Central Coalfields Limited vs M/S Damodar Ropeways And Infra Limited

Deepak Roshan, J

The instant appeal has been preferred by the appellant-company against the judgment dated 13.06.2018, passed by the Presiding Officer,

Commercial Court, Ranchi in Commercial (REVOC) case No.122 of 2015, whereby the objection filed by the appellant-company under section 34(2)

of the Arbitration & Conciliation Act, 1996 (hereinafter to be referred as ‘the Act’) for setting aside the award dated 05.10.2015, passed by the

sole Arbitrator in the matter of dispute arising out of contract dated 13.12.1982 for turnkey execution of coal handling plant at K.D. Hesalong Project

of CCL in N.K. area.

Facts of the case in brief is that in the year 1981, appellant-company floated an open tender for design, supply, erection and commissioning of 1.5

MT Coal Handling Plant for K.D. Hesalong Mines comprising primary and secondary (mines). The tender was pre-engineered by CCL consultant-

CMPDIL. Pursuant to the aforesaid tender respondent claimant â€"M/s Damodar Ropeways and Infra Ltd. (DRIL) participated and on 18.08.1982

upon the acceptance of bid, letter of intent was issued in favour of respondent-claimant. On 13.12.1982, an agreement was entered into between the

parties for commissioning the contract work within 18 months from 13.12.1982. In December, 1985, the first phase was commissioned and the

commercial operation of the same was commenced. Thereafter in November, 1986, the appellant-company amended phase-II by including weigh

feeder building within its scope and increasing its capacity of the wagon haulers. Consequently, the cost of contract was also enhanced and the

contract value was revised. The time for completion of the extended work was extended up to 31.08.1994. In July, 1995, the first test by using

locomotive without wagon was carried out by the appellant company. Since till March 1988, no load test was carried out by the respondent-claimant,

extension of time was granted till 30.06.1999 for completion of project. In August, 1999, a second load test was carried out by the appellant company,

but the respondent-claimant could not supply adequate coal from phase-I. From January, 2000 till June 2011 there was no activity on the site and

according to the respondent-claimant the site for wagon hauling system was not handed over by the appellant-company to the respondent-claimant. As

a result on 25.06.2011 the respondent-claimant terminated the contract and the matter was referred for arbitration.

The sole Arbitrator published his award dated 5.10.2015 and found the respondent-claimant entitled for payment of Rs.3,86,84,927/- with interest @

15 percent per-annum from the date of the award till the date of payment.

The appellant-company filed an objection under Section 34 (2) of the Act for setting aside the award dated 5.10.2015, passed by the sole Arbitrator,

which was dismissed by the impugned judgment dated 13.06.2018, which has been challenged by way of this appeal before this Court.

The learned counsel for the appellant company strenuously argued that the award given by the sole Arbitrator is not in consonance with the terms

of contract and learned Arbitrator has exceeded its jurisdiction in awarding for those items, which were not under the scope of work. The learned

counsel further contended that the claim by the respondent-claimant before the Arbitrator is hopelessly barred by limitation and learned sole arbitrator

failed to appreciate the fact that no amount should have been awarded on the ground of limitation itself. He further submits that the sole Arbitrator has

awarded 15% of interest pendente lite future etc. which is not in accordance with law. He further contended that seeing the prevalent rate of interest

in the banks, the learned Arbitrator should have awarded lesser rate of interest. The learned Commercial Court has committed a gross error in law in

not appreciating the fact that the claimant raised all the claims after more than 11 years as such, the claims should have been rejected. He further

contended that the learned Arbitrator failed to consider that phase-II of the contract was never completed and there was a delay on the part of

respondent-claimant in completion of contract work. The learned counsel for the appellant further contended that the Commercial Court should have

appreciated the fact that the learned Arbitrator has passed the award without considering the material facts submitted by the appellant company. He

concluded his argument by submitting that the award is in conflict with the public policy of India, as because the sole Arbitrator published the award

beyond the provisions of the terms of the contract.

Learned counsel for the appellant-company in order to buttress his arguments relied upon the judgment passed in the case of ONGC Ltd. Vs. Saw

Pipes Ltd. reported in (2003) 5 SCC 705 and also judgment passed in the case of Krishna Bhagya Jala Nigam Ltd. vs. G. Harischandra Reddy,

reported in (2007) 2 SCC 720.

In nutshell, the learned counsel for the appellant-company challenged the impugned order on basically three points (i) claim is barred by limitation (ii)

the award is not in consonance with the terms and has been given beyond its scope of reference and (iii) the interest granted by the sole Arbitrator i.e.

15% is very high in the backdrop of the fact that the present rate of interest in any Bank or financial institution is 6-7%.

The learned counsel for the respondent-claimant submits that there is no error, whatsoever, in the impugned judgment and the commercial Court

has appreciated the entire aspect of the matter and rejected the objection filed by the appellant-company. It is a settled principle of law that under

Section 34 (2) of the Act, the Court is not empowered to enter into the facts and so far as the interest is concerned, the same has been awarded in

terms of the contract and there is no illegality either in the impugned award or in the impugned judgment passed by the Commercial Court, Ranchi.

The respondent-claimant relied upon the judgment of Hon’ble Delhi High Court, inN HAI Vs. BSC-RBM-Pati Joint Venture, reported in (2018)

SCC OnLine Delhi 6780, wherein the Court has held that the appeal under Section 37 is like a second appeal. The first appeal being to the Court by

way of objection under Section 34. Being in the nature of second appeal, the Court should be hesitant to interfere with the decision of learned Single

Judge unless it is shown to be palpably erroneous on the fact or in law or manifestly perverse. Para-74 of the said judgment is quoted herein below: -

“74. Before parting with this judgment, we are constrained to note that, in case after case, we find that factual findings, in respect of

which the learned Arbitral Tribunal is the final authority, are being successively challenged, under Section 34 and thereafter, under Section

37 of the Act. This has effectively reduced the exercise of arbitration to the civil trial, and petitions under Sections 34 and 37 of the Act to

first appeals and second appeals. In fact, while second appeals under Section 100 of the Civil Procedure Code, 1908, would lie only on

questions of law, we find that arbitral awards are being challenged, even on facts, under Section 37 of the Act. Despite wealth of judicial

authority on this point, and repeated disapproval voiced by the Supreme Court and as well as several High Courts including this Court

thereon, it is almost invariably seen that every award passed by the arbitrator/Arbitral Tribunal, especially, where the awards are

commercial in nature, are challenged, first before the Single Judge and thereafter before the Division Bench merely because the

“aggrieved party†possess the financial wherewithal to do so. It is a matter of concern that the majority of such challenges are by

public sector undertakings, the appellant before us being one of the main contributors thereto. Such attempts contribute, in a great deal to

the menace of “docket explosionâ€, which plagues our Courts and consumes valuable time which could be used for settling more

important disputes. We unhesitatingly deprecate this practice.â€​

He further relied upon the judgment of MMTC Vs. Vedanta Ltd. reported in (2019) 4 SCC 16 3and also on the judgment passed in the case of

Mcdormatt International Inc. Vs. Burn Standard Co. Ltd., reported in (2006) 11 SCC 181.

He concluded his arguments by submitting that so far as the contention of the appellant company with respect to rate of interest, the Hon’ble

Apex Court in the case of MC Dermott International Inc. (Supra) in para 154 has held that Section 31(7) (a) provides that the Arbitral Tribunal may

award interest, at such rate as it deems reasonable. Para-154 of the judgment is quoted herein below:-

“154. The power of the arbitrator to award interest for pre-award period, interest pendente lite and interest post-award period is not in

dispute. Section 31(7)(a) provides that the Arbitral Tribunal may award interest, at such rate as it deems reasonable, on the whole or any

part of the money, for the whole or any part of the period between the date on which the cause of action arose and the date on which award

is made i.e. pre-award period. This, however, is subject to the agreement as regards the rate of interest on unpaid sums between the parties.

The question as to whether interest would be paid on the whole or part of the amount or whether it should be awarded in the pre-award

period would depend upon the facts and circumstances of each case. The Arbitral Tribunal in this behalf will have to exercise its discretion

as regards (i) at what rate interest should be awarded; (ii) whether interest should be awarded on the whole or part of the award money;

and (iii) whether interest should be awarded for the whole or any part of the pre-award period.â€​

Relying upon the aforesaid judgment, the learned counsel for the respondent-claimant submits that there is no error in the impugned order so as to

warrant any interference by this Court and the instant appeal deserves to be dismissed.

Heard learned counsel for the parties and perused the impugned judgment and relevant records of the case.

After going through the records, it transpires that the learned Court below has meticulously dealt each and every issues raised by the appellant-

claimant and refused to entertain the objection petition filed by the appellant-company. The learned Court below has categorically held that the

objections raised by the appellant-claimant does not fall within the ambit of Section 34 of the Act. After relying upon the settled principals of law laid

down by the Hon’ble Apex Court in the case of Associate Builders Vs. Delhi Development Authority, reported in (2015) 3 SCC 49, ONGC Ltd.

Vs. Saw Pipes Ltd. reported in (2003) 5 SCC 705 and other catena of judgments, it has been held that the Court is not sitting in appeal against the

award passed by the Arbitral Tribunal and it is not required to re-appreciate or re-evaluate the findings given by the Arbitrator. The learned Court

below has categorically observed that the award in question clearly shows that the Arbitrator has duly dealt with the entire issues in detail and arrived

at finding that the appellant-company is liable to pay to the respondent-claimant. The learned court below has further given a categorical finding that

nowhere in the award reflects that the award is against the public policy or that there is any bias or learned Arbitrator decided the disputes beyond his

jurisdiction.

Now it is well settled that any award can be set aside but only if it comes within the provision of Section 34 of the Act. An error apparent on the

face of the record would not imply closure scrutiny on the merit of the documents and materials on record. Once it is found that the view of the

Arbitrator is plausible one, the Court should refrain itself from interfering.

In the case of MMTC Vs Vedanta Ltd. reported in (2019) 4 SCC 163 the Hon’ble Apex Court has reiterated the law at paragraph 14, which

is as under: -

“14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such

interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake

an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has

not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34

and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.â€​

In the instant case, it cannot be said that Arbitrator has misconducted the proceeding. It was well within his jurisdiction to interpret the clause

mentioned in the contract agreement. At this stage it is pertinent to mention here that even the sole Arbitrator was from the appellant-company. From

bare perusal of the award, it transpires that it is well reasoned award. As a matter of fact, the learned Court below has specifically held that each and

every issue has been meticulously dealt by the sole Arbitrator and under appeal the facts cannot be re-appreciated or re-evaluated. In view of the

specific finding and the settled position of law as laid down by the Hon’ble Apex Court in catena of judgments, we are not in agreement with the

contention of the learned counsel for the appellant company and we refrain us from interfering on merit of the claims and the subsequent Award.

The only issue in which the appellant-company deserves some relief is with respect to rate of interest. In view of the substantial reduction of rate

of interest after the economic reforms, in our considered opinion the rate of 15 percent interest given by the Arbitrator for pre-arbitration period for

pendent lite period and future interest should be reduced. The Hon’ble the Apex Court in the case of Krishna Bhagya Jala Nigam Ltd. (Supra) in

paragraph no.-11 held as under:-

“11. On the merits of the claims made by the contractor we find from the impugned award dated 25-6-2000 that it contains several

heads. The arbitrator has meticulously examined the claims of the contractor under each separate head. We do not see any reason to

interfere except on the rates of interest and on the quantum awarded for letting machines of the contractor remaining idle for the periods

mentioned in the award. Here also we may add that we do not wish to interfere with the award except to say that after economic reforms in

our country the interest regime has changed and the rates have substantially reduced and, therefore, we are of the view that the interest

awarded by the arbitrator at 18% for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9%.â€​

Respectfully relying upon the aforesaid judgment of the Hon’ble Apex Court, we are of the view that the interest awarded by the sole

arbitrator at 15% for the pre-arbitration period, for the pendente lite period and future interest be reduced to 9%.

In view of the aforesaid facts discussion and judicial pronouncements, we find that on merits of claim made by the respondent-claimant, the

Arbitrator has meticulously examined the claim under each head, which has been upheld by the learned Court below. We do not see any reason to

interfere with the same. However, as indicated in the preceding paragraph, we hereby modify the Award to the extent that the interest rate given by

the sole Arbitrator @ 15% for the pre-arbitration period, for the pendent lite period and future interest be reduced to 9%.

In the result, the instant appeal is dismissed with modification in the Award, as indicated herein above.