Babaji Nayak vs Rites Limited Represented ...
2023 Latest Caselaw 5189 Ori

         IN THE HIGH COURT OF ORISSA AT CUTTACK
                     ARBA No.21 of 2007

     (From the Judgment dated 26.07.2007 passed by the learned
     District Judge, Dhenkanal in Arbitration Petition No.249 of
     2005 arising out of arbitration award dated 27.07.2005 passed in
     Arbitration Case No.1 of 2003


     Babaji Nayak                              ....           Appellant

                                 -versus-



     RITES Limited represented through    ....              Respondent
     its Deputy General Manager(C), RITES

     Advocates appeared in the case:
     For Appellant             :              Mr. B.N. Mohanty, Adv.

                                 -versus-

     For Respondent              :             Mr. B.S. Tripathy, Adv.


                 CORAM:
                 DR. JUSTICE S.K. PANIGRAHI

                   DATE OF HEARING:-18.01.2023
                  DATE OF JUDGMENT:-05.05.2023

  Dr. S.K. Panigrahi, J.

1. This Appeal under Section 37 of the Arbitration and Conciliation

Act, 1996 (hereinafter referred to as "the Act" for brevity) has been

filed seeking setting aside of the Judgment dated 26.07.2007

pg. 1 passed by the learned District Judge, Dhenkanal in Arbitration

Petition No.249 of 2005 arising out of arbitration award dated

27.07.2005 passed in Arbitration Case No.1 of 2003 by the learned

Sole Arbitrator Shri Govinda Das, Sr. Advocate.

I. FACTUAL MATRIX OF THE CASE:

2. In response to the Tender Call Notice dated 15.11.2000 issued by

the present Respondent, the Appellant submitted his tender on

12.12.2000 for execution of the balance work pertaining to Section

KB-I and II for Kalinga Railway Siding at Talcher, Angul District.

3. Having been declared successful, work order dated 25/30.1.2001

was issued in favour of the Appellant. The work order indicated

the time limit for completion of the contract to be three months.

After receiving the work order, the Appellant approached the

present Respondent at the site office for handing over of the site.

Subsequently, a portion of the site was handed over to the

Appellant on 02.02.2001 and the completion period of the work

was to be countenanced from that date.

4. Upon commencement of execution of the work, the tenants of Plot

Nos.1414, 1415 and 1416 of Khata No.184 of Mouza-Danara raised

a hue and cry on account of non-receipt of compensation as well

as employment pursuant to the land acquisition by Mahanadi

Coal Fields Ltd. These tenants allegedly created grave obstruction

and did not allow the present Appellant to proceed with execution

of the work. The same appears to have been intimated by the

pg. 2 Appellant to the Respondent through multiple letters, with the

first being written on 01.03.2001 and last on 20.11.2001.

5. It appears that despite the fact that the adverse situation was

brought to the knowledge of the present Respondent, it insisted

on completion of the work without rendering any assistance to

solve the issue of obstructions created by the tenants. Meanwhile,

the present Appellant also allegedly attempted to resolve the

issues of the tenants but the same was to no avail. In these

circumstances, the present Appellant requested the Respondent to

close the contract with refund of the security deposit and settle his

claims towards deployment of machines and man power at the

site for the extended period. It is pertinent to note here that there

was unilateral extension of time for completion of the work by the

Respondent despite no such request having been made by the

present Appellant.

6. However, in response to the request for closure of the contract, the

Respondent served an ultimatum on the Appellant to complete

the work in line with the extension granted i.e. by 13.11.2001 or

suitable action would be taken under Clause-62 of the General

Conditions of Contract. Vide letter dated 13.11.2001, the

Respondent gave the Appellant 48 hours additionally to complete

the work, failing which the contract would stand rescinded and

the earnest money deposited by the Appellant would be forfeited.

It was also brought to the notice of the Appellant that upon his

pg. 3 failure to complete the work, a subsequent agency would be

brought in to complete the work.

7. The contract ultimately stood rescinded by the Respondent on

20.11.2001. The present Appellant vide letter dated 27.12.2001

claimed a compensation of Rs.90,57,084/- towards the financial

loss sustained by the Appellant and requested that the matter may

be referred to Arbitration as per Clause 63 of the General

Conditions of Contract.

8. Upon failure of the Respondent to appoint an Arbitrator within

the 30 days, the Appellant approached this Court under Section

11(6) of the Act, wherein after hearing the parties, Sri Govinda

Das, Sr. Advocate was appointed as the sole Arbitrator to

adjudicate the dispute and difference between the parties.

9. After hearing the parties, the learned Sole Arbitrator vide his

award dated 27.07.2005 was pleased to partly allow the claims

made by the Appellant and rejected all the counter claims of the

Respondent. The learned Arbitrator partly allowed Claim No.2

(hiring charges of machineries) at Rs.7,500/- for 288 days for a total

of Rs.21,00,000/-; Claim No.4 (the wages of the employees

employed by the Appellant) for Rs.85,000/-; Claim No.10 (loss of

profit) at Rs.2,18,000/-, Claim No.1 (refund of security

deposit/EMD) at Rs.50,000/- and Claim No.12 (cost of litigation) at

Rs.15,000/- for a total amount of Rs.24,68,000/- with interest @ 9%

pg. 4 per annum from the date of commencement of the arbitration

proceeding to the date of payment of the amount.

10. Being aggrieved, the present Respondent approached the learned

District Judge, Dhenkanal under Section 34 of the Act vide ARBP

No.249 of 2005 seeking setting aside of the arbitral award dated

27.07.2005. After hearing both parties, the learned District Judge

vide order dated 26.07.2007, while upholding the award, partially

modified the same and reduced the amount awarded under Claim

No.2 (hiring charges of machineries) from Rs.21,00,000/- to

Rs.6,75,000/- and also set aside the Claim No. 2 (cost of litigation)

completely. The awarded amount was, therefore, revised by the

learned District Judge from Rs.24,68,000/- to Rs.10,28,000/-.

11.Being aggrieved, the present Appellant filed the present appeal

under Section 37 of the Act seeking setting aside of the judgment

dated 26.07.2007 passed by the learned District Judge, Dhenkanal

in Arbitration Petition No.249 of 2005 arising out of arbitration

award dated 27.07.2005 passed in Arbitration Case No.1 of 2003 by

the learned Sole Arbitrator.

12.As the matter stood thus, while the present Appeal was pending,

the present Respondent paid an amount of Rs.13,43,016/- to the

Appellant. The present Respondent then contended that the said

amount was paid in "full and final settlement" of the award as

modified by the learned District Judge vide order dated 26.07.2007

in Arbitration Petition No.249 of 2005 and, therefore, the present

pg. 5 Appeal ought to be dismissed. Despite protest by the counsel for

the Appellant, the said contention was accepted by this Court and

the present Appeal stood dismissed by order dated 13.09.2019 in

ARBA No.21 of 2007. However, the present Appellant approached

the Supreme Court vide SLP(C) No.27625 of 2019 and sought the

setting aside of order of this Court dated 13.09.2019 passed in the

present Appeal. The Supreme Court was pleased to allow the

Special Leave Petition and vide order dated 23.08.2022 in SLP(C)

No.27625 of 2019 directing that the present Appeal be restored

and adjudicated upon independently on its own merits.

13.Now that the facts leading up to the instant Appeal has been laid

down, this Court makes endeavour to summarise the contentions

of the Parties and the broad grounds on which they have

approached this Court seeking the exercise of this Court's limited

jurisdiction available under Section 37 of the Act.

II. APPELLANT'S SUBMISSIONS:

14. The counsel for the Appellant assails the impugned order dated

26.07.2007 of the learned District Judge mainly on the ground that

the learned District Judge, ignored the exclusive list of limited

grounds as contemplated under Section 34 of the Act and made an

endeavor to enlarge the scope of the same in order to interfere

with the award passed by the Arbitrator.

15.Furthermore, it was vehemently contended that while modifying

and reducing the amount awarded by the Arbitrator under Claim

pg. 6 No.2 (hiring charges of machines), the learned District Judge has

re-appreciated the evidence in order to examine the correctness of

the conclusion of the Arbitrator. By substituting his own views

and evaluation with that of the Arbitrator, the learned District

Judge has contravened the settled position of law which does not

permit any such substitution. Upon arriving at the conclusion that

the arbitral award is not in conflict with public policy or any

substantive law, the learned District Judge went beyond the scope

of Section 34 of the Act in substituting the reasoning of the

Arbitrator as well as partially modifying the award, both of which,

as submitted, is impermissible in law.

16.As regards to the cross objections filed by the present Respondent,

it was submitted by the counsel for the Appellant that the same is

impermissible and not maintainable in law. Furthermore, the

conduct of the Respondents in disbursing the amount as modified

by the learned District Judge indicates their acceptance and

admission of their liability.

III. RESPONDENT'S SUBMISSIONS:

17. Per contra, the learned Counsel for the Respondent submitted that

the present appeal ought to be dismissed as the Appellant has

received the entire modified awarded amount including the

interest on 03.11.2007 without any objection and demur.

18. Furthermore, in the entire discussion on Claim No.2, it was

submitted that there was no finding or reason assigned by the

pg. 7 Arbitrator that the contractor is entitled to compensation at the

rate of Rs.7500/- per day for 280 days (though the contract period

was for 90 days). The Arbitrator failed to appreciate that a

contractor who was entrusted with the work for a total contract

value of Rs.21,72,400/- would never pay hiring charges of

Rs.22,500/- per day as in that eventuality the contractor would

have a paltry sum to meet the expenses of labour payment, cost of

material and cost of establishment. The award of hiring charges of

Rs.7500/- per day was, therefore, violative of the Act.

19.It was also submitted that the Award was illegal as the Arbitrator

had deliberately ignored the material documents filed by the

Respondent. The award is not based on the evidence on record

and the Arbitrator distorted the tenor of the contract by giving

inconsistent and contradictory conclusions. As such, it was

vehemently submitted that the Award of the Arbitrator is not in

conformity with the public policy of India.

20. With reference to the cross objections, the counsel for the

Respondent submitted that the learned District Judge having held

that the Arbitrator has committed serious illegalities, should have

set aside the entire awarded amount instead of partially

modifying the same. Furthermore, the Respondent alleged that no

part of the award could be sustained as the appointment of the

Arbitrator was without jurisdiction and this aspect was not

properly considered by the Arbitrator while disposing of the

pg. 8 petition under Section 16 of the Act. It was also submitted that the

learned District Judge did not take note of the entire matter in its

proper perspective and as such the judgement of the court to the

extent it upheld the award is liable to be set aside.

IV. ISSUES FOR CONSIDERATION:

21.Having heard the learned Counsel for the parties and perused the

materials available on record, this Court here has identified the

following issues to be determined:

A. What is the scope of this Court's power under Section 37 of the Act and whether the arbitral award is in contravention of the public policy of State under Section 34(2)(b)(ii) of the Act?

B. Whether the Court while considering the objections under Section 34 of the Act may sit as a Court of appeal and re-appreciate or reassess the case of the parties and whether the Court is permitted to partially modify the award?

C. Whether the Appellant is barred from raising any dispute after accepting any payment of the nature of alleged "full and final payment"?

D. Whether the Arbitrator erred in law by granting interest on the awarded amount in the absence of a provision in the contract between the parties?

E. Whether a cross objection is maintainable in an appeal under Section 37 of the Act?

V. ISSUE A: WHAT IS THE SCOPE OF THIS COURT'S POWER UNDER SECTION 37 OF THE ACT AND WHETHER THE ARBITRAL AWARD IS IN CONTRAVENTION OF THE PUBLIC POLICY OF STATE UNDER SECTION 34(2)(B)(II) OF THE ACT?

pg. 9

22. In the present matter, this Court concerned with Section 37(1)(c)

which states that an appeal lies under Section 37 from an order

setting aside or refusing to set aside an arbitral award under

Section 34. This Court has had the occasion to recently deal with

this question in its judgment dated 09.01.2023 in ARBA No.39 of

2018 titled as United India Insurance Company Ltd., Bhubaneswar

v. Suryo Udyog Ltd.

23. The Supreme Court has confined the supervisory role of the

Courts when it comes to testing the validity of an Arbitration

Award. The Supreme Court in Mcdermott International

Inc. v. Burn Standard Co. Ltd.1 held that the Court may intervene

only in cases involving fraud, bias, violation of the principles of

natural justice, etc. but not to correct errors of the Arbitrator. The

interference of the Court must be kept at a minimum level.

24.Under Section 37, the extent of judicial scrutiny and scope of

interference is further narrower. The Supreme Court in UHL

Power Co. Ltd. v. State of H.P.2, recently held as follows:

"16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC

(2006) 11 SCC 181

(2022) 4 SCC 116

pg. 10 Ltd. v. Vedanta Ltd. [MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163 : (2019) 2 SCC (Civ) 293] , the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the Arbitration Act have been explained in the following words : (SCC pp. 166-67, para 11) "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 approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] 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."

pg. 11 A similar view, as stated above, has also been taken by the

Supreme Court in K. Sugumar v. Hindustan Petroleum Corpn.

Ltd.3.

25.It is in the parameters as laid down by the Apex Court vis-a-vis

the scope of judicial intervention that the present appeal

impugning the order dated 26.07.2007 passed by the learned

District Judge, Dhenkanal in Arbitration Petition No.249 of 2005

arising out of arbitration award dated 27.07.2005 passed in

Arbitration Case No.1 of 2003 by the learned Sole Arbitrator shall

be dealt with.

26.In Oil & Natural Gas Corporation Ltd. v. Western Geco

International Limited4, the Apex Court has observed that the

award could be set aside if it is against the public policy of India,

that is to say, if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality; or

(d) if it is patently illegal.

27.After being subsequently discussed in Associate Builders v. Delhi

Development Authority5 the position of law was clarified and laid

(2020) 12 SCC 539

(2014) 9 SCC 263

(2015) 3 SCC 49

pg. 12 down recently by the Supreme Court in Ssangyong Engg. &

Construction Co. Ltd. v. NHAI6 wherein it was held that:

"36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paras 18 and 27 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] , or secondly, that such award is against basic notions of justice or morality as understood in paras 36 to 39 of Associate Builders [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] ."

28. It is the Respondent's earnest contention that the arbitral award

goes against the fundamental public policy of India as the

appointment of the Arbitrator is contrary to the mandate of the

contract. The same issue was agitated by the Respondent in the

appeal preferred by them under Section 34 of the Act. The learned

District Judge has correctly given this issue primacy as the same

affects the root of the matter.

29.In this regard, this Court notes that it was the Appellant who vide

letter dated 27.12.2001 raised a demand to refer the dispute to an

Arbitrator. Upon receiving no reply, the Appellant approached

this Court under Section 11(6) of the Act seeking appointment of

an Arbitrator. This Court vide order dated 05.09.2002, was pleased

to appoint Sri Govinda Das, Sr. Advocate to adjudicate the dispute

(2019) 15 SCC 131

pg. 13 and difference between the parties. Section 11 of the Act clearly

stipulates that if the parties fail to agree on an Arbitrator within 30

days of the date of receipt of the request made, then the Chief

Justice or any person or institution designated by him may be

approached to secure the appointment of an Arbitrator. When the

present Respondent failed to act, as is required by the statute, the

Appellant approached this Court. The present Respondent's

grievance arises from the fact that Clause 64.6 of the General

Conditions of Contract which states that the Arbitrator is to be an

Engineer from the Respondent's company. However, this Court is

of the view that the said contention will not survive because the

intent of Section 11 of the Act clearly implies that the Chief Justice

or his designate will make the "choice" of the person to be

appointed as an Arbitrator. Being thus so, the Chief Justice or his

designate cannot be said to be bound by the agreement entered

into between the parties, as if the same was the intention of the

legislature, then it would have been expressly provided in the Act.

The Supreme Court has held in this regard in Datar Switchgears

Ltd. v. Tata Finance Ltd.7 that if the opposite party, upon receipt

of a request for appointment of an arbitrator, does not do so

within 30 days, then the opposite party's right shall cease in this

regard. This reasoning, which was also adopted by the learned

District Judge, suffers no infirmity.

(2000) 8 SCC 151

pg. 14

30.Therefore, bearing in mind the limited scope for this Court's

interference, the arbitral award cannot be said to be perverse,

absurd or against the fundamental public policy of India on this

ground.

VI. ISSUE B: WHETHER THE COURT WHILE CONSIDERING THE OBJECTIONS UNDER SECTION 34 OF THE ACT MAY SIT AS A COURT OF APPEAL AND RE-APPRECIATE OR REASSESS THE CASE OF THE PARTIES AND WHETHER THE COURT IS PERMITTED TO PARTIALLY MODIFY THE AWARD?

31. The law is no longer res integra that where the Arbitrator has

assessed the material and evidence placed before them in detail,

the Court while considering the objections under Section 34 of the

said Act does not sit as a Court of appeal and is not expected to re-

appreciate the entire evidence and reassess the case of the parties.

It is not open to the Court to interfere with the award merely

because in the opinion of the Court, another view is possible. The

duty of the Court, in these circumstances, is to see whether the

view taken by the Arbitrator is a plausible view on the facts,

pleadings and evidence before the Arbitrator. Even if on the

assessment of material, this Court while considering the objections

under Section 34 is of the view that there are two views possible

and the Arbitral Tribunal has taken one of the possible views

which could have been taken on the material before it, the court

would be reluctant to interfere. The Court is not to substitute its

pg. 15 view with the view of the Arbitrator if the view taken by the

Arbitrator is supported by his own reasoning. The same has been

previously reiterated by this Court in State of Orissa v.

Bhagyadhar Dash8.

32.It is seen that the Arbitrator has elaborately considered the various

documents, submissions and evidence led by the parties. The

contract being extended - whether unilaterally or not, would

create a duty to perform on the Appellant. The Appellant has

shown that he was willing and desirous to complete the contract

but because of the lack of assistance from the Respondent, he

could not do so. In this regard, this Court does not deem it

unreasonable that the Appellant would have had deployed

machinery for the entire duration of the contract. As such, the

Arbitrator has applied his mind and granted reasonable hiring

charges per day instead of directly allowing the hiring charges

claimed by the Appellant. The Supreme Court in P.R. Shah Shares

& Stock Broker (P) Ltd. v. B.H.H. Securities (P) Ltd.9 has held that

a Court does not sit in appeal over the award of an Arbitrator by

re-assessing or re-appreciating the evidence. An award can be

challenged only on the grounds mentioned in Section 34(2) of the

Act and in absence of any such ground, it is not possible to re-

examine the facts to find out whether a different decision can be

2016 SCC OnLine Ori 1039

(2012) 1 SCC 594

pg. 16 arrived at. This view was reiterated by the Apex Court in Swan

Gold Mining Ltd. v. Hindustan Copper Ltd.10, K.V. Mohd. Zakir v.

Regional Sports Center11 and State of U.P. v. Ram Nath

Constructions12 and the High Court of Delhi in M/S Pragya

Electronics Pvt. Ltd. v. M/s Cosmo Ferrites Ltd.13.

33.The learned District Judge has entered into the merits of the claim

and has decided the appeal under Section 34 of the Act as if the

District Court was deciding the dispute between the parties

afresh. The learned District Judge has embarked on a journey to

substitute his own reasoning with that of the learned Arbitrator by

modifying the amount payable under Claim No.2. The learned

District Judge has exercised jurisdiction not vested in it under

Section 34 of the Act.

34.Furthermore, it has been held time and again by the Supreme

Court in McDermott International Inc. v. Burn Standard Co.

Ltd.14, Kinnari Mullick v. Ghanshyam Das Damani15 and Dakshin

Haryana Bijli Vitran Nigam Ltd. v. Navigant Technologies (P)

Ltd.16. that under Section 34, the award can only be confirmed or

set aside, but not modified. The Supreme Court recently in NHAI

(2015) 5 SCC 739 11 AIR 2009 (SCW) 6217

(1996) 1 SCC 18

2021 SCC OnLine Del 3428

(2006) 11 SCC 181

(2018) 11 SCC 328

(2021) 7 SCC 657 pg. 17 v. M. Hakeem17, held that Section 34 being an appellate provision,

only provides for setting aside awards on very limited grounds.

Section 34 of the Act, does not include within its scope, the power

to modify an award.

35.In light of the settled position of law, this Court is unable to

sustain the reappreciation of the evidence or the modification of

the arbitral award by the learned District Judge.

VII. ISSUE C: WHETHER THE APPELLANT IS BARRED FROM RAISING ANY DISPUTE AFTER ACCEPTING ANY PAYMENT OF THE NATURE OF ALLEGED "FULL AND FINAL PAYMENT"?

36. For this Issue, this Court considers it apposite to first reproduce a

portion of the Supreme Court's order dated 23.08.2022 passed in

SLP(C) No.27625 of 2019, by virtue of which the present Appeal

was restored. The Apex Court observed therein:

"It reveals from the order impugned dated 13.09.2019 that the High Court has not looked into the appeal preferred at the instance of the petitioner on merits and dismissed on the premise that the petitioner had accepted a sum of Rs.13,43,016/- in terms of the award passed by the District Judge dated 26.07.2007 and since it was accepted by the petitioner without any protest, they have no right to continue with the proceedings initiated under Section 37 of the Act.

(2021) 9 SCC 1

pg. 18 It is also brought to our notice that the respondent has also filed cross objections and that too have been disposed of under the order impugned dated 13.09.2019.

With the assistance of the learned Counsel for the parties, we have looked into the money receipt dated 03.11.2007 which is on record (page 162), it nowhere indicates that it was accepted by the petitioner towards full and final settlement in terms of the award rather it is a money receipt signed by the petitioner and there is no other document filed by either party which may disclose that money has been accepted by the petitioner either under protest or for full and final settlement in terms of the award passed by the District Judge dated 26.07.2007.

After we have heard the learned Counsel for the parties, in our considered view, the judgment passed by the High Court impugned dated 13.09.2019 is not sustainable in law and deserves to be set aside."

37.As has been previously discussed by this Court in United India

Insurance Company Ltd., Bhubaneswar v. Suryo Udyog Ltd.

(supra), accepting a payment in the nature of a so-called "full and

final payment" in itself is not a bar for the Court in adjudicating

upon a dispute arising out of the quantum of such payment. It has

been held by the Supreme Court in National Insurance Company

Ltd. v. Boghara Polyfab Pvt. Ltd.18 that even in the case of

issuance of full and final discharge/settlement voucher/no-dues

certificate the arbitrator or Court can go into the question whether

(2009) 1 SCC 267 pg. 19 the liability has been satisfied or not. This decision has followed

the view taken by the Supreme Court in Chairman and Managing

Director, NTPC Ltd. v. Reshmi Constructions,

Builders and Contract19, which has also been reiterated by the

Apex Court in R.L. Kalathia & Co. v. State of Gujarat20 and

Ambica Construction v. Union of India21.

38.In the present case, however, as has been noted by the Supreme

Court itself, the money receipt dated 03.11.2007 nowhere indicates

that it was accepted by the Appellant towards full and final

settlement in terms of the award. Rather, it is merely a money

receipt signed by the Appellant without any such endorsement to

this effect. Therefore, the present Appeal can by no stretch of

imagination be liable to be dismissed on account of the present

Appellant receiving a sum of money in furtherance of the

impugned judgment and order.

VIII. ISSUE D: WHETHER THE ARBITRATOR ERRED IN LAW BY GRANTING INTEREST ON THE AWARDED AMOUNT IN THE ABSENCE OF A PROVISION IN THE CONTRACT BETWEEN THE PARTIES?

39. It is the contention of the Respondent that the learned Arbitrator

has also committed a patent illegality by granting interest at the

rate of 9% per annum when allegedly there is an express bar in the

General Conditions of Contract which governs the parties. A bare

(2004) 2 SCC 663

(2011) 2 SCC 400

(2006) 13 SCC 475

pg. 20 perusal of Clause 64.11. of the General Conditions of Contract

which refers to money claims, shows that it does not encompass

within its scope of applicability to arbitral awards which arise out

of a claim pertaining to determination, termination or non-

fulfillment of the contract. The Appellant's claim cannot be

equated to a money claim as the same arose because the Appellant

was unable to complete the contract despite his willingness and

readiness to do so. Therefore, the award of a moderate rate of

interest by the Arbitrator cannot be termed to be patently illegal.

40. Furthermore, as the conditions of the contract between the parties

is silent as to award of interest made for a claim of such an nature,

this Court may refer to the Supreme Court in Bhagwati Oxygen

Ltd. v. Hindustan Copper Ltd.22 wherein it was held that if there is

no provision in the arbitration agreement for a rate of interest,

then it is in the discretion of the Arbitral Tribunal to determine the

rate of interest to be granted based on the facts and circumstances

of the matter in hand. The learned Arbitrators further have the

power and jurisdiction to grant interest in all three stages of an

arbitration i.e. pre-reference period, pendente lite and post award

period. The learned Arbitrators are only bound by the terms of

the agreement entered into between the parties, but in cases where

the agreement is silent about the question of interest, the learned

AIR 2005 SC 2071 pg. 21 Arbitrators are required to use the test of reasonableness and

exercise their discretion in awarding interest.

IX. ISSUE E: WHETHER A CROSS OBJECTION IS MAINTAINABLE IN AN APPEAL UNDER SECTION 37 OF THE A&C ACT?

41. At the outset, it may be noted that this Court is of the opinion that

keeping the settled position of law in mind and the discussion

above, the arbitral award is not liable to be set aside on merits and

the learned District Judge's partial modification of the same is not

tenable in law.

42.However, this Court also considers it appropriate to briefly touch

upon the question of maintainability of cross objections in an

appeal under Section 37 of the Act.

43. While dealing with the previous Arbitration Act of 1940, the

Supreme Court in Municipal Corporation of Delhi and others v.

International Security and Intelligence Agency Limited23 had

inter-alia dealt with the issue of competence and maintainability of

cross objections in an appeal preferred under the Arbitration Act,

1940.

44.In this regard, the Supreme Court noted that Section 41(a) of the

Arbitration Act, 1940 provides that "the provisions of the Code of

Civil Procedure, 1908 (V of 1908), shall apply to all proceedings before

the Court, to all appeals, under Arbitration and Conciliation Act". A

(2004) 3 SCC 250

pg. 22 bare reading of Section 41(a) of the Arbitration Act, 1940 would

suggest that in all the appeals filed under Section 39 of the

Arbitration Act, 1940, the provisions of Order 41, Rule 22 of the

C.P.C. would be applicable. The Supreme Court also observed

that the right to take a cross objection is the exercise of substantive

right of appeal conferred by a statute, and the grounds of

challenge against the judgment, decree or order impugned remain

the same whether it is an appeal or a cross objection. The

difference lies in the form and manner of exercising the right.

Hence, the Supreme Court held that a cross objection can be

preferred under Section 39 of the Arbitration Act, 1940.

45. However, unlike the Arbitration Act of 1940, there is no such

provision in the present Act to prescribe that the provisions of the

C.P.C. should apply to all the proceedings before the court and to

all appeals under the Act.

46.The issue of applicability of C.P.C. in the context of

maintainability of cross objection under Section 37 of the

Arbitration and Conciliation Act, which was specifically dealt

with by the Supreme Court in the case of Mahanagar Telephone

Nigam Limited v. Applied Electronics Limited24.

47.The Apex Court while dealing with the applicability of the

provisions of C.P.C. with respect to proceedings taken under the

provisions of the Act, observed that while enacting the Act, the

(2017) 2 SCC 37 pg. 23 legislature has intentionally not carried forward any provision

pertaining to the applicability of C.P.C. While differing from the

ratio laid down in the case of Municipal Corporation of Delhi and

others v. International Security and Intelligence Agency

Limited (supra), the Supreme Court observed that the said

decision was rendered in the backdrop of the Arbitration Act,

1940, and hence, it is distinguishable. The Apex Court held that

the Arbitration and Conciliation Act, 1996 being a complete code

in itself, the applicability of C.P.C. is not to be conceived.

Accordingly, the Supreme Court held that the application of the

provisions of Order 41, Rule 22 of C.P.C., cannot be construed to

maintain a cross objection in an appeal filed under Section 37 of

the Arbitration and Conciliation Act.

48.The Supreme Court while rendering the above view, considered

its earlier decision in ITI Limited v. Siemens Public

Communications Network Limited25 wherein it has inter alia been

held that there is no express prohibition against the applicability

of C.P.C. in a proceeding arising out of the Arbitration and

Conciliation Act, hence, there cannot be any inference that C.P.C.

is not applicable in the matters related to the Arbitration and

Conciliation Act when the express exclusion of C.P.C. is not

provided for. The Supreme Court observed that the decision in ITI

Limited vs. Siemens Public Communications Network Limited

(2002) 5 SCC 510

pg. 24 (supra), though a binding precedent, appears to be incorrect, as

the scheme of the Arbitration and Conciliation Act clearly

provides otherwise and the legislative intent of the Arbitration

and Conciliation Act also postulates the same.

49.In view of such conflict with its pervious decision, the Supreme

Court observed that the views expressed in ITI Limited vs.

Siemens Public Communications Network Limited (supra)

deserves to be reconsidered by a larger Bench and the Supreme

Court continues to be in seisin of the said issue.

50.Until the date and judgment of this order, the outcome of the

reference to the larger Bench remains pending. Till then, it is

pertinent to mention, that the decision of the Supreme Court

in Mahanagar Telephone Nigam Limited s. Applied Electronics

Limited (supra) holds the field, which held that the filing of cross

objection under Section 37 of the Arbitration and Conciliation Act

is not maintainable; and that analogy cannot be drawn from the

provision of Order 41, Rule 22 of the C.P.C., as the same is not

applicable on the proceedings arising under the Arbitration and

Conciliation Act, 1996. Therefore, while even on merits the cross

objections are deemed to not hold much water, the said cross

objections as per the present position of law is also not

maintainable.

51.This Court also briefly notes that the conduct of the Respondent of

accepting and admitting their liability as per the award to the

pg. 25 extent of Rs.28,79,350/- as alleged to be evident from the deduction

of TDS is not extensively dealt with here. The counsel for the

Respondent has clarified that the said TDS certificates were

erroneous, immediately rectified with amendment of return and

the same was duly communicated to the Appellant. This Court

proposes to leave it at that.

X. CONCLUSION:

52. Therefore, in light of the discussion, keeping the settled principles

of law in mind and for the reasons given above, this Court is of the

considered view that the learned Arbitrator acted well within his

jurisdiction in awarding the appropriate relief.

53.The award of Rs.24,68,000/- including interest @ 9% per annum in

favour of the Appellant vide arbitral award dated 27.07.2005 is

upheld and reinstated in its entirety. The Respondent is directed

to make good the payment without any further delay after making

the adjustment in accordance with the amount already paid.

54.Consequently, it is observed that the present ARBA No.21 of 2007

is allowed and the arbitral award is upheld. The cross objections

are dismissed. No order as to costs.

( Dr. S.K. Panigrahi ) Judge Orissa High Court, Cuttack, Dated the 5th May,, 2023/B. Jhankar

BHABAGR Digitally signed by BHABAGRAHI AHI JHANKAR Date: 2023.05.10 JHANKAR 17:24:50 +05'30' pg. 26