Bhullar Construction Co. vs Executive Engineer,Provincial Division PWD (B and R)

Rajiv Narain Raina, J.—This is an arbitration appeal filed under S. 37 of the Arbitration & Conciliation Act, 1996 (for short "the Act") for setting aside the order passed by the Additional District Judge, Ludhiana dated 19th August, 2011 under S. 34 of the Act. The proceedings arise out of an arbitration award dated 31st October, 2006 passed by the 2nd respondent a retired Superintending Engineer of the department acting as Arbitrator. The subject matter of the disputes and differences which arose between the parties relate to civil works carried out by the appellant contractor for the employer Executive Engineer under a written contract which had an arbitration clause. The arbitration proceedings started on 06th October, 1998 and passed through the hands of several Arbitrators holding office of Superintending Engineer and ultimately at the hands of the 2nd respondent who was appointed on 06th July, 2004. The award was made on 31st October, 2006 which became subject matter of challenge under S. 34 of the Act through objections filed by the State department. The Arbitrator was asked to give a declaration under S. 12 which was done by order dated 28th August, 2006. On 28th August, 2006 the Arbitrator was removed and vide order dated 06th September, 2006 he was replaced. Since the removal of Arbitrator was said not to be in accordance with the Act the Arbitrator proceeded with the matter and passed an Award on 31st October, 2006 which became subject matter of challenge before the learned Additional District Judge, Ludhiana under S. 34 of the Act. The objection petition was dismissed by the Court against which FAO No. 1876 of 2008 was filed before this Court and the matter was remanded since no evidence was led by the parties in view of the rules. The learned Additional District Judge, Ludhiana vide the impugned judgment dated 19th August, 2011 has set aside the award.

In the impugned order, the learned Additional District Judge, Ludhiana had rejected the principal contention of the 1st respondent/employer that the Arbitrator had lost his mandate to continue with the arbitration proceedings by virtue of the order dated 06th September, 2006 passed by the Chief Engineer, i.e. the appointing authority and as such the award by the Arbitrator had no binding effect on the parties since its mandate terminated in accordance with the provisions of S. 14 of the Act as well. This means that the award dated 06th September, 2006 resulted from proceedings in continuation of the arbitration proceedings and has been held to be legal and valid. The order of the learned Additional District Judge, Ludhiana has not been appealed against by the State before this Court.

Having reached the conclusion that the arbitral proceedings were legal and valid, the learned Additional District Judge, Ludhiana under S. 34 proceedings has set aside the award mainly on the ground that the award was passed on a day before the Arbitrator was to retire from service on reaching the age of superannuation. Resultantly, eight years of arbitral proceedings between the parties have been nullified. The objection petition filed by the employer State has been accepted and the impugned award dated 31st October, 2006 has been set aside and the case has been remanded with a direction to the Chief Engineer to appoint a new Arbitrator to hold fresh arbitral proceedings.

One of the objections to the arbitral award, that the son of the claimant and the son of the Arbitrator studied together and, therefore, there was likelihood of bias has been correctly rejected by the Arbitrator inter alia for the reason that there was no evidence of such relationship established on record nor was the allegation proved as a fact. The Court below has held that the award cannot be found to be impartial or bad on this account. The Arbitrator correctly observes that the Court acting under S. 34 jurisdiction does not sit as a Court of appeal against the award nor on its reasoning in passing various claims. However, the Court while travelling on slippery ground goes on to observe as follows:--

"However, if the award is examined more accurately, it is certainly found that the same has not been given in an impartial manner with an unbiased attitude as was clear from the very perusal of it. The Arbitrator was certainly not carrying that spirit or attitude so far as his independence and impartiality was concerned. The very wordings of Award reflected his partial attitude as he recorded certain uncalled for comments against his superiors and a party showing his biased approach that may be on account of any reason. His inimical attitude towards one party i.e. XEN as well as otherwise his departmental boss/chief, was clearly decipherable from the remarks he made therein. Those may be the result of their personal rivalry and grudges but those go on to show his state of mind. Their this departmental mutual rivalry also more or less apparent from the circumstances and manner, under which proceedings were conducted. The moving of various objections during proceedings and passing orders of his removal whether rightly or not and ignoring all those by the Arbitrator, then reacting to those by way of passing adverse remarks against the parties go on to show the circumstances under which the Award was passed. This fact also cannot be ignored or loss sight of that the Arbitrator showed his anxiety to the extent that he passes Award at the fag end of his service career, i.e. a day before he is to retire from service. Such an award could not be allowed to be sustained in any manner that smacked of a clear personal vendetta and the result of bitter conflict or war between departmental colleagues or for some extraneous reasons involved. The sufferer is undoubtedly the claimant and further the public of such a conflict among departmental officials whose claims had taken such a long time for its decision. The role played by the departmental officials in delaying the passing of the award for years together is worth condemning. The impugned award cannot thus be said to have been passed in accordance with the public policy of India having been apparently passed in a biased, partial and unfair manner." 6. The Arbitrator has further observed in the award rather tellingly as follows:--

"The Chief Engineer has tried to pressurize the arbitrator to vacate the office of arbitrator by recommending to the Secretary to initiate disciplinary proceedings merely due to the reason that I have denied to dance to the tunes of respondent (Sh. S.P.S. Samra) and the Chief Engineer (Sh. A.P. Singh) who are, inclined to deny settlement of disputes through due process of law due to any intriguing reason and subsequently put blame upon me for delay in making the award. I will be making no mistake in construing that respondent had been trying to scuttle the arbitration proceedings even before my predecessor. The contents of letter No. 418-420 dated 18.6.2003 written by Shri A.K. Sood Arbitrator cum Superintending Engineer, Construction Circle, Amritsar to the Chief Engineer PWD B&R Patiala quitting as arbitrator is a cogent evidence to prove that respondent had been putting hurdles in the passage of justice. In the said letter, the then Arbitrator had written as under:--

"There after various dates were fixed for conducting proceedings for settlement of disputes but it was mainly the respondent who has been seeking adjournment one after the other."

"Under the circumstances, it may not be possible to give justice to this case and as such I request that some other arbitrator may kindly be appointed under clause 67 of the contract agreement."

From the above, it is quite evident that Shri A.K. Sood, Arbitrator vacated the office of Arbitrator merely due to delaying tactics adopted by the respondent. It is an undisputed fact that arbitrator was provided to the contractor for settlement of I disputes as long back as 6.10.1998 but award could not be made neither by my predecessors nor by me during long period of eight years due to variant excuses made by the respondent from time to time. Although, it is not within my jurisdiction to fix responsibility for delay and consequential burden of interest amount, yet the facts of delays and act to scuttle proceedings by the respondent and the Chief Engineer cannot be covered with blanket of any dimensions.

I will be doing no justice if I fail to discharge my duties as Arbitrator and leave the case undecided, without making an award even after holding 20 Nos. hearing during a period of more than two years. I am not prepared to shoulder responsibility and accusation at a later stage for waste of precious Govt. time and other acts and deeds which were necessary for holding 20 Nos. hearing of the case if I do not make and deliver award before relinquishing the office of arbitrator. Therefore, for the sake of justice, equity and fair play, I have made and signed the award on 31.10.2006 at Ferozepur on the basis of record, law established, contract agreement and rules of natural justice which is as under:"

Heard the learned counsel for the parties at length and perused the record. I have also read the judgment and order passed in the earlier appeal between the same parties being FAO No. 1876 of 2008 decided on 11th August, 2010.

Though the aforesaid appeal related only to the issue of validity of the arbitral award on grounds of personal bias of the Arbitrator yet this Court had observed that the learned District Judge if proceeding under S. 34 of the Act should have framed appropriate issues on pleadings of the parties and, therefore, granted opportunity to both to lead evidence in order to prove those issues before taking final decision in response to the validity of the arbitral award. The directions were issued to the learned District Judge, Ludhiana to decide the objections after framing issues and giving opportunity to both the parties to lead their evidence. The parties were directed to appear before the Court below on 23rd August, 2010. In the wake of that order, the present impugned order has been passed without framing issues or causing parties to lead evidence. However, since the issue in remand has been decided in favour of the claimant and the employer State is not in appeal against the order therefore it would neither be legally necessary to frame issues or take evidence with respect to the question of validity of the award on point of bias. However, it is quite another thing that on the merits of the arbitral award, no point of determination has been indicated nor is there any determination on the actionable claims granted or denied to reach a conclusion that the award is biased, partial or has been decided in an unfair manner for the only discernible reason that the award was announced at the fag end of the career of the Arbitrator. This Court is of the view that if an award is otherwise dishonest then the arbitrator''s retirement from service may be a material fact on account of the award being passed one day short of superannuation. However, no reason whatsoever has been assigned in the impugned order to show that the conclusions reached by the Arbitrator were dishonest or that the order reeked of the bad odour of extraneous considerations at play.

I have carefully gone through the award with a view to find anything which may touch upon its intellectual integrity, dishonesty or force reasoning or overstretching claims or any whisper of bias, mala fide or the kind, but am unable to put my finger on any cause for suspicion. The view taken is wholly plausible. In this exercise, I am not swayed by the length of the award but by its quality which appears ex facie acceptable. Nothing in it can be said to be opposed to public policy of India. As a matter of fact, no public policy is involved in the claims nor in its determination which is based on evaluation of facts duly taken on record and not assailed by the employer. However, in reaching this conclusion, I am not impressed by the argument of the claimant that the arbitration law requires framing of issues and to permit evidence to be led afresh in S. 34 proceedings as that course would make the entire scheme of settlement and resolution of disputes through arbitration converted into one of prolonged litigation found in civil courts. The jurisdiction that this Court exercises under S. 37 of the Act is not to nitpick on the order appealed and to put it under the microscope of a civil lawyer. All that is required to do by this Court is to ex facie examine whether the arbitral award is honest in its making. Viewed from this angle, the impugned order suffers from material irregularity in reading a dubious finding as to bias and impartiality in the proceedings of the Arbitrator. It may not be reason enough to set aside arbitral awards where the Arbitrator has acted as persona designata and has passed the award short of retirement. It was the Arbitrator''s duty to enter upon arbitration, hold fair arbitration proceedings and to pass an award. It is the State in this case which appears to have delayed the arbitration proceedings by resort to frivolous objections, change of arbitrator''s etc. Moreover, nothing has been shown by the respondents to this Court that the appellant was remiss in not diligently prosecuting its case before the Arbitrator and delayed the conclusion. After all, the last arbitrator held twenty sit tings before passing the award. For the foregoing reasons, this appeal is allowed and the impugned order dated 19th August, 2011 is set aside. With the passing of this order, nothing further remains to be done before the Arbitrator who remains functus officio. The award becomes automatically an executable decree in terms of the provisions of the Arbitration & Conciliation Act, 1996. The counter claim of the 1st respondent stands rejected by the Arbitrator for good and sufficient reason.