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2019 Supreme(Ker) 2
IN THE HIGH COURT OF KERALA AT ERNAKULAM
V. CHITAMBARESH, R. NARAYANA PISHARADI, JJ.
S. Dinesh Babu Chartered Engineer - Petitioners
Versus
C. Venugopalan & Ors. - Respondents
Arb. A. No. 31 of 2007
Decided On : 15-01-2019
For the Petitioners: Adv. Sri. P.M. Poulose.
Important points
" Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. -The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired
" The scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court`s jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it-The learned Additional District Judge has considered the merits of the application filed by the appellant under Section 34(1) of the Act in the correct perspective.
Headnote:The Arbitration and Conciliation Act, 1996 Section 28(2), Section 34(1), Section 34(2)(b)(ii), Section 34, sub-section (2), Section 5, Section 28(1)(a), Section 19, Section 19(1)- The Code of Civil Procedure, 1908 -The Indian Evidence Act, 1872- Section 19(2), Section 19(3), Section 19(3)(1), Section 19(4)-The Code of Civil Procedure, 1908-Order XVIII Rule 18 - As per Section 19(4) of the Act, it is for the arbitrator to decide the admissibility, relevance, materiality and weight of any evidence adduced before him
Facts of the case
The appellant is a chartered engineer and contractor- The first respondent is an officer of a bank- He wanted to construct a residential building-He entered into an agreement with the appellant on 02.05.1996 for construction of the building- The proposed building had a plinth area of 1443 sq.ft. The rate agreed upon between the parties was Rs.315/- per sq.ft. The construction of the building had to be completed within a period of eight months from the date of approval of the plan by the local authority-The appellant could not complete the work within the stipulated period due to various reasons- As per the order dated 17.03.1999 in A.R.No.12/1998 filed by the first respondent, this Court appointed a retired District Judge as the sole arbitrator to decide the dispute between the parties- The parties adduced evidence before the arbitrator- What is meant by the expressions "ex aequo et bono" and "amiable compositeur" in the context of Section 28(2) of the Arbitration and Conciliation Act, 1996?
Finding of the courts
As per Section 19(4) of the Act, it is for the arbitrator to decide the admissibility, relevance, materiality and weight of any evidence adduced before him-The arbitrator has relied upon the report of the expert only after examination of the expert as a witness- The procedure adopted by the arbitrator was not irregular or illegal.
Result : Dismissed
Certainly. Based on the provided legal document, here are the key points summarized:
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The court's intervention in arbitration awards is limited to specific circumstances such as fraud, bias, or violation of natural justice. The court's role is primarily to quash awards that are patently illegal or in conflict with public policy, rather than to re-examine factual findings or correct errors made by arbitrators (!) (!) .
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The arbitration process is designed to minimize court supervision, respecting the parties' decision to exclude court jurisdiction in favor of arbitration for its efficiency and finality (!) .
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The scope of judicial review under the relevant arbitration law is narrow. The courts do not reappraise evidence or substitute their judgment for that of the arbitrator unless the award is patently illegal or in conflict with the public policy of India. Errors on facts that are not patent cannot be grounds for setting aside an award (!) (!) .
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Conducting local inspections or examinations by arbitrators, including personal inspections of property, does not constitute illegality or procedural irregularity, provided the award is based on evidence and not solely on impressions from such inspections (!) (!) .
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The arbitrator's authority to decide ex aequo et bono or as an amiable compositeur is contingent upon express authorization by the parties. When authorized, the arbitrator may decide based on fairness and equity, potentially deviating from strict legal rules (!) (!) .
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The arbitrator's decision to decline appointing an expert and instead conduct a local inspection was justified based on the nature of the issues and the evidence available, as well as considerations of delay and cost (!) (!) .
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The court affirmed that the arbitrator's procedures, including reliance on expert testimony after examination and the conduct of inspections, were proper and within the scope of the law (!) (!) .
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The appellate court upheld the reasoning of the lower court, emphasizing that the arbitration award was based on meticulous analysis of evidence and was not patently illegal or against public policy, leading to the dismissal of the appeal (!) (!) .
These points collectively highlight the limited scope of judicial review in arbitration, the importance of procedural propriety, and the deference given to arbitrators' factual and procedural decisions unless there is clear illegality or breach of public policy.
R. NARAYANA PISHARADI, J.
1. What is meant by the expressions “ex aequo et bono” and “amiable compositeur” in the context of Section 28(2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as 'the Act')? Answer to this question is essential for the proper disposal of this appeal.
2. The appellant is a chartered engineer and contractor. The first respondent is an officer of a bank. He wanted to construct a residential building. He entered into an agreement with the appellant on 02.05.1996 for construction of the building. The proposed building had a plinth area of 1443 sq.ft. The rate agreed upon between the parties was Rs.315/- per sq.ft. The construction of the building had to be completed within a period of eight months from the date of approval of the plan by the local authority. The appellant could not complete the work within the stipulated period due to various reasons. Then, disputes arose between the parties with regard to the amount to be paid to each other on breach/termination of the agreement.
3. As per the order dated 17.03.1999 in A.R.No.12/1998 filed by the first respondent, this Court appointed a retired District Judge as the sole arbitrator to decide the dispute between the parties. The parties adduced evidence before the arbitrator. CW1 and CW2 were examined and Exts.C1 to C14 documents were marked on the side of the first respondent/claimant. RW1 was examined and Exts.R1 to R6 documents were marked on the side of the appellant.
4. After meticulous analysis of the evidence adduced before him, the arbitrator found that the appellant is not entitled to get any amount from the first respondent/claimant. The arbitrator also found that the first respondent/claimant is entitled to get an amount of Rs.1,09,000/- from the appellant. An award was accordingly passed by the arbitrator.
5. The appellant filed application under Section 34(1) of the Act in the District Court, Ernakulam as O.P.(Arb) No.189/2001 challenging the award passed by the arbitrator. As per the impugned judgment, the learned Additional District Judge found that the award passed by the arbitrator is reasonable and well considered and that there is no ground to set aside the award and dismissed the aforesaid application.
6. Notice was served on the first respondent. He has not entered appearance. We have heard Sri. P.M. Poulose, learned counsel for the appellant and perused the available records.
7. The plea of the first respondent/claimant before the arbitrator was that he paid Rs.3,84,000/- in instalments before the date 14.03.1996 and a further amount of Rs.50,000/- on 02.05.1996 to the appellant. His plea was that the appellant had stopped the construction of the building on 14.03.1996. The plea of the claimant was that the appellant had done work only for an amount of Rs.2,70,000/-. On the other hand, the appellant had raised counter claim before the arbitrator alleging that he had done extra work and he had constructed 1565 sq.ft as against the agreed area of 1443 sq.ft. The appellant pleaded that he had completed work worth Rs.4,40,000/- as per the agreement. He had alleged that he had done additional work for Rs.1,20,000/-. He had received Rs.3,84,000/- from the first respondent. Therefore, he claimed an amount of Rs.1,86,000/- from the first respondent/claimant.
8. Most of the grounds under which the award was challenged by the appellant in the application filed under Section 34(1) of the Act pertain to factual findings made by the arbitrator on the basis of the evidence adduced by the parties before him. However, learned counsel for the appellant contended that the award is in conflict with the public policy of India as erroneous findings have been made by the arbitrator which are patently illegal and therefore, the award is liable to be set aside under Section 34(2)(b)(ii) of the Act.
9. Applications under Section 34 of the Act are summary proceedings with provision for objections by the defendant/respondent, followed
