Bharat Transport and Madras Fertilizers Ltd., K.R. Veeraswami, District Judge (Retd.) vs Bharat Transport and Madras Fertilizers Ltd. <BR>Bharat Transport and Madras Fertilizers Ltd. Vs Bharat Transport Ltd.

Govardhan, J.—In O.P. No. 153/1995, the petitioner contends as follows; this Court by an order dated 4-12-1992, made in arbitration suit

C.S. No. 550/1991 has been pleased to appoint the petitioner as an Arbitrator to arbitrate the dispute between the respondents in that application.

After enquiry, the petitioner has passed an award on 23-12-1994 and has filed the same in Court along with the connected records. The Court

may be pleased to receive the award together with the records and pass suitable orders. The award was received. Advocates have entered

appearance on behalf of respondents 1 and 2.

The second respondent has filed O.P. No. 257/1995 for setting aside the award contending as follows: The first respondent was engaged as a

handling contractor under the contract dated 25-1- 1986. The first respondent claimed Rs. 70,395-54 towards the bills wrongfully disallowed

relating to 15-10-1987 to 15-6-1988. The first respondent has also claimed Rs. 3,36,500/- towards the amount incurred in implementing 7 group

system. The third claim of the first respondent is for Rs. 56,375-92 towards the amount paid as Special Incentive for clearing bagged urea. The

last claim of the first respondent is for Rs. 69,250/- being the amount recovered towards the loss of tokens. The first respondent has also claimed

interest at 21% per annum. The petitioner is liable to pay Rs. 20,475/- alone towards the first claim. It has nothing to do with the internal re-

allocation or administrative rearrangement of the first respondent. The claim regarding Rs. 69,250/- towards the recovery of Rs. 10/- for every loss

of tokens cannot be sustained since it is provided under the contract. The Arbitrator has passed the award allowing all the claims with interest at

18% per annum. The petitioner is aggrieved over the same, and hence the petitioner has filed this petition.

The first respondent has filed a counter contending as follows: The contract between the first respondent and the petitioner has been renewed

periodically. During the period of contract, the petitioner denied several payments by illegally recovering and holding payment of the bills,

disallowing various amounts from and out of the bills submitted without assigning any reason and failed to pay for additional work besides denying

the payments for additional wage expenses on account of the settlement made before the Labour Commissioner, Therefore, dispute arose between

the petitioner and the respondent. The petitioner did not appoint any Arbitrator in spite of having been called upon to do so. It is only as per the

order of this Court, the second respondent has been appointed as Arbitrator. No misconduct as such, has been made out in the O.P. and

therefore, it is liable to be dismissed. It is for the petitioner to show and justify as to how the first respondent is liable for the amounts for which

payment has been denied or recovered by the petitioner. Just because money is available with them, the petitioner cannot withhold payments. The

demand made by the first respondent does not amount to waiver of the rest of the claim of the first respondent. It only establishes that the

petitioner had failed to pay even, the admitted amount. The learned Arbitrator, after considering the facts placed before him, has passed the award.

Tokens were issued not only to the employees of the first respondent but also to the employees of other contractors. At no point of time, any

particular labourer of the first respondent was accused of not returning the token. The token is made of plastic of the size of one rupee coin. The

cost of manufacturing the same may not be more than 0.50 p. per token. The rate of the contract was fixed on the basis of the wages payable to

the labourer and the number of labourers to be supplied. The petitioner was the principal employer, and the fist respondent was the Contractor

supplying the labourers. Whenever there is any increase in the liability towards any payment to the labour, the petitioner is bound to compensate

the same. The petitioner having directed the first respondent to do certain additional work, cannot deny payment of the same after having derived

the benefit of the same. There is no ground to set aside the award. The petition is liable to be dismissed.

The Learned Counsel appearing for the petitioner viz., Madras Fertilisers Limited would argue that the Arbitrator who has been appointed by

this Court, has not passed an award in pursuance of the petition placed before him and he has not properly appreciated the rival contentions of

both parties and following erroneous propositions of law has passed the award allowing all the claims of the first respondent with interest at 18%

per annum and therefore it has got to be set aside. The Learned Counsel appearing for the first respondent viz., Bharat Transport Ltd. would argue

that the present petition is not an appeal against the award passed by the Arbitrator and therefore the petitioner cannot be said to have made out a

case to set aside the award passed by the Arbitrator.

The first respondent viz., Bharat Transport Limited., was a transport Contractor employed by the Madras Fertilisers Ltd. Some disputes have

arisen between the two. In the suit filed by the Plaintiff viz., Bharat Transport Limited by its Managing Partner, against Madras Fertilisers Ltd, this

Court has passed orders appointing an Arbitrator to decide the dispute between the parties. The Arbitrator has also submitted his award after

enquiry. The award is now the subject matter of this enquiry, awaiting a verdict as to whether the same has to be set aside or approved. Before

proceeding further. I am of opinion that it is expedient to bear in mind some established principles of law when an application u/s 30 of the

Arbitration Act is filed to set aside the award.

It has been held in the decision reported in Government of Madras v. Superintending Engineer (1969 (II) M.L.J. 13) that an award is liable to

be set aside u/s 30 of the Arbitration Act on the ground of legal misconduct on the part of the Arbitrator. It is also held in the above decision, as

follows:

It is not every error of law which necessarily vitiates an award. If a specific question of law is the sole content of the reference to arbitration, even

an erroneous finding on that question of law, may not vitiate the award. Further, errors which are ancillary to, and part of, the narrative of the facts

embodied in the award, May not vitiate the award. But a legal proposition which is the basis of the award, can make the award itself erroneous.

In the decision reported in College of Vocational Studies v. S.S. Jaitely (A.I.R. 1987 Del 134). it has been held that misconduct u/s 30(a) of the

Arbitration Act does not mean only a moral lapse but it comprises legal misconduct which is complete, by the arbitrator on the face of the award

arrives at an inconsistent conclusion, even on his own findings or arrives at a decision by ignoring material documents which throw abundant light

on the controversy between the parties and can help in arriving at a just and fair decision. In the decision reported in M/s. Bombay Ammonia

Private Ltd., v. Union of India (A.I.R.1987 Del 148), it has been held that an award passed on no evidence is liable to be set aside and an award

made without considering the vital document is liable to be set aside.. As per the decision reported in State of Karnataka v. R.N. Shetty and Co.,

Engineers and Contractors (A.I.R. 1991 Kar 96), where disputes are generally referred to arbitrator without any question of law or fact. Court

can find out whether arbitrator had committed any error of law apparent on the face, of record. In the decision reported in Allen Berry and Co.

Pvt. Ltd. Vs. The Union of India (UOI), New Delhi, it has been held as follows:

Mistake in award can be a ground of remission or setting it aside only when such mistake is apparent on the face of the award or forms a part of it.

From the above decisions, we have to infer that it is only a mistake which is apparent on the face of the award and forms a part of the same, or a

legal misconduct would be a ground of remission or setting aside the award.

6A. Now, let us consider the award passed by the Arbitrator on the four claims made by the first respondent-plaintiff against the defendants in the

suit. As far as claim No. 1 is concerned, it is for a sum of Rs. 70,395-54 withheld by the petitioner herein from the bills submitted by the First

respondent in this petition. The learned Arbitrator has considered clause 7 of the Annexure II which provides for the M.F.L. reserving his right to

withhold payment, the evidence of the respondents before him and has come to the conclusion that the first respondent herein has proved that the

petitioner in this petition without any justification and without assigning any reason, has wrongfully deducted the same. The Learned Counsel

appearing for the petitioner would argue that the first respondent herein has waived the claim for more than Rs. 20,475/- in their letter dated 11-

12- 1989 under Ex. A.-27 and yet, the Arbitrator has passed the award for the entire amount and it is a mistake apparent on the face of the

records. In the letter dated 11-12-1989, the first respondent herein has stated as follows: ""However we request your kind self to make a payment

as sanctioned by you immediately without prejudice for our claim over the balance amount for which act of kindness we shall remain grateful"". This

letter has been addressed by the first respondent to the petitioner without prejudice to their claim for the amount sanctioned viz. Rs. 20,475/-.

Therefore, it cannot be stated that the first respondent has waived the amount over and above Rs. 20,475/- which the petitioner admits as their

liability. The finding of the Arbitrator on this claim therefore cannot be said to be an error on the face of records to set aside the same

The second claim which has been allowed by the Arbitrator is for recovery of Rs. 69,250/- which has been deducted by the petitioner towards

the loss of tokens. As regards this claim, also, the Arbitrator has considered Annexure II Part B Clause 8 dealing with the distribution of the

tokens, the evidence of R.W.1 and R. W.2. and has given reasons as to why their evidence cannot be accepted and acted upon. The Arbitrator

has also observed that the respondent has not legally proved the loss of tokens or that the claimant is responsible for the loss of tokens. When

detailed reasons are given by the Arbitrator before coming to this conclusion, it cannot be stated that he has failed to appreciate the evidence

placed before him or placed the burden of proof on the respondent before him wrongly. When the arbitrator has given a specific finding that the

applicant herein has not proved their claim that the loss of tokens was due to the first respondent before him, the question of payment of penalty

and deduction of the amount being the value of the tokens does not arise for consideration, since it is only if it has been established by the first

respondent before the Arbitrator that the loss of tokens was due to the first respondent herein, subsequent event of deduction and penalty would

arise.

As regards claim Nos. 3 and 4 are concerned, they are towards the refusal of the petitioner herein to make payment to the first respondent on

these two claims. The Learned Counsel appearing for the petitioner would argue that these two claims have been allowed on the basis of the

document under Ex. A-21 which is in pages 33 and 34 of their typed set and the very letter itself shows that the supplementary bills for payment

are made in anticipation of the approval of the petitioner and the learned Arbitrator has passed the Award without considering this document and

on that ground alone it has to be allowed. The Arbitrator, apart from considering the evidence of D.Ws. 1 and 2, has also considered the

settlement arrived at between the parties under Ex. A-5 regarding payment for 7 group system and referred to Ex. A- 2 in which the first

respondent herein has stated that he is engaged for the purpose of finalising the terms of the contract and payments have to be made to workers

and he has made the payment. Similarly, with regard to claim No. 4 also, the Arbitrator has referred to Ex. A-20 which is to the effect that the item

of work was done and accepted the version of the claimant. These two claims have been made by the first respondent, for the work done by the

first respondent by engaging more workers as per this settlement. It is not the case of the petitioner that the work has not been completed and

done as claimed by the first respondent herein. Relevant document has been referred by the Arbitrator in his order. Then only Arbitrator has given

a finding that the first respondent has engaged additional works for the purpose of completing the additional work given to them by the petitioner

and has allowed that the amounts mentioned in the claim Nos. 3 and 4 have got to be paid by the petitioner. There is nothing to hold that it is an

apparent error on the face of the record of the Arbitrator. We have already seen that the Supreme Court has held that the mistake in award can be

a ground of remission or setting it aside only when such mistake is apparent on the face of the award or forms a part of it. Even though the

particular document viz., Ex. A-21 referred by the Learned Counsel appearing for the petitioner has not been referred by the Arbitrator, the

conclusion arrived at by the Arbitrator cannot be said to be a mistaken one, since he referred to other relevant documents for the said purpose. In

fact, Ex. A-21 is nothing but a list of number of persons employed by the first respondent to complete the extra work entrusted to them. Since

engaging extra workers for the extra work and completion of the work entrusted to them by the first respondent is not disputed or challenged by

the petitioner herein, I am of opinion that the failure of the Arbitrator to refer to Ex. A-21 is not a vital one, which would vitiate the award since the

established principle of law is, it is not every error of law which necessarily vitiates an award. Considering all these materials, I am of opinion that

the petitioner in O.P. No. 257/1995 has not made out a case for setting aside the award passed by the learned Arbitrator and the petition is liable

to be dismissed.

In O.P. No. 153/1995. orders have already been passed directing the reception of the award by the Hon''ble Mr. Justice S. Jagadeesan on 16-

3-1995. After considering the objections raised by the second respondent in this O.P., in view of my finding in O.P. No. 257/1995. this petition is

ordered and the award is ordered to be received. O.P.153/95 decreed in terms of the award with further interest at 18% per annum from 24-12-

1994 till realisation. In the result, O.P. No. 153/1995 is decreed in terms of the Award with further interest at 18% O.P. No. 257/1995 is

dismissed. No costs.