TaxTMI 
TaxTMI 
2010 (11) TMI 1148
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....ommissioning of the said gates at sites. Subsequently certain disputes arose between the parties. As per the terms of the contract, when a dispute arises, firstly a claim is required to be made before the Chief Engineer and thereafter the matter is to be sent to the Commissioner and subsequently a reference can be made to the Arbitrator. A sole Arbitrator was appointed in connection with the dispute in question and statement of claim was filed before the Arbitrator. The statement of claims contains the claims made by the Appellant on 25 counts. Out of the 25 claims, an objection was raised on behalf of the Respondent about 17 claims on the ground that the said claims were never made by the Appellants before the Chief Engineer or before the Commissioner of the Corporation and, therefore, the said claims cannot be decided by the Arbitrator in terms of contract between the parties. The Respondent Corporation initially had filed a petition before this Court in connection with the said aspect and in the said proceedings the parties agreed to refer the dispute to the sole Arbitrator for deciding 17 claims including the question as to whether in terms of the contract those 17 claims can b....
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....ed by the Respondent. It is argued by Mr. Kamdar that the arbitration clause was invoked by the Appellant in accordance with Clauses 56 and 57 of the General Condition of Contract (GCC). It is submitted that as per Clause 56.1 viz. "dispute or difference is to be referred to the Arbitrator", the contractor was required to refer the disputes and differences to the Commissioner for adjudication who was required to decide the same within 90 days of appointment. As per Clause 56.2, the contractor, if dissatisfied with the decision of the Commissioner, can invoke arbitration which can be said to be de novo proceedings and the Arbitrator under the said clause has been given wide and extensive powers of opening up, reviewing, revising any opinion, decision, valuation of the Commissioner and more importantly the said clause provided that neither party was limited by the claims as originally before the Commissioner. It is submitted that the Arbitrator is required to decide the dispute afresh and de novo on the basis of pleadings and as per evidence. It is submitted that the Respondent earlier raised an objection in respect of 17 claims out of 25 claims as filed before the Arbitrator on the ....
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....ents to provide the same. It is submitted that the said documents in question are the documents from third party Banks and that there is no obligation on the part of the Appellant to lead oral evidence to prove the same. It is submitted that it is open to the Arbitrator to draw an adverse inference in view of the fact that the Appellant had not led oral evidence to prove the same. It is submitted that it was open to the Respondent to lead their own evidence and produce positive material on record to disprove the said documents. It is submitted that the Evidence Act does not apply to the arbitration proceedings. It is submitted that it is not obligatory on the part of the Appellant to examine the witnesses only to facilitate the Respondent to take cross-examination of the witnesses. It is submitted that the learned single Judge has committed an error in holding that there is breach of principles of natural justice. It is further submitted that the Award in question is a non-speaking order and, therefore, it is not possible to find out the mind of the learned Arbitrator as to which particular documents had weighed in his mind at the time of passing of the award. It is submitted that ....
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....ny particular person. It is submitted that certain letters produced before the Arbitrator were received from Royal Bank of Scotland and Lloyds Bank wherein different figures have been quoted. It is submitted that all these documents were admitted in evidence by the Arbitrator after commencement of arguments, despite objections raised by the Respondent. The author of the said documents was not examined and, therefore, the Respondent was denied right to cross-examine the persons who had written the said documents. The Respondent was denied the right of cross-examination with regard to the veracity and in connection with the correctness and contents and with respect to the effect of the contents of the documents which had been illegally admitted in evidence by the Arbitrator in breach of principles of natural justice. It is submitted that the claim of the Appellant in the arbitration included claim for storage and handling charges. The Appellant sought to prove and support their claim by the letters, documents and also included a claim of interest on the basis of the said documents. The Appellant tried to prove that they were maintaining overdraft account that the monies paid by Respo....
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....he terms of the contract. On this point, Mr. Setelwad has relied upon certain judgments of the Supreme Court to which we will refer later on. It is submitted that the learned single Judge has considered the matter in its proper perspective and the said award of the learned single Judge is not required to be interfered with in this appeal. 7. We have heard the learned Counsel appearing in the matter at length. We have gone through the award of the Arbitrator as well as the order of the learned single Judge. We have also gone through the voluminous documents forming part of the proceedings and have also gone through the written submissions filed by both the sides. 8. The principal question which requires consideration is as to whether the learned single Judge has erred in setting aside the Award of the sole Arbitrator which is a non-speaking award. It is also required to be considered as to whether the learned single Judge has committed any error in coming to the conclusion that the Arbitrator could not have considered the 8 claims in question especially when the claim before the Commissioner was of lesser amount than the one placed before the Arbitrator. It is also required to....
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....dity of the contract. We are accordingly of the opinion that the Respondents are not precluded by what they did before the arbitrators from agitating the question of the validity of the contracts in the present proceedings. 9.1 Mr. Kamdar also relied upon the decision of the Supreme Court in the case of Kundale & Associates v. Konkan Hotels (P.) Ltd. (1999) 3 SCC 533 wherein the Supreme Court has observed in paragraphs 4 and 5 as under: 4. Before the arbitrator the Appellants had made a total claim of Rs. 98,023/-. This consisted of the claims in connection with the construction work and extra work as also giving credit for the amounts already received. In the course of the hearings before the arbitrator the Appellants filed a revised statement of claim in which they reduced their total claim to Rs. 66,499/-. The High Court commented on the fact that there was considerable variance between the original claim and the revised claim. There is an increase in certain claims and a reduction in certain other claims. The High Court has also commented that a copy of this revised statement was not formally served on the Respondents and their advocates in the same manner as the ea....
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.... We cannot examine the merit or otherwise of all these claims. 9.3 Our attention was also invited by Mr. Kamdar to the decision of the Supreme Court in the case of Paradip Port Trust and Ors. v. Unique Builders (2001) 2 SCC 680 wherein the Supreme Court has observed in para 10 thus: 10. The clause relating to the arbitration extracted above, is wide enough to cover all disputes or differences of opinion between the parties as to their respective rights and obligations or as to the true intent and meaning of those presents or any articles or conditions thereof (except the matter regarding which the decision has been specifically provided for in the terms and conditions). The claims made in the statement by the Company, in our view, are clearly covered and they fall within the scope of arbitration clause. The learned Counsel, referring to claims 2 and 7 urged that these claims were outside the terms of agreement. The Company made a claim for Rs. 12, 93, 260 against various heads and the arbitrator granted Rs. 8,61,315 with interest as stated in the award. It is an award made in lump sum. It is not possible to say whether the arbitrator awarded any amount under claims 2 an....
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....t is held that when an agreement is filed in court and order of reference is made, then the claim as a result of the order of reference is limited to a particular relief and the arbitrator cannot enlarge the scope of the reference and entertain fresh claims without a further order of reference from the Court. The court has considered the matter from the angle of Section 20 of the 1940 Act. 10.1 Mr. Setelwad has also relied upon the decision of the Supreme Court in the case of Union of India v. G.S. Atwal & Co. (1996) 3 SCC 568. Relying on the said judgment it is submitted that it is not open for the arbitrator to unilaterally enlarge the reference and act contrary to the terms of the contract. In paragraph 6 and 9 the Supreme Court has observed thus: 6. To constitute an arbitration agreement, there must be an agreement that is to say the parties must be ad idem. Arbitrability of a claim depends upon the dispute between the parties and the reference to the arbitrator. On appointment, he enters upon that dispute for adjudication. The finding of the arbitrator on the arbitrability of the claim is not conclusive, as under Section 33 ultimately it is the court that decides t....
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..... The reason being that the parties have by contract consented to the forum to adjudicate their dispute and to give a decision, by a non-speaking or speaking award in terms of the agreement. This principle is inapplicable to the jurisdiction of the arbitrator to unilaterally enlarge his own power to arbitrate any of the disputes. It is seen that by express agreement between the parties, arbitrability of the claim for refund of the hire charges was referred to arbitration and T. Raja Ram came to be appointed as arbitrator and entered upon that reference. But when claim was made, he enlarged the dispute unilaterally without there being any agreement by the Appellant. In fact they objected to the enlargement of the scope of the arbitration. Since arbitrator went on adjudicating the disputes, they were left with no option but to participate in the proceedings as the claims were pressed for and parties submitted to the jurisdiction of the arbitrator. Therefore, it did not amount to acquiescence. The jurisdiction of the arbitrator is founded upon the agreement between the parties. To the extent of the agreement, the parties are bound by the decision of the arbitrator. But the arbitrator ....
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....y the Respondent and to give a suitable award. In the instant case, the arbitration clause clearly provides that the Arbitrator shall have full power to open up, review and revise any decision, opinion, direction, certificate or valuation of the Commissioner and neither party shall be limited in the proceedings before such Arbitrator or arbitrators to the evidence or arguments put before the Commissioner for the purpose of obtaining the said decision. It is required to be noted that in the present case both the sides have led their documentary evidence and have submitted that they did not want to lead any oral evidence before the Arbitrator and, therefore, on merits so far as the eight claims are concerned, the parties have contested the proceedings before the Arbitrator. In so far as the judgment of the Supreme Court in the case of Orissa Mining Corporation (supra) is concerned, it was in connection with the proceedings under Section 20 of the Act of 1940 wherein it is held that when an agreement is filed in court and order of reference is made under Section 20(4) of the Act of 1940, then the claim as a result of the order of reference is limited to a particular relief and the arb....
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....ointed out earlier, out of 25 claims, ultimately parties agreed to go to the arbitration only in respect of 8 claims. It seems that the point regarding increase of quantum in respect of the said claims seems to have been raised for the first time in the arbitration petition. Even otherwise, as observed by the Supreme Court in the case of McDermott (supra) that it is open to the parties to enlarge the scope of reference by inclusion of fresh disputes and they must be held to have done so when they file their statements putting forward claims not covered by the original reference. In view of the same, we do not find any substance in the objection raised that the arbitrator had no jurisdiction to enlarge the scope of reference. 12. Even otherwise, looking to the arbitration clause provided in the agreement, the Arbitrator has given power to determine the claim even de novo and initially an objection was taken only regarding those claims which were not put forward before the Commissioner and, therefore, 17 claims were taken out and only 8 claims were referred to the Arbitrator which claims have been adjudicated by the Arbitrator. Considering the aforesaid, in our view, it cannot be ....
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....is true that the power of the Court in such cases may be limited and this Court cannot sit in appeal over the Arbitrator's Award and to find out sufficiency of evidence. However, in case of procedural defect, the Court can still interfere with such award even if the same is a non-speaking award. It is required to be noted that there is nothing on record to show as to what was the rate of interest charged at the relevant time in connection with the overdraft account. In the case of Vinayak Vishnu Sahasrabudhe v. B.G. Gadre and Ors. AIR 1959 Bom 39 a learned single Judge of this Court has held that though the Arbitration Act does not provide for the procedure to be followed by the arbitrators, even so, the Arbitrators are bound to apply the principles of natural justice. 14. Reliance has been placed by Mr. Setelwad in the case of Wazir Chand Karan Chand v. Union of India and Anr. AIR 1989 Delhi 175, wherein the Delhi High Court has held that the Arbitrator is not bound by the technical rules of procedure but he cannot ignore rules of natural justice. Even if the award is a non-speaking order, it must be in accordance with law and in consonance with the principles of natural ju....
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....h 14 it has been held as under. ...But the application of principle of natural justice does not imply that what is not evidence can be acted upon. On the other hand what it means is that no materials can be relied upon to establish a contested fact which are not spoken to by persons who are competent to speak about them and are subjected to cross-examination by the party against whom they are sought to be used. When a document is produced in a Court or a Tribunal the question that naturally arises is, is it a genuine document, what are its contents and are the statements contained therein true. 15. In our view, even in case of non-speaking order, the Court can examine the aforesaid aspect that accepting evidence behind the back of a party is held to be a legal misconduct on the part of the arbitrator, as held by the Delhi High Court in the case of Wazir Chand (supra). 16. Mr. Setelvad has submitted that the jurisdiction to remit an award by the Court to the arbitrator is a discretionary jurisdiction and that the judicial discretion exercised by the learned single Judge should not be interfered with unless the discretion has been misused. The Appellate Court would not....
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.... Section 16 is examined from the aforesaid standpoint and if the order of the learned civil court, remitting claim Item 1 is tested in the light of the discussions made above, the conclusion is irresistible that no case for remittance had been made out and the learned trial Judge exercised his discretion on the grounds which do not come within the four corners of the provisions of Section 16 of the Arbitration Act. In fact no reasons had been ascribed for interference with the award, rejecting claim item 1 and for remittance of the same. The High Court being the court of appeal, was therefore fully justified in exercise of its appellate power in correcting the error made by the Civil Judge in remitting claim Item 1. 17. In the case of Sangamner Bhag Sahakari Karkhana Ltd. v. Krupp Industries Ltd. (2002) 5 SCC 417, it has been held by the Supreme Court that the Appellate Court was not justified in interfering with the exercise of discretion unless it is misused. 18. Considering the case law on the subject and facts and circumstances of the case, in our view, admitting certain documents in evidence by the Arbitrator, without the same being proved, is an act of legal misconduct.....