Madhya Pradesh High Court

Municipal Corporation Gwalior vs M/S A.P.S.Kushwah Th: Proprietor ... on 8 December, 2022

Author: Rohit Arya

IN THE HIGH COURT OF MADHYA PRADESH

AT GWALIOR
BEFORE
HON'BLE SHRI JUSTICE ROHIT ARYA
&
HON'BLE SHRI JUSTICE MILIND RAMESH PHADKE

ARBITRATION APPEAL No. 12 of 2012

BETWEEN:-
1. MUNICIPAL CORPORATION GWALIOR THROUGH
ITS COMMISSIONER

2. MAYOR IN COUNCIL THROUGH THE MAYOR
GWALIOR, MUNICPAL CORPORATION GWALIOR.

3. GWALIOR MUNICIPAL CORPORATION COUNCIL
THROUGH THE PRESIDENT, GWALIOR MUNICIPAL
CORPORATION, GWALIOR.

4. THE EXECUTIVE ENGINEER (WATER SUPPLY)
P.H.E. MAINTENANCE DIVISION NO.1, MUNICIPAL
CORPORATION, GWALIOR

.....APPELLANTS

(BY SHRI N.K. GUPTA-SENIOR ADVOCATE WITH SHRI SANTOSH
2

AGRAWAL-ADVOCATE)

AND

M/S A.P.S. KUSHWAH THROUGH PROPRIETOR AJAYPAL
SINGH KUSHWAH S/O SHRI KRIPAL SINGH KUSHWAH, AGED
ABOUT 50 YEARS, R/O 57 B, ANUPAM NAGAR EXTENSION
THATIPUR, GWALIOR (MADHYA PRADESH)

.....RESPONDENT

(BY SHRI M.L. SWARNKAR AND SHRI UDAY ANAND SONI-
ADVOCATES)

----------------------------------------------------------------------------------------------

Reserved on : 22/11/2022

Pronounced on: 08/12/2022

______________________________________________________

This appeal having been heard and reserved for judgment,
coming on for pronouncement this day, Hon'ble Shri Justice
Rohit Arya pronounced the following:

JUDGMENT

This appeal by appellant/ Municipal Corporation is directed against the order dated 16/08/2012 passed in Arbitration Case

No.07/2012 by the 7th Additional District Judge, Gwalior. The learned Judge has rejected the objections filed under Section 34 of the Arbitration and Conciliation Act, 1996 against award dated

09/11/2011 passed by the Sole Arbitrator (Hon'ble Justice R.B. Dixit (retired)).

2. Before adverting to rival contentions, it is expedient to reiterate the law laid down by the Hon'ble Apex Court related to scope of interference by this Court in exercise of powers under Section 37 of the Arbitration and Conciliation Act, 1996. Regard being had to the concept of Public Policy of India embodied in the Arbitration and Conciliation Act, 1996 under various provision viz; 28, 31, 34 etc., the Court while testing an arbitral award on the anvil thereof does not sit as a Court of appeal in common parlence and cannot correct the errors of facts as the arbitrator is the master of quantity and quality of facts. Nevertheless, the Court is expected to ascertain the assessment/ evaluation of such facts/ material on record by the Arbitrartor on broad principles under the umbrella of Public Policy of India. The Hon'ble Supreme Court in the case of Associates Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49 has observed that the duty to adopt judicial approach arises from the very nature of the power exercised by the Court or the authority under the Statue as the Court or authority or tribunal cannot act in an arbitrary capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and its decision is not polluted by any extraneous

consideration. "Wednesbury Principle of Reasonablness", a well recognised principle in administrative laws, is also a dimension of Public Policy of India. A decision suffering from perversity or any irrationality cannot be construed as reasonable if tested on the touchstone of Wednesbury Principle. Therefore, decision that falls short of standard of reasonableness becomes vulnerable and open to challenge in the Court of law. Indeed, if an award is against justice or morality, it also becomes vulnerable being affront to the Public Policy of India besides, patently illegal if the award is passed in contravention of substantive laws of India. Indeed, if the award was induced or affected by fraud or corrpution, it stands vitiated being contrary to the Public Policy of India as explicit from explanation appended to Section 34 (2)(b)(ii) of the Act, 1996. That apart, the Arbitral tribunal is under legal obligation to decide the dispute in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transcation, ignorance or deviation from the terms of the contract shall render the award polluted with patent illegality in the teeth of Section 6 of the Act, 1996. Conclusions drawn on the basis of available evidence are not open for correction unless, the same are polluted with arbitariness and capriciousness. Similarly, in the case of Shah, Shares & Stock Broker (P) Ltd. Vs. M/s. B.H.H. Securities (P) Ltd. & Ors. reported in AIR 2012 (SC) 1866 the

Hon'ble Supreme Court has observed that under Section 34 of the Act, the Court does not sit in an appeal over an award of an Arbitral tribunal to take recourse to reassessment and reappreciation of the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The same law has been reiterated in the case of Haryana Tourism Limited Vs. Kandhari Beverages Limited reported in 2022 (3) SCC 237 holding that in an appeal under Section 37 of the Act, 1996, the Court cannot enter into the merits of the claim.

3. Relevant factual matrix necessary for disposal of this appeal are in narrow compass. Appellant/ Corporation had invited tenders for maintenance of submersible/ centrifugal motor-pumps, starters, service lines etc. including testing, lifting, and carry out necessary repairing and lowering/ installation of power driven submersible/ centrifugal motor-pumps at various tube wells/ dug-wells, existing under the Jurisdiction of Assistant Engineer, Water Supply Maintenance Sub-Division Lashkar West, for the period of 01 year from the date of issue of work order. The NIT was issued on 17/02/2006. The respondent applied for the tender documents on 24/02/2006. Besides, there were three more tenderers namely M/s Paras Aquatec, M/s Sai Pump Industries and M/s Rajendra Kumar Jain. All four tenderers quoted the following prices:

1. M/s A.P.S. Kushwaha - Rs.1,11,87,389/- (Rs.29,993/- per

pump per year)

2. M/s Paras Aquatec - Rs.1,11,87,016/- (Rs.29,992/- per pump per year)

3. M/s Sai Pump Industries - Rs.1,13,76,127/- (Rs. 30,499/- per pump per year)

4. M/s Rajendra Kumar Jain- Rs.1,11,88,135/- (Rs. 29,995/- per pump per year)

4. Thereafter, respondent and other three tenderers of Group-A were called upon for negotiation on 06/03/2006 to settle the rates. Since the negotiable rates were found on higher side, therefore, respondent was again called for negotiations on 02/05/2006. Respondent/claimant offered lowest rate of Rs.87,26,335/- for maintenance of 377 pumps for 12 months, according to which, the rate per pump per year worked out as Rs.23,395/-. The rates quoted by the respondent was recommended by the Commissioner Municipal Corporation, Gwalior to Mayor In Council, Gwalior on 04/07/2006 (Annexure C-8). Thereafter, the Mayor In Council approved the rates and accorded his sanction on 11/07/2006 (Annexure C-9) and the same was communicated to the respondent/ claimant by Executive Enginner, PHE Maintenance Division. Thereafter, vide communication dated 20/07/2006 (Annexure C-10), respondent was called upon to deposit the

remaining amount of security deposit to the tune of Rs.2,61,000/-, as earlier it has deposited Rs.90,000/- and remain present to sign the agreement on 02/09/2006. With reference to the said letter, another communication was made to the respondent/claimant on 28/07/2006 (Annexure C-11) reiterating the same contents and likewise communication dated 29/08/2006 (C-15) and 01/09/2006 (Annexure C-16) to the same effect. Respondent has deposited the entire amount of security deposit of Rs.2,64,012/- (Annexure C-17) albeit, he was required to deposit Rs.2,61,000/-. The details of security deposited by the respondent is acknowledged by the appellant/ Corporation in its official note-sheet appearing at pages no. 473 and 474 (Annexure C-18). The factum of agreement is also endorsed at S.No.65 in the agreement register maintained by the Municipal Corporation, extracts whereof are at page 476 (Annexure C-19). The aforesaid documents have been supplied to the respondent/ claimant under the RTI.

5. After submission of aforesaid security deposit, respondent was required to carry out the work related to maintenance of submersible/ centrifugal motor-pumps, starters, tube-wells, service lines etc. The contract lasted for the period from 01/09/2006 to 31/01/2007 (05 months). It appears that appellant/ Corporation realized that while it called all the four tenderers for negotiations, certain guidelines of the the M.P. State Government as contained in

the circular No.6144/2905/19/P/2005 Bhopal dated 12/09/2005 were not followed as only the lowest tenderer ought to have been called for negotiations as deducible from the proceedings on record as Annexure R/3. Thereafter, on 22/12/2006 (Annexure R/11) the contract awarded to the respondent/ claimant was cancelled and for the remaining period i.e. from 05/02/2007 to 04/02/2008, the contract was awarded to M/s Paras Aquatec with the observation that due to competitive rates offered by different tenderers, the Municipal Corporation is not put to any loss instead, it gained vide resolution dated 22/12/2006 (page 486). Albeit, the work order was sanctioned in favour of M/s Paras Aquatec on 05/02/2007 but actual work was undertaken by it from 16/02/2007 to 04/02/2008 on the same rates as negotiated with the respondent/ claimant i.e. Rs.23,395/- per pump per year. On aforesaid factual matrix, a dispute arose between the respondent/ claimant and appellant/ Corporation related to repair work carried out by respondent for the aforesaid period.

6. Respondent initially approached the Madhya Pradesh Madhyastam Adhikaran (Arbitration Tribunal) by filing the MJC No.05/2010. However, the tribunal vide order dated 09/03/2010 declined to entertain the claim of the respondent in view of existence of arbitration clause 17 of the agreement dated 02/09/2006. Under such circumstances, respondent preferred an

application under Section 11(6) of the Arbitration and Conciliation Act,1996 (for brevity "Act, 1996") before the designate of the Hon'ble The Chief Justice.

7. The Hon'ble judge designated by the Hon'ble The Chief

Justice, after hearing all the parties passed an order on 17 th day of February, 2011 appointing Shri Justice, R.B. Dixit (retired Judge of this High Court of Madhya Pradesh) as an arbitrator in Arbitration Case No.05/2010. The learned Judge has also taken into consideration arbitration clause 17 of the agreement while invoking the jurisdiction under Section 11(6) of the Act,1996, of course, with reference to the relevant facts pleaded to satisfy itself about the existence of the dispute emanating from the agreement and correspondences between the parties.

8. Before the arbitrator, both the parties filed pleadings, documentary evidence and also led oral evidence. The Arbitrator

while passing the award dated 9th November, 2011 has framed the following five issues:-

i. Whether the claimant was the lowest tenderer ?

ii. Whether his negotiated rates were duly admitted and his tender was accepted and agreement was signed ?

iii. Whether the offer of claimant was rejected by Mayor-in- Council and if so, its legal consequences ?

iv. Whether the work for the period 01-09-06 to 31-01-07 was executed by claimant on C.S.R. Basis ?

v. Whether the claimant is entitled to the different claims narrated by him in his petition ?

9. Issues no. (i), (ii) and (iii) have been answered in paragraphs 6 to 16 with reference to the evidence placed on record and issues no. (iv) and (v) have been dealt with in paragraphs 17 to 21 of the award. The arbitrator upon critical evaluation of the material available on record and with due advertance to the documentary evidence in particular, has reached to a conclusion that denial of payment to the respondent/ claimant for repair works of pump etc., undertaken by him during the period i.e. 01/09/2006 to 31/01/2007 @ 23,395/- per pump per year was not justified hence, respondent/ claimant was held entitled for the payment of the work amounting to Rs.36,35,920/-, refund of earnest money Rs.27,000/-, security deposit Rs.2,61,000/-, interest @ 9% per annum on the amount of Rs.39,23,920/- and cost of this arbitration being paid by him to the arbitrator Rs.30,000/-. Detailed discussion based on documents particularly as contained in paragraphs 9,10,14,16,17,20 and 21, suggest that the Arbitrator has passed a reasoned award based on material evidence placed before it.

10. The aforesaid award was made subject matter of challenge

on an application filed under Section 34 of the Act, 1996. The learned Additional District Judge has rejected the first objection related to constitution of Arbitration Tribunal, as according to the appellant/ Corporation, there was no agreement, hence, arbitration clause did not exist and for want thereof, there cannot be an arbitration for the claim raised. The aforesaid objection has been turned down primarily for the reason that the Arbitration Tribunal at Bhopal declined to entertain the claim of the respondent/ claimant in view of existence of arbitration clause 17 of the agreement in the light of the judgment rendered by the Hon'ble Supreme Court in the case of Va Tech Escher Wyass Flovel Ltd. v. MPSE Board & Another reported in 2011 (13) SCC 261 and secondly, on the ground that the learned Judge designated by the Hon'ble The Chief Justice in view of arbitration clause 17 of the agreement has already appointed an Arbitrator vide order dated

17th day of February, 2011 in Arbitration Case No.05 of 2010.

11. As a matter of fact, the aforesaid order of the High Court has not been interfered by the Hon'ble Apex Court as the SLP arising therefrom vide SLP (c) No.14303/2011 has been dismissed vide order dated 04/07/2011, albeit, it was observed that dismissal shall have no effect on the arbitration proceedings pending before the Arbitrator.

12. Shri N.K. Gupta, learned Senior Advocate contends that arbitration clause 17 contained in the agreement indeed is a format of the contract and was only signed by the respondent/claimant and not by the appellant/ Corporation therefore, the said contract cannot said to be conclusive, hence, no reliance could have been placed on clause 17 thereof to justify either rejection of an application filed under Section 7 of the Madhya Pradesh Madhyastam Adhikaran Adhiniyam, 1983, before the Arbitration Tribunal at Bhopal or in the matter of appointment of an Arbitrator by the designate of the Hon'ble The Chief Justice.

13. Shri M.L. Swarnkar, learned counsel for the respondent/ claimant while combating the aforesaid submissions firstly, submits that once an Arbitrator has been appointed by the learned Single Judge designated by the Hon'ble The Chief Justice under Section 11(6) of the Act, 1996, the same is not liable to be interfered with in view of the judgment rendered by the Constitution Bench of seven Judges in the case of SBP & Co. Vs. Patel Engineering Ltd. And Another reported in 2005 8 SCC 618 (relevant para 8) as reiterated in subsequent judgment in the case of APS Kushwaha (SSI UNIT) Vs. Municipal Corporation, Gwalior and Others reported in 2011 13 SCC 258. That apart, Ex. C-2 is the agreement, Ex.C-3 and C-4 are the letter of the Executive Engineer addressed to the claimant for participating in

the negotiations, Ex.C-7 is the negotiable rates, Ex.C-11 is the letter mentioning the tender of lumpsum (ekmust), Ex.C-41 is the approval of the Mayor In Council to the negotiated rates of the respondent/claimant, Ex.-C-43 is the order of the Mayor-In- Council elaborating the negotiatiable rates, are the admitted documents before the Arbitrator (designated by the Hon'ble The Chief Justice) and by the Additional District Judge, Gwalior. That apart, Ex. C-5 is the letter sent by the Commissioner, Muncipal Corporation to the Mayor-In-Council for approval, Ex.C-6 is letter by which Executive Engineer had informed the claimant about apporval of his lump sum negotiated rates, Ex.C-10 is the communication by Executive Engineer to the respondent/ claimant to deposit the remaining amount of security deposit to the tune of Rs.2,61,000/-, Ex.C-15 is the letter sent to the Commissioner asking the reason for not issuing work order in favour of the respondent/ claimant, Ex.C-47, C-48 and C-49 are the letter written by the respondent/claimant to the Executive Engineer for issuing work order in his favour. Besides that, vide resolution dated 22/12/2006, Municipal Corporation has clearly mentioned that by cancelling the contract of respondent/ claimant and allotting the same to M/s Paras Acquatec, there was no loss caused to the Corporation, instead it gained because of competitive rates offered by different tenderers. All aforementioned documents and facts

have been duly considered by the Arbitrator in paragraphs 2 (iii), 2(iv), 9, 10 & 17 of the Award. As such, it does not lie in the mouth of the appellant/ Corporation to deny existence of the agreement. No exception therefore, could be taken as regards existence of arbitration clause in the agreement, hence, the learned Court below has not committed any error of law or fact while rejecting the objections filed under Section 34 of the Act, 1996 by the appellant/ Corporation.

14. Shri Gupta, learned Senior Advocate also tried to persuade this Court with the submission that indeed there is no dispute about execution of the work by the respondent/ claimant i.e. repair work of water pump etc., as claimed but respondent is not entitled for the rates as claimed because he was given the work of repair in pursuance to the contract awarded at CSR rates (current scheduled rates), hence, his claim for more than the amount quantified through CSR for the repair work executed by him cannot be accepted. The arbitrator since did not consider the aforesaid aspect, therefore, the impugned award is contrary to the public policy and was liable to be interfered with by the learned Additional District Judge while hearing the objections under Section 34 of the Act, 1996.

15. Heard.

16. Having perused the impugned award, it is clear that while passing the award, the Arbitrator has carefully dealt with the evidence/ documents placed before it regarding factum of agreement, execution of work, negotiation of rates and approval of the contract on negotiable rates referred as agreement (Ex. C-2), letters of the Executive Engineer addressed to the claimant for participating in the negotiations (Ex.C-3 and C-4 ), negotiable rates ( Ex.C-7 ), letter mentioning the tender of lumpsum (ekmust) (Ex.C-11 ), approval of the Mayor In Council to the negotiated rates of the respondent/claimant (Ex.C-41), order of the Mayor-In- Council elaborating the negotiatiable rates (Ex.-C-43), letters (Ex.C-47, C-48, C-49) written by the respondent/claimant to the Executive Engineer for issuing work order. All the documents having material bearing in the case in hand have also been vetted by the Additional District Judge while dealing with objections preferred under Section 34 of the Act by the appellant/ Corporation in paragraphs 29, 30, 31 and 32 of the impugned order. In view of the aforesaid, we are of the considered view that, the Court below has given plausible reason while rejecting the objections under Section 34 of the Act, 1996 regard being had to the scope of jurisdiction of the Court as it is well settled position of law laid down by the Hon'ble Supreme Court in a catena of decisions as reiterated in the opening paragraphs of the impugned order, an

award can be set aside only if the award is against the Public Policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to, (a) fundamental policy of Indian Law; or (b) the interest of India; or

The impugned award is not only with due advertance to the terms of the agreement but also bearing in mind the relevant facts, peladings, documentary and oral evidence placed on record, and the same is neither against the substantive provisions of law nor is an infraction to the known dimensions of the concept of Public Policy of India as dealt with in the opening paragraphs of this order. Hence, in the considered opinion of this Court, no intereference is warranted either in the order passed by the learned Additional District Judge, Gwalior while rejecting the objections under Section 34 of the Act or while the Arbitrator had allowed the claim of respondent/ claimant in Arbitration Case No.05/10.

17. Consequently, appeal fails and the same is hereby dismissed.

                        (ROHIT ARYA)                 (MILIND RAMESH PHADKE)
                           JUDGE                                JUDGE
   VC



VARSHA
CHATURVEDI
2022.12.08 15:12:16
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