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State of West Bengal Vs. J and S Industries. - Court Judgment

LegalCrystal Citation
CourtKolkata Appellate High Court
Decided On
Case NumberF.M.A. 45 of 2006
Judge
AppellantState of West Bengal
RespondentJ and S Industries.
Appellant AdvocateMs. Shanti Das, Adv.
Respondent AdvocateMr. B.B Sarkar, Adv; Ms. Iti Dutta, Adv; Mr. Arup Chatterjee, Adv; Ms. Priti Kumari, Advs
Cases ReferredOrissa v. N.C. Budharaj
Excerpt:
order 9 rule 13, order 37 rule 4 & section 115: [b.n. agrawal & g.s. singhvi, jj] ex parte decree in summary suit - set aside by trial court - interference by high court in revision - high court had not even recorded any finding on this issue - order of trial court setting aside ex parte decree not suffering from any error of jurisdiction or material irregularity in exercise of jurisdiction - held, high court was not justified in interfering with the same. order of trial court restored for disposal of the summary suit afresh in accordance with law. .....act, 1940 by the state of west bengal challenging an award published on 30th december, 2002 by the learned arbitrator. 2. the facts of the case briefly are as follows:- 3. the parties entered into a contract in respect of construction of a building for biological production centre in the compound of bengal veterinary college, kolkata. the agreement was a product of a tender floated on behalf of the state of west bengal by superintendent engineering, west bengal circle construction board, p.w.d. 4. the respondent raised a dispute and requested the chief engineer to refer the matter for arbitration, since there was an arbitration clause contained in the said contract (in particular clause 25) for settlement of the disputes between the parties. 5. the state did not take any steps to refer.....
Judgment:
1. This appeal is directed against judgment and/or order dated 30th August, 2005 passed by the learned 8th Court of City Civil Court at Kolkata in Misc. Case No 1338 of 2003 and Title Suit No 81 of 2003. The said learned Court dismissed an application instituted under Sections 30 and 33 of the Arbitration Act, 1940 by the State of West Bengal challenging an Award published on 30th December, 2002 by the learned Arbitrator.

2. The facts of the case briefly are as follows:-

3. The parties entered into a contract in respect of construction of a building for Biological Production Centre in the compound of Bengal Veterinary College, Kolkata. The agreement was a product of a tender floated on behalf of the State of West Bengal by Superintendent Engineering, West Bengal Circle Construction Board, P.W.D.

4. The respondent raised a dispute and requested the Chief Engineer to refer the matter for arbitration, since there was an arbitration clause contained in the said contract (in particular Clause 25) for settlement of the disputes between the parties.

5. The State did not take any steps to refer the matter before an Arbitrator. Accordingly, an application was moved before the learned 8th Court of City Civil Court at Calcutta. On 27th May, 1998 Sri Saurendra Nath Sarkar (Retired Superintending Engineer, Construction Board, Directorate, West Bengal) was appointed by the Court as Sole Arbitrator to adjudicate upon the disputes between the parties.

6. On 30th December, 2002 the learned Arbitrator published its award in favour of the respondent for a sum of Rs.5,05,000/- and further the learned Arbitrator directed the State to pay interest at the rate of 6% per annum on the said sum of Rs.5,05,000/- from 9th February, 1982 upto 24th June, 1998 and further interest at the rate of 10% per annum from 9th July, 1998 till 30th December, 2002. The learned Arbitrator has also directed for payment of the cost of arbitration proceedings assessed at Rs.30,000/-.

7. The notice under Section 14(2) of the Arbitration Act, 1940 (hereinafter referred to as the said Act) was served on the State by the Court.

8. In these circumstances, the appellant filed an application challenging the said award under Sections 30 and 33 of the said Act, inter alia on the ground that the award has been published without application of mind; the learned Arbitrator has failed to appreciate the facts and circumstances of the case. The award is bad in law since error of law and fact are apparent on the face of the award. It is further stated that the said award is an unreasoned award and should be set aside.

9. The said application was contested by the respondent by filing an affidavit. The facts pleaded by the respondent are summarized as follows :

10. The respondent stated that they did not receive any payment in full and final settlement of their payment in respect of the contract and the petition which was filed by the appellant/State is without any merit. It is further stated that the State has failed to point out the error of law and fact as alleged and further it is stated that under the old Act of 1940, it is not necessary for the learned Arbitrator to give reasons in respect of the award so published by him and further the learned Arbitrator has right to grant interest at all stages. The said application was dismissed on contest by the learned Court below without cost on 30th August, 2005. The learned Trial Court duly considered the question raised before it with regard to the award published by the learned Arbitrator. The point urged on behalf of the State inter alia on the ground that :

a) the learned Arbitrator mis-conducted himself by granting pre-dispute interest from 1982 as well as cost; and

b) the award is unreasoned and the learned Arbitrator committed error of law apparent on the face of the award by awarding the claim which was barred under the provisions of laws of limitation.

11. The learned Trial Court decided the said questions.

12. In the present case, learned Arbitrator awarded interest at the rate of 6% per annum for pre reference period and 10% per annum for pendente lite interest and 12% per annum for post award period. The learned Trial Court decided the said question and held that in the present case the rate of interest awarded by the learned Arbitrator is reasonable and as such the interest awarded by learned Arbitrator does not deserve any interference. The learned Trial Court also considered the decisions of M/s. Sudarsan Trading Company v. The Govt. of Kerala and Anr. reported in AIR 1989 SC 890; New India Civil Erectors (P) Ltd. v. Oil and Natural Gas Corporation reported in AIR 1997 SC 980 and in the case of D.D. Sharma v. Union of India reported in 2004(4) Supreme 92. On the question that the award is a non-speaking award, the learned Trial Court held that it is not open to the Court to probe the mental process of the learned Arbitrator and speculate where no reasons are given by the learned Arbitrator. The question of limitation duly dealt with by the learned Trial Court relying on the Award where the learned Arbitrator held as follows :

And whereas after considering all the matter placed before me as stated hereinabove it appeared to me that the claim of the claimant is not barred by the law of limitation. It further appeared to me that after receipt of the final bill in full and final settlement and without recording dissatisfaction in the manner it has been recorded does not debar the claimant in preferring claim as claimed by the claimant.

13. Therefore, the learned Trial Court held that the learned Arbitrator duly considered the objection on the ground of limitation and held that the claim was not barred by limitation. On this ground the learned Trial Court did not accept the contention of the State that there was an error on the face of the award and accordingly dismissed the said application.

14. Being aggrieved, the present appeal has been filed by the appellant. Ms. Shanti Das, learned Advocate appearing on behalf of the appellant raised the following objections in respect of the said Award, i.e.

a) that the impugned award is a non-speaking award;

b) the claim of the respondent was barred under the provisions of the law of limitation and she submitted that if the claim, which is barred under the provisions of law, is allowed then automatically it can be said that there is an error apparent on the face of the award published by the learned Arbitrator;

c) she further contended that the learned Arbitrator has no right to grant pre pendente lite interest and post award interest.

15. Ms. Das submitted that the respondent duly accepted the payment after signing the certificate in favour of the State at the time of accepting the payment in respect of the final bill. Therefore, she contended that the claimant/respondent cannot have any right to raise any claim thereafter.

16. On the contrary, Mr. B.B. Sarkar, learned Advocate appearing on behalf of the respondent submitted that the question of limitation at this stage cannot be questioned. The payment in respect of the final bill was accepted by the claimant/respondent since his position was precarious at that stage. He had no other alternative than to accept the said amount which was offered by them otherwise the respondent ought to have suffered more in the hands of the State. In view of the said fact, he raised disputes with the authority thereafter and requested that the matter should be referred to the arbitration in accordance with the arbitration clause. On number of occasions the respondent in writing requested the authorities to appoint a learned Arbitrator in terms of the agreement. Since no step was taken by the authorities in that regard, the application was filed before the Court and after intervention of the Court the learned Arbitrator was appointed.

17. He further pointed out that the question of limitation was duly dealt with by the learned Arbitrator as it would be evident from the award itself where the learned Arbitrator has specifically stated that the claim of the claimant was not barred by laws of limitation. Therefore, he submitted that the learned Arbitrator duly considered the question and answered in favour of the respondent. He further contended that receipt of final bill cannot debar the claimant/respondent in preferring the claim as claimed by the claimant/respondent.

He also relied upon the following decisions in support of his contention:-

1. 66 CWN Page 977 (Union of India v. N.P. Singh);

2. AIR 1963 SC 1685 (Union of India v. A.L. Rallia Ram);

3. AIR 1971 SC 696 (M/s Allen Berry and Co. Pvt. Ltd. v. The Union of India);

4. AIR 1987 SC 2045 (Coimbatore District Podu Thozillar Samgam v. Bala Subramania Foundry and Ors);

5. AIR 1988 SC 1791 (State of Orissa v. Dandasi Sahu);

6. AIR 1989 SC 1263 (Food Corporation of India v. Joginderpal Mohinderpal And Anr);

7. AIR 1995 SC 2423 (Trustees of the Port of Madras v. Engineering Constructions Corporation Limited).

8. 1988 (3) SCC 76 (Union of India & Anr. v. M/s. L.K. Ahuja & Co.)

18. He further submitted that the Supreme Court held that even when a learned Arbitrator commits a mistake either in law or in fact in determining the matters referred to him and such mistake does not appear on the face of the award itself or in a document appended to or incorporated in it so as to form part of it then the award will neither be remitted nor can be set aside by the Court. He also contended that the point of limitation was never urged by the State at the time of appointment of the learned Arbitrator. However, the said point has been specifically dealt with by the learned Arbitrator and thereafter the learned Arbitrator has published the award. Therefore, it cannot be said that there is an error on law on the face of the award published by the learned Arbitrator. We have also considered the decisions cited by Mr. Sarkar that the Court has no power to find out the mental process or can make a probe with regard to the conclusion reached by the learned Arbitrator (See Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises & Anr. reported in (1999) 9 SCC 283. We hold that in view of the said decision the Court has no power to probe the mental process or reaching the conclusion by the learned Arbitrator. Accordingly, we accept the contention of the learned Advocate appearing on behalf of the respondent.

19. We have also noticed the latest decision of the Supreme Court in the case of Ravindra Kumar Gupta & Company v. Union of India, reported in (2010) 1 SCC 409 where the Court held that the Court cannot reappreciate the evidence led by the parties before the learned Arbitrator. The High Court cannot substitute its own opinion on appreciation of the evidence. Such a course is not permissible to the High Court while examining objections to the Award under Section 30 of the Arbitration Act, 1940.

20. In Union of India v. N.P. Singh (supra) where the Court held as follows :

First, unless it can be shown by something appearing on the face of the award that the learned Arbitrator had proceeded illegally his award must stand. Secondly, an award of an learned Arbitrator can be set aside on the ground of error of law on the face of the award when in the award a document is incorporated with it, as for instance, a note appended by the learned Arbitrator stating the reasons for his decision and there is some legal propositions which is the basis of the award and which is erroneous. Thirdly, the statement in the award that a dispute relates to a contract between the parties of certain date does not thereby so incorporate the contract with the award as to entitle the court to refer to its terms and by so doing to embark on an enquiry whether there is an error of law. Fourthly, before a court can set aside an award on the ground that an error of law appears on the face of it by its reference to some documents, it must be demonstrated affirmatively that the law was departed from by the learned Arbitrator in noticing the existence or contents of those documents so that a mere reference to certain documents in the award is insufficient to establish that it was a wrong in law to refer to them. These four propositions of law I deduce respectively from the leading authorities (1) In Government of Kelanton v. Duff Development Co. Ltd. (1923) A.C. 395 at pp. 409-10, (2) IN Champsey Bhara & Co. v. Jivaraj Ballo Spinning & Weaving Co. Ltd., 50 I.A. 324, (3) Salleh Md. v. Nathoomal, 54 I.A. 427 and (4) In Durga Prosad v. Shewkissen Das, 54 C.W.N. 74, (A.I.R. (36) 1949 P.C. 334). I had occasion to collect anda refer to those authorities in my previous decision in Ebrahim Kassam v. N.I. Oil Industries Ltd., reported in (5) A.I.R. 1951, Cal. 230, at pages 234-5.

21. We also noticed that in M/s. Alopi Parshad and Sons, Ltd., v. Union of India reported in A.I.R. 1960 S.C. 592 where the Supreme Court held as follows :

The award of an learned Arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a note appended by learned Arbitrators, stating the reasons for his decision, is the basis of the award and which is erroneous Champsey Bhara & Co. v. Jivraj Balloo Spinning and Weaving Co., Ltd., 50 Ind. App. 324: (A.I.R. 1923 P.C. 66). If, however, a specific question is submitted to the learned Arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not make the award bad on its face so as to permit of its being set aside. In re King and Duveen, 1913-2KB 32, and Govt. of Kelantan v. Duff Development Co. Ltd., 1923 A.C. 395.(See AIR 66 CWN Page 977 (Union of India v. N.P. Singh also See AIR 1987 SC 2045 (Coimbatore District Podu Thozillar Samgam v. Bala Subramania Foundry and Ors).

22. In Food Corporation of India (supra) the Court held as follows :

It has to be borne in mind, however, that wrong statement or conclusion of law, assuming even that it was a wrong statement of law, was not wrong statement of the proposition of law which was the basis for decision in this award. Error of law as such is not to be presumed, if there is a legal proposition which is the basis of the award and which is erroneous as observed in Champsey Bhara & Co., (AIR 1923 OC 66), then only the award can be set aside. There was no proposition of law; there was a legal deduction of law arrived at to say that the provisions of Cl. G(i) of the contract would be penal rate and such penal rate cannot be sustainable without evidence of the damages suffered to that extent. We are of the opinion that the learned Arbitrator had taken a view which is a plausible view. Beyond this, the court has nothing to examine. It is not necessary for a court to examine the merits of the award with reference to the materials produced before the learned Arbitrator. The Court cannot sit in appeal over the views of the learned Arbitrator by reexamining and re-assessing the materials. See the observations of this Court in Puri Construction Pvt. Ltd. v. Union of India (1989) 1 SCC 411 : (AIR 1989 SC 777).

23. In Trustees of the Port of Madras (supra) where the Supreme Court held as follows : .

the High Court cannot re-appraise the evidence, material before umpire and come to different finding of fact. The High Court did not also find- it was not even suggested by anyone, that the Board was guilty of any deliberate delay or of any negligence or that it was remiss in taking steps required for importing and/or supplying the machinery. The matter did not lay in its hands. In such a situation, there was no room for importing the theory of reasonable time and for punishing the Board for something of which it was not guilty. Secondly, the explanation to Section 46, makes it abundantly clear that the question what is a reasonable time was would in each particular case, be a question of fact. The question whether the machinery was imported and supplied to the contractor within a reasonable time or not was thus a question of fact and not a question of law. No such contention was raised before umpire not did he record a finding on the said aspect. It was not open to the High Court Bench to record the said finding of fact, for the first time, at the stage of letters patent appeal and hold on that basis that the Board was guilty of not performing its obligation within a reasonable time. The order of the High Court setting aside the award would therefore be illegal especially when it was not indicated on which ground it was set aside and the award was shown vitiated by an error of law apparent on the face of it or that umpire was guilty of any misconduct in conducting the proceedings or otherwise.

24. In M/s. Allen Berry (supra) where the three Judges Bench of the Supreme Court held that even when an learned Arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake.

25. Applying these tests, it is clear in the facts of this case that the Award of the learned Arbitrator cannot be set aside since we find that no document incorporated with it or a note appended by the learned Arbitrator stating the reasons for his decision or is the basis of the Award. We also note that the specific question of limitation was submitted before him and he answers it, even if answer involves an erroneous decision in point of law does not make the Award bad on its face so as to permit us to set aside the same. Therefore, we hold that no legal proposition as such is propounded by the learned Arbitrator in this case on which his decision is based and which legal proposition can be said to be erroneous.

26. In State of Orissa v. Dandasi Sahu (supra) where the Supreme Court held that the law as it stands today is that award without reasons are not bad per se. Indeed, an award can be set aside only on the ground of misconduct or on an error of law apparent on the face of the award.

27. In Union of India & Anr. v. M/s. L.K. Ahuja (supra) where the Court held as follows :

Para 8. In view of the well settled principles we are of the view that it will be entirely a wrong to mix up the two aspects, namely, whether there was any valid claim for reference under Section 20 of the Act and, secondly, whether the claim to be adjudicated by the learned Arbitrator, was barred by lapse of time. The second is a matter which the learned Arbitrator would decide unless, however, if on admitted facts a claim is found at the time of making an order under Section 20 of the Arbitration Act, to be barred by limitation. In order to be entitled to ask for a reference under Section 20 of the Act, there must be an entitlement to money and a difference or dispute in respect of the same. It is true that on completion of the work, right to get payment would normally arise and it is also true that on settlement of the final bill, the right to get further payment gets weakened but the claim subsists and whether it does subsist, is a matter which is arbitrable. In this case the claim for reference was made within three years commencing from April 16, 1976 and the application was filed on December 13, 1976. We are, therefore, of the view that the High Court was right in this case. See in this connection the observations of this Court in Inder Singh Rekhi v. D.D.A.

28. After considering the decisions cited at the Bar and after analyzing the said decisions we hold that in the instant case, the award cannot be said to be bad in law which is apparent on the face of it.

Jagdish Rai and Brothers v. Union of India, reported in 1999 (1) Arbi LR 696: (1999 AIR SCW 940 : AIR 1999 SC 1258 : 1999 All LJ 976), that the award of interest ought to be granted in all cases when there is a decree of money unless there are strong reasons to decline the same. In the case of M/s Jagdish Rai & Brothers v. Union of India, reported in (1999) 2 JT SC 268 : (1999 AIR SCW 940 : AIR 1999 SC 1258 : 1999 All LJ 976), this Court has held that there are four stages of grant of interest, viz. (1) from the stage of accrual of cause of action till filling of the arbitration proceedings, (2) during pendency of the proceedings before learned Arbitrator, (3) future interest arising between date of award and date of the decree and (4) interest arising from date of decree till realization of award. The power of Court to grant interest from date of decree is not in doubt. In the case of Hindustan Construction Co. Ltd. v. State of Jammu and Kashmir, reported in AIR 1992 SC 2192 : (1992 AIR SCW 2647) this Court has held that the learned Arbitrator is competent to award interest from the date of the Award. This Court has held in the case of Secretary Irrigation Department, Government of Orissa v. G.C. Roy, reported in 1992 (1) SC 508 : (1992 AIR SCW 389 : AIR 1992 SC 732), that the learned Arbitrator has power to grant interest pendent elite. Recently in the case of Executive Engineer, Dhenkanal Minor Irrigation Division, Orissa v. N.C. Budharaj (Dead) by LRs, reported in 2001 (1) JT (SC) 486 : (2001 AIR SC W 255), this Court has held that learned Arbitrator can award interest for the perseverance period. Thus as per law laid down by this Court interest can be awarded at all four stages. The reasoning given by the High Court that interest cannot be awarded by the learned Arbitrator is thus fallacious and cannot be sustained. In our view the direction to pay interest from date of Award cannot be faulted. The impugned judgment to the extent that it disallows the interest from the date of the Award is set aside.

29. Considering the said decision we hold that the direction to pay interest by the learned Arbitrator cannot be a ground to declare it as bad in law. We hold that learned Arbitrator has jurisdiction to grant interest and we uphold the decision of the learned Trial Court on this question.

30. On the question as raised by Ms. Das that the impugned award is a nonspeaking Award and cannot be said to be bad in per se as decided by the Supreme Court in State of Orissa v. Dandasi Sahu (supra) and we hold that the non-speaking Award under Arbitration Act of 1940 cannot be a ground to set aside the Award in view of the fact as laid down by the Supreme Court, the Court cannot sit on appeal or can probe into the matter to find out the mental process of the learned Arbitrator that how he has reached to his conclusion.

31. Accordingly on such question we hold that the jurisdiction of the Court in interfering with a non-speaking Award is very limited and accordingly such question is negatived by us. The other question which has been raised by Ms. Das that the claim of the respondent was bared under the provisions of law of limitation. We have already given our reasons following the decisions laid down by the Supreme Court and we hold that the question of limitation has already been dealt with the learned Arbitrator and the learned Arbitrator has specifically dealt with the said question and come to the conclusion that the claim of the claimant is not barred by law of limitation. Therefore, on that ground also we do not accept the contention of Ms. Das and the Award cannot be set side on the said question after applying the tests laid down by the Supreme Court as has been discussed by us in the preceding paragraphs.

32. We do not find that the judgment of the learned Trial Court suffers from any illegality and/or irregularity. We do not find any merit in the appeal. Hence, we affirm the judgment of the learned Trial Court.

33. For the reasons stated hereinabove, the appeal is dismissed.

34. Xerox certified copy of this order, if applied for, be supplied to the parties on usual undertakings.

L A T E R

35. Ms. Shanti Das, learned Advocate, appearing on behalf of the appellant prays for stay of the operation of the order.

36. Such prayer is allowed for 10 (ten) weeks.


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