AI Drafter 
TaxTMI 
TaxTMI 
2024 (1) TMI 295
X X X X Extracts X X X X
X X X X Extracts X X X X
....ment to construct the office and residence of the Chief Conservator of Forests at Sirsi for an amount of Rs. 14.86 Lakhs. 2.2 The said contract was entered into between the parties on 29th January, 1990 with the stipulation that the possession of the construction site would be handed over to the Claimant-Appellant on 8th March, 1990 and the work allotted was to be completed on or before 6th May 1992 i.e., 18 months from the date of the agreement excluding the monsoon season. 2.3 It is undisputed that the work as allotted could not be completed by the Claimant-Appellant, for which, he held the authorities of the State responsible as they allegedly did not clear his bills, repeatedly at every stage and also due to delays caused by change of site and in delivery of material for such construction. 2.4 For settlement and adjudication of disputes, the parties to the contract resorted to the arbitral mechanism and resultantly, in Arbitration Petition dated 31st May, 2002, Mr. S.K Angadi, Chief Engineer (Retd.) stood appointed as the Arbitrator on 30th July, 2002. PROCEEDINGS BEFORE THE LEARNED ARBITRATOR 3. Pursuant thereto, the Claimant-Appellant herein filed his claim before....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Payment on Idle labour Rs. 1,77,300/- Rs. 1,77,300/- 4 Payment on idle machinery Rs.98,500/- Rejected 5 Payment of extra expenses on procurement of water at the changed site of work Rs.24,000/- Rejected 6 Payment of extra expenses on shuttering, centring, fabrication done earlier subsequently dismantled. Rs.15,800/- Rs.15,800/- 7 Payment on revised rates on the work executed beyond the originally stipulated time Rs.11,33,000/- Rs.9,67,300/- 8 Payment on refund of freek rates recovered in work bills Rs.33,469/- Rs.33,469/- 9 Payment on refund of security deposit Rs.57,770/- Rs.57,770/- 10 Payment of interest, pre arbitration, pendente lite and future interest @18% p.a. on all amounts due from claim No.1 to 9 from, 09.03.94 till the date of payment Payment of interest @ 18% p.a. on all amounts due from 09.3.94 till the date of payment 11 Cost of Arbitration Rs.1,00,000/- Rs.50,000/- PROCEEDINGS UNDER SECTION 34 OF THE A&C ACT 7. Assailing the same, the Respondent preferred a petition under Section 34 of the A&C Act in which the learned Civil Judge, Sirsi, found 2 points to be ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the changes in design, it is observed that since the changes were minor it does not require any extra payment. The same would only be payable if there was duplication of work/removal of earlier construction as per the alteration. 8.8 The cost of arbitration being awarded at Rs.50,000/- is "at exorbitant rate." Even if the argument of delay and laches on part of the Department is accepted, "it cannot be ruled out that the Department always in right path" and the extent of the same cannot be accepted. 8.9 It was also observed that there was a justification for the learned Arbitrator to award an amount which is almost equal to the amount of tender, that too on such a high rate of interest which causes an undue encumbrance on the exchequer. 8.10 The remaining critical observations stand dealt with subsequently. PROCEEDINGS UNDER SECTION 37 OF THE A&C ACT 9. The High Court, vide its judgement under challenge before us, has confirmed the modification of the arbitral award as has been done by the learned Civil Judge, Sirsi, dismissing the application on part of the Claimant-Appellant. 9.1 It has been observed that the primary dispute is in respect of claim No. 7 which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her an arbitral award can be modified in the proceedings initiated under Sections 34/37 of the A&C Act is no longer res integra. While noting the provisions, more specifically, Section 34(4) of the A&C Act; the decisions rendered by this Court, including the principles of international law enunciated in several decisions recorded in the treatise "Redfern and Hunter on International Arbitration, 6th Edition", this Court in National Highways Authority of India v. M. Hakeen and Another (2021) 9 SCC 1 (2-Judge Bench), categorically held that any court under Section 34 would have no jurisdiction to modify the arbitral award, which at best, given the same to be in conflict with the grounds specified under Section 34 would be wholly unsustainable in law. The Court categorically observed that any attempt to "modify an award" under Section 34 would amount to "crossing the Lakshman Rekha". 15. On the exact same issue we may also note another opinion rendered by this Court in Dakshin Haryana Bijli Vitran Nigam Limited v. Navigant Technologies Private Limited (2021) 7 SCC 657 (2-Judge Bench) in the following terms:- "44. In law, where the court sets aside the award passed by the ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....intelligible or not for adequacy of reasons cannot stand in the way of making the award to be intelligibly readable. 18. Emphasizingly, it is reiterated that if the view taken by the Arbitrator is a plausible view, no interference on the specified grounds is warranted (Konkan Railway Corpn. Ltd. v. Chenab Bridge Project (2023) 9 SCC 85 (Three Judge Bench)). 19. It is also a settled principle of law that an award passed by a technical expert is not meant to be scrutinised in the same manner as is the one prepared by a legally trained mind (Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation Limited (2022) 1 SCC 131 (Two Judges Bench)). 20. We are dealing with an award passed on 18th February, 2003, prior to the amendment brought in Section 34 by virtue of the Arbitration and Conciliation (Amendment) Act, 2015. For the purpose of ready reference the relevant portion of the amended and the unamended provisions are extracted as under :- "Prior to 2015 Amendment 34. Application for setting aside arbitral award. - (1) Recourse to a court against an arbitral awärd may be made only by an application for setting aside such awa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er than international commercial arbitrations, may also be set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.]" 21. In so far as the state of the law prior to such Amendment is concerned, the situation stands encapsulated by this Court, in DDA v. R.S Sharma (2008) 13 SCC 80 (2 Judge Bench) where the grounds whereby courts may intervene against arbitral award, were listed. 22. Observations of this Court in Associate Builders v. DDA (2015) 3 SCC 49 (2 Judge Bench) are also of note. It was held: "15. This section in conjunction with Section 5 makes it clear that an arbitration award that is governed by Part I of the Arbitration and Conciliation Act, 1996 can be set aside only on grounds mentioned under Sections 34(2) and (3), and not otherwise. Section 5 reads as follows: "5. Extent of judicial intervention.-Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term 'public policy' in Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal. The result would be-award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void." (Emphasis supplied) 26. Ssangyong Engineering (supra) followed the observations of Associate Builders (supra). To efficiently encaps....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re only to be gone into, if the award is demonstrated to be contrary to the public policy of India. The reasons recorded by the learned Civil Judge for modifying the arbitral award, as reflected from a perusal thereof, have been recorded in an earlier section of the judgment. None of those reasons even so much as allude to the award being contrary to the public policy of India, which would enable the court to look into the merits of the award. 30. We have carefully perused the award passed by the Arbitrator in which he has not only referred to and considered the materials on record in their entirety but also, after due application of mind, assigned reasons for arriving at this conclusion, either rejecting, accepting or reducing the claim set out by the Claimant-Appellant. Noticeably, during the arbitral proceedings none of the parties raised any objection to the Arbitrator adjudicating the dispute, be it on any ground, including bias. Each one of the claims stands separately considered and dealt with. 31. We find that the view taken by the Arbitrator is a plausible view and could not have been substituted for its own by the Court. 32. The reasons assigned by the Court under S....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... at original spot or laying any foundation for construction of the residential house. So, under such circumstances the alleged loss pleaded by the opponent No.2 is only at his imagination." 32.5 For it is no business of the Court to consider the burden on the exchequer. All that is required by the Court is to see as to whether the contracting parties have agreed to bind themselves to the terms with the only supervisory jurisdiction of the Court to consider breach thereof, in the light of the grounds specified under Section 34. 32.6 To our mind, the court lost sight of the fact that the civil contract was composite in nature that is having contracted both of the building of the office and residence together. In these circumstances, the contractor could not have commenced work of part of the project when the complete site and the drawings were not handed over to him. In the absence of the parties have agreed otherwise, work could not have commenced. Hence, observation of the court, advisory in nature, for the contractor to have commenced the work for one part of the contract is unwarranted and uncalled for, in fact perverse. 32.7 The other observation that there was a delay ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and slow to disturb such concurrent findings." (Emphasis Supplied) 36. This view has been referred to with approval by a bench of three learned Judges in UHL Power Company Ltd v. State of Himachal Pradesh (2022) 4 SCC 116 (3-Judge Bench). In respect of Section 37, this court observed:- "16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed." 37. This Court has not lost sight of the fact that, as a consequence to our discussion as aforesaid, holding that the judgment and order under Section 34 of the A&C Act does not stand judicial scrutiny, an independent evaluation of the impugned judgment may not be required in view of the holding referred to supra in MMTC Ltd. However, we proceed to examine the same. 38. We may also notice that the circumscribed nature of the exercise of power under Sections 34 and 37 i.e., interference with an arbitral award, is clearly demonstrated by legislative in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....evidence was before the learned single Judge to arrive at such conclusion. This is of course, entirely without reference to the scope delineated by various judgements of this Court as also, the statutory scheme of the A & C Act. 44. Having referred to J.G Engineers (P) Ltd. v. UOI (2011) 5 SCC 758 (2 Judge Bench) and more particularly para 27 thereof, it has been held that the award passed by the learned Arbitrator is "patently illegal, unreasonable, contrary to public policy." There is no reason forthcoming as to how the holding of the learned Arbitrator flies in the face of public policy. ON INTEREST 45. On the issue of interest, we notice that the Arbitrator has awarded interest @ 18% p.a., w.e.f. 09 March 1994 which stood reduced to 9%. The transaction being commercial in nature, we see no reason as to why the claimant could not be entitled to interest in terms of the rate quantified by the Arbitrator which includes the period of pre-arbitration, pendante lite and future. We notice this Court to have stated in Hyder Consulting (UK) Ltd. v. State of Orissa (2015) 2 SCC 189 (3-Judge Bench), through S.A. Bobde, J. (as His Lordship then was) speaking for the majority as un....