| SooperKanoon Citation | sooperkanoon.com/496676 |
| Subject | Contract |
| Court | Chhattisgarh High Court |
| Decided On | Oct-17-2008 |
| Judge | Dhirendra Mishra and; T.P. Sharma, JJ. |
| Reported in | 2009(2)MPHT6(CG) |
| Appellant | South Eastern Coalfields Ltd. |
| Respondent | Om Prakash Sathyapal |
| Disposition | Appeal allowed |
| Cases Referred | Sathyanarayana Brothers (P) Ltd. v. T.N. Water Supply |
Dhirendra Mishra, J.
1. The instant miscellaneous appeal under Section 39 of the Arbitration Act, 1940 (for short 'the Act, 1940') is directed against the order dated 25-2-1994 passed in Misc. Civil Suit No. 1-A/91 whereby learned District Judge has rejected the application under Section 30 (a) & (c) of the Act, 1940 of the appellant and allowing the application under Section 14(2) of the Act has passed the judgment and decree in terms of the award dated 28th April, 1989 by the sole arbitrator.
2. Undisputed facts are that the respondent was awarded contract for 'construction of Bunker and Additional Crusher for Manikpur Colliery'. The value of the contract was Rs. 6,48,135/- and the period for completion of the contract was 9 months. However, the aforesaid period was extended from time to time with the consent of both the parties up to 30th April, 1989. The respondent raised a dispute in the year 1982 in respect of certain extra work executed by the contractor, which were not mentioned in the original agreement. The dispute between the parties was regarding the rate at which work of dewatering executed by the contractor is to be paid. The Chairman-cum-Managing Director of the appellant vide his memo dated 15th/19th December, 1985 appointed Shri K. Vijayan, Chief Engineer (E&M;), WCL, Bilaspur, as sole arbitrator for finalization of the rate for extra item of dewatering work executed in the aforesaid work. Learned Sole Arbitrator vide his award dated 20th April, 1989, finalized rate for extra item of dewatering work executed by respondent @ Rs. 3.50/- per kilo litre; the work of dewatering was quantified at 2,23,757.11 kilo litre being undisputed quantities recorded in the Measurement Book. It was also directed that amount payable to the respondent shall carry interest @ 12% per annum from the date of award till date of payment or date of decree whichever is earlier.
3. The respondent filed an application under Section 14(2) of the Act, 1940 and prayed for filing of the award. The appellant filed an objection under Section 30 (a) and (c) of the Act, 1940 for setting aside/remission of the award stating therein that rate for dewatering has been arbitrarily fixed at Rs. 3.50 per kilo litre without any basis. The contractor himself accepted running bills for the extra work @ 80 paise per kilo litre without any objection and, therefore, the Arbitrator was not justified in awarding extra rate. During the arbitration proceedings, the plaintiff had asked for production of GMSOR 1975 which contains rate of Rs. 1.60 per kilo litre for such work; the plaintiff had himself claimed dewatering @ Rs. 3/- per kilo litre before C.M.D. in his claim, which was challenged by the objector and in the circumstances, the dispute was referred to the Arbitrator for adjudication of the rate for extra work. However, the Arbitrator had exceeded terms of reference and did not consider material documents available on record and he is guilty of technical/judicial misconduct in conducting proceedings; the Arbitrator was referred the dispute for finalization of the rate for extra item of dewatering work executed in the construction of Bunker and crusher at Manikpur Colliery by the respondent. However, he exceeded his jurisdiction by allowing interest @ 12% per annum from the date of award though he was not competent to award interest.
4. The respondent in his reply submitted that the appellant participated in the arbitration proceedings without any objection regarding limitation and they cannot take objection before the Court in this regard. The rate of dewatering was fixed on the basis of evidence adduced before the Arbitrator. The objection regarding acceptance of running bills by the contractor without any objection was also considered by the Arbitrator and the contractor never accepted payment @ 80 paisa kilo litre without protest. With respect to the objection that contractor had himself claimed Rs. 3/- per kilo litre, while raising dispute before C.M.D., it was not specifically denied in the reply, however, it was averred that this objection was also considered by the Arbitrator while making award. With respect to the objection of award of interest, it was stated in the reply by the respondent that the Arbitrator was competent to award interest.
5. Learned District Judge, vide impugned award dated 25-2- 94, rejected the objection preferred by the appellant and passed the decree for a sum of Rs. 7,83,149.88/- with interest @ 12% per annum from the date of the award i.e. 28-4-89 with a finding that the award has been passed after affording proper opportunity of hearing to the parties on the basis of documents produced before him. Prima facie, there is nothing on record to show that the award has been passed without following principles of natural justice. The Arbitrator is not guilty of any judicial misconduct and the Arbitrator was within his right to award interest, even though this was not in term of reference. The question of limitation was never raised by the appellant before the Arbitrator.
6. Shri P.S. Koshy, learned Counsel for the appellant, contended that the respondent contractor while raising dispute before the competent authority i.e. CMD, SECL, had claimed payment @ Rs. 3/- per kilo litre for execution of dewatering work. On the other hand, appellant's stand was that as per Clause 3(b) of the General Terms of Conditions of Contract, payment towards extra work done by the contractor not stipulated in the original contract is to be calculated as per the schedule of rate of the company and in case, extra item is not mentioned in the schedule of rate then calculation is to be made on the basis of analysis of the rate. Accordingly, rate of dewatering work was analyzed and payment was made @ Rs. 0.80 paisa per kilo litre. On refusal of the contractor to accept the above rate, a three member committee was entrusted to determine the rate and as per the report of the committee, rate was computed at Rs. 0.25 per kilo litre, which was also not accepted by the contractor. In these circumstances, the dispute was referred to the Arbitrator by the competent authority for finalization of the rate for extra item of dewatering work executed by the contractor. The Arbitrator by the impugned award finalized that contractor is entitled for payment @ Rs. 3.50/- per kilo litre and further quantifying the pumped quantity as 2,23,757.11 kilo litre also held that the amount payable also carries interest @ 12% per annum from the date of award till date of payment or date of decree whichever is earlier. The award passed by the Arbitrator is non- speaking award and no reasons have been assigned for the conclusion.
7. On the other hand, Shri S.I. Ali, Counsel for the respondent, submitted that the award could be impugned only on grounds mentioned in Section 30 of the Act, 1940. The Arbitrator, on the basis of material available on record, has passed the impugned award. As per Section 29 of the Act, 1940, the Arbitrator is competent to award interest and interest @ 12% per annum is just and proper, considering the delay in finalization of the dispute. The award cannot be set aside only on the ground that no reason has been assigned for passing the award unless, prima facie, it is not established that principle of natural justice has not been followed before passing the award. The Arbitrator is not guilty of misconduct. Since award was passed after affording opportunity of hearing to the parties, there is no misconduct by the Arbitrator and the same has been subsequently confirmed by the Court.
8. We have heard learned Counsel for the parties. We have perused the award and the judgment whereby learned District Judge has passed a decree in favour of the respondent after accepting the award as also proceedings before the Arbitrator.
9. In the instant matter, the appellant has questioned the award of the sole arbitrator as also judgment & decree of the District Judge on the following grounds:
(i) the arbitrator has arbitrarily finalized the rate of dewatering work at Rs. 3.50/- per kilo litre without any basis. While fixing the rate, the arbitrator has ignored that the claimant himself has raised dispute before CMD stating therein that rate of dewatering should be Rs. 3/- per kilo litre, which was objected to by the appellant and in the circumstances, the matter was referred to the arbitrator for finalization of rate of extra work. However, arbitrator is guilty of misconduct by fixing the rate @ Rs. 3.50/- which is more than the amount claimed by the claimant himself and ignoring the evidence available on record where the rate was fixed at Rs. 0.80 paisa per kilo litre by the committee constituted for analyzing the rate;
(ii) the arbitrator has exceeded his jurisdiction by quantifying dewatering work and allowing interest on the amount payable to the contractor. From perusal of the order of reference, it would be evident that arbitrator was called upon to give his decision towards finalization of rate of dewatering work executed by the contractor;
(iii) Learned District Judge, without properly considering objection preferred by the appellant under Section 30 (a) and (c) of the Act, 1940, has mechanically rejected the objection and made the rule of Court on the basis of award passed by the arbitrator and further passed impugned decree without taking into account that the contractor had already accepted @ Rs. 0.80 paisa per kilo litre towards extra work of dewatering through running bills without any objection.
10. It is settled law that award passed by the Arbitrator can be set aside only on the ground enumerated in Section 30 of the Act, 1940 which reads as under:
30. An award shall not be set aside except on one or more of the following grounds, namely:
(a) that an arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award had been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;
(c) that an award has been improperly procured or is otherwise invalid.
11. In the matter of Union of India and Ors. v. Santiram Ghosh and Ors. , the Hon'ble Supreme Court held that where an arbitrator acts beyond the terms of reference, the award is illegal and not binding upon the parties.
12. In the matter of Associated Engineering Co. v. Government of Andhra Pradesh and Anr. it has been further held that:
The arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialized branch of the law of agency. If he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it.
13. In the matter of Seth Mohanlal Hiralal v. State of M.P. while interpreting misconduct referred to under Section 30(a) of the Arbitration Act, it has been held that misconduct under Section 30(a) has no 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 reach a just and fair decision.
14. In the matter of Sathyanarayana Brothers (P) Ltd. v. T.N. Water Supply & Drainage Board, the Hon'ble Supreme Court referring various earlier judgments has held that an award ignoring the very material and relevant documents throwing light on the controversy to have a just and fair decision would vitiate the award as it amounts to misconduct on the part of the arbitrator.
15. In the light of the above principles of law, if we examine the facts of the present case, we observe that competent authority CMD had referred the dispute to the arbitrator vide order dated 15th/19th December, 1985 for finalization of the rate for extra item of dewatering work executed during the construction of Bunker and crusher complex at Manikpur colliery by the respondent contractor. From record of the arbitrator, it is also observed that arbitrator sought clarification from the competent authority i.e. CMD, SECL, Bilaspur vide his letter dated 3rd/4th April, 1989 mentioning therein that term of reference is restricted to finalization of rate for extra item of dewatering work whereas, the claimant had demanded payment for dewatering work, consequential loss, as well as payment of interest thereon and sought advise whether award shall be restricted to finalization of rate only or whether interest & other matters should be considered. From perusal of the above document, it is observed that the same bears noting that 'only the rate is to be determined as per the term of reference'. However, by the impugned award after finalizing the rate, the arbitrator has also decided quantity of the extra work executed by the contractor and further awarded interest @ 12% on the amount payable to the contractor, which is beyond terms of reference.
16. From the record of the arbitrator, it also transpires that some payment was made to the contractor towards extra work of the dewatering @ Rs. 0.80 per kilo litre. However, the sole arbitrator in the impugned award has decided the rate of payment towards extra work and the quantity of the work and it has been further held that the contractors are entitled for interest @ 12% per annum. There is no finding whether any amount was already paid to the contractor. However, Learned District Judge, without there being any material on record, has passed the decree for a sum of Rs. 7,83,149.88/- with interest @ 12% per annum without ascertaining the fact whether the contractor was already paid any amount towards the work executed by him in running bills as claimed by the appellant in his objection under Section 30 of the Act, 1940.
17. The ground taken by the appellant in his objection under Section 30 of the Act, 1940 that contractor himself claimed payment @ Rs. 3/- per kilo litre while raising dispute before the competent authority has not been specifically controverted by the respondent in his reply. The award passed by the arbitrator is non-speaking award. The arbitrator has not assigned any reason for finalizing the rate @ Rs. 3.50/- per kilo litre. In the circumstances, learned District Judge ought to have satisfied himself that the arbitrator did not pass any award by not considering the claim of the contractor before competent authority wherein he had claimed Rs. 3/-per kilo litre towards the rate for dewatering. Thus, learned District Judge has rejected the objection of the appellant under Section 30 of the Act, 1940 without examining pleadings of the respective parties before the arbitrator and documentary evidence adduced by them during arbitration proceedings.
18. Therefore, in the considered opinion of this Court, the impugned judgment of learned District Judge making award of the sole arbitrator the rule of the Court and passed decree for a sum of Rs. 7,83,149.88/- with interest @ 12% per annum from the date of the award i.e. 28th April, 1989 cannot be sustained.
19. In the result, the appeal is allowed and the impugned judgment passed by learned District Judge is set aside. The matter is remitted to the District Judge with a direction to consider the objection preferred by the appellant under Section 30 (a) & (c) of the Act, 1940 afresh after affording proper opportunity of hearing to the parties.
20. Considering that the matter is quite old, it is further directed that the learned District Judge shall expedite the hearing and conclude the same preferably within a period of 6 months from the date of receipt of a copy of this order.