Eastern Coalfields Ltd. vs Maheswari Enterprises

Manoranjan Mallick, J.—This is an application u/s 30 read with Section 33 of the Indian Arbitration Act, 1940, praying for setting aside the Award passed by Mr. P. K. Pas, Sole Arbitrator, dated August 22, 1989.

The facts of. this case, in brief, are as follows.:

In response to a tender issued by the present Petitioner, namely, Eastern Coalfields Ltd., for construction of an Incline at Dalurband, the Respondent claimant submitted his tender in October, 1979 which was duly accepted by the Eastern Coalfields Ltd. The tender was for construction of retaining wall with C.G.I, sheet roofing over tubular trusses. While the work was in progress; there was heavy sliding of earth and part of retaining wall collapsed. Thereafter, Eastern Coalfields Ltd. decided to change the design to R.C.C. Box Tunnel to suit the site condition and, accordingly, the contract was closed with mutual consent.

Thereafter, on the basis of changed design Eastern Coalfields Ltd. invited fresh tender and the present Respondent submitted its tender on or about November 4, 1980, along with certain conditions. After some negotiation between the parties, the tender submitted by the claimant-Respondent was accepted by the Eastern Coalfields Ltd. on April 8, 1981, incorporating the agreed terms and conditions.

In course of construction considerable amount of additional items of work had to be executed to suit the site condition as per instruction of the Eastern Coalfields Ltd. There were disputes in analysing rates of additional items as per NCWA II which was prevalent during the time of execution. The 5th Running Accounts Bill though prepared by the department was not paid and the final bill was also not processed. After awarding the work at a value of Rs. 16,37,473-81 p., a revised estimate was prepared for an amount of Rs. 31,69,480-18 p.. The initial time of completion was for 4 months, but it is complained by the claimant-Respondent that the work was officially handed over after 17 months. The claimant complained that the delay was due to laches committed by Eastern Coalfields Ltd.

As disputes arose between the parties for which there was an arbitration clause, the claimant through his lawyer served a notice on Eastern Coalfields Ltd. for a reference to arbitration. As the said demand was not acceded to by Eastern Coalfields Ltd., the Respondent-claimant had to file a special suit u/s 20 of the Indian Arbitration Act, 1940, before this Court being Special Suit No. $1 of 1985. By an order dated April 2, 1986, this Court directed the Chairman-cum-Managing Director of Eastern Coalfields Ltd. to appoint an Arbitrator within 3 weeks.. But, as the order was not complied with, this Court by order dated May 20, 1986, appointed one Mr. H.N. Sanyal, Advocate, Sole Arbitrator.

Against the order passed by the learned trial Judge the present Petitioner preferred an appeal which was, however, dismissed by the Division Bench on August 5, 1986. The present Petitioner, Eastern Coalfields Ltd., filed a SLP before the Supreme Court. In the meantime, the appointed Sole Arbitrator, Mr. H. N. Sanyal, expired and by an order dated February 16, 1987, the Hon''ble Supreme Court directed this Court to require the Chairman-cum Managing Director of Eastern Coalfields Ltd. to appoint an Arbitrator in terms of the Agreement. Pursuant to the said directive this Hon''ble Court by an order dated March 6, 1987, directed the said Chairman-cum- Managing Director to appoint an Arbitrator, and by an order dated April 17, 1987, the Chairman-cum-Managing Director of Eastern Coalfields Ltd., appointed Mr. P. K. Das Sole Arbitrator.

Before the Sole Arbitrator the Respondent-claimant made a claim of Rs. 20,93,425.60 p. together with interest at the rate of 18 % per annum from November 7, 1984, till payment as well as the costs of the arbitration proceedings. Eastern Coalfields Ltd.. did not submit any counter-claim.

The Sole Arbitrator on considering the statements, details, evidence, arguments submitted by both the parties, passed the Award directing the Eastern Coalfields Ltd. to pay the Respondent-claimant a sum of Rs. 12,26,223 in full and final settlement of claims referred to him. The Sole Arbitrator has also awarded and directed Eastern Coalfields Ltd. to pay the Respondent-claimant interest at the rate of 15 % per annum on the awarded amount from the date of reference, that is April 17, 1987, to the date of publication of the Award.

Being aggrieved the Eastern Coalfields Ltd. has filed this application for setting aside the Award. The, claimant-Respondent has also filed- an application for judgment and decree on the basis of the Award.

On behalf of the Petitioner it is submitted that the Arbitrator committed misconduct in the proceedings by not considering the evidence adduced by the present applicant. My attention has been drawn to the copy of the Award sent to. the present Petitioner in which it was indicated that the Respondent, namely, Eastern Coalfields Ltd., did not examine any witness. It is contended that actually one witness was examined by the Respondent and from the fact that the Arbitrator noted that no witness was examined it can be concluded that the Arbitrator did not consider the evidence adduced by Eastern Coalfields Ltd. and, therefore, he misconduct in the proceedings.

On behalf of the claimant-Respondent it is submitted that the Award has subsequently been corrected before the same has filed in Court and the original corrected Award which is in Court would indicate that the Arbitrator has noted in the corrected Award that one witness was examined by the present Petitioner.

On perusing the original Award filed in Court, I find that the Arbitrator corrected the initial mistake committed by him by noting that the Petitioner has examined one witness. I find from the Award that the Arbitrator claims to have considered all the evidence adduced before him. Therefore, it has to be presumed that the Arbitrator has considered the evidence adduced not only by the claimant but also by the present applicant, i.e., Eastern Coalfields Ltd.

It is also submitted that even though no counterclaim was filed by the Eastern Coalfields Ltd., a counter-statement was filed challenging the claim of the claimant. The said counter-statement has not been considered by the Arbitrator.

I find from the Award that the Arbitrator has noted that he has considered ail the statements etc. and allowed both the parties full opportunity to plead their cases and on considering all matters has passed the Award. The expression, ''all the statements'' would indicate not .only the Statement of Claim made by the claimant but also the counter-statement made by the present applicant have been considered in the Arbitration. Therefore, I am unable to hold that the counter-statement of the present Petitioner was not considered by the Sole Arbitrator before making the Award.

The Sole Arbitrator has passed a non-speaking Award, and on perusal of the said Award, I am unable to hold that so far the main claim is concerned, there is any error apparent on the. face of the Award for this Court to interfere. I would, therefore, hold that there is nothing to interfere with the Award of Rs. 12,26,223 made by the Sole-Arbitrator in full and final settlement of the claim made by the claimant-Respondent.

On behalf of the Petitioner it is urged that the Sole Arbitrator committed a grave misconduct by not following the principles of law enunciated by the Supreme Court beginning from the case of Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others, and had awarded ''pendente lite interest'' which, in view of the above decision of the Supreme Court and clarified in the subsequent decisions in The Secretary to the Secretary to the Government of Orissa and Another Vs. Sarbeswar Rout, ; M/s. Hind Builders Vs. Union of India, the Sole Arbitrator could not have awarded.

On perusing the judgment in Executive Engineer, Irrigation, Galitnala v. Abhaduta Jena ( Supra), I am of the view that the Supreme Court in that decision has clearly held that the claimant is not entitled to claim pendente lite interest before the Arbitrator as the Arbitrator as the is not a Court nor was any reference to arbitration made in the suit.

Mr. Roy appearing for the Respondent has submitted that when this reference was made in the Special Suit filed u/s 20 of the Arbitration Act, 1940, then it has to be presumed that it is a reference in a pending suit.

But, in the decision reported in Hind Builders (Supra) the Supreme Court has clarified what is meant by arbitration in a pending suit. It means an arbitration made in a suit pending before the Court u/s 21 of the Arbitration Act, 1940. In the instant Supreme Court decision, even though in a pending suit Arbitrator, were appointed, but the Arbitrators were appointed by the parties out of Court and not by the Court u/s 21 of the said Act. Even in such case the Supreme Court has held that the Arbitrator had no jurisdiction to pass pendente lite interest.

Therefore, only because a Section 20 application had to be filed to obtain an order from the Court for a direction upon the Chairman-cum-Managing Director of the Eastern Coalfields Ltd. to appoint an Arbitrator and such application is to be treated as a special suit and on the basis of the said order the appointment of Arbitrator was made, it cannot Be held that the present arbitration was made in a pending suit. In my view pendente lite interest cannot be awarded by the Arbitrator except in a reference made by Court u/s 21 of the Arbitration Act in a pending suit. In that view of the matter, the Award of pendente lite interest made by the Sole Arbitrator in not sustainable in law.

I would, therefore, allow this application in part and modify the Award by deleting the Award regarding interest. Subject to this modification, the Award of the Sole Arbitrator shall stand.

Let the Award case appear for hearing on Thursday next for the purpose of passing a judgment and decree on the Award.

All parties concerned are to act on a signed copy of the operative part of the judgment and order on the usual undertaking.