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Union of India (Uoi) Vs. Hind Builders and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberAward Case No. 151 of 1984
Judge
Reported inAIR1985Cal204
ActsArbitration Act, 1940 - Section 5; ;Interest Act, 1978 - Section 3; ;Code of Civil Procedure (CPC) , 1908 - Section 34
AppellantUnion of India (Uoi)
RespondentHind Builders and ors.
Appellant AdvocateSujit Sinha, Adv.
Respondent AdvocateA.C. Bhabra and ;Jayanta Mitra, Advs.
Cases Referred(Sree Bajrang Jute Mills Ltd. v. Fulchand Kanhaiyalal Co.
Excerpt:
- .....itssubmissions. but the arbitrators entertainedthe said claims and misconducted themselves.4. the arbitrators awarded general damages for breach of contract twice and this error appears on the face of the award. 5. the arbitrators misconducted themselves in awarding interest in the manner mentioned in the award.3. the counsel for the petitioner submitsthat under clause 62 of the contract, therespondent was bound to refer all the disputesfirst to the railway for decision. if the railwaywould fail to give decision within a reasonabletime, or the respondent was dissatisfied withthe decision, then and then only it could invokethe arbitration clause and not otherwise. thiswas a condition precedent which ought tohave been fulfilled before a reference couldbe made. in the present case the.....
Judgment:
ORDER

Pratibha Bonnerjea, J.

1. In the present case, thereference was started under an order of Courtmade on 6th May 1983 in Special Suit No. 77of 1983 instituted by the M/s. Hind Buildersunder Section 20 of the Arbitration Act. The Unionof India duly filed its affidavit-in-opposition inthe said special suit and contested the saidproceeding. Thereafter the parties prosecutedthe arbitration proceeding and an award wasmade in favour of Hind Builders on 26-3-84. Inthis application, the Union of India has prayedfor setting aside the said award on severalgrounds mentioned in the petition.

2. During hearing, the petitioner's counsel, however, pressed five grounds only which are as follows : --

1. The order of reference D/- 6-5-83 was made without jurisdiction. Hence the reference was bad and the award is non est.

2. In the course of the arbitration proceeding it was agreed between the parties that the final measurement accepted by the parties would form the basis of the adjudication by the Arbitrators. The Joint Arbitrators misconducted themselves in not poceeding on the basis of the said agreed measurements.

3. At the arbitrators' meeting on 2-3-84, thepetitioner had prayed for time to adduceevidence against respondents' claim foradditional works. The Arbitrators refused thesaid prayer and did not record the same in theminutes of the meeting. At the next sitting on7-3-84, the petitioner made a formal applicationfor time to adduce evidence. It is alleged thatthe representatives of the petitioner, whoattended the meeting oh 7-3-84 were led tobelieve by the Arbitrators that the jointarbitrators would not entertain therespondents' claim for additional work and assuch the said representatives gave a declarationthat the petitioner had completed itssubmissions. But the arbitrators entertainedthe said claims and misconducted themselves.

4. The Arbitrators awarded general damages for breach of contract twice and this error appears on the face of the award.

5. The arbitrators misconducted themselves in awarding interest in the manner mentioned in the award.

3. The counsel for the petitioner submitsthat under Clause 62 of the contract, therespondent was bound to refer all the disputesfirst to the Railway for decision. If the Railwaywould fail to give decision within a reasonabletime, or the respondent was dissatisfied withthe decision, then and then only it could invokethe arbitration clause and not otherwise. Thiswas a condition precedent which ought tohave been fulfilled before a reference couldbe made. In the present case the respondentdid not refer the disputes to the Railway beforemaking the application under Section 20 of the Act.The condition precedent not being fulfilled,the respondent was not entitled to enforce thearbitration Clause on the date of theapplication. Under the circumstances, theCourt also did not have the jurisdiction topass the order D/- 6th May 1983. Thereference was therefore bad and the awardnull and void. In support of his contention,the counsel for the petitioner relies on AIR1945 Oudh 1 at p. 3 (Sher Bahadur Singh v.Ram Narain Singh). The facts of that casewere that a civil court, after passing a decreein a partition suit, entertained an applicationfor referring the disputes to arbitration in suit.There was an order for reference and an awardwas made. The award was challenged on theground that the reference was withoutjurisdiction because the application forarbitration was not made in any pending suit.It was held that the reference was withoutjurisdiciton as the court, after the decree waspassed, entertained the application and startedthe reference. The respondents' counselsubmits that the facts of that case were entirelydifferent from the facts of the present SpecialSuit No. 77 of 1983 and as such this case hasno application. In that case due to the passingof the partition decree, the court lostjurisdiction to entertain the application forreference. But in this case the conditionprecedent mentioned above, is nothing butone of the terms of the contract for the benefit of the petitioner and as such it must be treatedas waived by the petitioner as it did not takethis point while contesting the Special SuitNo. 77 of 1983. The petitioner had waived itsknown right available under the contract bynot challenging the said order and by contestingthe said reference without any objection. Thepetitioner is, therefore, debarred from agitatingthis ground on the principle of waiver.According to the petitioner's counsel the pointraised is a question of lack of jurisdiction andas such the principle of waiver or res judicatawill not apply. The respondents' counsel onthe other hand submits that even the questionof jurisdiction can be res judicata. He relieson 58 Ind App 381 at pages 390-391 : (AIR1931 PC 289 at p. 293), (Louis Dreyfus andCo. v. Arunachala Ayya). In this case, anaward made by an umpire was set aside. Therewas an appeal and by an order D/- 20-7-22,the appeal court upheld the order of the trialcourt for setting aside the award and remittedthe matter back to the Umpire. An appeal tothe Privy Council from the order D/- 20-7-22was dismissed due to default. The umpirethereafter made the award which was againchallenged. In the petition it was alleged interalia that the agreement of arbitration was madeby a person without having any authority todo so and as such the petitioner was not boundby the said arbitration agreement and the whole proceeding was bad. The Umpire had no jurisdiction to make the award. On these facts it was held at p. 391 (of I.A.) : (at p. 293 of AIR):--

'..... their Lordships, are of opinion that the question of the Umpire's jurisdiction is res judicata between the parties under order D/-20-7-22, the appeal from which to His Majesty in Council was dismissed and the matter was remitted to the Umpire. This could have been done only upon the footing that the respondent was bound by a submission to arbitration.'

4. According to the respondents' counsel the order D/- 6-5-83 is binding on the petitioner and the question of jurisdiction cannot be agitated at this stage. I accept the submission of the respondents' counsel and hold that this point is hit by the principle of waiver as well as by the principle of constructive res judicata due to the order DA 6-5-83. : AIR1963Cal140 (Sree Bajrang Jute Mills Ltd. v. Fulchand Kanhaiyalal Co.) is another authority on this point.

5. The next point raised by the petitioner is that there was an agreement arrived at between the parties in course of the arbitration proceeding that the adjudication by the arbitrators would be on the basis of the agreed measurements. The respondents' counsel invites my attention to the minutes of the meetings of the arbitration and submits that there was no agreement between the parties as alleged by the petitioner. It appears from the minutes of 23-2-84 (annexure 'C') that the petitioner produced certain documents before the arbitrators relating to the works done by the respondents. A statement of quantity of work executed was submitted in that connection which contained a remark 'subjected to checking'. The Arbitrators thereupon, directed the parties to submit the result of the checking at the next sitting. At the next meeting on 2-3-84, these items were discussed. The arbitrators directed the petitioner to submit a detailed description of certain items of works done by the respondents. The next meeting was held by the arbitrators on 7-3-84. The petitioner produced the purported details of works done, but that document also contained the endorsement 'subjected to checking'. The petitioner's counsel submits that the remark in the detailed quantity of work 'subjected to checking' proved that the document was already checked up. The respondent's counsel invites my attention to the statement of quantities submitted by the petitioner before the arbitrators on 23-2-84 which also contained the similar remark 'subjected to checking'. The respondent's counsel submits that the remark 'subjected to checking' does not mean that the document had been checked up as submitted by the petitioner's counsel. The document produced by the petitioner before the arbitrators on 23-2-84 also contained the same remark. In spite of that the arbitrators directed the document to be checked up. At that time it was not contended by the petitioner that the document had already been verified and that was why the remark 'subjected to checking' was written on it. On the contrary the document was checked up, discussions were held and further details were asked for by the arbitrators. I have carefully scrutinised the two documents submitted before the arbitrators by the petitioner on 23-2-84 and 7-3-84 and have found that both of them contained the same remark 'subjected to checking'. In this view of the matter, it is not possible for me to accept the submission of the petitioner's counsel that this statement of quantity submitted on 7-3-84 was checked up previously. I asked the petitioner's counsel to have this point clarified from the representatives of the petitioner present in Court. On instruction, the petitioner's counsel submitted that the said remark actually meant 'subject to checking'. The person responsible for preparing these documents is in the habit of writing 'subjected to checking' in place of 'subject to checking'. This clarified the position. As the statement of quantity remained unchecked, there was no question of any accepted or agreed measurements. In the premises, the question of agreement as alleged by the petitioner did not arise and must be rejected.

6. Regarding the 3rd point that the petitioner wanted time on 2-3-84 to adduce evidence against respondent's claim for additional works but the arbitrators did not allow the same, the records only show that at the meeting on 7-3-84, a letter was produced by the petitioner praying for time but the same was not pressed. If the petitioner wanted to adduce evidence on 2-3-84 as alleged, then it could easily come ready with all evidences on 7-3-84 and the evidence could easily be adduced on the last date. The petitioner is absolutely silent on the point as to whether the petitioner was ready with its witnesses etc. at the last meeting on 7-3-84 or not. I find that at the last meeting, the petitioner was represented by three persons. I also find that the parties gave a joint declaration before the Arbitrators that they had been given full opportunity to place their respective cases. This declaration was signed by Mr. L. M. Chakraborty, the Executive Engineer of the petitioner present on that date. It is alleged in the petition that this declaration was given as the Arbitrators by their conduct, induced them to believe that the respondents' claim for additional work would be rejected. The said allegations have been made by one Debdas Banerjee, the Deputy Chief Engineer of the petitioner, who never attended any of the meetings of the arbitration. It is surprising to note that none of the three persons who attended the last meeting, came forward to say on oath that they were mislead like that by the arbitrators. On the contrary, Debdas Banerjee, came forward and verified these allegations as true to his knowledge. It is a matter of regret that a high ranking officer of the petitioner has made these representations to court without having any personal knowledge in this matter. He ought to have realised that his conduct was unbecoming of a high official like him. If, however, he had heard about these allegations from one of the officers present on that date, then it would be hearsay evidence and absolutely inadmissible. The court cannot act on this evidence. No explanation has been given in the petition as to why none of the officers present at the meeting on 7-3-84 came forward to verify this affidavit. The charge brought against the arbitrators is a serious one. It is also significant to note that even when I allowed the parties to file supplementary affidavits none of the three officers came forward to say on oath that they were misled by the arbitrators. In that view of the matter, no reliance can be placed on Debdas Banerjee's statements in the petition. In this connection, I must record that the habit of making frivolous allegations in the petition falsely verified as true to knowledge is increasing alarmingly. Invariably long arguments are made on the basis of such reckless allegations. This is another form of abuse of the process of court and I record my strong disapproval in respect to the same. It is expected that the members of this profession should be careful about these matters.

7. The fourth point urged by the petitioner's counsel is that the arbitrators wrongly awarded general damages for breach of contract twice. According to the petitioner's counsel in case of breach of works contract, the measure of general damages should be the loss of profit being the natural consequence fo the breach. The respondent in this case entered into a works contract for piling, earth work and some construction works. By cancelling this contract, the petitioner prevented the respondent from earning the profit which it could have earned by . completing the worsts. The loss suffered by the respondent must be measure'd on the basis of the loss of profit. Therefore, the loss of profit would be the measure of general damages in this case. The arbitrators in their award, specifically mentioned each item of claim on which the damages have been awarded. I find that they awarded damages of Rs. 5,20,000/- for breach of contract and Rs. 5,00,000/- for loss of profit. I accept the contention of the petitioner's counsel that the arbitrators had awarded the general damages twice and this error appears on the face of the award. But I find that the award of Rs. 5,20,000/- is severable from the rest of the award and does not affect the rest of the award in any way.

8. The last point taken by the petitioner is that the arbitrators misconducted themselves by granting interest for the period prior to the date of reference without having any evidence in support for the same. The arbitrators could allow such interest only if there was an agreement between the parties to that effect or such interest had been claimed by the respondents under the Interest Act. There was no evidence on record to that effect and as such the awarding of interest for the period prior to the reference was bad in law. The arbitrators, however, had the jurisdiction to award interest from the date of the reference to the date of the award at the rate of 11% per annum on the principal sum awarded. The period prior to the reference for which interest was awarded is severable and if separated, will not affect the rest of the award.

9. In the premises, the principal sum awarded stands reduced by Rs. 5,20,000/- as mentioned above. The respondents will be entitled to interest at the rate of 11% per annum from the date of the reference to the date of the award.

10. Each parry to pay and bear its own cost of this application.


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