2008 Supreme(Mad) 1784
High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE S. RAJESWARAN
Tamilnadu Water Supply and Drainage Board (TWAD), rep. by its Managing Director Sri. K. Dheenabandhu
Versus
Pioneer Engineering Syndicate, Engineers and Contractors
O.P.No.77 to 79 of 1999, Appln. Nos.432 to 434 of 2000 and Appln. No.2834 of 2001
Decided on : 16-06-2008
For the Petitioner:Sudharsana Sunarj, Advocate.
For the Respondent:G. Masilamani, Senior Counsel for G. Narasimhulu, Advocate.
Headnote:
ARBITRATION - AWARD - SETTING ASIDE - GROUNDS - JURISDICTION OF ARBITRATOR - PARTNERSHIP FIRM - REGISTRATION - EFFECT OF NON-COMPLIANCE WITH SECTION 63(2) OF INDIAN PARTNERSHIP ACT, 1932 - ARBITRATION CLAUSE - VALIDITY - TIME AS ESSENCE OF CONTRACT - INTEREST - AWARD OF.
Fact of the Case:
The respondent, a partnership firm, entered into a contract with the Board for the execution of certain works. Disputes arose between the parties and the respondent invoked the arbitration clause in the contract. The Board challenged the jurisdiction of the arbitrator on various grounds, including the non-registration of the respondent firm under the Indian Partnership Act, 1932, and the invalidity of the arbitration clause. The arbitrator rejected the objections and passed an award in favor of the respondent. The Board filed petitions under Section 30 and 33 read with Section 31 of the Arbitration and Conciliation Act 1940 to set aside the award.
Finding of the Court:
The Court held that the non-registration of the respondent firm under Section 63(2) of the Indian Partnership Act, 1932, did not render the arbitration clause invalid. The Court also held that the arbitrator had jurisdiction to decide the disputes between the parties and that the award was not perverse or illegal. The Court further held that the arbitrator had the power to award interest on the amount due to the respondent and that the rate of interest awarded was not excessive.
Issues: 1. Whether the non-registration of the respondent firm under Section 63(2) of the Indian Partnership Act, 1932, rendered the arbitration clause invalid? 2. Whether the arbitrator had jurisdiction to decide the disputes between the parties? 3. Whether the award was perverse or illegal? 4. Whether the arbitrator had the power to award interest on the amount due to the respondent? 5. Whether the rate of interest awarded was excessive?
Ratio Decidendi: 1. The non-registration of a partnership firm under Section 63(2) of the Indian Partnership Act, 1932, does not render the arbitration clause in a contract entered into by the firm invalid. 2. An arbitrator has jurisdiction to decide disputes between parties to a contract if the arbitration clause in the contract is valid and the arbitrator is appointed in accordance with the terms of the arbitration clause. 3. An award is not perverse or illegal merely because the arbitrator's findings are erroneous or the arbitrator has taken a view of the evidence that is different from the view that the Court would have taken. 4. An arbitrator has the power to award interest on the amount due to a party to a contract if the contract provides for the payment of interest or if the arbitrator finds that the party is entitled to interest under the principles of equity. 5. The rate of interest awarded by an arbitrator will not be considered excessive unless it is明らかに excessive.
Final Decision: The Court dismissed the petitions filed by the Board and upheld the award passed by the arbitrator.
All the above three Original petitions are filed under Section 30 and 33 read with Section 31 of the Arbitration and Conciliation Act 1940 and Order 43 Rules 1, 2, 6 and 7 of O.S. Rules to set aside the award dated 210. 1997 passed by the Arbitrator Mr. Justice S. Sivasubramanian (Retd.) in O.P.No.44, 45 and 46 of 1998 respectively and for costs.
2. As the parties are one and the same and the issue involved is also the same, a common order is being passed to dispense of the above petitions and the applications.
3. Tamil Nadu Water Supply and Drainage Board (hereinafter called as “Board) have filed O.P.No.77, 78 and 79 of 1999 to set aside the three awards dated 210. 1997 passed by the arbitrator.
4. For the sake of convenience, I am referring to the facts in O.P.No.77 of 1999 and it is admitted by both the parties that the issue involved is one and the same in all the three petitions and only the amounts vary with regard to the tender price, the awarded amount, etc.
5. The Government of Tamilnadu decided to execute Water Supply projects to three cities viz., Coimbatore, Madurai and Salem with a loan assistance of the World Bank. Though the project involved a number of works, we are only concerned with three works viz.,
1. Coimbatore Reach I: for manufacturing, supply, laying, jointing and testing of PSC pipes of a diameter 1500 mm for feeder and transmission main (turnkey basis) for an estimated value of Rs.4,82,85,179/-;
2. Coimbatore Reach II: for similar work in respect of PSC pipes ranging from 700-1500 mm for transmission main (turnkey basis), for an estimated value of Rs.4,51,30,263/-; and
3. Madurai Reach I: for similar work in respect of PSC pipes of diameter 1000-1100 MM for transmission main (turnkey basis), for an estimated value of Rs.6,02,71,368/-
6. The Board, after negotiations accepted the tender submitted by Pioneer Engineering Syndicate, Hyderabad, the respondent herein in all the three petitions and issued the work order on 4. 1998. Formal agreement between the parties was signed on 6. 1988 between the Board and the respondent. O.P.No.77 of 1999 deals with the disputes and differences between the parties relating to Coimbatore Range II agreement.
7. In accordance with the terms of the agreement, the respondent undertook manufacturing, supplying, laying and jointing of PSC Pipeline work, at a tendered cost of Rs.4,51,30,263/- to be completed within a period of 24 calendar months. The said period was to commence on the date of handing over of the site, after concluding the agreement. According to the respondent, a part of the site was handed over on 19. 1988 and as such the stipulated time limit can be said to have commenced on 19. 1989 and expired on 19. 1991. The total number of pipes to be manufactured in 18 months was 2940 giving an average rate of 164 per month. The rate at which the pipes were to be laid in terms with the agreement was an average of 6 to 7 pipes per day,
8. According to the respondent, though they have a factory at Hyderabad, they were asked to set up a factory at the site of the work and they have made all the necessary preparations for executing the work. It is their case that inspite of their prepardness the Board committed breaches of contract conditions, like, delay in payment of initial advance by the board to the respondent, the failure of the board to make land for the factory, delay in according initial approval to the designs, manufacturing process of pipes etc. and the delay in giving possession of the site by the board.
.9. The board on the other hand were complaining of slow progress of work on the part of the respondent. By letter dated 26. 1991, the board extended the time for completion of work by six months with effect from 6. 1991. Thereafter, the board issued a Show cause notice on 8. 1991, seeking reasons as to why action should not be taken under the provisions of the agreement, for which, a reply was sent by the respondent. Not satisfied with th