Prem Chand Sharma & Co. vs Union Of India (Uoi) And Ors.
2002 Latest Caselaw 674 Del

JUDGMENT

Mukundakam Sharma, J.

1. Disputes having arisen between the parties while executing the contract in respect of construction work allotted by the respondent to the petitioner, the said disputes were referred to the sole arbitration of Shri P.K. Kohli, the Arbitrator who was appointed by the respondents No. 1 and 2. Shri P.K. Kohli, however, vacated his office and resigned his appointed as the Arbitrator and, therefore, the appointing authority, namely, the Chief Engineer, PWD, appointed Shri Y.P. Dangay as the Sole Arbitrator to decide and make the award regarding the disputes falling within the purview of Clause 25 of the agreement between the parties. The Sole Arbitrator entered upon the reference on 18th May, 1998 and passed his award on 5th February, 2001. The said award was filed in this Court pursuant to which an objection was filed by the respondents No. 1 and 2 under the provisions of Sections 30 and 33 of the Arbitration and Conciliation Act, 1940.

2. A preliminary objection has been raised on behalf of the petitioner regarding the maintainability of the aforesaid objection on the ground that the said objections under Sections 30 and 33 of the Arbitration Act of 1940 is not maintainable as the provisions of the Arbitration and Conciliation Act, 1996 is applicable to the facts and circumstances of the present case. Therefore, the objection taken by the petitioner is that the objection, if any, to the award, should and could have been filed only under Section 34 of the Arbitration and Conciliation Act, 1996. In view of the aforesaid objection taken by the petitioner, it would be necessary to dispose of the said objection at the very threshold.

3. An Arbitrator was appointed in the year 1998 pursuant to an order passed by this Court on 4th August, 1999 in I.A. No. 3916/1996 arising out of Suit No. 2516/1993. During the course of arguments, it was agreed to by the counsel appearing for the parties that to the present proceedings, the provisions of Arbitration and Conciliation Act, 1996 shall be applicable. It was, however, submitted by the counsel appearing for the respondents No. 1 and 2 that the objections were filed within the stipulated period of limitation as envisaged under Section 34 of 1996 Arbitration Act and, therefore, the objections filed by the respondents No. 1 and 2 could also be treated as a petition under Section 34 of the Arbitration and Conciliation Act, 1996.

4. I have considered the aforesaid submission of the counsel appearing for the respondents No. 1 and 2. In the present case, both the parties proceeded in the matter on the basis of the presumption that the Arbitration Act of 1940 is applicable. Even the Arbitrator filed the award in this Court in terms of the provisions of the Arbitration Act of 1940. Since the objections of the respondents No. 1 and 2 have been fined within the stipulated period of limitation as envisaged under Section 34 of the 1996 Act, I see no reason as to why the said objections filed by the respondents No. 1 and 2 cannot be treated as objections/petition filed under the Arbitration and Conciliation Act, 1996. Accordingly, I order for conversion of the said objections as petition under Section 34 of the Arbitration and Conciliation Act, 1996 and on the basis thereof, I heard the learned counsel appearing for the parties.

5. The scope and the extent of filing the objections for setting aside an award made under the Arbitration Act of 1940 was much more than the one filed through a petition under Section 34 of the Arbitration and Conciliation Act, 1996. The said position is reiterated by the Supreme Court in its decision in Olympus Superstructures Pvt. Ltd. Vs. Meena Vijay Khetan and Ors., . In paragraph 17 of the said judgment, the Supreme court has categorically observed that under the 1996 Act the scope of the provisions for setting aside the award is far less than the same under Section 30 or Section 33 of the Arbitration Act of 1940. Under the 1996 Act, an award can be set aside only if any of the clauses mentioned in Section 34(2) of the said Act is attracted.

6. Counsel appearing for the respondents No. 1 and 2 during the course of his submission sought to submit that even if all the objections raised in the objection filed under Sections 30 and 33 of the Arbitration Act of 1940 cannot be enquired and investigated upon under Section 34 of the 1996 Act yet, at least to the extent of the award passed, regarding Claim No. 19 could be interfered with by this Court exercising its powers under Section 34 of the Arbitration and Conciliation Act, 1996. He submitted that the said award cold be set aside as it is apparent that the said award deals with the dispute not contemplated by or nor falling within the terms of the submission to arbitration or on the ground which contains decisions on matters beyond the scope of submission to arbitration. He submitted that if the said Section is also held to be not applicable then, at least, the provision namely Section 34(2)(b)(ii) is applicable which provides that an award could be set aside if the Court finds that the said award is in conflict with the public policy of India. There is an explanation added to the aforesaid Section which provides that without prejudice to the generality of Sub-clause (ii) of Clause (b), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 of Section 81. In the aforesaid decision of the Supreme Court in Olympus Superstructures Pvt. Ltd., (supra), the Supreme Court had occasion to consider Sub-clause (iv) of Section 34 Sub-section (2). While dealing with the said Clause, it was held by the Supreme Court in paragraph 19 as follows:-

"19. The word 'terms of the submission to arbitration' in Section 34(2)(a)(iv) in our view, refer to the terms of the arbitration clause. This appears to be the meaning of the word if one refer to Section 28 which uses the word 'dispute submitted to arbitration' and to Section 43(3) which uses the word 'submit' future dispute to arbitration."

Therefore, on a reading of the said provision and in the light of the decision of the Supreme Court, it is settled that an arbitral award could be set aside by the Court if it is found that the arbitral award deals with a dispute not contemplated by or not falling with the terms of the arbitration clause.

7. It would, therefore, be necessary to examine and ascertain whether or not the objections raised to the award passed against Claim No. 19 could be said to be a dispute contemplated by or falling within the terms of the arbitration clause. The said Claim No. 19 was dealt with by the Arbitrator also as the Additional Claim No. 1 in which the petitioner claimed an amount of Rs. 7 lacs on account of loss of Overhead charges, salaries of Engineers, Staff, Hire Charges and T & P shuttering connected with their non-utilisation/under utilisation due to prolongation of contract for defaults of the respondent. After considering the claim and the evidence adduced, the Arbitration held that the petitioner is entitled to payment of lumpsum of Rs. 2 lacs for watch and ward and other staff and for some T & P during prolonged period of the contract. While coming to the aforesaid conclusion, the Arbitrator held that the stipulated date of start and completion of the work was 25th April, 1988 and 24th December, 1989 whereas the work actually got completed on 27th December, 1991. The Arbitrator held that the competent authority had granted E.O.T. without levy of compensation on the basis of hindrances and delay attributable to the respondents and that the hindrances during the stipulated period itself was for 317 days. He even found that some of that aforestated date of completion as was evident from the hindrance register that colour scheme was finally decided on 24th April, 1991. After perusal of the copy of the hindrance register, it was held by the Arbitrator that the hindrances are attributable to the respondents.

8. The objection raised by the respondents No. 1 and 2 as against the award in respect of Claim No. 19 is that the said award was passed by the Arbitrator over-stepping his limitation and that the aforesaid claim made in Claim No. 19 was beyond the agreement. It was submitted that the said claim is beyond 10cc and is also barred by principles of waiver and estoppel as the petitioner had agreed not to claim any damages or compensation for any extension granted during the period of contract. It was, therefore, the contention that such a dispute/claim does not arise out of the agreement between the parties and, therefore, could not have been referred to the Arbitrator for adjudication.

This claim was raised by the petitioner and was referred to the Arbitrator for his adjudication and decision by an order dated 4th August, 1999. The said claim was not initially referred to the Arbitrator by the appointing authority of the respondent. Accordingly, the respondent filed an application in this Court seeking intervention of the Court and for referring the said dispute also to the Arbitrator. The application was registered as I.A. No. 3916 of 1996 arising out of Suit NO. 2516 of 1993. The application was taken up for consideration and disposed of by this Court on 4th August, 1999, allowing the application and referring the said claim also along with another claim of the petitioner. The contents of the said order indicate that reference of the said dispute was opposed by the respondent only on two grounds - (a) limitation and (b) excepted matter. The plea that the same was barred by limitation was specifically rejected by the Court. The objection that the claim is an excepted matter was also considered by the Court and was rejected. It was held that the respondent had failed to show that the matter exclusively falls within the jurisdiction and for the decision of the Superintending Engineer or concerned Engineer or that it was final. It is thus proved that at that stage also the respondent did not take up a plea that there was any waiver or estoppel with regard to the plea or that the claim is beyond the scope of the reference, being not within the ambit of the agreement or prohibited by the agreement.

9. A bare perusal of the award passed by the Arbitrator would show that no such objection was raised even before the Arbitrator no any document was filed by the respondent No. 1 and 2 before the Arbitrator to show and prove that the aforesaid Claim No. 19/Additional claim No. 1 was in any manner not contemplated or prohibited by the Agreement or that the principles of waiver and estoppel is applicable. Attention of the Arbitrator was not drawn specifically to any letter wherein the petitioner had specifically agreed not to claim any damages/compensation for any expenses incurred for Overhead charges or for payment of compensation for the prolonged period of the contract.

10. My attention was not drawn to any of the Clauses of the Agreement under which it was ever stipulated that the contractor would not be entitled to any compensation for any prolonged period of the contract. Only reliance that is placed is on a letter in which allegedly the petitioner had stated that he would not seek for any compensation if the period of contract is extended. The said document was not placed before the Arbitrator nor the Arbitrator has made any reference to the said document. Therefore, to allow the respondent to rely upon the said document at this stage would cause prejudice to the petitioner. If it was a case of waiver and estoppel, the same should have been pleaded by the respondents No. 1 and 2 specifically before the Arbitrator and should have argued the matter giving an opportunity to the petitioner to rebut the said allegations. No such opportunity was provided to the petitioner. After having failed to do so, any reliance upon the said document at this stage would not only cause prejudice to the petitioner but would also amount to denial of an opportunity to the petitioner to lead rebuttal evidence on the same before the Arbitrator.

11. The Arbitrator has considered the aforesaid claim in the light of the evidence adduced by the parties and on consideration of the evidence on record has come to a definite conclusion that the competent authority had granted E.O.T. without levy of compensation on the basis of hindrances and delay attributable to the respondents. If the respondents are responsible for the delay and hindrances, in such a case, the petitioner shall be entitled to grant of compensation unless claim of such compensation is expressly barred. The agreement which was entered into the pursuant to which reference is made nowhere stipulated that any such claim is barred or prohibited. Clause 2 provided for levy of compensation by the competent authority in case of grant of such extension. Such compensation was also not levied by the competent authority while extending the period of performance of the contract. Having not done so and having not relied upon a particular document which is sought to be introduced before me for the first time, during the course of arguments, the respondents cannot take advantage of its lapses and introduce a case which was not pleaded and argued earlier.

12. Therefore, Clause (iv) of Section 34 Sub-section (2) is not attracted to the facts and circumstances of the present case. Therefore, I may now examine as to whether Clause 2(b)(ii) of Section 34 of the Act is attracted to the facts and circumstances of the present case. The said Clause provides that the arbitral award if it is found to be in conflict with the public policy of India, the Court may set aside the arbitral award. The expression "public policy of India" is not defined in the Arbitration and Conciliation Act, 1996. The explanation provided thereto does throw some light as to what is indicated by the expression "public policy of India". In the explanation it is provided that an award would be treated to be in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81.

13. My attention was drawn to a decision of this Court in C.V. Jani and Company v. Hindustan Fertilizer Corporation; reported in 2001 (1) AD Delhi 143. In Renusagar Power Co. Ltd. v. General Electric Co.; , the Supreme Court has held that the enforcement of a foreign award would be refused on the ground that it is contrary to public policy if such enforcement would be contrary to (i) fundamental policy of Indian law (ii) the interests of India and (iii) justice or morality. Although, the aforesaid decision was rendered in the context of a foreign award, but, the said decision does throw some light as to what is envisaged under the aforesaid expression. Said concepts would constitute public policy of India. Therefore, if the award is found to be contrary to any of the aforesaid principles, namely, fundamental policy of Indian law or Indian interest or justice or morality, the same could be held to be contrary to public policy of India.

14. The Contract Act provides that if a contract is arrived at through fraud, the said contract is voidable at the option of the party whose consent was so obtained under the Indian Law. Similarly, if the award is obtained through the means of corruption, the same is also against the fundamental policy of Indian law and also against justice or morality. Therefore, some such consideration shall have to be present in full force in an award so as to enable the Court to set aside such an award. The detailed discussion above with regard to the merit of the award of the Arbitrator in respect of Claim No. 19 clearly proves and establishes that the arbitral award is not in any manner contrary to and in conflict with the public policy of India. The ground on which the said claim was partly allowed cannot be said to be against the said principles or concepts.

15. In view of the aforesaid discussions, I find no merit in the objections raised by the respondents and the said objections stand rejected. The petition stands dismissed. Since the award is made by the Arbitrator under the Arbitration and Conciliation Act, 1996, the award itself is a decree by operation of law. It shall, therefore, be open to the petitioner to proceed to execute the decree in accordance with law by filing an appropriate application for payment of the decretal amount which is lying deposited in this Court. Parties shall, however, bear their own costs. This judgment and order also disposes of Suit No. 2516 of 1993.