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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 ..... bitral award, as reflected from a perusal thereof, have been recorded in an earlier section of the judgment. None of those reasons even so much as allude to the award being contrary to the public policy of India, which would enable the court to look into the merits of the award. The reasons assigned by the Court under Section 34 of the A C Act, 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. The award passed by the learned Arbitrator is patently illegal, unreasonable, contrary to public policy. There is no reason forthcoming as to how the holding of the learned Arbitrator flies in the face of public policy - it cannot be doubted that the Claimant-Appellant is entitled to interest. In the absence of compliance with the well laid out parameters and contours of both Section 34 and Section 37 of the A C Act, the impugned judgement(s) are required to be set aside. Consequently, the award dated 18th February 2003 of the learned Arbitrator is restored, for any challenge thereto has failed. Appeal allowed. - ABHAY S. OKA And SANJAY KAROL , JJ. JUDGMENT SANJ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over of site for performance of contract; (b) non-supply of working drawings and designs; and (c) delay in supply of materials. 5. For each of these issues, the learned Arbitrator, upon examination of the evidence before him found the Respondents liable. A pr cis of the reasoning adopted, is as under:- S.No. Point of Consideration Reasoning 1 Delay in handing over the entire site for total performance of the contract. 1) Non handling over the entire site in time is one of the reasons which resulted in noncompletion of the work within the stipulated time of 18 months. There is a delay of 9 months in handing over possession of complete site. Possession of office building was handed over on 07.03.1990 Possession of quarters building was handed over on December 1990. 2 Delay in supply of working drawings, designs, etc. 1) Drawing showing typical excavation plan for footings, details of columns were issued to claimant during September 1990, with a delay of 6 months 2) The drawing of R28 was not suppl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecurity 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 arbitrator is not supported by sound reasonings and it is in arbitrary nature and it is liable to be set aside? 2. What order? 8. The award passed by the learned Arbitrator was modified and the Respondents were directed to pay Rs.3,71,564 (25% of tender amount) along with Rs.10,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys 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 contract, cannot be accepted as the shift in venue was only in respect of the residential quarters and not for the office complex. 9.2 The estimation of cost is based on the tender notification relating to the year 1989-90. Costs in the year 1992 could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 filed, and uphold the award, or set aside the award if the grounds contained in subsections (2) and (2-A) are made out. There is no power to modify an arbitral award. In McDermott International Inc. v. Burn Standard Co. Ltd. [McD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 aw rd 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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; and to minimise the supervisory roles of courts in the arbitral process. 17. It will be seen that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 application of the law. In short, what is not subsumed within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 accepted the Claimant s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at 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 accepted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside an award, is all 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... INTEREST 45. On the issue of interest, we notice 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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