Savedi Road vs The State Of Maharashtra
2009 Latest Caselaw 111 Bom

                               1




                                                              
             IN THE HIGH COURT OF JUDICATURE AT




                                      
                             BOMBAY

                     BENCH AT AURANGABAD.




                                     
              ARBITRATION APPEAL NO.16        OF 2009.


     M/s S.D.Shinde and Company
     Contractor "Shri Parvati"




                            
     Savedi Road, Ahmednagar,
     Tq. and Dist.Ahmednagar
                ig                     ... Appellant.
              
                             Versus

     The State of Maharashtra
     through the Executive Engineer,
     Uppar Penganga Project,
      

     Division No.8, Nanded,
     Tq. & Dist. Nanded.           ... Respondent.
   



                               ...

     Mr.R.N.Dhorde, advocate for the appellant.
     Mrs.Geeta Deshpande, advocate for the Respondent.





                              ...


                             CORAM : V.R.KINGAONKAR,J.

Date : 15/16.12.2009.

ORAL JUDGMENT

1. This Arbitration Appeal arises out of

order rendered by learned Joint Civil Judge

(S.D.), Nanded, in proceedings seeking indulgence

of the Court to make award of Arbitrator as

rule of the Court.

2. The appellant filed application before

Civil Court alleging that after following due

procedure the Arbitrator, duly appointed, had

rendered award which may be made rule of the

Court. The appellant's application came to be

dismissed.

3.

                 The     appellant        is       a      company          duly
               
     incorporated       and     deals    in      contractual             Civil

     works.       The     Respondent       called           for      tenders

     regarding the work for              construction of earth
      

work lining and structures of Isapur Right Bank

Canal. The appellant filled the tender which was

lowest one and, therefore, the contractual work

was assigned to the appellant vide LCB Contract

No.11/87/88. The work order was issued on

9.12.1987. The appellant was directed to

complete the work on or before 9.6.1990. There

is no dispute about the fact that completion of

the work was delayed. The appellant was granted

third extension to complete the work on or before

30th September 1992. It appears that there was

no further extension issued but the appellant

continued to work notwithstanding the expiration

of outer limit of third extension period. The

Respondent terminated the works contract by

virtue of a notice dated 30th October 1992. The

notice, however, indicated that the authority to

work was terminated with retrospective effect

from 1.10.1992.

4. ig The appellant approached the Chief

Engineer in order to ventilate his grievances.

He contended that certain work was carried out by

him and he was not at fault. No action was taken

in pursuance to his representation. He had filed

suit (RCS No.143/1993) challenging the order

pertaining to withdrawal of the work and for

allowing encashment of the bank guarantee. That

suit was dismissed in default. The appellant,

therefore, communicated to the Respondent to

appoint Arbitrator as per the Arbitration clause

in the contract. No reply was, however, given by

the Chief Engineer or other authorities. The

appellant gave notice to the Chief Engineer on

3.12.1994. The appellant lastly communicated

that on his part retired Superintending Engineer

Shri S.M.Dandawate, was appointed as Arbitrator.

     5.          The           Arbitrator             commenced                the

     Arbitration         proceedings.          The        Respondent           was




                                               
     informed       by     the     Arbitrator             regarding            the

     procedure to be followed by him.                      The Respondent




                                 
     inter      alia      challenged           authority            of       Shri

     S.M.Dandawate
                 ig       to     act    as     an    Arbitrator.               The

     Respondent        submitted        that        the    appellant           had
               

failed to execute the work within the given time

frame and thereby committed breach of the

contract. The Respondent further submitted that

they were required to engage another agency for

completion of the work and, therefore, loss was

incurred due to such irresponsible conduct of the

appellant. It was further submitted that the

Respondents had filed suit against the appellant

for recovery of the damages and compensation to

the tune of Rs.53,83,375/- (Rupees fifty three

lacs eighty three thousand three hundred seventy

five). The Respondent, therefore, sought

dismissal of the Arbitration proceedings.

6. Upon hearing both the sides and on

consideration of the material placed before him,

the Arbitrator rendered the award. He held that

there was no breach of agreement on part of the

appellant. He further held that the Respondent

was liable to pay the difference of amount

regarding the work executed by the appellant. It

is pertinent to notice that the Respondent had

challenged ig appointment of the Arbitrator by

filing a suit which came to be dismissed. The

Respondent preferred CRA No.543/1996 which came

to be dismissed by this Court on 30.4.1996.

7. It appears that the suit (Spl.C.S.No.

238/1995) is pending and has been stayed vide

order dated 10.12.2003, rendered by this Court in

W.P.No.5171/2003.

8. While dismissing the CRA No.543/96,

this Court observed that legality of the

Arbitrator's appointment and his authority to

render the award can be challenged in the

Arbitration proceedings by the Respondent.

Taking cue from such liberty, the Respondent

questioned appointment of the Arbitrator and his

jurisdiction in the proceedings before the

Arbitrator. The contention of the Respondent was

that as per the contract, retired person could

not be appointed as sole Arbitrator. It was also

contended that unilaterally the appellant could

not have appointed Shri Dandawate. It was

further contended that the Arbitrator committed

misconduct while rendering the award by allowing

certain items which were impermissible. It was

further contended that the award was rendered

without any sufficient material and, therefore,

was improper and illegal. On these premises, the

Respondent sought dismissal of the application

seeking leave of the Court to make the award as

rule of the Court.

9. The objections raised by the Respondent

were accepted by the learned Civil Judge (S.D.),

Nanded and the award was set aside. Feeling

aggrieved, the appellant has come up in appeal.

10. Heard learned counsel.

11. The record shows that the Arbitrator

informed the parties by letter dated 14.11.1995

about the Arbitration proceedings. He called a

preliminary meeting at Pune on 28.1.1996. It

also appears that in the said meeting

representatives of the appellant were present.

Thereafter, several meetings were called wherein

representatives of both the sides were present.

The two final meetings were held on 30th and 31st

January, 1998. The counter claim filed by the

respondent was also considered. Ultimately, the

Arbitrator came to the conclusion that the

Respondents were liable to pay Rs.60,62,080/-

(Rupees sixty lacs sixty two thousand and eighty

only) to the appellant.

12. The important question involved in this

appeal is :

"Whether in the facts and

circumstances of the present matter,

the Arbitrator was ineligible and

disqualified to act as such because he

is a retired Superintending Engineer

of Irrigation Department.?"

13. The learned Civil Judge held that the

appointment of Shri Dandawate, was invalid for

the reason that the Arbitration clause envisaged

that Officer of the rank of Superintending

Engineer or higher rank only was eligible for

appointment as sole Arbitrator.

14. The Arbitration clause is as follows :

"Within 30 days of receipt of notice

from the contractor of his intention

to refer the dispute to arbitration

the Chief Engineer, Irrigation

Department, Aurangabad shall send to

the contractor a list of three

Officers of the rank of

Su0perintending Engineer or higher who

have not been connected with the work

under this contract. The contractor

shall within (15) days of receipt of

this list select and communicate to

the Chief Engineer the name of one

officer from the list who shall then

be appointed as the sole arbitrator.

          In      case        contractor,                  fails       to

          communicate         his     selection              of     name




                                                 
          within       the      stipulated            period,        the

          Chief     Engineer         shall        without          delay




                                                

select one officer from the list and

appoint him as the sole arbitrator.

If the Chief Engineer fails to send

such ig a list within (30) days as

stipulated, the contractor shall send

a similar list to the Chief Engineer

within (15) days. The Chief Engineer

shall then select one officer from the

list and appoint him as the Sole

Arbitrator, within (15) days. If the

Chief Engineer fails to do so, the

contractor shall communicate to the

Chief Engineer the name of one officer

from the list who shall then be the

sole arbitrator."

The appellant took necessary steps for calling

upon the Chief Engineer to appoint an Arbitrator.

It was for the Chief Engineer who was required

to send names of three (3) officers of the rank

of Superintending Engineer or higher rank, who

were not connected with the work under the

contract. This was not complied with by the

Chief Engineer. The expression "the officers of

the rank of Superintending Engineer or higher

rank is qualified by further explanation that

they shall not have any connection with the work

under the igcontract. This condition is more

important. It would imply that such appointee

must be completely disassociated with the work of

said contract. It is but natural that a

Superintending Engineer in service may be someway

or the other connected with the work regarding

the contract. In any case, the Arbitration

clause No.52 does not specifically disqualify "a

retired Superintending Engineer". The retired

Superintending Engineer is not specifically

barred to work as sole arbitrator.

15. At this juncture, it is important to

notice that the Respondent did not challenge the

qualification of the Arbitrator by filing

separate proceedings under the Arbitration Act,

1996. A suit was filed by the respondent in

order to challenge the appointment of arbitrator

but the same was dismissed. The CRA also came to

be dismissed. Why a retired Superintending

Engineer could not be appointed as the sole

Arbitrator is rather difficult to comprehend.

The Chief Engineer did not take initiative in

appointment of any Arbitrator. Moreover, the

representatives of the respondent participated in

the proceedings before the Arbitrator. A counter

claim was also filed before the same Arbitrator.

Considering the conduct of the Respondent's

officers, I am of the opinion that principle of

estoppel is applicable and the appointment of

sole Arbitrator could not have been challenged.

The challenge on this score ought to have been

rejected by the learned Civil Judge.

Dt.16.12.2009.

16. The interpretation of the Arbitration

clause could be made from another stand point of

the view. It is of common knowledge that the

Officer in service is employee of the Government

and can not do any other work unless there is

specific permission of the Government to

undertake such work. The Arbitrator is entitled

to receive remuneration. An Officer in service is

not entitled to receive any remuneration because

he is the paid employee and such payment can not

be accepted without prior permission of the

Government. The officer in service can not do

the arbitration work within the working hours.

If Rule 16 of the Maharashtra Civil Services

(Conduct) Rules, 1979 is perused then it will be

clear that such an Officer can not undertake

private trade or employment. The Government

servant is always considered to be on duty for

all the time. He can not do extra private work

unless is statutorily appointed or officially

nominated to do such work besides the office

work. In other words, ordinarily, an officer who

is in service can not be appointed as arbitrator

unless, of-course, there is some special

permission granted by the Government or statute

provides for such appointment. Considering such

legal embargo envisaged under the Maharashtra

Civil Services Rules, it does not stand to reason

that the Arbitration clause provided for

appointment of only officiating Superintending

Engineer or anyone above such rank. In this view

of the matter, the award could not be set aside

on the ground that it was rendered by the retired

Superintending Engineer, namely, Shri

M.S.Dandawate.

                                   
     17.           Now,
                   ig        it     may        be    gathered          that        the

learned Civil Judge was pleased to set aside the

award on the ground that detailed reasons were

not recorded in support of award of

compensation. The learned Civil Judge held that

as per the agreement, the rate of extra items of

the work to be carried out under directions of

the Executive Engineer was Rs.61/- per cubic,

whereas the arbitrator awarded Rs.147.50 per

cubic. This was treated as major deficiency in

the award and also misconduct of the arbitrator.

The learned Civil Judge also observed that the

arbitrator did not give detailed reasons as to

why the counter claim of the respondent was

disallowed. Obviously, it is required to be seen

whether the award could be set aside only because

detailed reasons were not recorded by the

arbitrator.

18. In "Raipur Development Authority etc.

Vs.M/s Chokhamal Contractors etc. etc." (AIR 1990

Supreme Court 1426), the Apex Court observed that

Arbitration Award is not liable to be remitted or

set aside merely on the ground that no reasons

have been ig given in support of the same. The

relevant observations are quoted in para 38 as

reproduced below :

"In the result we hold that an award

passed under the Arbitration Act is

not liable to be remitted or set aside

merely on the ground that no reasons

have been given in its support except

where the arbitration agreement or the

deed of submission or an order made by

the Court such as the one under

Section 20 or Section 21 or Section 34

of the Act or the statute governing

the arbitration requires that the

arbitrator or the umpire should give

reasons for the award."

In this view of the matter, when there was no

specific agreement between the parties that the

arbitrator shall give detail reasons in support

of the award, the learned Civil Judge should not

have interfered with the award on the ground that

there was no reasoning recorded in respect of

certain items of the claim.

19. It may be mentioned that Smt.Geeta

Deshpande, learned counsel for the Respondent

strenuously argued that the award is unfair and

that the same has been properly set aside by the

learned Civil Judge because the findings recorded

by the arbitrator are contrary to the record.

She seeks to rely on "Union of India Vs. M/s

Arora Associates and another" 2003 (4) ALL MR 901

in this context. A Single Bench of this Court

held that where the finding of arbitrator was

contrary to the material available on record,the

award could not be allowed to stand and was

required to be set aside. In the fact situation

of the present case only because certain rate is

shown in the agreement and enhanced rate is

considered while passing of the award, it can not

be said that the findings are contrary to the

record. The contradiction was not brought on

surface. It is important to notice that the

parties had agreed for escalation of the prices.

20. The learned counsel would also rely on

"Union of India and another Vs. M/s Sohan Lal

Puglia" 2004 (5) ALL MR (S.C.) 147. In the given

case, appointment of a retired District Judge was

challenged and was set aside. It was noticed,

however, that the employer had not refused to

appoint the arbitrator and, therefore, the

petition was not maintainable U/s 20 of the Act.

Reliance is also placed on "M/s Graphic Interiors

Vs. The Commander Works Engineer (Naval Works)

Mumbai" AIR 2000 Bombay 303. The arbitration

award was set aside on account of misconduct of

the arbitrator for omission to record reasons in

the context of claims which were allowed.

However, in the given case there was a specific

agreement which provided and made it obligatory

on the part of the arbitrator to indicate his

finding along with the sums awarded separately on

each individual item of dispute. Obviously, it

was obligatory on the arbitrator to assign the

reasons and record the findings as per the

agreement. This authority can be distinguished on

the fact situation of the present case.

Mrs.Geeta Deshpande, also invited my attention to

"J.C.Budhraja Vs. Chairman, Orissa Mining

Corporation Ltd. and another" (2008) 2 Supreme

Court Cases 444. The Apex Court held that

granting of rate of interest in excess of what

was claimed, could be regarded as a legal

misconduct, vitiating the award to that extent.

I do not find any parallel between facts of the

given case and the facts of the present case.

22. It is well settled that normally the

arbitration award can not be lightly brushed

aside. It can not be set aside unless there are

tangible reasons to infer misconduct or

misfeasance by the arbitrator and for the reasons

which are legally permissible under the

provisions contained in Section 30 of the

Arbitration Act, 1940.

23. Considering the foregoing reasons, I

find it difficult to maintain the impugned order.

Hence, the appeal is allowed. The impugned

judgment and order rendered by the learned Civil

Judge (S.D.), Nanded is set aside. The learned

Civil Judge shall make the award a Rule of the

Court by allowing the application of the

Respondent. No costs.

(V.R.KINGAONKAR,J.)

asp/office/Arbappeal1609