Senbo Engineering Ltd. vs Hajipur
2022 Latest Caselaw 3427 Jhar

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       IN THE HIGH COURT OF JHARKHAND AT RANCHI
               Commercial Appeal No.4 of 2021
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Senbo Engineering Ltd., a company registered under the provisions of the Companies Act, 1956, having registered office at 87, Lenin Sarani, P.O. & P.S. Lenin Sarani, District- Kolkata-700013, West Bengal ... ... Appellant Versus East Central Railway, represented through the General

Manager, Having office at Zonal Office Road, P.O. & P.S.

Hajipur, District-Hajipur, Bihar-844102

... ... Respondent

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CORAM : HON'BLE THE CHIEF JUSTICE HON'BLE MR. JUSTICE SUJIT NARAYAN PRASAD

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For the Appellant : Mr. Nand Kishore Singh, Advocate For Respondent : Mr. Pratyush Kumar, C.G.C.

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C.A.V. on 11.05.2022 Pronounced on 29.08.2022

Per Dr. Ravi Ranjan, C.J.

The instant appeal has been preferred under Section 13 of

the Commercial Courts Act, 2015 assailing the order/judgment

dated 06.01.2021 passed in Commercial Revocation Case No.07

of 2019, by which, an arbitral award dated 23.02.2019 passed

by the sole Arbitrator, has been set aside in entirety.

2. The brief facts of the case, required to be considered in

this appeal, stand enumerated as under:-

A notice inviting tender was issued by the East Central

Railway through its General Manager for construction of seven

bridges between Tori to Shivpuri (Km 23.00 to Km 44.00) in

connection with construction of Tori Shivpur new BG Rail line

project in Latehar district of Jharkhand State and the work was

awarded to the respondent vide LOA

No.ECR/CAO/Con/WT/S/165/13616 dated 03.06.2014. The

value of the work was estimated to the tune of

Rs.82,80,54,283.78 and the work was to be completed within

24 months from the date of issuance of acceptance letter i.e.,

till 02.06.2016. A formal contract/agreement was entered into

in between the parties on 31.10.2014. However, the work could

not have been completed within the stipulated time. Thereafter,

the East Central Railway vide its letter dated 11.07.2016 issued

letter for termination of contract. Thus, the dispute arose

between the parties and the claimant-respondent-appellant

filed an application before this Court for appointment of an

Arbitrator to adjudicate upon the dispute and this Court vide

order dated 28.07.2017 passed in Arbitration Application No.16

of 2017 has appointed Hon'ble Mr. Justice D.G.R. Patnaik, a

Former Judge of this Court as Arbitrator and the dispute was

referred for arbitration.

The award was passed in favour of the appellant holding

the termination of the contract to be illegal and has passed the

order allowing the claim to the extent of Rs.28,45,90,777.56

under different heads as under:-

Sl No.    Description                          Amount Allowed

1         Item No.I:-Refund of encashed Rs.8,59,08,325/-

          Bank Guarantees



2    Item     No.2:-Compensation              for Rs.2,44,85,062/-

     loss of on going work

3    Item     No.3:-Compensation              for Rs.36,00,000/-

     loss suffered on Batching Plant

4    Item No.7:- Loss of profit                     Rs.9,63,19,088.13/-



     Compensation          for       expenses

     incurred in purchase, supply

     and      cutting,    bending,         fixing

     TMT Bars and for procurement,

     fabrication of structural steel

     as per relevant clause of the

     contract



7    Item No.9:- Payment of interest                Rs.5,49,39,600.47/-

    (I)     Interest           on           Item

               No.1=Rs.4,12,35,996/-

    (ii) Interest on item nos.2, 10

    and 11=Rs.1,37,03,604.47/-

(iii) Interest on item No.7:- it To be calculated

shall be calculated @ 12 % per

annum from the date of award

till the date of actual payment

made on the amount of loss of

profit to the tune of

Rs.9,63,19,088.13

Total Rs.28,45,90,777.56/-

The respondent East Central Railway, being aggrieved with

the award, assailed the same by invoking the jurisdiction

conferred under Section 34 of the Arbitration and Conciliation

Act, 1996 (hereinafter referred to as the 'Act'), 1996.

The Court below, after hearing the application filed under

Section 34 of the Act, 1996 has considered the aforesaid award

to be incorrect, as would appear from paragraphs-26, 27 and

28 of the order passed by the concerned Court. The finding

recorded by the concerned court dealing with the application

under Section 34 of the Act, 1996 as referred under

paragraphs-26, 27 and 28 read as under:-

"26. In the present case award to the extent of Rs.8,59,08,325.00 has been made towards refund of encashed bank guarantee and security deposit vide item no 1 and further vide item no.9 (I) award has been made towards interest on item no.1. In this regard, I find that clause 29 and 30 of the Tender document stipulates, that both the BG and security deposit was to be released only after physical completion of the work where as in the present case only 4 % of the work has been executed by the contractor. Further both these clauses specifically bars payment of interest on BG and Security deposit but interest has been paid on both the items and therefore the claim awarded under item no 1 and item no 9 (I) is in

contravention of Clause 29 and 30 of the tender document.

27. Further vide item no 2, 3 and 7 the claim has been awarded towards compensation for loss of on-going work, compensation for loss suffered in batching plant and loss of profit. In this regard I find that clause 51 and 52 of the Tender Document specifically bars this claim wherein it envisages that:-

Clause 51-No claim whatsoever will be entertained by the railway on account of any delay or hold up of the works(s) arising out of delay in approval of drawings, changes, modifications, additions, omissions and site lay out plan or detailed drawings and designs and or late supply of such materials as are required to be arranged by the railway or due to any other factor on railway account.

(Emphasis added)

Clause 52 reads-No claim for idle labour, or idle machinery etc on any account will be entertained. Similarly no claims shall be entertained for business loss and any such loss.

28. So far as item no 11 and 12 are concerned, I find that the same has been awarded towards compensation for expenses incurred in purchase, supply and cutting, bending, fixing TMT bars and for procurement of structural steel as per relevant clause of contract. The learned Counsel for the petitioner submitted that even assuming that the contractor has purchases these articles but the articles were never supplied nor were used at the site and therefore no claim could have been granted for the articles which are in the claimants

possession. This claim has been dealt with the learned Tribunal at page 45 of the award wherein in the Tribunal has held "From perusal of the documents on record, it appears that the Claimant has filed its Rejoinder to the defence statement submitted by the Respondents and while reiterating the items for its claim for compensation, it has also put forth its claim for the aforesaid two items mentioned at serial no 11 and 12 of the summary of claims. Though the respondents have received a copy of the claimant's rejoinder, they have not controverted this portion of the Claimant's claim. In absence of any denial either specific or even general, it has to be deemed that the claimant has incurred the expenses under these two heads and is therefore entitled to claim payment for the same. In this regard I find that claim under Item no 11 and 12 has been awarded only because the petitioner/respondent did not controverted this claim either specific or in general and there is no discussion as to what was the evidence which was adduced by the claimant in support of this claim. I find that no reasons has been assigned by the Tribunal in awarding this part of the claim save and except that the petitioner respondent did not convert the claim. In Associate Builders case ((2015) 3 SCC 49) it has been held that "if an arbitrator gives no reasons for an award in contravention of Section 31(3) of the 1996 Act, such award is liable to be set aside."

The appellant, being aggrieved with the order/judgment

dated 06.01.2021 passed in Commercial Revocation Case No.07

of 2019, has preferred the instant appeal invoking the

jurisdiction conferred to this Court under Section 13 of the

Commercial Courts Act, 2015.

3. Mr. Nand Kishore Singh, learned counsel appearing for

the appellant, made following submissions:-

(i) The Court below has not exercised the power conferred

under the Arbitration and Conciliation Act, 1996 in a proper

manner, since several issues have been raised by the appellant

in support of the finding recorded by the learned sole

Arbitrator, but, no finding has been recorded either way i.e.,

discarding the same, therefore, the Court below has passed the

order in a mechanical manner, since, no consideration about

the plea raised before it in defence of the award has been

answered by recording the finding to that effect on the basis of

the ground agitated on behalf of the appellant, therefore,

submission has been made that since the judgment has been

passed by the concerned Court in exercise of power conferred

under Section 34 of the Arbitration and Conciliation Act, 1996

which having not considered the factual aspect agitated on

behalf of the appellant and as such, it cannot be said that the

judgment has been passed after giving proper consideration of

the factual aspect vis-à-vis the legal position as has been

agitated on behalf of the appellant and hence, the

judgment/order dated 06.01.2021 is not sustainable in the eye

of law.

(ii) The submission has been made that the award has

been passed by the sole Arbitrator after considering the fact

that there was non-cooperation on the part of the respondent

which led the appellant in not concluding the work within the

time frame. The aforesaid fact has been agitated before the

concerned Court dealing with the application under Section 34

of the Act, 1996, but, it would be evident from the bare reading

of the judgment/order dated 06.01.2021 (impugned) that no

such finding has been recorded about non-cooperation of the

respondent, which is the main ground taken by the sole

Arbitrator in non-conclusion of the work within the stipulated

time, therefore, the order passed by the concerned Court is not

sustainable in the eye of law.

(iii) The concerned Court has reversed the finding

recorded by the sole Arbitrator, in exercise of power conferred

under Section 34 of the Act, 1996, but while doing so, he has

exceeded its jurisdiction in reversing the fact finding recorded

by the sole Arbitrator in the award.

Submission has been made on behalf of the learned

counsel for the appellant that the concerned Court in exercise

of power conferred under Section 34 of the Act, 1996 can

reverse the fact finding recorded by the sole Arbitrator, but, the

same can only be done, if the award is based upon the perverse

finding. But, it would not be evident from the order impugned

that the concerned Court has considered this aspect of the

matter, rather, the Court has travelled into the principle of

public policy.

4. According to the learned counsel for the appellant, it is not

a case where the applicability of the principle of public policy is

applicable, which led the concerned Court to reverse the finding

recorded by the sole Arbitrator in the award.

5. Learned counsel for the appellant has relied upon the

judgment rendered by the Hon'ble Apex Court in J.G.

Engineers Pvt. Ltd. Vs. Union of India & Anr., (2011) 5 SCC

758 to fortify his argument that the reason shown for reversal

of the fact finding recorded in the award by the Court in

exercising the power conferred under Section 34 of the Act,

1996 which was based upon the non-consideration of the terms

and conditions of the agreement, since, the learned sole

Arbitrator has considered the accountability in non-conclusion

of the work within the stipulated period and exactly in the

similar circumstances, the Hon'ble Apex Court in the aforesaid

case, has decided the issue, as to whether the appellant was

responsible for the delay in execution of the work, was

arbitrable.

The aforesaid aspect of the matter was considered and the

matter has finally been settled by the Arbitrator and in such

circumstances, the Hon'ble Apex Court has came to the

conclusion that once it is held that the issues relating to who

committed breach and who was responsible for delay were

arbitrable, the findings of the arbitrator that the contractor was

not responsible for the delay and that the termination of the

contract is illegal, would not be open to challenge.

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It has been submitted that in the case in hand also the

appellant was ready to execute the work within time but it is

due to non-cooperation on the part of the respondent

concerned, the work could not have been completed and as

such, the learned Arbitrator after considering this aspect of the

matter has passed the award, which cannot be said to suffer

from perversity, as has been held by the concerned court in

exercising the power conferred under Section 34 of the Act,

1996.

Learned counsel for the appellant has further submitted

that once the award has been passed, based upon the reason,

the same is not required to be interfered with by the concerned

Court in exercise of power conferred under Section 34 of the

Act, 1996 that too without taking into consideration the plea

agitated before it.

6. Per contra, Mr. Pratyush Kumar, learned C.G.C. appearing

for the respondent-East Central Railway has submitted that

there is no infirmity in the order passed by the concerned Court

under Section 34 of the Act, 1996, reason being that the

concerned Court has considered the terms and conditions of

the contract, as per which, there is no condition stipulated

therein for refund of amount to the extent of Rs.8,59,08,325.00

towards refund of encashed bank guarantee and security

deposit.

Since, as per the conditions stipulated under Clause 29

and 30 of the Tender document which stipulates, that both the

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bank guarantee and security deposit were to be released only

after physical completion of the work whereas in the present

case only 4% of the work has been executed by the contractor.

Further, the concerned Court has considered that there is

no condition stipulated in the contract for issuance of direction

for payment of interest but even then, the award was passed

directing the respondent to pay interest.

7. According to the learned counsel for the respondent-East

Central Railway, since the work has not been concluded, rather

only 4% of the work could be completed, therefore, this aspect

of the matter ought to have been considered by the learned sole

Arbitrator, however, without considering this aspect of the

matter and without answering the implication of the specific

condition stipulated in the agreement, held that the amount of

bank guarantee and the security deposit to the extent of

Rs.8,59,08,325.00 are to be released since the same was only

to be paid, in case of conclusion of the work and as such, the

learned sole Arbitrator since has directed for disbursement of

the amount contrary to the terms and conditions of the

agreement. Therefore, the said order has been considered to be

against the public policy by the Court dealing with the

application filed under Section 34 of the Act, 1996, as such, the

aforesaid finding cannot be said to be incorrect, reason being,

when the parties have agreed and came into an agreement, the

terms and conditions bind them and once the terms and

conditions have been accepted, they cannot be allowed to

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retract back and claim the amount along with due

compensation as also that the order for refund of bank

guarantee and security deposit amount to be refunded with the

interest.

8. Therefore, According to the learned counsel for the

respondent-East Central Railway, the Court, dealing with the

application under Section 34 of the Act, 1996 has reversed the

award on the aforesaid ground as referred in the preceding

paragraph, which cannot be said to suffer from any illegality.

9. In the aforesaid backdrop of the facts, he further submits

that since an issue has been raised on behalf of the appellant

that there point of view was not considered, it would be a fit

case to remit the matter before the concerned Court for

consideration of the issue raised by passing a fresh order.

10. We have heard the learned counsel for the parties,

perused the documents available on record as also considered

the finding recorded by the concerned Court dealing with the

application filed under Section 34 of the Act, 1996.

11. The undisputed facts in this case are that the agreement

has been entered in between the parties for execution of the

work for construction of seven bridges between Tori to Shivpuri

(Km 23.00 to Km 44.00) in connection with construction of Tori

Shivpur new BG Rail line project in Latehar district of

Jharkhand State. The work could not have been completed, the

same has taken to be a ground for termination of the contract

and accordingly, the dispute arose in between the parties.

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The dispute was finally referred before the learned sole

Arbitrator by virtue of order dated 28.07.2017 passed by this

Court in A.A. No.16/2017, by which, Hon'ble Mr. Justice

(Redt.), D.G.R. Patnaik, Former Judge of this Court was

appointed as sole Arbitrator for resolution of the dispute.

The said award has been questioned by the respondent-

East Central Railway by invoking the jurisdiction conferred to

the concerned Court under Section 34 of the Act, 1996.

The concerned Court has passed the order by reversing

the award vide impugned judgment dated 06.01.2021 passed in

Commercial Revocation Case No.07 of 2019, which is the

subject matter of the instant appeal.

12. The submission has been made on behalf of the learned

counsel for the appellant that there is no infirmity in the award

but without appreciating that aspect of the matter, the award

has been reversed, which cannot be said to be proper and

therefore, the impugned order is fit to be quashed and set

aside.

The sole argument agitated by referring to the impugned

order/judgment is that whatever point has been considered by

the learned sole Arbitrator and even though the ground in

defence of the award was agitated before the concerned Court,

it would be evident from the impugned order that there is no

consideration at all. Merely the submission of the appellant has

been referred but no finding has been recorded either way.

Learned counsel for the appellant, therefore, submits that

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the order impugned is nothing but a cryptic and mechanical

order.

Learned counsel, in the backdrop of the aforesaid fact, has

submitted that the order/judgment impugned is fit to be

quashed and set aside and the award dated 23.02.2019 is fit to

be restored.

It has been submitted that so far as the interest part is

concerned, the appellant is ready to forgo, since there is no

condition to that effect in the agreement. However, so far as the

other claims are concerned, as directed to be paid, as would

appear from the tabular chart, referred hereinabove, the

appellant was legally entitled to get the same. Since, it was the

respondent who had come in the way in non-conclusion of the

work within the stipulated period, the same was taken as a

ground before the sole Arbitrator which has been considered in

the right perspective noticing about non-cooperation of the

respondent, the award has been passed in favour of the

appellant directing the respondent to make payment as per the

tabular chart under different heads.

13. On the other hand, learned counsel for the respondent-

East Central Railway, has submitted that the learned Arbitrator

has not appreciated the terms and conditions of the agreement

rather travelled beyond the terms and conditions, interest has

been awarded as also the bank guarantee and security deposit

have been directed to be refunded, even though, there was

specific bar in releasing the said amount. The said amount can

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only be refunded in a case where the work is concluded within

the stipulated time.

14. This Court, for appreciating the aforesaid arguments

advanced on behalf of the parties, is required to consider the

following issues:-

(i) Whether the court having jurisdiction under Section 34

of the Arbitration and Conciliation Act, 1996, is required to

consider the ground agitated in defence of the award and what

would be its result if there is non-consideration on the said

ground by the concerned Court?

(ii) Whether the impugned judgment passed by the Court

in exercising the power conferred under Section 34 of the Act,

1996, is held to be not sustainable due to non-consideration of

the ground agitated and in case of such decision, will it be

appropriate for this Court in exercise of power under Section 13

of the Commercial Courts Act, 2015 to restore the award

instead of remanding the matter to the concerned Court to pass

a fresh order after consideration of the factual aspect which has

been agitated before it?

Since both the issues are intertwined, as such are being

considered together and being answered.

15. There is no dispute about the settled position of law that if

an opportunity is being provided to the party and the same has

been responded, it is the bounded duty of the concerned Court

or the authority to deal with such pleading and answer it in

either way.

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16. It is in these circumstances only, it can be said that there

is proper consideration of the factual aspect placed before the

concerned Court or the authority.

17. The meaning of 'consideration' is the active application of

mind of the factual aspect, as per the definition of

'consideration' given by the Hon'ble Apex Court in Chairman,

Life Insurance Corporation of India & Ors. Vs. A.

Masilamani, (2013) 6 SCC 530, wherein, at paragraph-19, it

has been held by the Hon'ble Apex Court as under:-

"19. The word "consider" is of great significance. The dictionary meaning of the same is, "to think over", "to regard as", or "deem to be". Hence, there is a clear connotation to the effect that there must be active application of mind. In other words, the term "consider" postulates consideration of all relevant aspects of a matter. Thus, formation of opinion by the statutory authority should reflect intense application of mind with reference to the material available on record. The order of the authority itself should reveal such application of mind. The appellate authority cannot simply adopt the language employed by the disciplinary authority and proceed to affirm its order. (Vide Indian Oil Corpn. Ltd. v. Santosh Kumar [(2006) 11 SCC 147 : (2007) 1 SCC (L&S) 388] and Bhikhubhai Vithlabhai Patel v. State of Gujarat [(2008) 4 SCC 144 : AIR 2008 SC 1771] ."

18. This Court has considered the finding recorded in the

award by the learned Arbitrator and found therefrom that the

consideration has been given regarding casting accountability

upon the respondent for non-conclusion of the work within the

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stipulated period. That has led the learned Arbitrator to come to

the conclusion and passing the award in favour of the

appellant. However, the said award was questioned on the

ground that the learned Arbitrator had passed the award

deviating from the specific terms and conditions of the

agreement, wherein, even though, there is no Clause pertaining

to payment of interest, the award for payment of interest has

been passed.

Further, other amounts have been directed to be paid as

per the tabular chart, as quoted and referred hereinabove,

inclusive of the refund of bank guarantee and security deposit.

But, it is the plea of the respondent that such directions

contained in the award is contrary to the terms and conditions

of the agreement as per which the amount could only be

directed to be paid under the said heads in the case where the

work is concluded in entirety whereas records show that only

4% work could be completed.

19. In response to the same, learned counsel for the appellant

has taken the ground, referring to the reasons assigned by the

learned Arbitrator in passing such direction even contrary to

the agreement, that the learned tribunal has came to the

conclusion about accountability in not allowing the work to be

concluded within the stipulated time.

It appears from the judgment/order impugned that even

though, the appellant has raised this specific issue before the

Court below and the same has been noticed by it but no finding

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has been recorded and simply on going through the terms and

conditions of the agreement, the award has been held to be

illegal.

20. The question is that 'what is the meaning of notice and

what is the meaning of providing an opportunity of hearing'

that too, if any order has been passed in favour of the party,

which is the subject matter of consideration by the Higher

Forum.

Once the notice is issued to the party, which itself

suggests that the opportunity is being given to defend the order

which has been passed in favour of the party and if the party

appears and takes plea in defence of the impugned order before

the Forum, it would be the bounded duty of the concerned

Forum to give a specific finding either in discarding or

accepting the same. That would be required to be based on

reason. Only then, it could be said that there is proper

consideration of the factual aspect raised by the parties.

Otherwise, if the plea has been taken by the party but no

finding discarding the same is available in the order, the same

will have to be held to be cryptic and mechanical order.

The plea which is being taken before the concerned Forum

is required to be considered and 'consideration' means a proper

application of mind, as has been held in Chairman, Life

Insurance Corporation of India & Ors. Vs. A. Masilamani

(supra).

It is not disputed by the respondent-East Central Railway

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that there is no consideration of the factual aspect pleaded by

the appellant before the Court dealing with the application

under Section 34 of the Arbitration and Conciliation Act, 1996.

21. So far as the argument advanced on behalf of the learned

counsel for the appellant that the issue may be decided on

merit by this Court in the appeal itself instead of remitting the

matter before the concerned Court, this Court is of the view

that since this Court is sitting in an appeal and since the issue

of consideration of factual aspects, which were raised before the

learned Arbitrator, have been placed before the Court dealing

with the issue under Section 34 of the Act, 1996, that Court is

required to deliberate upon the same considering the relevant

documents or evidence for its proper appreciation, it would not

be proper for this Court to exercise such power under the

appellate jurisdiction rather this Court deems it fit and proper

to remit the matter before the concerned Court.

22. This Court sitting under the appellate jurisdiction is of the

view that the order/judgment impugned requires interference.

23. Accordingly, the order/judgment impugned dated

06.01.2021 passed in Commercial Revocation Case No.07 of

2019, is hereby quashed and set aside.

24. In the result, the instant appeal is allowed.

25. In consequence thereof, the matter is remitted to the

Court concerned for passing an order afresh in accordance with

law preferably within the period of three months' from the date

of receipt/production of copy of this order.

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26. Pending interlocutory application(s), if any, also stands

disposed of.

(Dr. Ravi Ranjan, C.J.) I agree

(Sujit Narayan Prasad, J.) (Sujit Narayan Prasad, J.)

A.F.R.

Rohit/