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IN THE HIGH COURT OF KERALA AT ERNAKULAM
P.B. SURESH KUMAR, C.S. SUDHA, JJ.
M/s. Navayuga Engineering Company Ltd - Appellant
Versus
Union of India, Represented by the Chief Engineer (NW) - Respondent
Arbitration Appeal No.38 of 2020
Decided On : 13-12-2021
Constitution of India, 1950 - Article 142 - Arbitration and Conciliation Act, 1996 - Section 34, 15, 34(2)(iv), 35, 34(2) (a) (iv), 34 (2) (v)(b)(ii) - Contract Act, 1872 - Section 70 - Evidence Act, 1872 - Section 19(1) – Enforcement of decrees and orders of Supreme court – Obligation of person enjoying benefit of non-gratuitous act - Appellant and respondent herein entered into a contract for provision - Work was completed - Disputes arose between parties and hence matter was referred for arbitration - Chief Engineer (QS&C Commander Works Engineer, Pune was appointed as sole Arbitrator - Claims were raised before Arbitrator by claimant for a total amount with interest - Whether court below was justified in setting aside award in respect of some of claims - Whether Arbitrator's conclusions are in accordance with law or not - Whether work done is extra works/new elements or whether it is missing details of the existing details/elements - Whether rates provided under condition 62(A)(a) is applicable - Whether it is rates provided under condition 62(B)(a) that is applicable.
Finding of the Court:
Court has interfered in a matter in which it has no expertise or know how, whereas Arbitrator an expert in this field is in a much better position to adjudicate same - This argument advanced on behalf of appellant is also justified - Basis on which this finding has been made is not known and is unclear - Probably as pointed out on behalf of appellant, a commonsensical approach has been taken by court below to conclude so - Here is a case where claimant has specifically contended that cost of manufacture of hollow Nodes is more compared to solid nodes - This has not been disputed by respondent and said claim has not been rejected by Arbitrator also - This point is not seen addressed and court below without properly comprehending situation seems to have arrived at its conclusion based on a common man’s understanding of same, which appears to be apparently incorrect - Findings of Arbitrator supported by cogent reasons ought not to have been - Communications between parties and other materials, Arbitrator had concluded that dispute had been raised by claimant before finalization of final bill as contemplated under condition 65 of GCC - These materials have also not been referred to and without referring to same, court below concluded that claim is not arbitrable - Finding of Arbitrator regarding costs and rate has not been disturbed - Reduction came about only because aforesaid claims have been set aside - This finding will also have to necessarily go in light of our above made conclusions.
Result: Appeal allowed
JUDGMENT :
C.S. Sudha, J.
The Hon’ble Supreme Court in Project Director, National Highways Authority of India v. M. Hakeem, (2021 SCC Online 473) held that Section 34 of the Arbitration and Conciliation Act, 1996 (the Act) does not contemplate modification of an award by a court in a proceeding under the said Section. Now the question is what constitutes modification of an award? If the Arbitrator has awarded separate amounts on various independent claims, would setting aside some of the claims, which are separable and independent of the remaining claims, constitute a modification of the award? This is one major issue apart from the justifiability of interference made by the court below and the arbitrability of certain disputes decided by the Arbitrator, that calls for an adjudication in this case.
2. First, a brief reference to the facts of the case-
The appellant and the respondent herein entered into a contract for the provision of Parade Ground, PT Complex, Athletic Track, Swimming Pool, Covered PT and Drill Shed etc. at Ezhimala. The work was completed on 31/10/2007. Disputes arose between the parties and hence the matter was referred for arbitration. Sri. N.D. Bhagatkar, Chief Engineer (QS&C), C/o. Commander Works Engineer, Pune was appointed as the sole Arbitrator. 31 claims were raised before the Arbitrator by the claimant for a total amount of Rs.16,04,07,582/- with interest. Claims 1 to 5, 7, 8, 10, 11, 14, 15, 16 to 20, 27, 30 and 31 were allowed and the remaining claims were rejected. The Arbitrator by award dated 21.5.2012 granted an amount of Rs.3,93,24,065/- with interest at the rate of 9% per annum w.e.f. 13/09/2009 to the date of award to be paid within 90 days from the date of award, failing which interest was to be paid @ 11% from the date of award till payment. The claim of the respondent for Rs.11 lakhs (Rs.5 lakhs for cost of arbitration and Rs.8,38,032/- for repair of roof) was rejected by the Arbitrator.
3. The respondent/Union of India (UoI) preferred O.P. Arb. Appeal No.664/2012 before the District Court, Ernakulam challenging the award. The Court confirmed the award under claim no.2, 3, 10, 11, 14, 15, 20 and 27 and set aside the award under claim no.1,4,5,7,8,16, and 19. The award under claim no.31 was modified. The award of Rs.3,93,24,065/- was thus reduced to Rs.22,36,380/- plus cost of Rs.28,402/-. Aggrieved, the appellant/claimant is before us.
4. Heard Sri. Anil Sebastian Pulickel, the learned counsel for the appellant and Sri. K. Shri Hari Rao, the learned Central Government Counsel for the respondent.
5. According to the learned counsel for the appellant, the court below went wrong in partly setting aside the award, which in effect, is a modification of the award. This is not permissible under Section 34 of the Act. It was pointed out that in a proceeding under Section 34, the court can only set aside an award on any of the grounds mentioned in S. 34(2) or 34 (2-A) and in no case, can the court modify an award or set aside an award partially except in the contingency provided under the proviso to S.34 (2)(a) (iv). If at all the court finds that a portion or part of the award is bad, the remedy lies in S. 34 (4), goes the argument. Reference was made to Hakeem’s (supra) case in support of the argument that the court has no power to modify an award. The learned counsel, in all fairness, has also brought to our notice, decisions which have held that the doctrine of severability can be applied to awards which are severable. Raghul Construction Engineers and Contractors v. N.T.P.C. [(2005) SCC Online Kerala 389]; R.S. Jiwani Mumbai v. Ircon International Ltd. Mumbai (2010 (1) Mh.L.J. 547); Anugraha Engineers & Contractors v. Union of India (2014 (1) L.W. 132); Saptarishi Hotels Pvt. Ltd. v. National Institute of Tourism and Hospitality Management (2019 SCC Online TS 1765) are the decisions referred to by the learned counsel. Therefore, the argument advanced is that the present appeal is liable to be allo
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