| SooperKanoon Citation | sooperkanoon.com/898537 |
| Subject | Arbitration |
| Court | Jammu and Kashmir High Court |
| Decided On | Aug-27-1992 |
| Case Number | A.A. 207 of 1991 |
| Judge | K.K. Gupta, J. |
| Acts | Jammu and Kashmir Arbitration Act, 2002 B.K. - Sections 29, 30 and 33 |
| Appellant | Northern Sanitation |
| Respondent | Hotel Corporation of India |
| Appellant Advocate | P. Kohli and R.K. Gupta |
| Respondent Advocate | T.S. Thakur, Adv. |
| Cases Referred | Indian Oil Corporation v. Indian Carbon Ltd. |
K.K. Gupta, J.
1. This case has a chequered background and because of procedural and legal wrangles the party entitled to relief has been deprived of the benefit for a long period. The petition under Arbitration Act was filed by Northern Sanitation on May, 30, 1985 and despite lapse of more than seven years such proceedings which are considered to be of summary nature remained undecided.
2. M/s. Northern Sanitation, petitioner-claimant, was allotted work for sanitary installations at CENTAUR LAKE VIEW HOTEL, Srinagar to be completed by April 15, 1982 which work could not be executed by that time as other agencies failed to perform their functions and in this manner petitioner projected certain disputes regarding the losses suffered by it by way of idling, travelling, over-head establishment, office expenses etc. This Court after obtaining objections from Hotel Corporation of India Ltd. respondent-objector, and hearing their counsel on April 11, 1986 appointed Shri R.C. Desai, Chartered Engineer, E.E.M.E., FIV-62 Sunder Nagar, New Delhi and Shri T.K. Saran retired Adviser (Construction) Bureau of Public Enterprises, Ministry of Finance, Government of India, as arbhrators, out of the names of arbitrators furnished by both the parties, who were directed to enter upon the reference and submit their award. They thereafter adjudicated upon the reference and made the award on November 12, 1986 allowing a sum of Rs. 34,15,383 to the petitioner-claimant in full and final settlement of their claims along with interest @ 15% per annum with effect from January 25, 1984 till date of payment or decree, whichever was earlier.
3. Respondent-Corporation objected to the award of the abovesaid arbitrators on various grounds and this Court framed as many as ten issues and ultimately on November 9, 1989 passed order setting aside the award and in turn appointed Shri Swami Dial, Chief Engineer C.P.W.D. retired as new arbitrator, who was required to submit award. Said arbitrator has made award on August 26, 1991 whereby he has held the petitioner-claimant to be entitled to an amount of Rs. 36,28,570.49p. payable by respondent-Corporation.
4. Abovesaid award submitted by Shri Swami Dial, arbitrator, has been challenged by the respondent by filing objections by way of a petition under Sections 30 and 33 Arbitration Act, C.M.P. No. 417 of 1991. It is averred in the said petition that having commenced work at the site the claimant never arranged for adequate labour to complete the work within the specified time, and according to it, in fact the petitioner was responsible for the delay in completing the said work in accordance with the terms of the agreement. They have challenged the award passed by Shri Dial on the following grounds :---
A)-- That the award passed by the arbitrator has been rendered invalid by reason of its being a non-speaking award despite directions from the Court to the arbitrator to give reasons for the same;
B)-- That the detailed evidence was led by the parties and as per statements of witnesses of the non-objector that the lapses were on their part from which it was apparent that the delay in execution of work was on account of claimant/non-objector but ignoring said clear evidence the arbitrator act contrary to the basic judicious requirements;
C)-- That the arbitrator misconducted himself by failing to draw adverse inference against the claimant on account of the fact that the claimant did not produce balance-sheet, books of accounts during the course of proceedings, despite persistent requests by the objector;
C-I)-- That the award made by the sole arbitrator is vitiated and liable to be set aside on account of the fact that the same is contrary to the terms of the work order and contract agreement between the parties;
D)-- That the arbitrator conducted misconduct in making the award which is in the nature inasmuch as the same has been made notwithstanding the fact that the claimant had produced no evidence or other material before the arbitrator to substantiate the claims made by it;
E)-- That the arbitrator conducted misconduct in entertaining fresh claims from the opposite party which had not been raised in the petition under Section 20, Arbitration Act;
F)-- That the arbitrator committed legal misconduct in having given a lump sum award keeping in view the fact that most of the claims submitted by the opposite party were admissible in terms of the contract, when it was obligatory on the party of the arbitrator to have given the award in respect of each claim made by the claimant;
G)-- That the arbitrator has committed legal misconduct in awarding interest to the opposite party for a period beyond the date of making of the award.
5. A prayer has been made in the said petition for setting aside the award or in the alternative to remit the same to the arbitratorwith a direction to give detailed reasons forthe same.
6. Petitioner-claimant has filed reply by stating that the respondent-objector in the garb of the petition wants to agitate those very contentions/ issues which were agitated before the arbitrator and considered by him and further there is no error/misconduct apparent on face of the award making it liable to be set aside. It has further been pointed out that the scope of inquiry under Section 30, Arbitration Act is very limited as this Court is not to sit as appellate Court over the judgment of the arbitrator. It has denied all the allegations of the respondent-objector and refuted above said grounds of challenge. It has been prayed by the petitioner-claimant that the award be made rule of the Court by further allowing interest @ 21% per annum from the date of decree till payment.
7. This Court on December 20, 1991 framed the following issues for determination:--
1-- Whether the arbitrator has misconducted himself and the proceedings? OP Objector Corporation.
2-- Whether the award is invalid by reasonof its being nonspeaking one? OP ObjectorCorporation;
3-- Whether the award is otherwise .invalid on any other ground? OP Objector Corporation;
4-- To what relief parties are entitled? O.P. Parties.
8. Objector-corporation was afforded eight weeks time to file affidavits by way of evidence in support of abovesaid issues which period was later on extended vide order of this Court dated March 4, 1992 for a further period of three weeks. Respondent failed to lead any evidence. Earlier the respondent objector had sought time to produce certain documents which too it did not produce despite opportunities granted.
9. The case was listed for hearing when on July 21, 1992 respondent-corporation filed application to impound the award being not properly stamped. After hearing learned counsel for the parties in regard to the said application this Court on the same day ordered for impounding the award as the claimant offered to pay the stamp duty in accordance with the provision of law and as determined by the Court. Accordingly the claimant was directed to furnish stamp duty of Rs. 103/- and penalty of Rs. 5/- and the same was paid. The document was allowed to be admitted in evidence.
10. I have heard the learned counsel for the parties and perused the record. The issues framed in the case are discussed separately below:
ISSUE Nos. 1 & 3:
11. Both the issues are inter-connected and as such the same are being disposed of jointly.
12. First of all Mr. Thakur, learned counsel appearing for the respondent-objector took the plea that the award was passed by the arbitrator after expiry of time allowed by the Court in accordance with the provisions of the Arbitration Act and, as such, award is not enforceable in law. Mr. Kohli learned counsel for the petitioner claiment has pointed out that last extension for making the award was granted by the Court on 8-5-1991 whereby the arbitrator was required to make the award up to 31-8-1991. I have perused the order of the Court in this regard and it comes out that extension of time for making the award was up to 31-8-1991 and intervening delay, if any, has also been condoned under the said order of the Court. In view of this fact Mr. Thakur did not press the said point.
13. The next point raised by Mr. Thakur is that the award made by the arbitrator is contrary to the terms and conditions contained in the contract agreement. According to him in accordance with Clause 18(C), (D), (E) and (F) if any cause by force majeure or by works or delays of other contractors or nondelivery or delay in the delivery to the contractor of any material or equipment or drawing or any cause, whatsoever, arising out of the acts of defaults of the owner or architect the remedy lies for the contractor was only extension of time and no claim was permissible. Mr. Kohli has replied this argument by contending that the question of interpretation of the terms of the agreement was within the domain of the arbitrator and the Court cannot interpret the term to arrive at a different conclusion. According to him if two views are possible the Court is required to accept the view taken by the arbitrator. He has referred to the order of this Court dated 11-4-1986 passed in original arbitration petition under Section 20 of the Arbitration Act filed by the petitioner-claimant under which respondent-objector had agreed for referring all the disputes to the arbitrator, including the claims which are subject matter of the award and at that time no objection was raised by the respondent about the claims being barred by any terms of agreement or otherwise not arbitrable. He has also argued that when the first award filed by the two arbitrators was set aside on technical grounds and the disputes were again referred to Shri Swami Dial vide order of this Court dated 9-11-1989 the respondent-objector did not object to the making of reference about such claims. I have considered these contentions raised by either side.
14. Clause 18 of the agreement entered into between the parties reads as under:--
'18-TIME OF COMPLETION :
a) All time limits stated in the contract documents shall be the essence of the contract. The contractor obligates himself to complete the work in all respect within the time schedule stipulated in the special conditions subject to any adjustment that may be granted by the owner on the recommendations of the Architect in writing under the conditions of the contract. He shall submit to the Architect and owner detailed verified progress reported on the first and fifteenth of each and every month.
b) A bar chart showing the programme of proposed construction within the scheduled time of completion is attached as Appendix IV to this document. The contractor shall carefully study the bar chart and obligate himself to carry out the work in conformity with the various stages of completion as shown in the bar chart.
c) Should the contractor be delayed or impeded in the execution of works by reason of:
i) Force majeure (See clause 48)
ii) By the works or delays of other contractors or trademen engaged or nominated by the owner and not referred to in the contract documents.
iii) The non-delivery or delay in the delivery to the contractor, of any materials or equipment or drawings which under the contract, the owner or the Architect is to supply; or
iv) Any cause whatever, arising out of the acts or defaults of the owner of the Architect;
v) Any accident happening to the works during their progress nor arising from the neglect, default of the contractor or his workmen or sub-contractors; or
vi) Extras or variations being ordered by the project Engineer on recommendation of the Architect; or
vii) Any other cause which in the opinion of the Architect has caused delay, the contractor may from time to time within 14 working days of the happening of any aforesaid apply in writing to the Architect for an extension of time on account thereof, setting forth the cause of such application.
d) The Architect shall, if he thinks the cause sufficient but not otherwise, write to the owner for extension of time. The owner may extend the time for completion of the works and the time for completion of the works so extended, shall for all purposes of the contract be deemed the time specified for completion of the works.
e) Unless the contractor shall apply for an extension of time within the period and the manner aforesaid, and unless and until the owner on recommendation of the Architect shall extend the time aforesaid, the contractor shall not by reason of any delay arising from cause aforesaid, be relieved in any way or to any extent from his obligations to proceed with, execute and complete the works within the time specified in the contract for the completion of the work.
f) In granting extension of time under this clause as aforesaid it is an express condition that there shall be no claims whatsoever by the contractor.'
15. No doubt the abovesaid clause provides for extension of time in case of delay attributable to the owner or their Architect but there is no provision contained in it regarding extending of delay for which claim of the contractor on account of such delay is not to be entertained. This clause cannot be interpreted or construed in such a manner as to allow the delay for indefinite period for all times to come. The delay should always be reasonable. Respondent in objections under Sections 30 and 33 of Arbitration Act in para 6 has stated so:--
'It is a common knowledge and a recognised practice that when a contractor tenders his rate he does so keeping in mind the fact of reasonable delay in the execution of work beyond the stipulated period. Assuming, though not admitting, that there was any delay on the part of objector in handing over of the site or owner supply materials, rates tendered by the claimant had in any case already provided for such reasonable delay, which was a condition in the work order and reflected in the work order itself .......'
Thus it appears that the respondent has construed the delay under Clause 18 above to mean reasonable delay only. In this case the work was required to be executed by the contractor before 15th April, 1982 and in fact the same was prolonged for further period of four years. By no stretch of imagination it can be considered to be a reasonable delay. Who is responsible for this delay and what is reasonable delay are again questions required to be considered and determined by the arbitrator, and the Court cannot substitute its own view to that of the arbitrator. Two arbitrators who earlier made the award as well as the present arbitrator have considered such delay to be not reasonable.
16. In case Sudarshan Trading Company v. Government of Kerala, AIR 1989 SC 890 their Lordships of the apex Court have held as under (at page 902) :--
'In the instant case the Court had examined different claims not to find out whether these claims were within the disputes referable to the arbitrator, but to find out whether in arriving at the decision the arbitrator had acted correctly or incorrectly. This, in our opinion, Court had no jurisdiction to do, namely substitution of its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a part amount was liable to be paid or damages liable to be sustained was a decision within the competence of the arbitrator in this case. By purporting to constitute the contract the Court could not take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. It had to be determined that there is a distinction between the disputes as to the jurisdiction to the arbitrator and the disputes as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the arbitrator to grant a particular remedy.'
17. A Full Bench of Kerala High Court in case, Government of Kerala v. V.P. Jolly, AIR 1992 Ker 187 has taken the following view (at page 191):
'In our view and obviously, the attack itself, as per appellant's contention, being based on the arbitrator's alleged violation of the terms of the contract or his alleged action in excess of his authority, such an attack cannot obviously be proved unless one is permitted to resort to the terms of the contract relating to the award of extra compensation or extra rate. But in case of non-speaking award one has to be confined to the award itself or to any document incorporated therein. If the document is not incorporated in the award it is not permissible for the Court to look out side the award and refer to the terms of the contract. Therefore, the attack cannot succeed on the ground of error of law on the face of the award under Section 16(1)(c).'
In AIR 1990 SC 1340 following conclusions have been arrived at (at page 1345):--
'We have considered respective contentions of the parties and we are of the opinion that the Division Bench erred in setting aside the award in so far as it related to the sum of Rs. 25,96,000. Though the annexure state about the award of the arbitrator is against various items of claims the mere enumeration of the heads of claims cannot be equated to an incorporation of the statement of claim by the contractors into the award. At any rate the award does not relate to the claims of various clauses of the contract and the mere fact that the statement of claim refers to various items in the schedule to the contract does not result in the contract itself being incorporated as part of the award. No error can be found in the award unless one reads into it first the statement of claim within the relevant clauses of the contract. But this cannot be done unless these documents are treated as incorporated in the award. This cannot be done.......'
18. In case, Continental Construction Company v. State of Madhya Pradesh, AIR 1988 SC 1166 the facts were that the contract could not be completed within the stipulated time because of alleged gross delay on part of the State Government in allotment of work and discharge of obligations under the contract. The contractor incurred unforeseen expenses and approached the authorities for payment. Upon refusal the contractor moved the District Judge for reference of the disputes to the arbitrator. The District Judge allowed the application and directed the State Government to file agreement in the Court and made a reference for specific question to the arbitrator. The arbitrator partly allowed the claim of the contractor. The award was filed in the Court of District Judge where the State Government filed objections under Sections 30 and 33 of Arbitration Act as the contractor was not legally entitled to claim for extra costs in view of the specific clause of the contract. The award was made rule of the Court. On appeal the High Court remanded the case for fresh decision and the District Judge accepted the objections of the State Government and set aside the award. Their Lordships of the Supreme Court held on the facts that the contractor having completed the work, it was not open to him to claim extra costs towards the rise in price of material and labour and the arbitrator could be said to have misconducted himself in not deciding this specific objection raised by the State regarding legality of extra claim of the contractor.
19. An award may be remanded or set aside on the ground that the arbitrator in making it had exceeded jurisdiction and evidence of matters not appearing on face of it will not be admitted in order to establish whether the jurisdiction had been exceeded or not. Mr. Thakur has laid stress on the judgment, AIR 1988 SC 1166 (supra) and, according to him, when there was a specific clause for not allowing any claim of the contractor in regard to delay caused the arbitrator was not competent to allow the same and in this manner he had exceeded his jurisdiction and misconducted himself. The facts as narrated above are certainly distinguishable to the facts of the present case. In that case a specific objection was taken by the State while opposing the application of the contractor filed under Section 20, Arbitration Act that the contractor was not entitled to extra costs for material and labour in terms of the contract and the Court had directed that the matter had to be agitated before the arbitrator. In this case no such objection was taken by the respondent-objector at the time of making reference to the arbitrator. In fact the respondent had consented for referring all the disputes raised by the contractor to the arbitrator. Secondly in that case State had taken a specific objection before the arbitrator which was not decided by him, but such is not the case here. Thus the principle laid down in the said judgment is not applicable to the facts of the present case.
20. The law laid down by the apex Court is very clear that the Court while dealing with petition under Sections 30 and 33, Arbitration Act relating to the validity of the award cannot look into any document or material, including the contract agreement, if not incorporated in the award for determining legality or illegality of the award. The Court has no jurisdiction to substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator has acted contrary to the terms of the agreement. In AIR 1990 SC 1340 (supra) their Lordship are emphatic in laying down proposition of law that no error can be found in the award unless one reads into it first the statement of claim and then relevant clauses of the contract but that cannot be done unless these documents are treated as incorporated in the award. Admittedly in the present case neither contract agreement nor any other document has been incorporated or made part of the award. So this Court has no jurisdiction to look into these documents and determine the validity or legality of the award.
21. The other point raised by Mr. Thakur is that there is no evidence on record to substantiate the pleas raised by the contractor in his claim petition, particularly with regard to claim No. 7. According to him the award as based on no evidence which cannot be sustained in the eyes of law. Mr. Kohli has referred to para 10 of the objections of the respondent-objector filed under Sections 30 and 33, according to which the objector has itself admitted the fact regarding leading of oral as well as documentary evidence by both the parties. This para 18 of the objections is as under:
'Both oral and documentary evidence was led before the arbitrator and thereafter learned arbitrator heard arguments at length and finally passed the award in favour of the respondent/non-objector on 26-8-1991.'
it appears from abovesaid averments made by the respondent itself that there is unqualified admission on its part regarding existence of evidence/material before the arbitrator. I have also perused the record in this respect. There is abundance of material produced before the arbitrator by both the parties in regard to the claims and counter-claims. Mr. Thakur could not point out or show from record that there was no evidence or material in regard to any claim made by the contractor-claimant. This plea raised by Mr. Thakur is thus without any basis.
22. Mr. Thakur has further argued that claim No. 6 which is a damage by way of interest, has wrongly been allowed to the contractor by the arbitrator as it was outside the reference made by the Court. I however, do not find any substance in this argument because in a petition under Section 20, Arbitration Act filed by the petitioner-claimant in para 28, para 23, has specifically claimed under item No. 6 damages by way of interest on the blocked capital of the unused material, an amount of Rs. 4,95,028/-. The claimant had reiterated that claim in statement of claims before the arbitrator.
23. Mr. Thakur has also assailed the award in regard to claim No. 7 on the ground that the same is contrary to the work order. He has further contended that the procedure and method for calculating escalation as provided in the work order has not been adopted by the arbitrator. Mr. Kohli has replied this argument by pleading that in fact there was sufficient evidence in regard to this claim before the arbitrator, besides the procedure for calculating escalation was properly followed. He has also referred to certain documents to substantiate his argument. I have perused the relevant record and I find that the method and procedure laid down in the work order has been followed.
24. No other plea has been raised by Mr. Thakur in regard to the objections filed by the respondent objector. The respondent has not led any evidence to prove the allegations regarding misconduct of the arbitrator in any other manner to discharge the onus of proof placed on it.
25. Considering to the above discussed facts, circumstances and the law on the subject both the issues are not proved and the same are decided against the respondent-objector.
ISSUE No. 2:
26. Mr. Thakur has argued that the arbitrator has not given reasons for coming to the conclusions arrived by him under the award, which according to him was obligatory for the arbitrator and is contrary to the directions of the Court. In this respect I have perused the order dated 9-11-1989 passed by this Court while setting aside the award of the two arbitrators and appointing a new arbitrator. The order of the Court is in the following manner:--
'It would be appreciated that the new arbitrator gives the award itemwise of the claims and counter-claims preferred by the parties and reasons for the same, if he deems proper.'
The abovesaid remarks of the Court in the judgment are not mandatory in nature but merely an observation and that too it was left to the arbitrator to give reasons or not. Though it was not obligatory for the arbitrator to give reasons while making the award, but as it appears from the award, he has disclosed his mind in earlier para of the award as under:--
'I am of the opinion that delay in execution and completion of the work is caused by the respondent. The respondent has failed to fulfil their objections under the contract and committed various breaches of the contract which are drastic and go to the root of it.'
The arbitrator is not required to give a detailed judgment even where it is obligatory upon him to give reasons. In case, Indian Oil Corporation v. Indian Carbon Ltd., AIR 1988 SC 1340 following principle has been laid down (at page 1343):
'The arbitrator has made his mind known on the basis of which he has acted, that in our opinion, is sufficient to meet the requirements even if it by reasons should be stated in the award. It is one thing to say that reasons should be stated and another not to state that a detailed judgment be given in respect of the award. Even if it be held that it is obligatory to state reasons, it is not obligatory to give a detailed judgment.'
In another case, AIR 1989 SC 973 their Lordships of the Supreme Court have held as under tat page 976 (of AIR)) :--
'Even, however, if it be held that it is obligatory for the arbitrator to state reasons, it is not obligatory to give a detailed judgment. An award of the arbitrator should be read reasonable as a whole to find out the implication and the meaning thereby. Short intelligible indications of the grounds should be discernible to find out the mind of the arbitrator for his action even if it was enjoined that in all cases of award by the arbitrator reasons have to be stated ........ The Court, however, does not sit in appeal over the award and review the reasons.'
It appears from the award that the arbitrator has given itemwise award which is in consonance with the order of the Court. As pointed out above he has disclosed his mind in the said award regarding the conclusions he has arrived at, for awarding the claims and rejecting the counter-claims. Moreover, the arbitrator was not under legal obligation to give a detailed judgment or detailed reasons in terms of the order of this Court. The law propounded by the apex Court in this regard, as referred to above, is very clear. Thus the arbitrator did not commit any error or illegality in making the award. This issue is therefore, decided against the respondent-objector.
ISSUE No. 4
27. This Court on April 11, 1986 referred the disputes to two arbitrators out of whom one was nominated by the petitioner-claimant and other by the respondent-objector. Both of them jointly made a unanimous award awarding an amount of Rs. 34,15,383/- in favour of the petitioner-claimant, payable by the respondent-corporation. That award was set aside by this Court simply on technical legal grounds and a new arbitrator, Shri Swami Dial was appointed, who was umpire nominated by both the parties earlier. He has made the award, which is under challenge in these proceedings. Shri Swami Dial is a retired Chief Engineer of C.P.W.D. It thus appears from all these facts that the arbitrators were the choice of the parties, to which respondent-objector had also consented. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of evidence, being the sole Judge. The Court cannot, while considering the validity or legality of the award, determine sufficiency or insufficiency of evidence placed on record or to reappraise the evidence. The jurisdiction of the Court is circumvent by the provision of law.
28. Mr. Thakur lastly laid stress on the rate of interest awarded by the arbitrator, which, according to him, is excessive and requires to be reduced. Mr. Kohli has resisted this prayer of Mr. Thakur on the ground that the transaction between the parties was commercial in nature and the respondent has wrongfully withheld the amount due and payable to the petitioner-claimant who suffered huge losses and as it had to incur such interest and other losses in execution of the contract in question. I have considered the respective contentions of either side. The petitioner-claimant had claimed interest @ 21% per annum, being a commercial transaction, but the arbitrator has allowed such interest @ 18% per annum. Mr. Thakur has not pointed out any reason to slash down the rate of interest. Moreover, in view of the facts of the case, as well as the longivity of litigation, I do not find it proper to reduce the rate of interest. This prayer of Mr. Thakur is, therefore, rejected.
29. In view of the above said facts and circumstances and the decision in the issues and award is made rule of the Court and a decree in terms of the same shall follow. Mr. Kohli has prayed for furture interest @ 24% as, according to him, petitioner-claimant has been deprived of such amount for the last so many years on account of acts of omission and commission on part of respondent-corporation. I, however, do not, find any reason to grant such interest of 24% per annum but future interest 18% per annum is allowed on the awarded amount, from the date of decree, till realisation. There shall he no order as to costs.