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M/S Anant Raj Agencies Petitioner v. Dda & Anr. S
Factual and Procedural Background
The petitioner filed a petition under Section 14 and 17 of the Arbitration Act, 1940, seeking the Court's direction to the Arbitrator (respondent No. 2) to file the arbitration award and for that award to be made rule of the Court. The petitioner had been awarded a contract for constructing 504 MIG Houses at Pitam Pura under agreement No. 36.DD-II/DDA/82-83. Disputes arose between the parties regarding the agreement, which were referred to arbitration as per the arbitration clause. The Arbitrator published the award on 25th March 1997, accepting the petitioner's claims for certain works. Respondent No. 2 filed objections challenging the award's validity on multiple grounds.
Legal Issues Presented
- Whether the arbitration award dated 25th March 1997 can be set aside on the grounds raised by respondent No. 2, particularly regarding claims for procurement of flush door shutters and sinks.
- Whether the objections raised by respondent No. 2 fall within the ambit of Sections 30 and 33 of the Arbitration Act, 1940, for setting aside an arbitration award.
- The scope of judicial interference in arbitration awards and the extent to which courts can reassess factual findings made by the Arbitrator.
Arguments of the Parties
Respondent No. 2's Arguments
- The petitioner procured machine panel shutters made of visa shal wood themselves, contrary to the agreement which required respondent No. 2 (DDA) to provide them.
- The Arbitrator erroneously accepted the petitioner's claim of Rs. 8.60 lacs despite the petitioner procuring material worth only Rs. 7.75 lacs.
- There was no necessity to procure shutters in February 1983 since work was to be completed by October 1983.
- Flush door shutters were to be provided only in the sample house, not the entire project, as indicated by letter Ex.C-4, which the Arbitrator overlooked.
- Similar objections were raised regarding procurement of sinks, with claims that such procurement was unnecessary at the time and unsupported by evidence.
- The award was based on no evidence and was contrary to the record, warranting setting aside.
Petitioner's Arguments
- The objections do not fall within the scope of Sections 30 and 33 of the Arbitration Act, 1940.
- The award dated 25th March 1997 is a reasoned and lawful award without any ground for challenge.
- Judicial interference would amount to acting as a court of appeal on the Arbitrator’s findings, which is impermissible.
- There were direct instructions from respondent No. 2 to provide flush door shutters, supported by letter Ex.C-2 from the Additional Chief Engineer.
- The petitioner procured flush door shutters at a cost of Rs. 8.60 lacs, supported by bills exhibited before the Arbitrator.
- The respondent later changed their decision by letter Ex.C-3, but the Arbitrator rightly relied on the initial instruction (Ex.C-2).
- The findings of fact made by the Arbitrator are final and cannot be assailed unless misconduct is shown.
- Respondent admitted the correctness of Ex.C-2 but claimed it was internal and not meant for the petitioner.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| AIR 1987, S.C 81 | The Arbitrator is the final arbiter of disputes; awards cannot be challenged merely because the Arbitrator reached a wrong conclusion or failed to appreciate facts. | The Court relied on this principle to emphasize the sanctity of the Arbitrator’s findings and limit judicial interference. |
| AIR 1987, S.C 1263 | Under Section 30 of the Arbitration Act, challenges to awards must show that the Arbitrator’s reasons were legally erroneous or unsustainable on any view of the matter. | The Court applied this to hold that mere mistakes in construction or appreciation do not justify setting aside an award. |
| 1994, Vol II, Arbitration Law Reporter, 479 | Power of Arbitrators to conduct proceedings and the sanctity of their awards. | Reinforced the Court's approach to uphold the award unless substantial infirmity is demonstrated. |
Court's Reasoning and Analysis
The Court carefully examined the objections raised by respondent No. 2 alongside the arbitration award and relevant correspondence, including letters Ex.C-2 and Ex.C-3. The core dispute revolved around whether the petitioner was authorized to procure certain construction materials or whether these were to be supplied by respondent No. 2. The Court noted that this factual determination was within the exclusive domain of the Arbitrator, who had conducted a thorough inquiry and afforded both parties an opportunity to present evidence.
The Court observed that the award was a speaking and well-reasoned award. It applied the statutory provisions of Sections 30 and 33 of the Arbitration Act, 1940, which restrict setting aside awards to specific grounds. The Court relied on established Supreme Court precedents affirming that an award cannot be challenged on the basis of factual errors or incorrect appreciation of evidence unless the reasoning is legally unsustainable or perverse.
Given the absence of any legal infirmity or misconduct by the Arbitrator, the Court found the objections lacking in substance and not meeting the threshold for interference. The Court emphasized that it is not a forum to reappraise evidence or substitute its own findings for those of the Arbitrator.
Holding and Implications
The Court dismissed the objections preferred by respondent No. 2 and directed that the arbitration award dated 25th March 1997 be made rule of the Court. No costs were ordered.
The decision directly affects the parties by confirming the validity and enforceability of the arbitration award in favor of the petitioner. The Court did not set any new precedent but reaffirmed the limited scope of judicial review over arbitration awards under the Arbitration Act, 1940.
H.R Malhotra, J.:— By making this petition under Section 14 and 17 of the Arbitration Act 1940 the petitioner desire this Court to issue notice to the Arbitrator i.e respondent No. 2 to file the award and then same be made rule of the Court.
2. Upon filing this petition, this court issued notice to the Arbitrator. The Arbitrator filed the award and its proceedings.
3. Notice of the filing of award was given to the respondent No. 1 to prefer objections, if any against the award within the statutory period. Respondent No. 1 preferred objections against the validity of the award assailing its correctness on numerous grounds.
4. Before adverting to the objections, it is expedient to recapitulate facts in succinct.
5. The petitioner was awarded the work of construction of 504, MIG Houses at Pitam Pura vide agreement No. 36.DD-II/DDA/82-83.
6. Certain disputes arose between the parties in regard to the agreement which were referred to the arbitration of respondent No. 2, there being an arbitration clause in the agreement. The Arbitrator published its award on 25th March, 1997 accepting the claim of the petitioner in respect of certain works of the said project. Feeling dissatisfied respondent No. 2 filed objections.
7. Claim No. 1 related to amount of Rs. 8.60 lacs on account of procurement of flush door shutters. It is the case of respondent No. 2 that machine panel shutters made of visa shal wood were to be provided by respondent No. 2 DDA but the petitioner firm procured this item themselves which was contrary to the agreement between the parties. The Arbitrator, according to respondent No. 2 erroneously accepted the claim of the petitioner despite there being deviation from the agreement by the petitioner firm. It is also the grievance of respondent No. 2 that the petitioner had procured the material of the value of Rs. 7.75 lacs whereas the Arbitrator accepted the claim of the petitioner for a sum of Rs. 8.60 lacs. It is further the case of the respondent that the Arbitrator overlooked the fact that there was absolutely no question of procurement of shutters by the petitioner in the month of February, 1983 particularly when the work which commenced in October, 1982 was to be completed in October, 1983 and therefore, according to respondent No. 2 there was no necessity to make purchases much before the structural work was to be completed. It is further stated in the objections that flush door shutters were only to be provided in the sample house and not in the entire project as was indicated in letter Ex.C-4. The Arbitrator without looking into this aspect and also without applying his mind, accepted the claim of the petitioner in toto.
8. Similar is the complaint in respect of providing of “sinks” in the kitchens. According to them there was really no necessity of procuring sinks and that too in the month of February, 1983 particularly when the structure work was to be completed in October, 1983. The award, as per respondent No. 2 is based on no evidence and rather it is contrary to the evidence on the record and liable to be set aside. These are the two primary objections on which the award is sought to be set aside.
9. The petitioner repudiated the averments made in such objections and claimed that objections as raised in the petition do not fall within the ambit and scope of 30 and 33 of the Arbitration Act, 1940 and further reiterated that the award dated 25th March, 1997 was reasoned one and in accordance with the law and there was absolutely no ground to assail the same. Petitioner further stated in the reply that interference in the award would amount to sitting as a court of appeal on the findings of the Arbitrator which is not permissible in law.
10. On merits of the case, the petitioner stated that there were direct instructions by the respondent to provide flush door shutters and Sh. V.N Thakker, Additional Chief Engineer had desired in January, 1983 that as per the instructions from engineer DDA, flush door shutters were to be provided in the housing scheme and in this regard a letter Ex. C-2 was written indicating the procurement of the material by the petitioner. Pursuant thereto, the petitioner procured the flush door shutters by spending a sum of Rs. 8.60 lacs, bills of which were produced before the Arbitrator and Exhibited as C-32 to C-34. According to the petitioner, the respondent subsequently changed the said decision vide their letter dated 19th December, 1983 Ex. C-3. The Arbitrator after going through the letter Ex. C-2 and also Ex.C-3 rightly relied upon Ex.C-2. Even otherwise, according to the petitioner, the findings of the Arbitrator being the findings of facts cannot be assailed by the respondent, as the Arbitrator is the sole judge for appreciating the sufficiency of the evidence and it is the exclusive domain of the Arbitrator to make appraisal of the evidence and then reach the conclusion which could not be ordinarily upset unless court find that the Arbitrator misconducted himself. The petitioner has primarily placed reliance on letter Ex. C-2 whereas respondent while preferring objections though admitted the correctness of Ex. C-2 but stated that it was only internal communication and was not meant to be sent to the petitioner.
11. I have thoroughly considered the objections preferred by respondent No. 2. Impugned award has also been carefully perused besides perusal of correspondences exchanged between the parties including Ex. C-2 and Ex. C-3.
12. Primarily the dispute between the parties seems to be on the aspect of procuring construction material. It is the case of the petitioner that vide letter Ex-C-2, they were authorized to procure material whereas according to respondent No. 2, the material was to be provided by them.
13. I may state that this was domain of the Arbitrator to look into this aspect for which he had undertaken complete exercise by affording opportunities to both the parties to adduce evidence in that regard.
14. As is seen, the impugned award is a speaking award and well reasoned. The legal position in regard to the importing of Section 30 and 33 of the Arbitration Act is quite clear. Reading of these two provisions make it clear that statute is far making award rule of the court unless the person who desire the court to reverse it brings his case within the four corners of essentials as provided under Section 33 of the Arbitration Act, 1940.
15. Learned counsel for the petitioner has also placed reliance on various judgments. These are AIR 1987, S.C 81, AIR 1987, S.C 1263 and also at page 2316. He has also laid emphasis on yet another authority reported in 1994, Volume II, Arbitration Law Reporter, 479.
16. All these authorities speak about power of the Arbitrators and the manner in which he is to conduct the proceedings and sanctity of the award. In the first authority cited above, the Apex court while dealing with the objections observed as under:-
The Arbitrator is made the final arbiter of the dispute between the parties. The award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion or has failed to appreciate facts.”
17. In the authority at Sr. No. 2 above, the Arbitrator in that case had also given speaking award which was assailed by the party against whom the award was. Their Lordships while dealing with the provisions of Section 30 of the Arbitration Act remarked as under:-
“Unless it was demonstrated to the court that reasons so given by the Arbitrator were erroneous as such as a proposition of law or a view which the Arbitrator had taken was a view which could not possibly be sustained on any view of the matter, then the challenge to the award of the Arbitrator cannot be sustained. The Arbitrator had construed the effect of particular case of the contract. It cannot be said that such a construction is a construction which is not conceivable or possible. If that is the position arising even for the arguments there was some mistakes in the construction, such a mistakes is not amenable to be corrected in respect of the award by the court.”
18. The Apex court also dealt with another aspect on the power of the court for setting aside the award.
19. For the reasons above, I find that the objections preferred by respondent No. 2 are devoid of any substance. No infirmity of any nature is noticed in the award as such no valid ground exist for setting aside the award.
20. Consequently the objections preferred by respondent No. 2 are dismissed resulting in making the award rule of the court. No order as to costs.
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