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Judgment
Pratap Krishna Lohra, J.—Appalled by the order dated 29.09.2011, the appellant has laid this appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, ''Act of 1996''). By the order impugned, learned District Judge, Udaipur has rejected the application of the appellant under Sections 33and 34 of the Act of 1996 declining to interfere with the arbitral award dated 22nd June, 2007.
Succinctly stated, the facts of the case are that State Government sanctioned a work order in favour of respondent No. 1 for constructing road of Udaipur bypass Phase-I, from Kilometer 0/0 to 5/718, originating from Kilometer 263/505 of Ajmer-Udaipur Section of NH-9. In this regard, a contract agreement No. 9/1995-1996 was executed between the parties. The work order was issued on 19.08.1995. According to the work order, the date of commencement of work was 04.09.1995 and completion of work was 03.09.1997. Since the respondent-contractor failed to complete the work within time, the appellant while invoking clause 2 of the agreement, imposed penalty upon the respondent-contractor and rescinded the work. The remaining work was done by some other contractor. Respondent-contractor invoked clause-23 of the agreement seeking reference of dispute for resolution to the empowered standing committee. On account of non-reference of dispute, the claimant moved an application under Section 11 of the Act of 1996 before this Court, and this Court vide order dated 15.07.2003 appointed Shri S.R. Mehta as sole arbitrator for adjudicating the dispute.
The respondent-contractor submitted its claim before the sole Arbitrator, while dividing it in 6 parts. The details about 6 claims of the respondent-contractor are as under:-
Claim No. 1
Damages due to change in scope of work and consequent idling for Rs. 15,43,668/-.
Claim No. 2
Reimbursement of wrong recovery of L.D. For Rs. 22,84,559/-.
Claim No. 3
Payment of final bill-Rs. 13,53,428/-
Claim No. 4
On account of loss of profit on balance work-Rs. 20,54,352.84.
Claim No. 5
Loss of Goodwill-Rs. 25,00,000/-
Claim No. 6
Compensation for depriving from working in Rajasthan-Rs. 25,00,000/-
For substantiating the aforementioned claims, the respondent pleaded requisite facts in the claim petition and also produced documentary evidence.
Responding to the claim petition submitted by the respondent-contractor, appellant filed a reply. In the return, appellant has pleaded that respondent No. 1 failed to maintain pro-rata progress as per contract and he was responsible for slow progress. It was further pleaded that as per Clause 2.3.1 of NIT, respondent No. 1 was under obligation to anticipate change and effects of change in scope of work and to provide remedial measures for the same. It was specifically pleaded in the return that in terms of contract, joint measurements were taken for preparing final bill and after preparation of final bill, the respondent-contractor has not made any endeavour to dispute the same within the stipulated period of 30 days, therefore, the respondent has no right to claim any additional amount under the so-called final bill. Apart from reply, the appellant has also filed a counter claim for recovery of balance of liquidated damages/compensation from respondent-contractor to the tune of Rs. 7,62,792/-. The sole Arbitrator framed in all 8 points for determination between the rival parties, and after completion of evidence passed Award on 22nd June, 2007 favouring the respondent-contractor. In the same breath, the sole arbitrator rejected the counter claim of the appellants. The sole Arbitrator passed the award in following terms:-
The claimants are entitled for a total amount of Rs. 63,15,794/- from the respondents.
The principal amount shall carry further simple interest @ 12% p.a. from the date sixty days beyond the date of making and publishing this award till the date of actual payment.
The above said award shall be by way of full and final settlement of the claims and counter claims put forth before Tribunal on all the counts.
The party shall bear their own cost including the cost of Arbitration.
Being aggrieved by the arbitral award, appellant submitted an application under Section 34 of the Act of 1996 for setting aside the arbitral award before the learned District Judge, Udaipur. In the application, appellant assailed the arbitral award by urging that sole Arbitrator has not scanned the materials on record and without recording cogent finding awarded claim worth Rs. 63,15,794/- in favour of respondent-contractor and simple interest @12% from the date of sixty days beyond the date of making and publishing award till the date of actual payment. In the application, it is stated that the respondent-contractor failed to complete the work within the prescribed time, therefore, while invoking clause 2 of the agreement, penalty has been imposed upon the respondent and rescinding the work and remaining work was got done from some other contractor. It is also stated in the application that their counter claim amounting to Rs. 7,62,792/- was rejected without any basis, which is not justifiable. It is also stated that between the rival parties, there is no agreement with regard to interest, and awarding of interest by the arbitrator is not as per the prevalent market rate. Lastly, it is averred that the respondent-contractor was intimated for physical verification of work but did not respond, therefore, final bill was prepared and same was paid in accordance with law.
Application under Section 34 submitted by the appellant was contested by respondent-contractor and a reply to the same is submitted. Countering all the allegations, in the return, respondent-contractor has pleaded that the Arbitrator has examined the matter threadbare and thereafter adjudicated its claim, which cannot be upset on the strength of grounds set out in the application. The respondent has also submitted in the reply that the sole Arbitrator has examined the individual claims in the light of evidence and other materials and thereafter decided all the issues and it is clearly evident from the arbitral award that some of the issues have been decided in favour of respondent and some have been decided against it. Therefore, resisting the application of the appellant with full vigor, respondent prayed for its rejection.
The learned District Judge examined the application of the appellant within the parameters and yardsticks set out under Section 34 of the Act of 1996 for interference with the arbitral award. In the order impugned, it is found by the learned Court below that there is no semblance of proof that award is vitiated within the four corners of any of the reasons set out under sub-section (2) of Section 34 of the Act of 1996. The findings of the sole Arbitrator were also examined by the learned Court below with bird''s eye view and it was found that there is no infirmity much less legal infirmity in the findings so as to interfere with the findings in exercise of powers under Section 34 of the Act of 1996. Learned Court below has also taken note of the fact that the powers under Section 34 of the Act of 1996 are to be exercised with great care and circumspection and such powers are not akin to the appellate Court, and consequently by the impugned order rejected the same.
I have heard learned Additional Advocate General for the appellant and Mr. Rajesh Joshi, learned counsel for the respondent-contractor, at length, perused the impugned order as well as the arbitral award.
The lis involved in the matter between the rival parties lies in a very narrow compass. Indisputably, the contract, which was entered into between appellant and the respondent-contractor, envisaged arbitration clause and dispute was referred to the sole arbitrator for adjudication by judicial intervention after considering the application of the respondent-contractor under Section 11 of the Act of 1996.
In the instant case, the sole arbitrator thoroughly scanned the evidence and available material to thrash out the grievance of the respondent-contractor and also simultaneously considered the counter claim of the appellant. As stated supra, the claim was bifurcated into six parts. Claim No. 1-damages due to change in scope of the work and consequent idling was completely declined by the sole arbitrator. Similarly, Claim Nos. 4, 5 and 6 were also denied to the respondent-contractor. In all, the sole arbitrator found claim Nos. 2 and 3 legitimate and accordingly quantified total amount payable to the respondent-contractor to the tune of Rs. 63,15,794/-. The counter claim, for recovery of remaining security deposits by the appellant, was not found worthy of any credit and the same was accordingly declined by the sole arbitrator. On the amount for which the respondent-contractor was found entitled, the sole arbitrator has also allowed simple interest @ 12% per annum from the date of sixty days beyond the date of making and publishing award till the date of actual payment.
The appellant made sincere endeavour to challenge the arbitral award by invoking Sections 33 and 34 of the Act of 1996 before the learned Court below. It is trite that the arbitral award can be set aside if the aggrieved party furnishes proof within the four corners of sub-section (2) of Section 34 of the Act of 1996. The leaned Court below has found that the grounds set out in the application are not falling within the ambit of sub-section (2) of Section 34 of the Act of 1996 and accordingly rejected the application.
The issue, relating to appointing retired Chief Engineer of Public Works Department as sole arbitrator, raised by the appellant also did not find favour of the learned Court below for the simple reason that considering him to be an expert, this Court has appointed him as a sole arbitrator.
The issue relating to award of interest by the sole arbitrator is also examined by the learned Court below as per the scheme of the Act of 1996. Section 31(7) of the Act of 1996 envisages four stages for which arbitrator is competent to award interest, namely, (1) from the stage of accrual of cause of action till filing of the arbitration proceedings, (2) during pendency of the proceedings before the Arbitrator, (3) further interest arising between date of award and date of the decree, and (4) interest arising from date of decree till realisation of award.
Therefore, once the arbitrator has recorded its affirmative finding to pass arbitral award for payment of money, its power to award interest at such rate, as it deems reasonable lies, within its sole discretion.
As observed supra, the scope of judicial review under Section 34 of the Act of 1996 is very much limited and the said jurisdiction is not akin to appellate Court, the learned Court below has not committed any infirmity in passing the impugned order by observing that the appellant has miserably failed to make out a case within the four corners of sub-section (2) of Section 34 of the Act of 1996. It may be observed here that although 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 all pains to examine the arbitral award threadbare to fully concur with the findings and conclusions of the sole arbitrator, which cannot be made subject-matter of judicial scrutiny in this appeal.
A learned Single Judge of this Court, in R.S.R.D.C. Ltd. V/s. M/s. Ravindra Agarwal [2007 (4) WLC (Raj.) 74],ENDLAWFINDER after considering the scope of judicial review of arbitral award, held as under:-
The scope of judicial review of the arbitral award is a narrow one. In order to escape the agony of a protracted trial, in order to save time and expenses, arbitration was developed as an alternate dispute resolution forum. In the commercial, world, where time is of essence and large amount of money is involved, the parties prefer to go for arbitration rather than for civil suit. The long gestation period of a civil suit, which meanders through a labyrinth of procedures and, at times, climbs the judicial pyramid, has persuaded the parties to place an arbitration clause in the contract. The scope and ambit of judicial review over an award passed by an arbitrator are now well settled. The arbitrator is a Judge appointed by both the parties after reaching a consensus, or a Court appoints him under the provisions of the Act. Since 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. Even an error of law on the face of the award cannot nullify the award. Thus, his decision is final unless the reasons given by him are totally perverse or the award is based on wrong proposition of law. But once it is found that the view of the Arbitrator is a plausible one, the Court cannot reverse it by interfering with the award. Moreover, the interpretation of a contract is a matter solely within the domain of the arbitrator. Therefore, the Court should be very weary of interpreting the contract. Similarly, the courts are precluded from reappraising the evidence produced before the arbitrator. The court does not sit in an appeal over the verdict of an arbitrator by reexamining and reappraising the materials placed before him. IN case two views are possible, the Court is not justified in interfering with the award by adopting its own interpretation. Even if it could be proved that the arbitrator has committed some mistake while arriving at his conclusion, such a proof would not invalidate the award. Moreover, it is not "misconduct" on the part of the arbitrator to give a reasoned decision, where his error is one of the fact or of law. Furthermore, even if there is an error of construction of the agreement by the arbitrator, the same is not amenable to correction. Lastly, the reasonableness of an award is not a matter for the Court to consider unless the award is preposterous or absurd. 18. Hon''ble Apex Court in case of Sumitomo Heavy Industries Limited Vs. Oil and Natural Gas Commission of India, , had occasion to consider the plea of the aggrieved party about perversity of the arbitral award under Section 34 of the Act of 1996, and further the scope of judicial review of arbitral award. The Court held as under:-
The view canvassed on behalf of the respondent was that Clause 17.3 ought to be read narrowly like an indemnity clause or given a literal interpretation as in the case of an insurance policy. The umpire on the other hand has observed that this clause is couched in wide terms and it was commercially understandable and sensible, since it was designed to cover a wide and potentially unforeseeable spectrum viz. the likely impact of a possible change in Indian law in future. In the circumstances the approach adopted by the umpire being a plausible interpretation, is not open to interference. The Division Bench was clearly in error when it observed that the view of the umpire on Clause 17.3 is by no stretch of imagination a plausible or a possible view. Perhaps, it can be said to be a situation where two views are possible, out of which the umpire has legitimately taken one. As recently reiterated by this Court in SAIL v. Gupta Brother Steel Tubes Ltd. if the conclusion of the arbitrator is based on a possible view of the matter, the court is not expected to interfere with the award. The High Court has erred in so interfering.
Can the findings and the award in the present case be described as perverse? This Court has already laid down as to which finding would be called perverse. It is a finding which is not only against the weight of evidence but altogether against the evidence. This Court has held in Triveni Rubber and Plastics v. CCE that 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. The legal position in this behalf has been recently reiterated in Arulvelu v. State.
In the present case, the findings and award of the umpire are rendered after considering the material on record and giving due weightage to all the terms of the contract. Calling the same to be perverse is highly unfair to the umpire. The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one''s own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn., the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding.
It is an obligation of the parties to a contract that they must perform their respective promises, and if a party does not so perform, the arbitrator or the umpire has to give the necessary direction if sought. In that process, they have to give a meaningful interpretation to all the relevant clauses of the contract to make them effective and not redundant. The intention of the parties in providing a clause like Clause 17.3 could not be ignored. It had to be given a due weightage. This is what the umpire has done and has given the direction to the respondent to compensate the appellant for the amount of the necessary and reasonable extra cost caused by change in law. We have no hesitation in holding that the award of the umpire is a well-reasoned award and one within his jurisdiction, and which gives a meaningful interpretation to all the clauses of the contract including Clause 17.3. In the circumstances in our view the High Court has clearly erred in interfering with the award rendered by the umpire.
In view of foregoing discussion and the above referred legal precedents, I am not persuaded to interfere with the impugned order passed by the learned Court below inasmuch as the learned Court below has not committed any manifest error in rejecting the application of the appellant while concluding that the arbitral award is neither perverse, nor based on wrong proposition of law.
The upshot of above discussion is that there is no merit in this appeal and same is, accordingly, dismissed.