Gujarat High Court
Oil & Natural Gas Corporation Ltd vs David Parkar Construction Ltd C/O I B ... on 12 June, 2024
Author: Sunita Agarwal
Bench: Sunita Agarwal
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 322 of 2010
FOR APPROVAL AND SIGNATURE:
HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA AGARWAL Sd/-
and
HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE Sd/-
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1 Whether Reporters of Local Papers may be allowed NO
to see the judgment ?
2 To be referred to the Reporter or not ? NO
3 Whether their Lordships wish to see the fair copy NO
of the judgment ?
4 Whether this case involves a substantial question NO
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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OIL & NATURAL GAS CORPORATION LTD
Versus
DAVID PARKAR CONSTRUCTION LTD C/O I B PATEL (P A HOLDER) &
ANR.
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Appearance:
MR AJAY R MEHTA(453) for the Appellant(s) No. 1
MR PR THAKKAR(899) for the Defendant(s) No. 1
MR.J P THAKKAR(7116) for the Defendant(s) No. 1
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CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE
SUNITA AGARWAL
and
HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE
Date : 12/06/2024
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE ANIRUDDHA P. MAYEE)
1. The present First Appeal under Section 37 of the
Arbitration and Conciliation Act, 1996 ('the Arbitration Act' for
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sake brevity) impugns the judgment and order dated 31.3.2009
passed by the learned 7th Additional District Judge, Vadodara in
Arbitration Misc. Application No.160 of 2002, whereby the
learned Additional District Judge has allowed the application
under Section 34 of the Arbitration Act and set aside the award
dated 3.6.2002.
2. The relevant facts in the present case are that the
appellant herein had invited tenders through its Superintending
Engineer (Civil) for the work of construction of Multi-storied "D-
Type" (20 residential units) for ONGC Township at Vadodara.
The bid of the respondent contractor / claimant came to be
accepted. Thereafter, an agreement came to be executed
between the parties. As per the agreement, tender work was to
commence from 31.3.1985 and was to be completed on or
before 30.6.1986, and accordingly, work order dated 16.3.1985
came to be issued. That various disputes arose with respect to
execution of the work between the parties. The respondent
contractor filed Special Civil Suit No.110 of 1988 raising various
claims. The appellant herein opposed the said suit and also filed
an application stating that there was an arbitration agreement
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between the parties and the dispute, if any, had to be resolved
through the arbitration mechanism. The said application came
to be rejected by the learned Trial Court, which came to be
confirmed by the High Court. Aggrieved, Special Leave Petition
came to be filed before the Apex Court. With the consent of the
parties, the Apex Court by its order dated 23.3.1999 in Civil
Appeal No.5015 of 1989 referred the dispute to the Sole
Arbitrator.
3. Pursuant to the reference, the respondent contractor /
claimant filed its Statement of Claim. The appellant herein filed
its reply as well as counter-claim against the respondent
contractor. The parties completed the pleadings, placed the
relevant documents on record and led the evidence in support of
their case. After hearing the arguments, the learned Arbitrator
by award dated 3.6.2002 was pleased to allow the two claims of
the respondent contractor and rejected the rest of the claims.
The learned Arbitrator also allowed the counter-claim of the
appellant with respect to the liquidated damages and ordered
the refund of the amount paid to the respondent contractor on
the ground of escalation. Further, the learned Arbitrator has
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also awarded interest @ 12% per annum to the parties on the
amount awarded.
4. Aggrieved, the respondent contractor/ claimant preferred
Arbitration Misc. Application No.160 of 2002 in the District
Court at Vadodara. By the judgment and order dated 31.3.2009,
learned 7th Additional District Judge, Vadodara allowed the said
application under Section 34 of the Arbitration Act and set aside
the impugned award. Hence, this appeal.
5. Learned counsel Mr. Ajay R. Mehta, appearing for the
appellant herein has submitted that the learned District Judge
has gravely erred in setting aside the award on completely
untenable grounds which are in contravention to the provisions
of Section 34 of the Arbitration Act. He submits that the learned
District Judge has set aside the well-reasoned award on
extraneous grounds which are not recognized in law. He
submits that in respect of claim No.1 of the respondent
contractor, the learned Arbitrator has specifically recorded that
the advocate for the respondent contractor/ claimant had
argued few star items in claim No.1, but thereafter, it was
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agreed between the parties that in respect of claim No.1, the
parties shall file their written submissions and on the basis of
the same, the learned Arbitrator would decide the claim No.1.
He submits that this action is not contrary to any public policy
or perverse in law and, therefore, the learned District Judge
ought not to have interfered with the said claim. He submits
that claim No.1 was decided by the Arbitrator on the basis of
the written submissions and was based on the cogent reasons.
Mr. Mehta further submits that the learned Arbitrator had
considered each claim as raised by the respondent claimant and
the same was decided on the basis of the entries made in the
measurement book maintained by the appellant and duly
countersigned on behalf of the respondent claimant. He submits
that the respondent contractor had not objected to any of the
measurements which have been duly countersigned by him and
the same were also paid in the running account bills. He
submits that the learned District Judge did not consider all
these aspects whereby the learned Arbitrator had rejected the
claims of the respondent claimant. He submits that the learned
District Judge has erred in holding that the learned Arbitrator
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did not appreciate the difference between the items of the work
done and extra work which was done, as alleged by the
respondent claimant. The learned counsel submits that once the
measurements had become final after the same were
countersigned by the respondent, the learned Arbitrator and the
learned District Judge could not go beyond the said
measurements which was as per the contractual terms. The
learned counsel submits that the arbitral award was passed on
the basis of the readings in the measurement book which was
duly maintained by the appellant and countersigned by the
respondent contractor. He further submits that the learned
District Judge did not consider the fact that the respondent
claimant could not substantiate its claim for escalation of the
prices and no evidence was produced on record in respect of the
same. Accordingly, the learned Arbitrator has rightly rejected
such claim of the respondent claimant. He further submits that
the learned District Judge has also erred in coming to the
conclusion that the counter claim of the appellant was barred by
limitation in view of the direction of the Hon'ble Supreme Court,
which had referred the dispute to the Arbitral Tribunal for
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adjudication with consent of the parties. He submits that the
counter claim was allowed by the learned Arbitrator in favour of
the appellant on two aspects, being liquidated damages as well
as over-payment in respect of the escalation as the same was
contrary to clause 10(c) of the contract. He submits that in the
present case, the learned District Judge has sat in appeal over
the findings recorded by the learned Arbitrator and thereby
passed the award in contravention to the provisions of Section
34 of the Arbitration Act. He submits that the learned District
Judge could not have re-appreciated the evidence on record and
sat in appeal to decide the application under Section 34 of the
Arbitration Act. He, therefore, submits that the present First
Appeal be allowed and the impugned judgment and order
passed by the learned 7th Additional District Judge, Vadodara be
quashed and set aside.
6. None appeared on behalf of the respondent at the time of
hearing.
7. We have heard the learned counsel for the appellant and
carefully perused the documents on record. In the present case,
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it can be seen that the respondent claimant had raised a defense
of limitation, which was validly rejected by the learned
Arbitrator, that there was a bonafide litigation pending in the
Civil Court in the nature of civil suit by the respondent claimant
and, therefore, the claims, as raised, were within time. It is
further seen that the learned Arbitrator has taken note of the
relevant clauses of the contract, in particular, clauses 7 and 8
thereof, which provide for a mechanism to get measurement of
the work done and after signing of the same by both the parties,
the respondent claimant is required to furnish bills for payment.
The learned Arbitrator has also taken note of the fact that as per
the contract, if there was any dispute with respect to any item,
he must raise a dispute within a week from the date when such
measurement becomes final and binding on the contractor. As
per the contract, it was the Engineer of the appellant company
who prepared the bill after finality of the measurements in the
measurement book. The learned Arbitrator has also recorded
that the respondent claimant has not submitted a single monthly
running bill in accordance with the contract. Further, the
representative of the contractor was present at the time of
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taking of the measurement. The company engineers had
followed the procedure as required by the contract when the
measurements are taken and thereafter, they have prepared the
monthly bills. The representative / Director of the respondent
claimant has signed the measurement books as to its
correctness and received payment of the monthly bills as
calculated on the basis of the measurement books. The learned
Arbitrator records that this procedure as per the contract is
followed till 27th running bill came to be prepared and paid in
accordance with the measurement books. That, thereafter, the
respondent claimant has submitted 28th bill on the ground of
alleged escalation, which also came to be paid by the appellant
company herein. That, thereafter, the respondent claimant has
come out with a final bill for the entire period of contract
running into 2 ½ years for the items by calling them extra work
and thereby giving a go-bye to the terms of the agreement and
the procedure envisaged under the contract. The learned
Arbitrator has also observed that this final bill was not based on
the measurement done as per the measurement book under the
contract and which was signed by the partners of the
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respondent claimant and duly paid up by the company. The
learned Arbitrator while considering this claim of the
respondent claimant had called upon it to produce its books of
accounts regarding material, vouchers for the period of
contract, wage book, wage slips and relevant documentary
evidence to show that he had paid higher charges and to
substantiate its claim for escalation. It is specifically recorded in
the award that the respondent claimant did not produce any
material towards the proof for this claim of escalation. The
learned Arbitrator has accordingly observed that in view of the
measurements recorded for the work done, which has been duly
countersigned by the respondent claimant and which had
become final upto and including 28th bill, which was also paid up
by the appellant company in terms of clauses 7 and 8 of the
contract, the said issue had become final between the parties in
terms of the contract. Further, it is observed by the learned
Arbitrator that once an issue becomes final in terms of the
contract between the parties, the Arbitrator loses its jurisdiction
to go into such dispute, more so when no objection is raised by
the respondent contractor/ claimant as per the terms of the
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contract executed between the parties within the stipulated
time of one week. We do not find any fault either in law or in the
facts and circumstances of the case as per the terms of the
contract that the learned Arbitrator has erred on this count. The
learned Arbitrator has rightly rejected such claim of the
respondent claimant.
8. Further, since the escalation was claimed on various
items, it was the advocate and the Power of Attorney for the
respondent claimant who had suggested that the claim No.1 be
decided on the basis of the submissions which came to be
agreed to by the appellant company and accordingly, by
consent, such a procedure was adopted to decide the claim No.1
of the respondent claimant. Such a procedure cannot be said to
be unknown to law or contrary to the public policy. Further, the
learned Arbitrator has given cogent reasons based on the
evidence before him while deciding such claim.
9. With respect to claim No.2, the learned Arbitrator has
specifically held that the claim of Rs.99,464.39 is de hors any
evidence. It is specifically recorded that the respondent
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claimant did not produce any evidence to show that it had paid
higher prices than those prevailing on the date when the
contract was signed. Further, it is also specifically observed that
the claim in respect of escalation also fails since the condition
as prescribed by clause 10(c) of the contract has not been
complied with by the respondent claimant. Thus, we find no
infirmity in respect of the rejection of this claim by the learned
Arbitrator.
10. It is further seen that the counter-claim as made by the
appellant company herein has also been cogently dealt with by
giving proper reasons by the learned Arbitrator. The learned
Arbitrator has decided the disputes between the parties within
the parameters of the contract/ agreement executed by them
and on the basis of the evidence which is produced on record by
both the parties. We do not find any error in the award as
passed by the learned Arbitrator.
11. Coming to the impugned judgment and order, we find that
the learned District Judge has decided the application under
Section 34 of the Arbitration Act as an Appellate Court ignoring
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the provisions of Section 34 of the Arbitration Act. The findings
as recorded by the learned District Judge are based on re-
appreciation of evidence, which is not permissible. We find that
the learned District Judge has re-appreciated all the claims,
counter-claims, documents and the evidence on record while
allowing the application under Section 34 of the Arbitration Act.
12. It is now well settled that the standard of scrutiny of
award can be done only on the grounds envisaged under Section
34 of the Arbitration Act. Judicial review and re-appreciation of
evidence are impermissible unless it is made out that the view
taken by the Arbitrator is based on patent illegality or on the
interpretation of the facts and terms of the contract, which are
absolutely perverse. The Court does not sit in appeal over the
arbitral award and can only interfere on merits on the limited
ground as provided under Section 34(2)(b)(ii), if the award is
against the public policy of India, and the award should be in
compliance with the Statutes and judicial precedents while
adopting a judicial approach and in compliance of the principles
of natural justice. Further, it is well settled by the decisions of
the Hon'ble Apex Court that patent illegality would constitute
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contravention of the substantive law of India, contravention of
the Arbitration and Conciliation Act, 1996 and contravention of
the terms of the contract. But, the interference by Courts in an
arbitral award will not entail review on the merits of the dispute
and has to be limited only to situations where it is found that the
findings of the Arbitrator are arbitrary, perverse, shocking the
conscience of the Court and where the illegality goes to the root
of the matter. In the present case, we find that the view taken
by the learned Arbitrator was a plausible view and in terms of
the contract entered into between the parties. It is well-settled
that the awards which contain reasons, when interpreting the
contractual terms, are not to be interfered with lightly. Re-
appreciation of evidence is not permissible. The learned
Arbitrator has construed the terms of the contract in the correct
perspective and hence, it was not open for the learned District
Judge to interfere with the award.
13. Further, we find that no manifest illegality has been shown
in the award before the learned District Judge nor any finding to
that effect has been recorded by the learned District Judge.
Further, there are apparent contradictions. In overall view of
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the matter, we find that the jurisdiction exercised by the learned
District Judge under Section 34 of the Arbitration Act is
contrary to the provisions contained therein, bad in law and
hence, cannot be sustained.
14. In view of the aforesaid observations, the present First
Appeal is ALLOWED. The impugned judgment and order dated
31.3.2009 passed by the learned 7th Additional District Judge,
Vadodara in Arbitration Misc. Application No.160 of 2002 is
accordingly quashed and set aside. The award dated 3.6.2002
passed by the learned Arbitrator is upheld and restored. No
order as to costs.
Sd/-
(SUNITA AGARWAL, CJ )
Sd/-
(ANIRUDDHA P. MAYEE, J.)
OMKAR
