Calcutta High Court
M/S. Tarun Kanti Choudhury vs State Of West Bengal on 17 September, 2019
Equivalent citations: AIRONLINE 2019 CAL 620, AIRONLINE 2019 CAL 620 (2019) 4 CALLT 123, (2019) 4 CALLT 123
Author: Moushumi Bhattacharya
Bench: Moushumi Bhattacharya
IN THE HIGH COURT AT CALCUTTA
Ordinary Original Civil Jurisdiction
ORIGINAL SIDE
Present:
The Hon'ble JUSTICE MOUSHUMI BHATTACHARYA
A.P. No.258 of 2008
M/S. Tarun Kanti Choudhury
Vs.
State of West Bengal
For the Petitioner : Ms. Sumita Mukherjee, Adv.
Ms. Kumkum Das, Adv.
For the State : Mr. Sakya Sen, Adv.
Mr. Paritosh Sinha, Adv.
Mr. Tauseef Ahmed, Adv.
Heard on : 28.02.2019, 12.03.2019, 11.04.2019,
17.04.2019, 22.04.2019, 26.06.2019,
9.07.2019, 30.07.2019.
Delivered on : 17.09.2019.
Moushumi Bhattacharya, J.
1. The petitioner has challenged an Award made and published on 22nd January, 2008 by a Sole Arbitrator and has prayed for setting aside of the said Award under Section 34 of The Arbitration and Conciliation Act, 1996. The learned Arbitrator had been appointed by an order of this court dated 23rd September, 2004.
2. The impugned Award relates to a contract entered into on 14th March, 2000 between the petitioner and the respondent for "Strengthening of Weak lane Flexible Pavement on NH 6 from 85 to 87 and 93 to 96 kmp." for an amount of Rs.3,34,40,228/-. The stipulated date for commencement of work was 14th March, 2000 and the work was to be completed within 24 months ending on 13th March, 2002. The petitioner was the claimant in the arbitration proceedings.
3. The grievance of the petitioner which led to filing of the Claim before the learned Sole Arbitrator was increase in the price of fuel, diesel and Bitumen compared to the price submitted at the time of tender leading to the petitioner incurring excess expenditure. The petitioner also complained against the delayed payments made by the respondent which resulted in other losses suffered by the petitioner. The Claims made by the petitioner as would appear from the Statement of Claim was on account of compensation for statutory increase in the price of Bitumen, diesel and Mobil as well as compensation on account of wages paid to workers who remained idle due to suspension of the work for reasons attributable to the respondent. The petitioner further claimed compensation on account of interest on blocked capital borrowed from banks. The total sum claimed by the petitioner was Rs.64,21,270/- together with interest, further interest and costs.
4. The respondent disputed the claims made by the petitioner before the learned Arbitrator. It was the case of the respondent that the petitioner had agreed to procure materials including Bitumen under the terms of the contract agreed upon by and between the parties and hence the respondent could not be made liable for the increase in the price of the materials. It was also the case of the respondent that the petitioner was fully aware of the terms and conditions of the contract with regard to the price rate quoted for the materials.
5. Ms. Sumita Mukherjee, learned counsel appearing for the petitioner assails the Award on the ground of the Award being inconclusive and inconsistent with the terms of the contract. Counsel submits that claims 1, 2 and 3, being compensation on account of statutory increase in the price of Bitumen, diesel and Mobil have not been rejected by the learned Arbitrator but have only been dealt with the observation that these three Claims "are not entertainable". Counsel relies on K.N. Sathyapalan Vs. State of Kerala reported in (2007) 13 SCC 43 where the Supreme Court held that rigid interpretation of contractual terms for ousting the obligations of an employer is not warranted. It is submitted that the reliance placed by the learned Arbitrator on specific clauses of the special terms of contract was not called for since the said clauses did not prohibit a Claim for statutory increase in the cost of Bitumen or diesel. With regard to claim no. 4, which was for compensation on account of wages paid to the workers who remained idle, etc., Counsel submits that the Award is indecisive as the learned Arbitrator did not either reject or accept Claim no.4. With regard to the claim nos.5 and 6 which were for compensation on account of interest on blocked capital and compensation on account of interest due to delay in making payment of bills respectively, the ground for setting aside the Award is that both the claims were dealt with in a manner which lacks clarity. Counsel submits that the observations made by the learned Arbitrator in the context of claim 6 (compensation on account of interest) is contrary to the evidence referred to in the Award. Counsel submits that contradictory statements have been made in Award with regard to the construction of the contract which shows that the Award is irrational and suffers from perversity.
6. Mr. Sakya Sen, learned counsel appearing for the respondent, defends the Award as being a well-reasoned Award supported by findings under each Head of Claim. Counsel submits that a challenge to an Award can only be made on the limited grounds available under Section 34 of the 1996 Act and does not call for a re-hearing of the subject-matter of the arbitration on merits. Counsel submits that none of the grounds invoked by the petitioner fall within the ambit of Section 34 of the Act. It is submitted that Claim nos.1, 2, 3 and 4 were considered and dealt with together and rejected on the ground of the prohibition contained in clause 29 of the special terms which disentitled the petitioner from making a Claim relating to materials, idle labour and machinery charges and further provided that the customer (petititoner) shall arrange for transport and not be entitled to any compensation for the loss suffered by the customer due to delay arising out of modification of the work or non-delivery of the possession of site. Counsel further submits that a court considering a challenge to an Award is not a court of appeal and errors of fact cannot therefore be corrected. It is submitted that the Arbitrator is the ultimate master of the "quantity and quality of evidence"
which have been relied upon during the arbitration proceedings. Counsel submits that once it is found that the Arbitrator's approach has not been arbitrary or capricious, the Award would not be amenable to challenge.
7. I have heard learned counsel for the parties. The challenge made to the Award is primarily by reason of the learned Arbitrator failing to entertain the Claims of the petitioner on the ground of being prohibited under the contractual terms and the Arbitrator not expressing a clear decision on Claim nos.5 and 6. The other ground as submitted by learned counsel for the petitioner is that the Arbitrator refused to pass an Award despite the relevant materials being on record and despite noticing a specific term in the contract which should have been construed in favour of the petitioner.
8. In the context of the allegations made on behalf of the parties, it would be useful to consider the manner in which the learned Arbitrator has dealt with the individual Claims in the impugned Award. With regard to the Claims no. 1, 2, 3 and 4 (compensation on account of statutory increase in the price of Bitumen, diesel, Mobil and on account of wages paid for idle labour and machineries). The Arbitrator took into account the specific clauses of the special terms and conditions of the contract of the clause mentioned, Clause 40 provided that the contractor shall not be entitled to compensation for any loss suffered by him due to delay arising out of possession of site, etc. Clause 29 provides that no Claim for idle labour, cost of hire and labour charges of tools etc. would be entertained; Clause 8 provides that no Claim shall be entertained in respect of cost of materials, hire charges, etc. as the same would be construed to have been covered by the rates quoted by the petitioner (mentioned as customer in the Special Terms). Clause 6 provides that the customer / petitioner shall arrange for all types of transport by Railway or road and supply of materials required for construction work and that further the contractor must consider this aspect while quoting the rate. Apart from taking note of the special terms, the learned Arbitrator was also of the view that the increase in prices of Bitumen, diesel, etc. was due to notifications issued by the Central Government which were beyond the control of the respondent and hence could not be treated as a breach on its part. The Arbitrator, accordingly, refused to entertain Claim nos. 1, 2 and 3. With regard to the Claim for compensation on account of wages for idle labour, the Arbitrator referred to Clause 29 of the Special Terms under which Claim for idle labour, enhancement of labour rate, cost of POL shall not be entertained. The Arbitrator also observed that had the workforce actually remained idle, as contended by the petitioner, the work would not have been completed within stipulated period under the contract.
9. With regard to Claim nos. 5 and 6 (compensation on account of interest on blocked capital borrowed from bank and on account of interest due to delay in payment of bills, respectively), the Arbitrator referred to Clause 8A of the contract under which it is provided that the bill shall be submitted by the contractor to the authority on or before the date fixed by the Engineer-in-charge and that payment against such bill would be made within 10 days from presentation of the bill. The Arbitrator took note of the bank statements disclosed by the claimant as well a chart showing the amount of interest claimed at the rate of 22 per cent per annum. On perusal of the relevant bank statements, it was found that there has been a delay of 16 days, 75 days and 113 days against the first, second and the seventh bills of the final bill respectively. According to Arbitrator, in a work's contract, the contractor has to execute the work on borrowed capital obtained from bank or other sources. The Arbitrator, however, was also of the view that the petitioner was not able to establish from the evidence-on-record as to the specific head under which the respondent failed in its obligation under the contract. With regard to the site not being made available to the petitioner on time, the Arbitrator was of the view that the said allegation has not been substantiated from the records and, therefore, held that Claim no.5 could not be entertained. Further, on Claim no.6, the Arbitrator found that the allegation of the respondent of not releasing payment of the amounts under the remaining bills in one installment was not part of the contractual provisions and that such allegation was made on verbal discussion between the parties without there being a record of the same. The Arbitrator, therefore, declined Claim no. 5 and 6 on this ground.
10. It must be stated that there are several references in the Award that an Arbitrator is bound by the terms of the contract executed between the parties and that the only exception would be when an Arbitrator is called upon to assess the damages in case of breach of the contractual terms without being held back by prohibitory clauses to that effect in the contract.
11. Having considered the reasons given in the Award for arriving at a decision under each head of Claim, this court is unable to hold that the Arbitrator misconducted himself in either ignoring relevant materials or evidence or took into account irrelevant considerations in passing the impugned Award. It is evident that before taking a decision under each head of Claim, the Arbitrator considered the relevant Special Term of the contract which had been agreed to by both the parties and construed the said term in the context of the Claim made by the petitioner. Section 28(3) of the Act casts an obligation on an arbitral tribunal to take into account the terms of the contract in all cases. The construction given to the specific clauses are relevant to the allegation levelled by the petitioner and cannot be said to be an unreasonable or arbitrary construction of the term which could call for setting aside of the Award. As has been held in a number of decisions, unless a court comes to a finding that a construction given by an Arbitrator is not one which could be given by a reasonable or fair-minded person, the court would ordinarily decline to interfere with the reasons or substitute its own reasons with those contained in the Award. Although counsel have referred to several decisions in their respective Notes of Arguments, only two decisions were cited in court during arguments and are therefore being dealt with. The decisions relied upon by learned counsel for the petitioner are K.P. Poulose Vs. State of Kerala reported in AIR 1975 SC 1259 and College of Vocational Studies Vs. S.S. Jaitely reported in AIR 1987 Delhi 134. However, in K.P. Poulose Vs. State of Kerala reported in AIR 1975 SC 1259, the Supreme Court found certain observations made by the Arbitrator to be inconsistent with the conclusion and held that under Section 30 (a) of The Arbitration Act, 1940, a decision ignoring material documents would amount to legal misconduct. In College of Vocational Studies Vs. S.S. Jaitely reported in AIR 1987 Delhi 134, the Delhi High Court held that there must be some rational nexus between the evidence and the verdict of an Award under the 1940 Act. In the said case, the Arbitrator was found to have misconducted himself in exceeding the terms of reference under which he was required to give reasons for his findings. None of these two decisions are relevant in the instant case, since the learned Arbitrator in this case has taken pains to deal with each and every Claim of the petitioner by giving specific reasons for not dissolving the same. The position of law as it stands at present is that a court in an application for setting aside of an Award cannot sit in appeal over the Award by reassessing an evidence and further that a view taken by an Arbitrator should not be interfered with until and unless the same is found to be arbitrary or capricious. The grounds on which an Award can be set aside have been enumerated in Section 34 of The Arbitration and Conciliation Act, 1996 which include that an Award must be in conflict with the public policy of India or is vitiated by patent illegality apparent on the face of the Award or is against the basic notions of justice or morality. Recent judicial pronouncements have also set the standard of an Award shocking the conscience of the court.
12. For an Award to be set aside, a ground of patent illegality has to be apparent on the face of the Award and should be one that does not involve a fact- finding exercise by the court hearing a petition under section 34 of the Act. A case of an Award being opposed to public policy under section 34 (2) (b) (ii) of the 1996 Act will have to be read with the Explanation to the said section. In the instant case, the Award is not one which can be said to be arbitrary or without reasons in support of the findings.
13. For the above reasons, this court does not find the impugned Award to fall under any of the categories mentioned under Section 34 and certainly not one which is capable of shocking the conscience of this court. A.P.258 of 2008 is, accordingly, dismissed without any order as to costs.
Urgent Photostat certified copy of this Judgment, if applied for, be supplied to the parties upon compliance of all requisite formalities.
(MOUSHUMI BHATTACHARYA, J.)