Madhya Pradesh High Court
P. C. Rajan Pillai vs Bharat Heavy Electricals Ltd. on 13 September, 2023
Author: Vishal Dhagat
1
IN THE HIGH COURT OF MADHYA PRADESH
AT JABALPUR
BEFORE
HON'BLE SHRI JUSTICE VISHAL DHAGAT
ARBITRATION APPEAL No. 19 of 2011
BETWEEN:-
P. C. RAJAN PILLAI CARRYING BUSINESS AS CIVIL AND
ELECTRICAL CONTRACTORS IN THE FIRM NAME AND
STYLE OF DEEPA ENGINEERS AS SOLE PROPRIETOR
THEREOF AND HAVING HIS OFFICE AT 42, WELFARE
CHAMBERS, IST FLOOR, SEC-17, VASHI, NAVI MUMBAI-
400705
.....APPELLANT
(BY SHRI S. K. RAO - ADVOCATE )
AND
BHARAT HEAVY ELECTRICALS LTD. (A COMPANY
REGISTERED UNDER THE COMPANIES ACT, 1958) AND
HAVING ITS REGISTERED OFFICE AT BHEL, HOUSE,
SIRI FORT NEW DELHI AND A FACTORY UNIT AT
PIPLANI BHOPAL (MADHYA PRADESH)
.....RESPONDENT
(BY SHRI ASHOK LALWANI WITH SHRI R. S. THAKUR - ADVOCATES )
Reserved on : 23/08/2023
Pronounced on: 13/09/2023
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This petition having been heard and reserved for judgment, coming on
for pronouncement this day, the Court pronounced the following:
JUDGMENT
1. Appellant has preferred an appeal under Section 37 (1)(b) of the
Arbitration and Conciliation Act, 1996 against order dated 11.3.2011 passed by
Special Court No.2, Bhopal in Arbitration Case No. 27/2008 by which
objections were allowed and award dated 4.12.2007 passed by sole Arbitrator
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Signed by: ARVIND KUMAR
DUBEY
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Mr. S. N. Patil was set aside.
2. Counsel for the appellant submitted that Court failed to consider
the law of arbitration while deciding objections preferred against award. Court
acted as an Appellate Authority and passed orders re-appreciating evidence
available on record. It is submitted that award can be challenged on limited
grounds enumerated in section 34 of the Arbitration and Conciliation Act, 1996
(hereinafter referred to as `the Act, 1996'). None of the said grounds was
available despite that Court interfered and set aside the award. Due to aforesaid
reason, interference done by Court was contrary to the Act, 1996. In these
circumstances, finding recorded by Court against award was also challenged on
its merits.
3. Counsel for the respondent/objector supported the order passed
by the Court and further submitted that no interference is called for as none of
the grounds has enumerated in Section 34 of the Act, 1996 is available to the
appellant to challenge order passed by Court. In these circumstances, appeal
may be dismissed.
4. Heard learned counsel for the parties.
5. Appellant has entered into contract with respondent/company for
doing civil work. Payment of final bill of Rs. 26,74,818/- was made . Appellant
after receiving an amount, on 1.12.2004 made a prayer for appointment of
Arbitrator. It was submitted by him that final bills of Rs. 1,76,69,823/- ought to
have paid to him. Shri S.N.Patil was appointed as sole Arbitrator and appellant
filed 10 claims before him. Out of which, claim no.1 for an amount of
Rs.4,60,872/- and claim no.3 for an amount of Rs. 47,83,601/- and claim no.9
for payment for payment of interest was allowed and rest of the 7 claims made
by appellant were rejected. Against award dated 4.12.2007, respondent-
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Signed by: ARVIND KUMAR
DUBEY
Signing time: 9/15/2023
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company preferred an application under Section 34 of the Act, 1996 for setting
aside the award.
6. Before sole Arbitrator, it was averred by appellant that 16th RA
bill was prepared. Period of contract was increased from 30.6.2000 to
30.7.2000. Appellant raised 17 bill for work done by him between 26.5.2000 to
30.6.2000. Measurement book was also produced before Arbitrator. Appellant
was pressurized to accept full and final payment. Appellant was under pressure
that he may not get the amount, therefore, he agreed to it and made full and final
settlement. It was also stated that amount in claim no.1 has wrongly been
deducted by respondent and award was passed.
7. Appellate Court considered evidence and arguments of the party
and held that once appellant has given full and final settlement receipt to
respondent thereafter agreement between the parties has come to an end. There
is no evidence on record to show that receipt was given under undue influence
and coercion. On basis of said finding, Additional District Judge, Special
Court, Bhopal set aside the award dated 4.12.2007 passed by Sole Arbitrator.
8. Perused the records of proceedings before Sole Arbitrator.
9. Section 34 of the Arbitration and Conciliation Act, 1996 is quoted
as under:-
34. Application for setting aside arbitral award.- (1) Recourse
to a Court against an arbitral award may be made only by an application
for setting aside such award in accordance with sub-section (2) and
subsection (3).
2. An arbitral award may be set aside by the Court only if-
(a) the party making the application [establishes on the basis of the record
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DUBEY
Signing time: 9/15/2023
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of the abrbitral tribunal that]-
i. a party was under some incapacity, or
ii. the arbitration agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law
for the time being in force; or
iii. the party making the application was not given proper notice of the
appointment of an arbitrator or of the arbitral proceedings or was
otherwise unable to present his case; or
iv. the arbitral award deals with a dispute not contemplated by or not
falling within the terms of the submission to arbitration, or it contains
decisions on matters beyond the scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to arbitration can
be separated from those not so submitted, only that part of the arbitral
award which contains decisions on matters not submitted to arbitration
may be set aside; or
v. the composition of the arbitral tribunal or the arbitral procedure was
not in accordance with the agreement of the parties, unless such agreement
was in conflict with a provision of this Part from which the parties cannot
derogate, or, failing such agreement, was not in accordance with this Part;
or
b. the Court finds that-
i. the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force, or
ii. the arbitral award is in conflict with the public policy of India.
[Explanation 1.- For the avoidance of any doubt, it is clarified that an
award is in conflict with the public policy of India, only if,-
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DUBEY
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(i) the making of the award was induced or affected by fraud or
corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian Law;
or
(iii) it is in conflict with the most basic notions of morality or justice.]
[ Explanation 2.-For the avoidance of doubt, the test as to whether
there is a contravention with the fundamental policy of Indian law shall not
entail a review on the merits of the dispute.]
[(2A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside by the Court, if
the Court finds that the award is vitiated by patent illegality appearing on
the face of the award:
Provided that an award shall not be set aside merely on the ground of
an erroneous application of the law or by re-appreciation of evidence.]
3. An application for setting aside may not be made after three months
have elapsed from the date on which die party making that application had
received the arbitral award or, if a request had been made under section
33, from the date on which that request had been disposed of by the
arbitral tribunal:
Provided that if the Court is satisfied that the applicant was
prevented by sufficient cause from making the application within the said
period of three months it may entertain the application within a further
period of thirty days, but not thereafter.
4. On receipt of an application under sub-section (1), the Court may,
where it is appropriate and it is so requested by a party, adjourn the
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DUBEY
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proceedings for a period of time determined by it in order to give the
arbitral tribunal an opportunity to resume the arbitral proceedings or to
take such other action as in the opinion of arbitral tribunal will eliminate the
grounds for setting aside the arbitral award.
[5. An application under this section shall be filed by a party only
after issuing a prior notice to the other party and such application shall be
accompanied by an affidavit by the applicant endorsing compliance with
the said requirement.]
[6. An application under this section shall be disposed of
expeditiously, an in any event, within a period of one year from the date on
which the notice referred to in sub section (5) is served upon the other
party.]
10. Counsel for the appellant submitted that grounds 34(2)(b)(ii) was
available to appellant for filing appeal. Arbitral Award is in-conflict with public
policy of India. Court has set aside the award passed by sole Arbitrator on
ground that no evidence was given to show that party was under undue
influence or coercion to sign final settlement of bills.
11. On going through the record of the case and award passed by
sole Arbitrator, it is found that sole Arbitrator has mentioned that no oral
evidence has adduced by the parties. Parties have filed settlement of claim,
written statement and documents and arguments were advanced on basis of
same. On basis of said arguments, sole Arbitrator held that 16th RA bill
measurement and final bill were reduced arbitrarily by respondent. Reduction
made was not in accordance with measurement book. Actual measurement was
recorded in measurement book and 16th RA bill was prepared in accordance
therewith. Reduction of amount of bill was done without any justifiable
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DUBEY
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reason. 16th and final bill bears a remark by Project Authority that bill is
prepared in line with the guidelines given by Head Office of respondent. On
basis of aforesaid, it was held that respondent has arbitrarily recorded the
measurement in 16th and final bill. One party cannot unilaterally deviate from
agreed measurement to the prejudice of others and claim of 16th RA bill stands
at Rs. 12,93,28,632.20/- was allowed. On basis of aforesaid fact, it was also
held that claimant was under economic duress and coercion as documents
reflect that unilaterally various changes were made in bills from time to time at
instruction of respondent-company and same was not in accordance with
actual measurement which is contained in measurement book. Reason has been
ascribed by Sole Arbitrator for allowing the claims of appellant. On basis of
documentary evidence, Sole Arbitrator reached a conclusion that there was
undue influence and coercion. Court committed an error of law in interfering
with award passed by sole Arbitrator. It is not the case that no evidence is
available on record to arrive at a conclusion that there was undue influence and
coercion for finally settling the bills. Evidence and reasons were discussed by
the sole Arbitrator. Evidence does not mean only oral evidence. It contains
documentary evidence also. Court has committed an error in interfering with the
award on the ground that no evidence has been adduced by the parties.
Documentary evidence was on record. No grounds as enumerated in Section 34
of the Act,1996 were available to the Court for interfering in well reasoned
award passed by sole Arbitrator.
12. In view of the aforesaid facts and circumstances, appeal filed by
appellant is allowed. Order dated 11.3.2011 passed on application under
Section 34 of the Act, 1996 is set aside.
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Signed by: ARVIND KUMAR
DUBEY
Signing time: 9/15/2023
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(VISHAL DHAGAT)
JUDGE
DUBEY/-
Signature Not Verified
Signed by: ARVIND KUMAR
DUBEY
Signing time: 9/15/2023
11:16:37 AM
