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M/s Cochin Shipyard Ltd. Versus M/s Apeejay Shipping Ltd.

2015 (12) TMI 778 - SUPREME COURT

Misconduct on the part of the arbitrator - Challenge to the arbitration award since the award was passed in violation of principle of natural justice inasmuch - Held that:- At the very outset, we are obliged to state that the respondent has not challenged the order passed by the High Court and, therefore, as far as examination of the umpire is concerned, it stands foreclosed. - The High Court further appreciated the reasoning expressed by the rule making Court and ruled that even if umpire would .....

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idence should be considered within the parameters of Sections 30 and 33 of the 1940 Act. The learned senior counsels for the parties have pressed their argument relating to legal misconduct. Both the learned senior counsels for the parties have construed the order that the said liberty has been granted to establish the misconduct and precisely that is the subject matter of challenge before us. Therefore, we have clearly opined that to substantiate a stance of legal misconduct on the part of the .....

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e have referred to certain authorities as regards the legal misconduct.

In view of the aforesaid premises, the appeal is allowed in part as far as it grants permission/liberty to the respondent to examine any witness in court. The learned Civil Judge would requisition the records from the learned arbitrator, if not already done, and the respondent would be at liberty to advance its arguments for pressing the factum of misconduct from the said records. - CIVIL APPEAL NO. 9187 of 2015 ( .....

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ch would be considered within the ambit and scope of the aforesaid provisions. 2. The facts which are essential to be stated for the adjudication of this appeal are that an agreement was entered into between the parties on 29.11.1980. As per the terms and conditions of the agreement, the appellant, a Government undertaking, had agreed to build and deliver a cargo ship to the respondent for the price of ₹ 32.527 crores. Certain differences arose between the parties which led to an arbitrati .....

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award. During the pendency of the said petition, the respondent almost after expiry of two years filed an application, that is, I.A. No. 5625 of 2011 seeking permission to examine the learned arbitrator and the General Manager of the respondent as witnesses. The learned Additional Subordinate Judge, vide order dated 23.12.2011, rejected the application holding that there was no justification to examine the arbitrator; that the Court while considering the objections under Sections 30 and 33 of th .....

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file a Writ Petition before the High Court which concurred with the view expressed by the court below opining that there was no necessity to examine the arbitrator as a witness as more than five years had elapsed since the award was passed. The High Court further appreciated the reasoning expressed by the rule making Court and ruled that even if umpire would be examined, no fruitful purpose will be served and, accordingly, gave the stamp of approval to the same. However, the High Court granted .....

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l proceeding. 4. At the very outset, we are obliged to state that the respondent has not challenged the order passed by the High Court and, therefore, as far as examination of the umpire is concerned, it stands foreclosed. As far as liberty to examine the witness to substantiate the claim for the rule making Court is concerned, it is contended by Mr. Ranjit Kumar, learned Solicitor General for the appellant, that the respondent has been allowed to examine the employee as a witness to prove the m .....

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before the Court which has the authority to accept the objection under Sections 30 and 33 of the 1940 Act or to pass a decree in terms of the award. In essence, the attack on the order by Mr. Ranjit Kumar is that the witness No. 2, General Manager, could not have been permitted by the High Court to be examined as a witness in the Court to prove any kind of legal misconduct, for the same has to be demonstrated from the records of the arbitral proceedings as well as the evidence adduced before the .....

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U.P. v. Allied Constructions (2003) 7 SCC 396 , State Bank of India v. Ram Das and Another (2003) 12 SCC 474 , D.D. Sharma v. Union of India (2004) 5 SCC 325, Hari Om Maheshwari v. Vinitkumar Parikh (2005) 1 SCC 379, Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd. (2005) 6 SCC 462 and Oil and Natural Gas Corporation v. Wig Brothers Builders and Engineers Private Limited (2010) 13 SCC 377. 5. Resisting the aforesaid submissions, Mr. Vivek Tankha, learned senior counsel for the respondent, would co .....

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on the proceedings before the learned arbitrator and, in fact, that is the only way it can be proven. It is further propounded by him that this Court in Fiza Developers and Inter-Trade Private Limited v. AMCI (India) Private Limited and Another (2009) 17 SCC 796 while dealing with Section 34 of the Arbitration and Conciliation Act, 1996 (for brevity, the 1996 Act ) has clearly held that evidence can be adduced. Learned senior counsel has drawn inspiration from the authorities in K.P. Poulose v. .....

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ned senior counsel for the appellant that the application preferred under Section 151 of the Code of Civil Procedure read with Order XVI Rule 1 of the Code of Civil Procedure was filed for substantiating the plea of legal misconduct alleged in the application. The learned senior counsel has drawn our attention to the various paragraphs of the petition and the relevant clauses to highlight the right to call for the learned arbitrator as a witness has been foreclosed. The purpose to examine the Ge .....

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ept on one or more of the following grounds, namely:- (a) that an arbitrator or umpire has misconducted himself or the proceedings; (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; (c) that an award has been improperly procured or is otherwise invalid. Section 33. Arbitration agreement or award to be contested by application.- Any party to an arbitration agreement or any per .....

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his Court does not even remotely relate to Section 33 of the 1940 Act. It centres around Section 30 of the 1940 Act. Though certain grounds have been provided under Section 30, we only require to deal with the ambit and sweep of legal misconduct on the part of the learned arbitrator inasmuch as there are allegations as regards non-consideration of relevant documents, ascription of reasons of passing of the award which do not flow from the material on record and further the conduct of the arbitra .....

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ehind the back of the appellant. Repelling the said submission, the Court opined :- Counsel then submitted that by amending an issue behind the back of the appellant, the arbitrator was guilty of misconduct. This contention has no force. The arbitrator had raised two issues. The second issue referred to the respondent's claim in respect of 46-1/2 bales a claim for loss in respect of the bales. At the time of the writing of the award, the arbitrator corrected this issue so as to show that the .....

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view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous." Be it noted, the proposition laid down in Champsey Bhara & Company (supra) has also been followed in Firm Madanlal Roshanlal Mahajan (supra). 11. In K.P. Poulose (supra) while dealing with the concept of misconduct, a three .....

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th his conclusion that the contractor had no right to extra payment for the particular work. In that context, the Court proceeded to observe as follows:- We now come to the award. Although the arbitrator has held that jetting, however, is not an authorised extra covered by the agreement , he has made the following significant observation which is inconsistent with his conclusion that the contractor has no right for extra payment for the jetting: The Chief Engineer has rejected the claims of the .....

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wever, is not an authorised extra covered by the agreement cannot be anything but rationally inconsistent. The award, therefore, suffers from a manifest error apparent ex facie. 12. After so stating, the three-Judge Bench opined that under Section 30(a) of the 1940 Act an award can be set aside when an arbitrator has misconducted himself or the proceedings and misconduct under Section 30(a) has not a connotation of moral lapse. It further observed that it comprises legal misconduct which is comp .....

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itrator/umpire may not be guilty of any act which can possibly be construed as indicative of partiality or unfairness. Misconduct is often used, in a technical sense denoting irregularity and not guilt of any moral turpitude, that is, in the sense of non-application of the mind to the relevant aspects of the dispute in its adjudication. In K.V. George v. Secretary to Government, Water & Power Department, Trivandrum, (1989) 4 SCC 595, this Court held that the arbitrator had committed miscondu .....

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abandoned after perusal of the order sheet of the arbitrator which showed that at each stage adequate opportunity was given to both the parties. Thereafter the court referred to the principles stated in Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji (1964) 5 SCR 480, Puri Construction Pvt. Ltd. v. Union of India (1989) 1 SCC 411, State of Orissa v. M/s Lall Brothers (1988) 4 SCC 153, Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. and Another (1989) 1 SCC 532, Raj .....

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Steel Authority of India Ltd., B.S. City, Bokaro (2001) 6 SCC 347, it has been held that reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under Section 30 of the Arbitration Act. The court as a matter of fact cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. 16. At this juncture, we may refer to some other .....

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atisfied, an award cannot be set aside, for the arbitrator is a Judge chosen by the parties and his decision is final. It has been further observed that 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 and further an error apparent on the face of the record would not imply closer scrutiny of the mer .....

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the parameters of Section 30 of the Act... 18. In Wig Brothers (supra) while dealing with the challenge under Sections 30 and 33 of the 1940 Act, the Court opined that a court while considering a challenge to an award under Sections 30 and 33 of the 1940 Act, does not sit as an appellate court and it cannot reappreciate the material on record. The Court further proceeded to state that an award is not open to challenge on the ground that the arbitrator had reached a wrong conclusion or had faile .....

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ective of any fall or rise in the cost of the work covered by the contract or for any other reason or any ground whatsoever. It is specifically agreed that the contractor will not be entitled or justified in raising any claim or dispute because of increase in cost of expenses on any ground whatsoever. By ignoring the said terms, the arbitrator has travelled beyond his jurisdiction as his existence depends upon the agreement and his function is to act within the limits of the said agreement. This .....

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ed to series of decisions to appreciate the concept of misconduct and how a party is entitled to make it the fulcrum of assail in his objection under Sections 30 and 33 of the 1940 Act. Misconduct, as has been laid down, does not always have a moral connotation. To elaborate, it may not have any connection with the individual/personal conduct of the arbitrator. The said conduct would be in sphere of moral misconduct. As far as legal misconduct is concerned, as the authorities would demonstrate, .....

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e the arbitrator and the evidence adduced before the arbitrator. Evidence cannot be adduced in court to substantiate the challenge on the score of legal misconduct. We are not entering upon any discussion pertaining to moral misconduct as that is not the issue in the case at hand. The decision in Fiza Developers and Inter-Trade Private Limited (supra) has been rendered by this Court while interpreting Section 34 of the 1996 Act. The context being different, we are not inclined to apply the princ .....

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