M/S R.N.Tandon And Sons vs Betwa River Board
2019 Latest Caselaw 6264 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

AFR
 
Court No. - 33
 

 
Case :- FIRST APPEAL FROM ORDER No.108 of 1991
 

 
Appellant :- M/S R.N.Tandon And Sons
 
Respondent :- Betwa River Board
 
Counsel for Appellant :- Ayush Khanna
 
Counsel for Respondent :- U.N. Sharma,A.K.Rai
 

 
Hon'ble Dr. Kaushal Jayendra Thaker,J.

1. Heard Sri Ayush Khanna, learned counsel for the appellant. No Advocate appeared for the respondent though name of Sri A.K. Rai and Sri U.N. Sharma are shown for the respondent and fresh notice was also issued which has been received by the respondents. The appeal is pending since 1991. The respondents have been negligent in appointing a counsel also. Today also, no-one represents the respondents though time and again notices have been sent to them. The fact that on the first occasion, jthe officer concerned was of the view that no interest would be charged from the appellant later on Suo Motu on audit objection, interest was ordered to be charged. The appellant has already deposited the said interest because of the order of the District Court which upheld the objection of the respondent herein, which is subject matter of challenge before this Court.

2. By means of this appeal, the appellant - contractor challenges the order and judgment dated 15.11.1990 passed by District Judge, Jhansi in Suit No. 13 of 1988 (M/s R.N. Tandon & Sons Vs. Betwa River Board) allowing objections of the respondents and refusing to accept the award of sole arbitration.

3. The brief facts of the case are that Betwa Board had entered into a contract with M/s R.N. Tandon & Sons for the construction of earth Dam on the left flank of River Betwa at Rajghat from Km. 4.04 to 6.05 (Lot II) and the agreement was executed with respect thereto on 14.1.1981 at Rajghat, district Lalitpur, U.P. There was some dispute between the parties with respect to the recovery of interest on the cost of machines taken by the contractor - appellant herein. AND WHEREAS DISPUTES pertaining to the 'Interest charges on the cost of machines made available to the claimant by the Board' having arisen between the two parties, of the said contract, the Chief Engineer (R), Tetwa River Board, Nandanpura, Jhansi, in pursuance of the aforesaid conditions of contract, nominated me, as the sole Arbitrator under his No.4921/CE/BRB/Appeal-2 (Tandon)/dated 12/86. Ruling of the Executive Engineer considered unacceptable by the contractor arose for the first time when the Executive Engineer, Rajghat Dam No.II, Chanderi Proposed recovery of the interest. The claimants asked for clarification from the Superintending Engineer as per clause 52 of Agreement. S.E. Gave his decision that recovery of interest on advance in form of Machinery is well covered under clause 9 of special conditions of the contract read along with clause 8 and 9 of the General conditions. C.E. Examined the arguments of both the parties gave his decision that no interest charge is leviable on the cost of machines and only cost is to be recovered from claimant as shown in column 4 of Annexure VII of the Agreement.

4. Learned counsel for the appellant has relied on the following authoritative pronoucements:-

(i) Hind Builders Vs. Union of India, (1990) 3 SCC 338;

(ii) K Marappan (Dead) through sole LR Balasubramanian Vs. Superintending Engineer TBPHLC Circle Anantapur, 1019 LawSuit (SC) 977;

(iii) State of U.P. and others Vs. J.M. Construction Company, FAFO No.714 of 2005, decided on 11.4.2019 by this High Court.

5. The main bone of contention in this appeal is whether when the terms of contract are silent about interest, can the first appellate court reverse the finding of the the Arbitrator held in favour of the contractor holding that on the terms of contract, no interest was payable by the contractor.

6. Learned counsel Sri Khanna has vehemently submitted that the decision requires to be upturned as it is against settled legal position and the District Court has decided the matter as if it is deciding an appeal and has tried to rewrite the arbitral award and no interest was chargeable from the appellant as held by the arbitrator and by the authorities in their Ist decision Suo Motu reviewed on audit objection raised later on.

7. This is an appeal under Arbitration Conciliation Act, 1940.

8. It is submitted by learned Advocate that judgment of the Apex Court in K.Marappan (Dead) Versus Superintending Engineer T.B.P.H.L.C. Circle Anantapur, 2019 JX(SC) 391 and in Raveechee and Company Versus Union of India, AIR 2018 SC 3109, has interpreted the role of the Courts while hearing matters under the arbitration Act. The judgment goes to show that pendente lite interest will depend upon several factors such as; phraseology used in the agreement clauses conferring power relating to arbitration, nature of claim and dispute referred to arbitrator, and on what items power to award interest has been taken away and for which period. The Court observed:

"34. Thus our answer to the reference is that if contract expressly bars award of interest pendente lite, the same cannot be awarded by the Arbitrator. And that the bar to award interest on delayed payment by itself will not be readily inferred as express bar to award interest pendente lite by the Arbitral Tribunal, as ouster of power of the arbitrator has to be considered on various relevant aspects referred to in the decisions of this Court , it would be for the Division Bench to consider the case on merits."

9. The decision of Supreme Court in Puri Construction Pvt. Limited Versus Union of India, AIR 1989 SC 777 and State of Orissa Versus B.N. Agarwalla , (1997) 2 SCC 469 and submits that in view of the said judgment, the appeal requires to be allowed as none of the aspects which are needed for upturning the well reasoned arbitral award and the finding of facts and upholding the same do not show that there was any perversity, though it was not proved that any misconduct or that there was breach of any of the provisions under the Arbitration Act which would call for interference by this Court in its appellate jurisdiction.

10. The Apex Court in FCI Versus Joginderpal Mohinderpal, (1989) 2 SCC 347 has held that the objection against an arbitral award can be raised only if it falls within the parameters fixed by the provisions of Section 14, and 33 of the Act, 1940. If the award satisfies that it is based on equity, fair play, principles of natural justice and established practice and procedure then the award should not be interfered. In proceedings of arbitration there must be adherence to justice, equity, law and fair play in action. The proceedings must adhere to the principles of natural justice and must be in consonance with such practice and procedure which will lead to a proper resolution of the dispute and create confidence of the people for whose benefit these processes are resorted to FCI Versus Joginderpal Mohinderpal (supra).

11. Section 30 of the Act, 1940 read as follows :

"Section 30. Grounds for setting aside award. An award shall not be set aside except 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 other- wise invalid."

12. Section 33 of the Act, 1940 read as follows :

"33. Arbitration agreement or award to be contested by application. Any party to an arbitration agreement or any person claiming under him desiring to challenge the existence or validity of an arbitration agreement or an award or to have the effect of either determined shall apply to the Court and the Court shall decide the question on affidavits: Provided that where the Court deems it just and expedient, it may set down the application for hearing on other evidence also, and it may pass such orders for discovery and particulars as it may do in a suit."

13. Thus, the judicial review of an award has been circumscribed by Apex Court in FCI Versus Joginderpal Mohinderpal ( supra) wherein it has been held that arbitration as a mode for settlement of disputes between the parties, has a tradition in India. It has a social purpose to be fulfilled today,. It has a great urgency today when there has been an explosion of litigation in the courts of law established by the sovereign power . It is, therefore, the function of Courts of Law to oversee that the arbitrators act within the norms of justice. Once they do so and the award is clear, just and fair, the Courts should, as far as possible, give effect to the award of the parties and make the parties compel to adhere to and obey the decision of their chosen adjudicator. It is in this perspective that one should view the scope and limit of correction by the court of an award made by the arbitrator.

14. In backdrop of this it will have to be decided as to whether can it be said that the decision of arbitrator upturned by the Court below is bad and was wrongly not made the Rule of Court as per Arbitration Act, 1940.

15. While perusing the award 26.7.1998, it is found that the arbitrator considered each item threadbare and has given his findings. Can it be said that arbitral award does not fulfill the contours of principles which are required to be followed by an arbitrator under the Act, 1940. Item No.5 is taken as illustration so as not to burden the judgment but to come to the conclusion as to show that the Arbitrator and the Judge both had applied the legal acumen.

16. This Court in First Appeal From Order No.714 of 2005, State of U.P. and other Vs. J.M. Construction Company, decided on 11.4.2019, has summarised the principles for deciding matters under the Arbitration Act, 1940 & 1996 wherein in paragraph no.24 it is observed as follows:-

"In Rajasthan State Road Transport Corporation, the learned counsel for the respondent-Company submitted that in fact there was no material on which the finding was recorded by the Arbitrator. In support thereof, learned counsel invited our attention to a decision of this Court in the case of K.P. Poulose v. State of Kerala & Anr., reported in [1975] 2 SCC 236 wherein it was held that the award can be set aside on the ground of misconduct if relevant documents are not considered by the Arbitrator. Therefore, we asked learned counsel for the appellant- Corporation to substantiate the finding recorded by the arbitrator that it is based on the material on record. In pursuance to the direction given by this Court, learned counsel for the Corporation filed an affidavit on 12.7.2006 and submitted that the document wherein the details on divisionwise average kilometer of new tyres and retreaded tyres along with average short-fall in guaranteed kilometers for the various periods was on record of arbitrator and same was produced before us. The details were given of all the Divisions i.e. Bharatpur, Jaipur, Sikar, Kota, Ajmer, Bikaner, Jodhpur and Udaipur. In all these eight divisions for the various period i.e. from June 1991 to February, 1994 the details have been given to substantiate the allegations that what was the average mileage of the new tyre and what was the average mileage given by the retreaded tyres and on that basis, the short-fall was given and accordingly, the amount of loss was worked out. These details which were placed before us formed part of the record before the arbitrator. The arbitrator in his detailed award has recorded his finding on the basis of the average performance of new vehicle tyres with that of the retreaded tyres of the Company and on that basis he has worked out the assessment in paragraph 17 of the award. Paragraph 17 of the award reads as follows :

"The RSRTC has compared the performance of retreaded tyres with the performance of new tyres in each division. In each division, as mentioned earlier, the road conditions, the vehicles used, the weather conditions, the general driving skills of the drivers and the level of maintenance and upkeep of vehicles were similar for the new tyres as well as retreaded tyres. The retreaded tyres should have given a kilometerage of 46,000 or 95 % of the life of new tyres. Therefore, the assessment of the performance done by the RSRTC is strictly in conformity with the provisions of clause 5 of the agreement. Notwithstanding the acceptance by the respondent of an error of judgment in guaranteeing 46,000 kms for a retreaded tyre, from the Statements enclosed by the claimant with its letters mentioned in para 5 of this order, it is clear that the retreaded tyres performance fell short of the guaranteed level. I, therefore, find claim of the RSRTC to be fully justified."

"9. This is the finding of fact given by the arbitrator. As against this, learned Single Judge as mentioned above, has held that there was no assessment in each division in similar conditions. Therefore, the learned Single Judge set aside the award but it is not factually correct. As mentioned above, there was a comparative assessment given by the Corporation and that was part of the record before the arbitrator and on that basis the finding of fact was recorded by the arbitrator. Learned counsel for the respondents strenuously urged before us that the performance of new tyres and of retreaded tyres on roads like Jaipur-Delhi would be better as against the road of Jaipur-Lalsot. Therefore, there was no assessment of performance of the new tyres vis-a-vis the retreaded tyres supplied by the Company in similar conditions. In fact, an average has to be taken of each division. It is not necessary that in each of the divisions of the Corporation, the road conditions will be similar. Once the company has entered into an agreement knowing fully well the conditions obtaining in the State of Rajasthan that all the routes in the State are not the roads of Class `A' category but there are roads of Class `A', Class `B' and Class `C' categories also. Therefore, the average performance has been recorded taking into consideration this aspect. It is unlikely that all over the State of Rajasthan the road condition like Jaipur-Delhi will be available for all other divisions. Therefore, in all the divisions the average performance has been taken into consideration. The assessment has been based on average of similar conditions of the roads i.e. the good quality as well as the poor quality. Therefore, average performance of the new tyres with the retreaded tyres has to be taken on the basis of roads available in Rajasthan. The average running of the new tyres on these road conditions with that of the retreaded tyres was to be compared to find out whether the performance of retreaded tyres was up to 95% average or not. After assessing the comparative assessment and going through the materials on record the arbitrator has recorded his finding. It was for the company if they wanted more information or wanted to allege that the road conditions are not similar or that the performance of the tyres which were fitted in the rear axle or on the front axle would not be the same, all these details if it wanted, it could have obtained from the Corporation but they did not do so and only at this stage the company wants to bring this factual controversy that retreaded tyres were not used in similar conditions. This argument at this belated stage cannot be accepted as all the materials have been considered by the arbitrator and after taking into consideration the average of each tyre in each region of the corporation has worked out that the performance of the retreaded tyres was not to the extent of 95%. This was a finding of fact recorded by the arbitrator and the same was made rule of the court by the District Judge. But the learned Single Judge erroneously took upon himself to sit as a court of appeal and disturbed this finding of fact. In our opinion, the view taken by the learned Single Judge of the High Court cannot be sustained."

17. During the pendency of this appeal, stay has not been granted. The appellant has seen that the amount awarded by the District Judge is secured by way of bank guarantee or any other security. Clause-9 of contract reads as under:-

"(iii) Clause-9 Special Conditions (modified):

Plant and Machinery:

The plant and equipment procured by the Board shall be made available to the contractor on terms and conditions laid down as under:-

(A) Plant/equipment available for the work for exclusive use by the contractor:

(i) The plant and equipment as per Annexure-VII, procured by the Board for execution of part of work under the contract to shall have to be taken over by the contractor at the cost occassioned to the Board which has been indicated in Col.4 of the said Annexure. This coast shall be set-off against the total amount of advance for equipment admissible to the contractor under Clause-8 (modified) of the General Conditions of contract and shall be recovered in accordance with Clause-9 of the same condition of the contract."

18. Clause-9 of the General conditions does not speak about payment of interest is the submission of Sri Khanna as a special condition which is at page 180 of the paper-book. He has further relied on the judgment of the Apex Court in Hind Builders Vs. Union of India, (1990) 3 SCC 338, K Marappan (Dead) through sole LR Balasubramanian Vs. Superintending Engineer TBPHLC Circle Anantapur, 1019 LawSuit (SC) 977 and State of U.P. and others Vs. J.M. Construction Company, FAFO No.714 of 2005, decided on 11.4.2019 by this High Court., which has interpreted the contract to mean that where there are two interpretations possible, the Arbitrator's view would prevail. In this case, in fact there was no two views possible. The view taken by the Arbitrator is laud and clear and the Arbitrator's view was such that the first court should not have interfered. Similar view has been reiterated recently by the Apex Court and this Court is the submission of Sri Khanna.

19. It is further submitted by the counsel for the contractor that while reading the aribtral award, it cannot be said that it falls within the parameters as envisaged under Section 30 of Act, 1940. It cannot be said that the arbitrator has misconducted himself and that there is any error apparent on the face of record. The factual errors are not open for correction by a Court. It is submitted that no mistake of fact is justiciable hence in view of the decision of the Apex Court in Dandasi Sahu Versus State of Orissa, (1990) 1 SCC 214 wherein it has been held that the arbitrator, in the case of a reference made to him in pursuance of an arbitration agreement between the parties, being a person chosen by parties and was apprised as the sole arbitrator of all the questions and the parties bind themselves as a rule, to accept, the award as final and conclusive. The arbitrator need not give any reasons and even if he commits a mistake either in law or in fact in determining the matter referred to him, where such mistake does not appear on the face of the award, the same could not be assailed or quashed or upturned. The award could be interfered with only in limited circumstances as provided under Section 16 and 30 of the Arbitration Act, 1940. In this situation the Court has to test the award with circumspection.

20. While considering the factual background and interpreting the arbitral award and the order of the District Judge, the award of the arbitrator is in consonance with clause 8 and 9 of the contract. The District Court seems to have return the judgment as if it was sitting in appeal and deciding the Suit which could not have been done. The authorities were also of the view that no interest could have been charged from the appellant but they reviewed their own decision which became subject matter of arbitration and the arbitrator gave cogent reasons for allowing the appellant's application and held that no interest was payable. This well reasoned arbitral award was interfered by the court on the ground that the finding is bad though he referred to several judgments he himself embarked on fact finding mission and appreciated on the basis that the arbitrator had committed an error and relying on AIR 1955 SC 468 in the case of Thawer Das Vs. Union of India and misread the award as if there was an error apparent on the face of record. The modified clause 9 did not permit any interest and the advance was to be given without any interest. The arbitral award also was based on the decision of the Apex Court in 1989 (2) SCC 721, Raipur Development Authority and other Vs. Chokhamal and others. The reasons were well assigned by the arbitrator, thus, the judgment of the District Court reversing the arbitral award is bad in the eye of law and contrary to the contours of arbitral award being set aside by courts.

21. This appeal is allowed. The appellants are entitled to the refund of the interest deducted. The security could be encashed. The judgment of district Court is quashed and is set aside.

22. Record and proceedings be sent back to the Trial Court. The award of the Tribunal shall be made rule of the court under the Arbitration Act, 1940.

23. This Court is thankful to Sri Khanna for ably assisting the Court in getting this matter of 1991 disposed of.

Order Date :- 1.8.2019

Irshad