Ajanta Tubes Limited And Ors. vs State Of Uttar Pradesh
2001 Latest Caselaw 1382 Del

ORDER

V.S. Aggarwal, J.

1. These objections have been filed by the State of Uttar Pradesh against the award of 28th July, 1997. The relevant facts are that respondents along with M/s BST Manufacturing Limited in alleged to have formed a consortium and submitted the tender before the objector (State of UP) for supply of 1060 MT of 168.3 MM-ODER Steel Pipes. It was accepted by the objector vide letter of 4th June 1988. M/s Ajanta Tubes Ltd, respondent no.1 was accepted as the leader of the consortium. After acceptance of the offer an agreement was executed on 18th July, 1988 for supply of steel pipes. The value of the supply is stated to be Rs.99,58,700/- and the quantity of the steel pipes had even been divided. The bank guarantee/security of the above named firms i.e. the respondents had been accepted. Disputes arose between the parties and matter was referred to the arbitrator on 14th May, 1996 by the order of this court.

2. Against the award the State of UP, petitioner, asserts asserting that the arbitrator has misconducted himself. It is alleged that the findings given by the arbitrator that the objector had not suffered any loss or damages on account of breach of contract committed by the respondent/claimants is not true. It is asserted that it was the objector who had to manage for completion of the work through the material available. The BST had failed in supplying the material and in fact it caused heavy losses to the objector, and public at large. The findings of the arbitrator to the contrary are being assailed and it is asserted that the bank guarantee could not have been released. It has further been alleged that this court had directed that disputes referred to are as mentioned in the application under section 20 of the Arbitrator Act and only those disputes could be gone into. The arbitrator was not directed to decide the losses or damages, if any, due to non supply of the material. The arbitrator is stated to have gone beyond the terms and conditions of the agreement executed between the parties and on these grounds as per the objectors, State of UP, the award is liable to be set aside.

3. Reply has been filed by the M/s Ajanta Tubes Ltd. Preliminary objection has been raised that the award of the arbitrator cannot be questioned on facts and therefore the objections are liable to fail. It is not in controversy that each one of the contractors i.e. M/s Ajanta Tubes Ltd., M/s Jindal Pipes Ltd and BST Manufacturing Ltd. were allowed to supply specified quantity of material independently allotted to each one of them. Each one of them furnished its own independent bank guarantee of its share equivalent to 10% of the value of the quantity to be supplied. It is denied that acceptance of these bank guarantees were subject to an undertaking. It is admitted that M/s Jindal Pipes Ltd supplied the quantity of material allotted to each one of them and became entitled to release of the bank guarantee. It is denied however that respondent no.1 had been at fault. Earlier when material was lying ready with BST the objector had told them not to supply the material unless the financial position/cash credit is available. Thereafter there was labour trouble in the factory of BST but objector had been sleeping over the matter for reasons best known to them. Non supply of material by M/s BST did not cause any injury. Thus it is the claim of the respondent that there is no ground o set aside the award because no loss had been suffered by the objector.

4. Furthermore the respondent pleads that all the three guarantees furnished by the them were encashed for non-supply of the quantity of the material allocated. After the period of the contract they were under non obligation to supply quantity allotted to M/s BST. The bank guarantee in this regard therefore could not be encashed. It is denied that the arbitrator could not go into these controversies.

5. The only question that comes up for consideration is as to i the award is liable to be set aside on the grounds alleged by the objector.

6. Perusal of the award passed by the learned arbitrator reveals that the arbitrator had framed the issues as to if respondent no.1 was not legally entitled to encash the bank guarantee furnished by the petitioner to a sum of Rs.3,31,644/- and in cash issue no.1 is decided against the petitioner whether respondent (objector) was entitled to retain the whole of the amount. Furthermore issue has been framed if the petitioner and respondent no.2 were entitled to claim any amount besides interest. The arbitrator after going through the material on the record and different clauses of the agreement concluded that the objector encashed the bank guarantee equivalent of 10% of the value of the goods which were allotted to BST and thus if had obtained the liquidated damages by encashing the bank guarantee. Therefore, the objector was legally bound to refund the amount of the bank guarantee in the absence of the loss. The award therefore was passed in favor of the respondent for the refund of Rs.3,31,644/- with simple interest at the rate of 9% till the date of the payment or the date of the decree, whichever is earlier.

7. As per the learned counsel for the applicant, the findings of the arbitrator are totally incorrect because the question as to whether damage has been suffered or not, was not to be gone into by the arbitrator. He contended that otherwise also the aid findings are incorrect and not based on material on the record.

8. The pleas of the applicant's learned counsel necessarily must fail and have no legs to stand. When parties agree to appoint an arbitrator in that event necessarily the findings of the arbitrator on disputes would be binding unless the same are erroneous or the arbitrator has misconducted himself.

9. Almost eight decades ago in the case of Champsey Bhara & Company vs. Jivraj Balloo Spinning and Weaving Company Ltd. AIR 1923 Privy Coucil 66 the Privy Council held that an error in law on the face of the award means that it can be found in the award which is erroneous. The award can only be set aside which is a result of the corruption or fraud. The principle of law so enunciated had stood the test of time and has always remained the same. The Supreme Court in the case of Tarapore & Co. vs. Cochin Shipyard Ltd. even went on to hold that when a specific question of law is referred to the arbitrator, the decision of the arbitrator would be binding subject to the exceptions referred to. The findings of the Supreme Court are:-

".....Therefore, on principle it appears distinctly clear that when a specific question of law is referred to an arbitrator for his decision including the one touching upon the jurisdiction of the arbitrator, the decision of the arbitrator would be binding on both the parties and it would not be open to any of the two parties to wriggle out of it by contending that the arbitrator cannot clutch at or confer jurisdiction upon himself by misconstruing the arbitration agreement."

10. Similarly in the case of Suresh Ragho Desai & Anr. vs. Smt. Vijaya Vinayak Ghag & Anr. the Supreme Court held:

"There is no allegation of any violation of principles of natural justice. One of the contentions in support of this application was that relevant documents had not been taken into consideration. The High Court has pointed out on reading the award that it does not indicate that all relevant documents had not been taken into consideration. On the facts of this case, from the records and on the face of the award there is no mistake of law apparent on the face of the award or gross mistake of facts resulting in the miscarriage of justice or of equity. In the premises it would be unjust under Article 136 of the Constitution to interfere or keep the finding at bay."

11. One need not ponder further with the innumerable other precedents but reference can again be made to the case of Arosan Enterprises Ltd. vs. Union of India & Anr. . Once again the question for consideration was a to even if the court comes to a conclusion it would be contrary to the arbitrator whether it would be a ground to set aside the award or not. The answer was in the negative and the Supreme Court concluded:-

"36. Be it noted that by reason of a long catena of cases, it is now a well-settled principle of law that reappraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the court to reappraise the evidence is unknown to proceedings under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. In the event however two views are possible on a question of law as well, the court would not be justified in interfering with the award.

The common phraseology "error apparent on the face of the record" does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined."

12. As pointed out above, the arbitrator has gone into the material evidence on the record and considered the documents, a finding of fact had been arrived at. Once such finding had been arrived at and it is not shown that the arbitrator has misconducted himself the court will not interfere in the said finding. Necessarily it must follow that the award is not liable to be set aside.

13. As a consequence of the reasons recorded above, objections must fail and are dismissed. Award is made a rule of the Court. Decree in terms of the award is passed.