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Mahanadi Coalfields Ltd. vs Rawani Constructions And Anr. on 22 February, 2007

Orissa High Court
Mahanadi Coalfields Ltd. vs Rawani Constructions And Anr. on 22 February, 2007
Equivalent citations: 2007 (3) ARBLR 234 Orissa
Author: B Das
Bench: B Das


JUDGMENT

B.P. Das, J.

1. The appellant has filed this appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (in short ‘the 1996 Act’) questioning the legality and validity of the judgment dated 29.08.2005 passed by the District Judge, Sambalpur, dismissing its application filed under Section 34 of the 1996 Act, registered as Arbitration Petition No. 3 of 2004, for setting aside the arbitral award dated 23.03.2004 passed by the arbitrator Shri O.S. Srivastava, respondent No. 2 herein, arising out of the contractual agreement entered into between the appellant and respondent No. 1 for construction of Kalyan Mandap at Talcher Coalfields.

2. The brief facts giving rise to the present appeal are as follows:

The appellant-Mahanadi Coalfields Ltd., which is a Government of India Undertaking (in short ‘MCL’) by tender notice dated 25.04.1996 invited tenders for construction of two Kalyan Mandaps, one at Talcher Coalfields and the other at IB Valley Coalfields. Respondent No. 1-M/s. Rawani Constructions (hereinafter called ‘Rawani’) submitted its offer for construction of the Kalyan Mandap at Talcher Coalfields at a contract value of Rs. 1,95,70,400, upon acceptance of which, the MCL issued the work order dated 24.07.1996 (Annexure 1) awarding the contract work to Rawani. The tender notice and Clause 6 of the work order provided that any dispute or difference arising out of the tender, work order and subsequent contract agreement relating thereto would be subject to the jurisdiction of the District Court, Sambalpur only. The work order further provided that the work was to be completed within a period of fifteen months which would be reckoned from the 10th day of issuance of the work order or from the actual date of handing over the site, whichever was later, and all running on account bills would be paid at 95% of the work value and the balance 5% so accrued would be paid along with the final bill. The MCL agreed to make payment to Rawani at the unit rates, as stated in the Bill of Quantities (BOQ). The contract agreement for the work in question was entered into between the MCL and Rawani on 12.09.1996.

3. According to the appellant-MCL, there was no arbitration clause in the aforesaid contract agreement as the same was scored through and as such there is no scope for settlement of disputes between the parties through arbitration, but the Chairman-cum-Managing Director of the MCL by letter dated 14.03.2003 (Annexure 3) appointed respondent No. 2-Shri O.S. Srivastava as the sole arbitrator to arbitrate the dispute between the parties in the absence of any arbitration clause in the contract agreement entered into between the parties. Rawani submitted its claim and the MCL submitted its counter-claim before the arbitrator. The MCL filed a petition before the arbitrator agitating therein the question of arbitrability of the dispute and the jurisdiction of the arbitrator on the ground that there was no arbitration clause in the contract agreement contending that the dispute was to be settled in court and not by arbitration. According to the MCL, the arbitrator passed the order dated 05.07.2003 (Annexure 5) without giving any finding regarding his jurisdiction to adjudicate the dispute or existence or otherwise of arbitration clause in the contract agreement. Further, it is alleged that the award dated 23.03.2004 has been passed without deciding the preliminary objections raised regarding the jurisdiction and maintainability of the claims of the claimant-Rawani in absence of arbitration clause in the contract agreement dated 12.09.1996 with a direction to the MCL to make payment of the awarded amount to the claimant-Rawani within 45 days of the award, failing which interest at the rate of 18% would be payable from the date of the award till the date of actual payment.

4. The MCL challenged the aforesaid award before the learned District Judge, Sambalpur, in an application filed under Section 34 of the 1996 Act on several grounds. The learned District Judge while deciding the said application opined that the grounds taken by the MCL for setting aside the award were not cogent for the reasons, namely, (i) though the arbitration clause in the contract agreement was scored through, the MCL had initially appointed one Shri A.K. Tripathy, Chief General Manager (S&M), MCL, as the arbitrator to adjudicate the dispute between the parties whether or not the contract agreement dated 12.09.1996 contained any arbitration clause and thereafter the Chairman-cum-Managing Director of the MCL appointed the present arbitrator-Shri O.S. Srivastava (OP No. 2) in place of Shri A.K. Tripathy, to adjudicate the reference inclusive of the dispute regarding existence or non-existence of any arbitration clause in the contract agreement entered into between the parties; (ii) it was also a fact that the petitioner-MCL had agitated the aforesaid question before the arbitrator-OP No. 2 and after hearing the parties the arbitrator passed a reasoned order on 05.07.2003 rejecting the objection raised by the petitioner, i.e. the present appellant; and (iii) thereafter the arbitration proceeding continued and both the parties participated in the said proceeding till its conclusion and in such circumstances, it could not be said that the arbitration tribunal was not properly constituted. The learned District Judge also found that there was no reason to set aside the award passed by the arbitrator on the grounds as indicated above.

5. In this appeal, the appellant-MCL tried to challenge the aforesaid award, inter alia, on the ground that the learned District Judge erred in law in upholding the reasons given by the arbitrator while deciding whether the agreement dated 12.09.1996 contained an arbitration clause and whether the reasons given by the arbitrator were beyond his scope and against the provisions of law and, therefore, the award as well as the impugned judgment passed by the learned District Judge were liable to be set aside. The appellant also raised a ground that the District Judge erred in law in not accepting the contention of the MCL inasmuch as when the claimant-respondent No. 1 had already accepted the final bill to its full and final satisfaction after furnishing a no claim certificate, it was estopped from raising further dispute and claiming damages.

6. Now, let me see whether the appointment of the arbitrator and the proceeding subsequent thereto is legal and valid in the absence of any arbitration clause in the contract agreement entered into between the parties. Fact remains that the appellant had raised the question of maintainability of the arbitration proceeding before the sole arbitrator Shri O.S. Srivastava, respondent No. 2 and the arbitrator after recording the facts, which are extracted hereinbelow:

1. M/s. MCL, while entering into an agreement of work amounting to crores of rupees neither thought it proper to get the fresh terms and conditions booklet printed thus removing the Clause 14 from terms and conditions nor used the word ‘delated’ and got this word ‘delated’ attested/authenticated by both parties by putting another set of signatures, after scoring pages 53 and 54. In the printed booklet the pages were not renumbered to remove doubt about the existence of these pages.

2. The agreement dated 14.02.1997 entered at area in which a clause of arbitration exists must have passed through various authorities superior to SE (Civil) Jagannath Area as the secured advance amounted to about Rs. Fifty lacs. If the insertion of arbitration clause was not proper, it should have been rescinded within reasonable time.

3. The instruction for removal of the arbitration clause from civil construction agreements as per decision in CMD’s Meet should have been ratified by the CIL Board as it is violative of the provision of dispute settlement given in the Civil Engineering Manual which has approval of the CIL Board. As such provisions of Civil Engineering Manual should prevail over decision in CMD’s Meet till it is ratified by the CIL Board.

4. The removal of arbitration clause only from civil construction agreements and not from other construction works like electrical and mechanical works, etc. is discriminatory. Arbitration clause exists in respect of electrical and mechanical works in MCL.

5. The contention of MCL that only course left to M/s. Rawani Constructions is to go to a court of law for settlement of dispute is against the spirit of Arbitration and Conciliation Act, 1996 which has been formulated to expedite out of court settlement of disputes between the parties.

6. Decisions of courts while deciding on arbitration bank upon the fact of existence of valid claim by party. In this case of M/s. Rawani Constructions, prima facie it appears that there are some claims, the actual value can be determined only after going through the merit of each claim.

recorded his decision to the following effect:

Based upon the above facts it is concluded that there exists adequate ground for going for arbitration adjudication. Both the parties are directed to appear for arbitration on 29.07.2003 at 10.30 am in the chamber of the sole arbitrator [Shri O.S. Srivastava, GM/TS to D(T)]. The proceedings would continue for two-three days to expedite the disposal.

7. The arbitrator passed the aforesaid order on 05.07.2003, vide Annexure 5. The appellant did not challenge the said order but participated in the arbitration proceedings, which culminated in passing of the award dated 23.03.2004, which was under challenge in the proceeding under Section 34 of the 1996 Act before the learned District Judge. Since it was the MCL, which first appointed Shri A.K. Tripathy, CGM (S & M) and thereafter the present respondent No. 2 (Shri O.S. Srivastava), and respondent No. 2 decided the preliminary objection by his order dated 05.07.2003 holding that he had jurisdiction to adjudicate the dispute which was allowed to remain unchallenged, now the appellant cannot come forward to say that the arbitrator acted without jurisdiction. Consciously, the appellant on two occasions appointed the arbitrator that shows the intention of the appellant to refer the matter to arbitration. Then also non-challenge of the order of the arbitrator dated 05.07.2003 and thereafter participation of the appellant in the arbitration proceedings shows that the appellant had consciously accepted the order of the arbitrator Shri O.S. Srivastava regarding the jurisdiction. Once the appellant did not challenge the order dated 05.07.2003 of the arbitrator upholding his jurisdiction, it must be construed that the appellant had accepted and submitted to the jurisdiction of the arbitral tribunal. The plea taken by the appellant in this regard that the arbitrator had no jurisdiction fails and the findings of the learned District Judge are accordingly upheld.

8. That apart, I do not find any ground to set aside the finding of the learned District Judge that though the contract agreement dated 12.09.1996 initially contained an arbitration clause vide Clause 14, which had been scored through subsequently inasmuch as scoring through the said clause had not been ratified by the claimant-respondent No. 1, who had signed on all pages of the agreement in usual course. The GM (C) of the appellant company had only signed at pages 53-54 which contained Clause 14, which, according to the learned District Judge, suggested that the arbitration clause was scored through subsequently behind the back of claimant-respondent No. 1. There is nothing before this Court to set at naught the finding of the learned District Judge in this regard.

9. The next question raised by the appellant is that the arbitration award is hit by the Public Policy of India. There was no pleading in this regard either before the arbitration tribunal or before the District Judge. Nothing was also brought to the notice of this Court to come to the aforesaid conclusion.

10. Law in this regard is well settled in the case of Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. , wherein the Apex Court held that the award could be set aside if it is against the Public Policy of India, that is to say, if it is contrary to–(a) fundamental policy of Indian Law; (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. In this proceeding I also do not find that the award is against the public policy.

11. It is further well settled by the Apex Court in the case of Hindustan Construction Co. Ltd. v. Governor of Orissa , wherein it was held that the court, while considering the question whether the award should be set aside, does not examine the question as an appellate court, and while exercising the said power, the court cannot re-appreciate all the materials on the record for the purpose of recording a finding whether in the facts and circumstances of a particular case the award in question could have been made. Such award can be set aside on any of the grounds specified in Section 30 of the old Act. The same principle also applies to the present case. The power and the jurisdiction of the court to set aside an award are specifically laid down in Section 34 of the 1996 Act. If none of the conditions laid down in the said section is satisfied, the award cannot be set aside on re-appraisal of the evidence.

12. In view of the aforesaid judicial pronouncements, I do not find any cogent ground to hold that the application of the appellant-MCL in any manner satisfied the conditions laid down in Section 34 of the 1996 Act for setting aside the impugned award.

13. The appeal is accordingly dismissed and the judgment of the learned District Judge, Sambalpur, passed in Arbitration Petition No. 3 of 2004 is hereby affirmed. There will be no order as to costs.

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