Madhya Pradesh Madhya Kshetra ... vs M/S Shyam Indus Pover Solution ...
2021 Latest Caselaw 1681 MP

HIGH COURT OF MADHYA PRADESH PRINCIPAL SEAT AT JABALPUR



ARBITRATION APPEAL                            35/2014
NO.
Parties Name                  MADHYA PRADESH MADHYA KSHETRA VIDYUT
                              VITRAN CO. LTD.

                              VS.

                              M/S SHYAM INDUS POWER SOLUTION PVT. LTD.
Bench Constituted             Single Bench
Judgment delivered By         HON'BLE SHRI JUSTICE VISHAL DHAGAT
Whether       approved   for YES/NO
reporting
Name of counsel for parties For petitioner: Shri Shobhit Aditya, Advocate.

                              For Respondent no.1 : Shri Pankaj Kumar Singh,
                              Advocate with Shri Aditya Khampariya, Advocate.
Law laid down
Significant       paragraph
number


                                 (O R D E R )
                                  30/04/2021

      Appellant has filed this appeal under section 37 of

Arbitration and Conciliation Act, 1996 calling in question order

dated 11.07.2014 passed in Arbitration Case No.24/2012 by 10th

Additional District Judge, Bhopal by which application filed by

appellant/defendant for setting aside arbitration award was

dismissed.



2.    Brief facts of the case are that appellant invited tenders on

27.07.2007 for distribution of electricity for Chhola Zone, North

Bhopal. Letter of intent was issued in favour of respondent on

06.11.2007. Respondent accepted letter of intent on 12.11.2007

and contract was executed between the parties on 22.12.2007.

Thereafter respondent worked as Authorized Franchise for
                                      2                                A.A No.35/2014



distribution of electricity in Chhola Zone, Bhopal from 1.02.2008

to 31.05.2012.

       (i)     Differences/dispute       arose     between       appellant        and

respondent over application of input rate formula. Respondent

company insisted on following base input rate as mentioned in

tender document and opposed following base input rate as

mentioned in distribution agreement clause 5.3.3 which was 1.80

per unit.

       (ii) Respondent company invoked the Arbitration Clause

21.1    and         issued   legal   notice   to    appellant         company      on

27.04.2010. After issuance of notice Arbitrators were appointed

by appellant as well as respondent who appointed Shri S.K.

Dubey as Presiding Arbitrator on 26.08.2010. Respondent filed its

claim before Arbitrator on 04.09.2010. Appellant company

submitted written statement on 15.10.2010. Both the parties

adduced documentary as well as oral evidence in the case.

       (iii)    Respondent       company         filed    an    application        for

amendment of statement of claim on 13.3.2011 which was

allowed        by    Tribunal   on   09.04.2011.         By    said     amendment

respondent company was allowed to amend pleadings and

include grounds of coercion and economic duress adopted by

appellant due to which respondent company signed distribution

agreement           on   22.12.2007.     Pursuant        to    amendment,         two

additional issues were framed and parties were given opportunity

to lead evidence on it.
                                3                           A.A No.35/2014



     (iv) After hearing the parties final award was passed on

04.02.2012 and directed appellant to pay an amount of

Rs.1,56,80,554/- along with interest @ 9.5%.

     (v) Appellant filed an application under Section 34 of

Arbitration and Conciliation Act, before 10th Additional District

Judge, Bhopal in Arbitration Case No.24/2012 for setting aside

the award. Award passed by Arbitration Tribunal was affirmed by

order dated 11.07.2014.

     (vi) Being aggrieved by order passed by 10th Additional

District Judge, Bhopal in Arbitration Case, appellant filed an

appeal under Section 37 of Arbitration and Conciliation Act, 1996

before this Court.



3.   Appellant challenged the order passed by Additional District

Judge, Bhopal on the ground that tribunal had committed an error

in allowing amendment application on 09.04.2011 at a belated

stage permitting them to raise new plea of economic duress and

coercion.   Arbitrator   had       misdirected   himself    in   advising

respondent to file an application for amendment. Not only

Arbitration tribunal allowed amendment application but also

permitted respondent to adduce additional evidence to fill up the

lacuna and improve its case. It was submitted that impugned

order passed by the Additional District Judge as well as award

passed by Arbitration Tribunal are patently illegal and are not

sustainable in the eyes of law.
                                 4                        A.A No.35/2014



4.   During    pendency    of       appeal   appellant   has   filed   an

application for proposed amendment in memo of appeal. By said

proposed amendment appellant wants to incorporate the ground

that Tribunal while passing impugned award dated 4.2.2012

exceeded its jurisdiction by declaring clauses of agreement as

not binding upon respondent and also inserted new clauses and

conditions in the agreement.



5.   Counsel   appearing    for      respondent    had   opposed       the

application for allowing amendment in memo of appeal. It is

submitted by him that appeal has been filed in the year 2014 and

amendment application has been filed in the year 2021 after a

long delay and, therefore, same may be dismissed. No reply has

been filed on the said application by respondent and vide order

dated 21.01.2021 it was ordered that application for proposed

amendment will be considered at the time of final hearing.



6.   Claim made by respondent was allowed by Arbitration

Tribunal. Claim was allowed holding that respondent company

was forced to sign distribution agreement dated 22.12.2007

under economic duress and coercion. Base input rate as

mentioned in tender document ought to have been made

applicable. In view of same proposed amendment is material in

dispute between appellant and respondent. Facts

regarding the

aforesaid amendment is already on record and documents have

also been filed by both the parties. No further evidence is

required in respect of said pleadings. Award has been passed on

basis of tender document and not on the basis of contract i.e

distribution agreement dated 22.12.2007.

7. In view of the same proposed amendment application is

allowed and proposed ground "J" is treated as one of the ground

in arbitration appeal. Appellant shall incorporate the amendment

in arbitration appeal within fifteen days from passing of this

order.

8. Counsel appearing for appellant has relied on AIR 2016 SC

1441, Union of India Vs. Ambica Construction. Counsel for

appellant placed reliance on para-6 of said order which is quoted

below as under: -

"6. "Court" has been defined in Section 2(c) of the Act to

mean a civil court having jurisdiction to decide the questions

forming the subject-matter of the reference. Section 41 of the

Act is extracted hereunder:

"41. Procedure and powers of Court. - Subject to the provisions of this Act and of rules made thereunder:

(a) The provisions of the Code of Civil Procedure, 1908 (5 of 1908), shall apply to all proceedings before the Court, and to all appeals, under this Act, and

(b) The Court shall have, for the purpose of, and in relation to arbitration proceedings, the same power of making orders in respect of any of the matters set out in the Second Schedule as it has for the purpose of, and in relation to any proceedings before the Court:

Provided that nothing in CI. (b) shall be taken to prejudice any power which may be vested in an Arbitrator or umpire for making orders with respect to any of such matters."

The court can exercise the power specified in Second Schedule of the Act. However, Arbitrator is not a court. Arbitrator is the outcome of agreement. He decides the disputes as per the agreement entered into between the

parties. Arbitration is an alternative forum for resolution of disputes but an Arbitrator ipso facto does not enjoy or possess all the powers conferred on the courts of law."

9. In view of same it is submitted that Arbitrator has to decide

the dispute as per agreement entered into between the parties,

i.e. on the basis of agreement of distribution dated 22.12.2007

and Arbitrator committed an error in relying on tender document

i.e. clause 35.1.4. Appellant has also placed reliance on paras-16

to 21 of judgement reported in AIR 2010 Supreme Court

3543, M/s Rashtriya Chemicals and Fertilizers Ltd. Vs. M/s

Chowgule Brothers and others. Said paragraphs are quoted

as under: -

"16. That brings us to the question whether an Arbitrator can make an award contrary to the terms of the contract executed between the parties. That question is no longer res integra having been settled by a long line of decisions of this Court. While it is true that the Courts show deference to the findings of fact recorded by the Arbitrators and even opinions, if any, expressed on questions of law referred to them for determination, yet it is equally true that the Arbitrators have no jurisdiction to make an award against the specific terms of the contract executed between the parties. Reference may be made, in this regard, to the decision of this Court in Steel Authority of India Ltd. v. J.C. Budharaja, Government and Mining Contractor (1999) 8 SCC 122 where this Court observed:

"...that it is settled law that the arbitrator derives authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be an arbitrary one; that this deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action...."

"...It is true that interpretation of a particular condition in the agreement would be within the jurisdiction of the arbitrator. However, in cases where there is no question of interpretation of any term of the contract, but of solely reading the same as it is and still the arbitrator ignores it and awards the amount despite the prohibition in the

agreement, the award would be arbitrary, capricious and without jurisdiction. Whether the arbitrator has acted beyond the terms of the contract or has travelled beyond his jurisdiction would depend upon facts, which however would be jurisdictional facts, and are required to be gone into by the court. The arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error..."

17. It was further observed:

"...Further, the Arbitration Act does not give any power to the arbitrator to act arbitrarily or capriciously. His existence depends upon the agreement and his function is to act within the limits of the said agreement...."

18. In W.B. State Warehousing Corporation and Anr. v. Sushil Kumar Kayan and Ors. (2002) 5 SCC 679, again this Court observed:

"...If there is a specific term in the contract or the law which does not permit the parties to raise a point before the arbitrator and if there is a specific bar in the contract to the raising of the point, then the award passed by the arbitrator in respect thereof would be in excess of his jurisdiction...."

19. In Bharat Coking Coal Ltd. v. Annapurna Construction, (2003) 8 SCC 154, this Court reiterated the legal position in the following words:

"There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameters of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the record."

20. In MD, Army Welfare Housing Organisation v. Sumangal Services (P) Ltd. (2004) 9 SCC 619 also this Court took the similar view and observed:

"An Arbitral Tribunal is not a court of law. Its orders are not judicial orders. Its functions are not

judicial functions. It cannot exercise its power ex debito justitiae.

The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subject- matter of reference."

21. Reference may also be made to the decisions of this Court in Associated Engineering Co. v. Government of Andhra Pradesh and Anr. (AIR 1992 SC 232); Jivarajbhai Ujamshi Sheth and Ors. v. Chintamanrao Balaji and Ors. (AIR 1965 SC 214); State of Rajasthan v. Nav Bharat Construction Co. (AIR 2005 SC 4430); Food Corporation of India v. Surendra, Devendra & Mahendra Transport Co. (2003) 4 SCC 80, which sufficiently settle the law on the subject."

10. On strength of said judgement it is argued by learned

counsel for the appellant that Arbitrator has committed an error

of jurisdiction in not relying on agreement of distribution between

the parties dated 22.12.2007 and passed the award contrary to

it. Appellant has further relied on judgement reported in AIR

2013 Supreme Court 3182, V.L.S Finance Ltd. Vs. Union

of India and others. Relying on the said judgement counsel for

appellant argued that new plea which is a pure question of law

can be raised at any stage of proceedings. It is submitted that

this Court can look into the question of law raised by the

appellant by way of amendment though there being no pleading

before Arbitral Tribunal or before this Court. For enforcing this

argument counsel for appellant has also relied on judgement

reported in M/s Ariane Orgachem Pvt. Ltd. Vs. Wyeth

Employees Union and Ors., AIR 2016 Supreme Court

1761, para-29 which is as under:-

"29. The appellant-Company has also contended that the respondent-Union has also raised the legal question

regarding the competency of the Deputy Labour Commissioner in passing the order of reference for the first time before this Court and the same was not raised before the High Court, therefore, the same shall not be permitted to be raised in these proceedings and this Court need not go into this aspect of the matter which is wholly untenable in law. This contention raised by the learned senior Counsel for the Appellant is rejected as the said contention is contrary to the issues/principles laid down by the Privy Council and this Court in the following judgments:

In Connecticut Fire Insurance Co. v. Kavanagh (1892) A.C. 473, 480 (PC), Lord Watson has observed as under:

"When a question of law is raised for the first time in a court of last resort, upon the construction of a document, or upon facts either admitted or proved beyond controversy, it is not only competent but expedient, in the interests of justice, to entertain the plea."

The aforementioned view of the Court of Appeal have been relied upon by this Court in Gurcharan Singh v. Kamla Singh (1976) 2 SCC 152. Therefore, with regard to the above mentioned aspect regarding the plea of the competency of the Deputy Labour Commissioner to pass an order of refusal to make a reference, although is being raised before this Court for the first time, is based on admitted facts. Hence, in accordance with the view taken by the Court of Appeal in Connecticut Fire Insurance Company case (supra) and this Court in Gurcharan Singh case (supra), the argument advanced by the first Respondent-Union deserves to be considered by this Court. Similar view has also been taken by this Court in the cases of VLS Finance Limited v. Union of India (2013) 6 SCC 278 and Greater Mohali Area Development Authority v. Manju Jain (2010) 9 SCC 157, wherein it has been held that pure question of law can be raised at any stage of litigation. In National Textile Corporation v. Naresh Kumar Jagad (2011) 12 SCC 695, it has been held by this Court that a new ground raising pure legal issue for which no inquiry or proof is required, can be raised at any stage. Further, in the case of Port Trust v. Hymanshu International (1979) 4 SCC 176, this Court has held thus:

"2...The plea of limitation based on this section is one which the court always looks upon with disfavour and it is unfortunate that a public authority like the Port Trust should, in all morality and justice, take up such a plea to defeat a just claim of the citizen. It is high time that governments and public authorities adopt the practice of not relying upon technical pleas for the

purpose of defeating legitimate claims of citizens and do what is fair and just to the citizens. of course, if a government or a public authority takes up a technical plea, the Court has to decide it and if the plea is well-founded, it has to be upheld by the court, but what we feel is that such a plea should not ordinarily be taken up by a government or a public authority, unless of course the claim is not well-founded and by reason of delay in filing it, the evidence for the purpose of resisting such a claim has become unavailable...."

11. Counsel appearing for respondent submitted that this Court

has very limited scope in interfering with an order passed under

Section 34 of Arbitration and Conciliation Act, 1996. He relied on

the judgement reported in the case of MMTC Limited vs.

Vedanta Limited (2019) 4 SCC 163. Paras 14 to 16 of said

judgement are quoted below as under: -

"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 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.

15. Having noted the above grounds for interference with an arbitral award, it must now be noted that the instant question pertains to determining whether the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbitration. However, this question has been addressed by the Courts in terms of the construction of the contract between the parties, and as such it can be safely said that a review of such a construction cannot be made in terms of reassessment of the material on record, but only in terms of the principles governing interference with an award as discussed above.

16. It is equally important to observe at this juncture that while interpreting the terms of a contract, the conduct of parties and correspondences exchanged would also be relevant factors and it is within the arbitrator's jurisdiction to consider the same. (See McDermott International Inc. v. Burn Standard Co. Ltd. (supra); Pure Helium India (P) Ltd. v. ONGC, (2003) 8 SCC 593, D.D. Sharma v. Union of India, (2004) 5 SCC 325)."

12. To fortify the aforesaid arguments counsel appearing for

respondent further relied on judgement reported in 2018 SCC

Online Delhi 6780, NHAI versus M/s BSC-RBM-Pati Joint

Venture; and judgement reported in Manupatra/DE/0459/2015,

High Court of Delhi in the matter of Mahanagar Telephone

Nigam Limited Vs. Fujitshu India Private Limited. Counsel

for respondent has relied on other judgements but for sake of

brevity all the judgements relied on by the respondent fortified

the same arguments and, therefore, they are not mentioned in

this order.

13. Counsel appearing for respondent also relied on judgement

reported in (2001) 8 SCC 97, Estralla Rubber vs. Dass

Estate (P) Ltd. and argued that amendment application filed by

respondent before Arbitral Tribunal was rightly allowed. He relied

on para-8 of said judgement which is quoted as under: -

"8. It is fairly settled in law that the amendment of pleadings under Order 6, Rule 17 is to be allowed if such an amendment is required for proper and effective adjudication of controversy between the parties and to avoid multiplicity of judicial proceedings, subject to certain conditions such as allowing amendment should not result in injustice to the other side; normally a clear admission made conferring certain right on a plaintiff is not allowed to be withdrawn by way of amendment by a defendant resulting in prejudice to such a right of plaintiff, depending on facts

and circumstances of a given case. In certain situations a time barred claim cannot be allowed to be raised by proposing an amendment to take away valuable accrued right of a party. However, mere delay in making an amendment application itself is not enough to refuse amendment, as the delay can be compensated in terms of money. Amendment is to be allowed when it does not cost serious prejudice to the opposite side. This Court in recent judgment in B.K. Narayana Pillai vs. Parameswaran Pillai and another [(2000) 1 SCC 712], after referring to number of decisions, in para 3 has stated, thus: -

"3. The purpose and object of Order 6 Rule 17 CPC is to allow either party to alter or amend his pleadings in such manner and on such terms as may be just. The power to allow the amendment is wide and can be exercised at any stage of the proceedings in the interests of justice on the basis of guidelines laid down by various High Courts and this Court. It is true that the amendment cannot be claimed as a matter of right and under all circumstances. But it is equally true that the courts while deciding such prayers should not adopt a hyper technical approach. Liberal approach should be the general rule particularly in cases where the other side can be compensated with the costs. Technicalities of law should not be permitted to hamper the courts in the administration of justice between the parties. Amendments are allowed in the pleadings to avoid uncalled-for multiplicity of litigation."

In para 4 of the same judgment this Court has quoted the following passage from the judgment in A.K. Gupta and Sons Ltd. Vs. Damodar Valley Corporation [1966 (1) SCR 796]: -

"The general rule, no doubt, is that a party is not allowed by amendment to set up a new case or a new cause of action particularly when a suit on new case or cause of action is barred: Weldon v. Neal [(1887) 19 QBD 394 : 56 LJ QB 621]. But it is also well recognized that where the amendment does not constitute the addition of a new cause of action or raise a different case, but amounts to no more than a different or additional approach to the same facts, the amendment will be allowed even after the expiry of the statutory period of limitation: See Charan Das v. Amir Khan [AIR 1921 PC 50 : ILR 48 Cal 110] and L.J. Leach and Co. Ltd. V. Jardine Skinner and Co. [AIR 1957 SC 357 :1957 SCR 438]."

This Court in the same judgment further observed that the principles applicable to the amendment of the plaint are

equally applicable to the amendment of the written statement and that the courts are more generous in allowing amendment of the written statement as the question of prejudice is less likely to operate in that event. It is further stated that the defendant has a right to take alternative plea in defence which, however, is subject to an exception that by the proposed amendment the other side should not be subjected to serious injustice and that any admission made in favour of the plaintiff conferring right on him is not withdrawn."

14. Heard the counsel appearing for appellant as well as

respondent.

15. Basic grievance of the appellant is that Arbitration Tribunal

has misdirected itself in advising the respondent of the proposed

amendment and allowing proposed amendment at the fag end

of the case. The said amendment has allowed the respondent to

introduce a new plea as an afterthought to fill up the lacuna and

further Tribunal committed an error in allowing respondent to

lead evidence on said amendment.

16. It is to be seen whether order allowing amendment dated

09.04.2011 was in conflict with basic notion of morality or justice

and whether the arbitration award is vitiated by patent illegality

apparent on face of record. Arbitration Tribunal has dealt with the

application for proposed amendment in great detail and

considered the arguments raised by appellant. It has been held

by Arbitral Tribunal that by said proposed amendment new plea

has not been introduced but it is only elaboration of plea already

made. After allowing application for proposed amendment issues

were framed and both parties were given opportunity to adduce

evidence. Respondent was also given an opportunity to do

consequential amendment. Respondent had denied that there

was any advice on part of Arbitrator to amend the pleadings.

Only because amendment application has been allowed after

some delay it cannot be said that there is a patent illegality

apparent on the face of record. The order allowing application for

proposed amendment does not suffer from patent illegality. This

court will not meticulously examine erroneous application of law

or re-appreciate the evidence regarding finding that there was

economic duress and coercion on respondent.

17. In view of same there is no scope for interference in

arbitration appeal in order dated 09.04.2011 by which application

for proposed amendment was allowed by Arbitral Tribunal.

18. Now ground "J" incorporated by amendment in Arbitration

Appeal that arbitration tribunal exceeded its jurisdiction by not

only declaring the clauses of agreement as not binding upon

respondent but also inserted new clauses and conditions in the

agreement by causing amendment of agreement is considered.

Arbitration Tribunal has already held that agreement of

distribution dated 22.12.2007 was based on economic duress and

coercion. Respondent was made to sign the agreement under

aforesaid influences. In tender document input rate which was

given was different on the basis of which the respondent

company had made tender bid but in agreement of

distribution/contract dated 22.12.2007 base input rate was

mentioned as 1.80 per unit which was contrary to clause

mentioned in the tender document. Respondent had raised

objection to it at initial stage itself but due to economic duress

and coercion it was forced to sign the contract on the last date

i.e. on 22.12.2007. Inducement was made to respondent to sign

the contract by letter dated 22.12.2007 by which they were

given assurance that input rate formula shall be considered and

may be changed. On basis of evidence and facts available on

record it cannot be said that arbitration tribunal has exceeded its

jurisdiction. Arbitration tribunal can take into consideration the

conduct of parties and correspondence between the parties and

said fact can be examined by Arbitration Tribunal though same

may not be part of the contract. Thus, ground "J" has no force

and same is rejected.

19. In view of the above it is clear that award passed by

Arbitration Tribunal does not suffer from any findings which are

arbitrary, capricious or perverse and no patent illegality has been

committed by Arbitration Tribunal in passing the award.

20. In view of the same arbitration appeal filed by the appellant

is dismissed.

(VISHAL DHAGAT) JUDGE mms

Digitally signed by MONSI M SIMON Date: 2021.04.30 15:18:33 +05'30'