M/S Chaddha & Co vs U.P. Jal Nigam And Another
2015 Latest Caselaw 4701 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Reserved on 20.08.2015
 
Delivered on 27.11.2015
 

 
Court No. - 34
 

 
Case :- FIRST APPEAL FROM ORDER No. - 724 of 2009
 

 
Appellant :- M/S Chaddha & Co
 
Respondent :- U.P. Jal Nigam And Another
 
Counsel for Appellant :- P.R. Ganguly,G. Khan,J.H. Khan,S.K. Singh,W.H. Khan
 
Counsel for Respondent :- Amit Dubey,Shailendra Kumar Singh,V.K. Rai
 

 
Hon'ble Sudhir Agarwal,J.

Hon'ble Brijesh Kumar Srivastava-II,J.

(Delivered by Hon'ble Sudhir Agarwal, J.)

1. This appeal under Section 37 of Arbitration and Conciliation Act 1996 (hereinafter referred to as "Act 1996") has come up at the instance of claimant appellant against judgment and order dated 15.01.2009 passed by Sri Amar Singh Chauhan, District Judge, Bhadohi in Misc. Arbitration case no. 1 of 2002 whereby the Court below has allowed respondent's application under Section 34 of Act 1996 and set aside award dated 31.07.2002 delivered by Sri S.C. Attri, sole Arbitrator (retired Superintending Engineer), U.P. Jal Nigam, Meerut.

2. Facts in brief giving rise to this appeal are that UP Jal Nigam, Varanasi (hereinafter referred to as "UPJN") invited tenders to carry out certain works pursuant whereto, appellant submitted tender alongwith terms, conditions, specification of items of works against lump sum rate of Rs. 15,25,000/-. The tender was submitted by appellant vide letter dated 22.08.1984. In the aforesaid letter one of the conditions mentioned, read as under:

"All disputes, if any arises, will be settled through arbitration."

3. Respondent UPJN accepted the tender vide letter dated 03.06.1985, after negotiation with appellant with regard to reduction of certain rates. In original tender, supply of material was to be made at Divisional Store, Varanasi whereas the appellant in his letter dated 22.08.1984 had specified it at the site of work. Respondents vide letter dated 03.06.1985, subject to reduction of certain rates, accepted tender offered by appellant, without expressing any disagreement with respect to condition contained in tender letter submitted by appellant that all disputes shall be settled by Arbitration.

4. Subsequently, parties executed formal agreement on the standard form of agreement, containing conditions of contract. After completion of work, the appellant sought payment for extra work done at the request of Department and when failed, he requested for appointment of an Arbitrator, vide letter dated 02.09.1997. Thereafter he preferred writ petition 13903 of 1997 which was disposed of vide order dated 28.04.1997 which reads as under:

"The petitioner alleges that certain payments are yet due to it on account of work which was done under certain contract.

If such is the case, the writ petition does not lie because the petitioner has remedy under the common law. However, Shri Sandeep Saxena, learned counsel for the petitioner said that petitioner's representation is pending which may be directed to be disposed of expeditiously.

The representation can always be asked to be disposed of expeditiously and it is so directed accordingly. Shri Sabhajeet Yadav, learned Standing Counsel has been heard in opposition.

Witht he aforesaid observations, the writ petition is dismissed."

5. Pursuant to Court's order dated 28.04.1997, respondent no.1, Deputy Manager (Legal Cell) vide letter dated 22.2.1998 required Superintending Engineer to suggest three names of officers for appointing one of them as Arbitrator.

6. Subsequently, Chief Engineer UPJN sent a letter dated 20.04.1998 requiring appellant to suggest three names for further action. Chief Engineer vide letter dated 23.4.1998 accepted Sri S.C. Attri, a Retired Superintending Engineer, for being appointed as Arbitrator but since Headquarters of UPJN did not take any further action, the petitioner again approached this Court in Civil Misc. Writ Petition No.13749 of 1999 which was disposed of on 2.4.1999 with the following direction:

"Heard.

This petition is disposed of with the direction to the authority concerned to decide the representation of petitioner dated 2.8.97, 3.9.97 and 25.4.98 within two months in accordance with law."

7. The Chief Engineer, UPJN then informed that Sri S.C. Attri has been appointed as Arbitrator and directed Superintending Engineer to take further action for attending hearing before him. The appellant submitted his claim to Arbitrator on 4.4.2002. Respondent filed written statement dated 17.5.2002. Thereafter, appellant filed rejoinder affidavit. After exchange of written reply evidence was also recorded on 31.7.2002. The Arbitrator held appellant entitled to payment of Rs 14,12,300/- besides simple interest at the rate of 18% per annum on unpaid amount with effect 1.9.2002 till the date of actual payment.

8. Aggrieved by the award, UPJN filed an application u/s 34 of Act 1996 for setting aside award before District Judge, Gyanpur at Bhadohi. In the entire application filed u/s 34, there was no ground that Sri S.C. Attri was never appointed as Arbitrator or that there was no arbitration agreement between the parties. On the contrary, respondents themselves referred to clause 24 of Contract Bond which reads as under:

"24. Decision of the Chief Engineer will be final except otherwise where it is specified in the contract. The decision of the Chief Engineer for the time being shall be final, conclusive and binding upon the parties to the contract. Upon all questions relating to the meaning of the specifications, drawings and instructions herein before mentioned and to the quality of workmanship or material used in the work, or as to any question claims, rights, matter or things, whatsoever in any way arising out of or relating to the contract drawing specifications, estimate, instructions, order all these conditions or otherwise concerning the work or the execution or failure to execute the same, whether arising during the progress of the work or after the completion, or the sooner determination thereof of the contract."

9. Respondents' contention was that under Clause 24, Chief Engineer's decision was final and there was no occasion for him to appoint any other Arbitrator.

10. The respondent filed an amendment application under Order 6 Rule 17 CPC, seeking to add a pleading that there was no arbitration agreement between the parties and Sri S.C. Attri was never appointed as Arbitrator. This application was rejected by Additional District Judge-III, Gyanpur vide order dated 23.4.2004 on the ground that parties have appeared before Arbitrator, participated in the proceedings before him without any objection and now when award has been given, at this stage, such an objection cannot be allowed to be raised and it is not justified.

11. Aggrieved by order dated 23.4.2004, respondent UPJN preferred Civil Revision no. 255 of 2004 before this Court. But this revision was dismissed by a detailed judgment dated 5.6.2006, passed by Hon'ble Prakash Krishna, J. The Court held that plea sought to be raised by way of addition are new pleas which cannot be allowed at a belated stage. The order passed by this Court reads as under:

"Heard the counsel for the parties at the admission stage.

By the proposed amendment, the applicant has sought permission to add plea, that there was no valid arbitration agreement between the parties and Shri S.C. Yatri was never appointed as an Arbitrator.

It is not in dispute that against the award of the Arbitrator objections have been filed by the present applicant on 11th of November, 2002. The learned counsel for the applicant submitted that in view of permit a party to amend the pleadings, the court below committed illegality in rejecting the amendment applicant in question. In contra, the learned opp. parties submitted that there is no error either of law or of jurisdiction in the order under revision and as such the present revision application is liable to be rejected. On merits, it was submitted that under the relevant provision, outer time limit for filing objections to an award has been provided for. The objector by means of the amendment application wants to incorporate certain pleas which cannot be permitted as the time for filing objections have already run out.

Sub Section (3) of Section 34 of the Arbitration and Conciliation Act, 1996 provides that an application for setting aside of an award may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award. Proviso to the aforesaid clause gives further a period of thirty days to entertain the objections if the court is satisfied that the applicant was prevented by sufficient cause from making the application within the period of three months, afore-stated. It has been held that provisions of Section 5 of the Limitation Act for extending the period for making such an application cannot be resorted to. Meaning thereby, if an application to set aside the award is not filed within the aforesaid period as mentioned in sub clause (3) and maximum period as provided for in the proviso has expired, the application cannot be entertained thereafter. The Court has no power to accept the application/objection thereafter. The phrase but not thereafter restricts the power of Court to entertain the objections beyond the statutory period.

The amendment in question is not by way of clarification to clarify the objections that have already been raised. The pleas sought to be raised by way of objection are new pleas. In this view of the matter after the expiry of the period as prescribed under Sub section 3 of Section 34, no further grounds of objection can be entertained by a court.

In view of the above discussion, there is no merit in the revision. The revision is dismissed summarily. The Court below is directed to proceed forthwith in the matter and conclude the proceedings preferably within a period of six months from the date of receipt of the certified copy of this order." (emphasis added)

12. Despite rejection of aforesaid amendment, the Court below by means of impugned judgment and order dated 15.1.2009 has set aside award on the ground that there was no arbitration agreement between parties and, therefore, entire award and proceedings before Arbitrator are without jurisdiction. Relevant observation made by Court below reads as under :

"esjk er gS fd dkUVSzDVj }kjk vkQj ysVj fnukafdr 22&8&84 dks ikVZ ,.M iklZy dkUVªSDV ckUM dk crk;k x;k gS] tcfd dkUVªSDV ckUM esa f'kM~;wy th] ,.M ,p esa 'krsZa] vof/k rFkk jsV fHkUu gS vkSj dkUVªSDVj dks f'kM~;wy th] ,.M ,p ds vuqlkj gh dk;Z djuk FkkA ;fn vkQj ysVj fnukafdr 22&8&84 dkUVªSDV ckUM dk ikVZ gS rks mldks dkUVªSDV ckUM esa lekosf'kr D;ksa ugh fd;k x;kA iwoZ esa mBk fookn ekuuh; mPp U;k;ky; }kjk fjV ;kfpdk esa eq[; vfHk;Urk dks lkSais x;s gSa] ;fn vfcZVªs'ku Dykt gksrk rks fdlh }kjk fdlh vfcZVªsVj dks fu;qDr djds fookn r; djk;k tkrkA dkUVªSDV ckUM ds Dykt 24 ds vuqlkj [email protected] lqifjVsfUMax bathfu;j dk fu.kZ; vfUre ekuk tk;sxkA mDr Dykt esa vfcZVªs'ku ls r; djkus dk dksbZ gokyk ugha gS] ;fn vfcZVªs'ku Dykt gS rks eSusftax MkbjsDVj gh vfcZVªsVj dks ekeyk lqiqnZ dj ldrk gSA phQ bathfu;j us vfcZVªs'ku ds fy;s lgefr nh gS] tcfd dkUVªSDV ckUM esa dksbZ vfcZVªs'ku Dykt ugha Fkk] blfy;s mldk {ks=kf/kdkj ughas ekuk tk ldrk] tks fd fjdkMZ ns[kus ls fof/kd =qfV Li"V >ydrh gSA blds vykok vfcZVªsVj us ckWUM esa nh xbZ 'krksZa ds vk/kkj ij ,okMZ ikfjr ugha fd;k gS] tks fd fof/kd ugha gSA ekuuh; mPp U;k;ky; bykgkckn us esllZ ,0 ,.M ,0 jsLVksjsUV ,.M gksVsy izkbosV fyfeVsM] dkuiqj cuke esllZ }kfjdkthr jsLVksjsUV izkbosV fyfeVsM] dkuiqj ,0vkbZ0vkj0 2005 bykgkckn i`"B la[;k & 60 ij O;oLFkk nh gS fd ewy ,xazhesUV esa vfcZVªs'ku Dykt Fkk] ckn esa viathd`r fy[kk&i "I am of the opinion that the offer letter dated 22.8.84 has been stated by Contractor to be a part and parcel of contract bond, whereas terms, period and rates as in Schedules G and H of the contract bond are different and the contractor had to work only in accordance with schedules G and H. If the offer letter dated 22.8.84 is a part of the contract bond, why it was not incorporated in the contract bond. The dispute arisen earlier has been referred to the Chief Engineer by the Hon'ble High Court by its order passed in writ petition. Had there been an arbitration clause, the dispute would have been resolved by way of appointing an Arbitrator. The order of the Chief/ Superintendent Engineer shall be final as per clause 24 of the Contract Bond. There is no reference in the aforesaid clause for settlement through arbitration. If there is any arbitration clause, the Managing Director alone can refer the case to an arbitrator. The chief engineer has given approval for arbitration, whereas there was no arbitration clause in the contract bond and that is why, this cannot be treated to be within his jurisdiction and on perusal of record, legal error is clearly apparent. Besides this, the Arbitrator has not passed award following the conditions provided in the bond; which is not legal. It has been laid down by the Hon'ble High Court in M/s A & A Restaurant and Hotel Private Limited, Kanpur versus M/s Dwarikajeet Restaurant Private Limited, Kanpur, AIR 2005, Allahabad- Page 60 that if an arbitration clause was there in original agreement, then it cannot be changed subsequently through any unregistered paper work. With extreme respect to the said authority, I am of the opinion that there is no arbitration clause in the original contract bond presented before me. On the basis of the unilateral offer letter dated 22.8.84 which has been issued by the contractor and which has not been approved by any authorised person of the Jal Nigam, the arbitrator had no legal right to pass an award ignoring the original contract. The applicant has paid sufficient court fee as per Schedule II of the Article 18 (1) (C) and objection raised by the respondent in this regard is devoid of merit. In Registrar, University of Cultural Science versus G.G.Hosamath (2004) 13 M.C.C. on page no 542, before Hon'ble Apex Court there was an agreement regarding vEstate Officer's decision to be final which was held not to be an arbitration clause. With utmost respect to the said authority, I am of the opinion that the said legal proposition is not applicable in the instant matter. In the instant case also, the decision of the Chief Engineer/ Superintending Engineer shall be treated as final, as provided in clause 24 of the Contract Bond. As per Section 2(a) II,IV,V of the Arbitration and Cancellation Act, 1996, the award in question is liable to be set aside." (English translation by the Court)

13. For deciding this appeal there are three points which require adjudication :

(i) Whether it was open for Court below to look into the question of existence of arbitration agreement particularly when no such objection was raised before Arbitrator and amendments sought to be made in this regard before court below was rejected?

(ii) Whether it was permissible for the Court below to examine the question whether there was an arbitration agreement or not, when in this regard amendment sought by respondents in application under Section 34 of Act 1996 was already rejected by Court below and the said order was confirmed by this Court by a detailed judgment passed in Civil Revision No. 255 of 2004?

(iii) Whether there actually did not exist an arbitration agreement, the basic premise, whereupon the impugned judgment has been passed by the Court below? If so, its effect.

14. Questions no. 1 and 2 can be taken together.

15. No objection was taken by respondents regarding existence of arbitration agreement and authority of Arbitrator to enter into arbitration and make award. Realizing this flaw, the respondents moved an application seeking amendment in their objection but it was rejected by court below. The respondent-UPJN came to this Court in Civil Revision No. 255 of 2004 but the same was also dismissed vide judgment dated 05.06.2006. The result obviously would have been that the respondent-UPJN stood barred from raising any plea regarding existence of arbitration agreement and authority of Arbitrator to make award. The court below ignoring this aspect, however, has proceeded to examine this issue as if litigation upto this Court would be of no consequence. This approach of court below is clearly erroneous, illegal and against the principle of judicial hierarchy also. By way of amendment filed before court below in the pending objection under Section 34 the respondent wanted to include a ground that there was no arbitration agreement and the Arbitrator had no authority to make the award. This amendment was not permitted by the court below by rejecting it vide order dated 23.04.2004. Confirming said order this Court very categorically held that amendment is not by way of clarification to clarify the objections, already raised, but seeks to raise new pleas. After expiry of the period prescribed under Section 34(3), no further ground of objection can be entertained by a court. Therefore, this Court categorically held that objection regarding existence of arbitration agreement by way of amendment cannot be allowed to be raised by respondent in pending objections before court below. It is also admitted that objections filed by respondent under Section 34 did not have any ground that there was no arbitration agreement. The court below has completely ignored judgment of this Court passed in Civil Revision No. 255 of 2004 while entering into the question whether there existed arbitration agreement or not and has exceeded its jurisdiction. This approach as also the order passed by the court below on this aspect, therefore, is clearly illegal and in excess of jurisdiction vested in it. In fact, the court below has attempted to sit over the judgment of this Court which is wholly unauthorized and a material illegality on its part, rendering impugned judgment vitiated in law in so far as it has recorded a finding on this question.

16. We, therefore, answer both the issues no. 1 and 2 in favour of appellant and against respondent-UPJN holding that it was not open to court below to allow respondents to raise plea of existence or not, of arbitration agreement, which was not an objection raised in the application filed under Section 34 and its attempt to incorporate such an objection has already failed upto this Court.

17. Now we come to question no. 3. In order to answer the aforesaid question, it would be appropriate to first examine, what is the requirement of the Statute. Learned counsel for the parties admitted that the matter in question would be governed by Act, 1996. Hence, we are proceeding to look into the aforesaid question in the light of provisions of Act, 1996.

18. It cannot be doubted that under Act 1996 existence of written document for arbitration is necessary. Section 7 of Act 1996 reads as under :

"7. Arbitration agreement :--(1) In this Part, "arbitration agreement" means an agreement by the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.

(2) An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement.

(3) An arbitration agreement shall be in writing.

(4) An arbitration agreement is in writing if it is contained in,--

(a) a document signed by the parties;

(b) an exchange of letters, telex, telegrams or other means of telecommunication which provide a record of the agreement; or

(c) an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.

(5) The reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if the contract is in writing and the reference is such as to make that arbitration clause part of the contract."

19. Section 7(4) of Act, 1996 explains and includes various documents so as to hold that there is an arbitration agreement in writing, takes within itself a situation wherein reference regarding arbitration is made and the existence of agreement is not denied by other. When the claimant requested the respondent-UPJN to appoint an Arbitrator and it was not objected by respondent-UPJN on the ground that there did not exist any arbitration agreement, the matter would be covered by Section 7(4)(c) and it would lead to an inescapable conclusion that there was an arbitration agreement in writing.

20. Moreover, Section 7(4)(b) covers even letters, telex, telegrams or other means of telecommunication which may provide a record of agreement. The tender document containing certain conditions submitted by appellant with respect to arbitration clause was not refused or denied to make a complete contract after negotiating on the rates. Therefore, the condition in tender document regarding arbitration became part of the contract. The court below in taking an otherwise view, in our opinion, is not justified. The judgments relied on in the impugned order to take an otherwise view have no application to the facts and dispute in the present case.

21. In the result, the appeal is allowed. The impugned judgment and order dated 15.01.2009 passed by District Judge, is hereby set aside. The objections filed by UPJN are rejected and the award of Sri S.C. Attri, sole Arbitrator, is made Rule of the Court.

Order date:27.11.2015

AKN/AK