2017 (12) TMI 1856 - SC - Indian Laws

Validity of Arbitral Award - Termination of contract - levy of penalty - HELD THAT - The arbitrator has taken note of the peculiar features of the contract inter se the parties that while the work of excavation of the earth, its loading into the trucks, unloading and transportation to site of the work was awarded to the Appellant as contractor, the spreading of the earth brought to the site of the work by the contractor and its compaction was to be done by the Respondent Department itself. It is, thus, that the Appellant claimed that even though they had taken up the work with right earnest to complete it within the scheduled period, the breaches of the Respondent has caused the delay. The dispute in question had resulted in a reasoned award. It is not as if the arbitrator has not appreciated the evidence. The arbitrator has taken a plausible view that the very nature of job to be performed would imply that there has to be an area for unloading and that too in the vicinity of 5 kilometres as that is all that the Appellant was to be paid for. The route was also determined. In such a situation to say that the Respondent owed no obligation to make available the site cannot be accepted by any stretch of imagination. The unpreparedness of the Respondent is also apparent from the fact that even post termination it took couple of years for the work to be carried out, which was meant to be completed within 45 days. The ability of the Appellant to comply with its obligations were inter dependent on the Respondent meeting its obligations in time to facilitate appropriate areas for unloading of the earth and for its compacting. At least it is certainly a plausible view. It has been opined by this Court that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the court and would not include what the court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be justice. The learned single Judge ought to have restrained himself from getting into the meanderings of evidence appreciation and acting like a second appellate court. In fact, even in second appeals, only questions of law are to be determined while the first appellate court is the final court on facts. In the present case the learned single Judge has, thus, acted in the first appeal against objections dismissed as if it was the first appellate court against a decree passed by the trial court. Appeal allowed.

Summary

Issues Involved:
1. Termination of contract due to alleged breaches by the parties.
2. Arbitration proceedings and award.
3. Appeal against the arbitration award based on breach of contract and public policy grounds.

Issue 1: Termination of contract due to alleged breaches by the parties

The Appellant was awarded a contract for earth excavation work by the Respondent, but disputes arose regarding fulfillment of obligations. The Respondent terminated the contract, leading to arbitration. The Appellant claimed various amounts, including balance payments and idle hour charges, while the Respondent counterclaimed for damages and expenses. The arbitrator partly allowed the Appellant's claims and rejected the Respondent's counterclaims. The arbitrator found that the Respondent failed to comply with its obligations, leading to an illegal termination of the contract.

Issue 2: Arbitration proceedings and award

The arbitration clause was invoked after the Superintendent Engineer failed to nominate an arbitrator. The arbitrator made a reasoned award in favor of the Appellant, awarding various amounts and interest. The Additional District Judge rejected the Respondent's objections under Section 34 of the Arbitration & Conciliation Act, 1996. However, the Punjab & Haryana High Court set aside the award, stating that the contract termination was justified. The Supreme Court noted that the arbitrator considered the parties' obligations and breaches, leading to a lawful award.

Issue 3: Appeal against the arbitration award based on breach of contract and public policy grounds

The High Court judge attempted to re-evaluate the evidence and disagreed with the arbitrator's findings. The judge argued that the Respondent had no obligation to provide unloading space for the earth brought to the site. However, the Supreme Court disagreed with this interpretation, emphasizing the interdependence of parties' obligations. The Court held that the arbitrator's award was reasoned and should not be set aside unless it shocks the conscience of the court. The Court upheld the enforcement of the award, criticizing the High Court judge's interference in the arbitration process.

This detailed analysis covers the issues of contract termination, arbitration proceedings, and appeal against the arbitration award, providing a comprehensive overview of the legal judgment.