JUDGMENT
Page 0933
1. The appellant is before this Court calling in question the order dated 1.9.2003 passed by the VI Addl. City Civil Judge, Bangalore city in Arbitration suit No. 5/2001. By the said judgment and order, the learned City Civil Judge has dismissed the petition filed by the appellant herein questioning the award dated 17.10.2000 passed by the Arbitrator.
2. The facts leading to the same are:
The Executive Engineer BCD II, CPWD i.e., the second respondent herein after finalising the tender process entrusted to the appellant, the work of construction of hundred bedded hostel under phase II including internal water supply, sanitary and drainage at a cost of Rs. 30,50,660/- under the agreement No. 82/BCD II/1989-90. The date of commencement of the work was indicated as 4.12.1989 and the work was to be completed within the stipulated period of 12 months. The work was however completed only on 30.6.1993. According to the appellant, the delay was attributable to respondent No. 2 and as such the second respondent granted tune up to 30.6.1993. With regard to the said entrustment of construction work, several disputes and differences arose between the parties and such disputes raised by the appellant could not be settled between the parties. Clause 25 of the agreement entered into between the parties provided for reference of any dispute and difference between the parties to an arbitrator to be appointed by of the Chief Engineer. Accordingly one Sri S.S. Juneja was appointed as the arbitrator and the appellant filed six claims on 26.11.1994 to which me 5th respondent Chief Engineer also referred additional four claims on 22.6.1995. The appellant filed a detailed claim statement on 23.5.1996 before the Arbitrator. The said arbitrator who had been appointed earlier resigned and as such the second arbitrator Dr. Y.P.C. Dangay was subsequently appointed. At this point, the arbitrator appears to have appointed one Sri N. Narayana as the Commissioner to measure the property. The appellant objected to the report of the Commissioner. Therefore, the second measurement was done and the report was submitted on 22.5.1999. The second Page 0934 Arbitrator also appears to have resigned and in his place Sri K.K. Mutreja was appointed as the sole arbitrator who proceeded to consider the case from the stage it was left by the earlier arbitrator by taking note of the written arguments which had been filed. However, at request the arguments were heard once again and subsequently the arbitrator drew up the award on 17.10.2000. A copy of the same was sent to the appellant on 20.11.2000. By the said award, the arbitrator has considered each of the claims under separate heads by assigning independent reasons and has rejected claim Nos. I, II, IV, V, VII, VIII and X and has partially allowed claim Nos. III, VI and IX. In that view, the arbitrator has awarded in all a sum of Rs. 1,00,500/- with simple interest at 12.5% per annum in respect of the claims awarded under Claim No. III and VI and such interest awarded is with effect from 2.8.1994 till the date of payment.
3. The appellant who claimed to have been aggrieved by the said award preferred the petition before the learned City Civil Judge by filing the said petition under Section 34 of the Arbitration and Conciliation Act, 1996 (Section 30 of the Arbitration Act, 1940). In the said petition the appellant had raised several grounds in order to attack the award on the ground of misconduct, incapacity and decision on matters beyond the scope of the submissions and also on the ground of mistake apparent on the face of the record, evidence etc. On receipt of the notice, respondents appeared and filed objections, at the outset contending that the grounds raised by the appellant do not fit into any of the clauses contained under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the ‘New Act’). The respondents further contended that the appointment of the arbitrator had been made in accordance with Clause 25 of the agreement and the entire arbitration proceedings had been held in accordance with law and therefore denied each of the allegations made against the Arbitrator and also contentions raised with regard to the claim. In this regard, the respondents contended mat the said arbitration clause empowered the Chief Engineer to appoint the arbitrator of his choice and the clause itself makes it clear that no objection could be raised with regard to the appointment of a Government Servant. Further the said clause also provides for appointing another arbitrator if the earlier arbitrator retires or becomes incapacitated for any reason. It was further contended that the appellant having taken part in the arbitration proceedings cannot at this point challenge the appointment of the arbitrator by the Chief Engineer since no such objection had been taken before the arbitrator about his appointment. The appellant while participating in the arbitration proceedings had also sought for appointment of the Commissioner to measure the property and thus having participated fully in the arbitration proceedings cannot now challenge the same before the Court. The respondents also sought to justify Page 0935 the award passed by the arbitrator on its merits and further sought to justify that the denial of the claims by the arbitrator is based on the evidence and material available on record and therefore the award did not call for interference at the hands of the Civil Court. In view of the pleadings of both the parties, the learned Civil Judge formulated the following questions for consideration:
i) Whether the petitioner proves any one of the ground mentioned under Section 34 of the Arbitration and Conciliation Act to set aside the award ?
ii) What order?
4. The learned Civil Judge, after considering the matter in detail, has by his judgment and order dated 1.9.2003 held that the appellant had not substantiated any of the grounds available under Section 34 of the New Act in attacking the award passed by the arbitrator.
5. The appellant while challenging the said judgment passed by the learned Civil Judge has adverted to in detail with regard to the merits of the claim made by the appellant before the arbitrator and the rejection of the claim made by the appellant by the arbitrator. That apart the appellant has contended in detail with regard to the findings and conclusions reached by the learned Civil Judge since according to the appellant the learned Civil Judge has mis-contrued the scope of enquiry available under the Arbitration Act. The appellant, at the outset, would contend that the learned Civil Judge ought not to have limited himself to consider the grounds raised by the appellant by bringing into consideration the narrow scope of Section 34 of the New Act since the proceedings had commenced under the Arbitration Act, 1940 (hereinafter referred to as ‘the Old Act’) where a wider scope is available to examine the said issue. In the alternative, the appellant would contend that assuming for a moment that the same was to be examined under the limited grounds available under Section 34 of the New Act, even men the appellant had made out sufficient grounds to enable me learned Civil Judge to interfere with the award passed by the arbitrator. Therefore, the appellant would contend that the judgment and order passed by the learned Civil Judge is not sustainable and the same requires to be set aside. With regard to the effect of such setting aside of the order as prayed for by the appellant, the appellant would contend that this Court, after setting aside the judgment and order passed by the Civil Court, would have to examine the claims made by the appellant before the arbitrator in detail in this appeal and after considering the case put forward by the appellant if the claim made by the appellant is sustainable, this Court itself would have to pass the award awarding the amount claimed by the appellant. Therefore, the appellant sought to attack the reasoning and conclusion reached by the arbitrator with respect to each of the claims. However, at this stage itself we should observe that the said contention cannot be acceded to since the submission was to such extent as if this Court was required to look into even the factual findings rendered by the arbitrator with reference to the records and Commissioner’s report which was available Page 0936 before the arbitrator and the appellant expects this Court to go into every detail pertaining to measurement as well as the claim made in that regard as if this is a Court exercising original jurisdiction. The appellant, while challenging the award passed by the arbitrator, had concentrated more on attacking the award on the ground that the arbitrator being an employee in the very same department and being sub-ordinate to the Chief Engineer, would be biased in the matter since according to the appellant, the award would be drawn up naturally to satisfy his superior officers and therefore the appellant submits that he would not get justice from such an arbitrator. That apart, the appellant would also contend that the arbitrator being an employee in the very same department would have initiated several ‘note’ pertaining to the contract in the earlier stages and as such the arbitrator would not be in a position to decide the matter with an independent mind. The appellant in this regard sought to place reliance on several judgments in an attempt to drive home the point as to what would constitute bias.
6. Per contra Sri Aravind Kumar, learned Assistant SG appearing for the respondents sought to justify the judgment and order dated 1.9.2003 passed by the learned City Civil Judge on the ground that the learned Civil Judge has taken into consideration the limited scope available in examining the award of this nature as contemplated under the provisions of Section 34 of the New Act and has rightly come to the conclusion that the appellant has not made out a case to interfere with or modify the award which was impugned before the learned Civil Judge. The learned Counsel would further contend that even though the proceedings in the instant case had commenced under the Old Act, the respondents did not choose to object to the petition filed by the appellant under the New Act before the learned City Civil Judge on that ground. Therefore the learned City Civil Judge has proceeded to assess the merits of the case put forward by the appellant, who was the petitioner therein and did not find merit in the case of the appellant to interfere with the award. The learned Counsel would also contend that the appeal filed against such judgment and order passed by the learned Civil Judge does not call for interference at the hands of this Court. That apart, in order to rebut the contention of the appellant with regard to bias alleged against the arbitrator, the learned Counsel referred to the relevant clause in the agreement providing for arbitration viz., Clause 25 wherein it is specifically agreed between the parties that there shall not be objection for appointing an arbitrator who would be a Government Servant. Further it is contended out the allegation made by the appellant, with regard to the arbitrator being biased in so far as being subordinate Officer to impress his senior Officers by passing awards to their satisfaction, is made without basis whatsoever since according to the learned Counsel, the present case is not the only instance where arbitration proceedings have been initiated, but there are several arbitration proceedings being conducted in similar matters. The learned Counsel would also contend that even the allegation that the arbitrator being an employee in the same department would have initiated ‘note’ etc relating to the contract and therefore he would be a person interested in the matter is Page 0937 also without basis as the said allegations are vague and without material particulars. Even the instances which the appellant has sought to refer to certain letters to indicate that he had raised grievance earlier, are general in nature and they do not relate to any specific complaints pertaining to the instant case. The learned Counsel has also relied on certain decisions to fortify his submissions. The details of the specific submissions and the judgments referred to by the appellant as well as the learned Counsel for the respondents would be adverted to at the appropriate stage of answering the questions to be raised by us here below in order to avoid repetition of the narration of contentions raised and the judgments referred.
7. Based on the pleadings, the contentions raised and the legal position on the issue, the following questions arise for our consideration:
i) Whether the provisions of Section 85(2)(a) of the Arbitration and Conciliation Act, 1996 would apply in the instant case ?
ii) If so, whether the learned City Civil Judge was justified in considering the petition within the scope of review available under Section 34 of the New Act ?
iii) If the answer to the first question is in the affirmative and if in the negative to the second question framed above, whether the learned City Civil Judge was justified in rejecting the claim of the appellant holding that the petitioner had not made out a ground for interference under Section 34 of the New Act ?
iv) If the answer is in the negative to the first question and affirmative to the second question framed above, whether the appellant has made out a case for interference with the award dated 17.10.2000 passed by the arbitrator either on the ground of bias or on the merits in so far as rejection of the claim made by the appellant ?
v) If the judgment and order dated 1.9.2003 passed by the Addl. City Civil Judge is not justified, in either of the situation indicated in question No. (iii) and (iv) above, what is the nature of relief to be granted in so far as challenge to the arbitration award passed by the arbitrator.
Since the first question goes to the root of the matter, as to whether the petition filed before the learned City Civil Judge ought to have been under the provisions of the Old Act or under the New Act and as to the scope of consideration before the learned Civil Judge we would at the outset refer to the provision contained in Section 85(2)(a) of the New Act which reads as follows:
85(2) Notwithstanding such repeal, –
(a),- the provisions of the said enactments shall apply in relation to arbitral proceedings which commenced before this Act came into force unless otherwise agreed by the parties but this Act shall apply in relation to arbitral proceedings which commenced on or after this Act comes into force;
8. The reading of the provision at the outset indicates that the proceedings which had commenced under the old Act has not only been saved but it Page 0938 also indicates which of the Acts should apply taking into consideration the arbitration clause agreed to between the parties and also the stage of the proceedings. Keeping this in view the relevant dates in the instant case would have to be noticed. The agreement was entered into in the year 1989 and the work had commenced on 4.12.1989 and completed on 30.6.1993. In view of the difference and disputes with regard to the said agreement, the notice seeking for arbitration had been issued on 2.8.1994 and the arbitrator was appointed on 28.11.1994. Though the claimant had preferred the claim statement on 23.5.1996, in view of the established position of law the arbitration proceedings had commenced on the issue of notice on 02.08.1994. At this stage, it is required to notice that the new Act came into force on 25.1.1996. In the instant case, even though the award has been passed on 17.10.2000 after the new Act had come into force as noted above, the arbitration proceedings commenced on 02.08.1994 when the old Act was still in force. That being the position, the question to be determined is as to whether the proceedings, in the instant case, is to be continued under the Old Act up to its logical conclusion or as to whether the provisions of the new Act could have been invoked at any one of the stages subsequently, more particularly, at the stage, when the petition was filed before the learned Civil Judge questioning the award passed by the Arbitrator. In that view of the matter, a close reading and understanding of the provision contained in Section 85(2)(a) of the New Act would have to be made. In this regard, we have the benefit of the decision rendered by the Hon’ble Supreme Court in the case of Thyssen Stahlunion Gmbh v. Steel Authority of India Ltd. wherein the Hon’ble Supreme Court after referring to all the earlier decisions on the point and adverting to in detail has taken note of the facts in that case which are as follows. The arbitration proceedings had commenced under the old Act by issue of notice dated 14.9.1995 seeking appointment of the arbitrator and the arbitrator was appointed on 15.11.1995. In that case even though the hearing before the arbitrator had commenced from 17.1.1997 and the award had been passed on 24.9.1997 after new Act came into force on 25.1.1996, the Hon’ble Supreme Court came to the conclusion that Section 85(2)(a) exempts the old Act from complete obliteration so far as pending arbitration is concerned and in this regard the Apex Court held that the saving would include the whole of the Old Act till the time of enforcement of the award and the right under the Old Act would not be affected. The Hon’ble Court held that once the arbitral proceedings have commenced, it cannot be stated that the right to be governed by the Old Act for enforcement of the award was incohate.
9. In addition, what would have to be further noticed by us is that the Hon’ble Supreme Court had come to such a conclusion in the said case when the same arose for consideration at the stage of execution of the Page 0939 award i.e., the award which was passed on 24.9.1997 after coming into force of the new Act was sought to be executed under the provisions of the new Act and therefore what was left was only to execute. Even in such circumstance, the Hon’ble Supreme Court had come to the conclusion that what would apply is the old Act since the arbitration proceedings had commenced by issue of notice under the Old Act. If this is borne in mind, and the facts in the instant case are examined the relevant dates noted by us above would indicate that not only the notice seeking appointment of arbitrator but the appointment of the arbitrator also had taken place before the new Act came into force. As such even in the instant case, even though the award was passed by the arbitrator on 17.10.2000 i.e., after the new Act had come into force, if either of the parties being aggrieved by the said award was to challenge the same before the learned Civil Judge, it could be done only under Section 30 of the Old Act so as to examine the correctness of otherwise of the award keeping in view the scope available under Section 30 of the Old Act and could not have been under Section 34 of tile New Act. No doubt, the appellant sought to attack and the learned Counsel appearing for the respondent sought to sustain the order by referring to certain decisions of the Hon’ble Supreme Court and various other Courts. Even though the said decisions have been referred to by the parties with regard to the merits, what is to be noticed by us, at the outset, is the scope of consideration by the learned Civil Judge keeping in view the applicability of the relevant provision. In this regard, the very point for consideration formulated by the learned Civil Judge is as to whether the petitioner would prove any one of the grounds mentioned under Section 34 of the Arbitration and Conciliation Act to set aside the award. This would clearly indicate that the learned Civil Judge has examined the correctness or otherwise of the award passed by the arbitrator keeping in view the limited scope available for examining the correctness or otherwise of the award within the parameters of the new Act. Hence, at this stage, it is necessary to once again notice the further observation of the Hon’ble Supreme Court in Thyssen’s case (cited supra) wherein the Hon’ble Supreme Court has categorically stated, the structure of both the Acts is different and when the arbitration proceedings commenced under the Old Act, it would be in the mind of everybody i.e., the arbitrator and the parties that the award should not fall foul of Section 30 and 32 of the Old Act. The Hon’ble Court further observed that nobody at that time could have thought that Section 30 of the Old Act could be substituted by Section 34 of the New Act. This observation of the Hon’ble Supreme Court would clearly indicate that when a particular provision is available for the purpose of conducting any proceedings, the mind set of the persons involved in invoking or considering such provision is also important. This would only clarify that the arbitrator also would have Page 0940 passed the award keeping in view the scope of the powers available under the Act which was in force and therefore the learned Civil Judge while examining the correctness or otherwise of the same also would have to examine the same keeping in view that scope which was available when the proceedings commenced. In fact the Hon’ble Supreme Court in yet another decision in the case of Milk Foods Limited v. GMC Icecream Private Limited AIR 2004 SC 3145 after referring in detail to the decision in Thyssen’s case has reiterated that the proceedings which had commenced under the Old Act is to be concluded under the Old Act itself and in the said case the Hon’ble Supreme Court has also emphasised on the concept of commencement of the proceedings to determine which of the Acts should apply and the Hon’ble Court has held that the issue of notice would be the point of commencement and that would become the relevant date for the commencement of the arbitral proceedings and if at that point the old Act was applicable, the entire arbitral proceedings up to the stage of execution will have to be completed under the Old Act itself.
10. In the instant case, as already noticed by us, the notice was issued on 02.08.1994 which is the date of commencement when the old Act was in force but the learned Civil Judge has not only framed the issue to consider the petition within the scope of Section 34 of the New Act but has proceeded in that regard and decided the case. If the appellant is given the benefit of attacking the award under Section 30 of the Old Act, he would be in a position to demonstrate both the misconduct of the arbitrator as well as the misconduct of the proceedings as alleged by him and in such event there is a wider scope for review under the provisions of the Old Act and in that view, the correctness or otherwise of the award passed by the arbitrator would have to be determined by the learned Civil Judge. In this regard, we have also noticed above that the appellant herein who was the petitioner had also mentioned Section 30 of the Old Act in his petition and therefore it would be in the interest of justice to permit the appellant to prosecute the very same petition and the learned Civil Judge would have to consider the matter after restoring the case on file. However, since the scope available under the Old Act is wider as explained by us, it would be open to the appellant to urge additional grounds, if any, before the learned Civil Judge if he deems fit. Since we have reached the conclusion that me matter requires re-examination by the learned Civil Judge under the provisions of the Old Act, the other questions raised by us for consideration would not survive at this stage since those are the issues which would have to be considered by the learned Civil Judge at the first instance while considering the correctness or otherwise of the award, and therefore we refrain from adverting to the contentions raised on merits and the decision cited in that regard as it would be wholly unnecessary.
11. In the result, we make the following order:
i) The appeal is allowed. The judgment and order dated 1.9.2003 passed by the VI Addl. City Civil Judge, Bangalore city in Arbitration Suit No. 5/01 in the form it exists is set aside.
Page 0941
ii) The matter is remitted to the Addl. City Civil Judge to restore Arbitration Suit No. 5/01 on file and consider the grounds raised by the petitioner/appellant under the provisions of the Arbitration Act, 1940.
iii) All the contentions raised by the parties are left open and any of the observations or conclusions reached hereinabove shall not be considered as an expression of opinion one way or the other on merits of the case put forward by the appellant.
iv) In the peculiar facts, there shall be no order as to costs.