TMI Blog1994 (9) TMI 366X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court, Mr. Justice S.N. Andley as an Arbitrator. The appellant State of Rajasthan appointed as its nominee Sri S. Adiappa, a retired Chief Engineer, P.W.D. (B R) Rajasthan as an arbitrator. However, the proceedings before the said arbitrators did not continue. The respondent contractor filed a petition under Section 20 of the Arbitration Act before the Delhi High Court. Such application was registered as Suit No. 758 A of 1982. By an order passed on 9.11.82 by the Delhi High Court, the arbitration agreement between the parties was filed and reference to arbitration was made. The parties thereafter sought for variation of the reference order dated 9.11.82. Instead of reference to a sole arbitrator, reference was made to arbitrators namely Sri Manohar Lal being, the nominee of appellant State of Rajasthan and Sri Guru Charan Singh being the nominee of the State of respondent contractor. The State of Rajasthan moved the Division Bench of Delhi High Court for stay of arbitration proceedings. The said arbitrator Sri Lal and Sri Singh thereafter resigned. Against the order of the Delhi High Court, the appellant, State of Rajasthan filed a special leave petition before this Court bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and the respondent contractor also filed written statement to the said petition of objection. 6. The respondent contractor made an application under Sections 15, 17, 18, 28 and 29 of the Arbitration Act, 1940 for the prayers that (a) award of ₹ 1 crore in favour of the said applicant be made rule of court (b) the interest be awarded from 24.2.1979 or in lieu thereof from 30.5.1979 i.e. date of breach (c) modify the award and decree the award of interest at 10% per annum calculated with quarterly interest on the entire sum of ₹ 1 crore from 24.2.1979 and 30.5.1979. and to allow further interest on the sum decreed at 15% per annum from the date of decree till date of payment (d) that the bank guarantees of ₹ 19.25 lakhs be returned and cancelled (e) the State of Rajasthan be allowed to withdraw approximate sum of ₹ 25 lakhs or ₹ 26 lakhs that have been realised from the sale of the applicant contractor's assets under the orders of this Court and as set out in the award, after the State of Rajasthan has satisfied the decree that would be passed by this Court in the facts of the case and in the interest of justice (f) the time for making the award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The respondent contractor has further contended that the arbitrators were nominees of the respective party to the arbitration and the arbitrators being men of unimpeachable integrity and the award running 39 pages and containing detailed findings on all the issues that were framed is quite legal and valid. Some of the important conclusions reached by the arbitrators by giving reasons therefore have been indicated in the counter. It has been contended that an award can be either set aside or modified or remitted to the arbitrators for reconsideration strictly within the ambit of Sections 15, 16 and 30 of the Arbitration Act. It has been averred in the said counter that vague allegation of error apparent on the face of the record and vague allegations that the clauses of agreement have been erroneously interpreted '. by the arbitrators are of no consequence and the objections raised by the appellant are liable to be rejected in limine. The court should not substitute its own evaluation of the conclusion of law or fact made by the arbitrator for the purpose of holding that such conclusion being contrary to the contract the arbitrator has acted beyond jurisdiction. It has been fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll date of realisation. The Bank is also seeking no sale of the mortgaged property being the residential house of the Managing Director of the respondent contractor. In support of such statement a copy of the plaint in the said in suit filed by the Bank has been annexed to the counter. Various factual and legal contentions raised in the counter disputing the contentions made in the petition of objection need not be elaborated and indicated in detail at this stage. 9. It may be stated here that by an order dated 26.3.1993 passed in LA. No. 3 in S.L.P. (C) No. 9089 of 1984, this Court directed that the claim made by the arbitrator Sri Lodha towards his fee of ₹ 46,904 be paid and it was further directed that one half of the award including interest accrued thereon would be paid to the respondent contractor against bank guarantee to the satisfaction of the Registrar of this Court. 10. It may also be indicated here that the appellant State of Rajasthan has filed additional objections. In the additional objections raised in the affidavit of Sri Zakir Hussain Executive Engineer, Mahi Menu dam Division I, it has been alleged that one of the arbitrators, Sri A.B. Rohatgi was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by way of an additional affidavit affirmed by an executive engineer of the Government of Rajasthan, Shri Zakir Hussain, raising the question of misconduct of one of the arbitrators and in the written submissions filed by Shri Tulsi the learned Additional Solicitor General appearing for the State of Rajasthan, such misconduct and consequential disqualification of arbitrator has been specifically contended. It has been alleged that one of the arbitrators, namely, Shri A.B. Rohatgi, disqualified himself from acting as an arbitrator in the arbitration proceedings in question by accepting a brief from the claimant-respondent in respect of a case though concerning a different cause of action, and representing the respondent- claimant in this Court in civil Appeal No. 4649 of 1984 (Puri Construction Pvt. Ltd. v. Union of India). The decision rendered in the said appeal is reported in AIR1989SC777 and in JT 1989 (1) 132 It has been alleged that the said Shri Rohatgi did not disclose the said fact before acceptance of the brief and also thereafter. Such act is therefore, not only inconsistent with his duty as an arbitrator but the same tantamounts to misconduct thereby rendering the award ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said fact before this Court and seeking appropriate direction against Shri Rohatgi if the appellant had any doubt about the neutrality of the said arbitrator. Shri Sibal has submitted that the other arbitrator Sri Lodha had also appeared for the appellant State of Rajasthan as an Advocate during the subsistence of arbitration proceeding when he was acting as an arbitrator and such fact may be convincingly demonstrated by referring to the reported decisions of this Court namely [1989]2SCR152 and AIR1988SC1451 . Mr. Sibal has submitted that senior counsel appearing for a client owe a duty to the institution and they do not identify with the interests of the client in matters in which they are not appearing. Senior Advocates appearing for one litigant appear against him in other matters. Such appearance is neither illegal nor improper. Shri Sibal has submitted that the appellant and the respondent had never doubted about the impartiality and integrity of the said arbitrators who are men of unimpeachable character and precisely for the said reasons, there was no occasion on the apart of the appellant to raise any objection against the functioning of Shri Rohatgi as an arbitrator and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tee in Chowdhri Murtaza Hossein v. Mussunat Bibi Bechunnissa reported in 3 I.A. 209. Reliance was also made to the observations in the decision of the Calcutta High Court in the case of Jupitor Calcutta Insurance Co. Ltd. reported in AIR 1956 Cal 1472 Reference was also made to another decision of this Court in N. Chellappan v. Secretary Kerala Electricity Board reported in [1975]2SCR811 holding that acquiescence defeat the right of the appellant at a later stage. Similar view was also expressed in another decision of this Court in Prasun Roy v. Calcutta Metropolitan Development Authority and Anr. reported in [1987]3SCR569 . Similar view has also been expressed in a recent judgment of this Court in Reserve Bank of India v, 5.5. Investments and Ors. reported in [1992]3SCR871 . In the said decision, this Court has negatived the contention that Umpire's entering upon the reference was invalid by holding that a party objecting to the Umpire's entering upon the reference, had agreed to extend the time to enable the Umpire to make the award. Having agreed to extend such time, it must be held that such party had waived its objection to the umpire's entering upon the reference. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before the arbitrators. (d) the arbitrators misread the statement of Sri Adi Anklesaria, because the arbitrators have only referred to answer to question No. 27, They have failed to consider the notes to question No. 147 wherein the said witness explained that it was not necessary in the case of construction of dam that the entire site should be made available before the work could start. (e) the arbitrators have again misread the statements of Sri Adi Anklesaria in holding that the progress of the claimant was so fast that the claimant was directed to go slow to avoid flooding of Banswara township. It is contended that the documents on record clearly contradict the finding that the contractor was asked to go slow. (f) the arbitrators failed to take into account the letter dated May 6, 1975, written by the claimant (Ex.R-44) wherein the claimant himself expressed difficulty in commencing the work before October 15, 1975 and sought to utilise the said period for the construction of other enabling works. (g) the finding of the arbitrators about the delay in handing over the site to the contractor is wrong. (h) the arbitrators have committed a fundamental error in awa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as entitled to extension has been assailed by contending that the arbitrators failed to take into account the plea of the appellant raised at page 164 Vol. II of the written submissions that the claimant had failed to apply for extension of time within the stipulated period as per clause 5 and has also failed to give cogent reason for extension. 16. The award of damages without quantifying the same in accordance with any rational principle has been assailed by contending that in a case of speaking award, the quantification of damages must be based on some principle and cannot be quantified arbitrarily by adopting rule of thumb. It has also been contended that the damages of ₹ 1 crore awarded by the arbitrators are patently excessive and disproportionate to any loss suffered by the claimants. In this connection, it has been alleged that the amount for which the tender was submitted by the claimants was ₹ 6,36,76,741 and average rate for the claim of masonary and concrete work work is ₹ 1.35 per cubic mtr. The quantity payable to the claimant from 1975-78 is ₹ 1,85,000 cubic mtrs. and at the rate of 1.35 per cubic mtr. amount payable to claimant comes to 2, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epositions before the arbitrators of the principal witness of the state of Rajasthan, Shri Anklesaria, by indicating the answers given in respect of question Nos. 235, 236, 237 and also question Nos. 208, 209, 204, 157, 138, 118 and question Nos. 24, 31, 81 and 166. In the written submissions filed on behalf of the respondent, such questions and the corresponding answers have been quoted. It is also contended that the arbitrators have placed reliance on three separate reports submitted by three separate Chief Engineers to the Mahi Control Boards. Such reports were made by Shri Gurucharan Singh, Shri B.K. Mehra and Shri J.I. Gianchandani. In the said reports the danger of the flooding of Banswara township was mentioned. The delayed handing over of flank blocks was admitted. The proposal to take up the work at the risks and costs of the contractor after invoking clauses 2 and 3 of the contract was also indicated. The Chief Engineers reported about the critical short supply of cement, power, gelatin, face stone, stone from Aeru Quarry and short supply of sand. It is also contended that to avoid financial liability, a proposal to invoke clauses 2 and 3 of the contract was forwarded to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... repudiation of the contract, and had also resiled from its contractual obligations, it was not entitled to claim any liquidated damages from the claimant. If the State was even partly responsible for the delay, the State could not invoke clause 2 and 3 and levy liquidated damages. In view of an agreed liquidated damage clause, the State's claim for unliquidated damage is also not sustainable. 20. In support of the contention that coming to an erroneous decision on facts by the arbitrator is not a misconduct and it is also not misconduct if the relevant facts are misunderstood and misappreciated, several decisions have been referred to. It has been urged by Mr. Sibal that appraisement of evidence by the arbitrator is ordinarily a matter which the Courts do not question and consider and the Court has no jurisdiction to substitute its own evaluation of the conclusion in law or fact. 21. It has been contended that the arbitrators were men of wide judicial experience. They had taken pains in referring to various facts in detail in basing their findings in support of the award. Both the parties were given adequate opportunities to lead evidences and to make submissions. The lon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rials on record and it cannot be reasonably contended that there was no basis whatsoever to base the findings made by the arbitrators upon consideration of the materials on record. 24. In our view, the appellant has failed to demonstrate any finding made by the arbitrator is either fanciful or not referable to be materials on record. What has been sought to be contended by the appellant is that the arbitrators have failed to properly appreciate various clauses of the agreement between the parties relating to the project of Mahi Bajaj sagar Dam. The appellant has also contended that the evidence given by Shri Anklesaria has been misappreciated, misunderstood and has been appreciated out of context. The arbitrators have considered the deposition of Sri Anklesaria and reports of the Chief Engineers out of their context and on misappreciation and misreading of the materials on record, the erroneous findings are arrived at. 25. The arbitrator is the final arbiter for the dispute between the parties and it is not open to challenge the award on the ground that the arbitrator has drawn his own conclusion or has failed to appreciate the facts. In Sudarshan Trading Co. v. Government of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble in each particular case. The word reasonable has in law prima facie meaning of reasonable in regard to those circumstances of which the actor, called on to act reasonably knows or ought to know. An arbitrator acting as a judge has to exercise a discretion informed by tradition, methodized by analogy, disciplined by system and subordinated to the primordial necessity of order in the social life. therefore, where reasons germane and relevant for the arbitrator to hold in the manner he did, have been indicated, it cannot be said that the reasons are unreasonable. 27. In this case, claims before the arbitrators arise from the contract between the parties. It is well settled that if a question of law is referred to arbitrator and the arbitrator comes to a conclusion, it is not open to challenge the award on the ground that an alternative view of law is possible. In this connection, reference may be made to the decisions of this Court in Alopi Prasad v. Union of India reported in [1960] 2 SCR 799 and Kapoor Nilokheri Cooperative Diary Farm Society reported in [1973] 1 SCC 78 In Indian Oil Corporation Ltd. v. Indian Carbon Ltd. reported in [1988]3SCR426 , this Court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndered by an arbitrator is open to challenge within the parameters of several provisions of the Arbitration Act. Since the arbitrator is a judge by choice of the parties, and more often than not, a person with little or no legal background, the adjudication of disputes by an arbitration by way of an award can be challenged only within the limited scope of several provisions of the Arbitration Act and the legislature in its wisdom has limited the scope and ambit of challenge to an award in the Arbitration Act. Over the decades, judicial decisions have Indicated the parameters of such challenge consistent with the provisions of the Arbitration Act. By and large the courts have disfavoured interference with arbitration award on account of error of law and fact on the score of misappreciation and misreading of the material on record and have shown definite inclination to preserve the award as far as possible. As reference to arbitration of disputes in commercial and other transactions involving substantial amount has increased in recent times, the courts were impelled to have fresh look on the ambit of challenge to an award by the arbitrator of the award does not get undesirable imm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to minimum. Keeping the aforesaid principle in mind, the challenge to the validity of the impugned award is to be considered with reference to judicial decisions on the subject. 31. The contentions about factual errors and omissions apparent on the face of record as raised in the written argument are essentially errors and omissions in not properly considering the materials on record, in misreading and misconstruing such materials and consideration of some documents and statements out of their contexts. The arbitrators have given the award by referring to various documents and statements available on record and indicating the reasons for basing the findings. Even if it is assumed that on the materials on record, a different view could have been taken and the arbitrators have failed to consider the document and materials on record in their proper perspective, the award is not liable to be struck down in view of judicial decisions referred to hereinbefore. Error apparent on the face of the record does not mean that on closer scrutiny of the import of documents and material on record, the finding made by the arbitrator may be held to be erroneous. Judicial decisions over the dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent contractor has urged that the machineries including those seized and sold at depreciated value will now cost about 2.5 crores of rupees. Considering the magnitude of work involving costly machineries and materials, if the two arbitrators in their wide experience have quantified the total damage and has given the award for ₹ 1 crore in favour of the respondent, it cannot be held that such award is so patently unjust and irrational and shocking to the conscience of the court, that the same should be interfered with. As already indicated, in the case of other contractor concerning first part of the work in Mahi Bajaj Sagar Dam, namely, R.S. Sharma Co. the arbitrators quantified damages to the extent of over ₹ 75 lakhs without indicating how such damages had been quantified. But challenge to such award by the State of Rajasthan failed and the award has been upheld by this Court. We, therefore, dismiss the petition of objection and additional objection challenging the validity of the award. 32. We are now left with the claim of further interest besides the interest awarded by the arbitrators in favour of the respondent on the said sum of ₹ 1 crore @ 15% per an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he agreement. 33. The Constitution Bench has pointed out that over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite and until Jena' case, almost all the courts in the country had upheld the power of the arbitrator to award interest pendente lite. It has also been indicated in the said Constitution Bench decision that the interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing complete justice between the parties, such power has always been inferred. 34. In the case of Santosh Singh Arora v. Union of India reported in AIR1992SC1809 , relying on the said Constitution Bench decision in G.C. Roy's case, this Court held that the appellant in the said case was entitled to be compensated for denial of his legitimate dues. This Court has allowed interest from December 18, 1968 when the arbitrator was named and not from November 21, 1983 when the matter was referred to the arbitration of Shri Justice A.C. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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