AO/300/2011
2022 Latest Caselaw 1824 UK

           IN THE HIGH COURT OF UTTARAKHAND
                              AT NAINITAL
                        SRI JUSTICE S.K. MISHRA, A.C.J.

           APPEAL FROM ORDER NO. 300 OF 2011

                             24TH JUNE, 2022

BETWEEN:

M/s O.P. Kalra & Brothers                                 ....Appellant.
And

U.P. Avas Evam Vikas Parishad & others                    ....Respondents.
Counsel for the Appellant             :      Mr. Tapan Singh, learned
                                             counsel.

Counsel for the Respondent Nos.1 to 3 :      Mr. B.S. Adhikari, learned
                                             counsel.

Counsel for the Respondent No.4       :      Mr. Rahul Consul, learned
                                             counsel.

                                   WITH
           APPEAL FROM ORDER NO. 390 OF 2011
BETWEEN:
U.P. Avas Evam Vikas Parishad & others                    ....Appellants.
And


M/s O.P. Kalra & Brothers                                 ....Respondent.
Counsel for the Appellants            :      Mr. B.S. Adhikari, learned
                                             counsel.

Counsel for the Respondent            :      Mr. Tapan Singh, learned
                                             counsel.

Upon hearing the learned Counsel, the Court made the
following

COMMON JUDGMENT :(per Sri S.K. Mishra, A.C.J.)

            Exception has been taken by the appellant in A.O.

No.300 of 2011, a proprietary firm, who was entrusted with

the contract works under the respondent No.1, to the

judgment passed by the learned District Judge, Haridwar in
                                  2

Miscellaneous Civil (Arbitration) Case No.34 of 2008, in

purported exercise of Section 34 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as "the Act"),

thereby modifying the awarded amount of Rs.10,55,520/- to

Rs.4,96,895/-, along with the past pendent lite and future

interest @9% per annum with effect from 19.03.2003 till the

payment of the said amount.


2.          Counter-appeal (AO No.390 of 2011) has been

preferred by the Uttar Pradesh Avas Evam Vikas Parishad

assailing those portions of the impugned judgment, by which

the learned District Judge has upheld the award partially in

favour of the contractor.


3.          Facts

of the case are not disputed at this stage.

There was an agreement between the Uttar Pradesh Avas

Evam Vikas Parishad (hereinafter referred to as "UPAEVP")

and the appellant bearing No.05/EE/2001-02 dated

19.09.2001 for construction of some shops in Ranipur,

Haridwar. The total cost of contract was Rs.23,98,727.63/-.

The work was to be executed by the contractor, the present

appellant, by 18.06.2002. On alleged failure of the contract

within the time prescribed, the contract was rescinded on

19.03.2003 by the UPAEVP. Consequently, the respondent

(appellant herein) moved the Housing Commissioner for

appointment of an Arbitrator as per clause-32 of the contract.

On 23.06.2004, Mr. D.C. Nautiyal, retired Chief Engineer,

P.W.D. Lucknow was nominated as sole arbitrator. He held

hearing on different dates in between 12.08.2004 to

28.10.2005. But, he could not complete the arbitral

proceedings. Hence, Mr. Girish Chandra Garg, retired Chief

Engineer, P.W.D. was appointed as the sole arbitrator, who

pronounced the award on 11.02.2008, by awarding a sum of

Rs.10,55,520/- along with interest @9% per annum. Such

award was challenged before the learned District Judge,

Haridwar in Miscellaneous Civil (Arbitration) Case No.34 of

2008. After taking up hearing of the case, the learned District

Judge took up each item of claim, set-aside the observations

and award with respect to Claim Nos.3, 7, 8 and 9. In other

words, the learned District Judge, while judging the

objections to the award raised by the UPAEVP, has re-

assessed the evidence, and taken into consideration each

item of claim made by the present appellant.

4. At the outset, Mr. Tapan Singh, the learned counsel

for the appellant-contractor, would argue that such approach

is not permissible under Section 34 of the Act. He, after

relying upon several judgments of this Court as well as the

Hon'ble Supreme Court, would further argue that the learned

District Judge, in purported exercise of Section 34 of the Act,

can set-aside the award only on limited grounds. He cannot

sit as a regular appellate court, and look into different claims

and objections raised before the Tribunal and re-assess/re-

appreciate the same.

5. Mr. B.S. Adhikari, the learned counsel appearing for

the UPAEVP, and Mr. Rahul Consul, the learned counsel

appearing for the Uttarakhand Avas Evam Vikas Parishad

(hereinafter referred to as "UKAEVP"), would argue that the

order passed by the learned District Judge does not require

any interference.

6. It may be noted here that, initially the case was

filed only against the UPAEVP, however, by order dated

30.11.2021, passed by this Court, UKAEVP has been arrayed

as a party respondent. It is further borne out from the

records that the amendment has not been carried out on the

appeal itself. Hence, the office to carry out the necessary

amendment.

7. It is also clear that after creation of the State of

Uttarakhand, the UKAEVP has been created, and all assets

and liabilities of the UPAEVP, with respect to the State of

Uttarakhand, have been transferred to the newly created

body. It is also not disputed by the learned counsel appearing

for the UPAEVP that all the assets and liabilities of the

UPAEVP, relating to the newly formed State, have been

transferred to it. It is, therefore, submitted by Mr. Tapan

Singh, the learned counsel for the appellant that the liability

of satisfying the award is on the UKAEVP.

8. Now reverting the arguments advanced by the

learned counsel for the parties, it is seen that Section 34 of

the Act provides for the ground for application for setting-

aside the arbitral award. It is appropriate to take note of the

exact words found in the statute. It reads 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 sub-section (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 of the arbitral 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,-

(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81.

(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 fact 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 the 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 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, and 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.]"

9. This Court, in the case of "Jai Prakash & Sons

vs. Central Public Works Department, 2022 (1) UC

161", (Appeal From Order No.499 of 2011, dated

30.11.2021), had decided the similar issue, and after taking

into consideration the provisions of Section 34 of the Act, and

the ratio decided by the Hon'ble Supreme Court, in the case

of "PSA SICAL Terminals Pvt. Ltd. vs. Board of Trustees

of V.O. Chidambranar Post Trust Tuticorin, (2021) SCC

Online 508", has held that in an application under Section

34 of the Act, the Court is expected to act as an appellate

court and re-appreciate the evidence. This Court has further

held that the scope of interference would be limited to

grounds provided under Section 34 of the Act. The

interference would be so warranted when the award is in

violation of "public policy of India", which has been held to

mean "the fundamental policy of Indian Law". A judicial

intervention on account of interfering on the merits of the

award would not be permissible. It is further held that

principles of natural justice as contained in Sections 18 and

34(2)(a)(iii) of the Act would continue to be the grounds of

challenge of an award.

10. Similarly, in the case of "Welspun Specialty

Solutions Ltd. (formerly known as Remi Metals Gujarat Ltd.),

(2022) 2 SCC 382", the Hon'ble Supreme Court has held that

Section 34 of the Act provided for certain specific grounds for

challenge. The limited grounds provided under Section 34 of

the Act have been interpreted by the Hon'ble Supreme Court

on numerous occasions. In the aforesaid reported case, the

challenge of award was based on the fact that the same is

against the public policy and patent illegality. Public policy as

a ground of challenge has always been met with certain

skepticism. The phrase 'public policy' does not indicate 'a

catch-all provision' to challenge awards before an appellate

forum on infinite grounds. However, the Hon'ble Supreme

Court has held that the ambit of the same is so diversely

interpreted that in some cases, the purpose of limiting

Section 34 jurisdiction is lost. The Hon'ble Supreme Court has

further held that Court's jurisprudence also shows that

Section 34(2)(b) has undergone a lot of churning and

continue to evolve. The purpose of Section 34 is to strike a

balance between Court's appellate powers and integrity of the

arbitral process.

11. It is apparent in this case that the learned District

Judge, while deciding the application under Section 34 of the

Act, has not come to the conclusion that there is any doubt or

shadow over the integrity of the arbitral award. The learned

District Judge, after considering each item of claim and the

evidence led, has come to the conclusion that such an

amount should not be awarded.

12. This Court also takes into consideration the

judgment rendered by a Co-ordinate Bench of this Court in

the case of "M/s Arvind Associates vs. Union of India (Appeal

From Order No.355 of 2008, dated 23.08.2021)", wherein the

Co-ordinate Bench took into consideration the reported

judgment in the case of "Project Director, National Highways

Authority of India vs. M. Hakeem & another, 2021 SCC Online

SC 473", and came to the conclusion that in a proceeding

under Section 34 of the Act, the learned District Judge shall

not act as a regular appellate court, but should confine his

findings only to the grounds enumerated in Section 34 of the

Act for setting-aside the arbitral award, passed by the Arbitral

Tribunal.

13. In that view of the matter, this Court is of the

opinion that the order passed by the learned District Judge,

Haridwar requires interference. Hence, the appeal is allowed,

and the judgment passed by the learned District Judge dated

21.05.2011 is, hereby, set-aside, and the arbitral award

dated 25.08.2008, passed by the sole arbitrator is, hereby,

restored to file.

14. The learned counsel for the UPAEVP and UKAEVP

only seek the indulgence of this Court to re-assess the

evidence and items of claims which were allowed in favour of

the contractor like a regular appeal.

15. This Court has held in previous paragraphs that

such approach is not permissible, and for that reason and the

reasons stated above in the preceding paragraphs, this Court

does not find any merit in AO No.390 of 2011, preferred by

the UPAEVP, and the same is, hereby, dismissed.

16. It is borne out from the record that as per the order

dated 10.10.2011, passed by this Court in Appeal From Order

No.390 of 2011, preferred by the UPAEVP, the entire awarded

amount, as per the judgment dated 21.05.2011, passed by

the learned District Judge, has been deposited by the

UPAEVP. The same shall be released in favour of the

appellant. As far as the remaining amount is concerned, the

same shall be paid by the UKAEVP to the appellant. The

UKAEVP is directed to pay the same to the appellant along

with interest @9% per annum only on the unpaid portion of

the award within a period of three months from today.

17. Urgent certified copy of this order be issued to the

learned counsel for the parties, as per Rules.

(S.K. MISHRA, A.C.J.)

Dated: 24th June, 2022 NISHANT