Food Corporation Of India vs M/S. Howe (India) Private Limited
2001 Latest Caselaw 731 Del

ORDER

Devinder Gupta, J.

1. This appeal has arisen against the order of learned Single Judge dated 25.2.1985 by which appellant's objections (IA.4687/84) to the award of the arbitrators were dismissed and the award was made rule of court with slight modification.

2. On 10.11.1972 an agreement was entered into between the appellant and the respondent under which the respondent was appointed to render consulting engineering services in respect of construction of grain storage facilities (Silos) at ten different sites projected by the appellant. On disputes having arisen between the parties regarding remuneration due to the respondent under the agreement, in terms of the arbitration clause contained in the agreement, the respondent appointed Mr.Justice B.N.Lokur (Retired) as an Arbitrator. The appellant failed to appoint arbitrator within the statutory period despite notice. As such Mr.Justice B.N.Lokur (Retired) entered upon reference as the sole arbitrator. The appellant approached this Court for setting aside the appointment of Mr.Justice Lokur (Retired) as the sole Arbitrator. By order dated 10.5.1985 appointment of Mr.Justice B.N.Lokur (Retired) as the sole Arbitrator was set aside. It was further directed that Mr.Justice Hardayal Hardy (Retired), who was appointed as an Arbitrators by the appellant will jointly enter upon reference and adjudicate upon the dispute. Both of them entered upon reference. Mr.Justice A.C.Gupta, a Retired Judge of Supreme Court was appointed as an Umpire. Mr.T.V.Tatachari was appointed as the Arbitrator by the appellant in place of Mr.Justice Hardayal Hardy, who had expired. On Mr.Justice T.V.R.Tatachari resigning as an Arbitrator on his appointed as Lok-Ayukat, Himachal Pradeh, Mr.Justice M.S.Joshi, another Retired Judge of this Court was appointed by the appellant as an arbitrator, who proceeded with the reference. Ultimately on 19.4.1984 the arbitrators made and published their awards, which was filed in this court, to which objections were filed by the appellant praying for setting aside the award. Respondent also applied for modification of the award praying that in addition to the interest already awarded by the Arbitrators interest also deserves to be allowed from the date of award till the date of decree. By the impugned judgment the appellant's objections to the award were dismissed. Award was ordered to be made rule of the court with modification by allowing the respondent's plea. In addition to the interest, which had been allowed in terms of the award, learned Single Judge allowed interest on the awarded amount from the date of award till payment or till the award is made rule of the court, which ever is earlier. Decree in terms of the Award was directed to be prepared. The respondent was also held entitled to future interest at the rate of 12% p.a. from the date of decree till realisation.

3. The appellant has in this appeal again reiterated the same objections, which were taken before learned Single Judge. Appellant's case is that the main dispute is whether the respondent is entitled to payments under clause D.1(I)(iii) of the agreement at the rate of 3% of the costs of works at the accepted tender value of the works regardless of the volume of works undertaken during 18 months or if there is delay i.e. works are not completed within 18 months, whether respondent is entitled to payment not under Clause D1(i)(iii) but only under clause E.9 of the contract. Learned counsel for the appellant contended that the contract read as a whole leaves no scope for any other interpretation except that the payments under clause E.9 are not in addition to the 3% contemplated by clause D(I)(iii) but the same are substitution thereof, namely, if the entire works are completed within 18 months, the latter would be applicable and in the event of delay the former alone will get attracted. It was further contended that Clause D.3 clearly visualizes the impact of delay in construction or adhering to work schedule. Clause E.1 also says that payments to be made are subject to clause D.3 and even Clause E.5 relating to termination of the contract by either party contemplates that the payments would be made as per clause D-3, regard being had to the services performed before the termination. Mr.Nayyar on behalf of the appellant contended that it was not a case where two acceptable interpretations or views on a contractual terms are possible since the appellant's contention has through out been that only one interpretation and view is possible. There was misconduct on the part of the arbitrators and error apparent on the face of the award due to which objections of the appellants ought to have been allowed by learned Single Judge. Learned Single Judge thus erred in rejecting the objections.

4. Mr.Watel, learned counsel for the respondent refuting the submissions contended that the learned Single Judge after hearing learned counsel for the parties had by the impugned order again gone into each and every contention of the parties, which he was not otherwise required to do. The appellant have to show before learned Single Judge even a single instance, much less to demonstrate that the Arbitrators have arrived at their findings in the award either by ignoring any material document on record or on the basis of evidence not available on record or that the findings are based on error of law apparent on the face of the award or even on the face of the record. Despite the fact that there is a limit to the jurisdiction of a Court in the matter of deciding the objections against the award, in as much as the Court in dealing with the objection petition does not act as a Court of appeal, still learned Single Judge in this case, in order to satisfy his conscience went through the record and dealt with each and every contention in detail and on merits and with cogent reasons came to the conclusion that the award is in its entirety in accordance with law. The same grounds are being repeated in this appeal by the appellant as if it is an appeal against the award. There is no scope for interference in this appeal. If on a view taken of a contract, the decision of the Arbitrators on certain matters is a possible view though perhaps not the only correct view, the award cannot be examined by the Court. Where reasons have been given by the Arbitrator in making the award, the Court cannot examine the reasonableness of the reasons. Arbitrator is the sole Judge of the quality as well as quantity of the evidence. Learned counsel for the respondent further urged that the award of interest for the period from the date of award till date of decree was rightly allowed by the Court since the Arbitrators had specifically stated that in the award that only Court had the power to decide the said question.

5. We have considered the respective submissions made at the bar.

6. It is not the case of the appellant that the Arbitrators did not notice the contentions of the appellant as are now sought to be raised before us in appeal, as regards the interpretation of various clauses of the contract vis-a-vis the claim of the respondent. The Arbitrators did form a particular opinion on various clauses of the contract and concluded:-

"A combined reading of Clauses D.1(1)(i) and D.1(1)(iii), D.1.3 and E.9 leads to the conclusion that Howe are entitled to remuneration for the entire works management and supervision at 3% of the accepted tendered cost without reference to the period of such management and supervision and without reference also to the cost of works actually done and the provision for payment of Rs.7500/- per fortnight is in respect of the liability of FCI to pay for the staff maintained by Howe for the period beyond 18 months. The contention of FCI that under Clause D.1(1)(iii), Howe are entitled to remuneration for works management and construction supervision in respect of works done in the first 18 months only and the payment of Rs.7500/- per fortnight provided in Clause E.9 is not by way of addition to what is payable under Clause D.1(1)(iii) is not tenable and has to be negatived.:

7. The appellant is questioning the reasonableness of the reasonings of the Arbitrators on the interpretation of various clauses of the agreement urging that the same are erroneous and its view alone ought to have prevailed with the Arbitrators. Precisely this is prohibited when the question arises on making the award a rule of the Court.

8. In M/s.Sudarsan Trading Co. v. The Govt. of Kerala and another it was held that reasonableness of the reasons given by the Arbitrator cannot be challenged. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. Arbitrator is the sole Judge of the quality as well as quantity of evidence and it will .not be for the Court to take upon itself the task of being a Judge on the evidence before the Arbitrator.

9. In M/s.Hind Builders v. Union of India it was held that if a clause of the contract is open to two plausible interpretation, it is legitimate for the Arbitrator to accept one or the other available interpretation and even if the Court may think that the other view is preferable, the Court will not and should not interfere with the award.

10. It is not disputed that the arbitration clause in the instant case is widely worded. The disputes, which were referred to the Arbitrators, inter alia, related to the construction of the contract. In these circumstances, it will not be permissible for the Court to substitute its own views on the various clauses of the contract with those expressed by the Arbitrators.

11. In H.P.State Electricity Board v. R.J.Shah and Company (1999) 4 S.C.214 similar question arose before the Supreme Court wherein also disputed referred to the Arbitrator inter alia related to the construction of contract. The contract was being read by the parties differently. The arbitrators were, therefore, clearly called upon to construe or interpret the terms of the contract. It was held that the decision thereon, even if it be erroneous cannot be said to be without jurisdiction and 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. Even if the parties 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.

12. Learned Single Judge in the instant case in his anxiety to satisfy his conscious proceeded to interpret various clauses of the agreement to test the correctness submissions made before him on behalf of the appellant and also independently came to the conclusion that the Arbitrators had rightly interpreted the said clauses. However, in our view such an approach by learned Single Judge ought not to have been adopted. In Food Corporation of India v. Joginderpal Mohinderpal and anther it was held that in an anxiety to render justice to the party to arbitrator, the court should not re-appraise the evidence intrinsically with a close scrutiny for finding out that the conclusions drawn from some facts, by the Arbitrator are according to the understanding of the Court erroneous. Such exercise of power, which can be exercised by an appellate court with power to reverse the finding of fact is alien to the scope and ambit of challenge of an award under the Arbitration Act.

13. In view of the above, we find hardly any force in the submissions made by learned counsel for the appellant that there is an error apparent on the face of the award due to which the award is liable to be set aside.

14. On the question of award of interest, we need refer only to the decision of Supreme Court in Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. and another wherein it was held that interest should be allowed for the period from the date of award till date of decree on the principle that the Court can, once the proceedings under Sections 15 to 17 are initiated, grant interest pending the litigation before it i.e. from the date of award to the date of decree in such cases only which arise after coming into force of Interest Act, 1978. Learned Single Judge, therefore, was perfectly justified in allowing interest for this period.

15. Consequently, we find no force in the appeal, which is hereby dismissed with costs.

16. The bank guarantee furnished by the respondent as a security in the sum of Rs.20,33,311.60 pursuant to the order of Supreme Court dated 4.12.1985 in C.A.No.5285/85 (arising out of S.L.P.No.1085/85) shall stand discharged. Ordered accordingly.