2001 (10) TMI 1170 - HC - Indian Laws

Appeal Dismissed: Arbitrator's Appointment Valid, RITES Liable, Award Upheld

The Court dismissed the appeal, upholding the validity of the Arbitrator's appointment, affirming RITES' personal liability under the contract, and ... - Issues Involved:1. Violation of the appointment procedure of the Arbitrator.2. Non-joinder of Town Municipal Council (TMC), Chintamani as a party.3. Legality and public policy compliance of the Arbitrator's award.Detailed Analysis:Re: Point (a): Violation of the Appointment Procedure of the ArbitratorThe arbitration agreement's Clause 65(2) outlined a specific procedure for appointing an Arbitrator. The Contractor issued a notice on 29-5-1997 seeking arbitration, and RITES was required to send a list of three officers within 30 days, which it failed to do. The Contractor, therefore, sent its own list on 1-7-1997, and subsequently appointed the second respondent as Arbitrator when RITES refused to select from the Contractor's list. The Court found that the Contractor followed the procedure correctly, and RITES forfeited its right by not adhering to the stipulated time frame. Additionally, RITES waived its objections by actively participating in the arbitration without raising timely objections, thus estopping itself from challenging the Arbitrator's appointment.Re: Point (b): Non-Joinder of Town Municipal Council (TMC), Chintamani as a PartyRITES argued that it acted as an agent for TMC, Chintamani, and thus, TMC was the principal liable for payments. However, the contract between RITES and the Contractor indicated that RITES was the employer and responsible for payments. The Court noted that RITES admitted delays in payments due to non-receipt of funds from TMC but never directed the Contractor to seek payment directly from TMC. The contract's terms and surrounding circumstances indicated that RITES undertook personal liability, creating a contract to the contrary under Section 230 of the Indian Contract Act, 1872. Therefore, the Contractor was justified in making claims against RITES, and the non-joinder of TMC did not invalidate the arbitration proceedings or the award.Re: Point (c): Legality and Public Policy Compliance of the Arbitrator's AwardThe Arbitrator's award was based on findings that RITES breached contractual obligations by failing to make timely payments, provide necessary site access, and prematurely terminating the contract. The award included compensation for unpaid work, retention money, equitable rates, price adjustments, compensation for idle resources, and interest. The Court emphasized that under the Arbitration and Conciliation Act, 1996, the scope for challenging an award is limited to grounds specified in Section 34, which do not include re-evaluation of facts or evidence. The Court found that the award was based on admissions and documentary evidence, and RITES failed to demonstrate that the award was contrary to the public policy of India. Consequently, the award was upheld.Conclusion:The appeal was dismissed, affirming that the Arbitrator's appointment was valid, RITES was personally liable under the contract, and the award was neither erroneous nor contrary to public policy. The Court emphasized the limited grounds for challenging arbitration awards under the 1996 Act, reinforcing the finality and binding nature of arbitral decisions.