M/S Karam Chand Thapar & Bros(Cs) ... vs National Hydroelectric Power ...
2009 Latest Caselaw 4124 Del

     *IN THE HIGH COURT OF DELHI AT NEW DELHI

+                         CS(OS)2143/2002 & OMP 21/2004

%                               Date of decision: 13th October, 2009

M/S KARAM CHAND THAPAR                                        ....Petitioner
& BROS(CS) LTD
                               Through:    Mr. P. Mishra, Sr Advocate with Mr
                                          Sandeep Sharma, Advocate

                                      Versus

NATIONAL HYDROELECTRIC POWER CORP...Respondent
& ANOTHER
                               Through: Mr. S.K. Taneja, Sr Advocate with Mr
                               Sachin Datta and Ms Shaila Arora, Advocates.


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

1.      Whether reporters of Local papers may
        be allowed to see the judgment?   No

2.      To be referred to the reporter or not?           No

3.      Whether the judgment should be reported
        in the Digest?  No


RAJIV SAHAI ENDLAW, J.

1. CS(OS) 2143A/2002 was registered on the filing of a petition

under section 14 of the Arbitration Act 1940 for directing the

arbitrator to file the original interim award dated 22nd November,

2002 in this court alongwith the entire arbitration

proceedings/record. Vide order dated 3rd January, 2003 the

arbitrator was directed to file the award and proceedings in this

court. The petitioner even without awaiting the filing of the award by

the arbitrator in this court filed IA.No. 5933/2003 under Sections 30

and 33 of the 1940 Act for setting aside the interim award dated 22 nd

November, 2002. The pleadings in the said application have been

completed. OMP 21/2004 was filed under Sections 5,11 and 12 of

the 1940 Act for revoking the authority of the arbitrator, so as to

prevent him from proceeding further with the arbitration

proceedings after the interim award aforesaid and for appointment

of an arbitrator in his place. Vide order dated 23rd January, 2004 in

the OMP though further proceedings before the arbitrator were

allowed to be continued, it was ordered that the arbitrator shall not

pass the final award. The said order has remained in force. The

counsels have informed that though the arbitrator has concluded the

proceedings and even heard arguments, however, the award has not

been published owing to the order aforesaid in these proceedings. It

was further informed that the arbitrator who is a retired judge of the

Allahabad High Court is over 83 years of age.

2. The senior counsel for the petitioner contended that if this

court were to allow the OMP, the ground for revocation of authority

wherein is the bias of the arbitrator in favour of the respondent, the

interim award against which objections have been filed in CS(OS)

2143A/2002 would also become liable to be set aside.

3. In the OMP the grounds taken for revocation of authority of

the arbitrator are, the arbitrator acting in a high handed fashion in

the matter of hearings preceding the interim award and pronouncing

the interim award. It is pleaded that the interim award given by the

arbitrator has shaken the faith of the petitioner in the conduct of the

arbitration proceedings by the arbitrator; a letter dated 30 th

December, 2002 is also stated to have been written by the petitioner

to the arbitrator in this regard expressing their loss of faith in the

arbitrator. The interim award subject matter of challenge in CS(OS)

2143A/2002 is on the arbitrability of the claims of the petitioner

against the respondent. The arbitrator has held some of the claims

of the petitioner to be not arbitrable. The said interim award is inter

alia challenged and it is also a ground in the OMP that the arbitrator

rushed into pronouncing on the arbitrability of the claims though the

contention of the petitioner before the arbitrator was that the said

arbitrability could not be gone into without adducing evidence; the

arbitrator is alleged to have disregarded the said submission of the

petitioner and rushed into making the interim award. It is also

pleaded in the OMP that subsequent claims of the petitioner against

the respondent with respect to the same contract were referred to

the arbitration of Justice H.C. Goel (Retd) of this court vide order

dated 10th April 2003 in Arbitration Application 299/2000 and it is

prayed that after revoking the authority of the arbitrator in this case,

the disputes subject matter of these cases be also referred to Justice

H.C. Goel. During the hearing it was informed that Justice H.C. Goel

has since recused himself and petition is pending in this court for

appointing a substitute arbitrator.

4. The petitioner has also filed I.A.No. 3193/2004 in the OMP

stating that it has come to know that the arbitrator whose authority

is sought to be revoked is the panel arbitrator of the respondent and

has been doing a number of arbitrations for the respondent and has

in all arbitrations to which the respondent is a party given an award

in favour of the respondent; it is further alleged in this application

that to the knowledge of the petitioner the arbitrator is paid a

monthly salary as fee by the respondent for doing the arbitration

matters; information was sought from the respondent in this regard;

the petitioner also filed copies of arbitral awards in other arbitration

proceedings in which the respondent was party and in which the

awards were published in favour of the respondent by the same

arbitrator.

5. The respondent in pursuance to the directions of this court on

25th August, 2004 in the OMP filed an affidavit verified on 9th

October, 2004 of its Deputy Manager (Civil) and in which it is stated

that the arbitrator is on the panel of arbitrators of the respondent;

that the arbitration with the petitioner is the only ongoing arbitration

of the respondent before the same arbitrator; that the other

arbitration proceedings of the respondent were before other

arbitrators; that the same arbitrator has acted as the arbitrator in

only ten arbitrations of the respondent; that the awards passed by

the same arbitrator in none of those arbitrations has been set aside

by any court; it was denied that any monthly salary / fee was paid by

the respondent to the arbitrator and it was stated that the

arbitrator's fee was shared by both parties to the arbitration in all

the cases and no extra remuneration had at any time been given by

the respondent to the said arbitrator. In fact, allegations of abuse of

process of this court are made against the petitioner. It is contended

that the petitioner surreptitiously, while seeking the order for filing

of interim award in this court also sought the order of calling for

arbitral record in this court and which resulted in scuttling the

further arbitration proceedings before the arbitrator, of stay whereof

there was no order also from this court.

6. To complete the narrative of facts, in the interim award dated

22nd November, 2002 under challenge, the arbitrator has held the

1940 Act to be applicable to the arbitration proceedings and negated

the contention of the petitioner of the applicability of the 1996 Act.

The senior counsel for the petitioner has not challenged the said part

of the interim award.

7. The arbitrator has by the interim award dated 22nd

November, 2002 adjudicated the plea of the respondent of the claims

of the petitioner being not arbitrable. The petitioner had made

seven claims against the respondent. The arbitrator has held claims

1, 3, 6 and 7 to be arbitrable and held claims 2, 4 and 5 to be not

arbitrable.

8. The arbitrator in deciding the arbitrability has relied upon

General Manager, Northern Railway Vs Sarvesh Chopra (2002)

4 SCC 45. According to the arbitrator, the Supreme Court in the

said judgment has carved out two exceptions to the arbitrability i.e.,

those claims which as per the terms and conditions of the contract

are simply not entertainable and secondly those which under the

terms and conditions of the contract are liable to be adjudicated

upon by an authority, in Sarvesh Chopra of the Railways and in the

present case of the respondent; whose decision the parties have

agreed to treat as final and binding and hence not arbitrable. The

arbitrator has held claims 2, 4 and 5 to be not entertainable, i.e.,

with respect whereto the contract provides that no claim shall be

entertained, even though no `in house' mechanism for settling such

claims is provided in the contract.

9. The senior counsel for the petitioner has contended that

when the same person is repeatedly appointed as the arbitrator by a

party, it creates an apprehension as to the impartiality of that

arbitrator. Reliance is placed on Nandyal Cooperative Spinning

Mills Vs K.V.Mohan Rao (1993) 2 SCC 654. He has further

contended that the plea of bias can never be conclusively

proved/made out and the court can act only on the basis of

circumstances. Reliance is placed on Amarchand Lalitkumar Vs

Shree Ambica Jute Mills Ltd AIR 1966 SC 1036 laying down the

criteria and the approach of the court in exercising the power to

revoke the authority of the arbitrator. It is contended that repeated

appointment by the respondent of the same arbitrator is a

disqualification and raises a justifiable doubt to the petitioner as to

why the respondent is relying upon one person only as the arbitrator.

Reference is made to Roshan Lal Sethi Vs The Chief Secretary

AIR 1971 J&K 91 to contend that authority of arbitrator can be

revoked on mere likelihood of bias. It is contended that the arbitrator

in the present case has prejudged the matter. The judgments in

International Airports Authority of india Vs K.D. Bali AIR 1988

SC 1099 and in Ranjit Thakur Vs Union of india AIR 1987 SC

2386 on, what is bias, have also been cited. It is urged that the

arbitrator sought to be removed is a "stock arbitrator" of the

respondent and the awards made by him in cases involving the

respondent, and in which other parties were large construction

companies, are under challenge. In response to another objection of

the respondent of the challenge to the order dated 22nd November,

2002 (interim award) being not maintainable at this stage, reliance is

placed on Satwant Singh Sodhi Vs State of Punjab (1999) 3 SCC

487 and National Thermal Power Corporation Vs Siemens

Atiengesellschaft 2005 2 ARBLR 172 Delhi to contend that where

the award is final and will have force without the delivery of the final

award, it is final for the objections to be preferred with respect

thereto and to draw a distinction between the interim award and a

final award.

10. The senior counsel for the petitioner while addressing on the

objections to the interim award drew attention to the arbitration

clause contained in clause 55.1 of the General Conditions of the

contract and which is as under:

"55.1. Except as otherwise provided, in clause 53 hereinbefore,

all questions, disputes or differences in respect of which the

decision has not been final and conclusive arising between

the contractor and the corporation, in relation to or in

connection with the contract shall be referred for

arbitration in manner provided as under : ..........."

Clause 53 is as under:

"Clause 53. Finality Clause

it shall be accepted as an inseparable part of the contract

that in matters regarding materials, workmanship, removal of

improper work, interpretation of the contract drawings and

contract specifications, mode of procedure and the carrying

out of the work as stipulated in the clause numbers 7, 8, 10,

13,17,18,21,23,24,29,32,34,37,38,40,41 and 44 the decision

of the Engineer-in-charge which shall be given in writing,

shall be final and binding on the contractor."

11. The claim No.2 of the petitioner which the arbitrator has held

to be not arbitrable was an account of use of higher size diameter of

steel in casting precast concrete lagging, than 6 mm diameter steel

bars as provided for in the drawings. It was inter alia the case of the

petitioner that the drawings in which the diameter of steel bars was

shown as 6 mm and on the basis whereof the costs had been

calculated by the respondent were supplied to the petitioner late but

even prior thereto the petitioner under supervision of / instruction of

the official of the respondent had been made to use the steel bars of

a higher diameter resulting in additional costs to the petitioner. The

arbitrator has held the said claim to be not arbitrable on the basis of

clause 21.2 of the agreement providing that the contractor shall not

be entitled to any additional payment over and above the unit price

contracted for various items of work, on account of variation in

dimension of structure, layout, design and details of work during the

execution of the work.

12. The arbitrator on an interpretation of Sarvesh Chopra

(supra) to the effect that the claims, which under the terms of the

contract were not entertainable or allowable were not arbitrable,

held the claim of the petitioner on account of use of higher diameter

steel bars not arbitrable.

13. The senior counsel for the petitioner has also contended that

the respondent, in its pleadings before the arbitrator did not

controvert that the drawings were given by the respondent to the

petitioner after the work using the aforesaid diameters steel bars

had been carried out; that the petitioner till the delivery of the said

drawings could not know the diameter of steel bar of which price

had been provided; that the officials of the respondent had for

geological reasons advised the petitioner to use the steel bars of a

higher diameter; that the bar in clause 21.2 (supra) is only of quoted

items and would not apply to the items which the petitioner during

the execution of the work is directed to use. It is argued that the 10

MM steel diameter of steel in claim No.1 is not provided in the

contract but only in the drawings. It is further contended that under

sub-clause (6) of the Arbitration clause 55, where the claims are of

over Rs 1 lac, the arbitrator is required to give reasons. It is

contended that the arbitrator has while holding claim No.2 to be not

arbitrable neither given any reason nor discussed the pleas of the

petitioner.

14. Claim No.4 of the petitioner was for extra expenses incurred

due to disproportionate increase in minimum wages not

compensated by the escalation formula. The arbitrator has held the

said claim also to be not arbitrable for the reason of clause 29.13 of

the contract prohibiting any claim on account of the contractor being

required to perform his obligation under the contract. Clause 29.5

provides for the contractor being liable to pay minimum wages.

15. The senior counsel for the petitioner has contended that

there was a delay of three years and three months and for which

period the contract time was extended by the respondent without

demur. Pleadings in OMP are relied on to demonstrate that the

delay was attributable to the respondent. It is further urged that the

respondent had allowed the petitioner to continue with the works

even after the expiry of the time and thus the clause 29.13 applicable

during the term of the contract would not come into play. Reliance

is placed on para 16 of Sarvesh Chopra (supra) to contend that

whether a particular matter is excepted or not is to be decided after

considering the relevant material - it is urged that the arbitrator in

the present case has decided without considering any material or

without giving any opportunity to the petitioner to lead evidence.

Reliance is also placed on the pleadings in the objections to the

award to contend that there is no express/specific denial by the

respondent to the factual pleas in the objections also. The senior

counsel for the petitioner also relies upon Paragon Constructions

(India) Pvt Ltd Vs UOI 2008 II AD (Delhi) 502 where a Single

Judge of this court has held that claims for prolongation of the

contract cannot be blocked by a no claim clause inasmuch as such

claims are by way of damages under Section 73 of the Contract Act.

I may however notice that in the said judgment the arbitrability was

not in question. Reliance is also placed on K.R. Raveendranathan

Vs State of Kerala (1998) 9 SCC 410. However, in that case the

Supreme Court only held that the court could not take upon itself the

burden of saying whether the claim was contrary to the contract or

not. The said two judgments are thus not found applicable. The

senior counsel for the petitioner next contended that the clause

29.13 aforesaid bars a claim only during the term of the contract but

not for a period beyond the terms of the contract.

16. Though no express arguments with respects to the claim No.

5 are addressed, the pleas in the objections with respect thereto are

the same as with respect to the claim No.4 aforesaid.

17. Per contra, the senior counsel for the respondent has

contended that the petitioner had in the present case instituted a

suit under Section 20 of the Arbitration Act, 1940 for appointment of

arbitrator being suit No. 1526A/1995; that the respondent had at

that stage only taken the plea of the claims of the petitioner being

not arbtirable; that the said suit was disposed of vide order dated

10th April, 2001 leaving the question of arbitrability also to be

decided by the arbitrator. It is further contended that it is not as if

the arbitrator is the nominee of the respondent; in the order dated

10th April, 2001 aforesaid it was provided that the respondent shall

send a panel of three names of retired judges of the High Court to

the petitioner and the petitioner out of the said panel will select one

to be appointed as the sole arbitrator in terms of the arbitration

agreement between the parties; it is contended that it is the

petitioner which has chosen the name of the arbitrator sought to be

removed, to be the sole arbitrator pursuant to the order aforesaid.

The respondent has also controverted the plea of the petitioner of

the arbitrator having not given appropriate opportunity to the

petitioner to address on arbitrability. It is contended that this court

in order dated 10th April, 2001, with the consent of the parties,

directed that the arbitrator will "first decide" the objection regarding

arbitrability of the disputes and thereafter proceed to decide the

disputes in accordance with law. It is thus contended that no bias,

irregularity or misconduct can be attributed to the arbitrator in first

deciding the aspect of the arbitrability. It is further urged that the

record of the arbitrator shows that the arbitrator heard the counsel

for the parties on five dates of which three were taken by the counsel

for the petitioner, qua arbitrability. It is also contended that in fact

it is the petitioner which after the interim award dated 22nd

November, 2002 aforesaid, on 5th December, 2002 took time to file

evidence but thereafter changed its advocate and then wrote letter

dated 30th December, 2002 for the first time alleging bias against the

arbitrator. It is contended that the order was surreptitiously

obtained from this court calling for the arbitral record also and not

merely the interim award and which resulted in further proceedings

before the arbitrator being held up. It is urged that the petitioner,

at the time of hearing on arbitrability before the arbitrator, did not

take a stand that the arbitrator should record the evidence first

before adjudicating on arbitrability. It is also argued that in fact

there is no interim award and only an order and objections at this

stage do not lie. On query as to what is the remedy of the petitioner,

being aggrieved by the interim award/order, the senior counsel for

the respondent contends that earlier there was a practice of

preferring petitions under Article 227 of the Constitution of India

before this court challenging the finding of the arbitrator on

arbitrability.

18. The senior counsel for the respondent has further urged that

the petitioner has not filed affidavit of its counsel who had appeared

before the arbitrator or of any other official of the petitioner

appearing before the arbitrator to the effect that any request was

made to the arbitrator for adjudicating the arbitrability after

recording evidence. The senior counsel for the respondent relies on

judgment of the Single Judge of this court in G Vijayaraghavan Vs

M.D., Central Warehousing Corporation 2003 (3) Arb LR 35 in

which Nandyal (supra) was also considered. Reference is also made

to M/s Setech Electronics Ltd Vs K.N. Memani 77 (1999) DLT

759 where another Single Judge of this court on the allegations in

that case, held no case of bias or revocation of authority of arbitrator

to be made out.

19. Reliance is placed on M/s Uttam Singh Duggal & Co. Pvt

Ltd Vs M/s Hindustan Steel Ltd AIR 1982 MP 206 where the

Division Bench held an order of the arbitrator on a preliminary issue

relating to jurisdiction to be not an interim award and no appeal

there against being maintainable. On the same aspect reliance is

also placed on Union of India Vs M/s East Coast Boat Builders &

Engineers AIR 1999 Delhi 44 though under the 1996 Act.

20. On the merits of the award, besides Sarvesh Chopra (supra)

forming the fulcrum of the interim award under challenge, reliance

is also placed also on Rajasthan State Mines and Minerals Ltd Vs

Eastern Engineering Enterprises (1999) 9 SCC 283 where also

the Supreme Court held that an award made by the arbitrator

disregarding the terms of the reference or the arbitration agreement

or the terms of the contract would suffer from a jurisdictional error;

that an arbitrator cannot award an amount which is ruled out or

prohibited by the terms of the agreement; because of a specific bar

stipulated by the parties in the agreement that claim could not be

raised - even if it is raised and referred to arbitration because of a

wider arbitration clause such claim amount cannot be awarded as

the agreement is binding on the arbitrator and the arbitrator has to

adjudicate as per the agreement.

21. On merits it is also urged that the Manager (Civil) of the

respondent who is stated to be the Engineer in Charge had vide

letter dated 27th June, 1992 held the claim No. 2 of the petitioner to

be untenable. Vis-à-vis the claims 4 and 5 it is stated that clause No.

29.13 is applicable not only during the term of the agreement only

but till the completion of the works and no claim for enhancement in

minimum wages even after the expiry of term of the contract can be

made in terms thereof also. The senior counsel for the respondent

contended that in the present case all the three claims held by the

arbitrator to be non-arbitrable were raised before the Engineer in

charge also and were negated after hearing; it is contended that the

same is borne out from the correspondence. However, the senior

counsel admits that the arbitrator has not dealt with the said aspect

in the award.

22. The senior counsel for the petitioner in rejoinder has urged

that the findings of the arbitrator on claim No.1 and on claims 4 and

5 are inconsistent. It is contended that claim No.1 has been held to

be arbitrable notwithstanding there being no basis therefor in the

agreement or for any in house determination for such a dispute. On

the contrary, in the same facts claims 4 and 5 are held to be not

arbitrable. It is further contended that the respondent had vide

letter dated 28th June, 1993 rejected the claim No.3 of the petitioner

also but the arbitrator has held the same to be maintainable. It is

denied that there is any decision of the Engineer-in-charge with

respect to the claims held to be not arbitrable. It is also contended

that this court should strike down any clause in the agreement even

if making a claim non-arbitrable as unconscionable inasmuch as the

petitioner cannot be deprived of a remedy. It is contended that the

parties having agreed on arbitration, there is no justification for

holding some claims to be arbitrable and others not. It is also urged

that the arbitrator has not even considered the entire clause 21.2 on

the basis whereof claim No.2 has been held to be non-arbitrable.

23. In the aforesaid state of affairs, three issues requiring

determination can be culled out:

A. what is the nature of the interim award / order dated 22 nd

November, 2002 and what remedy, if any, lies there against;

B. whether the authority of the arbitrator is liable to be revoked

and a new arbitrator is to be appointed and;

C. whether the interim award if objections there against are

permissible at this stage is liable to be set aside.

24. As far as the first of the aforesaid is concerned, the 1940 Act

unlike the 1996 Act did not provide for any appeal against the order

of the arbitrator holding a claim to be not arbitrable. In the absence

of any such provision, in my view the question posed does not really

arise for consideration. Upon the arbitrator holding the particular

claims to be not arbitrable, the only remedy there against can be by

way of proceedings under Sections 14, 30 and 33 of the Act. It is

nobody's case that the aggrieved party in such a situation is

remedyless or has no other recourse. The senior counsel for the

respondent had also suggested the recourse of Article 227 of the

Constitution of India. However, since the finding of the arbitrator

against arbitrability has an element of finality and of rejection of the

claim at least before the arbitrator, I do not see any reason as to why

the same could not be treated as interim award within the meaning

of Section 27 of the 1940 Act. As far as the claims which are held to

be not arbitrable, the arbitration proceedings would stand

terminated and no purpose would be served in requiring the

aggrieved party to wait till adjudication of the claims held to be

arbtirable to make a challenge to the finding of the arbitrator of

arbitrability then only. It has not been argued that the facts in this

case are so - as to render it impossible or inconvenient for this court

to return a finding on arbitrability at this stage or which will cause

prejudice to the adjudication of the other claims of the petitioner. If

that be so, in a particular case the court may defer the decision on

the objections qua the arbitrability till the decision on the claims

held arbitrable by the arbitrator. That being not the case, in my

view the present suit and the objections for setting aside of the

award are maintainable. I respectfully disagree with the Division

Bench of the Madhya Pradesh High Court in this regard.

25. The second question to be considered is of the revocation of

authority of the arbitrator. Such revocation was sought in the OMP

on the ground of misconduct in the proceedings leading to the

interim award. Subsequently as aforesaid the plea of the arbitrator

being the stock arbitrator of the respondent was also taken. The

appointment of the arbitrator at least in the present case was not as

the nominee of the respondent. The said appointment was pursuant

to the order dated 10th April, 2001 of this court in suit No.

1526A/1995. Thus, it is not as if the respondent imposed the

arbitrator on the petitioner. The respondent in accordance with the

order, furnished a panel of three names of retired judges of the High

Court to the petitioner including that of the said arbitrator and it is

the petitioner who selected the name of the arbitrator sought to be

removed out of the said panel. Of course, the senior counsel for the

petitioner has contended that the petitioner was then not aware of

the said arbitrator being the stock arbitrator of the respondent.

However, in my view the same would also be immaterial. The courts

have from time to time upheld the validity of arbitration clauses

enabling one of the parties only to appoint the arbitrator. Whenever

such authority / power is given to one of the contracting parties, that

contracting party would accordingly appoint someone in which faith

is reposed by that party. If that party is involved in a number of

arbitrations, the same person may be appointed as the arbitrator in

all the arbitrations. That alone in my view would not constitute a

ground for bias. Moreover, in the present case I find that no

objection whatsoever as to the procedure adopted by the arbitrator

was raised till the making of the interim award or in fact for more

than one year thereafter. The pleas of bias came to be made only

when the arbitrator decided against the petitioner on the matter of

arbitrability. An aggrieved party cannot be permitted to make such

allegation of bias for the reason of an unfavourable order. If the

same were to be permitted, it would prevent the people, not willing

to have their names dragged into controversy, from acting as

arbitrators.

26. In this regard another contention of the senior counsel for the

petitioner may also be noticed. It was suggested that the fact that

the arbitrator notwithstanding objection by the petitioner was

insisting upon continuing, speaks volumes of the bias of the

arbitrator. I am unwilling to accept the said proposition also. If the

same were to be upheld, it would give a handle to unscrupulous

litigants to unreasonably delay the arbitral proceedings by raising

allegations against the arbitrator. In Eckersley Vs Mersey Dock

and Harbor Board 1894 2 QB 667 quoted with approval in Indian

Oil Corporation Vs Raja Transport Pvt Ltd MANU/SC/1502/2009

it has been held that the rule which applies to a judge or other

person holding judicial office, namely, that he is not to hear cases in

which he might be suspected of bias in favour of one of the parties

does not apply to an arbitrator named in a contract to whom the

parties have agreed to refer disputes which may arise between them

under it. It was further held that in order to satisfy the court that

such an arbitrator is disqualified from acting, circumstances must be

shown to exist which establish at least the probability that he will in

fact be biased in favour of one of the parties in giving his decision.

In my view the same rule will apply even in the cases of appointment

of an arbitrator as in the present case or where the arbitrator is

stated to be the arbitrator in several of the arbitrations of the

respondent. Such arbitrators are not required to recuse themselves

merely because of allegation of bias being made against them.

27. None of the averments of the petitioner are found to be such

which even prima facie establish before this court that the arbitrator

has any bias against the petitioner or in favour of the respondent.

This court cannot go into the merits of the other awards stated to be

published by the arbitrator in other disputes concerning the

respondent. This court thus cannot comment on perusal of the

awards, copies of which have been filed in this case, that the

arbitrator has dismissed the claims of other contractors against the

respondent which otherwise were tenable. In fact I would go to the

extent of holding that even if this court were to set aside the interim

award of the arbitrator, in the absence of any mala fide being found,

that alone would also not be a ground for changing the arbitrator.

28. That brings me to the last leg of this case i.e., on the merits of

the interim award. The interim award as aforesaid is based on

Sarvesh Chopra (supra). Sarvesh Chopra (supra) undoubtedly

lays down that the claims which under the terms of the contract are

made, "not payable" are not entertainable or not arbitrable. The

arbitrator in the present case on an interpretation of the various

clauses of the agreement has held that the claims 2, 4 and 5 fall in

such category i.e., which were agreed by the parties to be not

payable. The same proposition was reiterated in Rajasthan State

Mines and Minerals Ltd (supra) with the addition that even if such

claims were referred, the same were not to be allowed by the

arbitrator inasmuch allowing the same would be in contravention of

the agreement.

29. The petitioner has not really pointed out anything wrong in

the finding of the arbitrator of the said claims being not maintainable

and/or barred by agreement of the parties. However, I may add that

even if this court on an interpretation of the clauses of the

agreement relied upon by the arbitrator to bar the said claims, were

to hold a different opinion, the same would still not entitle this court

to set aside the award. The arbitrator is a private court/forum

chosen by the parties and the parties are bound by his interpretation

of the contract. I even otherwise am of the same opinion as the

arbitrator as to the interpretation of the clauses of the agreement

relied upon to hold claims 2, 4 and 5 to be non-arbitrable. I may

notice that the arbitration clause under consideration in Sarvesh

Chopra (supra) was very widely worded and the only exception

thereto also was the matters whereunder the decision of the Railway

Authority was final. However, the Supreme Court held not only

those matters which were expressly excepted but even those matters

which were prohibited, to be not arbitrable. The position in the

present case is the same.

30. In the aforesaid background, the contention of the petitioner

of the drawings being given late or the work being executed before

thereto losses its significance. Once a claim is barred under the

agreement, the same would remain barred whatsoever may be the

circumstances leading thereto. I also do not find any merit in the

argument of any inconsistency in the award or of claim No.3 being

denied by the respondent and being held to be arbitrable by the

arbitrator. No clause in the agreement has been pointed out

whereunder the claim No.1 is barred. Merely because a provision is

not made for a claim does not tantamount to saying that it is barred.

In fact as noticed by the Single Judge of this court in Paragon

Construction India (supra), claims which are not barred can be

made under Section 73 of the Contract Act even though no remedy

thereof is provided in the contract. Similarly, it is not stated that any

clause of the agreement bars the claim No.3 held by the arbitrator to

be arbitrable. Merely because the arbitrator has not agreed with the

Engineer-in-charge / Manager of the respondent is no ground for

finding fault with the award. In fact it shows that the arbitrator has

not toed the line of the respondent. Again it is not as if the petitioner

is remedyless with the claims being held to be non-arbitrable. The

petitioner has the remedy of a civil suit available to it with respect

thereto, though it is a different matter whether the civil court also

would allow the said claim or not, if the parties had agreed to such

claim being not entertainable under the contract.

31. The petitioner has not been able to show that any of the

claims held to be not arbitrable do not fall within the clauses of the

agreement prohibiting such claims. Undoubtedly the courts have

allowed claims for escalation beyond the formulas agreed upon by

the parties, upon finding the contractor to have incurred escalation

for reasons attributable to the owner of the project. However, in

none of those cases was there any prohibition in the agreement to

such a claim. In the present case, the clause 29.13 prohibits the

petitioner from making the claims for the reason of complying with

his obligation under the contract, inter alia, of payment of minimum

wages. The wide of the said clause cannot be whittled down by

giving an interpretation that the compliance of obligation is to be

during the term of the agreement only. The parties had mutually

extended the term of the agreement and it is not shown that such

extension was on terms other than those earlier agreed between the

parties. The same is the position with respect to the claim No. 5 for

losses due to supply of electric power at low voltage. Clause 24.1

provides that the petitioner will not claim any damages or

compensation for non-supply of power as agreed.

32. The objections of the petitioner to the award, as well as the

OMP thus fail. The interim award dated 22nd November, 2002 is

made a rule of the court and decree is passed in terms thereof. The

petitioner is found to have held up the arbitral proceedings for a long

span of seven years. The petitioner is as such burdened with costs of

these proceedings of Rs 50,000/-

RAJIV SAHAI ENDLAW (JUDGE)

October 13, 2009 M