TMI Blog2001 (5) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... in public interest to undertake public works. Disputes and misunderstanding arose which led to the termination of the agreement resulting in the appellants seeking recourse to litigation by getting an Arbitrator appointed invoking the powers under Section 8 of the Arbitration Act, 1940 (hereinafter referred to as the `Act). As against the order dated 24.10.1992 of the District Judge, Gangtok (Sikkim), appointing the sole Arbitrator, the respondent challenged the same before the High Court by filing an appeal which came to be dismissed on 23.11.1992. The matter was pursued further before this Court in SLP (C) No.26 of 1993 and by an order dated 26.4.1993 the same was, by the agreement of parties, dismissed subject to the observation that the Arbitrator shall give a speaking order and, therefore, there was no need to go into the controversy raised. The appellants filed their statement of claim before the Arbitrator for a sum of ₹ 81,84,679.45 with further relief for the refund of ₹ 76 lacs, said to have been realised by the State by encashing two bank guarantees, with interest at 18% p.a. from 23.9.1992, the date of encashment. The respondent-State filed its reply oppo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (S.N. Bhargava) Judge Chief Justice 29/09/1995 29/09/1995 Thereafter, Dayal, J. ceased to be Judge of the Sikkim High Court and was transferred to the Allahabad High Court and in his place Justice M. Sengupta assumed office. Though the date for hearing of the matter was fixed by the said learned Judge, on the said date it was mentioned that Sikkim Subba Associates, the appellants, has filed an application in CMA No.11/96 invoking powers under Sections 98 and 151,CPC, opposing the hearing of the appeal in view of Section 98(2). The State also filed CMA No.15/96 invoking Sections 11, 98 and 151, CPC, questioning the very maintainability of the application filed by Sikkim Subba Associates. The said applications though initially were before Sengupta, J., due to inadvertence came to be listed before the new Chief Justice (Justice K.M. Agarwal) and when the learned Chief Justice asked the counsel as to whether they wanted the case to be made over to Sengupta, J., both sides wanted the same to be heard by the Chief Justice himself. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find it necessary to enter into the merits of the matter. We direct the learned counsel appearing for the contesting parties to file their brief written submissions within two weeks from today. The matters may thereafter be fixed for final disposal. Permitted to mention before the learned Chief Justice. On 11.4.1997 when the SLPs came up once again before the very Bench of this Court, it was ordered as follows :- In order to avoid multiplicity of the proceedings which may be the consequence if this Court first decides only the legality of the order dated 14.8.1996 passed by the learned third Judge in the High Court, we consider it appropriate to treat these special leave petitions as ones against the judgment of the High Court even on merits. Irrespective of the view taken by this Court on the question of the legality of the order of the learned third Judge, these matters would be heard as appeals even on merits of the case. This is clarified in view of the earlier order dated 3.3.1997 which had indicated that this Court did not propose then to go into the merits of these matters. Learned counsel for both sides agree that this would be the more appropriate course to avoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deletion of a statutory rule could not have been legitimately made by a notification by the rule-making authority in the absence of a specific statutory provision conferring any such power in this case, it is contended that the deletion could be only of prospective effect and the case before us would be governed by those rules, as if it existed. In our view, the decision in AIR 1950 Assam 80 (Supra) has no application to this case where unlike the Assam Case, the very Division Bench, as part of their judicial order also made a consequential order of reference to a third judge and inasmuch as there was no appeal challenging the same. We are of the view that rules 149 150 of the Sikkim High Court (Practice Procedure) Rules, 1991, which governed the situation, were very much in force on the date when the Division Bench exercised their power and the order of reference passed in this case could not therefore be said to be bad in law. Apart from the axiomatic principle of law that a subordinate legislation in the form of Rule or Notification could not be made/unmade retrospectively unless any power in that regard has been specifically conferred upon the Rule-making Authority , a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces, to decide this issue and the parties have also proceeded on the footing that there was a valid and binding contract between the appellants and the State, in this case, without prejudice to their contentions in respect of their rights under the agreement. On behalf of the appellants, it has been strenuously contended that the Arbitrators award cannot be challenged in proceedings under Section 30 of the Act, as if on an appeal and that the Award in this case has been rightly upheld by the District Judge, since it did not disclose any misconduct on the part of the Arbitrator and no other ground for any such an interference within the parameters of Section 30, having also been substantiated by the respondent-State. It is, therefore, contended that the decision of Chief Justice Bhargava, for the same reason, could not be sustained and that the learned Chief Justice committed an error in directing the Award, as affirmed by the District Judge, to be set aside for any one or other of the reasons assigned by him. At the same time, while strongly defending the decision of the learned Chief Justice, it was urged for the respondent- State that the numerous errors apparent ex facie on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... call for interference. While emphasising the position that misconduct in Section 30 (a) of the Act comprises legal misconduct, this Court held it to be complete in itself when the Arbitrator was found to have, on the face of the award, arrived at a decision by ignoring very material and relevant documents which throw abundant light on the controversy to help a just and fair decision or arrived at an inconsistent conclusion on his own finding (K.P Poulose vs State of Kerala Anr. - AIR 1975 SC 1259). In M/s Chahal Engineering and Construction Company vs Irrigation Deptartment., Punjab, Sirsa, (1993 (4) SCC 186), this Court held that the words is otherwise invalid in clause (c) of Section 30 of the Act would include an error apparent on the face of the record. In Trustees of the Port of Madras vs Engineering Constructions Corporation Ltd., (1995 (5) SCC 531) after adverting to the ratio of the Constitution Bench of this Court in Raipur Development Authority Ors. vs M/s Chokhamal Contractors others (1989 (2) SCC 721), this Court held that the error apparent on the face of the award contemplated by Section 16 (1) (c) and Section 30 (c) of the Act is an error of law apparent on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to show non application of the mind to the material facts placed before the arbitrator or umpire. In truth it points to fact that the arbitrator or umpire had not applied his mind and not adjudicated upon the matter, although the award professes to determine them. Such situation would amount to misconduct. In other words, if the arbitrator or umpire is found to have not applied his mind to the matters in controversy and yet, has adjudicated upon those matters in law, there can be no adjudication made on them. The arbitrator/umpire may not be guilty of any act which can possibly be construed as indicative or 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 vs Secretary to Government, Water Power Department, Trivandrum Anr. [(1989) 4 SCC 595], this Court held that the arbitrator had committed misconduct in the proceedings by making an award without adjudicating the counter claim made by the respondent. In Indian Oil Corporation Ltd. vs Amritsar Gas Service and Ors. [(199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o as to render the award to be one in utter disregard of law and the precedents. Although the award purports to determine the claims of parties, a careful scrutiny of the same discloses total non-application of mind to the actual, relevant and vital aspects and issues in their proper perspective. Had there been such a prudent and judicious approach, the Arbitrator could not have awarded any damage whatsoever and, at any rate, such a fabulous and astronomical sum on mere conjectures and pure hypothetical exercises, absolutely divorced from rationality and realities, inevitably making law, equity and justice, in the process, a casualty. The Arbitrator has acknowledged when recording a finding on the basis of indisputable facts that except for the first set of draws in respect of eight lotteries in groups A B, the prize money obliged to be deposited seven days before the draw (since the winners have to be paid only out of such deposits, after draw) as well as the agency fee running to crores was not deposited/remitted in time constraining thereby the State to mobilise funds to distribute prize money from State funds in order to preserve and protect the fair name and reputation of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ord in support thereof to warrant and justify the interference of this Court with the award allowing damages of such a fabulous sum, as a windfall in favour of the appellants, more as a premium for their own defaults and breaches :- a) The conclusions in the award are found seriously vitiated on account of gross misreading of the materials on record as well as due to conspicuous omission to draw necessary and lawful inferences, inevitably flowing from the indisputable materials as well as findings recorded by the Arbitrator himself. Conclusions directly contrary to the indisputable facts placed on record are shown to have been drawn on the question of alleged waiver throwing over board the well-settled norms and criteria to be satisfied and proved before the plea of waiver, can ever be countenanced leave alone, the basic and fundamental principle that a violator of reciprocal promises cannot be crowned with a prize for his defaults. Chief Justice Bhargava has taken great pains to enumerate them. Neither the Arbitrator, nor the District Judge or even the learned Judge who has chosen to differ from the view of the Chief Justice appear to have applied their mind judiciously or judi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lot of eight lotteries may be sent expeditiously and prize money in respect of all the 24 lotteries should be cleared immediately so that all the pending claims could be settled early in order to keep the prestige of the Sikkim State Lotteries. R-45 dated 31.3.92 addressed to the appellants reads thus : Please refer to our various letters and telegrams requesting you to settle the dues as mentioned below :- (1) Telegram No.452/Fin./Lott. Dated 28.10.91 (2) Telegram No.572/Fin/Lott. Dated 19/11/91 (3) Letter No.484/Fin/Lott. Dated 27/11/91 (4) Letter No.902/Fin/Lott. Dated 17/1/92 (5) Telegram No.1062/Fin/Lott. Dated 8/2/92 (6) Letter No.1066/Fin/Lott. Dated 12/2/91 As per your requests we have given sufficient time to settle the dues but because of your failure we have been compelled to stop printings of Tickets from 16/4/1992 onwards to avoid further liabilities. Further you have also failed to give assurance or proper response to our various letters. In view of your failure to settle the huge amount of dues your request to continue Seven Weekly Lotteries from 16/4/92 onward has not been considered by the Government. The dues based on draws upto 15/4/92 works out as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it the prize money in advance within the stipulated time, the time being essence since the prizes announced after the draw have to be paid from out of only the prize money deposited, the State was well within its rights to repudiate not only due to continuing wrongs or defaults but taking into account the past conduct and violations also despite the fact that those draws have been completed by declaration or disbursement of prize amounts by the State from out of its own funds. The conclusion to the contrary that the State has committed breach of the contract is nothing but sheer perversity and contradiction in terms. b) The mere reference to the documents or material on record, or a cryptic observation that all those materials have been considered is no substitute by itself for proof of such positive consideration, which should otherwise be apparent from only the manner of consideration disclosed from the award and reasonableness of the conclusions arrived at by the Arbitrator. That the contents of Ex. R-52 and R-43 have been patently misread is obvious from the fact that the Arbitrator has merely chosen to fall back on the word postpone totally ignoring the following words ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llants. The Award also suffers from obvious and patent errors of law in calculating damages on the footing that all the lotteries continued for their full term, ignoring the real facts. d) Clause 2 of the Agreement reads as follows:- 2. Except on the detection of the default or fraudulent conduct in lotteries or of any act of malfeasance or misfeasance on the part of the Organising Agents, the Government shall not rescind or modify this agreement. Provided that the Organising Agents shall be given an opportunity of being heard in person before any decision regarding rescission or modification is taken. Even a cursory reading of the clause would show that the Arbitrator has adopted a narrow, pedantic and perfidious construction of the clause not only doing violence to the language but defeating the very object of introducing such a clause reducing it to a mere dead letter by holding that apparent, obvious and admitted defaults of the nature will not fall within the said clause, but instead only defaults which are and could be found out or unearthed after detection alone would answer the situation envisaged therein. By such construction, the Arbitrator has chosen to deny the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disregard, and, after giving every credit to the desire on the part of this arbitration court to do justice, I think it manifest that they proceeded far too hastily in this case; and without imputing to them any prejudice or any desire to do wrong, I think that the mode in which the whole question was raised and was disposed of, was so slipshod and irregular that it might lead to injustice. Consequently, we have no hesitation to set aside the Award of the Arbitrator, as affirmed by the District Judge, insofar as it purports to award damages to the tune of ₹ 37,75,00,000/- in favour of the appellants, as wholly uncalled for and illegal. On behalf of the State of Sikkim, a strong plea has been made in pursuit of its counter-claim by contending that it is always permissible for this Court to set aside the bad or vitiating part of the Award and retain and affirm the valid portion, alone and, therefore, the Award to that extent may be allowed to stand and the same be made a rule of Court. No doubt this Court in M. Chelamayya Vs. M. Venkataraman (AIR 1972 SC 1121); Upper Ganges Valley Electricity Supply Co. Ltd. Vs. U.P. Electiricty Board (1973(3) SCR 107) and Union of India ..... X X X X Extracts X X X X X X X X Extracts X X X X
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