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IN THE HIGH COURT OF HIMACHAL PRADESH AT SHIMLA
DHARAM CHAND CHAUDHARY, J.
Himachal Pradesh State Electricity Board - Petitioner
Versus
Sh. Madan Lal Gulati - Respondent
Arb. Case No. 50 of 2007
Decided On : 19-12-2014
Arbitration - Electricity (Supply) Act 1948 - Clause 25 of the contract agreement - Section 31 of the Arbitration and Conciliation Act, 1996
Fact of the Case:
The petitioner-Board, constituted under the Electricity (Supply) Act 1948, awarded a construction contract to the respondent-Contractor for Thirot Hydel Project. The work was not completed within the stipulated period, leading to the rescission of the contract by the petitioner-Board. The parties entered into arbitration to resolve the resulting dispute.
Finding of the Court:
The court found that the Arbitrator had erred in entertaining and adjudicating the claims and counter-claims, as the rescission of the contract and execution of remaining work at the risk and cost of the Contractor did not constitute a dispute under Clause 25 of the contract agreement. The court set aside the award.
Issues: The issues included the legality and validity of the award, the time bar on counter-claims, and the jurisdiction of the Arbitrator.
Ratio Decidendi: The court held that the rescission of the contract and execution of remaining work did not fall under the arbitration clause, and the counter-claims were time-barred. The Arbitrator had no authority to condone the limitation without a valid case.
Final Decision: The court set aside the award, finding that the Arbitrator had erred in adjudicating the dispute and mis-conducted the proceedings.
JUDGMENT :
Dharam Chand Chaudhary, J.
Petitioner is a Board constituted under the Electricity (Supply) Act 1948. The petitioner-Board had taken in hand the construction work of Thirot Hydel Project. The construction of underground work comprising of Head Race Tunnel and Desilting Chambers was awarded to the respondent-Contractor for a sum of Rs.1.15 crores by the Executive Engineer, Thirot, Division No. 1 vide letter dated 21.11.1989. An agreement was entered upon between the petitioner and the respondent-Contractor. The agreed date for completion of the work was 31.08.1991. The respondent-Contractor, however, as agreed upon. The contract, therefore, was rescinded on 23.03.1992 with the stipulation to get the same completed by the petitioner-Board at the risk and cost of the respondent. The work could only be completed in the month of June, 1996.
2. The respondent-Contractor served the petitioner-Board with a legal notice dated 16.10.1998 calling upon thereby to appoint an Arbitrator for adjudication of the dispute having arisen in relation to the agreement. The Arbitrator came to be appointed on 09.09.1999.
3. The petitioner-Board preferred the claims against the respondent-Contractor well within the period of limitation in the month of June, 1999 i.e. well within three years of the date of completion of work i.e. June, 1996. The respondent, however, filed reply to the claims of the petitioner-Board and also the counter-claims on 26.08.2002 allegedly beyond the period of limitation. The Arbitrator announced the award on 07.09.2007 and thereby while awarding a sum of Rs.12,00,000/- along with interest @ 15% in favour of the petitioner- Board at the same time awarded a sum of Rs.21,63,850/- along with interest @ 15% in favour of the respondent-Contractor.
4. The petitioner-Board aggrieved by the award has questioned the legality and validity thereof on the grounds inter-alia that the same being non-speaking award having no reasons, as required under Section 31 of the Arbitration and Conciliation Act, 1996 recorded by the Arbitrator is against the public policy of India. Also that, the counter-claims being time barred have been erroneously entertained and the aspect of limitation has not been considered. The amount under the counter-claims has been awarded without there being any evidence available on record and rather the Arbitrator travelled beyond the terms of the agreement, while making the award in favour of the respondent- Contractor. On the other hand, claim to the tune of Rs.39,12,870/- of the petitioner-Board has not been considered in the light of the evidence available on record and only a paltry amount i.e. Rs.12,00,000/- has been awarded out of the same.
5. The respondent-Contractor in preliminary submissions has urged that no ground in terms of Section 34(2) of the Act is made out for setting aside the impugned award and also that the objection not filed by the authorized person, the same is not maintainable. The petition is also claimed to be time barred. On merits, while supporting the award, it has been submitted that he preferred the counter-claims well within the period of limitation. It is specifically pointed out that the petitioner-Board raised objections qua the counter-claims time barred only after 17 hearings having taken place in the matter before the learned Arbitrator. It is also denied that he failed to complete the work within the stipulated period. It is rather the petitioner-Board stated to have erroneously rescinded the contract.
6. In rejoinder, the petitioner-Board has denied the contents of the preliminary submissions being wrong. On merits, while reiterating the contents of the petition denied the contentions to the contrary in the reply being wrong.
7. On the pleadings of the parties, following issues were framed on 28.07.2008:
(i) Whether the award dated 7.9.2007 is against the Public Policy of India ? If so, its effect? OPO
(ii) Relief.
8. The parties though initially opted for producing evidence by
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