Sarkar Enterprise v. Garden Reach Shipbuilders And Engineers Ltd. .

1. This is an application under S. 34 of the Arbitration and Conciliation Act, 1996. Section 34 of the Act speaks for certain conditions under which the recourse of the Court against an arbitral award may be obtained by way of making an application for setting aside the arbitral award. At the inception it is to be said that unlike the Arbitration Act, 1940, scope and ambit of setting aside the Arbitrator's award under the new Act is very limited. It operates as good as decree. Therefore, the Court would be very slow in interfering with it unless an exceptional circumstances exists which can lead to a position of nullifying the claim. This is settled principle of law that unless and until the award seems to be bad from the fact of it, it should not be interferred with as an appeal from such award to adjudge the mental process of the Arbitrator. Such well settled principle of law practically codified by giving a rigid parameters of consideration under new Act so that the Court may not be unnecessarily burdened with such litigations when the parties themselves choose their own forum.

2. The fact remains that by consent of the parties, this Court was pleased to appoint Chairman-cum-Managing Director of the respondent-Company as Arbitrator. From the order of the Court dated 11th May, 1998, it appears that the Arbitrator was directed to proceed expeditiously and in summary manner so that there should not be any delay in disposing the matter. The Arbitrator was directed to adjudicate the claims and counter claims to be referred to him by the parties. In turn, when the matter was referred to the Arbitrator, the following issues as settled between the parties, were framed:—

1(a) Was the Claimant asked by the Respondent to bring the dredger at G.R.S.E (Main) for dredging work three months prior to 12th March, 1997. It so, whether any work was allotted to the claimant?

1(b) Is the claimant entitled to Rs. 1,000.00 (Rupees One thousand only) per day during the idle period?

2(a) Whether any or all of the terms and conditions specified in the agreement dated 10th July, 1999 are opposed to any statutory law or public policy or hit by principles of unequal bargaining?

2(b) Whether the contract dated 10th July, 1997 is legal, valid and binding upon the parties?

3. Whether the minutes of the joint meeting dated 5th December, 1997 have been waived or violated by the Respondent?

4(a) Whether the unilateral termination of the contract dated 10th July, 1997 by the Respondent was proceeded by a legal and valid notice?

4(b) Whether termination of the contract dated 10th July, 1997 by the respondent by issuing letters dated 8th Jan. 1998 and 18th April, 1998 are legal and valid?

5. Whether the claimant is guilty of any breach of the terms of the contract dated 10th July, 1997?

6. Whether the Respondent is guilty of any breach and/or violation of the terms of the contract dated 10th July, 1997?

7. Whether the Respondent is guilty of waiver, acquiescence or any other principles of law and equity?

8. Whether the Claimants are entitled to their claims set out in para (1) to (h) at pages 14 and 15 of their statements of claim or any part thereof?

9. Whether the Respondents are entitled to their claims set out in para 40(a) to 40(d) at pages 16 to 18 of their counter statement of facts and counter claims of any part thereof?

10. To what other reliefs, including interests, the parties are entitled to?

11. Whether the claimant is entitled to interim arbitral award of Rs. 5,85,322.40 and whether the claimant is entitled to withdraw the amount deposited with the Registrar, Original Side, High Court, at Calcutta?

3. Out of all the issues, leaving aside the issue No. 2(a) or at best 2(b) as above all other issues are either relating to question of fact or mixed question of law and fact, which cannot be spelt out by this Court in an application under S. 34 of the Act unlike an appeal. The award is a speaking award. The rest are discussed hereunder:

Issue Nos. 2(a) and 2(b)

“2(a) Whether any or all the terms and conditions specified in the agreement dated 10-7-1997 are opposed to any statutory law or public policy or hit by the principles of unequal bargaining?

2(b) Whether the contract dated 10-7-1997 is legal, valid and binding upon the parties?”

(a) It is the case of the claimant that the agreement dated 10th July, 1997 was drafted and prepared by the Respondent and it contains clauses which are opposed to public policy, particularly clause like ‘termination’. It is the further case of the claimant that the agreement contains illegal terms which were not understood by the claimant. In this connection the claimant heavily relied on the evidence of Mr. Dipak Sarkar in answer to questions Nos. 133, 167, 168, 169, 229, 222 and 223 and also the evidence of Mr. G.K Chowdhury in question Nos. 557, and 558. The Ld. Counsel for the Claimant citing Ss. 21 to 24 of the Indian Contract Act, further argued that the said contract involves reciprocal promises. He also argued that the claimant being an SSI Unit was not in an unequal bargaining position with the respondent. However, while concluding the argument relating to this issue the Ld. Counsel for the petitioner/claimant did not specifically conclude or refer anything as to what should be the fate of such a contract.

(b) The Respondent made an elaborate argument in respect of this issue. The officer representing the respondent stated that the issue raised was fortified with legal connotations and provisions of the law. He drew his attention to paragraph 37 of the Statement of claim wherein the Claimant contended that “the agreement dated 10-7-97 executed between the parties contained clauses which were opposed to public policy, were oppressive, voidable and were prapared by the GRSE authorities exercising, their fiduciary relationship with regard to the present claimant”. While arguing, the respondent explained various provisions of the Indian Contract Act, including Ss. 21 to 24 as relied on by the claimant. It was argued that the contract which contains clauses opposed to public policy is void ab initio as per S. 23 of the Indian Contract Act whereas Section 19 of the Indian Contract Act empowers the party which is affected by coersion, fraud, misrepresentation, etc. to avoid the contract being voidable. Hence, the claimant could either avoid the contract under S. 19, whatever might be the reasons or he could have simply declared the contract as void under S. 23 if in his opinion the contract contained clauses which were opposed to public policy. All the provisions from Ss. 19 to 30 of the Indian Contract Act which deal with void or voidable contracts were also explained to him. It was also argued by the said officer that from 12 March, 97 till 28 April, 98 when the contract was finally terminated by the Respondent, the claimant never raised any question with regard to legality or validity of the contract. The Respondent also argued that the claimant being an experienced business organisation had entered into the contract violuntarily and at their own free will and they could not now take a plea that they were not aware of the terms of the contract or the Contract Act as contended by them. In this regard reliance was made on a Division Bench judgment of the Madras High Court, reported in AIR 1998 Madras 9 wherein the Hon'ble Court had observed that “having signed agreement with eyes open, the party cannot make a grievance that the clauses are unreasonable”. It was also argued by the Respondent that there was no power imbalance, the claimant being an expedienced contractor and as such the contract cannot be said to be hit by principle of unequal bargaining. It was also stated that this was not the first contract that the claimant had entered into with the Respondent.

(c) In view of the aforesaid submissions and counter submissions by the parties the Arbitrator was unable to hold the view advanced by the claimant that they were forced to enter into a contract which contained clauses oppressive or opposed to public policy. On the contrary, relying on the principles of law settled in AIR 1998 Madras 9 (supra) the Claimant, being an experienced business, should not have signed the contract, if in his opinion the said contract contained oppressive clauses. He was inclined to hold that the argument forwarded by the Claimant is purely an after thought because during the entire period from 10 July, 97 to 28 April, 1998, the claimant never raised any objection regarding the legality or validity of the contract. He, therefore found the oral evidence adduced by Mr. Dipak Sarkar in this regard neither reliable nor justifiable as the same are not borne out either from any documentary evidence or corroborated by any other circumstantial evidence. There is thus no substance in the claimant's argument that the contract is not valid or is illegal and as such is not binding upon the parties. The Arbitrator, therefore decided issue No. 2(a) in negative and issue No. 2(b) in affirmative.

4. Against this background this jurisdiction under S. 34 of the act was invoked. According to Mr. Biswanath Mitra, learned counsel appearing on behalf of the petitioner. Section 34(2)(a)(i)(iv) and 2(b)(i), (ii) are applicable in this particular case. The aforesaid provisions are mostly dealt with the position when a party was under some incapacity, the arbitral award deals with a dispute nor contemplated by falling in the terms of submission to arbitration or decision on matters beyond the scope of the submission to arbitration. Therefore such part may not be necessary to bring into the zone of consideration. Question of small scale if any, can be at best brought as a policy of Government under S. 34(2)(b)(ii) for consideration policy of the Government is to make difference between Large Scale Industry and Small Scale Industry in granting or relaxing certain financial benefits. But such proposition cannot be fit in or influence any adjudicator in taking judicial decision arising out or contractual obligation. At best he can be called upon to show sympathy which may or may not be accepted. However it has got nothing to do in respect of performing any contractual duty as their obligation to do so. There should be a co-ordination between right and duty. If one think that by running as SSI unit he will only be entitled to take financial relation in addition to entering into big contractual work and when fail to perform take the advantage of sympathy, such sympathy must have been treated as misplaced sympathy.

5. Factually the petitioner made an agreement with the respondent basically for the purpose of making dredging work in dry dock so that the ship can be brought in for the purpose of cleaning and push back to the water. Therefore, upon making such contract, one can require appropriate performance of the contractor. Incapacity to perform obligation under the contract by a contracting party in distinct and different feature from incapacity in law. The Court is concerned about second type of incapacity but not the first one. So far next point is concerned, the petitioner contended that the Arbitrator's decision in the matter is beyond the scope of the jurisdiction. The main contention of the petitioner is that the Arbitrator being the Chairman-cum-Managing Director of the Respondent company cannot visualise the dredging work without making any sound check. According to the petitioner sounding check should be produced from the log book for the purpose of coming to a conclusion which was not done. I cannot probe the mental process of an Arbitrator in an application under S. 34 of the Arbitration and Conciliation Act, 1996 about sufficiency of evidence. Had it been the case of no evidence there would have been element of consideration. Therefore insufficiency of evidence, if any, cannot nullify the award.

6. The second part relates to jurisdiction of the Arbitrator raised by the petitioner which has been answered accordingly. Originally the petitioner applied under S. 9 of the Arbitration and Conciliation Act, 1996, made for the purpose of various interim measures by this Court. In the course of various discussions ultimately parties agreed to go before the Arbitrator being Chairman-cum-Managing Director of the respondent company. Even the arbitration clause provides as follows:—

“Arbitration:

Any dispute or difference arising out of or in connection with this Contract shall be referred to the Chairman & Managing Director of the Company who shall act as the sole Arbitrator or shall nominate another officer of the Company to act as the Arbitrator for adjudication on such dispute and difference in accordance with the existing laws”.

7. When the parties agreed, the matter was referred back to him by an order of this Court giving various guidelines which are available from the order itself. The Arbitrator proceeded accordingly. The petitioner participated in such arbitration proceeding without raising any objection to his jurisdiction, capacity etc. Now coming to this Court, the petitioner has taken such plea for the first time by saying that even if did not take the point before the Arbitrator but he can take now before the Court under S. 13(5) of the Arbitration and Conciliation Act, 1996. I am afraid that such submission is true interpretation of the Act. The new Arbitration Act is prepared so liberally by following United National Commission on International Trade Law (UNCITRAL) that the question of jurisdiction can be agitated even before the Arbitrator. Section 16 of the Act speaks for the same. Both the aforesaid sections are arising out of different chapters. Section 13(5) is provided under Chapter III of the Act made for general procedure for arbitration and challenges thereunder. It is not spelt out jurisdiction particularly unlike Chapter IV where under S. 16 is provided for making application to challenge the jurisdiction before the Arbitrator. Special superseds general. It cannot be the intention of the legislature that in each and every stage jurisdiction will be questioned and the moto of expeditious disposal will be spoiled.

The petitioner faintly riased an issue as to whether the dispute is in the nature of specific performance which can be decided by the Arbitrator or not knowing fully well that such question is now well settled in view of 1999 (5) SCC 651 : (AIR 1999 SC 2102) (Olympus Superstructures Pvt. Ltd. v. Meena Vijay Khetan) whereunder it was held that the Arbitrator can decide such issue. Therefore, strictly speaking there is no such sound submission available on account of the petitioner by which the petitioner's grievance can be looked into from other angle. It is further correct to say that law of acquiescence will be squarely applicable in this case since no question is raised before the Arbitrator about his jurisdiction and for the first time it is taken before the Court under an application for setting aside the award. Even going against my analysis I say that the question of jurisdiction may be taken up at any point of time if it inherently lacks but the question of jurisdiction based on factual matrix cannot be decided at any point of time since the same is not a question of inherent lacking of jurisdiction. Therefore such part cannot prevail over principles of waiver or acquiescence at this stage. Both the questions of jurisdiction and waiver/estoppel/acquiescence are the questions of law but based on factual matrix. Therefore, when fact remains that the petitioner has not taken such jurisdictional point before the Arbitrator which ought to be taken under the new Act, or in the Court during the course of arbitration proceeding under which the Arbitrator was appointed by consent of the parties and allowed the Arbitrator to pass a final award, such plea cannot be allowed to be taken now in the application for setting aside the award. When the very foundation of the reference to the Arbitrator is being shaken on the ground of the alleged invalidity of the agreement containing the arbitration clause, the participation of the party in the arbitration proceedings, culminating in an award will be of no consequence and he would be entitled to move an application for a declaration that the arbitration does not exist or the same is a nullity or void ab initio. The present situation is far from the same and cannot be converted to the situation as expressed herebefore. This is not the true impart of the Act. More particularly, there is a difference between an Arbitrator being creature of an agreement and creature of a reference of the Court of Law. The second one is exhanustive in nature to give far more answers to the parties requirements in a given situation. Interestingly both the parties have given their consent in respect of nature of reference and appointment of Arbitrator by the Court. Thus I do not find any reason to interfere with award passed by such Arbitrator, truly speaking, within the four corners of the reference framed by the Court. It cannot be construed that the Arbitrator Travelled beyond the jurisdiction which inherently lacking. Therefore, the law of acquiescence should prevail over such question and I hold the same.

8. Apart from the defence in the merit, Mr. B.S Sinha Roy, learned counsel appearing for the respondent took out a point of jurisdiction of the Court in entertaining this application. According to him appropriate subordinate Court under the High Court at Calcutta at Alipore, 24 Parganas (South), where the execution application is filed, has the appropriate jurisdiction. I am not at all agreeable with Mr. Sinha Roy from the very inception. In spite of the same upon observing his egarness to argue such point I have directed him to satisfy the Court.

In turn, Mr. Sinha Roy relied upon a judgment of the Supreme Court of India 2000 (4) SCC 539 : (AIR 2000 SC 1886) (P. Anand Gajapathi Rajy v. P.V.G Raju (Dead) and on the strength of such judgment said that there was no prior application before this Court for the purpose of appointment of Arbitrator so that this jurisdiction can be invoked. Since the parties agreed to refer the matter to the Arbitrator consequent to an application under S. 9 of the Act of 1996, not corresponding to the provision for such appointment, the same cannot be treated as prior application, Section 42 says as follows:—

“Jurisdiction”:

Notwithstanding anything contained elsewhere in this part or in any other law for the time being in force, where with respect to an arbitration agreement any application under this part has been made in a Court, that Court alone shall have jurisdiction over the arbitral proceedings and all subsequent applications arising out of that agreement and the arbitral proceedings shall be made in that Court and in no other Court,”

9. I am sorry to say that Mr. Sinha Roy became forgetful about the words ‘this part’ which is the cardinal principle herein. It cannot be said that either S. 9 or S. 11 of the Act of 1996 are falling in different parts of the Act of 1996 so that jurisdiction of the Court will be different to satisfy the test of Section 42 as above. True import is, if any application is made within this part in a Court, that Court alone shall have jurisdiction overall arbitral proceedings and all subsequent applications will be made there and on no other Court. In the Supreme Court judgment, the application was made under S. 8 of the Act referring the matter to an arbitration when the parties were governed by the Arbitration Act, 1940. Therefore, the true purport of S. 8 of the Act has to be interpreted and be understood in its appropriate prospective. The Supreme Court rightly held to understand the matter but the same is not fit to be applicable in this case. Therefore, in summing up the controversy, I would say that this Court has appropriate jurisdiction to entertain, try and determine the matter but on merit, I do not find any reason to interfere with the Award. Hence, the application under S. 34 of the Arbitration and Conciliation Act, 1996 is dismissed on merit. However, no order is passed as to costs.

10. This Court called upon the petitioner's Advocate to know whether the petition is interested to have installments for making payment of awarded amount or not when he refused to accept the same. On the contrary he prayed stay of operation of this order, which has been considered and refused.

11. Xerox certified copies of this judgment will be supplied to the parties within seven days from the date of putting requisites for the purpose of drawing up and completion of the order and for certified copy.

12. All parties are to act on a signed copy minute of this operative part of this judgment on the usual undertaking and subject to satisfaction of the officer of the Court in respect of above.

Order accordingly.