court
Additional District Judge06: ... vs M/S Vaishali Enterprises on 6 September, 2013
1
IN THE COURT OF SHRI MUKESH KUMAR GUPTA:
ADDITIONAL DISTRICT JUDGE06: CENTRAL: DELHI
CS No. 192/11/05
[Old Case: More than 7 years old]
U ID No. 02401C0457342005
Mahanagar Telephone Nigam Ltd.
Khurshid Lal Bhawan,
Janpath, New Delhi.
Through its Chief Accounts Officer (Legal)
....Petitioner
Vs.
M/s Vaishali Enterprises,
24/25, Village Jharodha,
Jharoda Mazara
Burari, Delhi110084. ...Respondent
Date of institution of petition : 30.05.2005
Date of assignment : 02.03.2012
Date of hearing final argument : 13.08.2013
Date of Judgment /order : 06.09.2013
Appearances : Shri Rajeev Sharma , Advocate, Ld. Counsel for the plaintiff.
Shri Pankaj Roy, Advocate, Ld. Counsel for the defendant.
Petition under Section 34 of the
Arbitration & Conciliation Act, 1996
J U D G M E N T :
1. By way of present judgment, I shall conscientiously adjudicate upon the petition under Section 34 of the Arbitration and Conciliation Act, 1996 for setting aside the arbitral award dated 01/03/2005 (hereinafter called the CS No.192/11/05 MTNL Vs. Vaishali Enterprises 1/15 2 "impugned Award") as passed by Shri A.K. Nagar, Sole Arbitrator, Chief Engineer (C) CTO Project, Bharat Sanchar Nigam Ltd., in case No. ARB/AKN/24/2004 titled M/s Vaishali Enterprises Vs. Mahanagar Telephone Nigam Ltd.
2. Eschewing prolix reference to the pleadings crystallizing the same, the respondent is stated to have entered into an agreement dated 21.02.1995 bearing contract No. AGM(MM II)/MM15/9495 of Trenching, Cable Laying, Pulling of Cable through Ducts and allied works in the GM (PMS) area of MTNL, Delhi with the petitioner and that agreement is stated to have remained in force uptil 31.01.1996. It is further the case of the petitioner that after expiry of aforesaid period of contract on 31.01.1996, the respondent accepted the petitioner's proposal for extending the contract. It is further the case of the petitioner that respondent was specifically informed by the petitioner vide its letter dated 23.01.1996 that in case the rates in new tender are lower then the same shall be payable for the work awarded during the extended period. The respondent is stated to have accepted the same without any demur/protest and executed the work awarded during the extended period. It has further been stated that for the work done during the extended period, two bills dated 27.12.1996, one bill No. 128 for a sum of Rs. 5,91,376/ and other bill No. 129 for a sum of Rs.1,10,238/ were raised by the respondent. The petitioner is stated to CS No.192/11/05 MTNL Vs. Vaishali Enterprises 2/15 3 have processed the claim of the respondent and restricted the payment of aforesaid two bills to the tune of Rs.3,61,981/ and Rs. 68,896/ respectively which according to the petitioner was accepted by the respondent unconditionally and without any protest and as such the accounts were stated to have settled. It has been contended by the petitioner that original agreement dated 21.02.1995 which contained the arbitration clause were in force only uptil 31.01.1996 and as such the existence of arbitration clause also came to an end and the workorder placed after expiry of original agreement was in accordance with the new terms and conditions which was duly accepted by the respondent without any protest or demur and as such there is no arbitration clause between the parties. It has further been stated that nonrelease of the balance payment of the aforesaid bills No.128 and 129, the respondent sought the appointment of an arbitrator pursuant to which, vide order dated 28.08.2003 bearing No. MTNL/Legal/Misc./MC168, Shri A.K. Nagar, CE(Civil )BSNL was appointed an Arbitrator by the petitioner. The Arbitrator on being appointed adjudicated the claim and called upon the parties to lead their evidence and passed the impugned award dated 01.03.2005. The petitioner/applicant has challenged the award interalia on various grounds which are summarised as under:
(a) That the Arbitrator has failed to appreciate the contentions raised CS No.192/11/05 MTNL Vs. Vaishali Enterprises 3/15 4 by the petitioner herein
(b) That the Arbitrator further failed to appreciate that the claimant in the arbitration proceedings had accepted the terms & conditions without any demur or protest and had executed the work awarded during the extended period.
(c)That the findings of the impugned award are erroneous as Ld. Arbitrator on the one hand has accepted the plea of claimant and on the other hand has held the respondent's claims partially justified.
(d) Ld. Arbitrator has failed to appreciate that respondent had accepted the payment of both the bills without any protest or demur.
(e)That the original agreement dated 21.02.1995 which contained arbitration clause was to remain in force only uptil 31.01.1996 and the passing of impugned award by the Ld. Arbitrator was in absence of Arbitration Clause despite petitioner's plea raised in its reply/defence statement which is absolutely unsustainable in law.
(f) That in absence of proper documents the facts of the case were not very clear as both the parties CS No.192/11/05 MTNL Vs. Vaishali Enterprises 4/15 5 had not performed the contract properly.
(g)That the impugned award as passed by the Ld. Arbitrator is not in accordance with the substantive law.
(h)Ld. Arbitrator has failed to appreciate that the original agreement dated 21.02.1995 which contained arbitration clause was to remain in force only uptil 31.01.1996 and the work order placed after expiry of original agreement was in accordance with the new terms and conditions duly accepted by respondent without any protest or demur.
(I)Ld. Arbitrator has passed the impugned award is without any reasons.
3. It has been prayed that the award dated 01.03.2005 passed by Shri A.K. Nagar, Sole Arbitrator, Chief Engineer (C) CTO Project, Bharat Sanchar Nigam Ltd. be set aside. The cost of the such proceeding has also been prayed.
4. The respondent has filed its reply to the aforesaid petition in which the respondent has taken various preliminary objections to the effect that the petition is false and frivolous, the petitioner has no grounds or legal justification available CS No.192/11/05 MTNL Vs. Vaishali Enterprises 5/15 6 for setting aside the award of the Ld. arbitrator. On merits, the respondents had denied all allegations of the claimant. It has been contended by the respondent that the petitioner has not written any letter during the period of dispute for extending the contract. It has been denied by the respondent that at the time of extension of contract, the respondent was specifically informed by the petitioner vide letter dated 23.01.1996 about the stipulation that in case, the rate in the new tender are lower, then, the same shall be payable for the work awarded during the extended period i.e. after 31.01.1996. It has also been denied by the respondent that respondent has accepted the same without demur or protest and executed the work awarded during the extended period. It has also been denied that contract for extended period was a conditional one i.e. in case the rate of new tender are lower then the same shall be payable, so that the petitioner in accordance with new rate of subsequent tender cleared the outstanding of the respondents vide bills No.128 & 129 for Rs.3,61,981/ and Rs.68,896/ respectively. It has also been denied that payment of both the bills were accepted by the respondent unconditionally or without any protest. It has also been contended that no rate were reduced by the petitioner herein itself before 18th of June as such the plea of the respondent is false in this respect. It has also been denied that respondent was not entitled for grant of any claim much less at the rate of 25% of balance of CS No.192/11/05 MTNL Vs. Vaishali Enterprises 6/15 7 disputed bill as has been awarded by the impugned award. It has also been denied that impugned award is erroneous or is liable to be set aside because the same is based on conjectures or surmises and the evidence led by the petitioner has completely been ignored by the Ld. Arbitrator. It has also been denied by the respondent that Ld. Arbitrator has caused grave miscarriage of justice as he has passed the impugned award without application of mind to the facts of the case. The respondent has prayed for dismissal of the petition with exemplary costs.
5. I have heard Ld. counsels for the petitioner Shri Rajeev Sharma, and Shri Pankaj Roy, Ld. counsel for the respondents and have gone through the averments of the parties and perused the entire record including the arbitration proceedings submitted by Ld. Arbitrator. I have given a thoughtful consideration to the same.
6. First and foremost the court shall take the question of limitation though the same has not been set up as a defence in the instant claim. However, same being a legal question is required to be taken as a mandate of law. It may be seen that present petition u/s 34 of Arbitration and Conciliation Act, 1996 has been made in respect of a award passed by the sole arbitrator Shri A.K. Nagar on 01.03.2005. From the Arbitration record, the copy of the award is sent by the CS No.192/11/05 MTNL Vs. Vaishali Enterprises 7/15 8 arbitrator on 01.03.2005 itself, though the postal receipt of the aforesaid has not been placed on record, however, even if it is persumed that the award was passed on 01.03.2005 and was sent on the same date, the same could have at best reached the respondent/petitioner herein within 3 days which would mean 04.03.2005. The present petition has been filed on 30.05.2005 and it is found to be well within the period of limitation of 3 months as provided under section 34(3) of the Act. The petition is accordingly found to be within limitation. Now adverting to other aspects.
7. Chapter 7 of the Arbitration and Conciliation Act, 1996 provides for a recourse against arbitration award by way of an application which can be made by either parties u/s 34 of the Act. The statute provides that on an application of either parties, an arbitration award including an interim award can be challenged and set aside. Reliance placed on AIR 2001 SC 1219 Sanshin Chemical Industry Vs. Oriental Carbon & Chemicals. However, the Hon'ble Apex Court in catena of judgment has always held that section 34 does not provide for an appeal against the arbitration award but provides for a limited remedy to the court whereby which the court can review and set aside the arbitral award only on the ground specified under subsection (2) and subsection (3) of the Act. It has been held in (2000) 3 Arb. LR 684 (Bombay) titled Laxmi Mathur Vs. CGM MTNL that erstwhile Arbitration CS No.192/11/05 MTNL Vs. Vaishali Enterprises 8/15 9 Act, 1940 provides for a wider scope against an Arbitration Award, but a remedy against section 34 of the Arbitration award under the 1996 Act, is available on limited grounds as provided in the statute itself. It is further a settled preposition of law that challenge to arbitral award is not to the decision but limited only to the decision making process. Reliance placed on (1992) "Supp" 2 SCC H. B. Gandhi Vs. Gopinath. Thus from the aforesaid discussion it is pertinent that scope of section 34 is limited and specified and an award can be challenged only on the ground specified in the section itself which are incapacity of the parties, violation of the arbitration agreement, absence of proper notice of the appointment of arbitrator or the arbitration proceedings, incapacity of the parties to present his case, the arbitral tribunal exceeding its jurisdiction to decide the dispute not contemplated by or falling within terms of the submission to arbitration or the same be in conflict with the public policy of India. The court shall be dealing with the relevant aspects as raised by the petitioner in the instant petition alongwith the contentions raised by the parties one by one.
8. One of the major contentions raised by the petitioner/objector during the course of the arguments is that the agreement dated 21.02.1995 between the petitioner and respondent remained in force uptil 31.01.1996 only and thereafter there has been no contract between the parties CS No.192/11/05 MTNL Vs. Vaishali Enterprises 9/15 10 and accordingly there has been no arbitration clause and the respondent could not have invoked the arbitration clause by a defunct agreement. Ld. Counsel for petitioner has vehemently relied upon the pronouncement of law laid down in ONGC Vs. Wig Brother, MANU/SC/0828/2010 stating that Arbitrator is only bound by the contractual terms and if he does not, he would be exceeding his jurisdiction i.e. beyond what has been stipulated. Ld. Counsel for petitioner has further relied upon the pronouncement of law laid down in 1991 (9) SCC 283 titled Rajasthan State Mines and Minerals Ltd. Vs. Eastern Engineering Enterprises thereby stating that if the arbitrator ignore the specific terms and conditions of the contract, it is the question of jurisdictional error which could be corrected by the Court in exercise of its power u/s 34 of the Act,. Though, there is no dispute about the preposition of law in the aforesaid judgment that Ld. Arbitrator is strictly bound by terms and conditions as stipulated in the original agreement, and being a creature of the agreement can not go beyond the terms of the agreement or reference, he has to answer, it may however be seen that main question before this court is that once the agreement has expired the work undertaken during the extended period by the respondent was not governed by the terms and conditions of the original contract. This arguments of the petitioner is fallacious without any basis and contrary to the records. If the letters dated 23.01.1996, 22.04.1996 or CS No.192/11/05 MTNL Vs. Vaishali Enterprises 10/15 11 18.06.1996 as exhibited before Ld. Arbitrator Ex.R1 to R3 respectively are perused, the same specifically mention that the extension is approved with same terms and conditions which ipso facto leads to renovation of the earlier contract on the same terms and conditions. Thus it cannot be said that there has been no arbitration agreement between the parties for the extended period. Interesting to mention herein that dispute was raised by the respondent herein for alleged non release of outstanding balance payment in respect of bills No. 128 and 129 and it was the respondent who has sought appointment of arbitrator in terms of the agreement. This request of the respondent was considered by the petitioner and as per its letter No. MTNL/Legal/Misc./MC168 dated 28.08.2003 appointed one Shri A.K. Nagar, CE (Civil) BSNL) as a sole arbitrator. Thus it is the petitioner itself which has appointed the arbitrator of its own volition taking recourse to the arbitration clause in the original agreement and the petitioner after appointment the arbitrator cannot take a stand that there has been no arbitration clause between the parties and the award passed by the arbitrator suffers from jurisdictional error.
9. The second major ground of challenge to the impugned award dated 01.03.2005 that the respondent was stated to have been specifically informed by the petitioner regarding revised rates vide its letter dated 23.01.1996 which according CS No.192/11/05 MTNL Vs. Vaishali Enterprises 11/15 12 to the case of the petitioner, was accepted by the respondent without any demur and protest and work was executed even during the extended period. Much emphasis has been laid about this aspect and the main controversy between the parties rests on the fact that the letter dated 23.01.1996 whereby which the extension of the work of agreement dated 21.02.1995 was given beyond the initial agreed period uptil 31.01.1996 and whether the same was communicated to the respondent or not. The respondent has vehemently denied by having received the aforesaid letter. The petitioner even during the entire course of the present objection petition has relied upon the fact that the extension of the work order was given on a new or lower rates which was specifically informed vide letter dated 23.01.1996. It has been sought to be argued that Ld. Arbitrator has failed to consider the aforesaid aspect and has gone beyond the terms of agreement as agreed to between the parties and the finding of the arbitrator is not only perverse but also against the public policy and therefore the award is liable to be set aside u/s 34 of the Act. Additionally, it has also been sought to be argued that the arbitrator being a creature of the contract between the parties is bound by the contractual terms and general conditions of the agreement.
In this regard, it may be seen that Ld. Arbitrator has duly dealt with this aspect of noncommunication or communication of letter dated 23.01.1996 as per respective CS No.192/11/05 MTNL Vs. Vaishali Enterprises 12/15 13 contentions of the parties and arrived at a determination that it was only vide letter dated 18.01.1996 Ex. R3 that the respondent herein was informed about the new terms and conditions of the agreement. Perusal of the arbitration record further shows that the much talked about the letter dated 23.01.1996 (Ex. R1 of the Award record) has not been addressed to the respondent. So much so that even in the endorsement of the copy, the name of the respondent has not been mentioned. This is further corroborated from the fact that another letter dated 22.04.1996 (Ex.R2) in the award proceedings whereby which the extension containing the terms of lower rates was stipulated has not been informed/addressed to the respondent herein nor his name is mentioned in the list of addressees to whom the copy has been sent and it was for the first time that a letter dated 18.06.1996 (Ex.R3 of the award proceedings) for the extension of old contract of 199596 was sent to the respondent herein who has also accepted the offer vide its letter dated 25.06.1996 (Ex.R4). Nothing contrary to the aforesaid has been shown on record by the petitioner herein that the letter dated 23.01.1996 Ex.R1 was in fact sent to the respondent herein. Interestingly, petition before the court is also silent on the mode and manner that the letter dated 23.01.1996 containing the stipulation regarding the lower rates was communicated to the respondent herein. No postal receipt or any other mode of communication has been CS No.192/11/05 MTNL Vs. Vaishali Enterprises 13/15 14 placed on record. Ld. Arbitrator has termed this letter dated 23.01.1996 Ex.R1 as the internal circular of petitioner herein and has dealt in with the aforesaid aspect including the aspect of claim of lower rates to commence from 18.06.1996 on the day the respondent herein was communicated about the change/lowering of rate in the first time. Once the aforesaid aspect has been duly dealt with by the Ld. Arbitrator, this court in exercise of its powers u/s 34 of the Act can not sit on appeal when the findings otherwise are just fair and reasonable and not contrary to the principles of Natural Justice. It is not the case of the petitioner that his contentions were not heard or considered during arbitration proceedings. The objector/petitioner herein was granted sufficient opportunities by the Ld. Arbitrator and the same was also availed by the petitioner before the Ld. Arbitrator by putting his case before him. It is settled prepositions of law that while deciding the objection u/s 34 of the Act, the court cannot commence denovo trial and should approach an award with a view to support it if that same is reasonable rather than to destroy it by calling it illegal or against the public policy. Further a court cannot substitute its own evaluation or the conclusion of law and facts to the extent that arbitrator has acted contrary to the bargain to the parties. Reliance placed on 2002 (65) DRJ 400 titled Union of India Vs. Hakam Chand & Co. Thus, this court cannot and should not sit over a evaluation arrived by the Ld. CS No.192/11/05 MTNL Vs. Vaishali Enterprises 14/15 15 Arbitrator unless the award suffer from bias, incapacity, non representation and any such irregularity or the arbitrator has failed to follow the Principles of Natural Justice. This court finds no such irregularity or illegality in the arbitral process carried out by Ld. Arbitrator in arriving on his findings of the award dated 01.03.2005. Resultantly, the petitioner has failed to make out a case calling for an interference for setting aside the award dated 01.03.2005 in exercise of this court's power u/s 34 of the Act. The objection petition is accordingly dismissed. Arbitration record be sent back to Ld. Arbitrator with the copy of this order. Records of this court be consigned to Record Room after due completion.
(MUKESH KUMAR GUPTA)
DATED 06.09.2013 ADJ06/CENTRAL/DELHI
ANNOUNCED IN THE OPEN COURT. ( pk)
CS No.192/11/05 MTNL Vs. Vaishali Enterprises 15/15
16
CS No. 192/11/05
MTNL Vs. VAISHALI ENTERPRISES
06.09.2013
Present : None.
Vide a separate judgment announced in the court today, the petition of petitioner is dismissed. Arbitration proceedings records be sent back to Ld. Arbitrator with the copy of this order. Records of this court be consigned to Record Room after due completion.
(MUKESH KUMAR GUPTA) ADJ06/CENTRAL/DELHI 06.09.2013 (pk) CS No.192/11/05 MTNL Vs. Vaishali Enterprises 16/15