Delhi High Court

M/S Archana Steel Private Limited vs Union Of India And Anr on 4 February, 2011

Author: Vipin Sanghi

$~ 2
*    IN THE HIGH COURT OF DELHI AT NEW DELHI

+                       Date of Decision: 04.02.2011

%                               C.S.(OS) NO.1005/2008


       M/S ARCHANA STEEL PRIVATE LIMITED          ..... Plaintiff
                      Through:  Mr. Rajesh Banati, Adv.

                       versus


       UNION OF INDIA AND ANR. B+                ..... Defendants
                       Through: Mr. Prasenjeet Mohapatra, Adv.


       CORAM:
       HON'BLE MR. JUSTICE VIPIN SANGHI

       1. Whether the Reporters of local papers may
          be allowed to see the judgment?           :         No

       2. To be referred to Reporter or not?             :    Yes

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


VIPIN SANGHI, J. (Oral)

I.A. No. 321/2009

1. These are objections preferred by the petitioner under

Sections 30 & 33 of the Arbitration Act, 1940 to the award dated

28.04.2008 made by the Sole Arbitrator Smt. Chetna Kumar, Financial

Adviser and Chief Accounts Officer/Finance & General, Northern

Railways, Baroda House, New Delhi. The learned Arbitrator, by the

impugned award has allowed the claim of the respondent, Union of

India of Rs.17,63,096/- along with interest @ 10% per annum. The

learned Arbitrator has rejected the counter claim of the petitioner for

Rs.6,40,000/-.

2. In relation to the disputes which arose between the parties

Sh. S.A. Singh, Sole Arbitrator and CME/Planning Northern Railway,

Baroda House, New Delhi made an unreasoned award bearing

No.CME/SAS/ARB/91/1 dated 01.09.1993. The Union of India was the

claimant. The claim was for a sum of Rs.17,63,096/-. The

objector/contractor had filed a counter claim of Rs.6,40,000/-. The

arbitrator awarded Rs.5,60,000/- apart from interest and costs in

favour of the Union of India. This award was challenged by the

petitioner by filing I.A. No. 6484/1996 in CS(OS) No. 2240/1993. The

said application was disposed of vide order dated 08.12.2004.

3. The court observed that "It appears that the counter claims of

respondent was not at all considered". The court further observed "Á

perusal of the award shows that not a word has been said therein

about the counter claims of the respondent. Learned counsel for the

objector has cited case law to the effect that if the arbitrator does not

consider the counter claims of the respondent, award is to be set

aside on the ground of misconduct." (emphasis supplied)

4. The court made reference to the following decisions - Bharat

Heavy Electrical Limited Vs. M/s BST Engineering Services,

1995 (2) Arb Law Reporter 403; K.V. George Vs. The Secretary to

Govt., Water and Power Deptt, Trivandrum & Another, AIR 1990

SC 53 and Punjab Housing Development Board and Anr. Vs.

Ludhiana Builders and Engineers (P) Ltd., 2001(3) Arb.LR (SC) 9,

relied upon the petitioner.

5. The operative part of the order passed by the court reads as

follows:

"Award is hereby set aside and remitted back to the learned Arbitrator for deciding afresh in accordance with law.

With this direction, suit stands disposed of.

Parties are directed to appear before the learned arbitrator on 27.12.2004". (emphasis supplied)

6. Upon the matter being remanded, a fresh Arbitrator was

appointed by the respondent. Learned counsel for the petitioner

submits that before the freshly appointed Arbitrator namely Sh. Ravi

Prabhat, the petitioner specifically sought to raise a clarification that it

was only the counter claims of the petitioner which had been remitted

back for re-adjudication, and that the claims of the respondent Union

of India were not to be taken up for re-adjudication afresh. He submits

that the learned Arbitrator Sh. Ravi Prabhat accepted this stand of the

petitioner and passed the order dated 14.12.2005 which, inter alia,

reads as follows:

"At the outset, the Respondent submitted that since the Award given in the instance case by the Learned Arbitrator Shri S.A. Singh was set aside by the Hon'ble High Court with the directive to examine the issue afresh, the original

claim of the Respondent shall stand and should also form part of the instant arbitration proceedings. It was clarified to the Respondent that a specific Award was given by the Learned Arbitrator Shri S.A. Singh and the Hon'ble Court set aside the Award which in the understanding of the arbitration would mean nothing but the Award per se. The claim of the Respondent was adjudicated upon by the Learned Arbitrator and the Award was set aside by the Hon'ble High Court."

7. The only grievance raised by the petitioner in the present

application, and which is urged before me, is that despite the limited

remand made by the court for re-adjudication of the counter claims of

the petitioner, the learned Arbitrator, while making the impugned

award has re-considered all the claims and counter claims and made

the award for an amount of Rs.17,63,096/- along with interest @ 10%

per annum in favour of the respondent Union of India, which is much

larger than the earlier awarded amount of Rs.5,60,000/-.

8. The submission of Mr. Banati, learned counsel for the

petitioner is that the learned Arbitrator could not have re-opened the

claims of the respondent Union of India which had been awarded only

to the extent of Rs.5,60,000/- in the earlier award dated 01.09.1993,

and awarded the larger amount of Rs.17,63,096/-. He submits that by

doing so, the learned arbitrator had misconducted herself. Mr.Banati

submits that the respondent Union of India accepted the said award of

Rs.5,60,000/- on its claims, and did not challenge the earlier award

dated 01.09.1993. He further submits that during the pendency of

consideration of the petitioner's objections in I.A. No. 6484/1996, the

petitioner had even sought the release of the balance amount withheld

by the respondent, after withholding the amount of Rs.5,60,000/-. In

those proceedings, the respondent had, after withholding the amount

of Rs.5,60,000/-, released the other withheld amounts of the

petitioner. Mr. Banati submits that the respondent had accepted that it

was entitled, under the contract, to receive only a sum of Rs.5,60,000/-

as adjudicated by the learned Arbitrator in the award dated

01.09.1993. It was, therefore, not open to the respondent to press its

claim for the amount of Rs.17,63,096/- when the matter was arbitrated

afresh before the learned Arbitrator. He submits that during the

pendency of the arbitration proceedings, Sh.Ravi Prabhat the erstwhile

Arbitrator was replaced by the present Arbitrator Smt. Chetna Kumar,

and she has not followed the order passed by Sh. Ravi Prabhat on

14.12.2005 while making the impugned award.

9. Mr. Banati submits that while remitting the award, all that the

court could have done was to remit the award for re-consideration of

the counter claims, and could not have remitted the entire award for

re-consideration, including even the claims of the respondent Union of

India. In support of his submission, he places reliance on the following

decisions:

1. K.K. John Vs. State of Goa, JT 2003 (Suppl.2) SC 197;

2. Punjab Housing Development Board and Another Vs. Ludhiana Builders and Engineers (P) Ltd., 2001(3) Arb.L.R. 29(SC); and

3. Bharat Heavy Electrical Ltd. Vs. M/s BST Engineering Services, 1995(2) Arb.L.R. 403.

10. On the other hand, learned counsel for the respondent

submits that the order dated 08.12.2004 passed by this court in Suit

No. 2240/1993 is amply clear. It very clearly states that "the award is

hereby set aside and remitted back to the learned Arbitrator for

deciding afresh in accordance with law". He submits that the entire

award had been set aside on the ground of misconduct of the

Arbitrator for non-consideration of the counter claims of the petitioner

herein.

11. The learned arbitrator has dealt with the aforesaid contention

of the petitioner in the award in the following manner:-

"7.2 The Respondents in their written submission 20.9.2007 have stated that Shri S.A. Singh, Sole Arbitrator vide the award dated 01.9.1993 awarded an amount of Rs.5,60,000/- in favour of UOI but not a word was said about the Counter Claim of the M/s Archana Steel Pvt. Ltd. regarding their counter claim amount of Rs.6,40,000/-, that no objections were filed by the UOI meaning thereby that UOI accepted the Award. M/s. Archana Steel Pvt. Ltd. however filed an objection to the Award dated 01.9.1993 requesting the Hon'ble Delhi High Court to set aside the Award of Rs.5,60,000/- and remit it to the Arbitrator to adjudicate their claim of Rs.6,40,000/-. During the pendency of the objection petition, the Hon'ble Delhi High Court vide order dated 16.9.1997 directed the UOI to release Rs.12,03,096/- (Rs.17,73,096 - Rs.5,60,000) to M/s. Archana Steel Pvt. Ltd. which the UOI did. Thereafter, the Hon'ble Delhi High Court vide their order dated 08.12.2004, set aside the Award dated 01.9.1993 and as per the interpretation of M/s Archana Steel Pvt. Ltd., directed the UOI to appoint an Arbitrator for adjudication of Rs.6,40,000/- only.

The above contention of the Respondents is factually incorrect. The Hon'ble High Court vide their judgment of 8.12.2004 have ordered as under:

"Award is hereby set aside and remitted back to the learned Arbitrator for being decided upon afresh in accordance with law".

They have not limited the arbitration to adjudication of Rs.6,40,000/- alone as stated by M/s Archana Steel Pvt. Ltd. Since the award has been set aside, it has to be dealt with de novo in its entirety. The refund order referred to above by M/s Archana Steel Pvt. Ltd. was during the pendency of the objection petition. The final order is that of 8.12.2004 and cannot be interpreted as limiting the arbitration to adjudication of Rs.6,40,000/- only".

12. Having heard the submissions of learned counsels, perused

the order dated 08.12.2004 passed in CS(OS) No.2240/1993, the

impugned award and the submissions and judgments relied upon by

the petitioner, I am of the view that there is no merit in the petitioner's

objection and it cannot be said that the learned arbitrator has

misconducted herself, or the proceedings, in dealing with the claim of

the respondent, Union of India afresh.

13. Firstly, I may examine the purport and effect of the order

passed by this Court in CS(OS)2240/1993 dated 08.12.2004. A perusal

of the said order clearly shows that the Court proceeded on the basis

that as per the case law cited by the petitioner "if the Arbitrator does

not consider the counter claims of the respondent (sic) petitioner,

award is to be set aside on the ground of misconduct."

(emphasis supplied). Therefore, the Court proceeded on the basis that

due to non-consideration of the counter claims, the entire award is

liable to be set aside on the ground of misconduct of the Arbitrator. In

the operative part of the said order, this Court in no uncertain terms

directed:- "award is hereby set aside and remitted back to the learned

Arbitrator for deciding afresh in accordance with law". Therefore, what

was set aside was not only a part of the award but the entire award.

No part of the award was saved and preserved from being setting

aside. Moreover the Court consciously remitted back the disputes to

the learned Arbitrator "for deciding afresh in accordance with

law". Therefore the learned Arbitrator was required to have a fresh

look into all matters and disputes between the parties, i.e the claims

and counter claims. The learned Arbitrator was bound by the

directions issued by the Court, and could not have ignored the clear

and unambiguous directions of the Court.

14. If the petitioner was so minded, the petitioner should have, at

the time of the passing of the order dated 08.12.2004 impressed upon

the court not to set aside the award made in favour of the respondent

for the amount of Rs.5,60,000/-. Obviously, the petitioner was satisfied

with the setting aside of the award of Rs.5,60,000/- made in favour of

the respondent UOI at that stage. It is not even the petitioner's case

that when the objections filed vide I.A.No.7484/1996 were preferred,

those objections only pertained to the non-consideration of the

petitioner's counter claims, and they did not pertain to the award of

Rs.5,60,000/- made in favour of the respondent. The petitioner neither

preferred a review, nor sought any clarification of the order dated

08.12.2004, nor appealed against that order. The petitioner, therefore,

clearly took its chance to have all the disputes i.e the claims and

counter claims re-adjudicated afresh and was satisfied with the entire

award being set aside.

15. The submission of Mr. Benati that the respondent had not

challenged the award of Rs.5,60,000/- and had accepted the said

amount as the only amount due in respect of the respondent's claims

cannot be accepted.

16. Merely because objections may not have been preferred by

the respondent to the award whereby the respondent's claims to the

extent of Rs.5,60,000/- were awarded as opposed to its claim of

Rs.17,63,096/-, it does not mean that the Court was powerless to set

aside the award under Sections 30 and 33 of the Arbitration Act, 1940.

If the Court found that the learned Arbitrator had misconducted

himself, the Court was not powerless to set aside the entire award.

This is evident from a plain reading of Section 17 of the Arbitration Act,

1940 which states that "where the Court sees no cause to remit the

award or any of the matters referred to arbitration for reconsideration

or to set aside the award, the Court shall after the time for making an

application to set aside the award has expired, or such application

having been made, after refusing it, proceed to pronounce judgment

according to the award.........". The power to remit the award under

the Arbitration Act, 1940 is contained in Section 16. This Section

empowers the Court to remit the award or any matter referred to

arbitration to the arbitrators or umpire for reconsideration upon such

terms as it thinks fit-

"(a) Where the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred;"

17. As the award dated 01.09.1993 was not a reasoned award, it

was not possible for the Court to conclude one way or another, as to

whether or not the counter claims had been taken into consideration

while making the lumpsum award for Rs.5,60,000/-. It appears that it

is for this reason that the entire award was set aside and the disputes

remitted back for adjudication afresh.

18. Merely because during the pendency of the objections to the

arbitral award, the respondent may have released the withheld

amounts over and above the amount of Rs.5,60,000/-, it does not

mean that the learned arbitrator did not have the jurisdiction to

entertain and adjudicate the claims of the respondent upon the award

being remitted vide order dated 08.12.2004. The respondent, at the

relevant time, proceeded on the basis that it had been awarded a sum

of Rs.5,60,000/-. A party may not be fully satisfied with the award in

its favour. However, yet it may choose not to challenge the said

award. That by itself cannot mean that when the award, even to the

extent that it was made in its favour is set aside, that party would be

precluded from reasserting its entire claim when the matters are being

adjudicated afresh.

19. The extract from the order dated 14.12.2005 passed by Shri

Ravi Prabhat, Sole Arbitrator is meaningless for two reasons. Firstly,

the learned arbitrator could not have restricted the scope and effect of

the order dated 08.12.2004 passed by this Court, whereby the entire

award had been set aside and the matter remitted back to the

Arbitrator for reconsideration afresh. Secondly even a perusal of the

order dated 14.12.2005 passed by the learned Arbitrator shows that

the said order does not support the contention of the petitioner.

Rather it supports the contention of the respondent. In that order, the

learned Arbitrator observed that "the Hon'ble court set aside the

award which in the understanding of the Arbitrator would mean

nothing but the award per se. The claim of the respondent was

adjudicated upon by the learned Arbitrator and the award was set

aside by the Hon'ble High Court."

20. Therefore, even Shri Ravi Prabhat proceeded on the basis that

the entire award had been set aside and it was not as if the award had

been remitted only for reconsideration of the counter claims of the

petitioner.

21. If the submission of Mr. Benati were to be accepted that only

the counter claims had to be reconsidered upon the award being

remitted, there would have been no occasion for the court to set aside

the award of Rs.5,60,000/- made in favour of the respondent UOI. All

that the Court would have done was to have remitted, not the award

but the counter claims of the petitioner to the Arbitrator on the ground

that they have been left undetermined. It is not that for remitting the

counter claims, the award had necessarily to be set aside. It was set

aside as it was an unreasoned award and, presumably, the court felt

that it was not possible to separate the counter claims from the claims.

22. According to Mr. Banati, the counter claims of the petitioner

had not at all been adjudicated. There was no question of the counter

claims being adjudicated "afresh", as they had not been adjudicated at

all. The use of the expression "afresh" postulates that there had been

an adjudication earlier. What had been adjudicated earlier was the

claims. The use of the expression "afresh" pertains to the claims of

the Union of India.

23. Pertinently, as aforesaid, the petitioner did not come back to

the Court after passing of the order dated 08.12.2004, and before the

passing of the impugned order, to seek any

modification/clarification/review of the said order, and did not appeal

against it, to say that the claims of the respondent UOI could not

reopened. The order dated 08.12.2004 has attained finality and the

same cannot be reopened or challenged in these proceedings.

24. The decisions relied upon by Mr. Benati do not advance his

case. In K.K. John (supra), the Court had expressly remitted the

award to the Arbitrator only on two issues. Despite that, the Arbitrator

proceeded de novo to make an award. It was in those circumstances

that the High Court set aside the award in appeal. The Supreme Court

concurred with the judgment of the High Court.

25. Reliance placed by Mr. Banati on Punjab Housing

Development Board (supra) is also of no avail. In this case, the

counter claim had not been considered. In para 7 of the judgment, the

Supreme Court observed as follows:

"7. Determination of the amount due to be paid by the appellants to the respondent is also inter-linked with determination of the counter claims made by them. Therefore, the Award passed by the Arbitrator and the orders of the courts below confirming the same are liable to be set aside and the matter remitted to the Arbitrator for adjudication of the counter claims filed by the appellants. It is made clear that the Arbitrator will not reopen the adjudication of the claims made by the respondent on merits, but will only consider the merits of the counter claims raised by the appellants and then decide the amount which is to be paid by one party to the other. This appeal is disposed of in the manner aforementioned. No costs".

26. The reason why the entire award has been set aside in the

present case is found in the aforesaid observation of the Supreme

Court. Determination of the amount due by one party to the other is

also interlinked with determination of the claims made by the other.

However, in Punjab Housing Development Board (supra), the

Supreme Court expressly stated that the arbitrator will not re-open the

adjudication of the claims made by the respondent on merits, but will

only consider the merits of the counter claims raised by the appellant

and then decide the amount which is to be paid by one party to the

other. Pertinently, though the position in Punjab Housing

Development Board (supra) was cited before the Court and taken

into consideration while passing the order dated 08.12.2004, the Court