M/S Gian Chand Mehta vs Union Of India & Ors
2009 Latest Caselaw 565 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                  CS(OS)1463A/2007

%17.02.2009                       Date of decision:17.02.2009

M/S GIAN CHAND MEHTA                               .......Petitioner
                        Through: Mr M.L. Kasturi, Advocate

                                Versus

UNION OF INDIA & ORS                          ....... Respondents
                        Through: Mr A.S. Dateer, Advocate

CORAM :-
HON'BLE MR. JUSTICE RAJIV SAHAI ENDLAW

1.    Whether reporters of Local papers may
      be allowed to see the judgment?   Yes

2.    To be referred to the reporter or not? Yes

3.    Whether the judgment should be reported
      in the Digest?                                  Yes


RAJIV SAHAI ENDLAW, J.

1. The suit was filed under Sections 14 and 17 of the Arbitration

Act, 1940. The case has a longer history than would appear from the

year of the suit. Disputes and differences arising out of the works

contract dated 19th August, 1986 awarded by the respondent

(Railways) to the petitioner were on 22th August, 1990 referred for

arbitration of Ms S Chauhan and Mr S.D. Sharma, officers of the

Railways. Claims were filed by the petitioner before the said

arbitrators in 1991. The arbitrators published an award dated 11 th

February, 1992. The petitioner herein filed suit No. 3356A/1992 in

this court under Sections 14 and 17 of the Arbitration Act for filing of

the said award in the court. Upon the award being filed in this court

in the aforesaid suit and notice of filing being issued, neither the

respondent (Railways) nor the petitioner filed any objections thereto

save that the petitioner herein filed a petition under Sections 15(b)

and 16 of the Arbitration Act, 1940.

2. The award rendered on 11th February, 1992 is a non speaking

award without any reasons. The award merely directed that against

the -

(A) Claim of the petitioner

(i) of Rs 1,55,963.78 for compensation/damage for breach of contract

by railways, nil amount was awarded

(ii) of Rs 88,183 for refund of security deposit, the amount awarded

was Rs 88,183/-

iii) of Rs 20,000/- for release of FDR of the said value, the amount

awarded was Rs 20,000/-

(B) Claim of the railways for liquidated damages of Rs 4,66,240/-

the amount awarded was Rs 88,183/-.

3. The award thus directed that the petitioner be paid by the

railways a sum of Rs 20,000/- in full and final settlement of all

claims referred to the arbitrators. The railways were also directed

to pay interest at 16% per annum on the amount awarded, if the

payment was not made within 60 days from the date of the

publication of the award.

4. The petitioner in its application under Sections 15(b) and 16 of

the Act contended that if the arbitrators had really arrived at a

conclusion that the petitioner was liable to pay to the railways

liquidated damages of Rs 4,66,240/- or any other sum, their award

could have been anything else but not exactly Rs 88,183/- which was

the security deposit of the petitioner and the refund of which had

been awarded in the petitioner's favour; it was further contended

that there was no justification and basis for the award of damages to

the railways equivalent to the security deposit of the petitioner. The

petitioner also drew attention to the arbitration agreement which,

inter alia, provided that where the claims were of more than Rs 3

lacs, intelligible award i.e., with reasons is to be given. It was

submitted that since the total amount of claims was in excess of Rs

3 lacs, the award without reasons was illegal. The petitioner

therefore prayed that the award be modified by deleting the award

of Rs 88,183/- as liquidated damages to the railways and by

correcting the amount awarded to the petitioner from Rs 20,000/- to

Rs 1,08,183/- i.e., inclusive of Rs 88,183/-. Alternatively it was

pleaded that the award be remitted to the arbitrator.

5. The respondent (Railways) filed a reply to the aforesaid

petition opposing the same. It was, however, not disputed that as

per the agreement of the parties, the award was required to be

intelligible and with reasons. It was contended that the award was

self explanatory and thus could not be said to be non speaking.

The respondent (Railways) thus supported the award.

6. The aforesaid CS(OS)3356A/1992 was disposed of vide order

dated 15th April, 2005. It was recorded therein that neither of the

parties could throw light as to how the sum of Rs 88,183/- awarded

by the arbitrators to the railways against their claim of liquidated

damages of Rs 4,66,240/- could be worked out. The contention of

the petitioner was that the award be corrected in exercise of power

under Section 15(b) of the 1940 Act by removing the portion

adjusting Rs 88,183/- towards liquidated damages held to be

payable to the Railways. This court held that Section 15(b) was not

applicable and the only recourse open was to proceed under Section

16 of the Act. It was further held that "Since the award in favour of

the petitioner pertaining to refund of security deposit and award

pertaining to counter claim of the Railways is in identical sum and it

cannot be asserted (sic, ascertained) as to how sum towards

liquidated damages have been arrived at, possibility of a

typographical error cannot be ruled out, for the reason it is highly

unlikely that an odd figure would match pertaining to refund of

security deposit and liquidated damages." This court thus remitted

the award with the direction that "learned arbitrators would

reconsider the award in light of the observations made in the

present order and would clarify as to how the sum of Rs 88,183/-

awarded to the railway authorities as liquidated damages has been

worked out."

7. The arbitrators, pursuant to the aforesaid directions vide

"Revised award" dated 23rd November, 2006 made clarifications to

the original award dated 11th February, 1992. The arbitrators have,

inter alia, clarified that in the original award they had allowed the

railways claim for liquidated damages to the extent equivalent to

refund of security deposit. The arbitrators have further explained

that, during the course of hearing for reconsideration, it has come

to light that there was no free access at all to the locations where

the petitioner was to make the supplies; that the petitioner

completed partial supplies to the places where the access was

available and could not supply the balance quantity; that the

railways after termination of the contract of the petitioner did not

take supply of balance quantities at the same locations as

mentioned in the contract with the petitioner and where the

petitioner could not effect the supplies but took the supplies from

another contractor at another location. The arbitrators held that

this proved that the petitioner was not to blame for the non supplied

quantities and against which the railways had claimed liquidated

damages of Rs 4,66,240/-. The arbitrators on reconsideration held

that the railways, to be entitled to liquidated damages, should have

taken the balance supplies at the same locations and on the same

methodology as in the contract with the petitioner and having failed

to do, so were not entitled to levy liquidated damages.

8. The arbitrators further clarified that at the time of making of

the original award on 11th February, 1992 it was not brought to

their attention that the balance supplies had been taken by the

railways at a different location.

9. The arbitrators, in view of the new facts brought out post

remission and which facts the arbitrators recorded, were also

agreed by the respondent (railways) during the course of hearing,

amended the award and granted nil damages (instead of damages of

Rs 88,183) to the railways against their claim for liquidated

damages. The arbitrators further held that the railways having

already paid Rs 20,000/- with interest earlier awarded, directed the

railways to pay an amount of Rs 88,183/- to the petitioner towards

refund of security deposit alongwith simple interest at 16% per

annum on Rs 88,183/- w.e.f. the date of original award i.e., 11th

February, 1992 till publication of the revised award on 23rd

November, 2006. It was further awarded that if the amounts were

not paid within 60 days from the publication of "revised award", the

petitioner shall be entitled to future interest at 9% per annum till

the date of payment.

10. The petitioner instituted this CS(OS) 1463A/2007 on 24th May,

2007, under Sections 14 and 17 of the Act for direction to the

arbitrators to file the "revised award" in this court and for making

the same the rule of court. This court vide order dated 14th August,

2007 directed the arbitrators to file the award alongwith arbitral

proceedings in this court and upon receipt of the same on 13th

December, 2007, notice of the filing of the award was issued. The

railways have filed written statement cum objections under Section

30 of the 1940 Act against the revised award. Two objections have

been raised - firstly it is contended that the suit is barred by time

inasmuch as the "revised award" was published on 23rd November,

2006 and the suit has been instituted on 24th May, 2007. Secondly,

it is contended that the arbitrators while rending the revised award

have ignored the directions in the order dated 15th April, 2005

remitting the award and have, in fact, chosen to publish altogether

new award and have rejected the entire claim of the respondent

(railways) for liquidated damages and which was earlier partly

allowed to the extent of Rs 88,183/-.

11. As far as the objection of limitation is concerned, Article 119(a)

of Schedule I to the Limitation Act prescribes the time of 30 days

from service of the notice of the making of the award, for instituting

a suit/application under Sections 14 and 17 of the 1940 Act as the

present proceeding is. The respondent, in the present case, has, in

reply to the objections, not even stated that the present suit was

filed within the aforesaid time. On the contrary, it is contended that

the said time is not applicable since the present suit is merely a

continuation of the earlier suit being CS(OS)3356A/1992. The

correctness of the said plea of the petitioner is to be tested. If not,

the suit is admittedly barred by time.

12. Suit CS(OS)3356A/1992 was disposed of by exercising power

under Section 16 of the Act. Section 16 empowers the court to,

from time to time, remit the award. Sub-section (2) requires the

court to, while remitting the award, fix the time within which the

arbitrator shall submit his decision to the court. The proviso

thereto empowers the court to extend the time at any time. Sub-

section (3) provides that an award remitted under sub-Section (1)

shall become void on the failure of the arbitrator to reconsider it

and to submit his decision within the time fixed. The limitation of

30 days under Article 119 (supra) is for an application for filing in

court of "an award" and commences from the date of service of the

notice of "making of the award". Section 14 also requires the

arbitrator to give notice in writing to the parties of the making and

signing of the award. Thus, the limitation of 30 days applies only to

an award. What is to be determined is, the status of the "decision"

of the arbitrator post remission. If the said "decision" has the status

of the award, then the aforesaid limitation of 30 days shall apply and

not otherwise. The arbitrators in the present case have, of course,

while submitting their decision post remission called the same

"revised award".

13. Section 16 does not use the expression "award" in relation to

the post remission findings. Rather it uses the expression

"decision". This is indicative of the fact that the decision/findings of

the arbitrator post remission are not an award but merely a decision

or a clarification. This is also borne out from the requirement of

Section 16 of the court fixing the time within which the arbitrators

are to submit their decision "to the court". In fact, upon non

submission of the decision within the prescribed time, the award

which is remitted, become void. From this, it appears that post

remission it is duty of the arbitrators to submit their decision to the

court and the arbitrators are not required to give notice to parties of

the making of the decision and the party is not required to take any

step for having the said decision filed in the court. Once the

legislature has used a separate terminology for the post remission

findings and has placed the obligation for submitting the said

finding/decision to the court on the arbitrators themselves, it cannot

be said that the said findings have a status of an award and it is the

duty of the party seeking to enforce the award in the light of the

said findings/decisions to have the same filed in the court. Thus, the

limitation of 30 days does not apply. I have been unable to find any

precedent on the subject.

14. However, the fact remains that in the present case, this court

did not fix any time for the arbitrators to submit the decision post

remission. It was nevertheless the duty of the arbitrators to submit

the post remission decision in this court. The suit CS(OS)

1463/2007 though titled as under Sections 14 and 17 of the Act, in

fact, is in the nature of an application for directions in the original

suit No.3356A/1992. Merely, because the petitioner has quoted the

wrong provision while applying to the court would not attract

provisions of limitation applicable thereto. The plea of the

respondent (Railways) of limitation is thus rejected.

15. In my opinion, the non fixing of time by this court, as

mandatorily required under Section 16(2) would also not be of any

effect. I find a divided opinion in this regard. While the High Court

of Madhya Pradesh in State of Madhya Pradesh Vs. Vijay Raj

Kankariya 1988 M.P. LJ 60 and the Division Bench of Andhra

Pradesh in M.R. Reddy & Co. Vs. State of A.P.

MANU/AP/0080/1978 have taken a view that the non fixing of time

by the court while remitting the award does not make the award

void, the Punjab High Court in H.L. Jain Vs Punjab State ILR

(1964) XVII (1) Punjab Series 816 has held that the order of

remittal not fixing time renders the award void.

16. In the present case the order remitting the award has attained

finality and has already acted itself out. I am unable to hold that an

order of the court not in accordance with law could make an award

void. No party can suffer owing to an act of the court. At best it

can be said that the order of remittal is bad or void, but the effect

thereof would only be to restore the position as existing prior to

remittal and cannot still make the original award void. The

language of Section 16 shows that the court, even after remitting

the award remains seized of the matter. If that were not so, Section

16 would not have provided for the arbitrator, post remission,

submitting his decision to the court. Section 16 of 1940 Act is akin

to Order 41 Rule 25 of CPC. Rule 26 there expressly provides that

the Appellate Court shall after receipt of findings post remand,

proceed to determine the appeal. Thus for any defect in order of

remand/remission cannot invalidate the original decree/award.

Moreover, the Division Bench of this court has, not withstanding

absence of express power to this effect in Section 16, held in U.O.I.

Vs. K.L. Bhalla ILR (1973) Delhi 160 that the time can be

extended by the court even after the expiry of time earlier fixed and

after the decision has been submitted by the arbitrator to the court.

In fact the Division Bench also noticed the difference between

making of award and decision of arbitrator under Section 16. I,

therefore, tend to respectfully agree with the M.P. High Court and

the Division Bench of the Andhra Pradesh High Court and in my

view the non-fixing of the time would be of no avail.

17. This brings me to the second objection raised by the

respondent (railways). There is merit in this objection. The award

dated 11th April, 1992 was remitted because this court entertained a

doubt that there was a mistake in the award in adjusting Rs 88,

183/- awarded to the petitioner inasmuch as it was felt that the

grant of liquidated damages could not be of the exact amount as the

security deposit, refund whereof was ordered to the petitioner,

specially as no reasons were given. The award was, therefore,

remitted for the arbitrators to confirm whether there was such a

mistake and if not, what were the reasons for awarding liquidated

damages to the railways in the sum of Rs 88,183/-. The arbitrators

post remission have confirmed that there is no mistake in their

awarding liquidated damages as aforesaid to the petitioner and have

further clarified that they had in their wisdom awarded liquidated

damages to the extent of the security deposit only, after having

found that the railways were entitled to liquidated damages in terms

of the contract. However, the arbitrator did not stop on that. They

proceeded to reverse their decision for award of liquidated damages

to the railways while confirming that in the award dated 11th April,

1992 they had intended to give liquidated damages to the extent of

the security deposit. They have, however, said that on discovery of

new facts they now find that the railways are not entitled to

liquidated damages.

18. Under Section 16 of the Act the award is remitted on terms as

the court may think fit. In this case this court while remitting the

award fixed the terms for the arbitrators to clarify whether the

award of liquidated damages in the same amount as the security

deposit was a mistake and if not to state the reasons for the

identical amounts. This court did not direct the arbitrators to

reconsider whether the railways were at all entitled to liquidated

damages or not. It was, therefore, not open to the arbitrators to

post remission come to the conclusion that the railways were not at

all entitled to the liquidated damages. The arbitrators post award

were functus officio and their power post remission was

circumscribed by the terms of the order remitting the award. The

decision could not be beyond the scope of said terms. Thus, the

decision of the arbitrators to that effect cannot be considered.

19. However, that is still not the end of the matter. As aforesaid,

the court remitting the award remains seized of the matter,

awaiting the decision of the arbitrator. Even if the said decision of

the arbitrators is to be ignored for not being in terms of order

remitting, the court still has to decide whether the award is to be

set aside or modified or made rule of the court.

20. In the present case, as aforesaid, the agreement of the parties

was for a reasoned award. There are no reasons given by the

arbitrators in the award dated 11th February, 1992 for award of

liquidated damages in the sum of Rs 88,183/- to the railways. In my

view in the present case non giving of reasons for award of

liquidated damages to railways coupled with what has transpired

post remission and with respect whereto no objection/ denial has

been filed, the award for grant of Rs 88,183/- as liquidated damages

to the railways cannot be upheld.

21. I, therefore, set aside that part of the award dated 11 th April,

1992. The effect thereof would be that the petitioner shall be

entitled to the recovery of the said amount.

22. The next question is as to the interest. The arbitrators had

granted interest at 16% per annum on the sum of Rs 88,183/- to the

petitioner w.e.f. the date of the original award i.e., 11th February,

1992. However, in view of the interest rates having fallen in the

interregnum, I deem it appropriate to grant simple interest on the

said amount of Rs 88,183/- to the petitioner w.e.f. the date of the

institution of the suit No. 3356A/1992 i.e.,. w.e.f. 2nd September,

1992 till the date of payment @ 9% per annum. The judgment in

terms of the award so modified is pronounced. The decree sheet be

drawn up. The parties are however left to bear their own costs.

RAJIV SAHAI ENDLAW (JUDGE) February 17, 2009 M