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SUPREME COURT OF INDIA
(From the High Court of Punjab & Haryana at Chandigarh)
M.R. SHAH, SANJIV KHANNA, JJ.
M/s. Narinder Singh and Sons – Appellant
Versus
Union of India through Divisional Superintendent Engineer-II, Ferozepur – Respondent
Civil Appeal No. 6734 of 2021
Decided On : 18-11-2021
Arbitration and Conciliation Act, 1996 – Sections 34 and 37 – Reversal of ex-parte arbitral award – As evidence of respondent by way of affidavit was not taken on record, their contentions and evidence were not considered and debilitated respondent from stating their case – Given the factual position, there was violation of principles of natural justice and lack of full opportunity as envisaged by Section 18 of Act, thereby, impeding a fair and just decision – Consequently, award suffers and is liable to be set aside in terms of clause (iii) to Section 34(2)(a) as well as clause (ii) to Section 34(2)(b) of Act – Parties have agreed that this Court may appoint an Arbitrator for adjudication of disputes – Retired Judge of Punjab and Haryana High Court appointed as Arbitrator to adjudicate and decide disputes – He would be paid arbitration fee and expenses in terms of schedule to the Act – Question of award of interest, pre-reference and pendente lite, left open to be decided by Arbitrator, without being bound by findings of High Court in impugned order. (Paras 7, 8, 9 and 10)
Facts of the case:
Arbitrator pronounced an ex parte award against respondent on 27th November 2010. Resultantly, respondent had filed objections under Section 34 of Arbitration and Conciliation Act, 1996 before Additional District Judge, Gurdaspur, which were dismissed vide order dated 22nd March 2012. However, the respondent succeeded in its appeal filed under Section 37 of Act before Punjab and Haryana High Court at Chandigarh, which, vide impugned judgment dated 24th October 2017, accepted FAO No. 5227 of 2012 (O&M) and set aside the award primarily on the ground that the arbitrator had violated principles of natural justice and had proceeded with great haste and hurry. It was also held that pre-reference and pendente lite interest could not have been awarded in terms of clause 16(2) of General Conditions of Contract. On the question whether the Court could remand the disputes to the Arbitrator, the impugned judgment holds that court remand was impermissible, but the parties were at liberty to approach the arbitrator for fresh adjudication or avail any other remedy permitted by law, while stating that the period spent in the arbitration proceedings and the resultant litigation should be excluded in terms of Section 43(4) of the Act.
Findings of Court:
Respondent would file their affidavits by way of evidence within four weeks from the date the Arbitrator enters upon reference. Arbitration record shall be forwarded to Mr. Justice S.N. Aggarwal (Retd.) and if not available, parties shall reconstruct the same by filing self-certified copies of pleadings and documents as filed by them in the arbitration proceedings.
Result : Civil Appeal disposed of with observations.
JUDGMENT :
SANJIV KHANNA, J.
1. Despite rounds of litigation, the disputes that arose in 1996 will, unfortunately, continue even post this judgment.
2. M/s. Narinder Singh and Sons, the appellant before us, vide letter dated 27th January 1993 was awarded tender by the respondent namely, Divisional Superintendent Engineer-II, Northern Railway, Ferozepur Division, Ferozepur, Punjab, for additional washing line to accommodate 26 coaches at Jammu Tawi Railway Station. Disputes arose when the respondent terminated the contract vide letter dated 03rd April 1996 due to stated non-performance and repeated lapses by the appellant. The appellant, on the other hand, alleged breaches on the part of the respondent who, it is stated, had modified the original work and changed scope of the work several times.
3. The appellant invoked the arbitration clause as per the contract agreement and in response, the General Manager, Northern Railways satisfied with the existence of the disputes, appointed an arbitrator. The appellant approached the District Court for termination of the mandate of the appointed arbitrator and substitution with an independent Arbitrator. The District Judge, Gurdaspur vide order dated 23rd December 2006 appointed Mr. Justice A.L. Bahri (Retd.) as the sole arbitrator. The respondent filed a Civil Revision Petition before the High Court against the order of the District Judge, Gurdaspur, which set aside the order of the appointment on the ground that the appointment of the arbitrator could only be done by the Chief Justice or any other Judge nominated by him. Finally, in the proceedings before the Chief Justice of the Punjab and Haryana High Court at Chandigarh, by an order passed on 15th February 2010, Mr. Justice A.L. Bahri (Retd.) was again appointed as the arbitrator.
4. The learned arbitrator, thereupon, pronounced an ex-parte award against the respondent on 27th November 2010. Resultantly, the respondent had filed objections under Section 34 of the Arbitration and Conciliation Act, 1996 (for short the ‘Act’) before the Additional District Judge, Gurdaspur, which were dismissed vide order dated 22nd March 2012. However, the respondent succeeded in its appeal filed under Section 37 of the Act before the Punjab and Haryana High Court at Chandigarh, which, vide impugned judgment dated 24th October 2017, accepted FAO No. 5227 of 2012 (O&M) and set aside the award primarily on the ground that the arbitrator had violated principles of natural justice and had proceeded with great haste and hurry. It was also held that pre-reference and pendente-lite interest could not have been awarded in terms of clause 16(2) of the General Conditions of the Contract. On the question whether the Court could remand the disputes to the Arbitrator, the impugned judgment holds that the court remand was impermissible, but the parties were at liberty to approach the arbitrator for fresh adjudication or avail any other remedy permitted by law, while stating that the period spent in the arbitration proceedings and the resultant litigation should be excluded in terms of Section 43(4) of the Act.
5. Having heard counsel for the parties, we find that the respondent was “unable to present his case” a valid ground and justification for setting aside an award under clause (iii) to sub-section (2)(a) to Section 34 of the Act. The award was also “in conflict with the public policy of India” under clause (ii) to Section 34(2)(b) read with the applicable Explanation 1 to Section 34(2) of the Act.
6. The appellant had filed the Statement of Claim on 3rd May 2010. On 31st May 2010, the respondent sought adjournment for filing Statement of Defence, which was granted by the arbitrator. On 10th July 2010, written statement along with the copies of documents were filed. The appellant, thereupon, filed rejoinder and affidavit of Paramdeep Singh (PW-1) in evidence on 5th August 2010. On the same day itself, evidence of the appellant was closed while declining the request o
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