Hindustan Steelworks Construction Limited Vs. P. Sethian - Court Judgment

Excerpt:
- mining direction to state government to consider all applications afresh in light of interpretation of section 11 of the act and rules 35, 59 and 60 of mc rules main issue : whether the state government's recommendation dated 06.12.2004 and the proceedings of the chief minister are contrary to the provisions of section 11 of the act and rules 59 and 60 of mc rules and not valid in law. a perusal of the proceedings of the chief minister shows that no clear reasons were given to show as to why jindal and kalyani were preferred over other applicants.[para 18]--the proceedings of the chief minister, at no level, consider the various guiding criteria mentioned in section 11(3)[para 19] b) whether the respondent-jindal's application dated 24.10.2002 made prior to the notification dated 15.03.2003 is capable of being entertained along with the applications made pursuant to the said notification -- applications made prior to the notification cannot be entertained because they are premature.[para 21] if such premature applications are allowed to be entertained, it would result in the state government giving out mining leases to favoured persons without notice to the general public.[para 53] c) whether the order of the high court of karnataka in ziaulla sharieff's case permit the consideration of the respondent-jindal's application dated 24.10.2002 made prior to the notification dated 15.03.2003. the order of the high court of karnataka in ziaulla sharieff's case does not permit the consideration of jindal's application dated 24.10.2002 which was made prior to the notification dated 15.03.2003.[para 42] d) whether rule 35 of the mc rules justify the recommendation of the state government in favour of the respondents-jindal and kalyani -- as discussed above, rule 35 only permits the state government to take additional factor of the "end use" of the minerals and not the existing investments made by the applicants. moreover, relying on the existing investments made, the respondents also does not satisfy the requirements under section 11(3)(d) which talks solely about proposed investments to be made and not the existing ones.[para 44] e) whether the criterion of "captive consumption" referred to in tata iron and steel co. ltd. vs. union of india, (1996) 9 scc 709, have any application in this case despite not being one of the factors referred to in section 11 (3) of the mmdr act or rule 35 of the mc rules -- we have already held that section 11(3) specifies the matter relevant for purposes of second proviso to section 11(2). we also referred to the committee's report. in accordance with the recommendation in the said report, section 11(3)(d) was added as part of the substitution of section 11 in the year 1999. sub-section (d) provides that "the investment which the applicant proposes to make in the mines and in the industry based on minerals" and it speaks about investment proposed to be made and not past investments. thus it confines the concept of "captive consumption of minerals to proposed investment and not past investments". even the residuary clauses in section 11(3)(e) are limited to "matters as may be prescribed", which would necessarily mean matters prescribed by rules. this is fortified by decision of this court in bsnl ltd. & anr. vs. bpl mobile cellular ltd. & ors., (2008) 13 scc 597, para 45.[para 35] f) whether factors such as the past commitments by the state government to applicants who have already set up steel plants, matter for consideration for grant of lease despite the mmdr act and the mc rules constituting a complete code -- it is not open to the state government to justify grant based on criteria that are de hors to the mmdr act and the mc rules. the exercise has to be done strictly in accordance with the statutory provisions and if there is any deviation, the same cannot be sustained. it is the normal rule of construction that when a statute vests certain power in an authority to be exercised in a particular manner then the said authority has to exercise it only in the manner provided in the statute itself.[para 28] in view of the specific parliamentary declaration as discussed and explained by this court in various decisions, there is no question of the state having any power to frame a policy de hors the mmdr act and the rules.[para 25] central and the state government act as mere delegates of parliament while exercising powers under the mmdr act and the mc rules.[para 27] g) whether the recommendation in favour of respondents-jindal and kalyani saved by the operation of the law of equity. the law of equity cannot save the recommendation in favour of jindal and kalyani because it is a well settled principle that equity stands excluded when a matter is governed by statute. this principle was clearly stated by this court in the cases of kedar lal vs. hari lal sea, (1952) scr 179 at 186 and raja ram vs. aba maruti mali (1962) supp. 1 scr 739 at 745. it is clear that where the field is covered expressly by section 11 of the mmdr act, equitable considerations cannot be taken into account to assess jindal and kalyani, when the recommendation in their favour is in violation of statute.[para 50] h) whether the learned single judge as well as the division bench are justified in arriving at such conclusion. though the learned single judge in his order dated 07.08.2008 quashed the communication/recommendation of the state government dated 06.12.2004 proposing to grant mining lease to jindal and kalyani, however, the learned single judge traveled much beyond the reliefs sought for in the writ petition and quashed the entire notification no. ci.16:mmm.2003 dated 15.03.2003. in our view, while approving earlier part of his order and quashing the communication/recommendation of the state government dated 06.12.2004, the other observations/directions are not warranted in the light of the provisions of the act and the rules. the said observations/directions are deleted.[para 55] the division bench has erred in concluding that the jindal's application made prior to the notification can be entertained along with the applications made pursuant to the said notification because it is not section 11(4) which covers the said notification under rule 59(1) but the first proviso to section 11(2). as a matter of fact, the division bench did not even mention section 11(4) in its reasoning apart from stray references even though the conclusion of the learned single judge hinged on how section 11(4) would be rendered otiose and redundant if the first proviso to section 11(2) was taken as governing the consideration of applications under a notification pursuant to rule 59(1) [para 52] i) whether it is advisable to remit it to the central government. [para 6] the central government considers only the materials forwarded by the state government along with its recommendation. as rightly pointed out, if the recommendation of the state government cannot be upheld in law, all consequential orders including the subsequent approval by the central government are also liable to be quashed. we reject the request for remitting the matter to the central government for its decision. --[para 56] held : in the light of the above discussion, the impugned order of the division bench of the high court dated 05.06.2009 in writ appeal no. 5084 of 2008 and allied matters as well as the decision of the state government dated 26/27.02.2002 and the subsequent decision of the central government dated 29.07.2003 are quashed. we direct the state government to consider all applications afresh in light of our interpretation of section 11 of the act and rules 35, 59 and 60 of mc rules and make a recommendation to the central government within a period of four months from the date of receipt of the copy of this judgment. it is made clear that we have not expressed anything on the eligibility or merits of any of the parties before us and our conclusion as to the decision of the state government is based on the interpretation of the statutory provisions mentioned above for which we adverted to certain factual details of the parties. the state government is free to consider the applications and take a decision one way or other in accordance with law, as discussed above, within the time scheduled. all the appeals are allowed to the extent mentioned above. no costs.[para 57,58]sanjib banerjee, j.1. to begin with, some hard facts relating to the proceedings need to be recorded without any comment for the moment. the disputes between the parties relate to the construction of certain buildings in libya and the first letter of intent was issued sometime in march - april, 1980. by april, 1984 the construction was completed and the site handed over by the contractor. the final bill was raised on april 22, 1984. in or about june, 1986 the petitioner herein instituted a suit before this court claiming a decree for rs. 1.76 crore on account of interest bearing loans that the petitioner, as employer, had provided to the contractor.2. the contractor applied for stay of the suit under section 34 of the arbitration act, 1940 and succeeded. the order, thus, implied that the claim of the petitioner herein in the suit was covered by the arbitration agreement between the parties. a reference commenced before a departmental arbitrator and thereafter before another. by an order dated february 1, 1993 the reference was directed to be presided over by the arbitrator whose award has been assailed in the present proceedings under sections 30 and 33 of the 1940 act. the pleadings reveal that it was the petitioner herein (the plaintiff in the suit) who had started off as the claimant in the reference and had filed a statement of claim seeking a total amount of libyan dinar 1,203,963.564. it is also evident that the contractor filed a counter-statement putting forth his claim and also dealing with the claim made by the petitioner herein. the status of the parties was subsequently switched at the third meeting held before this arbitrator, as is recorded as paragraph 23 of the award: the original claimant became the respondent and the original respondent the claimant. the pleadings were thereafter corrected by hand as copies thereof reveal. the reference meandered through more than 356 sittings (the minutes of such sitting held on january 16, 2007 appear at pages 53-60 of the petition). several more meetings must have been held before the award came to be made on december 31, 2007, nearly 15 years and 360 sittings after the reference commenced before the arbitrator.3. the claim of the contractor was in the sum of ld 665,232 equivalent to slightly over rs. 2.66 crore; the claim of the employer was ld 1,203,963.564. the award now made finds the contractor to be entitled to a sum of about rs. 1.46 crore plus interest. the award finds the employer entitled to a sum of about rs. 30.39 lakh without any interest.4. the parties estimate that they have spent a tidy sum on either side on the conservative estimate of about rs. 5000/- per side per sitting. in addition, the parties have shared the remuneration of rs. 9 lakh over a long period of almost 15 years. there must have been other expenses, particularly for the kerala-based contractor to attend arbitration in calcutta and bring his witnesses. this is just to put in perspective the net amount that the contractor would have obtained upon being the more successful in the reference.5. the petitioner assails the award on the ground of non-application of mind and on error apparent on the face of the award in the arbitrator having apparently held that the arbitrator had no jurisdiction to entertain the claim on account of the interest bearing loans that were made the subject matter of the petitioner's suit; and, on the arbitrator failing to give credit to the petitioner of the sums admitted in the reference by the contractor to have been received from the employer. the petitioner says that the arbitrator derived authority to adjudicate upon the disputes pursuant to the order made on the petition under section 34 of the 1940 act. the petitioner suggests that if the court found that the claim in the suit was covered by the arbitration agreement and, thus, stayed the suit and directed a reference, it was not open to the arbitrator to revisit the matter or find that the interest bearing loans were not covered by the arbitration agreement. the petitioner refers to the statement of claim carried by the contractor to the reference. the employer points out that the quantum of ld 665,233 that figures in the principal relief in the statement of claim of the contractor has been arrived at on the basis of the sum of three heads of claim and the adjustment of the amount received from the petitioner. the petitioner seeks to demonstrate that the award covered only the third head of claim and did not deal with the other two heads of claim (implying a rejection thereof) or the adjustment that had been given by the contractor on accounts of payments already received. it is urged that the award is fundamentally flawed both in its rejection of the major head of the petitioner's counter-claim and in the failure to perceive that there was an admission of the contractor having received ld 487,723.830 from the petitioner.6. in addition, the petitioner says that the award is contrary to the minutes of the 349th sitting in the reference. at the 349th sitting the arbitrator had noticed an argument made by the petitioner that the claims carried by the contractor were well in excess of what had originally been demanded in a letter of july 9, 1984. the petitioner says that in the arbitrator having observed at the 349th sitting that the excess claims could not have been made, the consideration of the additional and inflated claims in the award is per se invalid and would amount to legal misconduct.7. the petitioner begins by referring to one of the paragraphs in the award after the contractor's claim had been considered and the petitioner's claim had been taken up. the relevant paragraph from the award reads as follows:these submissions are not acceptable to me as no jurisdiction can be created by admission and/or consent of parties, particularly when it is patent to the arbitral tribunal that it has no jurisdiction to entertain claim not within the scope of the contract. nor is the arbitral tribunal concerned with any loan taken by the respondent from the state bank of india, london, nor concerned with the hardship faced by the respondent, if any, in not receiving any payment from its principal as alleged.8. the petitioner asserts that the arbitrator could not have held contrary to the order made on the petition under section 34 of the 1940 act and upon the arbitrator having disregarded the major head of the petitioner's claim, the entirety of the award has to be set aside.9. the respondent says that while it is true that the award does not mention the first two heads of claim that have been canvassed by the respondent in his statement of claim and the award does not refer to the sum of ld 487,723.830 that the contractor admittedly received from the employer, such omission would not render the award invalid. the respondent claims that there was no dispute between the parties as to the contractor's entitlement on account of the final bill which had been prepared and certified by the employer and there was, similarly, no dispute relating to the second head of claim for extra items of work which had been certified and accepted by the employer. the respondent suggests that it was only the third head of claim that was adjudicated upon and the award is only in respect of the 75 items of claim made by the contractor under the third head. the respondent states that if there was no dispute as to the first and second heads of claim as they were amounts certified by the employer and since the contractor had admitted receipt of the sum of ld 487,723.830, the only areas of conflict were the third head of claim put forth by the contractor and the counter claim of the petitioner. the respondent implores that after more than 360 sittings and more than 30 years from the date of issuance of the first letter of intent, the contractor should not be subjected to another reference if it is possible for the court to read the award as the respondent suggests.10. the respondent submits that notwithstanding the apparent view of the arbitrator in the paragraph quoted above, the arbitrator proceeded to deal with the employer's claim on account of interest bearing loans. the respondent says that, in any event, since the entirety of the payments made by the employer to the contractor was included in the sum of ld 487,723.830 for which the petitioner has, effectively, been given due credit, there is no merit in the primary challenge that has been brought.11. it is submitted by the respondent that the minutes of the 349th sitting, or the arbitrator's observations thereat, do not amount to the claims contained in the letter of july 9, 1984 being regarded as sacrosanct. the respondent says that as would appear from the letter of july 9, 1984, the claims there were on account of measured bills and the last sentence of the arbitrator's observations at the 349th sitting to the effect that 'subsequently in the pleadings the claim cannot exceed the claim made for arbitration at the time the dispute began,' cannot be understood to imply that the claims made in the statements of claim were to be reduced to be conformed to what had been claimed in the initial letter of july 9, 1984.12. the summary of the claim of the contractor reveals that the claimed amount of ld 665,233 in the principal relief of the contractor has been arrived at on the following basis:i) value of purported final bill asprepared by hindustan steelworksconstruction limited for theitems covered by the contractand certified thereon. ld 337,375.382ii) extra items of work certifiedand entered/to be entered in themeasurement book of hindustansteelworks construction limitedevaluated at the rate of theclaimant. ld 133,571.100iii) claims raised in the claimstatement of the statement offact. ld 682,010.00total value ld 11,52,956.482iv) the total amount paid byhindustan steelworksconstruction limited as advanceagainst the works carried out bythe claimant including paymentsagainst running account bills. ld 4,87,723.830total balance due to claimant ld 6,65,232.652say ld : 6,65,233/-equal to rs. 2,66,09,320/-13. it is apparent from the summary that the contractor claimed the sum of ld 337,375.382 in respect of the final bill; ld 133,571.100 on account of the certified extra items of work; and, ld 682,010.00 on other divers heads which were not included either in the final bill or in the extra items of work certified by the employer. on the basis of such three heads of claim, the contractor assessed that he was entitled to ld 1,152,956.482. from such amount he gave credit to the employer on account of advance and payments against running account bills to the extent of ld 487,723.830 to arrive at a net amount due to him in the sum of ld 665,232.652 which he rounded of to the next libyan dinar.14. the parties have relied on some additional papers spiral-bound in two volumes which include, inter alia, a copy of the application under section 34 of the 1940 act; a copy of the petitioner's claim; a copy of the contractor's statement of claim in the reference; and, a copy of the petitioner's counter statement of claim. the statement of claim of the contractor runs from pages 43 to 237 of the first volume. the summary of the contractor's claim set out above appears at page 77 of such volume and the relief's appear at page 78 thereof. at page 79 of the first volume, the summary of the claim is reiterated with additional details in support of the first head of claim relating to the final bill. at pages 80 to 82 of the first volume, particulars of the second head of claim are furnished. pages 83 to 237 include the material in support of the 75 sub-heads of claim under the third head that figures in the summary. pages 83 to 88 record the abstract of the several sub-heads of claim. page 89 is the preamble to the third head of claim. the individual sub-heads of claim begin at page 90 of the first volume. the 75th sub-head of claim is not detailed but is on account of interest as would appear from the abstract at page 88 of the first volume of additional papers.15. the award runs into 92 pages. the nature of the work, the values of the letters of intent and execution of the contract on june 27, 1982 are covered over the first four pages. the award thereafter records, in brief, the claimant's version of things before noticing the suit filed by the petitioner herein at paragraph 21 of page 11 thereof and the commencement of the reference thereafter. at paragraph 22 (page 12), the award records, 'in this background the claimant raised 75 claims...' over the several pages thereafter the award details the employer's version of things and the denial of the contractor's claim and the assertion of the counter-claim. from pages 21 to 27 of the award the averments made in a rejoinder filed by the contractor have been noticed and five points have been set out at paragraph 52 (pages 27-28) for consideration as, in the arbitrator's words, the 'findings thereon would go to the root of the matter and would greatly assist in the adjudication of the claims...' the five points are dealt with between pages 28 and 48 of the award. the claims and counter claims are dealt with beginning page 49 of the document. from page 49 to page 80 of the award 75 heads of claim are dealt with culminating in the following two paragraphs:accordingly, out of the total sum of l.d. 2,49,243.42, equivalent to rs. 99,69,736.80p. awarded to the claimant, no interest is payable on a sum of l.d. 73,0 13.00, equivalent to rs. 29,20,520,00p., awarded in respect of claims nos. 62, 63, 68 and 72 for loss/damages. the claimant thus is entitled to simple interest at the rate of 18% per annum on l.d. 1,76,230.42 (l.d. 2,49,243.42 - l.d. 73,013.00), equivalent to rs. 70,49,216.80p. from 20-05-1984 to 20-01-1988, 44 months, which amounts to rs. 46,52,483.00. accordingly, the claimant is entitled to total sum of rs. 1,46,22,2 19.80p. including interest as stated above.the claimant will also be entitled to such simple interest at the said rate of 18% per annum on the said sum of l.d. 1,76,230.42 from 31st december, 2007 the date of signing the award till the decree and/or realisation thereof whichever is earlier.16. the counter claim is considered from page 82 to page 92. the employer succeeded in establishing a part of the second and third heads of counter-claim. the final paragraphs of the award dealing with the counter-claim record as follows:in respect of the interest claimed on counter claims the respondent is allowed the same rate of interest as also for the same period as allowed to the claimant, that is, simple interest at the rate of 18% per annum on the total amount awarded, that is, l.d. 45,770.642, equivalent to rs. 18,30,825.60p., in respect of counter claims no. 2 and 3 clubbed together with effect from 20th may, 1984 till 20th january, 1988, the date of commencement of the arbitration proceeding, 44 months, which comes to rs. 12,08,344.80p.. therefore, the respondent will be entitled to a total sum of rs. 30,39, 170.40p.no interest is payable for the pendente lite period for the reasons already given in my judgment and award when considering the claims of the claimant. the respondent is, however, entitled to interest at the same rate on the amount of the counter claims awarded from the date of the award, that is, 3 1-12-2007 until decree or realisation thereof whichever is earlier.17. the petitioner is aggrieved in the arbitrator's treatment of first head of the claim and attributes legal misconduct and non-application of mind in the arbitrator having rejected what had apparently been permitted by this court in the proceedings under section 34 of the 1940 act. attractive as the argument appears at first flush, it does injustice to the several pages that follow the relevant paragraph in the award. the arbitrator has reasoned that though of agreement of june 27, 1982 included the previous correspondence exchanged between the parties, there was no correspondence relating to the grant of the loans. in effect, the payments claimed by the employer as loans have been regarded as advance payments or payments against work done by the contractor. notwithstanding the apparent rejection of the amount claimed as loans, it is implicit in the arbitrator's reasoning that such amounts have to be treated merely as the advance paid by the employer or payments made for which no special claim could have been brought by divorcing such payments from the contract. it is the substance of the matter that has to be regarded and not the form of expression. the respondent is correct in his assessment that the arbitrator considered the matter on merits and, having regarded that the amounts that the petitioner herein claimed were not loans made available to the contractor but were merely payments made in connection with the work, the arbitrator cannot be said to have fallen in any great error that would prompt a correction in proceedings of the present nature.18. the particular challenge urged by the petitioner in respect of some of the sub-heads of claim out of the 75 considered by the arbitrator also seems to be out of place. it is the petitioner's contention that eight of the 22 sub-heads of claim allowed by the arbitrator did not figure in the letter of july 9, 1984 and, of the 14 other claims that figured in the letter and have been granted in full or in part, seven were in excess of the amounts indicated on july 9, 1984. the petitioner has not challenged any of the 22 sub-heads of claim allowed by the arbitrator on any other ground save that some of them did not figure in the letter of july 9, 1984 and some others were in excess of what had been claimed therein. the solitary sentence against the arbitrator's observations at the 349th sitting in the reference does not imply that no claim beyond those contained in the letter of july 9, 1984 would be entertained. the observation suggested that the subsequent addition of or embellishment to the original claims may not be considered. in the several tens of pages that the award expends on the many heads of claim put forward by the contractor, all matters were taken into account. it is not the petitioner's case that the arbitrator travelled beyond the scope of the reference in considering the various claims. a stray observation recorded in the minutes of any sitting cannot be taken in isolation to pit the entirety of the award against a possible interpretation of the observation. it cannot be said that the observation precluded the arbitrator from considering the sub-heads of claim made under the third major head despite all of it being reflected in the statement of claim that the contractor carried to the reference.19. as would appear from the structure of the award, the arbitrator concentrated on the sub-heads of claim that figured under the third major head of claim made by the contract and on the several heads of counter-claim of the petitioner herein. there is no discussion in the award on either the final bill (covered by the contractor's first head of claim) or on the extra items of work certified (the contractor's second head of claim). there is, similarly, no discussion in the award on the admitted payments received as would appear from the summary of the statement of claim extracted above.20. the court cannot go into what transpired in the mind of the arbitrator since there is no reference in the award to the two major heads of claim and the adjustment on account of payments received by the contractor. in a sense, the award may be criticised as being incomplete or flawed in such aspect but it would also be inequitable to subject the respondent herein to a further reference some 26 years after the contract was executed. the manner in which the first and second heads of claim have been described in the summary by the contractor show that there may not have been any dispute between the parties in such regard. the contractor had claimed the final bill as certified and the amount due on account of extra items of work as certified. since the arbitrator did not refer to these two heads of claim, it would be evident that the petitioner herein did not question that such amounts had, indeed, being certified by it for payment. whatever may have figured in the pleadings filed by the petitioner filed in the reference, there is no assertion in this present challenge that the petitioner had questioned the amounts claimed to have been certified under the first two heads. it was a matter that was certainly overlooked by the arbitrator but since the sum of the amounts under the first two heads (ld 337,375.382 plus ld 133,571.100 amounting to ld 470,946.482) is more than offset by the amount of ld 487,723.830 admitted by the contractor to have been received from the employer, it is such differential amount of ld 16,777.348 (ld 487,723.830 less ld 470,946.482) that has to be reduced from the gross amount awarded in favour of the contractor by the arbitrator.21. accordingly, the principal sum awarded of ld 249,243.42 has to be reduced by the amount of ld 16,777.348 and the principal sum to which the contractor was found entitled will stand at ld 23 2,466.072. the conversion rate appears from the award. since ld 249,243.42 was found to be equivalent to rs. 99,69,736.80, the arbitrator appears to have proceeded on the basis that one libyan dinar being equivalent to rs. 40/-. thus, the principal sum to which the contractor is entitled is ld 232,466.072 together with interest thereon at 18 per cent per annum as awarded by the arbitrator on ld 159,453.072 (ld 232,466.072 less ld 73,013) equivalent to rs. 63,78,122.88 from may 20, 1984 till january 20, 1988. the contractor will also be entitled to simple interest at the rate of 18 per cent per annum on the sum of ld 159,453.072 from december 31, 2007 till today and on ld 159,453.072 at the rate of six per cent per annum till realisation. the rate of exchange will be reckoned to be rs. 40/- to the libyan dinar. there will be judgment upon award in favour of the respondent herein accordingly. there will also be judgment upon award in favour of the petitioner herein in the sum of rs. 30,39, 170.40 together with interest at the rate of six per cent per annum from today till realisation.22. ap no. 164 of 2008 and award case no. 1 of 2008 are disposed of accordingly without any order as to costs.23. without meaning any disrespect, it would do well for all concerned to reflect whether the litigants have gained at all in course of these proceedings. both parties appear to have lost to an insensitive system that shows scant concern for those that the system professes to serve. not all persons connected with the reference have lost out, however; unfortunately, the principal dramatis personae - the litigants - have.24. urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.