State of Rajasthan vs Ashok Kumar Contractor

Pratap Krishna Lohra, J.—Appellant, State of Rajasthan, has laid this appeal under Section 37 of the Arbitration & Conciliation Act, 1996 (for short, ''Act of 1996'') for assailing the order dated 7th October, 2013 passed by the District Judge, Bikaner, whereby application of the appellant under Section 34 of the Act of 1996 for setting aside the arbitral award dated 25th August, 2006 is rejected.

Brief facts of the case are that the appellant, State of Rajasthan issued a notice inviting tender for supplying 20 lacs tiles and 1 lac bricks. The contract was awarded in favour of respondent No. 1 for supplying the aforesaid articles and in this behalf an agreement bearing No. 56 for the year 1993-94 has been entered into between the appellant and respondent No. 1. As per the terms and conditions of the contract, the date was fixed for commencing the work as 21st November, 1993 and the date for completion of the work was fixed as 20th October, 1994. As respondent No. 1 did not complete the work within the stipulated time, appellant informed the respondent No. 1 that appropriate proceedings will be initiated against it as per Clause 12(B) and 15(B) of the agreement. The respondent-contractor, vide letter 17th April, 2001 made a request for appointing a sole arbitrator as per Clause 19 of the Agreement and thereafter matter was referred to sole arbitrator, Mr. P.K. Govil, Superintending Engineer for resolving the dispute between the parties vide letter dated 27th March, 2002 issued by Chief Engineer, IGNP, Bikaner. Before the Arbitrator, the respondent-contractor submitted statement of claim on 17th December, 2002 and claimed a sum of Rs. 38,04,918/- including the amount of interest on delayed payment. The appellant also filed counter claim on 16th April, 2003 and prayed that a sum of Rs. 13,38,909/- is due against respondent-contractor, which is recoverable.

On the basis of the pleadings of the rival parties parties, the learned sole arbitrator has framed six issues to decide the dispute.

On conclusion of arbitral proceedings, the sole arbitrator passed award on 25th August, 2006. Upon consideration of the materials available on record, the arbitrator declared respondent entitled for the claim of Rs. 16,15,546/- and also awarded interest @ 8% per annum w.e.f. 20.07.1997 upto date of award on due amount and further @ 7% from the date of award till the date of realization, if the appellant fails to make payment within four months from the date of award.

Being aggrieved from the arbitral award, the appellant invoked jurisdiction of the learned District Judge, Bikaner, by laying an application under Sections 34 of the Act of 1996. The learned District Judge, after thoroughly examining the arbitral award, declined to interfere with the arbitration award and rejected the application, vide order dated 7th October, 2014.

Learned counsel for the appellant, Mr. K.D. Singh, has argued that the learned District Judge, while passing the impugned order, has not thrashed out the matter in its entirety and has not considered the submissions made at the behest of appellant. Mr. Singh would contend that the arbitral award was per-se dehors the terms of the contract, but this vital issue is not properly appreciated by the learned Court below, while passing the impugned order. Learned Counsel has urged that a glance at the impugned order clearly and unequivocally reveals that on this crucial issue, learned Court below has not recorded any finding in the impugned order. Mr. Singh has submitted with full emphasis that there were many pit-falls in the arbitral award, which were canvassed before the learned Court below, but the learned District Judge has not examined the arbitral award in right perspective and as such impugned order warrants interference.

I have heard learned counsel for the appellant, perused the impugned order and materials available on record.

In this appeal the question which has cropped up lies in narrow compass. The concern of the Court is to examine the powers of the learned Court below to set aside arbitral award under Section 34 of the Act of 1996 and power of judicial review in this appeal.

Upon perusal of the materials available on record, it is crystal clear that the arbitrator has examined the matter thoroughly and recorded its finding on each and every issue meticulously by appreciating the evidence and material available on record. While considering the application of the appellant under Section 34 of the Act of 1996, the learned Court below has thoroughly examined the sustainability of arbitral award within the parameters prescribed under aforesaid section.

An arbitral award can be set aside if the aggrieved party has been able to make out a case within the four corners of sub-section (2) of Section 34 of the Act of 1996. As a matter of fact, the learned Court below was not obliged to re-assess the evidence on record while exercising its jurisdiction under Section 34 of the Act of 1996, but it has taken utmost care to examine the arbitral award threadbare. The learned Court below after examining the award has fully concurred with the findings and conclusions of the arbitrator by declining to interfere with the arbitral award.

The scope and ambit of judicial review over an award passed by an arbitrator are now well settled. Arbitrator is a Judge appointed by both the parties after reaching a consensus, or a Court appoints him under the provisions of the Act. The arbitrator is a Judge appointed by the parties, the parties are bound by his decision even if the award is wrong either on law or on facts. Thus, the decision of the arbitrator is final unless the reasons given by him are totally perverse, or the award is based on wrong proposition of law. A mere error of law on the face of award is not sufficient to nullify the award. If on examining the arbitral award the Court comes to the conclusion that view of the arbitrator is a plausible one, the same is not liable to be interfered with. It goes without saying that if the interpretation of a contract is a matter solely within the domain of the arbitrator, the Courts are expected to be weary in interpreting the contract.

My view on scope of judicial review for setting aside arbitral award under Section 34 of the Act of 1996 finds support from a decision of Hon''ble Apex Court in case of State of U.P. Vs. Allied Constructions, , wherein Court held as under:-

Any award made by an arbitrator can be set aside only if one or the other term specified in Sections 30 and 33 of the Arbitration Act, 1940 is attracted. It is not a case where it can be said that the arbitrator has misconducted the proceedings. It was within his jurisdiction to interpret Clause 47 of the Agreement having regard to the fact-situation obtaining therein. It is submitted that an award made by an arbitrator may be wrong either on law or on fact and error of law on the face of it could not nullify an award. The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for arbitrator to determine (see Sudarsan Trading Co. v. Govt. of Kerala). Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set aside. The arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the Court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once it is found that the view of the arbitrator is a plausible one, the Court will refrain itself from interfering (see U.P. SEB v. Searsole chemicals Ltd. and Ispat Engg. & Foundry Works v. Steel Authority of India Ltd).

The same view has also been reiterated by the Hon''ble Apex court in a subsequent decision in case of D.D. Sharma Vs. Union of India (UOI), .

Hon''ble Apex Court, while dilating on scope of judicial review of arbitral award, reiterated the same view in case of P.R. Shah, Shares and Stock Broker (P) Ltd. Vs. B.H.H. Securities (P) Ltd. and Others, , wherein the Court has held as under:-

A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not possible to re-examine the facts to find out whether a different decision can be arrived at.

Thus, viewed from any angle, the learned Court below has not committed any error in rejecting the application of the appellant as the reasons given by the arbitrator are neither perverse, nor based on wrong proposition of law. In this view of the matter, I feel dissuaded to interfere with the impugned order in this appeal.

Consequently, the appeal fails and is, hereby, dismissed summarily.