M/S. Charkop Priya Co-op. Housing Society Ltd. Vs. M/S. Trade Well Constructions - Court Judgment

Excerpt:
[a] arbitration act, 1940 - point not raised before the arbitral tribunal - cannot be permitted to be raised before the high court for the first time.;a point not raised before the arbitral tribunal cannot be permitted to be raised for the first time before this court unless from the award itself the error of law becomes apparent.;[b] indian partnership act, 1932 - section 69 - proceedings before arbitrator - not a suit - bar does not apply.;section 69 speaks about the filing of a suit in any court. the present proceedings before the arbitrator was not a suit nor was it filed before any court. hence the bar of section 69 of the partnership act would not apply even if it is assumed that on the relevant dale the partnership was not registered.;the section must be read as a whole. if so read.....orderf.i. rebello, j.1. the petitioners by this petition impugn award dated 20th december, 1995. the reference to the arbitrators was made without the intimation of this court. the arbitrators constituting the arbitral tribunal have allowed certain claims in part as claimed by the respondents herein. the arbitral tribunal has also dismissedthe counter claim made by the petitioners against the respondents. by the present petition the petitioners have prayed for setting aside the award dated 25th december, 1995. the award by the tribunal is a non-speaking award.2. on behalf of the petitioners it is contended as under :--(a) there is an error of law apparent on the face of the record as the respondents were not a partnership firm registered under the indian partnership act as amended in the.....

Judgment:
ORDER

F.I. Rebello, J.

1. The petitioners by this petition impugn award dated 20th December, 1995. The reference to the Arbitrators was made without the intimation of this Court. The Arbitrators constituting the Arbitral Tribunal have allowed certain claims in part as claimed by the respondents herein. The Arbitral Tribunal has also dismissedthe counter claim made by the petitioners against the respondents. By the present petition the petitioners have prayed for setting aside the award dated 25th December, 1995. The Award by the Tribunal is a non-speaking award.

2. On behalf of the petitioners it is contended as under :--

(a) There is an error of law apparent on the face of the record as the respondents were not a partnership firm registered under the Indian Partnership Act as amended in the State of Maharashtra and were thus barred under section 69 of the Indian Partnership Act from meeting the claim. The claim petition of the respondents, therefore, it is contended had to be rejected.

(b) By virtue of the Clauses 2.6.1 and 2.6.2 read with Clause 4.4(b) as also letter dated 14-8-1989 the claim Nos. 2, 3 and 13 could not have been decided by the Arbitrator and as such the Award to that extent is without jurisdiction.

(c) On a reading of Clause 3.2 with Clause 4.4(b) of the general conditions of the contract the Arbitrators acted without jurisdiction in awarding claims 5.6(a), 6(b), 7, 8 and 9.

(d) In so far as the claim No. 1 is concerned, it is contended the amount of Rs. 50,000/- has not been adjusted which payment was made by Bill No. 16 which is shown from the documents filed by the petitioners-claimants.

(e) In so far as rejection of the counter-claim is concerned, it is contended that the Arbitrators misdirected themselves in holding that the claim is not tenable.

3. On behalf of the respondents it is contended that the Award being non-speaking award this Court cannot go into the reasons for the award. Reasonability of the reasons also cannot be gone into. The Award does not disclose any error apparent on the face of the record. It is contended that in so far as Clause 2.6.2 is concerned the Consultant at the highest could fix the rates, but any decision in respect of rejection of the claim was not final between the parties as ft was not covered by the said clause and as such it was open to the Arbitral Tribunal to decide the claim. It is also pointed out that Clauses 3.3 and 4.4 b. would not be attracted. It is, therefore, contended that this Court should therefore, not interfere with the award of the Tribunal.

4. A few facts may be noted for the purpose of deciding the issue/s in controversy in the present petition. The petitioners on 28th March, 1988 accepted the tender of the respondents for the work which consisted of construction of buildings. In terms of the contract time stipulated for completion was 56 weeks and as such the work was to be completed by 24th April, 1989. By application dated 31st July, 1989 the respondents sought for extension of time for completion of the work upto 31st January, 1990. The application was considered and time was granted to the respondents upto 18th January, 1990. On 7th February, 1990 further extension was sought by a letter addressed to the Consultants upto 16th June, 1990. The Consultants by their letter dated 16th February, 1990 rejected the request for extension of time and also for revised rates. On 18th February, 1990 the Consultants issued a notice to the respondents to show cause why the contract should not be terminated. The petitioners replied to the notice by their letter dated 21st February, 1990. On 9th March, 1990 the contract was terminated. The respondents by letter of 15th March, 1990 replied to the letter of termination.

On 1st June, 1990 the respondents submitted their claims to the Consultants for settlement. The Consultants did not settle the matter or for that matter was it settledby the petitioners and as such disputes and differences arose between the parties. On 21st June, 1990 the respondents appointed Shri Jamshed Burjor Aga as their Arbitrator. On 9th July, 1990 the petitioners appointed Shri M.D. Tambekar as their Arbitrator. The Arbitrators made and published their Award on 20th December, 1995. The award was filed in this Court on 10th April, 1996. The petitioners thereafter have filed this petition on 9th July, 1996.

5. With this background the first contention of the petitioners has to be decided. It was contended that the respondents was not a duly registered partnership firm and consequently no claim and/or dispute at their instance could have been decided by the Arbitral Tribunal. The question whether the respondents are registered partnership is a mixed question of facts and law. The said contention was not raised before the Arbitral Tribunal. It is sought to be explained that this was not done for the reason that if it was raised then the respondents would have got themselves registered. It is further pointed out that it is only after the petition was filed that the partnership is registered in the year 1996. Ingenuity is no answer to a claim when the petitioners seek to set aside the award in favour of the respondents. The matter ought to have been in issue before the Arbitral Tribunal. The respondents ought to have been given an opportunity of leading evidence on the said point to satisfy the Tribunal that they in fact were registered. The respondents could not have been taken by surprise. A point not raised before the Arbitral Tribunal cannot be permitted to be raised for the first time before this Court unless from the Award itself the error of law becomes apparent.

In the instant case it is pointed out by the petitioners that in the reply filed by the respondents in para. 1 they have themselves admitted that the firm was registered on 19th October, 1996. Apart from the fact that the petitioners cannot be permitted to raise the said contention for the first time nowhere from the averments in para. 1 can the construction sought to be given by the petitioners can be spelt out. On the contrary what is seen is that as per the entry dated 19th October, 1996 the date of joining of the partners in the firm are with effect from 1st April, 1986. It is further averred therein that the respondent firm had applied for registration and due to technical reasons there was delay in issuance of formal certificate.

6. Even otherwise section 69 speaks about the filing of a suit in any Court. The present proceedings before the Arbitrator was not a suit nor was it filed before any Court. Hence the bar of section 69 of the Partnership Act would not apply even if it is assumed that on the relevant date the partnership was not registered. My attention was invited to the judgment of the Apex Court in the case of Jagdish Chandra Gupta.v. Kajaria Traders India Ltd., : [1964]8SCR50 to contend that it is other proceedings and that the bar will apply. The Apex Court therein was considering the expression 'other proceedings' in sub-section (3) of section 69. The Apex Court observed that the sub-section provides for the application of the provisions of sub-sections (1) and (2) to claims of set off and also to other proceedings of any kind which can properly be said to be for enforcement of any right arising from contract except those expressly mentioned as exceptions in subsection (3) and sub-section (4). It may be rioted that the proceedings arose on an application moved to the Court under section 8(2) of the Indian Arbitration Act. In the case of Meghraj Sampatlall v. Raghunath and Son, : AIR1955Cal278 a Division Bench of the Calcutta High Court was considering what section 69(3) would be attracted in proceedings in arbitration without the intervention of the Court. The Division Bench noted that section 69(3) does not preclude a reference to arbitration without the intervention of a Court in as much as a reference toArbitration 'aliende' the Court cannot be said to be a proceeding within the meaning of the section. The Division Bench thereafter observed that the various sub-sections show that the bar contained in it is intended to apply only to proceedings in Court. In Prem Lata (Smt.) and another v. Ms. Ishar Dass Chaman Lal and others, : [1995]1SCR168 , on the death of one of the partners of an unregistered partnership firm, the firm stood dissolved. There was a Clause in the Partnership for Arbitration. As the remaining partners refused to refer the matter to arbitration. The widow of the deceased partner moved under section 20 of the Arbitration Act. The Apex Court held that these are other proceedings and would be maintainable in view of the exception carved out by sub-section (3) of section 69 of the Partnership Act. In the case of Smt. Rampa Devi and others v. Bishambhar Nath Puri and others, : AIR1976All19 , the Division Bench of the Allahabad High Court was again considering the issue of sections 58 and 69 in the event a firm was not registered. The Division Bench noted that an unregistered firm cannot under section 20 move the Court to enforce arbitration Clause. However, it can proceed to refer the matter for arbitration without Court's intervention. It was further observed that non-registration of firm does not invalidate arbitration Clause embodied in the Deed. Non-registration, it was pointed out, is a bar in so far as sub-sections (1) and (2) of section 69 are concerned.

In the case of Iqbal Singh and others v. Ram Narain and others, : AIR1977All352 the Division Bench of the Allahabad High Court was again considering section 69(3) of the Indian Partnership Act. The Division Bench noted the judgment of the Apex Court in the case of Jagdish Chandra Gupta (supra). The Division Bench observed that the expression 'to sue' contained in Clause (a) of sub-section (3) shall include proceedings other than suits. The bar would not be there unless a case in those proceedings was for the dissolution of a firm or for the accounts of a dissolved firm.

I am in respectful agreement with the views expressed by the Calcutta and Allahabad High Courts. The section must be read as a whole. If so read sub-section (3) cannot be read de hors sub-section (1) and (2) of section 69. The expression claim or set off can only be in the suit. In this context the other proceedings must be held to be proceedings arising before a Court. If so read it will refer to a Court as contemplated under sub-section (1) and (2) of section 69 and as such reference to arbitration without intimation of the Court is not debarred. In the light of that I have no hesitation in rejecting the first contention on behalf of the petitioners.

7. That takes us to the second contention in respect of Clauses 2.6.1, 2.6.2. and 4.4. Claims 2, 3 and 13. Clause 2.6.2. of General Conditions reads as follows:-

'2.6.2 Ascertainment of Prices for variations :

a) Rates for all variation/extra items shall as far as possible be derived from the rates quoted by the Contractor in the price Bill of quantities.

b) Where derivation of rates as in (a) above is not possible, the Contractor shall furnish the detailed rate analysis along with the necessary supporting vouchers and allied information and the Consulting Engineer shall then fix rates as he shall think reasonable and proper and these rates shall be final and binding on the contract.'

Clause 4.4 of General Conditions is the Clause pertaining to arbitration. We are concerned more specifically with Clause 4.4(b), which reads as under :

4.4(b) In so far as any dispute or differences referred to arbitration shall related to or involves any arbitration shall relate to or involves any matterof thing in respect of which the decision, opinion on determination (whosoever expressed) of the Employer or Engineer or his authorised representative has such decision, and/or determination, as the case may be, shall be binding upon the arbitrator.'

It is sought to be contended that in so far as arbitration is concerned it is only those disputes which may be decided by the Arbitrator which can be considered. In so far as Clause 4.4.(b) is concerned when a dispute or difference involves any matter or thing which requires the decision or opinion or determination by the employer or Engineer or his authorised representative, such decision or determination as the case may be shall be binding upon the parties. The Arbitrator cannot go into the same. Clause (a) of Clause 2.6.2 provides that Rates for all variation/extra items shall as far as possible be derived from the rates quoted by the Contractor in the Price Bill of Quantities. In other words the rates are as provided for in the contract. Those would be rates that will have to be paid to the contractor, sub-Clause (b) of the same Clause provides where it is not possible to fix the rate in terms of Clause (a) then the Consulting Engineer based on the material or the detailed rate analysis filed by the contractor can fix the rates. When rates are so fixed the Arbitrator cannot go into the said issue. It is further material to note that if the Consulting Engineer rejects the claim for rates as claimed by the contractor that would not be a subject covered by either sub-Clause (a) or sub-Clause (b) of Clause 2.6.2. If this is so considered then the said Clause read with sub-Clause (b) of clause 4.4. will not stand in the way of the Arbitral Tribunal enquiring into the claim. It is in that context that the claims may be considered.

In so far as claim No. 2 is concerned it pertains to extra items. The Consulting Engineer had awarded an amount of Rs. 90,908.90. The correspondence on record shows that the Consulting Engineer had not decided certain disputes. The Arbitral Tribunal awarded a claim of Rs. 1,98,748/-. The question is whether in the light of the Clauses this Court can interfere with the said Award. It is clear that the same does not amount to an error of law apparent on the face of the record nor is there any challenge to the claim on the ground of misconduct nor can it be said that it is without jurisdiction. As pointed out earlier what could be concluded by the Consultant were the rates in terms of Clauses (a) and (b) of Clauses 2.6.2.

In so far item No. 3 is concerned they are rates for cement, steel, etc. The Tribunal has awarded an amount of Rs. 45,530.72. The Consulting Engineer had earlier allowed Rs. 1,88,131.60 as against the claim of Rs. 2,33,662.33. Three amounts were included herein viz. Steel, Cement and Water. In so far as cement and steel are concerned, there was a provision for payment of the increased rates. In so far as the water is concerned it was the respondents who were to pay the said amount. It is contended that it was for the petitioners to supply the water connection. In the instant case the water connection was not given and consequently water had to be brought from elsewhere. The Clauses of the contract were clear. Only increased rates in respect of certain items were to be paid by the petitioners. The claim for extra amount on account of water charges was clearly in admissible being beyond the terms of the contract and hence the Arbitral Tribunal acted in excess of jurisdiction in awarding the said amount. Even otherwise the decision of the Consulting Engineer on the question could not have been gone into.

In so far as Item No. 13 is concerned the same are rates claimed over and above tender rates for excess quantity. The Arbitral Tribunal has awarded an amount of Rs. 50,000/-. The said amount is claimed on account of increase inquantity of work. It was contended that the respondents were entitled to be paid at the marked rates prevalent at the time of carrying out the excess work. The Consulting Engineer in terms of the claim itself had decided the amount as claimed by the petitioners. The contract itself provided for items for which the contractor was entitled for higher rates. Beyond that the Contractor was not entitled to claim higher rate merely on the count that the work given was more than the amount earlier specified. It is not the case that the extra work was of such a large quantity that the Clause regarding rates would not be applicable. The reading of Clause 2.6.2 itself would give an indication that in case of variation if there was a price fixed in the contract that would be the price to be paid. In the light of that the Tribunal clearly exceeded jurisdiction in so far as the claim No. 13 is concerned. The Award to that extent is liable to be set aside.

8. That brings us to the challenge under Clause 3.2 and 4.4.(b) of the General conditions. I need not refer to 4.4.(b) which has been earlier reproduced. In so far as Clause 3.2 is concerned, the same reads as under :-

'3.2. Variation of Price :

Save as specifically provided elsewhere in the Conditions of Contract the Contract Price, shall not be adjusted in respect of any increase or decrease of cost to the Contractor in carrying out the works by reason of alteration in the rates of wages and allowances payable to the labour and staff change in the conditions of employment or labour and staff change in the cost of materials (whether for the permanent or temporary works) or in consumable stores, fuel and power variations in the freight and insurance rates the operation of any law or statute etc. or variation in the cost of any other matter or thing of whatsoever nature subsequent to the date of Tender.'

A plain reading of that Clause would show that the contract price shall not be adjusted in respect of any increase or decrease of costs to the contractor in carrying out the works by reason of alteration in the rates of wages and allowances etc. It further provides that such increase shall not be allowed subsequent to the date of tender. There is no Clause provided for fixing rates beyond the original period of the contract. The learned Counsel for the petitioners seeks to contend that it must be read that prices would remain the same as it a fixed price contract. I am unable to accept the said contention advanced on behalf of the petitioners. It is clear that Clause 3.2 pertains to rates during the terms of the contract. There is no provision made for the extended period of the contract. In the absence of any such Clause it was open to the Arbitral Tribunal to consider the rates as claimed by the respondent. Clause 4.4 in such a situation even if the Consulting Engineer had granted earlier a part of the claim would not stand in the way of the Tribunal in considering the claim as there would be no fault to the same under any terms of the contract. In the light of that matter there is no substance in so far as the challenge to claims 5, 6(b), 7, 8 and 9 are concerned.

9. That lead us to the challenge to Claim No. 1. It is pointed out that the amount was adjusted upto the 15th running bill and the amount of Rs. 50,000/- paid subsequently has not been adjusted. The claim of the respondents themselves show that the amount of Rs. 50,000/- had been paid and that naturally will have to be adjusted. It is pointed out that under Item No. 2 the amount of Rs. 90,908.90 has been adjusted and this includes the sum of Rs. 50,000/-. There is, therefore, no merits in so far as the challenge to Item No. 1 is concerned and consequently the said challenge is rejected.

10. In so far as interest is concerned, it is pointed out that interest for delayed payment is at the rate of 15% p.a. In the instant case the interest awarded is nor for delayed payment. Once the Arbitral Tribunal has awarded interest it is not for this Court to look into the quantum of interest unless it was exorbitant. In the instant case it is not so. Hence, the said contention must be rejected.

11. That brings us to the issue of rejection counter-claim raised on behalf of the petitioners. At the outset It must be pointed out that the prayer made by the petitioner is for setting aside the Award. On that count alone the challenge to the rejection of the counter-claim need not be considered. Apart from that, the challenge is on the ground of misconduct. The misconduct as alleged by the petitioner is that the Tribunal rejected the counter-claim on the ground that the claim is not tenable. It was for the Tribunal to go into the said issue. It is not a case of excess of jurisdiction, but the question is within jurisdiction as the Arbitral Tribunal could decide the same. Once the question is within jurisdiction the Court would not interfere with the Award of the Arbitrator. The second misconduct alleged is that the reasons had to be given. The contract did not provide for giving reasons. Therefore, the Tribunal was not bound to give reasons. The challenge on the ground of misconduct to that extent also has to be rejected.

12. For the aforesaid reasons the petition is partly allowed. The Award of the Tribunal to the extent it was allowed the claim Nos. 3 in an amount of Rs. 45,530.72 and 13 in an amount of Rs. 50,000.00 is set aside. The rest of the award is confirmed. Decree in terms of the award as modified less claims 3 and 13 with further interest from the date of the decree till final payment at the rate of 9% per annum. In the circumstances of the case there shall be no order as to costs.

13. The Counsel for the petitioners seeks satay of the decree. I find no substance in the application. Hence, application for stay rejected.

14. Petition partly allowed.