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TMI Blog2024 (1) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the Chief Conservator of Forests at Sirsi for an amount of Rs. 14.86 Lakhs. 2.2 The said contract was entered into between the parties on 29th January, 1990 with the stipulation that the possession of the construction site would be handed over to the Claimant-Appellant on 8th March, 1990 and the work allotted was to be completed on or before 6th May 1992 i.e., 18 months from the date of the agreement excluding the monsoon season. 2.3 It is undisputed that the work as allotted could not be completed by the Claimant-Appellant, for which, he held the authorities of the State responsible as they allegedly did not clear his bills, repeatedly at every stage and also due to delays caused by change of site and in delivery of material for such construction. 2.4 For settlement and adjudication of disputes, the parties to the contract resorted to the arbitral mechanism and resultantly, in Arbitration Petition dated 31st May, 2002, Mr. S.K Angadi, Chief Engineer (Retd.) stood appointed as the Arbitrator on 30th July, 2002. PROCEEDINGS BEFORE THE LEARNED ARBITRATOR 3. Pursuant thereto, the Claimant-Appellant herein filed his claim before the learned Arbitrator totalling to Rs.18,06,43 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rejected 5 Payment of extra expenses on procurement of water at the changed site of work Rs.24,000/- Rejected 6 Payment of extra expenses on shuttering, centring, fabrication done earlier subsequently dismantled. Rs.15,800/- Rs.15,800/- 7 Payment on revised rates on the work executed beyond the originally stipulated time Rs.11,33,000/- Rs.9,67,300/- 8 Payment on refund of freek rates recovered in work bills Rs.33,469/- Rs.33,469/- 9 Payment on refund of security deposit Rs.57,770/- Rs.57,770/- 10 Payment of interest, pre arbitration, pendente lite and future interest @18% p.a. on all amounts due from claim No.1 to 9 from, 09.03.94 till the date of payment Payment of interest @ 18% p.a. on all amounts due from 09.3.94 till the date of payment 11 Cost of Arbitration Rs.1,00,000/- Rs.50,000/- PROCEEDINGS UNDER SECTION 34 OF THE A&C ACT 7. Assailing the same, the Respondent preferred a petition under Section 34 of the A&C Act in which the learned Civil Judge, Sirsi, found 2 points to be arising for his consideration which he recorded as: - "1. Whether the petitioner made out the proper grounds that the award passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of work/removal of earlier construction as per the alteration. 8.8 The cost of arbitration being awarded at Rs.50,000/- is "at exorbitant rate." Even if the argument of delay and laches on part of the Department is accepted, "it cannot be ruled out that the Department always in right path" and the extent of the same cannot be accepted. 8.9 It was also observed that there was a justification for the learned Arbitrator to award an amount which is almost equal to the amount of tender, that too on such a high rate of interest which causes an undue encumbrance on the exchequer. 8.10 The remaining critical observations stand dealt with subsequently. PROCEEDINGS UNDER SECTION 37 OF THE A&C ACT 9. The High Court, vide its judgement under challenge before us, has confirmed the modification of the arbitral award as has been done by the learned Civil Judge, Sirsi, dismissing the application on part of the Claimant-Appellant. 9.1 It has been observed that the primary dispute is in respect of claim No. 7 which is the grant of revised rates of the escalated cost of work. The High Court has held that the view of the Arbitrator that the Department is solely responsible for the breach of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A&C Act; the decisions rendered by this Court, including the principles of international law enunciated in several decisions recorded in the treatise "Redfern and Hunter on International Arbitration, 6th Edition", this Court in National Highways Authority of India v. M. Hakeen and Another (2021) 9 SCC 1 (2-Judge Bench), categorically held that any court under Section 34 would have no jurisdiction to modify the arbitral award, which at best, given the same to be in conflict with the grounds specified under Section 34 would be wholly unsustainable in law. The Court categorically observed that any attempt to "modify an award" under Section 34 would amount to "crossing the Lakshman Rekha". 15. On the exact same issue we may also note another opinion rendered by this Court in Dakshin Haryana Bijli Vitran Nigam Limited v. Navigant Technologies Private Limited (2021) 7 SCC 657 (2-Judge Bench) in the following terms:- "44. In law, where the court sets aside the award passed by the majority members of the Tribunal, the underlying disputes would require to be decided afresh in an appropriate proceeding. Under Section 34 of the Arbitration Act, the court may either dismiss the objections f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erference on the specified grounds is warranted (Konkan Railway Corpn. Ltd. v. Chenab Bridge Project (2023) 9 SCC 85 (Three Judge Bench)). 19. It is also a settled principle of law that an award passed by a technical expert is not meant to be scrutinised in the same manner as is the one prepared by a legally trained mind (Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited (2022) 1 SCC 131 (Two Judges Bench)). 20. We are dealing with an award passed on 18th February, 2003, prior to the amendment brought in Section 34 by virtue of the Arbitration and Conciliation (Amendment) Act, 2015. For the purpose of ready reference the relevant portion of the amended and the unamended provisions are extracted as under :- "Prior to 2015 Amendment 34. Application for setting aside arbitral award. - (1) Recourse to a court against an arbitral awärd 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- ... (v) the composition of the Arbitral Tribunal or the arbitral procedure was not in accordance with the agreement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncerned, the situation stands encapsulated by this Court, in DDA v. R.S Sharma (2008) 13 SCC 80 (2 Judge Bench) where the grounds whereby courts may intervene against arbitral award, were listed. 22. Observations of this Court in Associate Builders v. DDA (2015) 3 SCC 49 (2 Judge Bench) are also of note. It was held: "15. This section in conjunction with Section 5 makes it clear that an arbitration award that is governed by Part I of the Arbitration and Conciliation Act, 1996 can be set aside only on grounds mentioned under Sections 34(2) and (3), and not otherwise. Section 5 reads as follows: "5. Extent of judicial intervention.-Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part." 16. It is important to note that the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting the needs of arbitration; also to provide that the tribunal gives reasons for an arbitral award; to ensure that the tribunal remains within the limits of its jurisdiction; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... patently illegal. The result would be-award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void." (Emphasis supplied) 26. Ssangyong Engineering (supra) followed the observations of Associate Builders (supra). To efficiently encapsulate the extent thereof particularly in the context of Indian awards, we may refer only to para 37 where it has been held:- "37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2-A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erred to and considered the materials on record in their entirety but also, after due application of mind, assigned reasons for arriving at this conclusion, either rejecting, accepting or reducing the claim set out by the Claimant-Appellant. Noticeably, during the arbitral proceedings none of the parties raised any objection to the Arbitrator adjudicating the dispute, be it on any ground, including bias. Each one of the claims stands separately considered and dealt with. 31. We find that the view taken by the Arbitrator is a plausible view and could not have been substituted for its own by the Court. 32. The reasons assigned by the Court under Section 34 of the A &C Act, to our mind, are totally extraneous to the controversy, to the lis between the parties and not borne out from the record. In fact, they are mutually contradictory. 32.1 In awarding an amount of 25% of the tender amount (incorrectly recorded as "over the tender amount" in some parts of the judgment of the learned Civil Judge, Sirsi) in favour of the Claimant-Appellant, the Court has ipso facto accepted that the Claimant-Appellant had not breached the terms of the contract. In fact, the Court appears to have accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that the civil contract was composite in nature that is having contracted both of the building of the office and residence together. In these circumstances, the contractor could not have commenced work of part of the project when the complete site and the drawings were not handed over to him. In the absence of the parties have agreed otherwise, work could not have commenced. Hence, observation of the court, advisory in nature, for the contractor to have commenced the work for one part of the contract is unwarranted and uncalled for, in fact perverse. 32.7 The other observation that there was a delay on the part of the contractor in completing the work or speeding up the work does not reflect in the record. They are nothing short of mere conjectures. This is more so in view of the absence of invocation of the arbitration clause or initiation of the proceedings thereunder on the part of the Respondent against the contractor as also not raising any counter claims for adjudication by the Arbitrator. 32.8 Accounting for the legal position, the court could have at best set aside the award and could not modify the same. 32.9 We also notice the learned Arbitrator, to have accep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the more circumscribed." 37. This Court has not lost sight of the fact that, as a consequence to our discussion as aforesaid, holding that the judgment and order under Section 34 of the A&C Act does not stand judicial scrutiny, an independent evaluation of the impugned judgment may not be required in view of the holding referred to supra in MMTC Ltd. However, we proceed to examine the same. 38. We may also notice that the circumscribed nature of the exercise of power under Sections 34 and 37 i.e., interference with an arbitral award, is clearly demonstrated by legislative intent. The Arbitration Act of 1940 had a provision (Section 15) which allowed for a court to interfere in awards, however, under the current legislation, that provision has been omitted. Larsen Air Conditioning and Refrigration Company v. Union of India and Others 2023 SCC OnLine 982 (2-Judge Bench). 39. The learned Single Judge, similar to the learned Civil Judge under Section 34, appears to have not concerned themselves with the contours of Section 37 of the A&C Act. The impugned judgment reads like a judgment rendered by an appellate court, for whom reexamination of merits is open to be taken as the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the Arbitrator has awarded interest @ 18% p.a., w.e.f. 09 March 1994 which stood reduced to 9%. The transaction being commercial in nature, we see no reason as to why the claimant could not be entitled to interest in terms of the rate quantified by the Arbitrator which includes the period of pre-arbitration, pendante lite and future. We notice this Court to have stated in Hyder Consulting (UK) Ltd. v. State of Orissa (2015) 2 SCC 189 (3-Judge Bench), through S.A. Bobde, J. (as His Lordship then was) speaking for the majority as under: "4. Clause (a) of sub-section (7) provides that where an award is made for the payment of money, the Arbitral Tribunal may include interest in the sum for which the award is made. In plain terms, this provision confers a power upon the Arbitral Tribunal while making an award for payment of money, to include interest in the sum for which the award is made on either the whole or any part of the money and for the whole or any part of the period for the entire pre-award period between the date on which the cause of action arose and the date on which the award is made... The significant words occurring in clause (a) of sub-section (7) of Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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