State of Rajasthan vs V Construction

Atul Kumar Jain, J.—This appeal has been filed under Section 37 of the Arbitration and conciliation Act 1996 (hereinafter referred as the Act of 1996) against the judgment dated 21.02.2013 passed by District Judge, Baran in civil misc. case No. 55/2011 titled as State of Rajasthan v. M/s. V. Construction Kota by which the objections filed by the appellant under Section 34 of the Act of 1996 were dismissed by that court.

It has been argued by the appellant that the Learned District Judge, Baran has rejected his objections without giving any reasons. It has also been argued by the appellant that the lower court/arbitrator has arbitrarily ignored the statements of witnesses Gopal Lal Mathur and Mukesh Meena. It has also been argued that the lower court/arbitrator has arbitrarily relied upon the statement of a handwriting expert who was not even registered for this purpose. It was also argued by the appellant that the lower court/arbitrator has arbitrarily mis-interpreted the clause 32 of the agreement and it has wrongly held that at the time of withdrawing of work, the concerned Executive Engineer was having budget of Rs. 52.59 Lakhs and the jurisdiction of the work was also with the concerned Executive Engineer who granted the work order in favour of the claimant. It was further argued that the arbitrator has wrongly awarded the compensation to the tune of Rs. 5 Lakhs under Section 74 of the Contract Act which was not applicable in the case of claimants.

On the other hand, respondent has argued that award could have been challenged before the Court only on the basis of the grounds mentioned in Section 34 of the Act of 1996 which nowhere exist in the present matter.

Here following important rulings deserve to be mentioned:--

"(1) Sadashiv Dada Patil Vs. Purushottam Onkar Patil (D) by LRs., (2006) 9 JT 64 : (2006) 10 SCALE 21 : (2006) 11 SCC 161 : (2006) 6 SCR 843 Supp : (2012) AIRSCW 5237 : (2006) 7 Supreme 600 . In this case it was held by the Apex Court that the Act of 1996 makes provisions for the supervisory role of courts and for that review of arbitral award will be permitted only to ensure fairness. The supervisory role and the minimum level of interference is envisaged only in cases of fraud or bias, violation of natural justice etc. Violation of public policy should be so unfair and unreasonable as to shock the conscience of the court. The arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian law; (b) the interest of India; (c) justice or morality; or (d) if it is patently illegal or arbitrary.

(2) State of Rajasthan Vs. Nav Bharat Construction Company, (2010) 1 JT 523 : (2010) 1 SCALE 244 : (2010) 2 SCC 182 : (2010) AIRSCW 955 : (2010) 1 Supreme 94 . In this case, it was held by the Apex Court that while interpreting the provisions of Sections 30 and 33 of the Arbitration Act, 1940 if it is found that the Arbitrator acted beyond/ignored the terms of the contract even then jurisdiction of the court under Section 30 will not be appellate jurisdiction and so the court cannot reappreciate the evidence or examine the correctness of conclusion arrived at by the Arbitrator. It was further held that the award passed by the arbitrator cannot be set aside on the ground that it was erroneous. Interference with the award merely on the ground of possibility of another view was also held not permissible.

(3) Ravindra Kumar Gupta and Company Vs. Union of India (UOI), AIR 2010 SC 972 : (2009) 14 JT 591 : (2009) 14 SCALE 303 : (2010) 1 SCC 409 : (2009) 1 SCR 142 : (2009) 10 UJ 5090 . In this case, it was held by the Apex Court that if the arbitrator has recorded its finding giving elaborate reasons then such finding cannot be called perverse or based on no evidence.

(4) M.P. Housing Board Vs. Progressive Writers and Publishers, AIR 2009 SC 1585 : (2009) 4 JT 219 : (2009) 4 SCALE 119 : (2009) 5 SCC 678 : (2009) 4 SCR 725 . In this case, Hon''ble the Apex Court held that under Section 30 of the Arbitration Act, 1940, the Courts do not exercise appellate jurisdiction and cannot reappraise the evidence.

(5) BOC India Ltd. Vs. Bhagwati Oxygen Ltd., (2007) 1 ARBLR 476 : (2007) 8 JT 258 : (2007) 4 SCALE 325 : (2007) 9 SCC 503 : (2007) 3 SCR 915 . This was also a case of Arbitration Act, 1940 and it was held by the Apex Court that when Arbitrator had taken a plausible view on interpretation of the contract, the court cannot set aside award on the ground of misconduct of arbitral proceedings.

(6) Kwality Manufacturing Corporation Vs. Central Warehousing Corporation, (2009) 4 JT 570 : (2009) 4 SCALE 205 : (2009) 5 SCC 142 . In this case also, it was held that under Section 30 of Section 33 of the Arbitration Act, 1940, the court while considering challenge to award does not sit in appeal over the finding and decision of the arbitrator. The court cannot reassess or re-appreciate evidence or examine the sufficiency or otherwise of the evidence. The award of arbitrator is final and the same can be challenged or set aside only on the grounds mentioned under Section 30 and Section 33 of the Arbitration Act, 1940."

Ruling referred by the appellant is M/s. J.G. Engineers Pvt. Ltd. v. Union of India and Anr. decided by the Supreme Court on 28.4.2011. In this case, it was held that if the issues relating to "who committed the breach and who was responsible for delay" were arbitral and the findings of the arbitrator that the "contractor was not responsible for the delay and that the termination of contract is illegal" are not open to challenge and thus rejection of the counter-claims of the respondents by the arbitrator was upheld by the Apex Court reversing the decision of the High Court.

In the circumstances of the case, it was also held in this case that if the contract in clear and unambiguous terms, bars or prohibits a particular claim, any award made in violation of the terms of the contract, violates Section 28(3) of the Act and would be considered to be patently illegal and therefore liable to be set aside under Section 34(2)(b) of the Act of 1996.

Respondent relies upon following rulings:--

"(1) Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and Others, AIR 1999 SC 2102 : (1999) 2 ARBLR 695 : (1999) 3 JT 514 : (1999) 3 SCALE 587 : (1999) 5 SCC 651 : (1999) 3 SCR 490 : (1999) 2 UJ 997 : (1999) AIRSCW 1831 : (1999) 5 Supreme 338 . In this case it was held that under the Act of 1996 the scope of the provisions for setting aside the award is more or less the same as it was under Section 30 or Section 33 of the Arbitration Act of 1940.

(2) Friends Coal Carbonisation Vs. Hindustan Zinc Ltd., AIR 2002 Raj 116 : (2002) 4 WLC 707 : (2002) 2 WLN 96 . In this case, it was held that under Section 34 of the Act of 1996 the Court cannot examine the terms of the contract and cannot interpret them for the purpose of deciding whether claimants were not covered by the terms of the contract. It was further held that merits of the dispute cannot be examined by the court under this provision and courts are not authorised to arrive at different conclusion in this regard.

(3) Fateh Chand Vs. Balkishan Das, AIR 1963 SC 1405 : (1964) 1 SCR 515 . In this case provisions of Section 74 of the Contract Act were elaborated by the Apex Court.

(4) T.P. George Vs. State of Kerala and Another, AIR 2001 SC 816 : (2001) 2 JT 438 : (2001) 1 SCALE 667 : (2001) AIRSCW 616 : (2001) AIRSCW 4022 : (2001) 7 Supreme 518 : (2001) 1 Supreme 556 . In this case, it was held that the arbitrator can award interest for all four stages:--

(i) From the stage of accrual of cause of action till filing of the arbitration proceedings.

(ii) During pendency of proceedings before arbitrator.

(iii) Future interest arising between date of award and date of decree and

(iv) Interest arising from date of decree till realisation of the award.

Ultimately, it was held in this ruling by the Apex Court that the direction to pay interest from date of award cannot be faulted.

(5) Channa Bros. and Co. Vs. Union of India (UOI), (2003) 1 ARBLR 157 : (2002) 2 JT 643 . In This case arbitrator had awarded interest on the award amount and the Apex Court held that award was not required to be, in any way, altered by the High Court and the Apex Court upheld the order of payment of interest."

In the light of the arguments made by the parties I have perused the award dated 28.02.2011 given by the arbitrator and I have also perused law laid down by various rulings. I am convinced that the award is well-reasoned and perfectly within the scope of the arbitration agreement. It cannot be said that the impugned award deals with a dispute not contemplated by or not falling within the terms of statement to arbitration or it contains decisions of matters beyond the scope of the submissions to arbitrator. Award of Compensation of Rupees Five Lacs was also fully justified in the circumstances of the case.

Learned counsel for the appellant has not been able to substantiate his argument that how the arbitral award is in conflict with the Public Policy of India. Every, issue has been discussed at length by the arbitrator and the arbitrator has given valid reasons to justify its findings. In this appeal this court is not supposed to reassess or reappreciate evidence to examine the sufficiency of evidence. Award of the arbitrator can be challenged only on the limited grounds mentioned in the Act of 1996. Findings of the arbitrator cannot be called perverse and also it cannot be said that the findings of the arbitrator was baseless on based on no evidence in the case.

In the circumstances of the case, District Judge, Baran was also not entitled to set aside the award of the arbitrator and hence, in this appeal this court is also of the view that the order of the court below as well as the award passed by the arbitrator do not deserve any interference by this court and hence, this appeal deserves to be dismissed, which is hereby dismissed. Stay petition also stands disposed of accordingly.

Copy of this order be sent to the court below immediately along with the record of that court.