State of Uttaranchal vs Mining Associates

B.C. Kandpal, J.—Since similar controversy is involved in all the four appeals, therefore, they are being decided by this common judgment,

In A.O. No. 633/2006, judgment and order dated 19-11-2005, passed by District Judge, Pithoragarh in O.S. No. 19/2003, has been challenged.

A.O. No. 634/2005, has been preferred against the judgment and order dated 19-11-2005, passed by District Judge, Pithoragarh, in O.S. No. 17/2003.

A.O. No. 635/2006, has been preferred against the judgment and order dated 19-11-2005, passed by District Judge, Pithoragarh, in O.S. No. 18/2003.

A.O. No. 636/2006, has been preferred against the judgment and order dated 19-11-2005, passed by District Judge, Pithoragarh, in O.S. No. 20/2003.

Brief facts of the case are that agreements Nos. 01/93-94, 02/93-94, 03/93-94 and 04/93-94, all dated 18-5-1993, were entered into between the appellant and respondent for the work of Drilling at Chamgarh Dam site in Saryu River in District, Pithoragarh. Thereafter, certain dispute arose between the parties and Sri S.C. Joshi, Chief Engineer, North Irrigation Department, was appointed as Arbitrator to resolve the dispute between the parties. The respondent filed various claims regarding balance payment of work done, recovery from running bill and compensation for keeping Drill Machine, Pump and Crew idle at side, and for the loss of profit for incomplete work, interest on the aforesaid amount etc. Objection was also filed by appellant-State against the said claims. The Arbitrator after concluding the arbitration proceedings passed the award and decreed the claims. The sole Arbitrator gave his awards dated 31-5-2003 in all the four matters. In Agreement No. 01/93-94, the Arbitrator awarded a sum of Rs. 36,16,179/-; in contract agreement No. 02/93-94 he awarded a sum of Rs. 32,64,343/-; in contract agreement No. 03/93-94 he awarded a sum of Rs. 48,52,421/- and in contract agreement No. 04/93-94, the Arbitrator awarded a sum of Rs. 35,48,896/- and directed the respondent/State to pay the amounts within six months from the date of award, failing which simple interest @ 12% per annum will be paid to the claimant from six months after the date of award to the date of payment or decree whichever is earlier.

The awards were sent to the District Judge, Pithoragarh. Parties filed objections against the award.

The learned District Judge after hearing learned Counsel for the parties and considering the objection raised by the State and perusing the awards, dismissed the objections for setting aside the arbitral awards vide impugned judgments and orders dated 19.11.2005.

Feeling aggrieved by the aforesaid impugned judgments and awards, the appellant-State has preferred these appeals u/s 37 of Arbitration and Conciliation Act, before this Court.

Heard Sri P.C. Bisht, learned Standing Counsel for appellant, Sri Alok Singh, senior Advocate, assisted by Ms. Mamta Joshi, Advocate, for respondent and perused the record.

Learned Standing Counsel appearing on behalf of the appellant/State has submitted that the court below has committed manifest error of law in not appreciating that the Arbitrator is creator of arbitration agreement itself and as such he is bound to follow the terms and condition of agreement. It has also been submitted that the court below has not examined itself in order to ascertain as to whether same has been followed by the Arbitrator or not. He has further submitted that in view of the specific terms and conditions of the arbitration agreement regarding variation of quantity of the work, the contractor was not entitled to any compensation by way of loss of profit and the court below has failed to appreciate this aspect, as Clause-17 of the agreement is quite clear that if the work is cut down the contractor will be paid for work as so cut down but in neither case will be paid only compensation whatever the loss of profit, which he might have made if he had been allowed to complete all work included in the tender. Learned Counsel for the appellant has also submitted that the court below has failed to appreciate that the arbitrator has awarded an interest @ 15% per annum on the different claims awarded in favour of the contractor, which is highly excessive and unreasonable.

Learned Counsel for the respondent has made rival submission by taking the plea that the impugned awards made by the arbitrator did not require any interference by the court below, hence the learned District Judge, has rightly rejected the objection filed by the appellant and made the awards as rule of the Court. It has also been submitted that the interest awarded by the arbitrator is within the purview of the legal provisions of the Act, therefore, the appeals being devoid any merit are liable to be dismissed.

In order to appreciate the arguments advanced by the learned Counsel for the appellant, it is to be seen whether the ground taken by the appellant comes within the purview and ambit of Section 34(2) of the Arbitration and Reconciliation Act, 1996, in order to set aside the awards of the sole arbitrator. In this respect perusal of Section 34(2) of the Arbitration and Reconciliation Act, 1996 shall be relevant, which reads as follows:

Section 34(2)- An arbitral award may be set aside by the court only if-

(a) the party making the application furnishes proof that-

(i) a party was under some incapacity; or

(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force ; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration; provided that, if the decisions on matters submitted to arbitration an be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with agreement of the parties, unless such agreement was in conflict with a provision of this part from which the parties can not derogate, or, failing such agreement, was not in accordance with this part; or

(b) the Court finds that-

(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii) the arbitral award is in conflict with the public policy of India.

In the present case the perusal of record shows that there are no such allegations and facts which may fall under the scope and ambit of the aforesaid provision of the Arbitration and Reconciliation Act, 1996. All the matters of the dispute were substantially submitted before the arbitrator for adjudication and settlement by both the parties on the demand of sole arbitrator, therefore, the appellant now cannot be permitted to travel beyond its pleadings because in view of the fact that all necessary and material facts whatsoever both the parties had in support of their case set up by them before the sole arbitrator and those pleadings have been adequately adjudicated by the arbitrator after giving the parties an opportunity of hearing.

Apart of the aforesaid situation the award can be set aside when the matter has been adjudicated by the arbitrator against the provisions of law or against the public policy. But in the instant case nothing could be pointed out before me which may suggest that the awards have been made by the arbitrator against the provision of law or they are against public policy.

The Hon''ble Apex Court in a case of State of Orissa and Others Vs. Lall Brothers, , has clearly ruled that the arbitral award can be considered for setting aside only when prima facie it appears that the arbitrator has committed legal error in passing the award. The Hon''ble Apex Court in another case of Food Corporation of India Vs. M/s. Veshno Rice Millers, , has also ruled that the arbitral award cannot be set aside on the basis of factual or legal aspects as the court while hearing this matter cannot act as an appellate court. The Hon''ble Apex Court in Jivarajbhai Ujamshi Sheth and Others Vs. Chintamanrao Balaji and Others, , and in Sudarsan Trading Co. Vs. Government of Kerala and Another, , has also held that the evidence cannot be re-assessed while considering the arbitral award. Therefore, on the basis of the aforesaid discussion, as well as in the light of the various judgments pronounced by the Hon''ble Apex Court, I am of the definite view that the present matters do not fall under the ambit of Section 34(2) of the Act and the court below has rightly rejected the objections filed by the State/appellant and correctly made the awards as rule of the court.

As far as another submission raised by the learned Counsel for the appellant is concerned, the same relates to the higher rate of interest imposed by the arbitrator in the awards. From perusal of the awards it reveals that the arbitrator has directed to pay the conditional interest of 12% in case if the payment is not made within a period of six months. The arbitrator in other items, in case, has awarded the interest @15% per annum, the same cannot be said to be against the provision of law, as in view of the provision of Section 317(b) of the Arbitration and Reconciliation Act, 1996, the arbitrator could have awarded an interest upto an extent of 18% per annum. The arbitrator has awarded interest @ 15% per annum in case of breach of contract and the interest awarded by the arbitrator cannot be said to be excessive in any manner.

For the reasons recorded above the appeals filed by the State bear no merit and are liable to be dismissed.

Accordingly, all the appeals are dismissed. The impugned judgments and orders passed by the court below are hereby confirmed.

Let a copy of this judgment be placed in the files of A.O. Nos. 634 of 2006, 635 of 2006 and 636 of 2006.