Laxmi Pat Surana vs Voltas Ltd

Ravi Krishan Kapur, J

This is an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (“the Actâ€). In this appeal, the appellant has challenged an

order and judgment dated 6 December, 2018 (“impugned orderâ€) whereby the Learned Single Judge had dismissed an application filed under

Section 34 of the Act challenging an award dated 28 March, 2017 (“impugned awardâ€​) passed by the Sole Arbitrator.

The question before the Sole Arbitrator concerned a claim for price of goods sold and delivered and for services rendered. By the impugned award,

the Arbitrator has directed the appellant to pay a sum of Rs.22,31,532.00/- alongwith interest @ 6% per annum from November 19, 2008 till realisation

of its dues to the respondent.

Briefly stated, by a contract dated 7 April, 2007 the appellant had placed a work order for design, engineering, testing and commissioning of a water

cooler type central air-conditioning system for a complex situated at Kharagpur. The respondent accepted the work order and by a letter dated 20

April, 2007 confirmed the value of the entire project at Rs.1,24,23,086/- subject to levy of statutory duties and taxes. The contract provided that the

entire work was to be completed by the respondent by 30 June, 2007. The other terms and conditions of the contract stipulated that the respondent

was to provide warranties/guarantees and satisfactory completion certificates upon completion of the said work and completion of a performance test.

Admittedly, the respondent provided a handing over certificate on 21 August, 2008. The claim of the respondent before the Arbitrator was for price of

goods supplied and delivered.

It is the case of the respondent that notwithstanding satisfactory completion of the work, the claimant had failed to pay the balance sum of

Rs.22,31,532.60/- inclusive of interest. On the other hand, the appellant had filed a counterclaim for an amount of Rs.4,32,81,496.20/- under various

heads including for liquidated damages. It is an admitted position that before the Arbitrator at the 22nd sitting, the appellant withdrew five of his initial

claims after which the counterclaim was restricted to Rs.6,21,154.30/- on account of liquidated damages and for delay in completion of works by the

respondent. The appellant also claimed an additional amount on account of the delay in execution of works and cost of electricity. It was the primary

grievance of the appellant that the respondent had failed, neglected and refused to carry out the performance test as stipulated under the contract

despite repeated reminders on 5 September 2008, 6 January 2009, 16 June 2009, 28 June 2010 and 11 August, 2010. The appellant further contended

that he was ready and willing to make payment to the respondent but only on the contractual terms and after completion of all the obligations of the

respondent under the contract. The appellant also contended that the respondent was liable to compensate the claimant for the delay in completion of

the works.

Mr. L. P. Surana, the appellant (appearing in-person), contended that the award passed by the Arbitrator is erroneous both on facts and on law and

is liable to be set aside. He urged that the award was based primarily on the admissions of the claimant contained in the letter dated 16 June, 2009,

wherein the appellant had recorded its appreciation for the good air conditioning and plant installation and commissioning by the respondent and further

requested them to continue to provide the good services for the proper operation and maintenance of the air conditioning system. In the said letter, the

appellant had also sought for time to make payment of the balance amount to the respondent on the ground of facing acute financial crisis. It was

further contended by the appellant that the said letter did not contain an unequivocal and categorical admission of liability and the same should have

been read alongwith the other letters dated 16 June 2009, 28 June 2010 and 11 August, 2010 exchanged between the parties. Accordingly, it was

contended, that the Arbitrator erred in his appreciation of the facts and circumstances of the case and failed to give due weight to all the

correspondence which had been exchanged between the parties. It was also contended, that the performance test which the respondent was obliged

to do under the contract was not performed and as such the respondent was in breach of its obligations under the contract and the appellant should

have been compensated for the breach by the respondent. It was further contended, that the claim for liquidated damages on account of delay in

execution of the contract by the respondent ought to have been awarded and the Arbitrator erred in not awarding the same. The appellant also

contended that there was no performance test, no guarantees and no warranties which had been furnished by the respondent and this was in violation

of the terms and conditions of the contract.

Mr. Gupta, the learned counsel appearing on behalf of the respondent, supported the impugned award and the impugned order passed by the

learned Trial Court on the ground that there were no grounds made out warranting interference with the impugned award and the impugned order. He

emphasised that the appellant had failed to show any ground under Section 34 which could be attracted in the facts and circumstances of the instant

case. He submitted that the admission contained in the letter dated 16 June, 2009 relied on by the Arbitrator in passing the impugned award was clear,

unequivocal and unambiguous. He submitted that the warranties and the guarantees under the contract had been duly furnished by the respondent and

this was a fact which was duly dealt with in the pleadings filed before the Arbitrator. He further submitted that the condition for carrying out the

performance test was given a go-bye by the parties since the appellant was satisfied with the working of the air-conditioning system which had been

set up by the respondent and had not complained for a long period after installation. He placed much emphasis on the letter dated 16 June, 2009

wherein the appellant had unequivocally recorded its appreciation for the good air conditioning plant installed by the respondent. In this background, he

submitted that there was no question of interference with the impugned order or the impugned award. Accordingly, he submitted that the instant

appeal was liable to be dismissed with costs.

We do not find it necessary to multiply the references. It is sufficient to recall some of the legal principles which have emerged from a vast body of

ever-growing case law of the various High Courts and the Hon’ble Supreme Court of India pertaining to Section 34 of the Act that may be

summarised as follows:

a) On a cumulative reading of Section 5 and Section 34 of the Act, it is now well settled that an award passed by an Arbitrator can be set aside on the

limited grounds and the supervisory role of a Court is reduced to a minimum level.

b) It is not permissible for a Court to examine the correctness of the findings of the Arbitrator as if it were sitting in appeal overj an award. As such, a

Court while considering the objections under Section 34 of the Act is not expected to re-appreciate the entire findings and re-assess the whole case of

the parties.

c) If the conclusion or the final decision of the Arbitrator is based on a possible view of the matter, a Court should not interfere with an award.

Generally, the conclusion of the Arbitrator with regard to the construction of a contract is not to be interfered with, if there is a plausible view of the

matter, and even an error relatable to interpretation of the contract by an Arbitrator is regarded as an error within its jurisdiction and as such it is an

error which is not amenable to correction by Courts.

d) “A perverse finding is one which is based on no evidence or one that no reasonable person would have arrived at. Unless it is found that some

relevant evidence has not been considered or that certain inadmissible material has been taken into consideration the finding cannot be said to be

perverse. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is

arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse.†But,

if there is some evidence on record which is acceptable and which could be relied upon, howsoever concise it may be, the conclusions would not be

treated as perverse and the findings would not be interfered with.

The aforesaid principles have been repeatedly reiterated by the different Courts in India including the Hon’ble Supreme Court. Some of the

authorities that can be cited which reiterate the aforesaid principles are McDermott International Inc. Vs. Burn Standard Co. Ltd. (2006) 11 SCC 181

(para 52), Steel Authority of India Vs. Gupta Brothers Steel Tubes Limited (2009) 10 SCC 6 3(paras 27 to 30), Sumitomo Heavy Industries Limited

Vs. Oil and Natural Gas Corporation (2010) 11 SCC 296 (paras 36 to 44), Navodaya Mass Entertainment Ltd. Vs. J.M. Combines (2015) 5 SCC 698

(paras 8 and 9), MMTC Ltd. Vs. Vedanta Ltd. (2019) 4 SCC 16 3(paras 11 to 26), SSangyong Engineering & Construction Co. Ltd. Vs. National

Highways Authority of India 2019 SCC Online SC 67 7(paras 38 and 39), Associate Builders Vs. Delhi Development Authority (2015) 3 SCC 49

(paras 32, 34 and 52), MTNL Vs. Fujitshu India Private Limited 2015 (2) ArbLR 332 (Delhi), and Mahanagar Telephone Nigam Ltd. Vs. Finolex

Cables Limited reported at 2017 (166) DRJ 1.

In Associate Builders Vs. Delhi Development Authority (supra) at para 33 it has been held as follows:

“A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of

evidence to be relied upon when he delivers his arbitral award. Thus, an award based on little evidence or on evidence which does not measure up in

quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious,

then he is the last word on facts.â€​

The primary grievance of the appellant is that the Arbitrator erred in placing reliance on the letter dated June 16, 2009 and in construing the same

to be an acknowledgement of liability. According to the appellant, there was other correspondence dated January 6, 2009, June 16, 2009, June 28,

2010 and August 11, 2010, exchanged between the parties which could explain the admission. The appellant further submitted that on a construction of

all the correspondence exchanged between the parties the admission relied on by the Arbitrator was neither unambiguous nor clear nor unconditional.

Thus, according to him the admission could be explained away.

A perusal of the award would reveal that the Arbitrator has dealt with the aspect of the admission at paragraphs 16 to 21 of the impugned award.

The Arbitrator has meticulously considered all the correspondence. He has interpreted the letter dated June 16, 2009 as an acknowledgement of

liability and an existence of a jural relationship (Paragraph 20). At paragraph 21 of the impugned award, the Arbitrator has dealt with the other letters

dated 5 September, 2008, 6 January, 2009, 16 June, 2009, 28 June, 2010 and 11 August, 2010 and interpreted the same to record an assurance of

payment and that the appellant was facing financial stringency. At paragraph 22 of the impugned award, the Arbitrator has dealt with the defence of

the appellant, that the letter dated 16 June, 2009, was procured by the respondent and was written in good faith. The Arbitrator after considering the

defence has disbelieved the same. The argument on behalf of the appellant that even on the aspect of the letter dated 16 June, 2009 bearing

no.MC/VOLTAS/09-10/041 not being addressed by the Arbitrator, the Arbitrator has held at para 27 of the impugned award that the same appears to

be “an afterthoughtâ€​.

In the impugned judgment, the Learned Single Judge has also dealt with this grievance of the appellant at paragraphs 11 and 13 of the impugned

judgment. The Learned Judge after considering the grievance of the appellant and the impugned award has arrived at a conclusion that the Arbitrator

after duly considering the correspondence has interpreted the same and given reasons for his conclusion. The Learned Judge has then concluded that

the award cannot be interfered with either on the ground of patent illegality or perversity or unreasonableness or on any other grounds.

For the foregoing reasons, we find that the objections raised by appellant have been duly considered both by the Arbitrator and the Learned Single

Judge. As stated hereinbefore, there are limits to our powers of reviewability under Section 34 of the Act. We are fully mindful of the fact that we are

not sitting as an Appellate Court over the Arbitrator’s decision. We cannot reappraise or re-examine the evidence. The view taken by the

Arbitrator is a plausible view. It may not be the only correct view, but it is a possible view. The Arbitrator has dealt with all the points which were

raised by the appellant. We do not find any perversity or unreasonableness in the findings of the Arbitrator. Hence, we find no merit in this objection

raised by the appellant and accordingly, reject the same.

The next point urged on behalf of the appellant was that the respondent was in breach of the contract and therefore not entitled to claim payment

in full. It was submitted on behalf of the appellant that on a reading of Clause 5 (d) of the contract the respondent was only entitled to the entire

consideration after it had conducted the performance test. It was further submitted by the appellant that since the performance test had not been

conducted in terms Clause 5 of the contract and upon production of relevant documents the respondent was not entitled to the entire consideration. To

this extent, it was submitted on behalf of the appellant that the learned Arbitrator misconstrued the terms of the contract and the letters exchanged

between the parties, particularly those relating to withholding of payment to the respondent by reasons of the performance test not having been carried

out. We find that this aspect of the matter has been duly considered by the Arbitrator at paragraphs 21, 22, 24, 28 and 29 of the impugned award and

the Arbitrator after construing Clause 5 (d) and the correspondence exchanged between the parties has come to a finding that the plant was handed

over on 21 August, 2008 and apart from a report of a snag as recorded in the letter dated 4 December, 2008 the appellant had not made any complaint

in respect of performance of the air conditioning system. The Arbitrator has held that the respondent had not alleged in any of the letters that the

performance was not satisfactory. In fact, at paragraph 29 of the impugned award the Arbitrator has come to a finding that Clause 5 (d) did not

authorize the appellant to withhold payment when commissioning and functioning of the plant had been acknowledged on several occasions even as

late as on June 16, 2009. Accordingly, the Arbitrator has rejected this contention of the appellant.

We are also of the view that the Learned Single Judge has dealt with this objection raised by the appellant and has come to a finding that the

impugned award contained reasons based on relevant materials and was not liable to be interfered with. We are of the view that the jurisdiction of a

Court being limited, the interpretation of the contract and the correspondence exchanged between the parties is based on a possible view of the matter

submitted to the Arbitrator. It is not the role of the Court to deduce the implications of the contract in question or the correspondence exchanged

between the parties and any error relatable to interpretation of the contract by an Arbitrator is an error within his jurisdiction and as such not amenable

to correction by a Court. We do not find that the view taken by the Arbitrator on this aspect of the matter is either perverse or capricious or

incongruous or incompatible with the terms of the contract or the correspondence exchanged between the parties. The Arbitrator has given due

weight to the fact that the appellant had not raised any contemporaneous objection with regard to the working of the air conditioning system. On the

contrary, the Arbitrator has come to a specific finding that the letters written by the appellant reflected that the appellant was admittedly satisfied with

the working of the air conditioning system. Additionally, the Arbitrator has also given due weightage to the fact that the expert witness on behalf of the

appellant had not given any evidence as to any malfunctioning of the air conditioner at the relevant point of time. For these reasons, we find no merit in

the objection raised by the appellant and reject the

The next contention raised on behalf of the appellant was that the appellant was entitled to liquidated damages for delayed execution of the work

and had claimed a sum of Rs.6,21,154.30/-. In this connection, the appellant had pleaded in its counterclaim (at paragraph 14 of the counter statement)

and had relied on Clause 7 of the contract which dealt with the aspect of compensation/completion of the work. In the impugned award, the Arbitrator

has dealt with this aspect at paragraphs 31 to 37 of the impugned award and has come to a finding that the claim for liquidated damages was barred

by limitation and the entire claim was an “afterthoughtâ€. The Arbitrator has also held that there is no evidence to show that the parties actually

treated time to be essence of the contract or at that time of handing over the said plant the same was accepted subjected to the claim on account of

the liquidated damages. In the impugned order, the Learned Single Judge has addressed this issue at paragraph 14 of the impugned order and has

found no merit in this objection raised by the appellant.

We are of the view that the interpretation adopted by the Arbitrator is neither capricious nor misconceived nor incompatible nor inconsistent with

the terms of the contract. The view of the Arbitrator is a possible view of the matter and it was legitimate for the Arbitrator to accept the available

interpretation even though we may think that other views could be preferable. In any event, we find no perversity or illegality or any error on the face

of the record of the impugned award.

As such, there is no merit to this objection raised by the appellant and the same is also rejected.

It was next argued on behalf of the appellant that no guarantees or warrantees in terms of Clause 11 of the contract had been furnished by the

respondent. We are of the view that this aspect of the matter has been taken care of in the pleadings filed by the parties and though the appellant had

raised an issue regarding non-furnishing of guarantees and warrantees in the counter statement, the respondent had duly dealt with same in its reply.

As such, there is no merit to this objection which warrants any interference with the impugned award.

The next issue raised by the appellant was that of interest. It was submitted on behalf of the appellant that there is a complete bar for payment of

interest in the contract and that the respondent is not entitled to any interest in terms of the contract. The Arbitrator has dealt with this issue at

paragraphs 35 to 38 of the impugned award. The Arbitrator has interpreted Clause 18 of the contract as per the Regulations of the Indian Railways.

The Arbitrator has also relied on Clause 16.3 of the conditions of the contract of the South Eastern Railway and has come to a finding that the same

has no application to the contract between the claimant and the respondent. The Arbitrator has also relied on the letter dated 17 April, 2017. At

paragraph 38 of the impugned award, the Arbitrator has held that even though there is no agreement on account of interest the respondent was

entitled to interest at the rate of 6% per annum from 19 November, 2008 till realization of its dues.

We are of the view that the aspect of grant of interest has also been duly dealt with by the Arbitrator and we are unable to hold that the Arbitrator

has committed any illegality or perversity or contravened any law in awarding the sum of 6% as interest from the due date. Accordingly, this

contention of the appellant also stands rejected.

In conclusion, we find that the Arbitrator in passing the impugned award has dealt with each of the issues raised by the appellant in the present

proceedings before us. The appellant has been unable to show any ground under Section 34 or otherwise of the Act which would come to its aid in the

instant case. There is nothing that the appellant has been able to show which warrants any interference with the impugned award. We are satisfied

that the Learned Single Judge in passing the impugned order has not committed any error either in law or on facts. The discretion exercised by the

Learned Single Judge in dismissing the application under Section 34 of the Act is neither arbitrary nor capricious nor irrational.

At the cost of repetition, it is important to remind ourselves sitting in this jurisdiction that a Court whilst hearing an application under Section 34,

requires to show more judicial restraint than in the process of an Appellate jurisdiction. An arbitration is an alternate dispute resolution where parties

voluntarily decide to avoid the protracted and lengthy process of the Court. The vast jurisprudence on this aspect is never ending and multiplying

everyday. If a Court is permitted to review the final decision of the arbitral tribunal both on law or on merits outside the permissible limits statutorily

prescribed then the entire object of efficacy and efficiency of the Arbitral Tribunal would be rendered nugatory and infructuous.

For the foregoing reasons as discussed above, the impugned order passed by the Learned Single Judge and the impugned award is upheld.

Accordingly, the instant appeal fails, and the connected application also stands dismissed. However, there shall be no order as to costs.