TaxTMI 
TaxTMI 
2001 (5) TMI 949
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.... State in return for a stipulated fee to mobilise funds, in public interest to undertake public works. Disputes and misunderstanding arose which led to the termination of the agreement resulting in the appellants seeking recourse to litigation by getting an Arbitrator appointed invoking the powers under Section 8 of the Arbitration Act, 1940 (hereinafter referred to as the `Act). As against the order dated 24.10.1992 of the District Judge, Gangtok (Sikkim), appointing the sole Arbitrator, the respondent challenged the same before the High Court by filing an appeal which came to be dismissed on 23.11.1992. The matter was pursued further before this Court in SLP (C) No.26 of 1993 and by an order dated 26.4.1993 the same was, by the agreement of parties, dismissed subject to the observation that the Arbitrator shall give a speaking order and, therefore, there was no need to go into the controversy raised. The appellants filed their statement of claim before the Arbitrator for a sum of Rs. 81,84,679.45 with further relief for the refund of Rs. 76 lacs, said to have been realised by the State by encashing two bank guarantees, with interest at 18% p.a. from 23.9.1992, the date of enca....
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....bsp; Sd/- (Ripusudan Dayal) (S.N. Bhargava) Judge Chief Justice 29/09/1995 29/09/1995 Thereafter, Dayal, J. ceased to be Judge of the Sik....
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....r, in the aforementioned circumstances, we conclude that there was no deliberate delay on the part of the petitioners, but it was only because they thought that it was not necessary to challenge the order of 29.9.95 as they had challenged the subsequent order of 14.8.96. We, therefore, condone the delay and allow the amendment. We would also like to make it clear that we do not propose to go into the merits of the matter except to consider whether in the aforesaid factual background was it permissible to the learned Chief Justice to hear and pass the order of 14.8.96. In other words, was the learned Chief Justice entitled to hear the matter in view of the per Court order passed on 29.9.95. If yes, the question is whether the per Court order of 29.9.95 itself was a correct order. If no, what order this Court should pass in the matter. This is the limited question which we may be required to consider at the initial stage unless we find it necessary to enter into the merits of the matter. We direct the learned counsel appearing for the contesting parties to file their brief written submissions within two weeks from today. The matters may thereafter be fixed for final disposal. P....
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....& another vs Kirpal Singh & Another(1995 (5) SCC 119) and that of the Assam High Court in Abdul Latif vs Abdul Samad (AIR 1950 Assam 80). In traversing the said claim, Shri V.A. Bobde, learned senior counsel for the Sikkim State, contended that the words Court consisting of in juxtaposition to the words Constituting the Bench, in proviso to sub-Section (2) of Section 98 will only have relevance and has to be construed with reference to the sanctioned strength alone - which at all relevant points of time was only three so far as Sikkim High Court is concerned and whenever there is a third judge, even on the vacancy being filled up on such vacancy arising for any reason in respect of any one of the two, the matter should be referred to and heard by the third judge and neither any exception could be taken for the same nor could it be claimed that the judgement under appeal before the High Court should only be confirmed. Since retrospective deletion of a statutory rule could not have been legitimately made by a notification by the rule-making authority in the absence of a specific statutory provision conferring any such power in this case, it is contended that the deletion could be onl....
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....rders passed by this Court on 11.4.97 to treat the appeals as having been filed even on the merits of the case and be heard as such, and that too, on the agreement expressed by the counsel on both sides, to be also the appropriate course, in these matters, it is not permissible for the appellants to take a stand to the contrary to avoid or stall an hearing and disposal of these appeals on the merits of the matters involved therein. The respondent-State, though at some point of time, seems to have pressed into service Article 299 of the Constitution of India, to contend that no valid contract between parties came into existence as envisaged therein and consequently neither the Arbitrator could have entered upon reference nor can the State be held bound by such an agreement, the same was not pursued before us realising the futility of the same, having regard to the peculiar facts of this case. We are not called upon, in such circumstances, to decide this issue and the parties have also proceeded on the footing that there was a valid and binding contract between the appellants and the State, in this case, without prejudice to their contentions in respect of their rights under the a....
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....arious levels exercising powers under the Act as well as by this Court, without unnecessarily multiplying the number of authorities by making reference to only some relevant out of the same, for our purpose. Relying upon the ratio in Champsey Bhara & Company vs Jivraj Balloo Spinning & Weaving Company Ltd. (AIR 1923 P.C. 66) this Court in M/s Alopi Parshad & Sons Ltd. vs Union of India(AIR 1960 SC 588) observed that the award may be set aside on the ground of an error on the face thereof, when in the award or in any document incorporated with it, as for instance, a note appended by the Arbitrator(s) stating the reasons for the decision wherein the legal propositions which are the basis of the award are found to be erroneous. A specific question submitted to the Arbitrator for his decision, even if found answered wrongly involving an erroneous decision in point of law also, was considered not to make the award bad on its face so as to call for interference. While emphasising the position that misconduct in Section 30 (a) of the Act comprises legal misconduct, this Court held it to be complete in itself when the Arbitrator was found to have, on the face of the award, arrived at a ....
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....urt held that the arbitrator need not give any reasons. The award could be impeached only in limited circumstances as provided under Section 16 and 30 of the Act. If the award is disproportionately high having regard to the original claim made and the totality of the circumstances it would certainly be a case of non application of mind amounting to legal misconduct and it is not possible to set aside only invalid party while retaining the valid part. In other words the doctrine of severability was held inapplicable in such a situation. It is, therefore, clear that the word misconduct in Section 30(a) does not necessarily comprehend or include misconduct of fraudulent or improper conduct or moral lapse but does comprehend and include actions on the part of the arbitrator, which on the face of the award, are opposed to all rational and reasonable principles resulting in excessive award or unjust result or the like circumstances which tend to show non application of the mind to the material facts placed before the arbitrator or umpire. In truth it points to fact that the arbitrator or umpire had not applied his mind and not adjudicated upon the matter, although the award professes to ....
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....onable or right thinking person or authority could have reasonably come to such a conclusion on the basis of the materials on record or the governing position of law to interfere. So far as the case before us is concerned, the reference to the Arbitrator is found to be a general reference to adjudicate upon the disputes relating to the alleged termination of the agreement by the State and not a specific reference on any particular question and consequently, if it is shown or substantiated to be erroneous on the face of it, the award must be set aside. The Award under challenge, in our view, stands vitiated on account of several serious errors of law, apparent on the face of it and such infirmities go to substantiate the claim of the State that not only the Arbitrator acted arbitrarily and irrationally on a perverse understanding or misreading of the materials but also found to have misdirected himself on the vital issues before him so as to render the award to be one in utter disregard of law and the precedents. Although the award purports to determine the claims of parties, a careful scrutiny of the same discloses total non-application of mind to the actual, relevant and vital ....
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....nd continuous wrongs and defaults and continue to perform their part of the contract to their disadvantage and detriment and also further penalise them with damages for not doing so, when even dictates of common sense, reason and ordinary prudence would commend for rejecting the claim of the appellants as nothing but a gamble and vexatious. The Arbitrator, who is obliged to apply law and adjudicate claims according to law, is found to have thrown to winds all such basic and fundamental principles and chosen to award an astronomical sum as damages without any basis or concrete proof of such damages, as required in law. Though the entire award bristles with numerous infirmities and errors of very serious nature undermining the very credibility and objectivity of the reasoning as well as the ultimate conclusions arrived at by the Arbitrator, it would suffice to point out a few of them with necessary and relevant materials on record in support thereof to warrant and justify the interference of this Court with the award allowing damages of such a fabulous sum, as a windfall in favour of the appellants, more as a premium for their own defaults and breaches :- a) The conclusio....
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....tion of our Telegram dated 8.2.92, a detailed statement of Agency fee due upto 31st January, 1992 is enclosed herewith:- 1st. lot of eight lotteries - Agency Fee - 1,09,36,924 Interest - 10,64,272 2nd. lot of eight lotteries - Agency fee - 1,15,09,517 Interest - 5,25,534 3rd. lot of eight lotteries - Agency fee - &nbs....
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....directed to give you this notice to settle the entire dues before 15th April, 1992 failing which Government will be compelled to take action and also invoke the guarantees. Waiver involves a conscious, voluntary and intentional relinquishment or abandonment of a known, existing legal right, advantage, benefit, claim or privilege, which except for such a waiver, the party would have enjoyed. The agreement between parties in this case is such that its fulfilment depends upon the mutual performance of reciprocal promises constituting the consideration for one another and the reciprocity envisaged and engrafted is such that one party who fails to perform his own reciprocal promise cannot assert a claim for performance of the other party and go to the extent of claiming even damages for non-performance by the other party. He who seeks equity must do equity and when the condonation or acceptance of belated performance was conditional upon the future good conduct and adherence to the promises of the defaulter, the so-called waiver cannot be considered to be forever and complete in itself so as to deprive the State, in this case, of its power to legitimately repudiate and refuse to perf....
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....en misconstrued by ignoring the vital and relevant portions contained therein. Similar instances in respect of other relevant documents also are rampant, as could be seen from the award, appropriately pointed out by the Chief Justice in his judgment. c) The manner in which the Arbitrator has chosen to arrive at the quantum of damages alleged to have been sustained by the appellants not only demonstrates perversity of approach, but per se proves flagrant violation of the principles of law governing the very award of damages. The principles enshrined in Section 54 in adjudicating the question of breach and Section 73 of the Contract Act incorporating the principles for the determination of the damages, are found to have been observed more in their breach. Despite the fact that M.K. Subba, who had been all along corresponding and dealing with the matter directly, has without any justification whatsoever, not only been withheld from the witness box but despite the oral evidence of RW-1, facts which could only be denied or proved by M.K. Subba have been taken for granted. No one from the appellants side who could speak for as to what is the usual course of things in lotteries was exa....
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....isconstruction and misdirection alone is sufficient to scrap the Award of the Arbitrator. e) The Award of an Arbitrator cannot be opposed to law and what is not permissible in law cannot be granted or even approved by Courts merely because it was an Arbitrator who granted it.Section 54 of the Contract Act is a complete answer to the claim at the instance of the appellants for either performance of the contract or for asserting a claim for compensation/damages for the alleged non-performance arising out of repudiation by the State. The Arbitrator could not have been oblivious of the fact that it was the defaults, violations and breaches committed by the appellants that necessitated the termination of the contract by the State, left with no other option for it, in law. Even a cursory reading of the Award in the light of the materials on record, as rightly pointed out in the judgment of Chief Justice Bhargava, with particular reference to the indisputable facts disclosed on the basis of the correspondence between parties would disclose that no reasonable or prudent person could have ever either reasonably, fairly or justly arrived at such findings as have been recorded by the Arbit....