Harindra Singh vs Union Of India And Another
2019 Latest Caselaw 5473 ALL

HIGH COURT OF JUDICATURE AT ALLAHABAD
 
 

A.F.R.
 
Court No. - 33
 

 
Case :- FIRST APPEAL FROM ORDER No.1237 of 2000
 

 
Appellant :- Harindra Singh
 
Respondent :- Union Of India and another
 
Counsel for Appellant :- K.K. Dubey
 
Counsel for Respondent :- Manoj Kumar, Addt. Solicitor General, Ashok Mehta, Devendra Gupta, S.N.Srivastava, Shiv Kumar Pal
 

 
Hon'ble Dr. Kaushal Jayendra Thaker, J.

1. Heard Sri K.K. Dubey for the appellant and Sri Devendra Gupta, Senior Advocate, for the respondents.

2. By means of this appeal, the appellant challenges the order dated 26.5.2000 passed by District Judge, Jhansi, in Misc. Case No.15 of 1998, whereby District Judge set aside the arbitral award dated 20.10.1997 passed by Arbitrator on the ground that reasons were ascribed and that the respondent to whom the arbitrator wrote a letter and deposited the award along with Annexure-A in two separate covers by raising the objection for payment of only the final bill, the Union of India did not produce before the authority below the second envelop which contained the reasons given by the arbitrator for allowing and/or disallowing the claim either of the appellant or the respondent.

3. The facts in brief are that by virtue of an agreement executed between the Union of India and Harindra Singh on 8.12.1987 the contract was given for a work for the value of Rs.31,48,602.40. The work was to commence from 30.121987 and was agreed to be over within a year by 29.12.1988. The work could not, however, be completed within the stipulated period and could actually be finished only on 31.3.1995. For this purpose eight extensions were given by the Union of India. The sole arbitrator had sittings of the arbitration and gave award on 20.10.1997 awarding the claim in favour of the contractor - Harindera Singh of the value of Rs.23,69,157.00. He also allowed interest on the awarded sum at the rate of 12% per annum and thus the total awarded money was calculated at Rs.23,73,489.96. The objections taken against the award are that it is against law; that the interest awarded before actual passing of the award; that the interest awarded is unreasonable; that the proceedings were not kept secret by the Arbitrator; that he had acted in excess of his jurisdiction in giving the award in respect of escalation of labour charges etc.; that the award is exparte and that the arbitral award does not state the reasons upon which it is based. The trial court did not accept any of the contentions of the Union of India but in the end portion, granted the prayer on the basis that the arbitral award lacked reasons. Thus, the prayer was made for setting aside of the award which was accepted. The Union of India had accepted all the claims but had kept the final bill pending and it was under these circumstances that the matter was sent for arbitration.

4. The Written Submission submitted by counsel for the appellant in verbatim is as under:-

"The appellant and the respondent on behalf of Union of India entered into an Contract Agreement No. CWE/JHA/J /31 of 87-88 under CWE, Jhansi Cantt. for the provisions of Ancillaries at Nowgaon (Madhya Pradesh) under the territorial jurisdiction of CWE, Jhansi Cantt.

When certain differences had arisen between the parties to the contract a request was made by the Appellant/contractor for the appointment of an Arbitrator on 26.02.1997 to the competent authority the Chief Engineer Jabalpur Zone, Bhagat Marg, Jabalpur as provided under the Contract Agreement.

Considering the request and having gone through the disputes and differences between the parties, the Competent Authority, the Chief Engineer, Jabalpur Zone, Bhagat Marg, Jabalpur, had appointed Lt. Col. S.C Dey as the sole Arbitrator vide Letter No.760408/ARB/4/E8 dated 31.03.1997 further amended by Letter No.760408/ ARB/13/E8 dated 24.07.1997 issued by the Chief Engineer, Jabalpur Zone, Bhagat Marg, Jabalpur.

After hearing both the parties at length the following award was published by the sole Arbitrator in favour of the appellant contractor.

Claim No.

Brief Description of Claim

Claimed

Amount (Rs.)

Payment of final RAR and undisputed portion of final bill Amount of Claim Rs. 5.40 lakh

Amount amended to Rs. 7,81,698.70 Amount of claim further revised to Rs. 4,08,767.71. Claim partially sustained and awarded Rs. 1,58,148.00 (Rs. One Lakh Fifty Eight Thousand One Hundred Forty Eight Only).

1,58,148.00

Refund of Sales Tax deducted unilaterally and uncontractually. Amount of claim Rs. 0.50 lac Amount amended to Rs.23,416/-. Claim sustained and awarded Rs.23,416/- (Rupees Twenty Three Thousand Four Hundred Sixteen Only).

23,416.00

Reimbursement of escalation prices as per contract. Amount of claim: Rs. 3.00 lakhs. Amount amended to Rs. 2,99,132.44 Amount further amended to Rs. 5,48,792.80. Claim partially sustained and awarded Rs. 4,85,300. (Rupees Four Lakhs Eighty Five Thousand Three Hundred Only).

4,85,300.00

Payment of works redone as per direction of department. Amount of claim: Rs. 7.50 Lac, Amount revised Rs. 13,14,570/- Claim partially sustained ij and Forty Seven Thousand Only).

47,000.00

Reimbursement of cost of stores forcibly taken away by unit troops amount of claim Rs. 1.75 lakhs amount amended to Rs. 2,15,800/-.

Nil

Reimbursement of wages paid to watch and ward.

Amount claim: Rs. 15.37 lakhs, Amount amended to Rs. 14,56,100.00 Amount particularly sustained and awarded to Rs. 58,500/- (Rupees Fifty Eight Thousand Five Hundred Only).

58,500.00

Damages on account of various broaches by the department, Amount claim: Rs. 34.00 lakhs.

Amount amended to Rs. 30,62,935.00.

Amount partially sustained and award Rs. 14,35,000/- (Rupees Fourteen Lakhs Thirty Five Thousand Only).

14,35,000.00

Reimbursement of cost of work NIL done at higher rates and not covered by admissible escalation. Amount claim: Rs. 3.00 lakhs. Claim not sustained and awarded.

Nil

Refund of cost of set cement. Amount claim: Rs. 0.06 lac Amount amended to Rs. 10,293.00 Amount partially sustained and awarded Rs. 5,593/- (Rupees Five Thousand Five Hundred Ninety Three Only).

5,593.00

Interest on delayed payment of RAR, Final Bill and Claims. Claim on Rate of interest @ 12% per annum, simple interest on award amount of Claim No. 1 & 6 only from 22 August 1997 to date and thereafter 12% per annum simple interest on the total amount of award excluding directional award against claim no. 13 below

12% per annum, simple interest on award amount of Claim No. 1 & 6 only from 22 August 1997 to date and thereafter 12% per annum simple interest on the total amount of award excluding directional award against claim no. 13 below.

Refund of additional security Amount of Claim: Rs. 0.362 lakhs. Claim sustained and awarded Rs. 36,200/- (Rupees Thirty Six Thousand Two Hundred Only).

36,200.00

Cost of reference. Amount of claim Rs. 50,000/- Amount of claim partially sustained and Awarded Rs. 20,000/- (Rupees Twenty Thousand Only).

20,000.00

Any other claim/ dispute arising out of audit and technical check of final bill. Amount not indicated in the reference along with the amount indicated subsequently for a directional award to release to Claimant.

Union of India is directed to release bank guarantee bond for Rs. 1 lac along with the payment of award to claimant.

It shall be pertinent to mention here that no claim made by Respondent was allowed by the Arbitrator or the court below.

5. Before the court below it was contended by the objector namely the respondents that the arbitral award was an unreasoned award and, therefore, it required to be set aside. The court below accepted this submission of the respondent - Union of India and did not make the arbitral award Rule of the court and set it aside. The appellant herein challenged the same making the arbitrator also a party before this Court. It appears that the arbitrator on being issued with the notice/summon filed his reply and brought it to the notice of this Court that reasons were assigned and they were in a different cover given to the authorities for making it rule of the Court. On perusing this reply, a request was made by the appellant to this Court and in the year 2004, this Court passed the following order. The order of this High Court dated 29.9.2004 passed by this Court is as under:-

"Heard Shri R.P. Singh, learned counsel for the appellant and Shri Namit Sharma, holding brief of Shri Manoj Kumar, learned counsel for the respondent. It was directed by this Court on 27th November, 2003 that respondents will produce the second sealed cover sent by the arbitrator. The same has not been produced. By moving this application, prayer is being made to direct the respondent to produce second sealed cover sent by the arbitrator. Let the paper be produced by the respondent on or before 1st November, 2004 and the case be listed before appropriate Bench for hearing on 1st November, 2004."

On perusing the second envelop which contains elaborate reason, the undersigned felt that the Officer Incharge was guilty of suppression of facts before the trial court. The order of this High Court is as under:-

"Hon'ble Dr. Kaushal Jayendra Thaker,J.

I had requested for alternative dispute redressal but the officers had refused to mediate, the matter was kept today for arguments. The statement was made by Additional Solicitor General that again the matter be kept for alternative dispute redressal.

The officer who had filed the affidavit, namely, Mukeh Kumar was not the person who was incharge of the garrison, at the time of disposal of matter before the District Judge.

List the matter on 14.03.2019 at 2 p.m. before undersigned for alternative dispute redressal, no further dates shall be granted, as I am well aware that this exercise is only for taking adjournment. The officer who can take decision be kept present.

Order Date :- 6.3.2019

Shubhankar"

6. This Court had thought of some solutions as the appellant was without any fruits of his work done because of the deliberate and or inadvertent mistake of the respondent and, therefore, the alternative resolution was suggested because it was contended in the appeal that the award was set aside on the sole ground namely that the arbitrator had not assigned any reason for passing the award. The fact that the arbitrator had assigned reasons and kept in a sealed cover which was kept by the officers and not submitted to the Court, this Court had felt that it would be better that instead of passing any stricture, the matter should be shorted out but it could not be done.

7. The objections raised by Union of India were rejected by the court below but upheld their contention that the arbitral award was an unreasoned order.

8. Pursuant to the order of this Court, the respondent herein produced documents which was sealed by this Court on 12.2.2008, which have been perused by the undersigned in detail while going through the entire record.

9. While going through the written submissions and the judgment cited by the appellant and the respondent can it be said that arbitral award suffers from error of law and facts which would make the award vulnerable. The principles for deciding a matter under the Arbitration Act both 1940 and 1996 would be necessary. The sole arbitrator held in favour of the claimants. The main ground of challenge before the Court was that the arbitrator had not given reasons.

10. It has been contented by the counsel for appellant that Principal Civil Court/District Judge Jhansi (present Mr. Umeshwar Pandey, H.J.S) in its judgment and order dated 26.05.2000 while deciding the application under section 34 of Arbitration and Conciliation Act, 1996 preferred by Union of India against the award published by the sole Arbitrator Lt. Col. S.C Dey in favour of the appellant on 20.10.1997. The judgment decided against appellant on the ground that it was unreasoned award. The judgment and order passed by Civil Court/District Judge Jhansi (present Mr. Umeshwar Pandey, H.J.S) in Misc. Case No. 15 of 1998 under Section 34 of the Arbitration and Conciliation Act has already been filed by the the appellant before this Hon'ble Court, which is on record.

"On perusal of the Judgment and Order passed by Civil Court/District Judge Jhansi (present Mr. Umeshwar Pandey, H.J.S) in misc. Case No. 15 of 1998 under Section 34 of the Arbitration and Conciliation Act, 1996, it is apparent on the face of the record the specific requirements and ingredients as per Sections 31 and 34 of the Arbitration and Conciliation Act 1996 have been overlooked and the application of the respondents under Section 34 of the Arbitration and Conciliation act 1996 was allowed which was preferred against the award published by the sole Arbitrator Lt. Col. S.C Dey.

11. It has been further contended by the counsel for the appellant that the Principal Civil Court/District Judge Jhansi (present Mr. Umeshwar Pandey, H.J.S) in its judgment and order dated 26.05.2000 that the award published is apparently unreasoned, no specific reasons had been mentioned therein by the sole Arbitrator, while granting the claims of the Appellant contractor while on the other hand each and every claim which either had been allowed or rejected by the sole Arbitrator is based on proper and substantial reason. It is further submitted by the counsel for appellant that the original copy of the award and the case file, which were in covered sealed envelopes with the Officers of respondent - Union of India given by the Arbitrator to the respondent, out of those only one envelope having award therein was produced before Principal Civil Court/District Judge Jhansi (present Mr. Umeshwar Pandey, H.J.S) so far the Principal Civil Court/District Judge, Jhansi (Present Mr. Umeshwar Pandey, HJS) had failed to consider all the relevant facts of the award and allowed the application of the Applicant/Respondent (in present Appeal) and the Award dated 20.10.1997 passed by Lt. Col. S.C. Dey had been rejected by an order dated 26.05.2000 (the order is under challenge in the present Appeal)".

12. In support of the pleadings and contentions based on facts of the case, the written submissions were filed by both appellant and respondent which are reproduced verbatim here under:

FOR APPELLANT

"1- REASONS GIVEN BY THE ARBITRATOR NEED NOT BE ELOBERATE IN DETAIL-

"It has been held by the Hon'ble the Apex Court in the matter of Indian Oil Corporation Versus Indian Carbon Ltd. Reported in AIR 1988 SC 1340 Para 8 that- It is one thing to say that reasons should be stated and another thing to state that a detailed judgment is to be given in support of an award. Even if it be held it is obligatory to state the reason, it is not obligatory to give a detailed judgment" A similar view was also taken by the same court in the matter of Gujarat Water Supply Versus Unique Erectors reported in AIR 1989 SC 973, Para 9.

Similar views were expressed by Full Bench (5 Hon'ble Judges Bench) of the Hon'ble Supreme Court in the matter of Goa, Daman & Diu Housing Board Versus Ramakant V.P. Darvotkar reported in AIR 1991 SC Court 2089 Para 9. In case the Hon'ble Supreme Court set aside the High Court finding that the Arbitrator was guilty of misconduct for his failure to give reasons as required. The Hon'ble Apex Court had observed " There is however nothing to show that the awards have been improperly procured. There is no allegation, far less, any finding, that the Arbitrator was biased or unfair or he has not heard both the parties or he has not fairly considered the submission of the parties in making the award in question. In our opinion, it is evident from the four awards made by the Arbitrator, that the Arbitrator has considered the submission of the parties in making the award in question. In our opinion, it is evident from the four awards made by the Arbitrator, that the Arbitrator has considered all the relevant issues raised by the parties in the Arbitrator proceedings and came to his finding after giving cogent reasons. The above award cannot under any circumstances be considered to be made by the Arbitrator without recording any reasons for the same. Therefore, in such circumstances, it is not proper to hold that the Arbitrator has misconduct himself or the proceedings in the matter of giving the awards".

In the case of Raipur, Development Authority etc. Vs. M/s. Chokhamal contractors etc. reported in AIR 1990 Supreme Court Page 1426, the Hon'ble Apex Court in paragraph 37 held as under:-

"There is, however, one aspect of non-speaking awards in non-statutory arbitrator to which Government and Governmental authorities are parties that compel attention......, the legitimate criticism that Government failed to provide against possible prejudice to public interest."

In another case of Anand Brothers Pvt. Ltd. vs. Union of India and others reported in (2014) 9 SCC 212, in paragraph 12 has considered and decided the phrase 'finding' and in paragraph 13 defined the phrase "conclusion" further regarding the finding and speaking order the Apex Court in the aforesaid judgment in paragraph 14 has held as under:

It is trite that a finding can be both; a finding of fact or a finding of law........This is the rule also in the case of finding of fact where too the process of reasoning must be disclosed in order that it is accepted as a finding in the sense the expression is used in Clause 70.

Therefore, in view of the aforesaid pronouncement, it has to be examined by perusing of the award wherein the Arbitrator dealt with each and every claim separately and recorded the reasoning for allowing or disallowing the claim. As mentioned herein above the award it self is on part of the record (Paper Book)

The learned Trail Court therefore erred in setting aside the award by concluding that the award is without reasons.

2. EFFECT BE GIVEN TO THE VALID PART OF THE AWARD.

In view of the conciliation as stated herein above under the head 'REASONS GIVEN BY THE ARBITRATOR NEED NOT TO BE ELOBERATE IN DETAIL' the contention of the Appellant that sufficient reasons had been given by the learned Arbitrator against all claims. However, even if it is held that in few cases the reasons do not exist or not adequate, the award would be bad only to that extent. The remaining award would still be valid. It is therefore prayed that atleast effect be given to the valid part of the award, so that the suffering of the claimant is reduced. The bad part of the award (if at all) can be remanded back to the Arbitrator for conciliation action as contemplated in below.

This issue of giving effect to valid part of the award is no more res-integra since this proposition by now is well settled. As per decision of the Hon'ble Apex Court in Nattapati Chilamayya Versus M. Venkat Raman, reported in AIR 1972 SC 1121 on 1125. The above proposition in principal has also been included in the Arbitration and Conciliation Act, 1996 in which as per section 34 (2) (a) (iv), only that part of the award is to be set aside which is beyond jurisdiction provided of course it is separable. In the present case, all claims are independent and hence there would be no problem in separating bad portion from the valid portion.

3- PRAYER TO CONSIDER THE SUBJECT MATTER UNDER SECTION 34 (4) OF THE ARBITRATION AND CONCILIATION ACT, 1996

Section 34 (4) of the Arbitration and Conciliation Act, 1996 contains a provision to give the Arbitrator an opportunity to take appropriate action to eliminate the ground for setting aside the award. In this case, the award was set aside merely on the ground that it did not contain reasons. This ground could have easily been eliminated by referring the matter to Arbitrator with the permission of the court under the above section 34 (4). As such, even if this Hon'ble court also finds that the award is without reasons, it is prayed that the appellant be allowed the remedy available to him Under Section 34 (4) of the Act by giving an opportunity to the Arbitrator to make good the deficiency (if at all) of not giving reasons. This would be in conformity with the well settled principal of Law as laid down by the Hon'ble Apex Court in the matter of Bijendra Nath Srivastava Versus Mayank Srivastava as Reported in 1994 (6) SCC 117.

The Appellant therefore Most Respectfully prays for the following reliefs :

A. The Hon'ble Court be pleased to set aside the impugned judgment of the learned District Judge/Principal, Civil Court so that the Arbitral award may attain finality and can be implemented as a decree of the court.

B. If prayer, at (A) above is not found acceptable in the eyes of law, the Hon'ble Court may graciously be pleased to grant the following relief.

i) Each claim of the award being separable, orders be passed for implementing the valid part of the award and the bad part of the award be remanded back to the Arbitrator for elaborating reasons, if required.

ii) Pass any other and further relief which this Hon'ble Court may deem fit and proper in the facts, reasons and circumstances of the case.

iii) The cost of the appeal may also be awarded.

The claims which were put for kind consideration before the Arbitrator have been decided in the following manner beside the facts of the case.

CLAIM NO.1

The amount awarded is only Rs. 18,148/- which included Rs. 1.50 Lakh towards the Appellant's Bank Guarantee which was encashed by the Union of India. Thus in effect only an amount of Rs. 18,148/- was allowed. As per second para on page 12 of the award, the Union of India submitted a minus bill towards closing of the hearing, but it was on account of revision of value of L.O. from Rs. 12.10 to Rs. 14.58. This was not found acceptable by the Arbitrator due to reasons given by him against claim 3. Thus even though calculations in support of the amount of Rs.8148/- was not given by the Arbitrator. The bent of his mind comes quite clear from the narration of this claim in the award.

CLAIM NO.2

The reason for awarding the amount of Rs. 28,416/- becomes quite clear from the award viz. The work was carried out of MP where there was no provision of this tax. This position was accepted even by the UP Sales Tax Authorities, who as mentioned in second Para on Page 14 of the award withdrew their earlier demand. As such the reason based on which the above amount was awarded is obvious from the award.

CLAIM NO.3

In this case also the reason is quite clear in that the Arbitrator relying upon the judgment of the Karnataka High Court held that for MES work minimum wage should be that as fixed by the Central Government and hence the escalation was required to be based on the value L.O. as Rs. 9.50 in lieu of Rs. 12.10 considered by the Union of India. Though the Arbitrator did not give the calculation in support of the awarded amount Rs. 4,85,300/- against Rs. 5,48,792.30. It is not obligatory on his part to give such calculations as already mentioned above. Beside, in all probability this detail might be available in the Arbitrator's second folder which the Union of India did not file in the court.

CLAIM NO.4

In this claim,the Arbitrator awarded only Rs. 47,000/- which, in his view was the amount of work redone by the contractor pertaining to septic tank, main hole covers, white washing and painting etc. The representative of the Union of India did admit redoing of this work by the contractor and hence reason for awarding this claim is quite obvious.

CLAIM NO.6

The Arbitrator gave specific reason for awarding this claim. As seen from para 5 on page 20 of the award, the Arbitrator made it clear that the compelling circumstances (viz the absence of the troops for whom the accommodation was built), left no choice to the contractor but to employ chokidars beyond his liability. The Union of India objected to the amount of the claim which was duly considered by the Arbitrator who awarded only Rs.58,500.00 against the Appellant's claim of Rs. 14,55,100/-. As submitted earlier, the award need not contain calculations in support of the amount awarded.

CLAIM NO.7

The Arbitrator awarded an amount of Rs. 14,35,000/- against the contractors claim of Rs. 30,62,935/- for the various breaches committed by the Respondent. The various breaches are listed in the award and they resulted in prolongation of the contract by number of months. Finding on this issue had been given by the Arbitrator in Claim No.6 a reference of which had been made by him in this claim also. The arbitrator held that these breaches attracted Section 73 of the Contract Act and hence awarded the claim in favour of the contractor, which amount was considered by him as reasonable considering the increase in the contractors overheads etc. during the prolonged period.

CLAIM NO.9

An amount of Rs. 5,598/- had been awarded against this claim for cost of set cement. The award contains sufficient reasons in its justification.

CLAIM NO.10

Interest on the delayed payment has been held justified in number of cases by the Hon'ble Apex Court and, as such, it should be granted.

CLAIM NO.11

This claim pertains to refund of contractors additional security which the Department was bound to return on expiry of defect liability period of one year from the date of completion of the work. This amount was not included in the final bill and hence it had been awarded separately under this claim. Reasons to this effect had been given in the award.

CLAIM NO.12

an amount of Rs. 20,000/- was awarded against this claim as the claimant contractor was dragged into Arbitration by the department.

The Arbitrator awarded 'Nil' amount against these claims and gave sufficient reasons for doing so.

For supporting the case of appellant i.e Harindra Singh, the cases refereed as:-

(I) Indian Oil Corporation Ltd. Vs. Indian Carbon Ltd. (1988) 3 SCC 36;

(II) Goa, Daman And Diu Housing Board Vs. Ramakant V.P. Darvotkar, (1991) 4 SCC 293;

(III) Gujarat Water Supply and Sewearage Board Vs Unique Erectors (Gujarat) (P) ( Ltd.) (1989) I SCC 532;

(IV) Rajpur Development Authority etc. etc. Vs.M/s. Chokhamal Contractors etc. etc., AIR 1990 SC 1426; and

(V) Anand Brothers Private Limited Vs. Union of India and others, (2014) 9 SCC 212"

13. The Written Submission submitted by counsel for the respondent No.1 - Union of India in verbatim are as under:-

"On 06.02.2019, this Hon'ble Court passed order and directed as under:-

"Learned Counsel for the Union of India may impress upon the authorities concerned about this flaw in their working and convey to this court whether they will be willing to go mediation or not. This exercise may be completed on or before 14.02.2019.

List the appeal on 14.02.2019 at 02:00 p.m before the undersigned for conveying the court whether officer would like to go for mediation or not.

The Officer shall remain present to convey whether they would like to go for mediation or not.

This Court appreciates the gesture of Sri Devendra Gupta, who has undertaken to convey the feeling of the court to the Officers concerned."

The copy of the order dated 06.02.2019 is being filed herewith.

On 06.03.2019, this Hon'ble Court has passed order and directed as under:-

"List the matter on 14.02.2019 at 02:00 p.m before undersigned for mediation, no further dates shall be granted, as I am well aware that this exercise is only for taking adjournment. The officer who can take decision be kept present."

The copy of the order dated 06.03.2019 is being filed herewith.

On 14.03.2019, this Hon'ble Court has passed order as under:-

"This Court is thankful to Col. V.R.S. Katwal, C.W.E Jhansi, Sri Mukesh Kumar Marothia, Garrison Engineer, Jhansi, who have remained present at the instance of this court for mediation.

I have tried to mediate and they would go back to their respective offices and convey the oral feelings of this Court and discuss with their officers and revert back to this Court on 05.04.2019 at 02:00 P.M and convey if there is possibility of mediating or setting the dispute. Personal presence of Col. V.R.S. Katwal on that day is dispensed with."

On 05.04.2019, this Hon'ble Court has passed order as under:-

"The parties to argue the matter on 08.04.2019. The matter was practically argued and it appears that this is only a delaying tactics. Mediation Fails.

List the matter on 08.04.2019.

As the matter is recalled after it is delved as the counsel do not agree for dates. Hence it is better that the matter is heard on merits, 19 years have already elapsed after appeal is filed."

This Hon'ble Court has tried to see that the matter be disposed of by way of alternative dispute mechanism as from the record it was very clear that some mischieved/fraud was played by the respondent before the court below and the reasonings were lying in the office of the respondents till they were directed to produce the same in the year 2004. It was very clear that the order could not be sustained. Thereafter this Court directed the respondents to hear the matter on merits and on 08.04.2019 after hearing both the parties on merits, this Court has directed parties to file written submissions. In compliance of this Hon'ble Court's order, present written submission are being placed on behalf of Respondent no.1, Union of India.

WRITTEN SUBMISSION ON BEHALF OF RESPONDENT NO.1 IS AS UNDER:-

By means of the present F.A.F.O., the appellant is assailing the order dated 26.05.2000 passed by District Judge, Jhansi, in Misc. Case no.15 of 1998, whereby the court below has rightly allowed the objections of Union of India and set aside the award dated 20.10.1997 given by the Arbitrator.

In the objection, it is objected that by the Arbitrator, vide letter no. 34689 dated 02.04.1997 initiate the proceedings and first meeting held on 15.09.1997 at Jhansi then second meeting held from 25.04.1997 to 28.09.1997 and third & last meeting was on 04.10.1997 at Jabalpur and then awarded Rs.23,69,157.80 on 20.10.1997. (Para 4, page 52 of the paper book filed by Union of India).

It is most respectfully submitted that in the ground no. 4 of the objections, it is stated the proceedings has not been kept confidential by the Arbitrator and decision was reflected much before the conclusion of hearing by the Arbitrator. (Para 7-D, page 53 of the paper book filed by Union of India).

It is also a ground in objection that without assigning any reason in different heads, the award has been published and those points were never in question, on what points were also award was published. (para 7-I, Page 54 of the paper-book filed by Union on India).

The appellant Shri Harendra Singh has filed his affidavit before District Judge on 23.07.1999 wherein he specifically stated in para 7 as under:-

"That vide letter dated 21.03.1997 the CWE Jhansi had clearly written to the effect-

'Reference to the arbitration is occurred except in respect of disputes for payment of final bill reimbursement of escalation and refund of additional security as these are being paid through final bill as per express conditions of the contract.' (para 7, page 72-73 of the paper book filed by Union of India).

That the Court below has recorded findings as under:-

"It requires radical nexus between the evidence and the conclusion. The Arbitrator is thus bound by the aforesaid provision to tell the reason why he came to the particular conclusion......the defence and the documentary evidence produced during the hearing", the amount has been awarded. The Arbitrator has thus not recorded reasons of making the award on any item referred therein. The simple observation recorded in the award as aforesaid will not amount to be the reasons for the conclusions arrived at by the Arbitrator. Obviously, no rational nexus between the evidence and the inference drawn out of it have been shown in award by the Arbitrator". (internal page 8 of impugned order filed with the memo of appeal).

From the perusal of impugned order, it appears that the court below has rightly passed the order on face of evidence and record and the Arbitrator, while publishing the award, has erred in considering the same and grant the claims of appellant contractor wrongly without assigning any proper reasons.

It is also most respectfully submitted that the second sealed cover envelope which probably contains the proceedings during arbitration was not summoned by the court below, so it can not be produced and when this Hon'ble Court has summoned, it was produced by the officials. It is also submitted that reasons can not be written separately it should contain in the award itself, therefore non-production of second seal cover envelope which contains proceedings has got no nexus.

The claims which were put for consideration before Arbitrator have wrongly be decided as above :-

CLAIM NO.1

The claim no. 1 is pertaining to over drawn of store with respect to 12 items which was not returned by the contractor and as per contract agreement the recovery of the said store by the contractor, at double the market rate (page 18, 19, 20 of the paper-book filed by the Union of India).

CLAIM NO.3

The claim no. 3 is pertaining to reimbursement of escalation in price. It is submitted that while Arbitrator was decide the instant claim, he erred in calculating the labour wages, he did not state reasons for rate, for which formula he calculated the same and he awarded Rs.4,85,300/- without expressing any reasons with regard to formula as well as calculations (page 26 & 28 of the paper-book filed by Union of India).

CLAIM NO.4

The claim no. 4 is pertaining to payments of works redone as per direction of department. It is submitted that the work done by the contractor beyond its original period of completion after 87 months.

With regard to claim nos. 6,7,9,10,11 and 12, it is submitted that while deciding the above claims the Arbitrator had not assigned any cogent reasons and published the award in favour of contractor by overlooking the material/ evidence filed by the Union of India with wrong interpretation.

It is further most respectfully submitted with regard to final bill, the payment was made to the contractor during work on its progress time to time and final bill came negative to be payable to the contractor during the hearing on 04 Oct. 1997, wherein the payment account of escalation to be made was calculated based on L.O. as Rs.14.58 amending L.O. as Rs. 12.10 earlier admitted in the paras 13 to 20. The same final bill as revised and audited by AAO, GE Jhansi, was perused by both the parties and Arbitrator. Further, GE Jhansi representative of Union of India had stated that this final bill after having been audited by AAO, GE Jhansi has been forwarded to CDA, Lucknow, for their audit which the GE promised to deliver to the Arbitrator by 10 Oct. 1997, the same could not be produced due to departmental procedure and Arbitrator has published the award in a very hurried manner on 20 Oct. 1997, without affording further opportunity. (page 17 of the paper-book filed by Union of India).

For supporting the case of Respondent no. 1 i.e Union of India, the cases refereed as:-

(1). Reported in A.I.R 1995 Supreme Court, page 2189 (HINDUSTAN CONSTRUCTION CO LTD V/S GOVERNOR OF ORISSA).

(2). Reported in A.I.R 1975 Supreme Court, page 230 (N. CHELLAPPAN V/S SECRETARY, KERALA STATE ELECTRICITY BOARD).

(3). Reported in A.I.R. 1991 Supreme Court, page 957 (PRAVARTAK COMMERCIAL CORPORATION LTD V/S CHIEF ADMINISTRATOR DANDAKARANYA PROJECT).

(4). Reported in A.I.R 1987 Delhi, page 134 (COLLEGE OF VOCATIONAL STUDIES V/S S.S. JAITLY)."

14. Decisions under the Arbitration Act both under 1940 Act and 1996 Act which would have to be looked into for the purpose of our exercise would be ....

(I) Steel Authority of India Ltd Vs. Gupta Brothers Steel Tubes Ltd. (2009) 10 SCC 63 .

"...... The courts below have currently held that the arbitrator has gone into the issues of facts thoroughly, applied his mind to the pleadings, evidence before him and the terms of the contract and then passed duly considered award and no ground for setting aside the award within the four corners of Section 30 has been made out......... In what we have already discussed above, the view of the arbitrator in this regard is a possible view. Consequently, appeal has no merit and costs."

(ii) Sumitomo Heavy Industries Ltd Vs. Oil & Natural Gas Commission of India (2010) 11 SCC 296

".... award was not only a plausible one but a well reasoned award. In the circumstance the interference by the High Court was not called for. In that view of the matter we allow this appeal and set aside the judgment of the learned Single Judge, as well as that of the Division Bench...."

(ii) Rashtriya Ispat Nigam Ltd. Vs. M/s Dewan Chand Ram Saran reported as 2012 (5) SCC 306

".... There was no reason for the High Court to interfere in the view taken by the arbitrator which was based, in any case on a possible interpretation of clause 9.3. The learned single Judge as well as the Division Bench clearly erred in interfering with the award rendered by the arbitrator. Both those judgments will, therefore, have to be set-aside. Accordingly, the appeal is allowed and the impugned judgments of the learned Single Judge as well as of the Division Bench, are hereby set aside...."

(iii) 2011 (5) SCC 758, in the case of J.G. Engineers Pvt. Ltd. Vs./ Union of India & Anr.

(iv) First Appeal No.137 of 1992, in the case of State of Gujarat & Anr. Vs. Nitin Construction Company, judgment dated 22.03.2013 of the Hon'ble High Court of Gujarat.

(v) First Appeal No.3688 of 2012, in the case of State of Gujarat Vs. Vijay Mistri Construction & Anr., judgment dated 22.03.2013 of the Hon'ble High Court of Gujarat.

(vi) Reported in 2000 (4) GLR 3652 in the case of Oil & Natural Gas Corporation Limited V/s. Essar Steel Limited, (Paragraph-8).

(vii) Reported in 1999(9)SCC 449, Arosan Enterprises Limited V/s. Union of India & Anr.

(vii) Reported in 2003 (8) SCC 4, Continental Construction Limited V/s. State of U.P., Assam State Electricity Board V. Buildworth (P) Ltd., AIR 2017 ,Gujarat Water Supply & Sewerage Board V. Unique Erectors (Gujarat) (P) Ltd., 1989 (1) SCC 532: Irrigation Department, State Of Orissa V. G.C. Roy, 1992 1 SCC 508 : Jugal Kishore Prabhatilal Sharma V. Vijayendra Prabhatilal Sharma, AIR 1993 SC 864 and Smt. Aruna Kumari V. Government Of Andhra Pradesh, AIR 1988 SC 873.

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 (supra), 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."

15. Therefore in light of decisions of the Apex Court and the discussion herein above, the scope of interference with the findings of Arbitrator as upturned by the District Judge on the basis of principles enunciated would have to be analyzed and whether the Court can interfere with the findings of Arbitrator will have to be decided as per the judgment in case of Bharat Coking Coal Ltd Vs. Annapurna Construction reported in 2003 (8) SCC 154.

16. The constitution bench of the Apex Court in General Assurance Society Ltd. v. Chandmull Jain : AIR 1966 SC 1644, while dealing with provisions of contract observed as under:-

"In interpreting documents relating to a contract of insurance, the duty of the court is to interpret the words in which the contract is expressed by the parties, because it is not for the court to make a new contract, however reasonable, if the parties have not made it themselves."

17. In Oil and Natural Gas Corporation Ltd. (supra), while dealing with the provisions of section 34 of the Arbitration and Conciliation Act, 1996, the Apex Court has held as under in para 54, 55, 56:-

"54. In the light of the aforesaid decisions, in our view, there is much force in the contention raised by the learned counsel for the appellant. However, the learned senior counsel Mr. Dave submitted that even if the award passed by the arbitral tribunal is erroneous, it is settled law that when two views are possible with regard to interpretation of statutory provisions and or facts, the Court would refuse to interfere with such award.

55. It is true that if the arbitral tribunal has committed mere error of fact or law in reaching its conclusion on the disputed question submitted to it for adjudication then the Court would have no jurisdiction to interfere with the award. But, this would depend upon reference made to the arbitrator; (a) if there is a general reference for deciding the contractual dispute between the parties and if the award is based on erroneous legal proposition, the court could interfere; (b) It is also settled law that in a case of reasoned award, the Court can set aside the same if it is, on the face of it, erroneous on the proposition of law or its application; (c) If a specific question of law is submitted to the arbitrator, erroneous decision, so as to permit of its being set aside, unless the Court is satisfied that the arbitrator had proceeded illegally.

56. In the facts of the case, it cannot be disputed that if contractual term, as it is, is to be taken into consideration, the award is on the face of it, erroneous and in violation of the terms of the contract and thereby it violates Section 28(3) of the Act. Undisputedly, reference to the arbitral tribunal was not with regard to interpretation of question of law. It was only a general reference with regard to claim of respondent. Hence, if the award is erroneous on the basis of record with regard to proposition of law or its application, the court will have jurisdiction to interfere with the same."

18. In P. Radhakrishna Murthy v. National Buidings Construction Corporation Ltd. : (2013) 3 SCC 747, the Apex Court has held as under in para 15:-

"15. The High Court has rightly held that the arbitrator is not a conciliator and his duty is to decide the disputes submitted to him according to the legal rights of the parties and not according to what he may consider to be fair and reasonable. The High Court has further rightly made observation in the impugned judgment that an arbitrator cannot ignore law or misapply it, nor can he act arbitrarily, irrationally, capriciously or independent of the contract while passing the award. The courts of law have a duty and obligation to maintain purity of standards and preserve full faith and credit as well as to inspire confidence in the minds of litigants while adjudicating the claims of the parties by resorting to alternate dispute redressal method of arbitration under the provisions of the Arbitration Act."

19. In State of Rajasthan v. Nav Bharat Construction Company Ltd., 2006 (1) SCC 86, the Apex Court has held that arbitrator cannot go beyond the terms of the contract between the parties, in the guise of doing justice and he cannot rule contrary to the terms of the contract and if he does so, he will have misconducted himself. Para 27 of the aforesaid judgment is reproduced below:-

"27. There can be no dispute to the well-established principle set out in these cases. However, these cases do not detract from the law laid down in Bharat Coking Coal Ltd. case or Continental Construction Co. Ltd. case. An arbitrator cannot go beyond the terms of the contract between the parties. In the guise of doing justice he cannot award contrary to the terms of the contract. If he does so, he will have misconducted himself. Of course if an interpretation of a term of the contract is involved then the interpretation of the arbitrator must be accepted unless it is one which could not be reasonably possible. However, where the term of the contract is clear and unambiguous the arbitrator cannot ignore it."

20. In Bharat Coking Coal Ltd. v. Annapurna Construction: 2003 (8) SCC 154, the Apex Court observed as under in para 22:-

"22. There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record."

Although, there is no dispute on the proposition that if two interpretations are possible from the terms of the contract, and the arbitrator accepts one, it is not open for the court to interfere in the matter. Reliance has been placed by counsel for the contractor on the judgment in Macdermott Internation Inc. (supra), wherein he Apex Court has relied upon the judgment in ONGC (supra) and held as under in para 59:-

"59. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merits of the matter.

21. It is very clear that the award initially is of 8 pages and from page 9 reasons for the award are appended which is by way of Appendix-A which clearly goes to show that reasons have been properly assigned, thus, now to contend that reasons were not assigned is bad.

22. Thus, on the aforesaid principles and the law laid down by the Apex Court in the case of Navodaya Mass Entertainment Ltd. V. J.M. Combines, (2015) 5 SCC 698, wherein the principles for considering arbitral award are reiterated. Further in NHAI VS. JSC CENTRODORSTROY, (2016) 12 SCC 592, will have to be looked into. Further in Anand Brothers Vs. Union of India (supra), the cardinal principles of construction or arbitral award is also embodied. In our case the arbitration proceedings were completed on 20.10.1997 whereby the arbitrator granted some of the claims of the appellant. It is a fact as mentioned in the order of the learned Judge that submissions were not made in respect of all the objections but only emphasized that it was an unreasoned award. All the other objections were admittedly turned down. The legal and factual merit was held to be in favour of the contractor but the objection was upheld holding that the award was without any reasons. In this background, the matter will have to be decided.

23. While going through the record and the award it appears that while considering the claim of the contractor, the arbitrator has considered each and every aspect of the claim made by both the parties and has considered each and every item and the arbitral award reflects on the merits of each claim which the arbitrator has considered and it can be culled out from the arbitral award as well as the subsequent yellow cover that it was either purposefully withheld by the officers of respondents and or were not submitted to the court below. It is in the written submissions accepted by the Union of India and it has been submitted as follows:

"It is also most respectfully submitted that the second sealed cover envelope which probably contains the proceedings during arbitration was not summoned by the court below, so it can not be produced and when this Hon'ble Court has summoned, it was produced by the officials. It is also submitted that reasons can not be written separately it should contain in the award itself, therefore non-production of second seal cover envelope which contains proceedings has got no nexus."

This shows that they have not produced the same before the authorities that was one of the reasons for giving a chance of amending their wrong but instead of doing the same they reiterated the stand taken which has been rejected by the court below on merits.

24. The nexus for coming to the decision is also reflected in the award of arbitrator. From the execution of the agreement dated 8.12.1987 by and between the parties, it is very clear that the Court below has held in favour of the appellant and that as regards the objection relating to the award not stating the reasons upon which it is based it is upheld. The submission by the learned counsel for the objector Union of India that judgment of Delhi High Court in College Vocational Studies Vs. S.S. Jaitely reported in AIR 1987 Delhi 134, holding that the award in question gives the conclusion and not the reasons and, therefore, it is invalid and against the provisions of Section 31 (3) of the Act, will have no applicability as the award assigns proper reasons as envisaged under the New Act of 1996 Section 31 (3) of the Act provides for the arbitral award to state reasons upon which it is based and the Courts are thus made bound to find out this necessary ingredient of such award.

25. The courts do not exercise appellate jurisdiction over the verdict of the Arbitrator and cannot go into the merits of the case or reappraise the evidence, it is only when the findings of the Arbitrator are based on no evidence, the court can go into such finding of an award based on no reasons the award can be set it aside. In our case, the award contains reasons for each claim. The arbitrator has rejected some claims also by giving cogent reasons. In that view of the matter, the court below could not have held that there was no reasons even if the sealed cover was not before it, the arbitral award before it disclosed the mind of the arbitrator and, thus, this finding of the court below while interfering with the arbitral award that it contain no reasons is bad. The specific requirement of provisions of Sections 31 and 34 have been overlooked by the court below. The recent judgment of the Apex Court in ICOMM TELE LIMITED VS. PUNJAB STATE WATER SUPPLY AND SEWERAGE BOARD AND ANOTHER, (2019) 4 SCC 401, will apply to the facts of this case and I take support from the same. In holding that the court below has exceeded its jurisdiction in upturning the award of the arbitrator. In MMTC Ltd. Vs. Vedanta Limited, reported in (2019) 4 SCC 163, wherein arbitrability of the dispute has been considered and it has been held that when the view taken by the arbitrator is a possible view, the court cannot sit in appeal. In this case, it has to be observed with great pain that the respondent did not place on record the cover containing reasons and even if we go by the facts, it is very clear that the arbitrator had considered each aspect and had given brief reasons also even in the award which was separate than the one in which the award was given, therefore, the submissions of the counsel for the respondents cannot be accepted and has to be held that the award was a well reasoned award meeting all the contours of the Arbitration Act. This makes it explicitly clear that the respondents had no intention of seeing that the arbitral award is fulfilled. The act of respondents authorities and its officers would permit this Court to even hold them guilty of act which was malacious and with a purpose the reasonings were not placed on record. I am pained to write this the reason being I am now with the aid of the latest information technology scanning the entire award which runs into 26 pages along with Appendix which was as Annexure-A and which contained reasons from page 8. This aspect has now been accepted by the Union of India but they have still submitted that reasons could not have been kept in a different cover. The award as would be seen is after narration of all factual data and the arbitrator has analyzed each and every claim made by either parties and that is how he has come to the conclusion. The award is reproduced herein below:

The aforesaid is the complete set of award and, therefore, the finding of the court below that there were no reason assigned is baseless even if we peruse the first - six pages, it can be seen that the arbitrator has applied his mind to each and every claim which is the most important aspect of the arbitral award and, thus, it goes to show that the arbitral award could not have been interfered with by the court below as there were reasons assigned and even if we peruse the unannexed award which was before the court below, it would be culled out that the arbitrator had applied his mind for each and every claim and had followed the principles enunciated for such award. The respondents now cannot challenge the findings which were against them as they could have filed cross-objection which they have not for rejection of their claim, thus, in view of the reasons assigned by the arbitrator, this appeal will have to be allowed.

17. The only aspect which requires further consideration is whether the interest has been properly granted or not and what should be the rate of interest. The powers of interference of Courts in grant of interest in arbitral matter came up before the Division Bench of Gujarat High Court of which the undersigned was a presiding Judge in First Appeal No. 3256 of 2001 (OIL and Natural Gas Corporation Limited Versus Birla Techneftegas Exploration Limited decided on 7.4.2016 by the High Court of Gujarat wherein the following observations are relevant and are extracted herein below:-

"........28. Therefore in light of decisions of the Apex Court and the discussion hereinabove, the scope of interference with the findings of Arbitrators and confirmed by the District Judge, on the basis of principles, we are not inclined to interfere with the findings, as settled in view of decision in case of Bharat Coking Coal Ltd Vs. Annapurna Construction reported in 2003 (8) SCC 154.

29. The award so far as interest is concerned, reads as follows:

"With regard to contention (a) above, it is contended by the respondent that increase in HSD is not by operation of law but on account of the administrative orders and, therefore, the claim is not maintainable under Article 23.1 which deals only with variation in operating costs on account of change in or enactment of law in India or interpretation of existing law in India after the date of opening of price bid. To examine this contention it is essential to refer to the provisions of Essential Commodities Act,

1955. Section 2 of this Act in subsection (a) defines "Essential Commodity". In sub clause (viii) of clause (a) of section 2, petroleum and petroleum products have also been included as "Essential Commodities Act, Central Government has power to regulate and control the prices at which an essential commodity may be bought or sold. Therefore, increase in prices of HSD being a petroleum product is pursuant to the exercise of powers given to the Central Government under Section 3 of the Essential Commodities Act and is therefore, on account of a change in law."

The Tribunal has relied on the decisions of the Privy Counsel and Apex Court and also relied upon the affidavit of appellant filed before the Tribunal before the Award passed.

The awarding of interest cannot be said to be in any manner, warranting any interference, however, the factum of interest, in our view may be considered, which in our view is on higher side looking to prevalent practice at the relevant time. The quantum of interest, if reduced to 9% from 15%, the same would meet with ends of justice. As a result thereof, we modified the same and factum of interest is ordered to be reduced from 15% to 9%. The rest of the award is not interfered in any manner."

18. Recently, 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 judgments go 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."

19. Further, in Ambica Constructions v. Union of India,(2017) 14 SCC 323, wherein the Supreme Court observed that the Clause of the GCC did not bar the arbitrator from awarding interest pendente lite and affirmed the award passed by the arbitrator. The three Judge Bench of this Court held that the contention raised by the Union of India based on the Clause of the GCC that the arbitrator could not award interest pendente lite was not a valid contention and the arbitrator was completely justified in granting interest pendente lite. Relying on the three Judge Bench judgment in Union of India v. Ambica Construction (supra) and in Irrigation Deptt., State of Orissa (supra), this Court held that the bar to award interest on the amounts payable under the contract would not be sufficient to deny the payment of interest pendente lite.

18. From the record produced before the court below, it is clear that the arbitrator on page 6 of the award has passed the following order as far as grant of interest is concerned. It is clear that he has not granted any pendente lite interest to the appellant and the findings are as below:-

"Interest on delayed payment of RAR, Final Bill and Claims.

Claim on Rate of interest @ 18%

Amount of claim not indicated.

Claim amended to @ 24%.

Claim partially sustained to 12% per annum simple interest on award amount of Claim Nos. 1 & 6 only from 22 Aug 97 to the date of award and thereafter 12% per annum simple interest on the total award amount excluding directional award against claim No.13 below to the claimant from the date of award to date of payment or court decree whichever is earlier.

[email protected] per annum simple interest on amount of Award of claim No.1 & 6 only from 22 Aug 97 to date and thereafter 12% per annum simple interest on the total amount of award to the claimant from the date of award to the date of payment or court decree whichever is earlier excluding directional award against Claim No.13 below Rs.36,200.00.

and directed refund of additional security amount of claim and directed release of bank guarantee bond of Rs. 1 Lac. The Union of India had demanded certain amounts by way of counter claim which was rejected. The award of interest cannot be said to be bad as it was part of the arbitral agreement between the parties. However, the rate of interest can be brought down to 9% if the amount is now deposited within 12 weeks from today failing which the amount be paid with the interest as specified by the arbitrator.

26. The decisions cited by the respondents are on the merits of the claim which have been adjudicated both by the arbitrator and the court below and they are concurrent findings of fact and the said decision will not help the respondents who are wrong doers. The same go to the merits of the matter and the court below has rejected all their contentions and, therefore, having not challenged those findings, now to contend as far as claims are concerned, cannot be permitted. The said decisions do not apply to the facts of this case. The appeal requires to be allowed. The judgment of the court below cannot be sustained and has to be upturned.

27. In this case objection no.1 which is accepted was regarding non giving of reasons. I do not delve into any other reason as the court below has also not considered any other ground of objection. The reasons were assigned. They were not produced by the Union of India before the court below. The Union of India had to produce the same on directions given by this court and, therefore, the matter was sought to be resolved by way of mediation. There was no other reason why the matter was kept for mediation and, therefore, it cannot be said that the award was an arbitral award.

28. A perusal of the award from the paper-book which runs into not less than 26 pages reasoning are there as shown herein above.

29. In view of the matter, the appeal is allowed. The arbitral award is upheld. There being no cross appeal preferred by the Union of India against the rejection of their claims, the amount be deposited within 12 weeks from today. The oral cross objection qua interest is suo motu allowed and interest is reduced from 12 per cent to 9 per cent simple interest through out.

30. The record and proceedings be sent back to the Tribunal forthwith for compliance.

Order Date :- 8.7.2019

Irshad