Manager, Electric (DHP), Kishtwar and another vs Om Raj Manhas

This appeal is directed against the order and the decree dated 2981998 passed by Additional District Judge, Kishtwar

2 The Court below accepted, vide the impugned order, the Arbitrator's award and made it the rule of the Court whereby the claim of respondent,

Mr Om Prakash Manhas, got decreed for the recovery of Rs 1,55,355/ with 12% interest thereon from 2541992 to 2171998

3 The reference to the arbitration related to the dispute with respect to the installation of 750 Nos of florescent tube lights, with the necessary

fittings, in the premises/work spots identified by the Engineering personnel of the Dulhasti Project, Kishtwar, of the National Hydro electric Power

Corporation Ltd (hereafter referred to as (the Project) The dispute having arisen, request appears to have been made to the Chief Engineer in

terms of the agreement of contract, to refer it to the Arbitrator The approach by the contractor to the Chief Engineer for reference did not ex facie

fructify with the result that the District Court at Kishtwar was approached by the contractor for issuance of direction to the Chief Engineer of the

Project for making the reference of the dispute

4 The perusal of the record reveals that despite Court's direction, dated 15121995, to the Chief Engineer for appointment of the Arbitrator, the

controversy/dispute did not get resolved, it appears further from the order of the Court dated 24111997 that the Chief Engineer of the Project

appointed Justice Rajinder Sachar (Rtd) as the arbitrator The so appointed Arbitrator declined to enter upon the reference whereat the Chief

Engineer appointed Mr OP Boni, Retired Chief Engineer, as the Arbitrator

This was not acceptable to the contractor, who accordingly approached the Civil Court seeking appointment of an Arbitrator for resolving the

dispute in reference The learned District Judge after taking note of the circumstances in which the request for appointment of the Arbitrator was

made felt that it would be just and fair for the Court to appoint the Arbitrator It was thereon that on the concensus of the counsel for the parties

that Mr Om Prakash Chowhan, Superintending Engineer, Electricity, Jammu, was appointed the Arbitrator

5 The matter thus went to the appointed Arbitrator who on notice to the parties sought their statements about their respective claims and thence

raised the relevant issues The parties adduced oral as well as documentary evidence in support of their respective claims/contentions and the

Arbitrator thereafter published the award on 2171998 whereby the Contractor was held to be entitled to recover the decreed amount from the

project in reference The award was filed in the Court of Additional District Judge, Kishtwar The Project filed, through its Manager, Electrical, the

objections to the award seeking its setting aside on the grounds :

i) that the Arbitrator had been appointed in contravention of and in derogation to the terms and conditions of the agreement;

ii) that the Arbitrator committed misconduct in relation to the proceedings as the necessary issues were not raised;

iii) that the award is the result of nonappreciation of the evidence adduced by the respondents;

iv) that the award of interest @ 12% per annum from April, 1992 to November, 1997 is bad in law;

v) that during the pendency of the arbitration proceedings, the nonpetitioner ie the Project, came to find that the contractor was related to the

Arbitrator so his replacement having been sought, the request was turned down by the Court

6 Heard

7 Section 39 of the Arbitration Act permits the filing of an appeal against an order which has refused to set aside the award or an order which sets

aside the award Section 17 of the Act provides, besides other things, that where the Court sees no cause to set aside the award, it shall proceed to

pronounce the judgment according to the award and upon the judgment so pronounced, a decree shall follow This section provides that no appeal

shall lie from such a decree except on the ground that it is in excess or not otherwise in accordance with the award

8 Conjoint reading of these two statutory provisions shows that no appeal can lie against the decree passed on acceptance of the award but

Section 39 leaves scope for scrutiny of the order setting aside or refusing to set aside an award

9 Here in this case the appeal is directed against the order of the learned Additional District Judge who has refused to set aside the award The

appeal is thus competent

10 The memo of appeal besides other contentions makes the averment that the award suffers from legal infirmity as it has been passed without

joining the NHPC as the party though it was a necessary party in that the contract in reference was entered into for and on behalf of the NHPC

This ground was not taken either before the District Court which made the reference or before the Arbitrator This objection was, not again raised

before the Court which made the rule of the Court It is for the first time that this objection has found reflection in the memo of appeal The counsel

appearing for the appellant perhaps was conscious of the untenability of the objection of the alleged nonjoinder of the party and that is why the

Court was not addressed on this aspect of the matter The objection taken as to the nonjoinder of the alleged necessary party cannot prevail now

as it has been taken belatedly and halfheartedly Otherwise also there is no force in the contention that the award deserved to be set aside on this

court

11 The appellants have made reference to interim orders passed, after the award had been published and filed, to canvass that the Court faultered

as the objections filed against the award were not considered and the matter was heard by the Court before the objections had as a matter of fact

been filed This is not the correct factual position The orders recorded by the Court on 1281998 and 2581998 show that after the objections had

been filed on behalf of the Project and after hearing the counsel appearing for it the learned Judge turned down the objections and refused to set

aside the award It is a total misstatement of fact that the Court below passed the impugned order in hot haste without following the procedure of

giving reasonable opportunity to the aggrieved party to prove the grounds of alleged misconduct of the Arbitrator

12 The order and the decree are assailed on yet another ground It is pleaded that the arbitration clause in the contract provided that the Chief

Engineer, NHPC, alone was competent to appoint the Arbitrator for adjudication of disputes between the Project Management and the contractor

It is averred further that the Court travelled beyond the scope of arbitration clause and appointed the Arbitrator at the request of the contractor It

is in this context pleaded in the memo of appeal that this objection was taken before the Court in support of the request to set aside the award, but

it has not been considered

13 Perusal of the objections filed against the award goes to show that the award was challenged on the ground of being published by the arbitrator

who had not validly been appointed This argument could have perhaps carried the day for the appellants but the minutes of the proceedings in the

Court at the prereference stage go to show that the arbitrators appointed by the Chief Engineer either refused to enter upon the reference or the

appointment was in total disregard of the Court directions issued at the prereference stage In the circumstances the Court felt it to be just and fair

to appoint the arbitrator It was with the consent and on the consensus of the parties, projected through their counsel, that Mr OP Chouhan,

Superintending Engineer, was appointed the Arbitrator This appointment was not questioned by the Project which instead submitted to the

jurisdiction of the Arbitrator by presenting its case before him Put in other words the Project acquiesced in the appointment of the Arbitrator by the

Court Having submitted to the Arbitration proceedings before the Arbitrator appointed by the Court, the Project cannot be permitted to thwart the

result of the proceedings by turning about to plead that the Arbitrator had no jurisdiction to enter upon the reference as he was appointed by the

Court and not by the Chief Engineer A party who stands by the Arbitrator, knowing him to be not validly appointed, and takes his chance of the

award turning about to be favourable to him in spite of such defective appointment cannot be permitted at a subsequent stage to put forward that

ground if the award turns out against him The policy of the law requires that either of the parties to the dispute should at once bring to the notice of

the Court the bad appointment of an arbitrator or his partiality so that proceedings before such arbitrator may not be allowed to continue

14 If the Court had wrongly nominated the Arbitrator and made reference of the dispute to him for adjudication that order could have been

challenged under Section 39 of the Arbitration Act Instead of challenging the appointment of the Arbitrator by the Court the Project submitted to

his jurisdiction perhaps under the expectations that the award will turn out to be in its favour and thus took the chance to put forward its case

before him, it cannot, be now allowed to turn round and challenge the appointment of the Arbitrator on the score that it was only the Chief

Engineer who could have appointed the arbitrator and not the Court The objection is on the face of it belated and motivated to get rid of the award

which has turned out to be in favour of the contractor and against the Project I am thus not inclined to accept the plea that the award had been

published by an arbitrator who was not duly appointed in terms of the contract/agreement between the parties

15 The order and the decree in reference are challenged on yet another ground; namely that the Arbitrator committed misconduct in not framing all

the issues On perusal of the record of the arbitration proceedings, as also the award, it transpires that the Arbitrator raised as many as five issues

which emerged from the claim and the counterclaim It is not even now shown as to which is that averment about which the necessary issue has not

been raised This objection thus needs only to be noticedThe raising of issues is not the sine qua non for the resolution of a dispute, contours

whereof are from the very beginning known to the parties Law needs hardly to be cited that even in civil proceedings nonraising of the issues does

not render the final judgment and decree a nullity unless it is shown that the nonraising of the issues? and necessary issues has resulted in such a

prejudice against the complaining party which has caused miscarriage of justice

16 Perusal of the objections filed against the acceptance of the award goes to show that the request for recasting of the issues was turned down

vide the order dated 651998 by the Arbitrator It appears that the grievance projected by the Project was that the onus of proof of the issues had

not properly been placed so the request for recasting This prayer was rightly turned down by the Arbitrator as the issues had been raised in

presence of the counsel for the parties and noobjection to their nature or scope was pointed out at that time

17 The question of burden of proof looses its all significance when the parties adduce evidence on the issues raised Presuming that the Arbitrator

had wrongly placed the burden of proof of the issues yet that question is of no consequence now as the parties have adduced evidence and on

appreciation thereof, the award has come into existence

18 The order and the decree in reference are challenged on the ground that they are the result of nonappreciation of evidence, Having taken this

objection, the appellant appears to have subsequently become conscious of its nonmaintainability and that is why no arguments were advanced to

canvass the alleged nonappreciation and the resultant effect on the award It is not shown as to where has the Arbitrator faultered in not

appreciating the evidence adduced on behalf of the Project The objection is thus overruled

19 The Arbitrator has allowed the interest at the rate of 12% per annum from April, 1992 to November, 1997 The question that can arise in this

context is whether the Arbitrator could have allowed interest, on the sum found due, for any period prior to the order of reference

20 Reference to Arbitration was made by the Court on 3151997 and the application on which the reference was made did not make a request for

referring the claim to interest for arbitration Delving on this point it can be contended that in the absence of reference to the Arbitrator for

adjudication on the claim of interest for a period prior to the date of reference, the award for interest on the amount found due from any date prior

to date of reference is bad in law Put in short the Arbitrator's award granting interest can be challenged

21 It appears from the award that the contractor had presented on 2441992 the claim for the amount of Rs 1,66,500/ before the Management of

the Project It thus appears that the Arbitrator has allowed interest from the date when the cause of action accrued, that is the date when the claim

was preferred but not paid The record of the arbitration proceedings gives out that the Arbitrator entered upon the reference on 511998, The

application on which the arbitrator was appointed and reference made did not, as said above, make any claim to interest on any amount The order

of reference also does not show it that any claim to interest, prior to the date of reference that is 24111997, was made by the contractor Put in

other words, no claim to interest was projected either in the application seeking reference to Arbitrator nor was such a reference by the Court The

Arbitrator nonetheless came to award interest at 12% per annum on the amount found due from the date of cause of action

22 The question that requires to be addressed is whether the Arbitrator was competent to award interest for the period prior to the order of

reference This question is settled by the decision in case State of Orissa v BN Agarwal, AIR 1997 SC 925 This has been followed by the Division

Bench decision of this Court in CIMA No28/1992

23 The settled law is, that the Arbitrator can award interest for the prereference period only if such a claim can be based on a substantive law or

express contract or on the basis of tradeusage Admittedly there is no substantive law, as the Interest Act of 1937, applicable so as to empower the

Arbitrator to award interest on the adjudged sum for the prereference period No contract is shown to have existed between the parties to this case

whereby interest on the adjudged sum from the date of claim till the date of reference could be allowed It too is not even whispered much less

proved that by any tradeusage or practice the interest for prereference period could be allowed by the Arbitrator

24 The Arbitrator has the jurisdiction to award interest for pendente lite period wherefor the only requirement was to show that it was not

prohibited by the contract between the parties Interest for pendente lite period, that is from the date of reference to the date of award can, in the

absence of contract to the contrary, be awarded by the Arbitrator

25 On the touchstone of the legal position it is held that the Arbitrator in the case at hand had no power to grant interest for the prereference

period as no such right had the basis in any substantive law nor did presumably the agreement provide for payment of interest for that period The

existence of usage to justify the payment of interest for the prereference period is nowhere pleaded muchless established The Arbitrator was

therefore wrong to allow the interest from 2641992, that is the date of accrual of the cause of action up to 24111997, that is the date of reference

The award allowing interest at the rate of 12% per annum on the sum adjudged due, that is Rs 61,845/, for this period is disallowed

26 The Arbitrator's award for payment of interest at the rate of 12% per annum on the sum adjudged that is Rs 61,845/ @ 12% from the date of

reference that is 24111997 to the date of award that is 2171998 is hereby allowed

27 It is in the above context to be noticed that having assessed and determined the cost of installation of the installed tube lights and fittings for 665

Nos at Rs 1,74,630/ the contractor was paid Rs 85,785/ and thereby only the amount of Rs 61,845/ remained due from the Project to the

contractor, interest has to be allowed only on this amount and not on the amount of compensation for damages or litigation expenses

28 The ground taken to assail the impugned order and decree is that the Arbitrator has committed misconduct in that he being related to the

contractor ought not to have entered upon the reference and the Court committed error in not replacing the Arbitrator despite written request to

that effect having been made

29 It is pertinent in this context, to refer to the objections that were filed against the award It came to be averred in para No1 of the objections that

during the pendency of the proceedings before the Arbitrator, the Project came to know that the contractor and the Arbitrator were related to

each other and this relationship resulted in the Arbitrator's leaning in favour of the contractor This is projected to be the Arbitrator's misconduct,

sufficient to set aside the award

30 It is not in the first place indicated either in the objections or otherwise as to what is the alleged relationship between the contractor and the

Arbitrator The objection has been projected in vague terms Again it is not shown as to how the Arbitrator exposed himself to the charge of having

leaned in favour of the contractor In the absence of necessary details and particulars either of the alleged relationship or the alleged misconduct in

proceedings, it is difficult to countenance the argument that the award of the Arbitrator, to whose jurisdiction parties submitted themselves,

deserves to be ignored and set aside A party which submits to the partial Arbitrator knowing him to be partial but takes the chance of the award

coming out to its favour in spite of such partiality cannot be permitted to put forward that ground when the award ultimately turns out against him

An Arbitrator has always to be fair, disinterested and impartial and the law does not permit any speculation or gamble on this basic requisite

fundamental of the Arbitrator If the party does speculate or gamble on that point, it does so at its own peril

31 The policy as already stated is that the party smelling partiality of the Arbitrator at the proceedings should at once bring it to the notice of the

Court so that such proceedings are not allowed to continue or else such a ground cannot be allowed to be projected to set aside the award at a

latter stage

32 If it was a fact that the Arbitrator was related to the contractor and this came to the notice of the Project during the pendency of the Arbitration

proceedings, it ought to have brought it to the notice of the Court and sought replacement of the Arbitrator

33 The record of the Court shows that an application came to be filed on behalf of the Project on 2431998 praying that as the Arbitrator and the

contractor were related and hailing from the same area, so the Arbitrator who had expressed his preframed opinion as to the genuineness of the

contractor's claim deserved to be removed This application remained undecided till 381998 when it was simply filed by the Court This means that

the application was not allowed by the Court The minutes of the proceedings before the Arbitrator do show that having on the one hand not

perused the application for removal of the Arbitrator, the appellant herein submitted to his jurisdiction The record shows that the appellant did not

press motion for the removal of the Arbitrator as it not only participated in the proceedings but even adduced evidence in support of their

contentions before the Arbitrator This circumstance goes to show that the socalled partiality of the arbitrator, on account of his undisclosed

relationship with the contractor, was not taken seriously by the appellant Having entrusted their fate into the hands of the Arbitrator despite having

sought his removal on the ground of his relationship with the contractor, the project cannot be now heard to say that the Arbitrator was not

disinterested or impartial Prayer for his removal on the ground of the alleged relationship has thus in the circumstances to be inferred to be waived

This is evidenced by the express and intentional act on the part of the management of the Project which, despite the knowledge of such alleged

relationship, participated in the proceedings by cross examining the contractor and by adducing their evidence to rebut the claim It can be said in

other words that if it was a fact that the arbitrator was related to the contractor and the management came to know about the relationship during

the pendency of the arbitration proceedings, then one cannot see any reason as to why did it not press the application for the removal of the

Arbitrator and why did they submit to his jurisdiction by participating in the proceedings Having allowed the arbitrator to carry on with the

arbitration proceedings without any serious objection or protest, it can be deduced that the management of the project waived the objection

34 It appears that the appellant wanted to take the chance of a decision being given by the Arbitrator in its favour and that is why it participated in

the proceedings before the Arbitrator Now as the award has been passed against the appellant, it cannot be allowed to question the award on the

alleged ground of relationship of the contractor with the Arbitrator It can safely be deduced that the appellant accepted the Arbitrator and waived

the objection of his relationship with the opposite party with full knowledge of their legal rights It is indicated by the record that the ground for

changing/removal of the Arbitrator was clearly an after thought attempt aimed at introduction of a ground to avoid the award if it went against the

appellant

35 If the Arbitrator is shown to be partial and have bias it will amount to misconduct which in turn will be sufficient to set aside the award

Allegation of misconduct must, however, be with necessary particulars and must be explicit The broad allegation of misconduct on account of

relationship, the particulars whereof are not disclosed, is not enough Having not disclosed the particulars of the alleged relationship between the

contractor and the Arbitrator, it cannot be countenanced that the relationship was such as could have led to the bias in favour of the contractor

Having particiated in the proceedings before the Arbitrator with full knowledge of the alleged relationship, the award cannot be interfered with on

the ground that the Arbitrator has misconducted himself or misconducted the proceedings The law is well settled that even an award made by a

party itself is valid if the other party has agreed to refer the dispute to it Viewed from that position, it cannot be said that the grounds exist to

interfere with the award on the vague allegation that the Arbitrator was related to the contractor or that the Arbitrator had bias against the appellant

36 The order of the Court whereby the award has been made rule of the Court permits limited interference in that the interest part of the award has

not been dealt with by the Court The Arbitrator could not have allowed interest on the amount adjudged due under the contract for any period

prior to the date of reference No prayer was made for reference to arbitration to the claim of interest from the date of reference till the award Now

that the Arbitrator has allowed interest from the date of reference to the date of award on the adjudged amount of Rs 61,845/, interest @12% per

annum thereon shall be available to the contractor from the date of reference that is 23111997 till the date of award and from the date of decree till

realisation The contractor shall be entitled to the litigation expenses assessed at Rs5000/ by the Arbitrator This is so because the judgment debtor

has not thrown any challenge thereto

37 The appeal thus stands partially allowed Decree sheet be drawn up accordingly

Appeal allowed