Delhi High Court
M/S. Naraindas R. Israni vs Union Of India on 13 November, 1992
Equivalent citations: AIR1993DELHI78, 49(1993)DLT107, 1993(25)DRJ1, AIR 1993 DELHI 78, 1993 (1) ARBI LR 233, 1993 (2) LJR 170, (1993) 1 PUN LR 50, (1993) 25 DRJ 1, (1993) 1 OCR 50, (1993) 1 RRR 433, (1993) 1 ARBILR 233, (1993) 49 DLT 107
ORDER
1. This is a petition under S. 14 of the Arbitration Act for making the award dated 10-5-90 given by H. N. Chandwani, Arbitrator, respondent No. 2, a rule of the Court.
2. Brief facts which gave rise to the present petition are as under : that petitioner is a 'A' Class contractor. He carries on his business of construction under the name and style of M/s. Narain Dass R. Israni (hereinafter referred to as petitioner for the sake of brevity). The Union of India, respondent No. 1, awarded a contract to the petitioner for construction of Farmers' Hostel, IARI, Pusa Road, New Delhi (hereinafter referred to as Respondent No. 1 for the sake of convenience) vide an agreement No.T/EE/CB 8/77-78. Later on disputes and differences arose in between the petitioner and respon were referred to Shri H. N. Chandwani, respondent No. 2 for adjudication (hereinafter referred to as respondent No. 2). The respondent No. 2 made and published his award on 10-5-90. The said award was filed before the Court on 29-8-90. Notices were issued to both the parties in regard thereto. The petitioner did not file any objection against the said award and prayed that the same be made rule of the Court.
3. Respondent No. 1, however, objected to the said award inter alia on the following grounds : that respondent No. 2 has misconducted himself and the proceedings. These are errors apparent on the face of the record. The respondent No. 2 failed to appreciate the evidence on record. He has allowed the claim of the petitioner without making a 'speaking award', though he was required to do so in terms of the arbitration agreement. The respondent No. 2 was required to give reasons while allowing a claim for more than Rs.50,000/- vide clause 25 of the Agreement. All the claims allowed were hopelessly barred by time. The impugned award is thus unsustainable and is thus liable to be set aside.
4. Petitioner filed a reply to the objections. According to the petitioner the objections are false and frivolous and are thus liable to be dismissed. He has prayed that the Award be made a rule of the Court. The reply is supported by an affidavit.
5. The following issues were framed by the learned predecessor of this Court :--
1. Whether the award is liable to be set aside/modified on the objections raised in the objection petition?
2. Relief. Issue No. 1.
6. Learned counsel for the respondent No. 1 Mr. Seth has contended that the learned Arbitrator has misconducted himself and the proceedings. There are errors apparent on the face of the award inasmuch as all the claims allowed by the respondent No. 2 were hopelessly barred by time. Respondent No. 2 was required to give reasons for arriving at the conclusions when the claim was for more than Rs. 50,000/-. He was thus under an obligation to make a speaking award. In view of the above the impugned award is liable to be set aside.
7. Learned counsel for the petitioner Mr. Markanda has urged to the contrary. According to him the award is perfectly legal and valid. Respondent No. 2 has given cogent reasons for the conclusions. It is a speaking award. An arbitrator is not expected to write a detailed judgment like a Civil Court. All the claims were within time and as such were rightly allowed by respondent No. 2. Objections are false and frivolous and are thus liable to be dismissed.
8. Since we are concerned with the construction of S. 30 of the Arbitration Act which deals with the ground on which an award can be set aside, the provisions of the said Section can be adverted to with profit. It is in the following words :--
"An award shall not be set aside except on one or more of the following grounds :--
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under S. 35;
(c) that an award has been improperly procured or is otherwise invalid."
9. It is manifest from the relevant provisions of law cited above that an award can be set aside only in those discerning few cases which fall well within the domain of S. 30 of the Arbitration Act alluded to above i.e. when (1) the arbitrator has misconducted himself or the proceedings; (2) if the award has been given after the arbitration proceedings have been suspended; (3) if the award has been improperly procured.
10. This is not the case of the objector that the award in the instant case was improperly secured. This is also not the contention of the respondent No. 1 that the impugned award was given after the suspension of the arbitration. The one and the only ground on which the respondent No. 1 want this Court to set aside the award is that the arbitrator has misconducted himself and the proceedings and there are errors apparent on the face of the award. Let us now see as to how far the respondent No. I have succeeded in substantiating the said assertion?
11. It has been urged for and on behalf of the respondent No. I that all the claims allowed by respondent No. 2 were barred by time under S. 37 of the Arbitration Act read with S. 3 and Art. 55 of the Limitation Act. Hence, the arbitrator was duty bound to disallow the claims of the petitioner instead of allowing them. The learned counsel in support of his argument has led me through S. 37 of the Arbitration Act which envisages :
(1) All the provisions of the Indian Limitation Act, 1908, shall apply to arbitrations as they apply to proceedings in Court.
(2) .....
(3) For the purposes of this section and of the Indian Limitation Act, 1908, an arbitration shall be deemed to be commenced when one party to the arbitration agreement serves on the other parties thereto a notice requiring the appointment of an arbitrator, or where the arbitration agreement provides that the reference shall be to a person named or designated in the agreement, requiring that the difference be submitted to the person so named or designated."
12. Section 3 of the Limitation Act, 1963 read as under :--
(1) Subject to the provisions contained in Ss. 4 to 24 (inclusive), every suit instituted, appeal preferred, and application made after the prescribed period shall be dismissed although limitation has not been set up as a defense.
(2) For the purpose of this Act -- (a) a suit is instituted --
(i) in an ordinary case, when the plaint is presented to the proper officer."
13. Article 55 of the Limitation Act provides the limitation of three years for compensation for the breach of any contract, express or implied not herein specially provided for, when the contract is broken or when the breach in respect of which the suit is instituted occurs or (where the breach is continuing) when it ceases".
14. Learned counsel for the objector in view of the above has a argued with all the vehemence at his command that in the instant case the contract was awarded on 22-9-77, the contract was completed on 24-8-79, the final bill was presented on 5-9-88, the reference to the arbitration was made on 3-2-89. The reference, thus, to the arbitration was hopelessly barred by time inasmuch as it was made nearabout ten years after the completion of the contract. The learned counsel in support of his above argument has led me through the observations of their Lordships of the Supreme Court as , K. P. Poulose v. State of Kerala ......" at page 1261 Misconduct under S. 30(a) has not a connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision." Thus, on the basis of the above authority learned counsel for respondent No. 1 has argued that the arbitrator should have rejected all the claims of the petitioner as the same were barred by time in view of a large number of documents placed on the record of the arbitrator by the objector. The petitioner laid their claims for the recovery of the amount vide letters dated 16-3-82, 15-3-82 and 1-2-82 i.e. Exts. P5, P6& P7 respectively. The same were rejected by the respondent through their letters dated 8-3-82 and 26-7-82 i.e. Exts. R1 and R2 respectively. Thus, if the period of limitation is computed even from the date of the letter Ex. R2 i.e. 26-7-82 even then the period of limitation expired on 26-7-85.
15. Learned Counsel for the petitioner Mr. Markanda, on the other hand, has contended that the learned counsel for the respondent has construed amiss the provisions of the Arbitration Act as well as that of the Limitation Act. According to the learned counsel, the final bill was drawn on respondent No. 1 on 5-9-88. The same was cleared by the respondent on 15-10-88. Thus, according to the learned counsel for the petitioner the period of limitation is to be computed from the said date. The petitioner invoked the arbitration clause on 9-1-89 as is manifest from the letter of the Chief Engineer dated 3-2-89 (within 90 days as provided in the agreement). Thus, the arbitration clause was invoked within the period of limitation as envisaged vide clause 25 of the agreement. I am tempted here to cite a few lines from the agreement which runs as under :--
"It is also a term of contract that if the contractor (s) do/does not make any demand for arbitration in respect of any claim (s) in writing within 90 days of receiving the intimation from the Government that the bill is ready for payment, the claim of the contractor (s) will be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims."
16. It is crystal clear from above that the petitioner could have invoked the arbitration clause within 90 days from the date on which he received the intimation that the bill is ready for payment. Admittedly no intimation was given in this regard by the respondent to the petitioner as no document has been placed on record showing the said intimation. In view of the above this Court is of the view that the period of limitation in the instant case would start running from 15-10-88 i.e. the date of the payment with regard to the final bill. If the period of limitation is so computed as per the provisions of clause 25 of the agreement in that eventuality we find that the arbitration clause was invoked within less than 90 days. I am supported in my above view by the observations of P. C, Mallick, J, as made in , M. L. Dalmiya and Co. v. Union of India..... "If any payment is made on a running bill, such sum will be deducted from the final bill as being an advance payment on account of the final bill.
If one or more of the running bills submitted by the contractor has or have not been paid and the cause of action for the realisation of the same has become time barred due to the passage of time, nevertheless, the contractor will be entitled to recover the same as a part of the final bill. Failure to pay the final bill constitutes a new cause of action and the starting point of limitation for payment will arise from the date of default in the payment of the final bill."
17. The next contention put forward by the learned counsel for the petitioner is that the respondent for the best reasons known to them never raised any point with regard to the limitation before the learned arbitrator. Hence, in view of the above they are estopped from raising the said point before this Court. Admittedly, this is not the objection raised by the objector that they raised the plea with regard to the plea of limitation before the learned arbitrator and the same was not looked into and adjudicated upon. Thus, they cannot now be permitted at this stage to raise the said plea. The underlying idea behind the enactment of Arbitration Act was to provide a cheap and speedy remedy to the litigant public for resolving their disputes. Thus if the parties have chosen a particular forum for agitating their grievances they must raise all sort of issues with regard to the facts and law before the said authority. If they are permitted to raise the said issues over again before the Court it will defeat the very purpose of the Arbitration Act.
18. The above view was given vent to by a Division Bench of the Patna High Court reported as , Union of India v. B. C. Basu, (at page 28)... "This much is, however, undisputed that neither any objection was taken by the appellant at the time of making of the reference to the arbitrators that a part of the claim was barred by limitation nor any such objection was raised by them before the arbitrators. For the first time the objection was taken before the Court after the award was filed. As the maxim that limitation bars only the remedy but does not destroy the right is well known, no illegality was therefore, committed by the arbitrators in entertaining the claim of the contractors for the said period.".
19. The above issue was again raised before a single Judge of this Court as reported in (1969) 71 PL'RD 31, M/s. Bhairon Mal Ram Kishan Dass v. Jagjeet Singh,..... "It is obvious that this affidavit is silent on the point if any objection on the ground of limitation was pressed either in the trial Court prior to the reference to arbitration or before the arbitrator. The entire subject-matter of the dispute in the Court having been referred to arbitration by the agreement of parties, an objection that the Court should have dismissed the suit and declined to make the reference, does not seem to me to be open to the judgment-debtor at this stage. Similarly, the objection not having been pressed before the arbitrator, such an objection was hardly competent in the Court after the award was filed by the arbitrator. The bald submission of the counsel is not supported by any statutory provision; nor has any precedent been called in aid and I am not at all impressed by the cogency of the argument which is unsupportable on any recognized principle of law."
20. The next limb of the argument of the learned counsel for the respondent is that the arbitrator in the instant case has not given out reasons for arriving at his conclusions. He was under an obligation to do so vide clause 25 Of the agreement which provides as under :
"In all cases where the amount of the claim in dispute is Rs. 50,000/- (Rupees fifty thousand) and above, the arbitrator shall give reasons for the award."
21. The claim No. 5 is for Rs. 3,06,700/-and the claim No. 9 is for Rs. 1,50,000/-. The arbitrator has not given a reasoned award for allowing a sum of Rs. 95,500/- against Claim No. 5 and Rs. 60.500/- against Claim No. 9. There is no detailed break-up justifying the amounts allowed by the arbitrator. In fact, both the awards are for the said claim involving increase in the cost index. Furthermore, the arbitrator has ignored the petitioner's own undertaking dated 16-8-81 that he will not make any claim for delay in the execution of work. Respondent No. 1 granted the extension to the petitioner covering the delay in the performance of the contract vide their letter dated 28-9-81 without prejudice to their rights.
22. The contention of the learned counsel, I feel, is without any merit. It is a well established principle of law that an arbitrator is not required to give a detailed judgment just like a civil court. What is expected of the arbitrator is simply this much that he must give out the trend of his thought process. To the same effect are the observations of a Division Bench of this Court as , Delhi Development Authority v. M/s. Uppal Engineering Construction Co .....
"As already noted, we have dealt with this matter in the case of M/s. A1 Karma (supra). We have held that the arbitrator when called upon to give a reasoned award is still not required to write a detailed judgment as Judges do. However, he is required to indicate the trend of his thought process but not his mental meanderings. The purpose of commercial arbitration, being speed, certainty and a cheaper remedy. Since the parties choose their own arbitrator they cannot, when the award is good on the face of it, object to the decision either upon law or facts, unless such mistake appears on the face of the award on a document appended to or incorporated with it. M/s. Alien Berry & Co. P. Ltd. v. Union of India, ."
23. It was further observed in Krishna Construction Co. v. Delhi Development Authority, 1988 Vol (Eight) (1) Arb. L.R.D. 263,.... "The law is that the arbitrator is not required to give any arithmetic computation."
24. Furthermore, a careful scrutiny of the award reveals that the learned arbitrator has dealt with each and every argument elaborately giving out reasons for arriving at his conclusions. The learned arbitrator while dealing with the undertaking given by the petitioner has observed as under:--
"..... The claimant's undertaking dated 16-8-81 (Ext. R-14(A), given much after the completion of work on 24-8-79, about non-claim of anything extra on account of delay in completion of work, was obviously not given out of free will and the same was for the purpose of finalisation of the decision about the grant of the extension of time by the Superintending Engineer. Under these circumstances the contention of the respondents that the claimants surrendered their right to the claim is not justified."
25. The next contention raised by the learned counsel for the respondent that the arbitrator should not have allowed the claim of the petitioner with regard to the compensation on account of the delay in the execution of the work because of the alleged lapses on the part of the respondent, I am sorry, is without any merit. To my mind, this argument is not available to the counsel for the respondent before this Court inasmuch as the arbitrator is the final authority to adjudicate upon the disputes raised before him. The same dispute cannot be raised over again before the Court when a party applies to it for making the award a rule of the Court. In this connection I am tempted over here to cite the observations of their Lordships of the Supreme Court as , M/s. Hindustan Tea Co. v. M/s. K. Sashikant & Co..... "Under the Law, the arbitrator is made the final arbiter of the dispute between the parties. The award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion or has failed to appreciate facts...... In our view, on the facts of this case challenge to the Award is not permissible by taking the stand that the Arbitrator acted contrary to the provisions of S.70 of the Contract Act. In these premises the objection filed to the Award has to be rejected."
26. To the same effect are the observations of their Lordships of the Supreme Court as , P. M. Paul v. Union of India..... "In the instant case the dispute that was referred to the arbitrator was, as to who is responsible for the delay, what are the repercussions of the delay in completion of the building and how to apportion the consequences of the responsibility. The arbitrator found that there was escalation, and, therefore, he came to the conclusion that it was reasonable to allow 20% of the compensation under the claim. He accordingly allowed the same.
Held that, the arbitrator had not misconducted himself in awarding the amount of compensation and therefore award could not be set aside on that ground."
27. The learned counsel for the respondent has then argued that the arbitrator was not competent to award future interest at the rate of 14% per annum from the date of the award till the realisation of the amount. In this connection he has relied upon a decision of the Andhra Pradesh High Court , State of Andhra Pradesh v. Krishnaiah Naidu, wherein it was observed...... "Under S.8 or S. 17 the Court does not refer the dispute to arbitrator, but merely appoints an arbitrator in certain specified circumstances, and in such cases, reference to arbitration is without the intervention of the Court i.e. by the parties themselves, and not by the Court. Therefore, such arbitrator unlike an arbitrator appointed through intervention of Court cannot award interest for period subsequent to award."
It is fully manifest from above that the arbitrator is not competent to award future interest i.e. from the date of the award till the realisation of the award amount.
28. Learned counsel for the petitioner, on the other hand, has contended that an arbitrator is competent to grant pendente lite interest. He has in this connection led me through the observations of their Lordships of the Supreme Court as , Secretary, Irrigation Department, Govt. of Orissa v. O. C. Roy..... (at page 748). "A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name. It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator as it is for the period prior to the arbitrator entering upon the reference. This is the principle of S.34, CPC, and there is no reason or principle to hold otherwise in the case of arbitrator. An arbitrator is an alternative forum for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes or differences arising between the parties. If the arbitrator has no power to award interest pendente lite, the party claiming it would have to approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead to multiplicity of proceedings. An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to follow, as they think fit, so long as they are not opposed to law......... Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred. Having regard to the above consideration the following principle should be followed in the matter of awarding interest pendente lite by the arbitrator.
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite."
29. It is manifest from above that an arbitrator is competent to award interest pendente lite where there is no prohibition for the same by agreement or otherwise. However, I feel the above authority is not of any assistance to the petitioner inasmuch as the arbitrator herein has awarded future interest i.e. from the date of award till the realization of the amount at the rate of 14% per annum. I feel the arbitrator was not competent to do so as the arbitrator neither enjoys the powers of a Civil Court nor was the dispute referred to him by a Court. Hence, I conclude that the arbitrator was not competent to award the future interest.
30. Issue No. 1 is disposed of accordingly. RELIEF
31. In the circumstances stated above, the petitioner is entitled to succeed to the above extent only i.e. the reference with regard to the future interest in the award shall stand deleted. The petition is allowed to this extent only with costs. The impugned award dated 10-5-90 is made a rule of the Court with the above modification. The petitioner shall be entitled to pendente lite and future interest at the rate of 14% p.a. Let a decree be passed in terms of the award in favor of the petitioner against the respondent with the above modification with regard to the deletion of the future interest as awarded by the arbitrator under Claim No. 6 of the award.
32. Order accordingly.