Rameshwara Nand Sharma vs H.P. State Forest Corporation Ltd. and Another

Kuldip Singh, J.—The objector has filed these objections u/s 34(3) of the Arbitration and Conciliation Act, 1996 (for short Act) against the award dated 22.3.2003 vide which an amount of Rs. 2,423/-in addition to Rs. 10,000/- on account of E.M.D lying with the Corporation was held payable to Petitioner/claimant.

The brief facts of the case are that objector was awarded Labour Supply contract vide Lot No. 4/98-99 (Sharontha), Rohru for cutting, conversion and carrying of timber upto road side depot. The agreement dated 28.4.1998 was executed between the parties vide which approximately 205.760 m3 timber was to be converted and carried. The contract was to be completed upto 31.3.1999. It has been alleged that the fire broke out on 8.2.1999 at the road side depot, Chambanala and the entire timber was reduced to ashes.

It has been further alleged that after the completion of the work the Respondents did not release the payment of the objector who served notices dated 29.5.2000, 30.10.2000. The Respondents did not appoint Arbitrator. The objector filed OMP(M) No. 41 of 2001 and vide order dated 2.8.2001, the High Court ordered the appointment of the Arbitrator.

The Arbitrator ultimately announced the award dated 22.3.2003 against which the objector has filed the objections u/s 34(3) of the Act. The Respondents have accepted the award and they have not filed any objection. On the pleadings of the parties on 18.7.2003 the following issues were framed:

(a) Whether this Court has no jurisdiction to entertain the ''objections?

(b) Whether the objections filed by the objector are beyond the scope of Section 34 of the Arbitration and Conciliation Act?

(c) Whether the compensation awarded against the objector is illegal and against the provisions of the Act?

(d) Relief.

The parties led their evidence by way of affidavits. I have heard learned Counsel for the parties and have also gone through the record. At the time of hearing of the petition it has been noticed onus of the issues has not been placed specifically on the parties. However, this has not affected the merits of the case as the parties have understood the case of either side, issues and what was proved and by whom. The learned Counsel for the parties have not addressed any arguments on issue No. (a) nor there is any material on record to show that this Court has no jurisdiction to entertain the objections. Therefore, it is held that this Court has jurisdiction to entertain the objections, hence issue No. (a) is decided accordingly.

Issues Nos. (b) and (c)

The Issues No. (b) and (c) are interconnected and therefore both of them are being taken up together for decision. The learned Counsel for the Petitioner has confined the claim of Petitioner to an amount of Rs. 1,52,560/- rejected by Arbitrator under issue No. 5 of the impugned award. He has submitted that Arbitrator without positive finding that there was shortage of 126.30 M3 left out/unconverted timber illegally held that Respondents are entitled to compensation for 126.30 M3 timber at the rate of Rs. 1200/- M3 amounting to Rs. 1,51,560/-. The short question involved in the case is whether the Respondents are entitled to compensation amounting to Rs. 1,51,560/- under issue No. 5 of the impugned award.

The Clause 1 of Schedule A of the agreement provides that 205.760 M3 volume of timber was to be converted and carried under the agreement. The question is whether the objector had converted and carried 205.760 M3 timber as per the agreement or not. The connected question is what are the consequences, if the objector had not converted and carried the timber allotted to him as per agreement.

The Arbitrator vide item-A under issue No. 5 of the impugned award has held as follows:

Compensation for 126.30m3 left out/unconverted Timber @ Rs. 1200/-per m3 payable to Respondent = Rs. 1,51,560/-

The Arbitrator under issue No. 3 has again recorded a finding: "as per issue No. 1 that the objector has left 55 trees having volume of 126.30m3 unconverted in the forest". The learned Counsel for the Respondents has failed to point out that under issue No. 1, Arbitrator has recorded a finding that volume of 55 unfelled trees comes to 126.30m3. The precondition for awarding compensation under Clause 12 of Annexure A of the agreement is the finding that there was shortage. In absence of finding of shortage there can not be conclusion of awarding compensation under Clause 12. Thus impugned award is against the agreement and well settled fundamental principle that conclusion must be based on finding. In absence of specific finding that the volume of 55 unfelled trees comes to 126.30M3 it is not possible to hold that objector is liable to pay at the rate of Rs. 1200/- per m3 of 126.30m3 as held vide item-A under issue No. 5. This being the position, the Arbitrator has erred in returning the finding that objector is liable to pay Rs. 1,51,560/- on account of compensation for 126.30m3 left out /unconverted timber at the rate of Rs. 1200/- per m3.

The Arbitrator vide item-B under issue No. 5 has also held that objector -claimant is entitled to Rs. 2,47,484/- on account of extraction charges of 199.603m3 timber. The total timber which was to be extracted as per the agreement was 205.760m3. In presence of finding vide item-B under issue No. 5 that objector-claimant had extracted 199.603m3 timber, the observation of the Arbitrator vide item-A of issue No. 5 that objector has not converted 126.30m3 timbers is not sustainable. Therefore, Arbitrator has erred in deducting Rs. 1,51,560/- from the amount due to the objector. In view of above, the issues No. (b) (c) are decided in favour of the objector.

Now the question is what ultimate order this Court can pass in view of finding that Arbitrator has erred in holding that objector is liable to pay compensation amounting to Rs. 1,51,560/-. The relief prayed in the petition is that objections may be allowed and award announced by the Arbitrator in favour of the Respondents amounting to Rs. 1,51,560/- may be quashed and the objector may be held to be legally entitled to the same under the law.

In McDermott International Inc. Vs. Burn Standard Co. Ltd. and Others, the Supreme Court has held that 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. In view of the law laid down by the Supreme Court, it is clear that this Court can only quash the award leaving the parties free to begin the arbitration again if it is desired.

In Arbitration Case No. 22 of 2007 decided on 22.2.2010, it has been held that in view of the law laid down by the Supreme Court this Court can only quash the award leaving the parties free to begin the arbitration again if it is desired. The power of setting aside in certain circumstances may include the power of reducing of the amount awarded by the Arbitrator but it is difficult to hold that power to set aside award also includes the power to award some amount to the objector/Petitioner over and above the amount awarded by the Arbitrator on the basis of decision of the Court.

In view of above discussion, it is held that Arbitrator has erred in deducting Rs. 1,51,560/-from the claim of the objector/Petitioner but in view of Mcdemott International INC (supra) a mandate cannot be given to the Respondents to pay Rs. 1,51,560/- to the objector. The objector is at liberty to approach the Arbitrator to claim Rs. 1,51,560/- and Arbitrator, if approached, shall decide the matter in accordance with law and in view of findings recorded above. The petition stands disposed of on above terms.