M/s Bharat Coking Coal Limited vs M/s U.V. Engineers

Gautam Kumar Choudhary, J

Heard, learned counsel for the parties.

The Appellant- BCCL is in appeal under Section 39(1) of the Arbitration Act, 1940 against the judgment dated 31st May, 2022 passed in Title (Arbitration) Suit No.119 of 1993 whereby and whereunder the objection raised under Sections 30 and 33 of the Arbitration Act, 1940 was not allowed and the award was made Rule of the Court.

Respondent-Firm was awarded the work of construction of Coal Handling Plant at North Amlabad vide Agreement No.15/1981-82 and the work order was also issued on 03.11.1981. The Contractor was awarded three other contracts for construction of coal handling plant at Nichitpur/Tetulwari vide separate agreement executed on the same day.

The work was finally executed on 31st May, 1986.

The Contractor raised dispute with respect to all the three agreements in a single arbitration and on his request, one Sri P.D.N. Sinha, who, at that time, was General Manager, Quality Control, BCCL, was appointed as an Arbitrator.

Corporation also raised counter claim under twenty-nine heads.

The  sole  Arbitrator  published  the  arbitral  award  on  04.08.1993 whereby and whereunder the total claim of Rs.98,94,109.50/- along with interest @ 13% per annum w.e.f. 16.11.1986 was allowed. Agency had raised a total claim of Rs.2,80,13,056.99/- in altogether 26 heads as detailed in the award which included loss on mobilization advance, increased cost of construction, soil excavation, carriage of soft rock, extra over work, excavation of dumped / settled stack of earth etc.

Argument on behalf of Appellant

Arbitrator, who was appointed in official capacity deliberately delayed four years till his superannuation to make the award. He could not have continued with the arbitral proceeding beyond his superannuation.

It is argued by the learned counsel on behalf of the appellant that twenty-six issues were framed as suggested by the Appellant-Corporation, whereas, twenty-nine issues were framed as suggested by the plaintiff. The issues that were suggested by the appellant also contained some preliminary issues namely (1) Whether the reference to a single Arbitrator was hit under Section 19 of the Partnership Act, (2) Whether the plaintiff not being registered firm, the reference was maintainable under Section 69 of Partnership Act, (3) Whether the claim is barred by limitation, (4) whether the alleged disputes came within the purview of Section 2A of the Arbitration Act, 1940 and if the Arbitrator could look into claim under Section 70 of the Contract Act. It is argued that Section 37 of the Arbitration Act, 1940 makes Limitation Act specifically applicable.

On preliminary issue of maintainability, no finding was recorded by the Arbitrator, but surprisingly the learned Court below has noted in the judgment at para 11 that that Arbitrator had duly dealt with the matter. This was an error of record as the preliminary issues were not decided by the Arbitrator. It is also pointed out that in the award, there was no reference to the Contract Act, however, the learned Court below has noted in the same paragraph as follows: -

“I further find that the sole Arbitrator has meticulously dealt with the provisions of the Contract Act and passed the award in consonance with the terms of the contract”

Appointment of Arbitrator was specific in respect of Agreement No.15 of 1981-82 and work order dated 03.11.1981. However, the Arbitrator in the first line of the Award has claimed himself to be appointed to adjudicate disputes and differences and claims for Rs.2,80,13,056.99 with interest @ 21% as per Annexure A against 26 items of claims. Appointment letter will disclose that no such Annexure was given to adjudicate for the above stated amount.

It is contended that award was cryptic as there was no finding on the issues framed in general which will be apparent from the award itself where the claims have been set out up to page 11 and thereafter, the matter has been decided without any finding on preliminary issue or the other issues on the basis of evidence. As a matter of fact, it was specifically stated by the Arbitrator while hearing the arbitral proceeding on 09.03.1991 that the preliminary issues will be decided at the time of final award, but the preliminary issues were never decided or answered by the Arbitrator.

Argument on behalf of the Respondent

It is argued by the learned counsel on behalf of the respondent/claimant that the there is no averment on the part of the appellant at any stage that work was not executed. As a matter of fact, the work was to be completed within 15 months from 13.11.1981 which was duly extended from time to time and the work was ultimately completed on 31.05.1986. The original value of the work was to the tune of Rs.58,33,597/-, which was enhanced to Rs.1,43,20,160.44/-. The final measurement was also made, but the payment was not made since the bill was not signed by the plaintiff. It was against this backdrop that the claim of the respondent was allowed by the Arbitrator.

It is further argued that although the Arbitrator was appointed for the claim arising out of all the four work orders pertaining to Amlabad, Nichitpur, Tetulwari and Kashalpur, but as it is apparent from the cause title of the award as well as the decree passed by the learned Court under Section 34 of the Arbitration Act, 1940 it was confined to the work executed by the claimant with respect to Amlabad. The other claims were not pressed and remained undecided.

The main argument is that this Court has no jurisdiction to interfere with the award which has been affirmed by the learned Court below in view of the ratio laid down by the Apex Court in the following authorities :-(1989) 2 SCC 721, (2001) 3 SCC 351, AIR 2001 SC 2668, (2001) 2 SCC 680, (2005) 6 SCC 462.

ANALYSIS

Scope of interference in a challenge to an arbitral award is a limited one. Law has been summed up by the Apex Court in Atlanta Ltd. v. Union of India, (2022) 3 SCC 739 :

The consistent view taken in several judicial pronouncements is that the Court does not sit in appeal over an award passed by an arbitrator and the only grounds on which it can be challenged are those that have been specified in Sections 30 and 33 of the Arbitration Act, namely, when there is an error on the face of the award or when the learned arbitrator has misconducted himself or the proceedings.

Section 30 of the Arbitration Act, 1940 sets out the grounds on which an award can be set aside on one or more of the following grounds, namely:

(a) that an Arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;

(c) that an award has been improperly procured or is otherwise invalid.

What ‘misconduct’ means in this context is crystallized by a long line of judicial precedents. The Apex Court held in Seth Mohanlal Hiralal v. State of M.P., (2003) 12 SCC 144 that Arbitrator had misconducted by ignoring the two very material documents. It held that misconduct under Section 30(a) has no connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring the very material documents which throw abundant light on the controversy to help a just and fair decision. Again in V.G. George v. Indian Rare Earths Ltd. & Another, (1999) 3 SCC 762, it was held that the amount awarded under Claim 3 was beyond the scope of the agreement entered into between the parties and was therefore struck down. In S.S. Jatley v. College of Vocational Studies, 1994 Supl. (2) SCC 402, it was held that Arbitrator is guilty if he ignores the very material document which throws abundant light on the matter in the controversy or if he makes the award without perusing the contract upon which the rights and liabilities of the parties depend. In P.M. Paul v. Union of India, 1989 (Supp) 1 SCC 368 that an award of an Arbitrator/Umpire can be set aside, inter alia, if he has misconducted himself or the proceeding. Adjudicating upon a matter which is not the subject-matter of adjudication, is a legal misconduct for the arbitrator.

From the above authorities, it can be safely concluded that hands of the Court at the stage of Section 33 of the Arbitration Act, 1940 or at the appellate stage, are not fettered and an award can be set aside if there is material to show that Arbitrator had misconducted. To err is human. Arbitrators can and do err in adjudicating the matters. To contend that Courts are devoid of jurisdiction to interfere is not in tune with statutory scheme of the provisions of judicial scrutiny at the stage of trial as well as appeal. To hold otherwise will render the provisions under Sections 15, 19, 31 and 39 of the Arbitration Act, 1940 redundant. Under Section 31, Court has jurisdiction in matter to which the reference relates to adjudicate on all questions regarding the validity, effect or existence of an award of an arbitration agreement. Thus, the law mandates the Courts to determine all questions relating to arbitration.

In the present case, a bare perusal of the order passed by the learned trial Court in Title (Arbitration) Suit No.119/1993 vindicates the plea of the appellant that the issues raised before the Court, were neither discussed nor even answered. The judgment runs into eleven pages and objections raised by the appellant have been set out in para 3 (page 2 – 6). The objections include those under the provisions of Partnership Act and Limitation Act and on preliminary issue of maintainability of arbitral proceeding.

Findings of the trial Court starts from para 5, page 7 – 11 which expostulates at length on the law, and is completely bereft of any discussion or finding on the issues raised by the appellant. A cryptic reference has been made in page 10 stating that “defendant no.1 had not adduced any evidence to show that the Arbitrator had misconducted himself or the proceeding”. It is true that the Court is not required to re-appreciate the evidence, but it was incumbent on it to record its finding on the maintainability and other such issues regarding misconduct of the Arbitrator. The award has been confirmed in a most mechanical manner without application of mind and therefore, the impugned order is liable to be set aside.

The impugned order is set aside and remanded to the learned trial Court. Both the parties are directed to appear before the trial Court on 9th June, 2025 after summer vacation. The trial Court will decide the matter afresh, within three months from the said date of appearance of the parties. In the event of non-appearance of any of the party, the Court may proceed as per Order XVII Rule 2 of the CPC.

Arbitration Appeal accordingly, stands disposed of. Interlocutory Application, if any, is also disposed of.