Jammu & Kashmir High Court - Srinagar Bench
Union Of India vs Mohammad Yousuf Mir And Others on 8 February, 2022
Sr. No. 01
HIGH COURT OF JAMMU & KASHMIR AND LADAKH
AT SRINAGAR
(Through Video conferencing)
Reserved on : 12.11.2021
Pronounced on : 08 .02.2022
CFA No. 02/2015
IA No. 1/2015
CM No. 4968/2020
Union of India
.... Appellant(s)
Through:- Mr. Nazir Ahmad Bhat, Advocate
v/s
Mohammad Yousuf Mir and others
..... Respondent(s)
Through:- Mr. Manzoor Ahmad Dar, Advocate
Coram: HON'BLE MR. JUSTICE JAVED IQBAL WANI, JUDGE
ORDER
1. The appellant through the medium of the instant appeal filed under
Section 37 of the J&K Arbitration & Conciliation Act, 1997 ( for brevity „the
Act‟) has thrown challenge to the order dated 27.05.2015 (for brevity „impugned
order‟) passed by learned Principal District Judge, Srinagar ( for brevity „court
below‟) passed in File No. 08/Arb. titled "Ab. Salam Mir vs. Union of India
and others".
2. It is pertinent to mention here that during the pendency of the
appeal the original contractor/respondent herein, namely, Abdul Salam Mir died
and consequently, his legal heirs came to be substituted as respondents 1 to 5.
2 CFA 02/2015
3. Before adverting to the grounds of challenge, a brief description of
the facts is summarized as under:-
i) That upon issuance of a NIT by the Chief Engineer HQ 31 Zone,
C/o 56 APO /appellant herein, a contract bearing No. CESZ-33/93-94
came to be awarded for provision of Security Wall, Fencing, Watch
Towers and Security Lights at Khundru station to the contractor/
predecessor-in-interest of the respondents herein. Post issuance of letter of
award, the contractor claimed to have mobilized his men, machinery,
equipment and other resources for speedy execution of the contract work
within the stipulated time, being 18 months prescribed in the tender from
the date of commencement of the contract which however, got delayed
and consequently, resulted into prolongation in the period of contract.
ii) That the said delay in completion of the contract was attributed to
the acts of omission and commission on the part of the
department/appellant herein as the period of completion had been
extended without levy of any compensation.
iii) That despite the aforesaid delay during the currency of the contract
various disputes arose in connection with the subject contract between the
department/appellant herein and the contractor and upon pressing into
service the arbitration clause, an arbitrator, namely, Sh. Krishan Kumar
(Chief Engineer) from amongst the panel of arbitrators (Pune) came to
appointed by the Engineer-in-Chief in terms of of condition 70 of the
IAFW-2249, forming part of the contract agreement;
3 CFA 02/2015
iv) That the arbitrator so appointed entered upon the reference,
adjudicated upon the disputes and passed an arbitral award on 25.09.2002;
v) That during the pendency of the proceedings before the arbitrator
the contractor had sought adjudication of various disputes including the
one pertaining to the damages sustained on account of "Prolongation of
Contract" which claim in the estimation of the department/appellant
herein was not open to the arbitration, however, the arbitrator on the
strength of the provisions contained under Section 16 of the Act, opined
that the claims raised are capable of being adjudicated before the
arbitrator.
vi) That the contractor had sought adjudication of 18 claims out of
which 06 claims came to be granted partially by the arbitrator.
A brief description of the claims made and allowed by the arbitrator
for brevity and convenience are detailed out hereunder:-
C.No Nature of Claim Amount Amount allowed by
Claimed Arbitrator
Claim No. 1 Change in place of issue of Es. 1,44,000 Es. 24,600
schedule "B" Stores
Claim No. 2 Drastic changes in alignment Rs. 8,36,500 Rs. 83,600
of security Wall/ Fencing
and Extra approaches by
providing retaining walls
and change of GE‟S Office
Claim No. 3 Damages sustained due to Rs. 1,40,825 Rs. Nil
disallowing dismantling of
existing fencing
Claim No. 4 Damages sustained due to Rs. 19,18,000 Rs. 2,54,000
third party interference
Claim No. 5 Extreme restriction at site Rs. 18.76,363 Rs. Nil
4 CFA 02/2015
Claim No. 6 Damages sustained due to Rs. 16,20,000 Rs. 1,84,012
non issue of water
Claim No. 7 Complete stoppage of work Rs. 69,940 Rs. 8,000
by FAD
Claim No. 8 Drastic Change in scope of Rs. 13,68,510 Rs. Nil
work
Claim No. 9 Damages sustained due to Rs. 1,06,400 Rs. Nil
theft of materials
Claim No. 10 Reimbursement of Rocks Rs. 5,74,562 Rs. 1,05,000
encountered by Excavation
in lieu of Soil
Claim No. 11 Stepping ordered in the wall Rs. 2,50,000 Nil
in steep hill slopes
Claim No. 12 Entire Excavation done in Rs. 5,00,544 Nil
toots of trees and cutting in
jungle
Claim No. 13 Barbed wire fixed in a Rs. 2,00,000 Rs. 20,000
manner other than specific
as in CA
Claim No. 14 Damages sustained due to Rs. 1,50,000 Rs. 1,37,500
delay in interim payments
Claim No. 15 Cost of escalation of Not indicated Rs. 1,43,500
material duel and labour on
the amount of claim
Claim No. 16 Interest not indicated A)12% on claim
No.1,2,4,6,7,10,13 &
15 from 1/10/2000 to
date of award.
B) Future interest
awarded on all
awarded claims of
contractor inclusive
(A) above. Interest
will be calculated
from 1/03/2003
onwards till date of
actual payment, as
simple interest at
10% (Ten Percent)
per annum
Claim No. 17 Cost of reference Rs. 50,000 Nil
Claim No. 18 Prolongation of contract Rs. 82,97,430 Rs. 7,50,000
period
5 CFA 02/2015
Claims of Union of India
C.No Nature of claim Amount Amount allowed
claimed by Arbitrator
Claim No. 1 Cost of reference Rs. 50,000 Rs. Nil
4. Post passing of the award by the arbitrator dated 25.09.2002, the
department/appellant herein instead of questioning the legality and validity of
the same under Section 34 of the Act, filed objections/counter claims before the
court below inter alia on the following counts:-
"a) That the arbitrator appointed by the
petitioner/department has mis-conducted the
proceedings.
b) That the amount awarded by the by the arbitrator
was unjustified and exaggerated.
c) That the award is not reasoned and there is no
proof of proper application of mind by the arbitrator.
d) That the award passed in favour of the contractor
is without jurisdiction and barred by limitation.
e) That the award is indefinite, vague inoperative, as
such liable to be dismissed.
f) That the award would result in substantial
miscarriage of justice.
g) That the award passed is not in accordance with
the terms and conditions of the contract.
h) That arbitrator could not have granted interest on
the sum awarded."
6 CFA 02/2015
5. As against the aforesaid pleas raised by the appellant herein, the
contractor sought dismissal of the objections/counter claims before the court
below inter alia on the following counts:-
"i) That in terms of provisions contained under
Arbitration and Conciliation Act, the interference of the
courts has been minimized as is provided under Section 5
of the Arbitration and Conciliation Act, therefore, count
has to be loath in interfering with the award unless the
grounds urge fall within the parameters laid down under
Section 34 of Arbitration and Conciliation Act.
ii) That non-filing of the application under Section 34
of the Arbitration and Conciliation Act, for calling in
question the legality and validity of the award, would
entail the dismissal of the so called objections/counter
claims filed by the petitioner/department. The scheme of
the Act does not at all envisage or provide for filing of
objections instead an application needs to be filed as
provided under Section 34 of Arbitration and
Conciliation Act.
iii) That the scope and power of the courts have been
limited under the Act, none of the grounds urged by the
department in their objections can be construed as a valid
ground falling within the parameters as envisaged under
Section 34 of Arbitration and Conciliation Act.
iv) That the court dealing with legality of award under
Section 34 cannot sit as a court of appeal, as such, it is
not open for the court to evaluate and analyze the
material considered by the arbitrator, even if the
arbitrator has recorded an erroneous or wrong finding of
fact, or resorted to erroneous interpretation of documents,
there is no scope for the court to interfere with under
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Section 34 of Arbitration and Conciliation, Act in
disturbing the findings of the arbitrator.
v) That the constitution of the arbitral tribunal having
been done by the petitioner/department, therefore, it is
not open for the petitioner/department to question the
fairness and objectivity of the arbitrator."
6. That the court below while considering the objections/counter
claims filed by the department/appellant herein and the pleas raised by the
contractor passed the impugned order upholding the validity of the award as
having been passed in accordance with law.
7. The appellant herein in the memo of appeal has thrown challenge to
the impugned order inter alia, on the grounds that the court below without
considering the claim and grounds urged before it rejected the same and did not
mention reasons for not accepting the objections submitted by the
department/appellant herein and that the impugned order is bad in law inasmuch
as, the court below while passing the impugned order wrongly observed that it
cannot sit as a Court of appeal, overlooking the position that the award passed
by the arbitrator is not only perverse, but against the public policy as well, and
ignored that the arbitrator while passing the award had not followed the
principle of natural justice, having not provided sufficient opportunity of
hearing to the appellant herein and that it also did not consider that the arbitrator
while passing the award did not record reasons while deciding various claims.
Heard learned counsel for the parties and perused the record.
8. Learned counsel for the appellant herein while making his
submissions reiterated the contentions raised and grounds urged in the memo of
appeal, whereas the counsel for the contractor/ respondent herein while
8 CFA 02/2015
controverting and resisting the submissions made by the counsel for the
department/appellant would seek dismissal of the instant appeal.
9. Before proceeding further in the matter a reference hereunder to the
judgment of the Apex Court passed in case titled as MMTC Limited vs. Vedanta
Limited, reported in 2019 (4) SCC 163, would be relevant and germane herein,
wherein at Paras 10, 11, 12 13 and 14 following is observed:-
10. Before proceeding further, we find it necessary to briefly
revisit the existing position of law with respect to the scope of
interference with an arbitral award in India, though we do not
wish to burden this judgment by discussing the principles
regarding the same in detail. Such interference may be
undertaken in terms of Section 34 or Section 37 of the
Arbitration and Conciliation Act, 1996 (for short, "the 1996
Act"). While the former deals with challenges to an arbitral
award itself, the latter, inter alia, deals with appeals against an
order made under Section 34 setting aside or refusing to set
aside an arbitral award.
11. As far as Section 34 is concerned, the position is well
settled by now that the Court does not sit in appeal over the
arbitral award and may interfere on merits on the limited
ground provided under Section 34(2)(b)(ii), i.e. if the award is
against the public policy of India. As per the legal position
clarified through decisions of this Court prior to the
amendments to the 1996 Act in 2015, a violation of Indian
public policy, in turn, includes a violation of the fundamental
policy of Indian law, a violation of the interest of India, conflict
with justice or morality, and the existence of patent illegality in
the arbitral award. Additionally, the concept of the
"fundamental policy of Indian law" would cover compliance
with statutes and judicial precedents, adopting a judicial
9 CFA 02/2015
approach, compliance with the principles of natural justice,
and Wednesbury reasonableness. Furthermore, "patent
illegality" itself has been held to mean contravention of the
substantive law of India, contravention of the 1996 Act, and
contravention of the terms of the contract.
12. It is only if one of these conditions is met that the Court may
interfere with an arbitral award in terms of Section 34(2)(b)(ii),
but such interference does not entail a review of the merits of
the dispute, and is limited to situations where the findings of
the arbitrator are arbitrary, capricious or perverse, or when
the conscience of the Court is shocked, or when the illegality is
not trivial but goes to the root of the matter. An arbitral award
may not be interfered with if the view taken by the arbitrator is
a possible view based on facts.
13. It is relevant to note that after the 2015 Amendment
to Section 34, the above position stands somewhat modified.
Pursuant to the insertion of Explanation 1 to Section 34(2), the
scope of contravention of Indian public policy has been
modified to the extent that it now means fraud or corruption in
the making of the award, violation of Section 75 or Section
81 of the Act, contravention of the fundamental policy of Indian
law, and conflict with the most basic notions of justice or
morality. Additionally, subsection (2A) has been inserted
in Section 34, which provides that in case of domestic
arbitrations, violation of Indian public policy also includes
patent illegality appearing on the face of the award. The
proviso to the same states that an award shall not be set aside
merely on the ground of an erroneous application of the law or
by reappreciation of evidence.
14. As far as interference with an order made under Section
34, as per Section 37, is concerned, it cannot be disputed that
such interference under Section 37 cannot travel beyond the
10 CFA 02/2015
restrictions laid down under Section 34. In other words, the
Court cannot undertake an independent assessment of the
merits of the award, and must only ascertain that the exercise
of power by the Court under Section 34 has not exceeded the
scope of the provision. Thus, it is evident that in case an
arbitral award has been confirmed by the Court under Section
34 and by the Court in an appeal under Section 37, this Court
must be extremely cautious and slow to disturb such concurrent
findings."
10. Perusal of the record indisputably tends to show that the appellant
herein while throwing challenge to the arbitral award did not file proceedings in
terms of Section 34 of the Act, but filed objections/counter claims before the
court below praying therein for setting aside of the award and making of a fresh
reference to an independent arbitrator for deciding the disputes afresh in
accordance with law. Even though, in opposition to the aforesaid proceedings
instituted by the appellant herein before the court below, the contractor/
respondent had raised a preliminary objection that the said proceedings have not
been filed as per the recourse provided under the Act, yet the court below having
regard to the fact that the matter has remained pending for more than a decade,
proceeded to examine the merits of the pleas taken in the objections/counter
claims filed by the appellant herein instead of rejecting the proceedings on a
technical ground that the same are not filed in tune with Section 34 of the Act.
The course so adopted by the court below in the facts and circumstances of the
case can safely said to have been taken in the interest of justice and court below
cannot be said to have faulted in this regard.
11. Further perusal of the record demonstrates that the court below has
rightly opined that the objector/appellant herein for making out a case for setting
11 CFA 02/2015
aside of the award has to have a case in line with the grounds referred in Section
34 of the Act, and that the objector/appellant herein has not pleaded that it was
under some incapacity or the agreement which is genesis in arbitral proceedings,
was not capable of enforcement or was otherwise invalid. The Court below has
rightly noticed that the objector/appellant herein had not pleaded that it was not
given proper notice by the arbitrator during the arbitration proceedings.
12. Perusal of the record further reveals that the court below while
examining the validity or otherwise of the award has considered the fact that the
arbitrator has returned finding on 18 issues of variance between the parties, even
though only 11 claims are termed to be bad by the objector/appellant herein
being issue Nos. 1, 2, 4, 6,10, 13, 14, 15,16 and 18.
The court below rightly, while referring to the ambit and scope of
the Act, has opined that it restricts the scope of the appeal against an arbitral
award, as the objective of such restriction is to avoid wastage of time by once
again looking into the merits of the case and re-appreciate the evidence and to
ensure finality of an arbitral award.
This Court while considering the instant appeal filed under Section
37 of the Act, cannot hold a different view in this regard in the matter and
concur with the finding returned by the court below. It needs to be reiterated that
the power of the Court under Section 34 of the Act is limited and Courts are not
to expand their powers granted by the statute and any such attempts by the Court
while exercising power under Section 34 of the Act shall frustrate the purpose of
the Act itself.
12 CFA 02/2015
13. Further perusal of the record tends to show that the court below has
rightly held the award to be reasoned and speaking one and not against any
public policy, while holding that the arbitrator has rightly acted in fairness and
objectively and returned finding in the award after providing proper and
sufficient opportunity to the contesting parties. The court below has thus, rightly
turned down the contention raised in the proceedings filed before it by the
appellant herein in particular qua claim Nos. 1, 2, 3, 4, 6, 7, 10, 13 & 14. The
plea raised before the court below about price escalation in claim No. 15 has
also been rightly found to be without any force while taking into account the
judgment referred thereto in the impugned order. The contention of the appellant
before the court below that the arbitrator could not returned the findings on
claim No. 18 has been rightly considered and decided by the court below.
14. Further law is settled that an error relatable to the interpretation of
the contract by the arbitrator is an error within his jurisdiction not amendable to
correction in view of Section 34 of the Act. Reassessment/ re-appreciation of the
record before the Tribunal is not permissible as the court would not be
examining the matter as appellant forum.
15. Record further would reveal that the issue of grant of interest by the
arbitrator has also rightly been considered and decided by the court below, while
taking placing reliance on the judgments referred to in the impugned order and
the court below has rightly opined that in respect of the claim on account of
interest, since no stipulation of the contract was relied upon or pressed into
service by the department/appellant herein, before the arbitrator which would
prohibit payment of interest by the arbitrator, therefore, the arbitrator relying
upon the statutory mandate as envisaged under Section 31 (7) of the Act, has
13 CFA 02/2015
rightly proceeded to award the interest after recording his satisfaction that the
contractor/respondent herein had been deprived of his rights to use the amount.
The court below while considering the said issue raised by the
department/appellant herein has rightly relied upon the judgment of the Apex
Court in case titled as Secretary, Irrigation Department, Government of Orissa
and others vs. Secretary to Government of Orissa and others, reported in
1992(1) SCC 508, which though relatable to Section 31 of the Act of 1940, laid
down a principle of law about the power of the arbitrator to grant interest. The
said position recorded has been given statutory recognition under Section 31
sub-section (7) of the Act, which encompasses the power of the arbitral tribunal
to grant interest and that there being no stipulation prohibiting the arbitrator
from allowing payment of interest, no infirmity can be said to have been noticed
in the award passed by the arbitrator and consequently, in the impugned order
passed by the court below.
16. The position of law in view of judgment of the Apex Court passed
in MMTC (supra), is no more res integra that the finding of fact as well as law
as recorded by the arbitrator are not ordinarily amenable to interference either
under Section 34 or Section 37 of the Act. The interference of the Court is
permitted only where finding of the Tribunal is contrary to the contract or is
perverse in nature. The final arbiter of facts as well as law and even errors,
factual or legal which stop short of perversity cannot be looked either under
Section 34 or Section 37 of the Act. Further the Court while exercising powers
and determining validity or otherwise of an arbitral award cannot act as a court
of appeal, as the power under Section 34 and 37 of the Act are circumspect.
Furthermore, in terms of Section 5 of the Act, the scope of interference of civil
14 CFA 02/2015
Courts has been minimized in order to achieve the aims and objectives of the
Act as an alternate dispute resolution forum and in terms of Section 37, the
scope and interference gets further narrowed down.
17. Viewed in the context what has been observed, considered and
analyzed hereinabove, the impugned order dated 27.05.2015 does not call for
any interference by this Court and resultantly, the appeal fails and is,
accordingly, dismissed.
(Javed Iqbal Wani)
Judge
Jammu
08.02.2022
Bir*
Whether the order is speaking: Yes
Whether the order is reportable: Yes
