Metallurigical Engineering ... vs Scil
2009 Latest Caselaw 1428 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

+             C.S.(OS) 859A/1998 with OMP No. 84/1998

                                       Date of Decision: 16st April, 2009

       METALLURIGICAL ENGINEERING CONSULTANTS ... Petitioner
                     Through: Mr. Deba Prasad Mukherjee with
                               Mrs. Nandini Mukherjee Sen,
                               Advocate.
                versus

       SCIL                                             ..... Respondent
                            Through:    NEMO.

       CORAM:
       HON'BLE MR. JUSTICE VIPIN SANGHI

       1. Whether the Reporters of local papers may           No
          be allowed to see the judgment?
       2. To be referred to Reporter or not?                  No
       3. Whether the judgment should be reported             No
          in the Digest?
%                             JUDGMENT (Oral)

VIPIN SANGHI, J.

1. The petitioner M/s. Metallurgical & Engineering Consultants

(India) Ltd. (MECON) has filed the aforesaid petition under Section 30

of the Arbitration Act 1940 to impugn the majority award dated

19.11.1996 and the order dated 09.12.1997 modifying the said award

made by the Arbitrators.

2. The petitioner was awarded the contract to install 7 Meter Tall

Coke Oven Batteries Nos.1, 2 & 3 and associated Coke Dry Cooling

Plants Nos.1, 2 & 3 by Rashtriya Ispat Nigam Limited at their

Vishakapatnam Steel Project at Visakhapatnam. The petitioner, in

turn, appointed the respondent M/s. SCIL India Ltd. as the sub

contractor and placed an order on them for execution of the work of

erection, testing start up, commissioning and post-commissioning

services of the 7 Meter Tall Coke Oven Batteries No.1 & 2 and

associated Coke Dry Cooling Plants 1 & 2 of the Visakhapatnam Steel

Project for a total estimated price of Rs. 8,03,76,680/- by a letter of

Intent No. 11.83.0526 dated 6.10.1982. This was followed by a formal

agreement being executed between the parties on 10.11.1983

containing the detailed terms and conditions for execution of the

aforesaid works. Disputes arose between the parties on account of

delay in the execution of the works. Since there was an arbitration

agreement contained in the agreement dated 10.11.1983, disputes

between the parties herein were referred to arbitration in accordance

with the rules of the Indian Council of Arbitration. The arbitration panel

consisted of Mr. Justice R.S. Pathak (retd. Chief Justice of India), who

acted as the Chairman, Mr. Justice H.L. Anand (retd. Judge, Delhi High

Court) and Mr. Justice S.N. Sapra (retd. Judge Delhi High Court). The

petitioner was the claimant before the arbitrators. Petitioner made a

claim of Rs.9,52,61,788/- against the respondent. The respondent SCIL

repudiated the petitioners claim and made a counter claim of Rs.

68,22,43,745.67/-. Mr. Justice H.L. Anand (Retd.) made a detailed

reasoned award dated 04.10.1996. On the other hand, Mr. Justice S.N.

Sapra (Retd.) made his award dated 30.09.1996 after having the

benefit of perusing the award made by Mr. Justice H.L. Anand (Retd.).

While substantially agreeing with the award made by Mr. Justice Anand

(Retd.) on his findings on issue nos.1 to 10, 12 to 15, 17 to 23, 24 to 34

and 36 to 41 subject to his findings, he expressed his disagreement

with the award made by Mr. Justice Anand (Retd.) on a few issues. The

Chairman Mr. Justice R.S. Pathak (Retd.) after perusing the two awards

made by Mr. Justice H.L. Anand (Retd.) and Mr. Justice S.N. Sapra

(Retd.) and after giving his due consideration concurred with the award

made by Mr. Justice H.L. Anand (Retd.). Consequently, the majority

award as made by Mr. Justice H.L. Anand (Retd.) and concurred by Mr.

Justice R.S. Pathak (Retd.) holds the field. On the applications of both

the parties for modification of the majority award, the same was

corrected on 09.12.1997. Mr. Justice S.N. Sapra (Retd.) agreed with

these corrections.

3. The learned arbitrators by the majority award, as corrected,

held the respondent SCIL accountable for the excess amount of

Rs.9.13 lacs paid to them, since it was held that they had directly or

indirectly received a total sum of Rs.1194.78 lacs as against the total

value of work of phase I of Rs.1185.65 lacs. The majority award also

granted damages to the claimant to the tune of Rs.1,59,27,000/-

thereby rendering the respondent liable to the petitioner claimant in

the sum of Rs.1,68,40,000/-. The respondent‟s counter claims were

allowed to the tune of Rs.56,96,231/- under item nos.1 and 2; to the

extent of Rs.8,27,600/- under item nos.11 and 12 and to the extent of

Rs.52,16,604.94 in respect of items under item „B‟ relating to

miscellaneous claims. The total amount of counter claims allowed by

the majority award, therefore, comes to Rs.1,17,40,435.94. The

liability of the respondent to the claim, therefore, stood reduced to

Rs.50,99,564.06 to which the claimant was held entitled. As against

this, the claimant had received a sum of Rs.2,53,97,261/- by

encashment of bank guarantee. Consequently, the majority award, as

corrected, directed refund of the excess amount received by the

petitioner of Rs.2,02,97,696.94. It was directed that if the amount is

refunded within one month no interest would be payable. However, in

case the same is not so paid, the respondent was entitled to interest

on the outstanding amount @ 18% p.a. from the date of expiry of one

month from the date of the award i.e. 09.12.1997 until payment.

4. Mr. Mukherjee, learned counsel for the petitioner has sought

to raise a challenge to the majority award on four counts only. His first

submission is that the award made by the learned arbitrators was not

made in a single and common sitting. He submits that the arbitrators

should have applied their minds at the same time in consultation with

each other and then made the award. He submits that it was

necessary and essential for the learned arbitrators to have made and

signed the award at the same time on the same day for it to be a valid

award. However, from a perusal of the award it is evident that Mr.

Justice H.L. Anand (Retd.) prepared his award which was sent to Mr.

Justice S.N. Sapra (Retd.). Mr. S.N. Sapra (Retd.) after perusing the

same made his own award dated 30.09.1996. It appears that

thereafter Mr. Justice H.L. Anand (Retd.) prepared the formal award

dated 04.10.1986 and both these awards were forwarded to the

Chairman Mr. Justice R.S. Pathak (Retd.) who thereafter made his

award expressing his agreement with the award made by Mr. Justice

H.L. Anand (Retd.).

5. The second submission of Mr. Mukherjee is that one of the

issues raised before the arbitral tribunal was with regard to the legality

of the invocation of bank guarantee nos. BG375 and BG417 dated

6.6.85 and 17.7.87 by the claimant. The respondent had disputed the

said invocation as being illegal and wrongful. Mr. Mukherjee submits

that this issue was not gone into by the tribunal as is evident from the

majority award. He submits that since the said issue was not gone into

by the learned arbitrators, the amount recovered under the said bank

guarantees could not be accounted for while making the award.

6. The third submission of Mr. Mukherjee is that the learned

arbitrators while deciding issue no. 23 had wrongly computed the

amount in para 173 of the majority award. As per para 173 of the

majority award, the arbitrators had computed the total value of work of

phase 1 at Rs. 1185.65 lacs and the amount received by the

respondent as Rs.1194.78 lacs. In the objections filed before this

court, the petitioner has computed the excess payment made at Rs.

2,07,4,398.00/-.

7. The last submission of Mr. Mukherjee is that the learned

arbitrators were not justified in denying the claim for interest made by

the claimant. He submits that the claim for interest has primarily been

declined by taking into account the fact that the respondent had been

declared as a sick industry and its case has been referred to the BIFR.

He submits that the sickness of the respondent was not a relevant

consideration that could have been considered by the arbitrators to

deny the claim of interest to the petitioner the transaction being a

purely commercial one. The claimant, according to Mr. Mukherjee, was

entitled to grant of interest on the amount due and payable by the

respondent. No other submission has been made by Mr. Mukherjee.

8. Having heard learned counsel for the petitioner and having

perused the record including the majority award as corrected, I find no

merit in the objections preferred by the petitioner and, in my view, the

same deserves to be dismissed.

9. So far as the objection of Mr. Mukherjee to the manner in

which the award has been made is concerned, I find no merit in the

same. A perusal of the award shows that the same has been signed by

the three arbitrators. The award is engrossed on stamp papers and

bears the date 19th November, 1996 which is the date of the award.

The award recites that after considering the pleadings and having

heard oral evidence and submissions of the parties at length, the

arbitrators give their award by majority of two to one with reasons

pronounced by each arbitrator in Annexure (A) by Mr. Justice R.S.

Pathak (Retd.) (B) by Mr. Justice H.L. Anand (Retd.) (C) by Mr. Justice

S.N. Sapra (Retd.).

10. When an arbitral tribunal consists of more than one arbitrator,

and each of the arbitrators decided to write their own opinions, it is but

natural that the respective opinions would be written individually and

once an opinion has been written by one of the arbitrators, it would be

circulated to the others. It is only after circulation of the respective

opinions that the final award emerges either as a unanimous award or

as a majority award. That is exactly what has transpired in the present

case. As noticed above, it is clear that Mr. Justice H.L. Anand (Retd.)

firstly prepared his opinion which was circulated to Mr. Justice S.N.

Sapra (Retd.). Mr. Justice S.N. Sapra (Retd.), on perusing the said

opinion preferred to write his own opinion partially disagreeing with the

findings of Mr. Justice H.L. Anand (Retd.). Mr. Justice S.N. Sapra (Retd.)

wrote his opinion on 30.11.1996 thereafter the opinions of Mr. Justice

H.L. Anand (Retd.) which was dated 04.10.1996, and the opinion of Mr.

Justice S.N. Sapra (Retd.) dated 30.09.1996 were circulated to Mr.

Justice R.S. Pathak (Retd.), the Chairman of the tribunal who concurred

with the award made by Mr. Justice H.L. Anand (Retd.). Thereafter the

learned arbitrators have made their formal award dated 19.11.1996

which has been duly signed by each one of them. The formal award by

majority accepts the view penned down by Mr. Justice H.L. Anand

(Retd.). It is evident that there was consultation and exchange of

views between the learned arbitrators. There is no infirmity in the

mechanism adopted by the learned arbitrators while making the

majority award and Mr. Mukherjee has not been able to point out as to

how the procedure adopted by the learned arbitrators is fallacious.

This objection is, therefore, rejected.

11. Before I deal with the next objection, I may note that it is well

settled that the arbitrators are the final arbiter of all factual disputes

between the parties. It is not for this court to re-appreciate the facts

and to re-compute for itself the amounts as are claimed by one or the

other party. The arbitrators have looked into the facts and figures

relied upon by the parties and thereafter arrived on their own

calculations. The Court cannot re-examine the correctness of the

conclusions arrived at by the arbitrator. The jurisdiction of the Court while

hearing objections to the award is not appellate in nature, and the award

passed by an arbitrator cannot be set aside on the ground that it is

erroneous. It is not open to the Court to interfere with the award merely

because in the opinion of the Court another view is equally possible. It is only

when the Court is satisfied that the arbitrator has mis-conducted himself or

the proceedings, or that the award has been improperly procured or is

otherwise invalid that the Court may set aside an award. Wrong or right, the

decision is binding if it is reached fairly after giving adequate opportunity to

the parties to place their grievance in the manner provided by the arbitration

agreement [see Bhagwati Oxygen Limited v. Hindustan Copper Limited

(2005) 6 SCC 462].

12. The challenge raised to the computation of the amount due

and payable to the petitioner claimant under Claim No. 23, in my view,

is not sustainable. No error on the face of the award is discernible and

none has been pointed out by the learned counsel for the petitioner while

contending that the learned arbitrators in their majority award have wrongly

computed the excess payment due to the petitioner. It is not even the

petitioner‟s case that the learned arbitrators have travelled beyond the

contract or that they have acted in excess of their jurisdiction. Paragraph

173 of the majority award reads as follows:

"173. I would, therefore, accept the computation of the Claimant that, as against the total value of work of Phase I at Rs.

1185.65 lacs, respondent had received a sum of Rs. 1194.78 lacs as at the close of the contract. Issue No. 23 is decided accordingly."

13. The aforesaid shows that the majority award in fact accepted

the computation of the claimant petitioner. It, therefore, does not lie in

the mouth of the petitioner to contend before this court that excess

payment to the tune of Rs. 2,07,04,398/- had been made by the

petitioner to the respondent. On what basis the aforesaid claim was

made by the petitioner has not been shown to me. The aforesaid

objection raised by the petitioner is, therefore, rejected.

14. I also find no merit in the submission of Mr. Mukherjee that

because the arbitrators did not go into the issue of legality of

invocation of the bank guarantees, adjustment of the amount received

by encashment of the said guarantees could not have been made in

the award. The issue with regard to the legality or otherwise of the

invocation of bank guarantee was an issue which was raised at the

instance of the respondent since it is the respondent who was

aggrieved by the said invocation. The learned arbitrators initially did

not go into the said issue as it was pending before the Supreme Court

at the relevant time. Later on, while dealing with the applications filed

by the parties they have noticed the fact that the S.L.P. filed by the

respondent questioning the legality of the invocation of the Bank

Guarantees has been dismissed. Therefore, the learned arbitrators

have proceeded on the basis that the invocation of the Bank

Guarantees was legal when made. However, that does not mean that

the arbitrators could not have taken into account the fact that the

claimant petitioner had already pocketed the aforesaid amount upon

invocation of the said bank guarantee. The learned arbitrators in view

of the aforesaid development, in the correction order held as follows:

"The position, as at present, therefore, is that as against its entitlement of Rs. 50,99,564.06, Claimant has received a sum of Rs. 2,53,97,261.00, being in excess of the amount to which it was entitled by Rs. 2,02,97,696.94. The Claimant would refund the aforesaid excess amount to the Respondent, within one month without interest. In case the payment is delayed Respondent would be entitled to interest, on the outstanding amount at 18% per annum, from the date of the expiry of one month from the date of the Award, until payment".

15. I also find no merit in the submission of Mr. Mukherjee that

the arbitrators erred in denying the interest to the petitioner on the

amount of Rs.9.13 Lakhs awarded on issue No.23. The arbitrators

have given two reasons, and not one, for denying the claim of interest

in favour of the petitioner. Firstly, the arbitrators have noted that

under the contract there is no express provision with regard to grant of

interest. Consequently, there is no contractual obligation towards the

payment of interest on outstanding amounts. Secondly, the

arbitrators have also taken into consideration the poor financial

condition of the respondent SCIL and the fact that it was a sick

company whose case was proceeding before the BIFR. Mr. Mukherjee

submits that the petitioner claimant was entitled to interest by virtue

of Interest Act 1978. He submits that "Court" includes a tribunal and

an arbitrator. He further submits that in any proceeding for recovery

of damages, or in any other proceedings in which the claim of interest

or damages already paid is made, the court may, if it thinks fit, allow

the interest to the person entitled to damage or to the person making

such claim.

16. A perusal of Section 3 of the Interest Act 1978 shows that the

same is an enabling provision. However, it does not mandate that in

every case it is incumbent either for the court or for the arbitrator or

the tribunal to grant interest. It is for the court to consider the facts

and circumstances of each case and thereupon exercise its discretion

judiciously to grant or deny the claim for interest. Since the arbitrators

have, after considering the respective claims and counter claims of the

parties exercised their discretion to deny interest to the claimant, in

my view, it is not for this court while hearing these objections to the

award to interfere with the award and grant interest to the petitioner.

It cannot be said that the factum of the respondent being a sick

company was not a relevant consideration. I may also note that the

amount found by the arbitrators to be due to the petitioner on account

of excess payment, upon the taking of accounts, was to the extent of

Rs. 9.13 lacs only which was a small fraction as compared to the total

value of the contract. This figure was arrived at by the arbitrators

upon adjudication. Prior to that the actual amount due was not even

known to either of the parties. In fact, the respondent had substantial

counter claims as is evident from the fact that their counter claim to

the extent of Rs.1.17 Crores were allowed by the arbitrators. It was,

therefore, not a case where the respondent had withheld a payment of

an amount which it was aware of as being its liability. Moreover, the

arbitrators did not even grant interest to the respondent on the excess

amount recovered by the petitioner by invoking the Bank Guarantees

from the time the petitioner received the said amount till one month

after the date of the award. In my view, these are germane reasons

why the petitioners claim towards interest could not have been

sustained.

17. For all the aforesaid reasons, I see no merit in this petition

and the same stands dismissed. The majority award made by the

learned arbitrators is made rule of the court. In case the petitioner has

not refunded the amount of Rs.2,02,97,696.94 within the period of one

month from the date of the correction order dated 09.10.1997, the

petitioner shall be liable to bear interest on the said amount @ 18%

p.a. from 09.01.1998 upto date, and further interest on the said

amount of Rs.2,02,97,696.94 @ 9% p.a. from today till payment or

realization, as the case may be.

VIPIN SANGHI, J.

APRIL 16, 2009 dp/rsk