Bangalore District Court
3. The Brief Facts Leading To The Case Are ... vs No.1 Participated In The Tender And ... on 11 January, 2022
1
Com.A.S.No.47/2017
IN THE COURT OF LXXXII ADDL.CITY CIVIL & SESSIONS
JUDGE, AT BENGALURU (CCH.83)
This the 11th DAY OF JANUARY 2022
PRESENT:
SRI.DEVARAJA BHAT.M., B.COM, LL.B.,
LXXXII ADDL.CITY CIVIL & SESSIONS JUDGE,
BENGALURU.
Com.AS.No.47/2017
BETWEEN:
M/s. Pebble Bay
Developers Pvt. Ltd., A
Company Incorporated
under the Provisions
of Indian Companies
Act, 1956, having its
office at Raheja
Chambers, Linking
Road and Main
Avenue, Santa Cruz
(W), Mumbai - 400 054
and represented by its
Director, Mr.Aditya
Raheja.
: PETITIONER
(Represented by M/s.
AKS Law Associates -
Advocates).
2
Com.A.S.No.47/2017
AND
1. M/s. Gammon India
Ltd., A Company
incorporated under
the provisions of
Indian Companies Act,
1956, having its office
at "Gammon House",
Veer Savarkar Marg,
PO Box No.9129,
Prabhadevi, Mumbai -
400 025, and
represented by its V.P.
Head Work Survey and
Authorized Signatory
Mr.J.L.Ashar.
2. Sri.Justice
L.Srinivasa Reddy,
Sole Arbitrator,
Arbitration and
Conciliation Centre,
No.49, 3 rd
Floor,
Khanija Bhavan, Race
Course Road,
Bengaluru - 560 001 .
: RESPONDENTS
(Respondent No.1 is
Represented by M/s.
Lawyers Inc Advocates)
3
Com.A.S.No.47/2017
Date of Institution of the 05.04.2017
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
was pronounced 12.01.2022
Date of First Case - Not held -
Management Hearing
Time taken for disposal 26 days
from the date of
conclusion of arguments
Total Duration Year/s Month/s Day/s
04 09 06
(DEVARAJA BHAT.M),
LXXXII Addl. City Civil & Sessions Judge,
Bengaluru.
JUDGMENT
This is a Petition filed by the Petitioner under Section 34 of the Arbitration & Conciliation Act, 1996 for setting aside the Arbitral Award dated 10.03.2017 passed by the learned Sole Arbitrator.
4Com.A.S.No.47/2017
2. The Respondent No.1 "M/s Gammon India Limited" had invoked the Arbitration Agreement and preferred certain Claims against "M/s. Pebble Bay Developers Private Limited" the Petitioner.
3. The Brief facts leading to the case are as follows:-
The Petitioner and Respondent No.1 had entered into Ex.P.2/Agreement dated 14.12.2007 for carrying out civil and structural work of construction of "Pebble Bay" residential apartment at Dollars Colony, Bengaluru, that prior to the said agreement the Petitioner had invited tender for carrying out civil and structural work of said construction, that the Respondent No.1 participated in the tender and quoted their rate as per Ex.P.3, that negotiations were conducted and the Respondent No.1 submitted Ex.P.4/Final offer for the total value of Rs.95,19,08,756/-, that Ex.P.5/Letter of Award was issued in favour of the Respondent No.1, that the date of commencement of the project was 15.04.2017 and the completion period for this project was 14 months plus the grace period of one month, that the Respondent No.1 was not able to complete the work within the stipulated time and the Respondent No.1 de-mobilized and abandoned the site in 2011, that the Petitioner had to engage a fresh contractor and incurred huge expenses to complete the 5 Com.A.S.No.47/2017 work undertaken by the Respondent No.1, that the Petitioner had paid the Respondent No.1 a total amount of Rs.116 Crores as agreed in full and final settlement, that the Respondent No.1 came up with a fanciful claim of Rs.724.09 Lakhs as per the letters dated 21.06.2011 and 05.07.2011, that the Respondent No.1 seeks to invoke Clauses 6.1 and 6.2 of the General Conditions of the Contract to claim certain amounts on the ground that the scope of work was increased by adding one basement floor and two additional floors besides the miscellaneous works, that the Petitioner denied the liabilities as per Ex.R.4/Letter dated 08.07.2011, that the Respondent No.1 claims to have issued a bill styled as Ex.P.11/Final Bill which was never received by the Petitioner, that the Respondent No.1 invoked the Arbitration Clause and made the claims before the learned Arbitrator and after enquiry the learned Arbitrator has passed the Impugned Award.
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 No.1 has filed a detailed statement of defence on 16.07.2018 and he prayed to dismiss the said application.
6Com.A.S.No.47/2017
6. The Advocate for the Petitioner has produced copies of the Arbitral Records as per Paper Book Nos.1 and 2. I have heard the arguments of Sri.Ajesh Shankar Kumar, Advocate for the Petitioner and the arguments of the Sri.B.N.Prakash, Advocate for the Respondent No.1. The Advocate for the Petitioner has filed Written Arguments on 23.12.2021.
7. 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?
8. 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
9. Point No.1: - The Respondent No.1 has preferred a Claim Petition before the Learned Arbitrator for the relief of directing the Respondent (i.e., the present Petitioner) to pay the Claimant (i.e., the present Respondent No.1) a sum of 7 Com.A.S.No.47/2017 Rs.13,38,20,361/- together with interest at the rate of 18% per annum from the date of claim petition till the date of payment with cost of Arbitration Proceedings.
10. The Petitioner has preferred a Counter Claim before the Learned Arbitrator.
11. The Learned Arbitrator has partly allowed the claims of the Respondent No.1 and dismissed the Counter Claim of the Petitioner in the Impugned Award. It is to be noted that the Respondent No.1 has not challenged the rejection of the portion of his Claim.
12. The Petitioner has challenged the said Impugned Award in this proceeding. 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.
8Com.A.S.No.47/2017
13. The First ground is that the Impugned Award is in conflict with the public policy of India as it is in contravention of the fundamental policy of Indian Law because the learned Arbitrator has not considered, reasoned grounds for acceptance or rejection of the submission and evidence of the parties, reasoned grounds for acceptance or rejection of the authorities of the parties and has instead proceeded to pass the Award without adequate reasoning by only considering the case of the Respondent No.1, that the purpose of reasoning to be forth coming from the Award would be to reflect due application of mind by the learned Arbitrator to the pleadings of the parties, consideration of their evidence, consideration of their submission, perusal of the documents and the application of law to the facts of the case, that justice is done when it also appears from the Award to be done.
13.a. In the present case the learned Arbitrator has given cogent reasons and made detailed discussions in the Impugned Award. Further, he has framed Five Issues and made discussions Issue wise and has given finding on each Issue by discussing the same in detail. At any stretch of imagination, it can be considered that it is not a reasoned order as contended by the Petitioner. Further, in this aspect, it is to be noted that in the 9 Com.A.S.No.47/2017 decision reported in A.I.R. - 1988 - S.C. - 1340 (Indian Oil Corporation vs. Indian Carbon Ltd), it is held as follows:-
"It is one thing to say that reasons should be stated and another thing to state that a detailed judgment is to be given in support of an award. Even if it be held it is obligatory to state the reason, it is not obligatory to give a detailed judgment".
13.b. A similar view was also taken by the Hon'ble Supreme Court in the decision reported in A.I.R. - 1989 - S.C. - 973 (Gujarat Water Supply vs. Unique Erectors).
13.c. Similar views were expressed by Full Bench (5 Hon'ble Judges Bench) of the Hon'ble Supreme Court in the decision reported in A.I.R. - 1991 - S.C. - 2089 (Goa, Daman & Diu Housing Board vs. Ramakant V.P. Darvotkar), wherein the Hon'ble Apex Court has held as follows:-
" There is however nothing to show that the awards have been improperly procured. There is no allegation, far less, any finding, that the Arbitrator was biased or unfair or he has not heard both the parties or he has not fairly considered the submission of the parties in making the award in question. In our opinion, it is evident from the four awards made by the Arbitrator, that the Arbitrator has considered the submission of the parties in making the award in question. In our opinion, it is evident from the four awards made by the Arbitrator, that the Arbitrator has considered all the 10 Com.A.S.No.47/2017 relevant issues raised by the parties in the Arbitrator proceedings and came to his finding after giving cogent reasons. The above award cannot under any circumstances be considered to be made by the Arbitrator without recording any reasons for the same. Therefore, in such circumstances, it is not proper to hold that the Arbitrator has misconducted himself or the proceedings in the matter of giving the awards".
13.d. In another decision reported in 2014 (9) - S.C.C. - 212 (Anand Brothers Private Limited vs. Union of India and Others), at Para No. 12 has considered and decided the phrase 'finding' and in Para No. 13 defined the phrase "conclusion" and further regarding the finding and speaking order the Hon'ble Apex Court at Para No. 14 has held as under:-
"It is trite that a finding can be both; a finding of fact or a finding of law........This is the rule also in the case of finding of fact where too the process of reasoning must be disclosed in order that it is accepted as a finding in the sense the expression is used in Clause 70".
13.e. By considering the ratio of the above-mentioned decisions, in the present case, the learned Arbitrator has given cogent reasons and made detailed discussions in the Impugned Award. Therefore, in view of the ratio of the aforesaid decisions, it has to be examined by perusing of the Impugned Award 11 Com.A.S.No.47/2017 wherein the learned Arbitrator dealt with each and every claim separately and recorded the reasoning for allowing or disallowing the claim. Hence, as per the ratio of the above decisions, the said contentions of the Petitioner cannot be accepted. The award cannot be set aside on the said ground. 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 ground is thwarted and rejected.
14. The Second ground is that the learned Arbitrator has failed to consider that as parties have commercially agreed and negotiated a contract and thereafter received consideration thereof, consequent to the contract executed by the parties, performance have to be observed in its entirety and cannot be replaced by a performance which according to the learned Arbitrator is appropriate in the absence of a waiver.
14.a. The learned Advocate for the Respondent No.1 has argued that the Respondent No.1 has completed the works as per contract and claimed the amount in accordance with agreed terms, that there is no evidence on record to show that the Petitioner has raised any objection with regard to the work 12 Com.A.S.No.47/2017 completed by the Respondent No.1, that all the Running Bills from No.1 to 38 were approved by the Engineer in charge.
14.b. The learned Advocate for the Petitioner by referring to the Cross-examination of PW.1 has argued that the PW.1 has admitted that it has not produced the RA Bill No. 1 to 38 and that the objection was raised while marking the said documents, that no secondary evidence was adduced on the disputed RA Bills and that the PW.1 is only a formal witness and he has no personal knowledge about the facts and hence the Respondent No.1 has not proved its case at all.
14.c. However, the RA Bill No. 1 to 38 were produced before the Arbitral Tribunal as could be seen from the Paper Book - Volume No.1 at Page No. 406 to 443. Similarly, the disputed RA Bill No. 39 to 48 were also produced before the Arbitral Tribunal as could be seen from Page No. 444 to 462 at Ex.P.11 (a) (1) to Ex.P.11 (a) (8). All the said RA Bills were submitted along with covering letters. It is an admitted fact that the R.A.Bill No.39 to 48 were neither approved nor rejected. In view of non-payment of the said bills, and therefore the Respondent No.1 has raised the dispute and invoked the Arbitration Clause. The finding of the learned Arbitrator is based on the evidence led by the parties and in accordance with the 13 Com.A.S.No.47/2017 statutory provisions. So far as the contention of the Petitioner about the learned Arbitrator has considered the secondary evidence in spite of his objections for marking of the document is concerned, I deem appropriate to reproduce Section 18 and 19, nestled under Chapter V - Conduct of Arbitral Proceedings of the Arbitration and Conciliation 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 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
Com.A.S.No.47/2017
14.d. I, am of the considered view that the aforesaid challenge flanked by the Petitioner 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 Para No. 41 of the said 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 15 Com.A.S.No.47/2017 procedure and the conduct of proceedings. In the even 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 content of sub-section (3) but provides an instance of the power conferred by sub-section (3)."
14.e. In Para 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 consolidate and amended the law of arbitration. The legislature in its wisdom has conferred power upon the 16 Com.A.S.No.47/2017 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.f. Further, I shall not refrain to pull out a leaf of knowledge and enlightenment from the decision reported in 2014 (6) - R.A.J. - 465 (Del) ( Silor Associates SA vs. Bharat Heavy Electrical Ltd). In the said decision, the Hon'ble High Court of Delhi while deciding a Petition under Section 27 of the Arbitration and Conciliation Act, seeking necessary orders and directions to direct the respondent to produce two documents traversed through the scheme and provisions of the Arbitration and Conciliation Act, has held a follows :-
"15. While hearing a petition under Section 27 of the Act, no doubt, I am not hearing an appeal from the order passed by the Tribunal. An appeal from an order passed by the Tribunal is maintainable only in terms of Section 37(2) of the Act, and not otherwise. But that does not mean that when an order passed by the Tribunal invoking Section 27 of the Act - to seek the assistance of the Court in taking evidence, is placed before the Court, the Court would simply act on the request of the Tribunal, even if it appears to the Court that the order of the Tribunal has been 17 Com.A.S.No.47/2017 passed on an erroneous premise in law. The Court is not bound to act on the request of the arbitral tribunal mechanically - even when the order appears to have been passed by the arbitral tribunal on a misconception of law. In such a situation, the Court would not only be entitled to, but would be duty bound to correct the error, if any, found in the order passed by the Tribunal. In Managing Director, Army Welfare Organisation (supra), the Supreme Court observed:
"72. This Court cannot sit in appeal over the award of the arbitrator but can certainly interfere when the award suffers from non-application of mind or when a relevant fact is ignored or an irrelevant fact not germane for deciding the dispute is taken into consideration".
In my view, the same principle applies to orders placed before this court under Section 27 of the Act.
16. Section 27(3) mandates that the Court "may" within its competence "and according to its rules on taking evidence", execute the request made by the tribunal by ordering that the evidence be provided directly to the tribunal. The use of the expression "may" shows that the court is not bound to act on the request in every case where a request for taking evidence is made by the tribunal. The Court "may" decline the request of the tribunal, if either it is not within the competence of the court to make an order on the request, or the request is not in accordance with the rules of the court on taking evidence.
18Com.A.S.No.47/2017
17. Section 19(1) of the Act, inter alia, provides that "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)". This means that the Tribunal is not bound by the rigor and strict provisions of the Code of Civil Procedure, 1908 (CPC), or the Indian Evidence Act, 1872 (Evidence Act).
18. Section 19(2) states 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. In the present case, the parties have not agreed on any specific procedure to be followed by the Arbitral Tribunal in conduct of its proceedings. Section 19(3) states that "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"
(emphasis supplied). Therefore, the Arbitral Tribunal is free to devise its own procedure, subject to the condition that such procedure should conform with the provisions of Part I of the Act. The procedure that the Tribunal may devise should meet the basic tenets of an adjudicatory process, namely, that the procedure should treat parties equally, and each party should be given a full opportunity to present its case (see Section 18). The procedure to be evolved by the Tribunal cannot be such that it curtails the rights of the parties under Sections 13, 16, 17, 22, 23, 24, 25 & 26 of the Act, or any of them.
19. There is nothing in the Act to contra indicate the existence of jurisdiction/power in the tribunal to require the parties to produce documents, exhibits or other 19 Com.A.S.No.47/2017 evidence, as the arbitral tribunal may determine. The aforesaid provision has the effect of vesting the tribunal with much greater autonomy in the matter of regulating its procedure for conduct of the arbitration proceedings, than that exercised by a civil court- which is bound by the rigour of the Code of Civil Procedure (CPC) and the Indian Evidence Act. The scheme contained in Section 19 of the Act is not to denude the arbitral tribunal of its power to regulate its procedure for effective and expeditious conduct of the arbitration proceedings in a transparent and fair manner. On the contrary, the legislative intent appears to be vest the arbitral tribunal with autonomy and flexibility in the matter of conduct of its proceedings so as to expedite the proceedings and cut the procedural wrangles witnessed in courts - which are governed by the CPC and the Evidence Act.
20. The procedure that the Tribunal may adopt for conducting the proceedings need not be evolved by consensus of the parties. It is for the Tribunal to devise its own procedure, if the parties have themselves not evolved the procedure consensually under Section 19(2).
21. At this stage, I may take note of the procedure prescribed by the CPC, and the courts power to direct production of documents by a party to the proceedings. Section 30 CPC provides that, subject to such conditions and limitations as may be prescribed, the Court may, at any time, either on its own motion or on the application of any party make an order relating to, inter alia, production of documents. Order 11 deals with the aspect of service of interrogatories, discovery, inspection and production of documents. The aspect of 20 Com.A.S.No.47/2017 production of documents is dealt with in Order 11 Rule 14, which states that it shall be lawful for the court, at any time during the pendency of the suit, to order the production by any party thereto, upon oath of such of the documents in his possession or power, relating to any matter in question in such suit, as the court shall think right and the court may deal with such documents, when produced, in such manner as shall appear just.
22. Order 11 Rule 21 CPC deals with the consequences of non compliance of an order directing a party to answer interrogatories or to discover documents or grant inspection of documents. If the plaintiff fails to comply with any such direction, the suit is liable to be dismissed for want of prosecution. If the defendant is in breach of such an order, his defence is liable to be struck out. Pertinently, Order 11 Rule 21 does not take within its scope the aspect of non production of documents directed to be produced by a party under Order 11 Rule 14 CPC.
23. Order 16 CPC deals with the aspect of summoning and attendance of witnesses. Order 16 Rule 6 states that any person may be summoned to produce a document, without being summoned to give evidence, and any person summoned merely to produce a document shall be deemed to have complied with the summons if he causes such document to be produced, instead of attending personally to produce the same. The expression "any person" used in Order 16 Rule 6 CPC would include a party to the proceedings. This is evident from Order 16 Rule 20 CPC and is well accepted in judicial pronouncements referred to a little later. Order 16 Rule 10 CPC deals with the procedure to be 21 Com.A.S.No.47/2017 adopted qua the person to whom summons have been issued, inter alia, for production of documents, and who fails to produce the documents in compliance with such summons. If the person - without lawful excuse, fails to produce the document in compliance with the summons, the court may issue a proclamation requiring him to attend and to produce the document at a time and place to be named. If, inspite of this procedure being adopted, the person fails to produce the document, the court may issue a warrant for his arrest - with or without bail, and may make an order for attachment of his property for an amount not exceeding the amount of the costs of attachment and of fine which may be imposed under Order 16 Rule 12.
24. Order 16 Rule 15 imposes a duty upon the person summoned to give evidence or produce documents before the court. Order 16 Rule 20 provides that where any party to a suit present in court refuses, without lawful excuse when required by the court, to give evidence or to produce any document, then and there in his possession or power, the court may pronounce judgment against him or make such order in relation to the suit as it thinks fit.
25. From the above provisions, it appears that the reason why Order 11 Rule 21 does not deal with the aspect of non compliance of an order directing production of documents by a party, is that such a default is covered and dealt with by Order 16 CPC.
26. Consequently, it is evident that the discovery, inspection and production of documents by a party, at 22 Com.A.S.No.47/2017 the request of the opposite party, is a matter of procedure. It is for this reason that the same has been dealt with in Order XI Rules 12 to 15 and 21, and Order 16 of the CPC. Thus, the arbitral tribunal is not powerless to direct production of a document - considered to be relevant evidence by it, by one or the other party to the proceedings. This power is statutorily conferred upon the tribunal Section 19 of the Act. Exercise of this statutory power by the arbitral tribunal does not tantamount to assumption of "inherent power"
by the arbitral tribunal - which power does not vest in an arbitral tribunal.
27. It is one thing to say that the arbitral tribunal does not have the power or the jurisdiction to direct production of documents by one of the parties, and it is another thing to say that the arbitral tribunal does not have the power to enforce compliance of such a direction. If a direction issued by the arbitral tribunal directing production of documents by a party is not complied with, it appears that the arbitral tribunal would be in a position to invoke Section 27 of the Act, since Section 27 of the Act deals with the aspect of taking the courts assistance for taking evidence. The aspect of production of documents is specifically dealt with in Section 27(2)(c)(ii). However, the arbitral tribunal in the present case has proceeded on an erroneous premise that it does not have the jurisdiction to direct production of documents by the respondent, even though the arbitral tribunal has found the aforesaid two documents to constitute relevant evidence, and the arbitral tribunal has straightaway invoked the provisions contained in Section 27 of the Act to seek the courts assistance for a direction to the 23 Com.A.S.No.47/2017 respondent to produce the said documents.
28. The Supreme Court, in Delta Distilleries Limited v. United Spirits Ltd. & Anr., (2014) 1 SCC 113, has held that the expression "any person" used in Section 27 of the Act is wide enough to cover not merely the witnesses, but also the parties to the proceedings and that, in the event of the document not being produced as directed by the arbitral tribunal, the arbitral tribunal would be entitled to draw an adverse inference against such a party. The Supreme Court has held:
"21. As seen from these two sections, Section 25(c) provides that in the event a party fails to appear at an oral hearing or to produce documentary evidence, the arbitral tribunal may continue the proceedings, and make the arbitral award on the evidence before it. This evidence can be sought either from any third person or from a party to the proceeding itself. The substitution of the phrase "parties and witnesses" under Section 43 of the earlier act by the phrase 'any person' cannot make any difference, or cannot be read to whittle down the powers of the Arbitral Tribunal to seek assistance from the court where any person who is not cooperating with the Arbitral Tribunal or where any evidence is required from any person, be it a party to the proceedings or others. It is an enabling provision, and it has to be read as such. The term 'any person' appearing under Section 27(2)(c) is wide enough to cover not merely the witnesses, but also the parties to the proceeding. It is undoubtedly clear that if a party fails to appear before the Arbitral Tribunal, the Tribunal can proceed ex- parte, as provided under Section 25(c). At the same time, it cannot be ignored that the Tribunal is required to make an award on the merits of the claim placed before it. For 24 Com.A.S.No.47/2017 that purpose, if any evidence becomes necessary, the Tribunal ought to have the power to get the evidence, and it is for this purpose only that this enabling section has been provided. The Supreme Court has further observed "23. It was contended that if the necessary documents are not produced, at the highest an adverse inference may be drawn against the Appellant. That is a power, of course available with the Arbitral Tribunal, and if necessary the same can be used. However, as observed by the learned Arbitrator in her order dated 27.3.2007, the documents sought in the present matter were required to arrive at the decision on the claim of the Respondent No. 1, since, the quantification in support of the claim on a theoretical basis. A hypothetical calculation should not be resorted to when actual Sales Tax Assessments are available, which would show as to whether the quantum of set-off allowed and claimed was in fact justified".
29. Therefore, it is evident that the arbitral tribunal is empowered on its own, without taking resort to Section 27 of the Act, to direct, a party to produce documents, and upon the failure to comply with the tribunals direction to produce documents, the aggrieved party - who is aggrieved by the non production of documents, may either require the arbitral tribunal to draw an adverse inference against the defaulting party, or may chose to require the arbitral tribunal to enforce the direction to produce the relevant document with the assistance of the court by resort to Section 27 of the Act.
25Com.A.S.No.47/2017
30. It may be that the aggrieved party (who is aggrieved by the non production of the documents by the opposite party) may be satisfied by the arbitral tribunal drawing an adverse inference against the defaulting party, and may not wish to pursue the aspect of production of documents by the opposite/defaulting party by resort to Section 27 of the Act. It is not necessary for the arbitral tribunal in every such case to seek assistance of the court, and it would depend on the facts and circumstances of each case, whether such assistance should be sought. In any event, there would be no cause to seek assistance of the court by resort to Section 27 of the Act, without first issuing a direction to the concerned party to produce the document, and only upon the failure to comply with such a direction, the arbitral tribunal would be justified in seeking the assistance of the court under Section 27 of the Act - if so desired by the aggrieved/non defaulting party.
31. I find merit in the submission advanced by the petitioner before the arbitral tribunal that if the arbitral tribunal is held not to have jurisdiction to evolve its procedure requiring production of documents (when there is no agreed procedure laid down by the parties themselves), the same would delay the conclusion of the arbitration proceedings as, in every case, the arbitral tribunal would necessarily have to move for the courts assistance under Section 27 of the Act to obtain a direction for production of the relevant documents by one of the parties, even though the party from whom documents are required to be produced may be willing to comply with such a direction if it were to be so directed by the arbitral tribunal. It would also mean that even in a case where a party requiring production of 26 Com.A.S.No.47/2017 documents were to be satisfied with the drawing of adverse inference against the defaulting party, the resort to Section 27 of the Act would necessarily have to be undertaken - leading to unnecessary waste of time and resources of the parties and delay in the arbitral process.
32. The scheme of the Act, when seen as a whole, is to minimise the interference by the courts during the arbitration proceedings. That is why Section 5 specifically prohibits any judicial authority to intervene in the arbitration proceedings, notwithstanding anything contained in the other law for the time being in force, in matters governed by Part I of the Act except to the extent provided for in the Act. The aforesaid scheme is also evident from Sections 13 and 16 of the Act, which provide that issues relating to challenge to the arbitral tribunal on grounds of justifiable doubt, competence (qualification), and jurisdiction of the tribunal cannot be agitated midway when the arbitral proceedings are on, and such challenges should await the making of the award by the tribunal."
14.g. The Hon'ble Apex Court in the decision reported in (2018) 9 - S.C.C. 49 (Emkay Global Financial Services Ltd. vs. Girdhar Sondhi) has held that an application under Section 34 of the Act for setting aside an arbitral award will not ordinarily require anything beyond the record that was before the arbitrator. I, have carefully perused the arbitral record and it is observed that as per Section 19(2) of the Arbitration and 27 Com.A.S.No.47/2017 Conciliation Act, no procedure between the parties was agreed to be followed by the arbitral tribunal in conducting its proceedings. It is further observed that the learned Arbitrator rightfully exercised the power vested in him under the mandate of Section 19(3) and 19(4) of the Arbitration and Conciliation Act. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
15. The Third ground is that there is an agreed procedure for submitting a Bill by the Respondent No.1, for its approval or otherwise by the Petitioner, for the payment or its rejection by the Petitioner, for the subsequent claim to be made by the Respondent No.1, for the dispute resolution thereof and for time to initiate Arbitration, as per Clauses of Ex.P.2, that the Respondent No.1 has failed to substantiate that the said procedure has been followed or even that the disputed R.A. Bills, Ex.P.11(a)(2) being covering letter dated 01.09.2010 enclosing R.A.Bill 40 to Ex.P.11(a)(8) being covering letter enclosing R.A.Bill 48 have been delivered to the Petitioner, that the learned Arbitrator having recorded the evidence in this regard and perused the terms of Ex.P.2 could not have overlooked the consequences of the Respondent No.1 not 28 Com.A.S.No.47/2017 following the procedure while passing the Impugned Award.
15.a. In order to answer this ground, I refer to some of the documents produced by both parties along with their respective contentions, here below.
15.b. The Petitioner issued Tender Notice inviting Tenders for the construction of Residential Complex " Pebble Bay", that the Respondent No.1 submitted its Tender as per Ex.P.3 on 05.03.2007, that this Bid was not accepted by the Petitioner, that after mutual negotiations, the Respondent No.1 submitted its Revised Offer as per Ex.P.4 on 07.04.2007, that the same was accepted and the Petitioner issued Ex.P.5/ Letter of Award on 16.04.2007. As per Clause 3 of Annexure to Ex.P.4 as well as Ex.P.5, the stipulated period for completion of the work was 14 months plus one month grace period from 15.04.2007. As per Clause 1.0 of Ex.P.5, the accepted contract price is Rs.9,51,90,875/-. The parties entered into Ex.P.2/ Agreement on 14.12.2007. The learned Advocate for the Petitioner has argued that as per Page No.504 of Ex.R.2/E-mail dated 17.03.2011, the final payment to be made for Rs.1.5 Crores and that as per Page No.506 of Ex.R.3/Minutes of Meetings dated 30.04.2011 finalizes the terms of the completion. According to the 29 Com.A.S.No.47/2017 Respondent No.1, the entire project including the additional work was completed by about April 2011 and the 48 th RA Bill for the month of April 2011 was submitted to the Petitioner through Ex.P.11(a)(8)/Ex.R.18/Letter dated 02.05.2011.
15.c. The learned Advocate for the Respondent No.1 has argued that the learned Arbitrator has framed Issue No.4 and made detailed discussion in Para Nos.45 to 51 of the Award, based on the evidence led by the parties, that it is very clear that the Final Bill was deemed to be served on the Petitioner and there is nothing on record to show that the Respondent No.1 did not complete the work or there is any breach of contract by the Respondent No.1, that the learned Arbitrator has come to the conclusion that the Final Bill was served on the Petitioner.
15.d. The learned Advocate for the Petitioner has argued that the learned Arbitrator at Para No.51 having come to the conclusion that there is no evidence as to when the Bills were sent for certification and why they were not taken up for certification should have rejected the claim in its entirety and instead does the reverse. He has further argued that the right of the Respondent No.1 to claim any RA Bill is only as per 30 Com.A.S.No.47/2017 Clause 31.1.a at Page No. 322 of the Contract, that in spite of the learned Arbitrator in Para No.53 relies on letters of the Respondent No.1 and at Para No.56 to conclude that RA Bills were nor certified due to the inaction or indifference of the Petitioner, that this finding is in direct contradiction to the finding in Para No.51.
15.e. As discussed by me above, while answering the second ground, the Respondent No.1 has performed its part of the obligations under the contract and RA Bills up to 38 were approved by the Engineer, that RA Bills 39 to 48 were sent to the Petitioner, but neither approved nor rejected, that the Final Bill was also sent and the same was met with no response from the Petitioner. The learned advocate for the Respondent No.1 has argued that the Respondent No.1 has raised the bills after the completion of the work as per the contract but the Petitioner failed to make the payment. From the records of the Arbitral Tribunal, it is very clear that the Respondent No.1 has proved its case with help of documentary evidence such as the contract documents which are admitted, the RA Bills and the Final Bills, receipt for having sent the bills, letters requesting for payment etc., that there was no evidence produced by the Petitioner to show that there was any breach of contract by the 31 Com.A.S.No.47/2017 Respondent No.1 nor is there any serious challenge to the evidence of PW-1 during the cross -examination. Further, the learned Arbitrator has decided the issues in favour of the Respondent No.1 and allowed the claim holding that the Respondent No.1 acted in accordance with the terms of the contract. The said finding cannot be considered as perverse or illegal. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
16. The Fourth ground is that each R.A.Bill has a different cause of auction, that the Respondent No.1 has neither proven submission of the disputed R.A.Bills to the Petitioner and not proved submission of the claim under Ex.P.2 in time or its approval or rejection, that the claim of the Respondent No.1 fails for misjoinder of causes of auction, that this has not been considered by the learned Arbitrator.
16.a. From the Arbitral Records, it is very clear that all the R.A.Bills were produced every month, that the R.A.Bills up to 38 was certified by the Engineer in charge and from R.A.Bill Nos.39 to 48 were submitted along with the Final Bill and Petitioner 32 Com.A.S.No.47/2017 again neither approved nor rejected the Final Bill. The learned Arbitrator at Para Nos.53 to 63 has discussed in detail and rejected the said contention of the Petitioner and held that submission of R.A.Bills and the claims are as per the contract and the same is valid under law. The said finding is not perverse or illegal. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
17. The Fifth ground is that the law of limitation puts a time frame for submitting a claim before a Court in case of a claim/damages etc., that Ex.P.2 puts a time for submitting a claim for Arbitration, that the settled law is that when parties have agreed to a period for submission of a claim and after which it is deemed to have lapsed, then that time period is sacrosanct, that the law of limitation does not modify the term for waiver of claim under the contracts or its submissions, especially when parties have agreed differently, that this aspect has not been considered by the learned Arbitrator.
17.a. The learned Advocate for the Petitioner after drawing my attention to Clause 22 of Annexure.2 wherein it is mentioned that if the contractor does not make any demand for 33 Com.A.S.No.47/2017 appointment of Arbitrator in respect of claims in writing within 90 days of receiving the intimation that his Final Bill is ready for payment, the claim of the contractor will be deemed to have been waived and absolutely barred and the owner shall be discharged and released of all liabilities under the contract, in respect of claims and has argued that the present claim is barred by limitation on the said ground.
17.b. The learned Arbitrator has held that the said Clause is not enforceable on the ground that the same is in violation of Section 28 of the Contract Act, 1872 by relying on a decision reported in A.I.R. - 1997 - S.C. - 2049 (National Insurance Company Limited vs. Sujir Ganesh Nayak and Co.).
17.c. The learned Advocate for the Petitioner has argued that the Respondent No.1 knowingly signed the contract with specific terms and hence he was aware of such terms included in the contract, that now having failed to comply with the terms of the contract he is estopped from raising such contentions and hence the finding of the learned Arbitrator based on Section 28 of the Contract Act and the ratio of the above- mentioned decision are not applicable, since general law of 34 Com.A.S.No.47/2017 limitation is applicable to cases where such time limits are not specified in the contract.
17.d. For the said aspect, I wish to refer a decision reported in 1996 (1) - S.C.C. - 90 (Muni Lal vs. Oriental Fire & General Insurance Company Limited & Another), wherein it is held that Section 28 of the Indian Contract Act prohibits prescription of shorter litigation than the one prescribed in the Limitation Act, and that an agreement which provides that a suit should be brought for the breach of any terms of agreement within a time shorter than the period of limitation prescribed by law is a void to that extent as such agreement absolutely restricts the parties from enforcing their rights after the expiration of the stipulated period, although it may be within the period of general limitation.
17.e. It is to be noted that Section 28 of Indian Contract Act was amended on 08.01.1997, which is extracted as below :-
"28. Agreements in restraint of legal proceedings, void :- Every agreement -
(a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limited the time within 35 Com.A.S.No.47/2017 which he may thus enforce his rights; or
(b) which extinguishes the rights of any party thereto, or discharges any party thereto from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to that extent."
17.f. Prior to the amendment of Section 28 of the Indian Contract Act, the Hon'ble Supreme Court drew a distinction between the curtailment of the period of limitation and extinction of the right itself in an agreement in view of Section 28 of the Indian Contract Act, in the above-mentioned decision reported in A.I.R. - 1997 - S.C. - 2049 (National Insurance Company Limited vs. Sujir Ganesh Nayak and Co.), which is referred to by the learned Arbitrator in the Impugned Award. In the said decision, it was held that curtailment of the period of limitation is not permissible in view of Section 28 but extinction of the right itself unless exercised within the specified time is permissible and can be enforced. The above view was reiterated in another decision reported in (1997) 10 - S.C.C.
-528 (Wild Life Institute of India, Dehradun vs. Vijay Kumar Garg).
17.g. But after amendment to Section 28 of the Indian Contract Act, both the curtailment of the period of limitation 36 Com.A.S.No.47/2017 and extinction of the right are not permissible and if there is any clause to that effect in an agreement it would be barred by the provisions of the amended Section 28.
17.h. The learned Advocate for the Respondent No.1 has argued that the said contention of the Petitioner is being answered in Issue No.4 by the learned Arbitrator, that it was the case of the Petitioner that it has not received the Final Bill, that when the Petitioner has taken such a stand, the question of intimating the Respondent No.1 that the Final Bill is ready for payment does not arise at all, that therefore period of 90 days for invoking Arbitration is not applicable for the case on hand, that under the circumstances the said contention was rejected by the learned Arbitrator at Para Nos.65 to 71 of the Award.
17.i. From the contentions of the both parties and on perusal of the arbitral award, the Petitioner has denied the receipt of the Ex.P.11/Final Bill. Further, it is the contentions of the Respondent No.1 that RA Bills No. 39 to 48 were neither certified nor rejected by the Petitioner.
17.j. In the said circumstances, I wish to refer to a decision reported in I.L.R. - 2004 - KAR - 1152 (MYSORE MINERALS 37 Com.A.S.No.47/2017 LIMITED vs. TAM-TAM PEDDA GURUVA REDDY), wherein the Hon'ble High Court of Karnataka by following the judgment of the Delhi High Court reported in (1987) 2 - A.L.R. - 73 (RAM DITTA MAL vs. FOOD CORPORATION) has held that the period of limitation will not start running from the date of completion of work or the non-payment of running bills and that the cause of action will arise only after the Defendant intimated about the preparation of the Final Bill or his having accepted the payment. In another recent decision reported in 2018 (12) - S.C.C. - 393 (Aries & Aries vs. Tamilnadu Electricity Board), it is held that the suit is to be filed within the limitation from the date of rejection of the claim by the Defendant and the said suit is governed by the Article 113 of the Limitation Act. In the said suit, after receipt of final payment, the Plaintiff demanded further payment on 16.05.1981, which was rejected by the Defendant on 06.11.1981. The Hon'ble Supreme Court has held that cause of action in respect of said rejected claim arose on 06.11.1981 and the suit filed was well within limitation. The fact of the said case is applicable to the present case also and hence, the said ratio is also applicable to the present case. Hence, in view of the ratio of the above- mentioned decisions, the claim preferred by the Respondent No.1 before the learned Arbitrator is within limitation. Hence, this ground is not available for the Petitioner under Sub-Section 38 Com.A.S.No.47/2017 (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 Sixth Ground is that the amendment of the scope of work which is the essence of the claim of the Respondent No.1 would have been preceded by submissions of drawing by the Petitioner to the Respondent No.1 and also a written request thereof, that there is no averment or proof of the same being delivered by the Respondent No.1, that the learned Arbitrator having recorded the evidence in this regard and perused Ex.P.2 could not have overlooked the consequences of the Respondent No.1 not following the procedure in carrying out works not agreed to be in writing while passing the Impugned Award.
18.a. From the Arbitral Records, it is very clear that the Engineer in charge has certified the R.A.Bills towards work completed on two additional floors on each block and the basement, that therefore the learned Arbitrator has rejected the said contentions of the Petitioner at Para Nos.41 to 44 of the Award. The said finding is not a perverse or illegal. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the 39 Com.A.S.No.47/2017 respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
19. The Seventh ground is that there is a specific provision for extra scope of works under the Ex.P.2, that the learned Arbitrator has failed to consider that in the absence of a written amendment of scope of work, the Respondent No.1 could not put forth a claim.
19.a. This ground is nothing but repetition of 6 th ground. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
20. The Eighth ground is that there is a specific provision for virtual completion, physical inspection and delivery of the project site in Ex.P.2, that the Respondent No.1 has abandoned the project site has admitted by them in Ex.P.8, that there is no evidence by the Respondent No.1 has to what was the status of the project site when they abandoned the site, that the Respondent No.1 has not handed over the project site in accordance with the terms of Ex.P.2, that these aspects if gone into by the learned Arbitrator would have resulted in the 40 Com.A.S.No.47/2017 rejection of the claim of the Respondent No.1 and allowing the counter claim of the Petitioner.
20.a. From the Arbitral Records, it is very clear that the Respondent No.1 has submitted its R.A.Bills only after completion of work as per contract and the Engineer in charge neither accepted the bills nor rejected it, that the Petitioner did not release the payment in respect of R.A.Bills even after repeated request, that neither the Petitioner nor the Engineer in charge raised any objection at the time of joint inspection regarding any non-completion of work, that entire work has been executed as per the approval, drawing, sketches and completed to the satisfaction of the Petitioner, that there is no document to show that the Petitioner raised objection regarding non-completion of work, that the Petitioner simply kept quite for long time without any response to various communications of the Respondent No.1 for payment against R.A.Bills. Hence, the finding of the learned Arbitrator is not perverse or illegal. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
41Com.A.S.No.47/2017
21. The Ninth ground is that there is an admitted delay by the Respondent No.1 in completing the project and the same is recorded in the Award, that obtaining or not of the plan sanction/permission of the construction license by the Petitioner was not a cause for extension of time for performance by the Respondent No.1, that Respondent No.1 is bound to pay damages as per Ex.P.2 for delay, that these aspects if gone into by the learned Arbitrator would have resulted in the rejection of the claim of the Respondent No.1 and allowing the counter claim of the Petitioner.
21.a. It is admitted fact that the Respondent No.1 was assigned with additional work and there is no time fixed for completion of the additional work, that in support of the allegation of delay, the Petitioner did not produce any evidence, that the learned Arbitrator has held that there is no evidence to show that how much delay was committed by the Respondent No.1 and also no evidence to show for having taken any action against the Respondent No.1 for delaying the work. Hence, the said finding of the learned Arbitrator is not perverse or illegal. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
42Com.A.S.No.47/2017
22. The Tenth ground is that Ex.R.12 was obtained on 21.03.2013 and i.e., two years after the Respondent No.1 abandoned the project site, that it shows the date on which the Petitioner submitted its application for obtaining the same, that the inference is that the project site was ready only on 22.10.2012 being evidenced in Ex.R.12 and not earlier, that this drives the conclusion that when the Respondent No.1 abandoned the project site, the same was incomplete, that these aspects if gone into by the learned Arbitrator would have resulted in the rejection of the claim of the Respondent No.1 and allowing the counter claim of the Petitioner.
22.a. From the Impugned Award, it is very clear that the learned Arbitrator has considered when was the work completed on the basis of various letters produced by both sides and came to the conclusion that Final Bill was raised after completion of work and the Petitioner avoided the R.A.Bills only to avoid the payment. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
43Com.A.S.No.47/2017
23. The Eleventh Ground is that the PW-1 is only as a formal witness has no personal knowledge, that the said evidence is of no value, that that these aspects if gone into by the learned Arbitrator would have resulted in the rejection of the claim of the Respondent No.1 and allowing the counter claim of the Petitioner.
23.a. From the Arbitral Records, it is revealed that the PW-1 is the Managing Director of the Respondent No.1 Company and he was directly involved in the entire matter right from inviting tender till invoking Arbitration, that the claim was based on a written contract and all the communications are in writing, that the Respondent No.1 has produced all the material evidence required to adjudicate claims before the Arbitral Tribunal. It is also pertinent to note that the PW-1 was extensively cross- examined by the Petitioner. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
24. The Twelveth Ground is that the parties have agreed to settle claims in full and final and settlement as per Ex.R.3, that this aspect has not been considered by the learned Arbitrator.
44Com.A.S.No.47/2017
24.a. In respect of this aspect, the learned Arbitrator has framed Issue No.3 and the learned Arbitrator in Para No.64 has dealt with the said contention and held that Ex.R.2 cannot be held as full and final settlement between the parties. The said finding is neither perverse nor illegal. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
25. The Thirteenth Ground is that the parties having agreed on fixed price contract in lieu of an item rate contract, that this aspect has not been considered by the learned Arbitrator.
25.a. From the perusal of the Clause 6.1 of GCC it is very clear that it is a item rate contract. The learned Arbitrator has also after considering the materials on record has held at Para Nos.33 and 34 of the Impugned Award that the contract was item rate contract and not a lump sum contract. The said finding is neither perverse nor illegal. Hence, the arbitral award is neither against the fundamental policy of India nor in contravention of law. Thus, the challenge flanked by the respondent calling for the setting aside of arbitral award on this count is thwarted and rejected.
45Com.A.S.No.47/2017
26. The Fourteenth Ground is that as per the Order dated 11.12.2014 in CMP No.28/2014 the Hon'ble High Court of Karnataka has left open all the contentions, that the learned Arbitrator the application under Section 16 of the Act dismissed the same on the ground that the same shall be considered on recording the evidence, that in the Award he refers to the interim orders which is impermissible.
26.a. The learned Advocate for the Respondent No.1 has argued that the Petitioner has filed an I.A., under Section 16 of the Act challenging the jurisdiction of the tribunal as the claim was already fully satisfied by the Petitioner, that the learned Arbitrator has rejected the said I.A., and framed Issue No.3 in that regard, that the learned Arbitrator has rejected the contention of the Petitioner that the claim is fully settled on the basis of evidence and the same is discussed at Para Nos.61 to 64 of the Award. The learned Advocate for the Respondent No.1 has further argued that the Petitioner represented through his counsel in CMP No.28/2014 and categorically agreed for appointment of Respondent No.2 and Sole Arbitrator and no objection was raised at the time of appointment.
26.b. On perusal of the arbitral records, as there was no response to Ex.P.11/Letter, the Respondent No.1 issued Ex.P.14/ 46 Com.A.S.No.47/2017 Letter on 30.03.2013 to the Petitioner, that the Petitioner has sent a reply as per Ex.P.15/Legal Notice dated 13.04.2013, that the Respondent No.1 issued a Reply as per Ex.P.16 on 25.04.2013, that thereafter, the Respondent No.1 invoked the Arbitration Clause as per Ex.P.17/ Letter dated 03.05.2013, that the learned Arbitrator was appointed as per the Orders passed in CMP No. 28/2014 dated 11.12.2014 by the Hon'ble High Court of Karnataka, to decide the matter both on maintainability of the Arbitration proceedings and other preliminary issues and also about main matters. Thereafter, the learned Arbitrator has dismissed the I.A. No.I filed by the Petitioner under Section 16 of the Arbitration and Conciliation Act, as per a separate detailed orders on 13.08.2015. After the said Order, the Petitioner has filed his Statement of Objections with counter claim before the learned Arbitrator on 15.10.2015. When such being the case, he is now estopped from contending otherwise. 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.
27. The Fifteenth Ground is that the parties before the Hon'ble High Court of Karnataka is only agreed that the seat of 47 Com.A.S.No.47/2017 Arbitration would be Bengaluru, but nothing more, that this aspect has not been considered by the learned Arbitrator.
27.a. This ground is nothing but repetition of Ground No.
14. I have already discussed about the said fact while answering Ground No.14. Hence for the same reasons, I cannot accept the contentions raised in this ground. 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 Sixteenth Ground is that the learned Arbitrator travelled beyond the scope of Arbitration under Clause 22 in Annexure-2 of in Ex.P.4, that Clause 48 of Ex.P.2 provides for Arbitration for any disputes at Mumbai, that the claims are made under Ex.P.2, that the resolution of the said dispute by the learned Arbitrator is beyond the scope of Clause 22 of Ex.P.4 which is limited to dispute within only that letter.
28.a. The learned Advocate for the Respondent No.1 has argued that the said contention of the Petitioner is not tenable for the reason that the Petitioner has denied the receipt of the 48 Com.A.S.No.47/2017 Final Bill and has also denied the liability to pay any sum to the Respondent No.1 and therefore Clause 22 of Annexure-2 of Ex.P.4 has no application whatsoever in case in hand.
28.b. Further, I have already discussed about the similar contentions raised by the Petitioner in this ground, while answering Ground No.5 above. Therefore, all these reasons I cannot accept the said contentions of 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 challenge flanked by the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
29. The Seventeenth Ground is that the Impugned Award replaces a contract agreed to between the parties, that the learned Arbitrator is to enforce the terms agreed by the parties not withstanding if it is convenient or otherwise to either.
29.a. The learned Advocate for the Petitioner has relied on a decision reported in 2006 (1) - S.C.C. - 86 (State of Rajastan vs. Nav Bharat Construction Company), and has argued that an arbitrator cannot go beyond the terms of the contract between the parties, that in the guise of doing justice 49 Com.A.S.No.47/2017 he cannot award contrary to the terms of the contract, that if he does so, he will have misconducted himself. I will discuss about this decision with subsequent decisions, latter on.
29.b. The learned Advocate for the Petitioner has relied on a decision reported in 2021 (6) - S.C.C. - 718 (Bangalore Electricity Supply Company Limited vs. E.S. Solar Power Private Limited), and has argued that the duty of the court is to strictly interpret the contract as per the words used in the absence of ambiguity. I have gone through the said decision. The said decision relates to an Order passed by the Appellate Tribunal for Electricity at Delhi. It does not relate to the provisions of the Arbitration and Conciliation Act. Hence, the principle laid down in the said decision is not applicable to the facts of the case.
29.c. On perusal of the Impugned Award with the terms of the contract between the parties, it cannot be held that the learned Arbitrator has completely ignored the terms of the contract and traveled beyond all the terms of the contract while interpreting the same.
29.d. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and 50 Com.A.S.No.47/2017 thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. The findings of fact by the Arbitral Tribunal, if based on evidence, even where a different opinion can be held on the basis of that evidence, the findings given by the Arbitrator has to be accepted and the Courts cannot substitute its opinion. The power to interpret the contract also lies with the Arbitrator. It is to be noted that the learned Advocate for the Petitioner has relied on the above-mentioned decision reported in 2006 (1) - S.C.C. - 86 (State of Rajastan vs. Nav Bharat Construction Company), wherein it is also held that if an interpretation of the contract is involved then the interpretation of the arbitrator must be accepted unless it is one which could not be reasonably possible. Therefore, 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 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 51 Com.A.S.No.47/2017 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. In another decision reported in 2009 (10) - S.C.C. - 63 (Steel Authority of India Limited vs. Gupta Brothers Steel Tubes Limited), it is held that once the arbitrator has constructed Clause 7.2 of the contract of the said case, in a particular manner and such construction is not absurd and appears to be plausible, it is not open to the Court to interfere with the award of the arbitrator.
29.e. For the same principle, I wish to refer another decision reported 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.
29.f. Therefore, an award warrants interference by the Court under Section 34 of the Arbitration and Conciliation Act only when it contravenes a substantive provision of law or is patently illegal or shocks the conscious of the Court and that a 52 Com.A.S.No.47/2017 plausible/reasonable view taken by an Arbitrator, even if the same is based on insufficient evidence, is not to be substituted by the Court. 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 Eighteenth Ground is that in view of Clause 3(1)
(a) of Ex.P.2 the claims raised by the Respondent No.1 are deemed to have been fully waived and absolutely extinguished, that the Arbitral proceedings should have started within 90 days of the bill being rejected or payment being received, that the Arbitration commenced beyond the prescribed period of 90 days, that the Arbitrator has wrongly applied the ratio of AIR - 1997 - SC - 2049 (National Insurance Company Limited vs. Sujir Ganesh Nayak and Co.).
30.a. About this ground, I have already discussed while answering Fifth Ground above. For the same reasons, I cannot accept the contentions urged by the Petitioner in this ground. 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 53 Com.A.S.No.47/2017 the Petitioner calling for the setting aside of Arbitral Award on this count is thwarted and rejected.
31. The Nineteenth Ground is that the learned Arbitration is failed to consider the novation replaced by a fixed price contract of Rs.112 Crores, that in Ex.P.9 the Respondent No.1 is not disputing the said variation, that the payment of Rs.112 Crores was made by the Petitioner on the understanding between the parties at the payment will be made as lump sum of entire work, that the learned Arbitrator ought to have treated the contract as fixed price contract.
31.a. In order to answer this ground, the following documents with contentions of both parties have to be considered.
31.b. The Respondent No.1 wrote Ex.P.6/ Letter on 21.06.2011 requesting the Petitioner to release the outstanding amount of Rs. 724.09 lakhs. The learned Advocate for the Petitioner has argued that as per Page No.23 of Ex.P.6/Letter by Respondent No.1 for release of money, the Respondent No.1 admits that R.A.Bills are not certified and that there are delays. As there was no response to Ex.P.6/ Letter, the Respondent No.1 wrote Ex.P.7/ Letter on 05.07.2011 requesting the Petitioner for 54 Com.A.S.No.47/2017 certification of RA Bills No. 39 to 48 and for payment of the outstanding amount of Rs. 724.09 lakhs. The Petitioner by Ex.R.4/ Letter dated 08.07.2011 denied the contents of Ex.P.6 and asserted that the contract in question was for a lump sum amount of Rs. 112 Crores including the additional work entrusted to the Respondent No.1 and the Petitioner had paid Rs. 116 Crores against the total agreed amount. The Respondent No.1 addressed Ex.P.8/ Letter dated 30.07.2011 to the Petitioner inviting attention to Ex.R.4, reiterating that the project work which had been entrusted to the Respondent No.1 was on item rate basis and not a lump sum contract and the additional works added to the original scope of work and the Respondent No.1 had not left any work incomplete before demobilizing the project.
31.c. The learned Advocate for the Respondent No.1 has argued that the amount paying by the Respondent No.1 is as per scope of work assigned by the Petitioner, that the contract was item rate contract and the Respondent No.1 has raised RA Bills on the basis of work completion, that the two additional floors and a basement work was assigned to the Respondent No.1 and the same is proved on the basis of the document relied by the Petitioner i.e., Ex.R.4, that the learned Arbitrator at Para Nos.41 to 43 of the Impugned Award has considered the 55 Com.A.S.No.47/2017 additional work assigned and held that amount claimed is as per contract.
31.d. On perusal of the above-mentioned documents with the Impugned Award, the said contentions urged by the Petitioner in this ground cannot be accepted at all. 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 ground is thwarted and rejected.
32. The Twentieth Ground is that the learned Arbitrator has gone beyond the terms of the contract, that the Respondent No.1 has not produced an iota of evidence to prove that he has carried out one basement floor and two additional floors besides miscellaneous works and even if so carried out the amount claimed by him is corresponding to the work so carried out, that practically a basement is built before the super structure and the basement is built according to the height/number of floors to be built, that the so called extra scope of work did not/could not exist and that is why there is no written contract on this aspect, that as per the Clause 34 of Ex.P.2, the Respondent No.1 has not produced written order 56 Com.A.S.No.47/2017 from the Engineer in-charge and hence he is not entitled to any payment for the extra works he claimed to have carried out, that the Award is contrary to the terms of the contract and thereby patently illegal.
32.a. I have already discussed about the contentions urged by the Petitioner in this ground, while answering Ground No. 17 above. For the same reasons, I cannot accept the contentions of 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 challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
33. The Twenty-First Ground is that the claim of the Respondent No.1 that additional basement and floor was constructed is absolutely untenable as per the evidence of RW-4 and the learned Arbitrator failed to take note of the same tenders the Award contrary to law and irrational.
33.a. In fact, this ground is in the nature and tenor of appeal. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate 57 Com.A.S.No.47/2017 the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. 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 ground is thwarted and rejected.
34. The Twenty-Second Ground is that the so called Final Bill as per Ex.P.11 was never received by the Petitioner, that the learned Arbitrator has wrongly drawn presumption in view of A.I.R. - 2014 - S.C. - 3057 (Ajeet Seeds Limited vs. K.Gopalakrishnaiah), that the Petitioner shifted office from Dickenson Road in the year 2008 and when the Respondent No.1 was not produced postal acknowledgment the raising of the said presumption is perverse.
58Com.A.S.No.47/2017
34.a. The learned advocate for the Respondent No.1 has argued that the presumption is drawn by the learned Arbitrator as per Section 27 of General Clauses Act and relied on the decision reported in A.I.R. - 2014 - S.C. - 3057 (Ajeet Seeds Limited vs. K.Gopalakrishnaiah), that there is no rebuttal evidence by the Petitioner against the presumption, that there is no evidence as to shifting of office nor any document produced to show that Petitioner has intimated the Respondent No.1 regarding the change of address, that the Respondent No.1 has produced Registered Post Receipt for having sent the Final Bill to the correct address, that therefore the presumption drawn by the learned Arbitrator is in accordance with law and principle laid down by the Hon'ble Supreme Court and that the same is discussed at Para Nos.46 to 50 of the Impugned Award.
34.b. It is to be noted that whether the presumption drawn by the learned Arbitrator is correct or not, I have to make a re- appreciation of evidence and material produced before the learned Arbitrator, which is not permissible under law, while dealing with a Petition under Section 34 of the Arbitration and Conciliation 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 59 Com.A.S.No.47/2017 challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
35. The Twenty-Third Ground is that the Award of interest is contrary to the terms of the contract, that the quantum of interest and other claims are not in the manner contemplated of the contract.
35.a. The learned advocate for the Respondent No.1 has argued that the interest awarded by the learned Arbitrator is as per the norms of commercial contracts and as per the provision of Section 31 (7) (a) and (b) of the Arbitration and Conciliation Act and not under the contract, that hence the contentions of the Petitioner on this ground does not hold water and that the same is discussed at Para Nos.52 to 60 of the Impugned Award.
35.b. On perusal of the Impugned Award, I cannot reject the said arguments of the learned Advocate for the Respondent No.1. For the same reasons, I am of the opinion that the award of interest by learned Arbitrator is proper and correct. 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 60 Com.A.S.No.47/2017 calling for the setting aside of arbitral award on this ground is thwarted and rejected.
36. The Twenty-forth Ground is that Ex.P.11 has not been submitted in terms of the contract.
36.a. In fact, I have already discussed about this fact while answering Third Ground above. For the same reasons, I cannot accept the said contentions of 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 challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
37. The Twenty-fifth Ground is that a reading of the Impugned Award reveals that from the outset the learned Arbitrator has pre-determined the liability of the Petitioner.
37.a. I have already discussed about the contentions raised by the Petitioner in this ground, while answering Ground No. 19 above. For the same reasons, the said contentions of the Petitioner cannot be accepted. 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.
61Com.A.S.No.47/2017 Thus, the challenge flanked by the Petitioner calling for the setting aside of arbitral award on this ground is thwarted and rejected.
38. The Twenty-Sixth Ground is that the learned Arbitrator has failed to consider that the non-performance and breach of the obligations by the Respondent No.1 under the contract as resulted in burden on the Petitioner to expend more money by engaging a sub-contractor to finish the work left undone by the Respondent No.1, that the learned Arbitrator ought to have applied its mind to the fact that the Respondent No.1 has in breach of Clause 47 of Ex.P.2 and without the consent of the Petitioner or the Engineer in charge decommissioned the site and abandoned the site in a manner contrary to the terms of Ex.P.2.
38.a. The learned advocate for the Respondent No.1 has argued that there is no evidence produced by the Petitioner to show that the Respondent No.1 has committed breach of contract in any manner, that there was no termination of contract under Clause 47 by the Engineer in charge, that no complaints regarding any delay and the sub-contractor engaged by the Petitioner to complete the work undone by the Respondent No.1, namely M/s Shivakumar and Co., was proved 62 Com.A.S.No.47/2017 to be associated with the Petitioner in connection with the supply of labour and no evidence produced to show that any other work got done by the Petitioner, that the learned Arbitrator has rightly rejected the counter claim of the Plaintiff.
38.b. The learned Arbitrator has held that the above- mentioned Sri. Shivakumar, who is said to be Proprietor of the said concern is not examined about the completion of work and that he has received alleged payment. The learned Arbitrator has also held by relying on Ex.P.18 to Ex.P.20 which were dated 02.05.2011 which is even prayer to the submission of Final Bill by the Respondent No.1 and hence the contention of the Petitioner cannot be accepted. Further, the learned Arbitrator has also consider Ex.R.2 wherein it is mentioned that the said Sri. Shivakumar was associated with the Petitioner in connection with the labour supply. The said findings of the learned Arbitrator cannot be considered as perverse or 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 ground is thwarted and rejected.
63Com.A.S.No.47/2017
39. The Twenty-Seventh Ground is that the learned Arbitrator without applying its mind Awarded at 7% interest as sought by the Respondent No.1 despite there being a breach by the Respondent No.1.
39.a. I have already discussed about this fact while answering Ground No. 23 above. Hence for the same reasons, I cannot accept the contentions of the Petitioner as urged in this ground. 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 ground is thwarted and rejected.
40. The Twenty-Eighth Ground is that the learned Arbitrator erred in rejecting the counter claim on completely irrelevant and and untenable grounds.
40.a. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the 64 Com.A.S.No.47/2017 findings of the arbitrator, as if it were sitting in appeal over his findings. In fact, this ground is in the nature and tenor 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 ground is thwarted and rejected.
41. The Twenty-Ninth Ground is that the learned Arbitrator has committed a patent illegality in awarding interest at 12% per annum from the date of Award in respect of the principal amount, that the rate of interest is exorbitant and unjustified.
41.a. First of all with regard to award of interest, I have already discussed while answering earlier grounds. At Para No. 60 of the Impugned Award the learned Arbitrator having considered about the said aspect has held about the rate of interest. Further, whether the interest awarded is exorbitant or unjustified is not a ground to be urged under Section 34 of the Arbitration & Conciliation Act, 1996, since it requires the re-
65Com.A.S.No.47/2017 appreciation and re-evaluation of the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. In fact, this ground is in the nature and tenor 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 ground is thwarted and rejected.
42. The Thirtieth Ground is that the learned Arbitrator has failed to consider the injury and hardship suffered by the Petitioner due to breach by the Respondent No.1.
42.a. The learned Advocate for the Respondent No.1 has argued that as there is no breach of contract by the Respondent No.1, the question of Plaintiff suffering injury and hardship does not arise.
66Com.A.S.No.47/2017
42.b. Section 34 of the Arbitration & Conciliation Act, 1996 does not empower the Courts to re- appreciate and re-evaluate the evidence produced before the Arbitral Tribunal and thereafter to judge if the findings of the Arbitral Tribunal are correct or wrong. The Superior Courts have repeatedly held that it is not permissible to a Court to examine the correctness of the findings of the arbitrator, as if it were sitting in appeal over his findings. In fact, this ground is in the nature and tenor 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 ground is thwarted and rejected.
43. The scope of this court is limited with regard to Section 34 of the Act. The position of law stands crystallized 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 67 Com.A.S.No.47/2017 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 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."68
Com.A.S.No.47/2017
44. 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."
45. Thus, it is observed and held that the arbitral award is not marred by any patent illegality, as there is no contravention 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 69 Com.A.S.No.47/2017 terms of the contract, trade usages applicable to the nature of contract and substance of dispute.
46. The Arbitration and Conciliation (Amendment) Act, 2015 made major changes to Section 34. The changes were suggested by the 246th Report of the Law Commission of India on Amendments to the Arbitration and Conciliation Act, 1996 of August 2014 and the Supplementary to the 246th Report of the Law Commission of India on Amendments to the Arbitration and Conciliation Act, 1996 of February 2015. These changes were aimed at restricting Courts from interfering with arbitral awards on the ground of "public policy." Accordingly, the amendment added "Explanation 2" to Section 34(2) as well as Section 2A. Explanation 2 of Section 34(2) states -
"For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian Law shall not entail a review on the merits of the dispute."
47. Because of this amendment, Courts would no longer be able to interfere with the award passed by the arbitrator. The explanation makes it especially clear that in no way would a Court be entailed to review the award on merits of the dispute.
70Com.A.S.No.47/2017 However, after amendment to Arbitration and Conciliation Act, Section 2A also curtails the scope of interpretation of "patently illegal" as propounded in the said decision reported in 2003 (5)
- S.C.C. - 705 (ONGC vs. Saw Pipes Limited). Section 2A states :-
"An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiate by patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous application of law or by reappreciation of evidence."
48. Thus, Courts can no longer reappraise evidence or set aside awards merely because the Arbitral Tribunal has made errors when dealing with the same.
49. Hence, 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 stops short of perversity, does not merit interference under Section 34 of the Arbitration & 71 Com.A.S.No.47/2017 Conciliation Act, 1996. Courts can no longer reappraise evidence or set aside awards merely because the Arbitral Tribunal has made errors when dealing with the same.
50. In the decision reported in (2017) 13 - SCALE - 91 (SC) (Venture Global Engineering LLC and Ors vs. Tech Mahindra Ltd. and Ors), the Hon'ble Supreme court has held as follows:-
"The Award of an Arbitral Tribunal can be set aside only on the grounds specified in Section 34 of the Arbitration & Conciliation Act and on no other ground. The Court cannot act as an Appellate Court to examine the legality of Award, nor it can examine the merits of claim by entering in factual arena like an Appellate Court."
51. A similar view is also taken in the decision reported in (2017) 14 - SCALE - 240 (SC) (Sutlej Construction vs. The Union Territory of Chandigarh).
52. The learned Advocate for the Petitioner has relied on a decision reported in 2019 (15) - S.C.C. - 131 (Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd.), wherein the Hon'ble Supreme Court has once again reiterated the law related to the 72 Com.A.S.No.47/2017 examination by a Court of an Award under Section 34 of the Arbitration & Conciliation Act, 1996 and has held as under:-
"34. What is clear, therefore, is that the expression public policy of India, whether contained in Section 34 or in Section 48, would now mean the fundamental policy of Indian law as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental policy of Indian law would be relegated to the "Renusagar" understanding of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, in so far as principles of natural justice are concerned, as contained in Sections 18 and 34(2) (a) (iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra).
35. It is important to notice that the ground for interference in so far as it concerns "interest of India"
has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". This again would be in line with paragraphs 36 to 39 of Associate Builders (supra), as it is only such arbitral awards that 73 Com.A.S.No.47/2017 shock the conscience of the court that can be set aside on this ground.
36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or morality as understood in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with.
37. Insofar as domestic awards made in India are concerned, an additional ground is now available under subsection (2A), added by the Amendment Act, 2015, to Section 34.Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within the fundamental policy of Indian law, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the back door when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that re-
appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
74Com.A.S.No.47/2017
39. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).
41. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being aground for challenge under public policy of India, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as 75 Com.A.S.No.47/2017 such decision is not based on evidence led by the parties, and therefore, would also have to be characterized as perverse."
53. In the decision reported in 2019 (16) - SCALE - 823 (Hindustan Construction Company Limited & Anr. vs. Union of India & Ors.), the Hon'ble Apex Court has held as under:-
"49. Further, this Court has repeatedly held that an application under Section 34 of the Arbitration Act, 1996 is a summary proceeding not in the nature of a regular suit - see Canara Nidhi Ltd. v. M. Shashikala 2019 SCC Online SC 1244 at paragraph 20. As a result, a court reviewing an arbitral award under Section 34 does not sit in appeal over the award, and if the view taken by the arbitrator is possible, no interference is called for - see Associated Construction v. Pawanhans Helicopters Limited. (2008)16 SCC 128 at paragraph 17.
50. Also, as has been held in the recent decision Ssangyong Engineering & Construction Co. Ltd. vs. NHAI 2019 SCC Online SC 677, after the 2015 Amendment Act, this Court cannot interfere with an arbitral award on merits."
54. The Hon'ble Supreme Court in the decision reported in 2020 - SCC Online - S.C. - 466 (Patel Engineering Ltd. vs. North Eastern Power Corporation Ltd) has once again exposited the 'patent illegality' ground, appearing in Section 34 76 Com.A.S.No.47/2017 (2A) of the Arbitration and Conciliation Act, 1996. The most significant part of this judgment is the recognition and re- affirmation given to the test of patent illegality, as set out in Paragraph (42.3) of the above-mentioned decision reported in 2015 (3) - S.C.C. - 49 (Associate Builders vs. DDA) and which was reiterated in Paragraph (40) of the decision reported in 2019 (15) - S.C.C. - 131 (Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd.). The aforementioned test of 'patent illegality' lays down that any contravention of Section 28 (3) of the Arbitration & Conciliation Act, 1996 is deemed to be a sub-head of patent illegality. According to it, an Arbitral Tribunal must decide in accordance with the terms of the contract, but if an Arbitrator construes a term of the contract in such a way that it could be said to be something that no fair minded or reasonable person could do, the same will render the award 'patently illegal'.
55. By keeping in mind about the said legal aspects, I am of the opinion that the Arbitral Award is not marred by any patent illegality, as there is no contravention 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.
77Com.A.S.No.47/2017 The Arbitral Award is also held to not be in contravention of Section 28(3) of the Arbitration & Conciliation Act, which pertains to the terms of the contract, trade usages applicable to the nature of contract and substance of dispute.
56. On a parting note, I would like to add, that the challenge to the various clauses of contract by the Petitioner under the present petition is not tenable. It is accordingly, held that the Arbitral Award is neither against the fundamental policy of India nor in contravention of law. Therefore, I find no perversity in the Arbitral Award and the same is upheld.
57. Having given my careful consideration to the submissions urged and the complete case record in the preceding paragraphs of this judgment, I am of the view that is not a fit and proper case for exercise the jurisdiction of this court under Section 34 of the Arbitration & Conciliation Act and interfere with the Arbitral Award and the same is upheld.
58. In my humble opinion, it cannot be said, in the present matter, that finding recorded by the Learned Arbitrator 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 Arbitrator shows that evidence of both the parties 78 Com.A.S.No.47/2017 have been considered in detail and the Learned Arbitrator has taken into account each and every submissions advanced by the parties before him, including appreciation of evidence in proper manner before arriving at the decision to pass the impugned award and as such, the judgment cited by the Learned Counsel for the Petitioner, is of little assistance to him.
59. 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 79 Com.A.S.No.47/2017 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."
60. The learned Advocate for the Petitioner has relied on a recent Judgment of the Hon'ble Supreme Court in Delhi Airport Metro Express Private Limited vs. Delhi Metro Rail Corporation Limited in Civil Appeal No.5627/2021 (arising out of SLP (C) No. 4115/2019) decided on 09.09.2021. In the said judgment, the Arbitral Award which was challenged before the Hon'ble High Court under Section 34 was dismissed and in appeal under Section 37. The Division Bench of Hon'ble High Court has allowed the appeal and set aside the award. In this judgment, the Hon'ble Supreme Court has set aside the order of the Division Bench. In the said Judgment, the Hon'ble Supreme Court in Para 24 has held as under:-
"24. This court has in several other judgments interpreted Section 34 of the 1996 Act to stress on the restraint to be shown by courts while examining the validity of the arbitral awards. The limited grounds available to courts for annulment of arbitral awards are well known to legally trained minds. However, the difficulty arises in applying the well-established principles for interference to the facts of each case that come up before the courts. There is a disturbing tendency of courts setting aside arbitral awards, after 80 Com.A.S.No.47/2017 dissecting and reassessing factual aspects of the cases to come to a conclusion that the award needs intervention and thereafter, dubbing the award to be vitiated by either perversity or patent illegality, apart from the other grounds available for annulment of the award. This approach would lead to corrosion of the objection of the 1996 Act and the endeavours made to preserve this court, which is minimal judicial interference with arbitral awards. That apart, several judicial pronouncements of this court would become a dead letter if arbitral awards are set aside by categorizing them as perverse or patently illegal without appreciating the contours of the said expressions."
61. The Hon'ble Supreme Court at Para 35 of the said Judgment has held that as the arbitrator is the sole judge of the quality as well as the quantity of the evidence, the task of being a judge on the evidence before the Tribunal does not fall upon the court in exercise of its jurisdiction under Section 34. The Hon'ble Supreme Court has also held in Para 39 of the said Judgment that construction of the contract is within the jurisdiction of the Tribunal and merely because another view is possible, the court cannot interfere with such construction and substitute its own view.
62. On going through these Judgments, it makes further clear that Arbitrator is sole judge of the quality and quantity of the 81 Com.A.S.No.47/2017 evidence and construction of contract is within the jurisdiction of the Tribunal and the court cannot lightly interfere with the award passed by the learned Arbitrator. On considering the facts of the present case, as held in this Judgment there are no grounds to set aside the award of the learned Arbitrator under Section 34 of the Act. The Hon'ble Supreme Court in this Judgment has even held that patent illegality which do not go to the root of the matter and every error of law committed by the Arbitral Tribunal could not fall within the expression patent illegality.
63. Relying upon the law laid in the decision reported in 2015 (5) - S.C.C. - 698 (Navodaya Mass Entertainment Limited vs. J.M. Combines), it can be said that not only the reasoning of Arbitral Tribunal are logical, but all the material and evidence were taken note of by Arbitral Tribunal and this Court cannot substitute own evaluation of conclusion of law or fact to come to the conclusion other than that of Arbitral Tribunal. Cogent grounds, sufficient reasons have been assigned by Arbitral Tribunal in reaching the just conclusion and no error of law or misconduct is apparent on the face of the record. This Court cannot re-appraise the evidence and it is not open to this Court to sit in the appeal over the conclusion/findings of facts 82 Com.A.S.No.47/2017 arrived at by Arbitral Tribunal. Re-appraisal of the matter cannot be done by this Court. No error is apparent in respect of the Impugned Award. I do not find any contradiction in the observations and findings given by Arbitral Tribunal. The Impugned Award does not suffer from vice of irrationality and perversity. The conclusion of the Arbitral Tribunal is based on a possible view of the matter, so the Court is not expected to interfere with the award. Even impugned award passed by Arbitral Tribunal cannot be set aside on the ground that it was erroneous. The award is not against any public policy nor against the terms of contract of the parties. No ground for interference is made out. None of the grounds raised by the petitioner attract Section 34 of the Arbitration and Conciliation Act. Therefore, I answer this Point in Negative.
64. 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 10.03.2017 is hereby upheld.
83Com.A.S.No.47/2017 The Petitioner shall pay the cost of this proceeding to the Respondent No. 1.
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 directly on computer, verified and then pronounced by me in open Court on this the 11th day of January, 2022).
(DEVARAJA BHAT.M), LXXXII Addl. City Civil & Sessions Judge, Bengaluru.
84 Com.A.S.No.47/2017 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 10.03.2017 is hereby upheld.
The Petitioner shall pay the cost of this proceeding to the Respondent No. 1.
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 11.01.2022 ).
(Typed to my dictation)
LXXXII ACC&SJ, B'LURU.