Goel Associates vs Sail Cooperative Group Housing ...
2001 Latest Caselaw 828 Del

ORDER

A.K. Sikri, J.

1. The petitioner is a firm of Architects with Mr. M.P. Goel and Mr. Ambrish Vidyarthi as partners. The respondent is a society of employees of Steel Authority of India Ltd. It had entered into an Agreement dated 29-12-1987 with the petitioner for providing services to the respondent in the construction of flats for its members. By letter dated 29-3-1993 respondent terminated this Agreement and asked the petitioner to refund Rs. 30,000/- paid in advance. The petitioner denied the allegations and made counter-claims. Disputes having been arisen between the parties, both the parties appointed their Arbitration and both the Arbitrators appointed Justice S.N. Sapra, a retired Judge of this Court as an Umpire. Since the Arbitrators rendered conflicting Awards, matter was referred to the Umpire for his decision who made and published the Award dated 24-11-1997.

2. Vide I.A. 6809/98 objections have been filed by the petitioner to this Award.

3. It may be mentioned here that the petitioner had claimed a sum of Rs. 34,98,000/- on account of the alleged illegal termination of the contract stating that the petitioner would have earned its fee as per Clause-2 of the Agreement had the agreement not been cancelled illegally. The respondent had made counter-claim to the tune of Rs. 86,80,252/-. The learned Umpire framed as many as 11 issues and has given his findings on each issue. The issues framed read as under:

1. Whether the petition has been filed, signed and instituted by a duly authorised person? OPC.

2. Whether the claimant has the locus standi to file the present claim against the respondent? OPC.

3. Whether the invocation of the arbitration clause for the termination of the contract is not valid due to laches? OPR.

4. Whether the claim against the respondent society is not maintainable in view of Cooperative Societies Act, 1972? OPR.

5. Whether the claimant performed his duty to mitigate his alleged loss due to the alleged negligence of the respondent.

6. Whether the claimant is entitled to relief claimed? OPC.

7. Whether claimant is entitled to any interest, if so at what rate? OPC.

8. Whether the claimant fulfillled his part of Agreement satisfactorily? OPC.

9. Whether the contract of agreement was validity terminated, by the respondent and consequences thereof? OPR.

10. Whether the respondent is entitled to claim a sum of Rs. 86,80,252/- (Rupees Eight Six Lacs Eight Thousand Two Hundred Fifty Two Only)? OPR.

11. Whether the respondent is entitled to any interest, if so at what rate? OPR.

4. It may not be necessary to state the findings of the Umpire in respect of each issue. The material issue for our purposes are Issue Nos. 8 and 9 which relate to the validity of termination. In the impugned Award the learned Arbitrator has noted that Agreement was cancelled on two grounds, namely, (1) the petitioner had not rendered any service for allocation of land to the society, which amounted to breach of agreement (2) the claimant concealed or misrepresented that M/s. Goel Associates was the proprietory concern of Mr. M.P. Goel Vidyarthi and entered into an Agreement on the representation that Mr. M.P. Goel and Mr. Ambrish Vidyarthi were partners. The learned Arbitrator found first ground of cancellation as not tenable. Dealing with second ground of termination of the Agreement, the learned Arbitrator returned the following findings:

"Now I will consider whether the respondent was justified in terminating the agreement on the second ground.

The job of an architect is highly skilful and professional, and his engagement is matter of confidence and faith.

This has been proved by documentary as well as oral evidence that the respondent only knew Mr. A. Vidyarthi. It is Mr. Vidyarthi, who by letter dated August 28, 1987 (Exh. CW-1/R-II) along with profile, approached respondent as Associate of M/s. Goel Associates, for being engaged as Architects. In the Bio-data, name of the Associates were mentioned as (1) Mr. M.P. Goel and (2) Mr. A. Vidyarthi. There is no doubt that the Claimant never disclosed to the respondent that it was the sole proprietory concern of Mr. Goel. In fact, respondent was under bonafide impression and had reason to believe that Mr. Vidyarthi was a partner or Associate of M/s. Goel Associates. This is the reasons that the respondent entered into agreement with the claimant. In fact, Mr. Goel was not known to the respondent. Moreover, it is mr. Vidyarthi, who received a sum of Rs. 30,000/- from the respondent, vide Receipt dated 12th February, 1988 (Exh. CW-1/7). In this receipt Mr. Vidyarthi has signed for M/s. Goel Associates as Architect. Further, it was Mr. Vidyarthi who was invariable corresponding with the respondent and attended few meetings.

Under these circumstances and in the event of Mr. Vidyarthi retiring as associates from the claimant, the respondent had the option under law either to continue with the agreement or terminate the same. The respondent was justified in terminating the agreement on the ground that Mr. Vidyarthi was no longer associated with the claimant.

Thus I hold that on this ground, the termination of the agreement was legal and justified".

5. In view of aforesaid findings on these issues, claims of the petitioner were disallowed. The learned Umpire also disallowed counter-claims of the respondent. It may be mentioned that even the respondent had filed objections to this Award disallowing its counter-claims. However, the respondent did not press these objections which were accordingly dismissed as withdraw.

6. Mr. R.P. Bansal, learned senior counsel appearing for the petitioner supported the objections by contending that the findings of the learned Arbitrator were self-contradictory inasmuch as learned Arbitrator has negated the contentions of the respondent to the effect that the petitioner was a partnership concern and specifically held that it was the sole proprietory concern of mr. M.P. Goel. Once that position was accepted by the learned Umpire which meant that Mr. A. Vidyarthi was not partner in the firm holding that respondent was justified in terminating the Agreement on the ground that Mr. A. Vidyarthi was no longer associated with the petitioner was not a valid ground inasmuch as Mr. A. Vidyarthi was only an associate of the petitioner and was working with the petitioner. The self-contradiction clearly showed that the learned Umpire had committed the mistake which is apparent on the fact of record. It was also submitted that Mr. A. Vidyarthi had left way back on 26th October, 1990 and respondent kept on dealing with the petitioner even thereafter. Therefore, this could not be a valid ground for termination of the contract in the year 1993. It was also submitted that there was no termination clause in the contract and the learned Umpire failed to consider this aspect and in the absence of such a termination clause there could not have been a termination of the contract even if the respondent still terminated the contract and did not want petitioner to do the work for the respondent, the petitioner was entitled to the remuneration as per the contract. The view taken by the Arbitrator was, therefore, perverse. In support of these submissions the learned counsel relied upon the judgment of this Court in the case of M/s. Bombay Ammonia Pvt. Ltd. Vs. Union of India AIR 1987 Delhi 148 to the effect that when there was an error apparent on the face of the Award, the Award was liable to be set-aside. Reliance was also placed upon the judgment in the case of Thomas Vs. Hammersmith Borough Council (1938) 3 ALL E.R. 203. It was argued that Hudson in his authentic work 'Engineering and Building Contracts' under Chapter 'Architects, Engineers and Surveyors' based on this authority says that in the event of clear agreement as to the purpose of the appointment, any termination of employment before the purpose is achieved would amount to a breach of contract. The above case was also of an architect. It was submitted that to the same effect is the authority in the case of Muna Sona Sundaram Chettiar Vs. Sona Theeanna Chokalingam Chettiar AIR 1938 Madras 672 DB holding that where a person has agreed to employ another, he is not entitled to put an end to the employment because he can get somebody else to perform the duties at a smaller salary. It was also submitted that when an erroneous proposition of law is stated in the Award which is its basis the Award can be set-aside as held in the case of Trustees of the Port of Madras Vs. Engineering Constructions Corporation Ltd. ; Union of India Vs. A.L. Rallia Ram ; N. Cellophane Vs. Secretary Cereal State Electricity Board and another ; The Government of Nadir Pradesh Vs. The Gammon India Ltd. Bombay and another AIR 1984 AP 230; Coimbatore District Podu Thozillar Samgam Vs. Bala Subramania Foundry and others ; State of U.P. Vs. M/s. Allied Construction Engineers & Contractor (1996) 2 Arbitration Law Reporter 243 DB and M/s. Publishers Vs. H.P. Board of School Education 1997 (1) Arbitration Law Reporter 497.

7. On the other hand learned counsel for the respondent submitted that in such and substance the objections of the petitioner amounted to challenging the Award of the Umpire on merits by contending that the conclusions of the learned Umpire was not correct in law. According to Mr. Rajiv Nayyar, learned senior counsel appearing for the respondent it was not the function of this court to sit in appeal over the Award rendered by the Arbitrator or the Umpire and substitute its own findings for that of the Arbitrator. He submitted that the scope of interference with such an Award is very limited and the whole attempt of the petitioner was to show that Umpire had given wrong findings and this Court should reappreciates those findings which was impermissible. In support of this submission, learned counsel relied upon the following judgments:

1. State of Orissa and another Vs. Kalinga Construction Co. (P) Ltd. .

2. Puri Construction Pvt. Ltd. Vs. Union of India .

3. State of Rajasthan Vs. Puri Construction Co. Ltd. and another .

4. Hindustan Construction Co. Ltd. Vs. Governor of Orissa and others .

5. B.V. Radha Krishna Vs. Sponge Iron India Ltd. .

6. State of U.P. Vs. Harish Chandra and Co. .

7. H.P. State Electricity Board Vs. R.J. Shah and Company .

8. The main question to be considered is as to whether the objections raised by the petitioner are in the realm of "merits of the case". If that be so, then the Court would not interfere with such an Award as the Court is not sitting as Appellate Authority over the Award. The Court is also not to substitute its findings for that of the Arbitrator howsoever erroneous it may be. That is what the law is and is now firmly established by series of judgments including the judgment on which reliance has been placed by the counsel for the respondent. It is not necessary to refer to all these judgments. For our purposes, it would be sufficient to refer to the judgment of the Apex Court in the case of H.P. State Electricity Board Vs. R.J. Shah and Company . In this case Supreme Court has, after canning through the relevant case law on the subject, reiterated the principles on the touch stone of which the objections to the Award under Section 30 and 33 of the Arbitration Act, 1940 are to be dealt with. The Court distinguished the case of one of jurisdiction from the case where there is error in the exercise of jurisdiction holding that Award would be set-aside if there was error of jurisdiction but not if error is committed in exercise of jurisdiction. In that case the appellant awarded a work contract to the respondent. Terms and conditions, which were binding on the parties, were incorporated in the contract. Clause 3.2.(e)(ii) of the contract read as follows:

"Should this tender be accepted in whole or in part, I/we hereby agree to (i).....(ii) to execute all works referred to therein and to carry out such deviations as may be ordered up to a maximum of 20 per cent, at the rate to be determined in accordance with provisions contained in clause 12-A of the tender form".

'Works' had been defined under the contract as "shall unless something either in the subject or context repugnant to such construction be construed and taken to mean the works by or by virtue of the contract contracted to be executed whether temporary of permanent and whether original, altered, substituted or additional".

9. The dispute between the parties which was referred to arbitration was whether the revised rates based on market rates would be payable to the respondent when the total value of the work exceeded the deviation limit, i.e., total contract value plus 20 per cent, as was contended by the respondent herein, or whether the revised rates/market rates would be payable against each item as and when the work performed against any item exceeded the deviation limit of 20 per cent, which is the case of the appellant herein. The rate of work in excess of deviation limit, according to the appellant herein, was required to be determined only in accordance with the provisions contained in clause 12-A. The arbitrators gave their award without assigning any reason. When the award was filed in the High Court, the appellant filed its objections. The High Court held that except the award pertaining to one of the claims, rest of the award id not suffer from any error apparent on the record. On behalf of the appellant it was submitted that on the correct interpretation of the contract and of clause 12-A in particular the arbitrators had no jurisdiction to revise the rates of any item merely because the overall value of the contract which was executed had been exceeded by 20 per cent. The submission was that the contract permitted increase only if there was a deviation in individual items by more than 20 per cent and no increase was permitted if there was an overall increase of 20 per cent without there being an increase in individual items. It was contended that even in the case of a non-speaking award as the arbitrators had exceeded their jurisdiction, the award was liable to be set aside. It was further submitted that no claim had been made before the arbitrators for the award of interest and, therefore, award of interest by the arbitrators with effect from 22-12-1976 till the date of payment as per the award could also not be sustained. On behalf of the respondent it was submitted that the claim of the respondent for revised rates was based on the interpretation of the contract and this point was specifically referred to the arbitrators and, therefore, the award of the arbitrators was final and binding an could not be set aside. It was further submitted that implied term of the reference was that the arbitrators could award interest. Dismissing the appeal, the Supreme Court held:

"The case where there is want of jurisdiction has to be distinguished from the case where there is error in exercise of jurisdiction. The award is liable to be set aside if there is error of jurisdiction but not if the error is committed in exercise of jurisdiction. When the arbitrator is required to construe a contract then merely because another view may be possible the court would not be justified in construing the contract in a different manner and then to set aside the award by observing that the arbitrator has exceeded the jurisdiction in making the award.

In order to determine whether the arbitrator has acted in excess of jurisdiction what has to be seen is whether the claimant could raise a particular dispute or claim before an arbitrator. If the answer is in the affirmative then it is clear that the arbitrator would have the jurisdiction do deal with such a claim. On the other hand if the arbitration clause or a specific term in the contract or the law does not permit or give the arbitrator the power to decide or to adjudicate on a dispute raised by the claimant or there is a specific bar to the raising of a particular dispute or claim then any decision given by the arbitrator in respect thereof would clearly be in excess of jurisdiction. In order to find whether the arbitrator has acted in excess of jurisdiction the court may have to look into some documents including the contract as well as the reference of the dispute made to the arbitrators limited for the purpose of seeing whether the arbitrator has the jurisdiction to decide the claim made in the arbitration proceedings".

10. Applying the aforesaid principles to the facts of that case, the Court observed that the arbitration clause was widely worded. The dispute which was referred to the arbitrators, inter alia, related to the construction of the contract. The contract did visualise the contractor raising a claim for revision of rates. The dispute was as to when such a claim could be raised. Correspondence exchanged between the parties prior to the making of the reference shows that the arbitrators were called upon the construe the contract in order to determine whether the contractor was entitled to claim revision of rates and if so what should be the revised rates. The dispute before the arbitrators, therefore, clearly related to the interpretation of the terms of the contract. The said contract was being read by the parties differently. The arbitrators were, therefore, clearly called upon to construe or interpret the terms of the contract. The construction placed on the contract by the arbitrator cannot be said to be an implausible one. Even if the arbitrators construed the terms of the contract incorrectly it cannot be said that the award was in excess of their jurisdiction. Their jurisdiction clearly was to construe the terms of the contract and their decision thereon is final and binding on the parties. It is not possible to say that the arbitrators travelled outside the bounds of the contract. It cannot be said that the award showed that there was an error of jurisdiction even though there may have been an error in the exercise of jurisdiction by the arbitrators.

11. In the present case on disputes having arisen between the parties pursuant to the termination of contract by the respondent, the matter was referred to the Arbitrator. Reference was based inter alia, on the claim of the petitioner for recovery of Rs. 34,98,000/- on the ground of wrongful cancellation of the Agreement. Thus the tenability of this claim preferred by the petitioner depended on the question as to whether the Agreement in question was validly terminated by the respondent. The petitioner cannot dispute this aspect. In fact issue No. 9 was specifically framed relating to validity of the termination of the Agreement. Thus it cannot be denied that the Arbitrator had the jurisdiction to decide the issue relating to the validity of the termination of the Agreement between the parties. Thus it is not a case where the Arbitrator decided a particular question over which it had no jurisdiction. On the contrary the Arbitrator was called upon to decide this question and thus he had necessary jurisdiction to deal with this aspect of the matter. While deciding that he decided this question in favor of the respondent. The Arbitrator has given reasons to support his conclusion which are as under:

(i) He was persuaded by the consideration that the job of an Architect is highly skilful and professional, and his engagement is matter of confidence and faith.

(ii) It has been proved by documentary as well as oral evidence that the respondent only knew Mr. A. Vidyarthi.

(iii) By letter dated August 28, 1987 (Exh. CW-1/R-II) along with profile, he approached respondent as Associate of M/s. Goel Associates for being engaged as Architects.

(iv) In the bio-data two names of the Associates were mentioned and one was that of Mr. A. Vidyarthi.

(v) The respondent was under bona fide impression and had reasons to believe that Mr. Vidyarthi was a partner or Associate of M/s. Goel Associates and for this reason the respondent entered into an agreement with the petitioner.

(vi) Mr. Goel was not even known to the petitioner.

12. No doubt it ultimately turned out that petitioner is a sole-proprietorship concern of Mr. M.P. Goel and, therefore, issue in respect of the constitution of petitioner's firm is decided in favor of the petitioner. However, while dealing with issue No. 9 what persuaded the Arbitrator is that the petitioner never disclosed to the respondent that it was a sole-proprietorship concern of Mr. M.P. Goel. The Arbitrator recorded the finding of fact that the respondent was under bonafide impression and have reason to believe that Mr. A. Vidyarthi was a partner or associate of M/s. Goel Associates and for this reason the respondent entered into an Agreement with the petitioner. It has also been recorded that Mr. Goel was not even known to the respondent. On the basis of this reasoning, the learned Arbitrator has held that the respondent had the option under law either to continue with the Agreement or terminate the same and it was justified in terminating the Agreement on the ground that Mr. A. Vidyarthi was not longer associated with the claimant. Thus the learned Arbitrator has, in his estimation and opinion, found that as far as respondents are concerned their dealings with the petitioner remained through Mr. A. Vidyarthi who dealt with the respondents all along and even the contract was given to the petitioner because of Mr. A. Vidyarthi and under the impression that he was partner or associate of petitioner. In fact it cannot be denied that in the Bio-data of the petitioner, name of Mr. A. Vidyarthi was one of the associates. The view taken by the learned Arbitrator is, therefore, plausible one and in any case in view of the aforesaid judgment of the Supreme Court in the aforesaid case i.e. H.P. Stat Electricity Board Vs. R.J. Shah and Company (supra) the Court is not permitted to do the exercise of finding fault with such a view and to decide as to whether the view taken is erroneous in law. The whole attempt of the petitioner is to challenge this finding of the Arbitrator on merits under the garb of labelling the same as "error apparent on the face of record" or "perversity" in the findings. By adopting such phraseology, the attempt of the petitioner to challenge the Award on merits cannot be permitted. I do not see any force in the contention of the counsel for the petitioner that any material has been over looked or that the findings are contradictory. I also do not agree with the learned counsel for the petitioner that the Arbitrator has stated any erroneous proposition of law in the Award. In view of my disagreement with the contention of the petitioner's counsel on the very premise or foundation on which it is based, the judgments cited by him will have no application. As -

(i) I do not find any "error on the face of the Award" or that the findings are "perverse".

(ii) The Award does not suffer from want of Arbitrator's jurisdiction.

(iii) The view taken by the Arbitrator is plausible and not based upon any erroneous proposition of law.

(iv) The attempt of the petitioner is to challenge the Award on merit i.e. to argue that the view taken is erroneous in law. Such attempt to enter forbidden territory cannot be allowed to be treated.

13. The Application containing objections, which are without any merit, is accordingly dismissed. Judgment in terms of the Award is pronounced. The Award is made a rule of the court. Decree-sheet in terms thereof be drawn accordingly.

14. The suit stands disposed of.