IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 6TH DAY OF DECEMBER, 2019 PRESENT THE HON'BLE MRS.JUSTICE B.V.NAGARATHNA AND THE HON'BLE MR. JUSTICE SURAJ GOVINDARAJ M.F.A. No.1020 OF 2001 C/W M.F.A.No.1792 OF 2001 (AA) IN M.F.A. No.1020 OF 2001:
BETWEEN:
BHARAT CONDUCTORS PVT. LTD., NO.116, II PHASE, PEENYA INDUSTRIAL AREA BANGALORE-560058 REPRESENTED BY ITS MANAGING DIRECTOR MR. DINESH BHANDARI ... APPELLANT (BY SRI. K. CHANDRANATH ARIGA, ADVOCATE) AND:
1. THE CHAIRMAN & MANAGING DIRECTOR THE KARNATAKA POWER TRANSMISSION CORPORATION LTD., A REGISTERED COMPANY UNDER THE COMPANIES ACT 1956, CORPORATE OFFICE KAVERI BHAVAN, BENGALURU-560009 (AMMENDED AS PER ORDER DATED 11.10.2019) 2. V. BYRAPPA ARBITRATOR NO.582, II BLOCK II MAIN, RAJAJINAGAR BANGALORE-56010 ... RESPONDENTS (BY SRI. HARIKRISHNA S. HOLLA, ADVOCATE FOR R1;
R2- NOTICE IS DISPENSED WITH VIDE COURT ORDER DATED 09.10.2001) ***** IN M.F.A. No.1792 OF 2001:
BETWEEN:
THE KARNATAKA ELECTRICTIY BOARD (PRESENTLY THE KARNATAKA POWER TRANSMISSION CORPORATION LTD.,) KAVERI BHAWAN, BANGALORE-560009 REPRESENTED BY……….. ... APPELLANT (BY SRI. HARIKRISHNA S. HOLLA, ADVOCATE) AND:
1. V. BYRAPPA (ARBITRATOR) NO.562, II MAIN, II BLOCK RAJAJINAGAR BANGALORE-560010 2. M/S BHARAT CONDUCTORS PVT. LTD NO.116, II STAGE, III PHASE PEENYA INDUSTIRAL AREA BANGALORE-560068 ... RESPONDENTS (R1-SERVED;
BY SRI. K. CHANDRANATH ARIGA, ADVOCATE FOR R2) THESE APPEALS ARE FILED UNDER SECTION 39 OF ABRITRATION ACT 1940, AGAINST THE ORDER AND DECREE DATED 15.12.2000 PASSED IN ARBITRATION CASE NO.40/94 BY THE VI ADDITIONAL CITY CIVIL JUDGE, BANGALORE, REJECTING THE PETITION FILED UNDER SECTION 14 OF ARBITRATION ACT.
THESE APPEALS COMING ON FOR FINAL HEARING AND HAVING BEEN RESERVED FOR JUDGMENT ON 11.10.2019, THIS DAY, SURAJ GOVINDARAJ J., PRONOUNCED THE FOLLOWING:
J U D G M E N T 1. The present appeal is filed, challenging the rejection of the petition filed by 2nd respondent-arbitrator under Section 14 of the Arbitration Act, 1940 (hereinafter referred to as the ‘Act’ for the sake of brevity), wherein respondent No.2 – arbitrator had sought for the passing of a decree in terms of the award passed by the Arbitrators.
2. Brief facts of the case, as stated in MFA 1020/2001, are as follows:
3.1 It is stated that the appellant and respondent No. 1 had entered into a contract dated 05.10.1984 for the supply of 2300 km of Squirrel ACSR and 1150 km of Weasel ACSR, which was executed by the appellant.
However, respondent No.1 did not update the prices and make payment; hence disputes arose in connection with the payment of the amounts. As required under the contract, the disputes and differences were referred to arbitration by the appellant by invoking the arbitration clause in the contract.
3.2 The appellant had appointed an arbitrator, so did the respondent. Both the arbitrators appointed an umpire and they passed an award on 20.10.1994. Respondent No.2 herein who was the coordinating arbitrator had filed an application under Section 14 of the Arbitration Act, 1940 for the passing of a decree in terms of the award, which came to be numbered as A.C.No.40/1994. The award is in favour of the appellant.
3. On service of process, the respondent No.1 filed its objections. The objections filed by respondent No.1 herein who was respondent No.2 in A.C.No.40/1994 in brief were as under:
3.1 That though the arbitrators framed 19 issues based on the pleadings of the parties, they answered only five issues (Issue Nos.9, 10, 11, 12 and 13) and allowed the claim of the appellant herein.
3.2 The arbitrators had failed to address the preliminary issues raised by Respondent No.2 therein namely Issue Nos.14, 15 and 16 which go to the root of the matter.
3.3 The arbitrators had committed misconduct on their part having failed to answer all the issues framed by them.
3.4 The statement made by the arbitrators in the award to the effect that the counsel for Respondent Nos.1 and 2 did not press for hearing Issue Nos.14, 15 and 16, is patently a false statement.
3.5 The entire claim put forth by the appellant herein is outside the contractual obligations and therefore, beyond the scope of arbitration proceedings.
3.6 The arbitrators had passed an award upon matters not referred to arbitration, which in fact could not be a subject matter of the arbitration.
3.7 The arbitrators were required to give a reasoned award.
3.8 Apart from the above main contentions, there are various other contentions as regards appreciation of the documents and evidence by the Tribunal and further that, the arbitrators had proceeded to pass the award on the basis of the consideration which was not agreed between the parties.
4. Per contra, appellant in MFA No.1020/2001 contended before the trial court as under:
4.1 The award was proper and there was no requirement for reasons to be given. There is no error apparent on the face of the record.
4.2 There was no requirement that the arbitrators had to decide all issues framed in the case expressly as long as the whole case was decided by the arbitrators.
4.3 Though Respondent No.2 therein wanted Issue Nos.14, 15 and 16 to be considered as preliminary issues, the arbitrators after hearing both the parties by their order dated 17.07.1992 held that these issues would be decided after recording the evidence and the said order having been passed in the presence of the parties had become final.
4.4 When the final arguments were heard, Respondent No.2 did not choose to raise those issues in their arguments nor was it raised in their written arguments submitted on 28.09.1994. Hence, the appellant prayed for rejection of the objections raised by Respondent No.2 therein and requested the Court to pass a decree in terms of the award.
5. In view of the objections and counter filed, the trial court framed the following points for determination: “1. Whether the second Respondent-KEB has made out grounds to set aside the award?
2. What order?”
6. The points were answered as under: Point No.1 – Affirmative Point No.2 – As per final order 7. The trial Court held as follows:
7.1 Issue Nos.14, 15 and 16 are preliminary issues raised by respondent No.2 therein.
7.2 Issue No.14 is as regards whether the respondent No.2 therein proves that the contract between the parties is fully and finally discharged and as such the claim based on non-existent contract is not maintainable in law.
7.3 Issue No.15 is whether the respondent proves that no dispute exists under the contract in view of the accord and satisfaction reached between the parties.
7.4 Issue No.16 is as to whether the claim was barred by limitation.
7.5 The trial court referring to the award observed that both the parties had consented for hearing of preliminary issues after the recording of evidence. The trial Court observed that the arbitrators had given their finding only on Issue Nos.9, 10, 11, 12 and 13 and thereby allowed the claims. It is manifest from the award that the arbitrators not only failed to address the preliminary issues raised by respondent No.2 therein but also failed to address other issues. The trial Court observed that it is mandatory on the part of the arbitrators to give their finding on each and every dispute raised by the parties and therefore, held that there is non-application of mind by the arbitrators and that the dispute referred to the arbitrators remained unanswered.
7.6 The trial Court also noticed from the award that the arbitrators had failed to give any finding on the counterclaim raised by respondent No.2 therein.
7.7 The trial Court observed that not only Issue Nos.14, 15 and 16 were not treated as preliminary issues but there is no consideration of those issues at all in the award even at the final stage. The observation by the arbitrators that parties did not press those issues is not supported by any material on record. Therefore, the said statement made by the arbitrators in the award amounted to misconduct and a malafide action on the part of the arbitrators within the meaning of Section 30 of the Act.
7.8 The trial court held that it was obligatory on the part of the arbitrators to answer the preliminary issues and then only to proceed to answer the other issues. The arbitrators had selected and answered only those issues which were favourable to respondent No.1 therein i.e., the appellant herein and failed to answer the preliminary issues and the same is an error apparent on the face of the award.
7.9 The trial court applied the principles laid down by Hon’ble Supreme Court in the case of STATE OF ORISSA VS. ORIENT PAPER AND INDUSTRIES LIMITED reported in 1999 (3) SCC 566 in support of its decision to set aside the award and remit the matter back to the arbitrators for re-determination.
8. This order dated 15th December 2000 of the 6th Additional City Civil Judge, Bangalore passed in A.C.No.40/1994 is challenged before this Court by both the parties.
9. Bharath Conductors Private Limited was the claimant before the arbitrators, respondent No.1 in A.C.No.40/1994 and appellant in MFA No.1020/2001 (hereinafter referred to as the ‘claimant’ for the sake of brevity).
10. Karnataka Electricity Board was respondent No.1 in arbitration proceedings and respondent No.2 in A.C.No.40/1994 and the appellant in MFA No.1792/2001 (hereinafter referred to as the ‘respondent’ for the sake of brevity).
11. The claimant in its appeal MFA No. 1020/2001 has contended as under:
11.1 The award passed by the arbitrators is after careful consideration of the issues under dispute, claims and contentions of the parties and materials on record.
11.2 The trial Court ought to have passed a decree in terms of the award instead of remitting it for re-determination.
11.3 There is no requirement for the arbitrators to give any reasons. The award would not suffer from any infirmities due to it being non- reasoned.
11.4 The trial Court has not considered the decisions submitted by the claimant.
11.5 The arbitrators have not misconducted themselves and there are no error/s apparent on the face of the award. Therefore, the trial court erred in not passing the decree in terms of the award.
11.6 The arbitrators are not bound to decide the case issue-wise.
11.7 The arbitrators have decided to consider the preliminary issues subsequent to the evidence which is not challenged by the respondent and subsequent to recording of evidence, respondent did not press for consideration of the preliminary issues. Even in the oral and written arguments, respondent did not make any reference in this behalf when arbitrators decided and passed an award finally and hence, there was no need to consider preliminary issues separately.
12. The Respondent in its appeal i.e., MFA No.1792/2001 has contended as under:
12.1 The award should be set aside as the arbitrators have committed misconduct on their part having failed to answer and consider all the issues framed by them which go to the very root of the matter.
12.2 The award should not have been remitted but ought to have been set aside.
12.3 The agreement entered into does not provide for payment of supply of aluminium conductors on weight to weight basis or for escalation of price for steel core wire. Therefore, award could not have been remitted back since there was no basis for the aforesaid claim of escalation in the materials supplied.
12.4 There is no intimation as required by Clause 17 of the contract, which is forwarded to Karnataka Electricity Board. Therefore, Claimant is not entitled to the claim raised before the arbitrators.
12.5 There are breaches of the contract committed by Claimant.
12.6 The trial court failed to appreciate that the Claimant has admitted that there is no agreement to pay extra charges on weight to weight basis which has also been admitted in evidence by stating that there was no agreement for price variation in respect of steel core wire.
12.7 The trial Court has failed to appreciate and consider that the arbitrators have decided the disputes referred to them without any basis and therefore, the decision is de hors the very contract itself.
12.8 The arbitrators having passed an order in respect of matters which are not the subject matter of the contract, there was no purpose in remitting back the award and therefore, sought for setting aside the order dated 15.12.2000 passed by VI Additional City Civil and Sessions Judge, (CCH-11) in A.C.No.40/1994.
13. Both the appeals were clubbed together and were taken up on an earlier occasion by this court and both the appeals were dismissed on 06.11.2006 by directing the arbitrators to resolve the dispute between the parties within three months. While doing so, this Court held that the award neither is a speaking nor a reasoned one and there was a requirement for the arbitrators to give reasons and hence, concurred with the decision of the trial court in setting aside the award and remanding the matter for fresh consideration albeit, with an additional condition by directing the arbitrators to give reasons for their finding/s.
14. Aggrieved by the same, the claimant filed Special Leave Petition before the Hon’ble Supreme Court of India which was convereted as Civil Appeal No.1633 of 2007 on leave to appeal being granted. The Hon’ble Apex Court relying on its earlier judgment in the case of RAIPUR DEVELOPMENT AUTHORITY VS CHOKHAMAL CONTRACTORS reported in (1989) 2 SCC 721 set aside the order dated 06.11.2006 passed by this Court holding that this Court has erred in arriving at a conclusion that the impugned award passed by the arbitrators was liable to be set aside as it was neither a speaking nor a reasoned award. The Hon’ble Supreme Court categorically opined that the Arbitrators are not required to give reasons.
15. The Hon’ble Supreme Court observing that other issues raised by KEB not having been answered by this Court and in order to afford an opportunity to the respondent to agitate the remaining issues, remanded the matter to this Court for consideration of the remaining issues which were raised by the respondent by restoring MFA No.1020/2001 and MFA No.1792/2001 to the file of this Court.
16. Subsequent to the above order, MFA No.1020/2001 and MFA No.1792/2001 were restored. The appearance of the respective advocates is taken on record on various dates. When the records were ordered to be put up, it was reported by the registry that the appeal papers were destroyed on 21.12.2012. Hence, the papers were not available for perusal by this Court. In that view of the matter, this Court vide order dated 16.02.2018 directed the counsel for the claimant to submit paper book of all the documents and records of the case for perusal by this Court.
17. On 14.02.2019, the counsel for both the parties submitted that the matter could be settled through mediation. Hence, the matter was referred to Bangalore Mediation Centre directing the parties to appear therein on 02.03.2019. However, the parties could not reach any settlement and the file was sent back. By this time, the name of the respondent has undergone a change in that Karnataka Electricity Board was changed to Karnataka Power Transmission Corporation Limited (hereinafter referred to as ‘KPTCL’ for the sake of brevity). Hence, an application was filed to amend the name which was allowed. Thereafter, the matter was taken up for hearing.
18. We have heard Sri.K.Chandranath Ariga, learned counsel for the claimant and Sri.Harikrishna S.Holla, learned counsel for the respondent on 09.10.2019 and 11.10.2019.
19. Sri.Chandranath Ariga, learned counsel for the claimant has submitted that the claimant had filed the claim petition and the respondent had filed its objections towards which the claimant filed its rejoinder. Thereafter, the arbitrators held about seventeen (17) sittings and the proceedings were concluded on 17.07.1994 after which, the arbitrators held three meetings in which all the issues under dispute, respective claims and contentions, materials on record, deposition of witnesses and the arguments of the learned counsel for the claimant and respondent regarding each and every issue were discussed. It is only thereafter that the arbitrators passed an unanimous award on 20.10.1994. He submitted that the respondent had given up the preliminary issues and therefore, arbitrators proceeded to pass the final order. He states that non-passing of specific order as regards Preliminary Issues 14, 15 and 16 does not in any manner amount to misconduct. There are no reasons, which are required to be given by the arbitrators. The fact that the arbitrators have not answered those issues in favour of the respondent indicates that those issues have been rejected. Therefore, the award is proper and valid and therefore, there is no need to remit the award to the arbitrators. He further submited that since the matter is pending before this Court, this Court could examine the evidence on record as regards all the issues which are not specifically decided by the arbitrators and this Court after considering all the documents and evidence on record could give its finding instead of remitting the matter to the arbitrators, more so, when the availability of those arbitrators is in doubt.
20. Sri. Harikrishna Holla, learned counsel for respondent No.1, on the other hand, contended that once the issues have been raised, those issues have to be answered either with reasons or otherwise. He further contended that the respondent had neither filed any memo nor made any submission to the arbitrators for giving up the preliminary issues. Hence, the very factum of recording by the arbitrators that the respondent has given up those issues is, by itself, a misconduct, more so, when the arbitrators had chosen to answer only the issues in favour of the claimant and completely disregarded the issues in favour of the respondent. He submited that there being several issues, which remained unanswered and in terms of the order of the Hon’ble Supreme Court are required to be answered and answering all those issues would require an examination of the evidence on record including the documents, oral evidence and for this Court to hear the arguments on the same. He submitted that it is the arbitrators who had to decide on the matter and as such, the matter could be remanded to the arbitrators. As regards availability or non-availability of the arbitrators, he submitted that arbitrators could be appointed afresh and these arbitrators could go through the record, examine the same, hear the parties and pass the award afresh.
21. We have perused the paper book and original record of the arbitral proceedings as also heard respective counsel. The points that would arise for our consideration are:
1. Whether the arbitrators misconducted themselves by not giving a finding on Issue Nos.14, 15 and 16, which were infact to be considered as preliminary issues?
2. Whether this Court can render a finding on the remaining issues canvassed on behalf of the respondent or will they have to be determined by the arbitrators?
3. What order?
22. At the outset, it would be necessary to extract the issues framed by learned arbitrators. They are as under:-
1. Whether the delays in supplies were caused due to FORCE MAJEURE CONDITIONS in the claimants unit during 1985-86?
2. Whether there were steep rise in the costs of Aluminium and HTG Steel core wire during the existence of the contract?
3. Whether the Respondents committed default by:
i. Not revising the prices of conductors suitably from time to time?
ii. Not establishing the letter of credit in terms of the P.O. for payment of 5% invoices of the claimants.
iii. Issuing threatening letters to the claimants contrary to the terms of the contract?
4. Whether in an opening meeting with the suppliers on 15.5.1985 the Respondents’ officials agreed to give full variations in price of Aluminium on weight to weight basis and also on HTG Steel Core wire?
5. Whether the respondents contravened the provision of the P.O. by offering Ad-Hoc price revision, on account of price revision of Aluminium effective from 19.1.1988.
6. Whether the Respondents established an L/C, in favour of the claimants without sufficient negotiable validity (i.e., only one day on 29.6.1988 was a Bank holiday)?
7. Whether the Respondents gave piece-meal and short extensions in delivery schedules and L/C validities in spite of longer extension of credit by REC and whether the same were major causes for delay in supplies?
8. Whether the P.O. ought to have been short-closed on 1986 itself by the respondents? If so, whether the claimant is eligible for full variations in the prices and compensations, equivalent to rates of non-IBRD contracts, in regard to such supplies?
9. Whether the claimant is entitled to Rs.7,64,780.48 on account of variations in Aluminium prices?
10. Whether the claimant is entitled to Rs.5,08,519.32 on account of Differential Duty Draw Bank?
11. Whether the claimant is entitled to Rs.4,67,894.54 on account of variations in the prices of HTG steel core wire?
12. Whether the claimant is entitled to Ra.1,37,425.85 on account of variations in the Labour indices?
13. Whether the claimant is entitled to Rs.10,14,455.00 being the interest at 18% for 3 years on the amounts shown in columns 9, 10, 11 & 12 above?
14. Whether the respondent proves that the contact between the parties is fully and finally discharged and as such the claim based on a non-existent contract is not maintainable is law.
15. Whether the respondent proves that no dispute exists under the contract in view of the accord and satisfaction reached between the parties.
16. Is the claim barred by limitation.
17. Whether the claimant proves that he sent letter dated 11.3.1985 and that is has been duly received by the respondent.
18. Whether the “labour problem” pleaded by the claimant constitutes “FORCE MAJURE” condition.
19. Whether the claimant proves that they were present in the meeting held on 15.5.1985 between the Board and the suppliers.
23. The arbitrators passed an award on 28.09.1994.
The relevant portion of the award for the purpose of these appeals is as under:-
“WHEREAS the respondent desired that Issue 14, 15 and 16 be heard first to decide whether the Arbitration should be proceeded or not and the views of the Advocates of Respondent and Claimant was heard and the Arbitrators at the 10th meeting of the Arbitrators held on 17th July 1992 ordered that the above issues will be decided after recording the evidence, and the parties themselves submitted to the Arbitration and later did not press the issues for consideration.
WHEREAS Sri. P.L. Kumarswamy passed away in August 1992 and the Respondent appointed in his place, Sri.
S.M. Byadagi, Retired District & Sessions Judge in the palace of late Sri. P.L. Kumaraswamy on 7th June 1993.
WHEREAS from time to time by the consent of both the parties, time as extended further for making and filing the award which now stands extended upto 31 October 1994.
WHEREAS as it was agreed by both parties that evidence of their witnesses be led by filing affidavits of their witnesses in lieu of examination-in-chief or orally examined and the said witnesses be cross examined by opposite parties advocate which was done.
WHEREAS full scope was provided to the Advocate of both parties to present their case without any fetters.
WHEREAS oral arguments were submitted before the Arbitrators by the Advocates of the Claimant and Respondent followed by filing the synopsis of arguments in writing.
WHEREAS 27 meetings were held for this Arbitration when the parties their representative Lawyers being present concluded on 16 July 1994.
WHEREAS we the arbitrators, Sri. V.Byrappa, Bangalore, Sri. B.K. Ramdas, Bangalore and Sri. S.M. Byadagi, Bangalore held three meetings on 24.09.94, 01.10.94 and 20.10.94 when all the issues under dispute respective claims and contentions of the parties, materials on record, the deposition of witnesses and the arguments of the Advocates for Claimant and Respondent regarding each and every issue were discussed and after careful consideration, we the Arbitrators unanimously make the Award in full and final settlement of claims in respect of the matter in dispute referred to in the manner following:
Issue No.
Claim in dispute Amount awarded 9. Whether the Claimant is entitled to Rs.7,64,780-48 on account of variation of Aluminium prices 10. Whether the Claimant is entitled Rs.5,80,519-32 on account of Differential duty drawback.
11. Whether the Claimant is entitled Rs.4,67,894 on account of variation in the prices of HTG Steel Core Wire.
12 Whether the Claimant is entitled to Rs.1,37,425-85 on account of Variation of Labour indices.
13. Whether the Claimant is entitled to Rs.10,14,455.00 being the interest at 18% for 3 years for the amounts claimed under issues 9, 10, 11 & 12.
Rs.6,29,836.90 Rs.5,08,519.32 -Nil-
Rs.1,10,1 3.90 a) Interest at 18% per annum awarded for Item 19 Duty draw back from 1.1.89 Rs. 5,31,397.60 b) Interest at 18% per annum for amounts awarded under items 9 & 12 from 06.12.91 to the date of award Rs.3,82,924.55 Total Rs.9,14,322.15 Grand Total Rs.21,62,792.27 (Rupees Twenty one lakhs sixty two thousand, seven hundred and ninety two and paise Twenty Seven only) We order and award that the amount of fees and charges payable in respect of the Arbitration and award be equally shared by the two parties and that each party will bear its other costs of the Arbitration.
We the Arbitrators hereby authorize Sri. V. Byrappa, Co-ordinator Arbitrator to purchase the stamp, sign the necessary application and present the Award before the court for making it a rule of the Court.
We also authorize him to engage a counsel for the above purpose. We further authorize him to issue the statutory notice to the parties under section 14 (1) of the Arbitration Act.”
24. Assailing this, the respondent – KEB filed its statement of objections to the award in A.C.No.40/1994. The issues canvassed by the respondent in A.C.No.40/1994 are summarised as under:-
24.1 That the respondent had insisted on issues Nos.14, 15 and 16 being heard first to decide the point of jurisdiction and though both the parties were heard and dispute was posted for orders, the arbitrators, by order dated 17.7.1992 held that those issues would be decided after recording evidence along with other issues. However, the impugned award indicates that the parties themselves submitted to arbitration and later did not press the issues for consideration. The statement recorded by the arbitrators is contrary to the evidence on record, facts and documents on record and therefore, such erroneous recording of the statement by the arbitrators is an error apparent on the face of the record and also amounts to a misconduct on part of the Arbitrators, hence, the entire award is liable to be set aside on that ground was the contention.
24.2 It was contended that though the arbitrators stated that all the points were answered, a perusal of the award indicates that only Issue Nos.9, 10, 11, 12 and 13 have been answered and the arbitrators have not answered other issues namely Issue Nos.1, 2, 3 to 8, 14, 15, 16, 17, 18 and 19. Therefore, the award is contrary to the statement made by the arbitrators, the award is imperfect and did not decide all the issues which arose for consideration. Therefore, the award is liable to be set aside.
24.3 That the arbitrators have misconducted the proceedings and therefore, the award is liable to be set aside.
24.4 That the price variation has not been taken into consideration by the arbitrators while passing the award. The price variation formula contained in the agreement would apply only to aluminium metal and did not apply to steel wire. The contract did not provide for price on weight to weight basis for aluminium or steel. Therefore, the award passed on the basis of weight to weight basis is untenable.
24.5 The labour problems pleaded by the claimant is not recognized under the agreement. Therefore, it could not enable the claimant to seek for extension of time or price variation. The award therefore is not in terms of the contract and the finding on this is bad making the award liable to be set aside.
24.6 The claimant had sought for extension of time on three occasions and when each extension was granted, it was categorically mentioned that the delivery schedule of the subject purchase order was amended and the amendment in delivery schedule was without any extra expenditure to the Board, which was accepted by the claimant. Thereafter, the claim made by the claimant for price variation is contrary to the contract and the award passed accepting that is not sustainable.
24.7 That there was no contract entered into between the claimant and respondent for enhancement of the price of aluminium or steel on weight to weight basis.
24.8 Though it was contended that other electricity boards had made payment according to certain circulars and claimant had sought for similar payment, but those circulars were not produced. Hence, the contention in this regards could not have been accepted.
24.9 Apart from this, there were other issues which had been canvassed by the respondent on the merits of the matter and would require an appreciation of evidence.
24.10 The award filed before the Court was challenged by the respondent contending that the arbitrators had misconducted themselves since no reasoning had been given and further on account of the preliminary issues not having been dealt with as such and even thereafter no finding having been given on the preliminary issues as also other issues.
25. Per contra, the Claimant supported the award and contended that the same is in accordance with law, the contentions raised by the Respondent are not justified, there were no grounds made out and a Decree was required to be passed by the trial court in terms of the award.
26. Before we advert to the facts, it would be of benefit to refer to the provisions that are applicable thereto.
27. Section 15 of the Arbitration Act, 1940 deals with power of Court to modify award and the same is reproduced as under:-
“15. Power of Court to modify award: The Court may by order modify or correct an award-
(a) where it appears that a part of the award is upon a matter not referred to arbitration and such part can be separated from the other part and does not affect the decision on the matter referred; or (b) where the award is imperfect in form, or contains any obvious error which can be amended without affecting such decision; or (c) where the award contains a clerical mistake or an error arising from an accidental slip or omission.”
28. A perusal of the above would indicate that the award could be separated or severed in such a manner as it does not affect the decision on the matter referred, then the Court could modify the award. Where the award is imperfect in form or contains any obvious error which can be amended without affecting any decision, the court could modify the award. The Court could also modify the award when the award contains a clerical mistake or an error arising from an accidental slip or omission.
29. Section 16 of the Arbitration Act, 1940 reads as under:-
“16. Power to remit award.
(1) The Court may from time to time remit the award or any matter referred to arbitration to the arbitrators or umpire for reconsideration upon such terms as it thinks fit-
(a) where- the award has left undetermined any of the matters referred to arbitration, or where it determines any matter not referred to arbitration and such matter cannot be separated without affecting the determination of the matters referred; or (b) where the award is so indefinite as to be incapable of execution; or (c) where an objection to the legality of the award is apparent upon the face of it., (2) Where an award is remitted under sub- section (1) the Court shall fix the time within which the arbitrator or umpire shall submit his decision to the Court: Provided that any time so fixed may be extended by subsequent order of the Court.
(3) An award remitted under sub- section (1) shall become void on the failure of the arbitrator or umpire to reconsider it and submit his decision within the time fixed.”
30. The Court has the power to remit the matter as regards the matters which are not determined by the arbitrators or where the award is indefinite or incapable of execution or where an objection to the legality of the award is apparent on the face of it.
31. It is only in the event of Sections 15 and 16 not being applicable then under Section 17, the Court would have the power to pass a judgment in terms of the award. For easy reference, Section 17 of the Arbitration Act, 1940 is extracted hereunder:
“17. Judgment in terms of award.
Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.”
In the present case, respondent had objected to a judgment being passed in terms of the award and had canvassed various points as stated hereinabove.
32. One other relevant provision for this matter would be Section 30 of the Arbitration Act, 1940, which deals with grounds for setting aside the award. The said section is hereunder reproduced for easy reference.
“30. Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely:-
(a) that an arbitrator or umpire has misconducted himself or the proceedings.
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35;
(c) that an award has been improperly procured or is otherwise invalid.”
33. Though no applications were filed under Section 30 of the Arbitration Act, 1940, the objections filed towards passing of the judgment in terms of the award contained certain grounds under Section 30 namely grounds (a) and (c). In that, respondent alleged that the arbitrators had misconducted themselves, as also the proceedings/award were otherwise invalid.
34. In the above background, in our considered view, the objections to the award as canvassed by the respondent had to be dealt with in terms of Sections 15, 16 and 30 of the Arbitration Act, 1940.
35. On perusal of the contentions canvassed by the respondent, we are unable to modify the award so as to satisfy the valid objections raised by the respondent. The only option which is available to us are in terms of Sections 16 and 30 which are to be taken up together.
36. The award having been passed and the arbitrators not having dealt with preliminary issues even though the arbitrators themselves had stated that Issue Nos.14, 15 and 16 would be treated as preliminary issues goes to the root of the matter, the arbitrators had to deal with those issues and give a finding. But not doing so amounts to a misconduct of the proceedings on the part of the arbitrators.
37. A perusal of the entire award would indicate that there is no finding on the preliminary issues at that stage. From the records it is also seen that even in the final award also there is no finding on Issue Nos.14, 15 and 16. The issues having been extracted hereinabove, it is clear that those issues go to the root of the matter and unless and until findings were given on Issue Nos.14, 15 and 16, the matter could not have proceeded further. In that, if Issue Nos.14, 15 and 16 are decided in favour of the respondent, then, the arbitration would have failed and the claim of the claimant would have had to be rejected. The claim could only be considered if the claimant was successful in overcoming the preliminary objections raised by the Respondent in terms of Issue Nos.14, 15 and 16.
38. There is a finding recorded by the arbitrators stating that they have heard the respondent-claimant in the 10th meeting held on 17.07.1982 and they have ordered that the above issues will be decided after recording of evidence. This establishes that the respondent was keen on a finding being given on those issues and that there were arguments advanced on those issues. The arbitrators in the award have stated that parties themselves submitted to arbitration and later did not press the issues for consideration. But this is not supported by the records available.
39. A perusal of the order sheet or the proceedings maintained by the arbitrators on 17.07.1992 indicates as under:-
1. Pronounced the orders on the preliminary issues in the presence of the parties. The parties have filed a joint memo agreeing for extension of time for making the award by four months i.e. form 5-8-1992 to 4-12-1992. The time is extended accordingly.
2. The case is posted to 8th August 1992 at 10.30 A.M. for both the parties to file their respective documents, if any, and list of witnesses.
40. There is another record of proceedings held on 17.07.1992 which reads as under:-
1. Heard both parties Both question of fact & law are interlinked. Therefore, they cannot be decided at this stage. The finding on issue Nos.14, 15 & 16 will not determine the dispute involved in this Arbitration. Hence, these issues will be decided after recording evidence.
2. Pronounced the orders in the presence of parties.
(underlining by us) 41. Subsequent thereto, the evidence was recorded and was completed on 27.05.1994 in the 24th meeting of the arbitrators. It is then recorded as under:
The Advocate for KEB stated that it was not possible to trace the original of second sheet of R2 and it was found that in all the files available only Zerox copies are available. He also mentioned that there was little likelihood of tracing the original.
2. Further, cross-examination of Sri. R.Venkata Reddy, was continued and concluded. There was no re- examination.
The next Arbitrators Meeting will be held on 18-6-1994 at 11.00 A.M. at Cauvery Bhavan, when arguments will be presented. The claimant and the respondent will jointly file the statements of liabilities under various price variation possibilities (1) as per the contention of the Board (2) as per the contention of the claimant. This will also cover other isues like duty draw back.
42. Arguments were heard on 18.06.1994 and it was recorded as under:-
Sri. B.T.A. Raman, Advocate for the Claimant presented the arguments on behalf of the Claimant and concluded.
Next meeting of the Arbitrators will be held on 2nd July 1994 at 11.00 A.M. at Cauvery Bhavan, when the reply arguments will be presented by the Advocate for the respondent.
43. The minutes for 02.07.1994, reads as under:
Shri. N.Kumar, Advocate for the Respondent, presented the arguments on behalf of the Board.
Reply by the Advocate for the Claimant will be at the next meeting of the Arbitrators to be held on 16th July 1994 at 11.00 a.m. at Cauvery Bhavan, Bangalore.
44. The minutes for 16.07.1994, reads as follows:
Shri. B.T.A. Raman, Advocate for the Claimant presented its arguments in reply to arguments made by Shri. N.Kumar, Advocate for the Respondent, with this the arguments were concluded.
1. Synopsis of the arguments will be filed by both the advocates on or before 30th July 1994, copies of which would be sent to the parties also.
2. Both the parties agreed to enlarge time for making of the award by a period of three months i.e., from the present terminal date of 31.7.1994 (till October 1994).
3. The two parties will file the statement of accepted calculation sheets for various contingencies as already been required, on or before 30th July 1994.
The Arbitrators will meet at an agreed later date to finalize the Award.
45. A perusal of the extract of the 27th meeting held on 16.07.1994 indicates that the arguments were concluded and the arbitrators would meet to finalise the award.
46. From the above extracts of the proceedings or order sheets of the meetings, it is clear that at no point of time, Issue Nos.14, 15 and 16 were taken up as preliminary issues. There is also no record of any statement made by any of the parties, more particularly, the respondent to the effect that they are not pressing the Issues Nos.14, 15 and 16 for consideration. But, the recording of such statement by the arbitrators in the award is contrary to the records and the arbitrators have on that basis given a go by to the obligation on the part of the arbitrators to give a finding on these important preliminary issues which go to the root of the matter. The recording in the award that the parties submitted to arbitration and did not press the issues for consideration is made in such a manner as if to indicate that both the parties (including the respondent) have given up those issues and they do not want any finding on those issues. Though there is no recording of such a statement in any of the minutes/proceedings/order sheet, shockingly, the same finds a place in the award. This, in our opinion, would amount to misconduct by the arbitrators since the arbitrators have recorded a statement or submission without there being any such statement or submission being made.
47. It is contended by Sri. Holla, appearing for the respondent that all the disputes have not been answered. Per contra, Sri. Ariga, for the claimant has submitted that, all the issues need not be answered by the arbitrators and there cannot be any such imposition.
48. We could agree with the submission made by Sri.
Ariga, learned counsel for appellant, if the decision on one issue would render a decision on other issues redundant or irrelevant. In the present case, Issue Nos.1 to 8 and Issue Nos.17 to 19 would not be rendered redundant on account of a finding on Issue Nos. 9 to 13. Hence, there was a requirement for the arbitrators to give a finding on those issues.
49. Be that as it may. Even accepting the arguments of Sri. Ariga, learned counsel for the claimant - appellant that there is no requirement to render a finding on all issues, we are of the opinion that in the instant case when the issues go to the root of the matter as also the jurisdiction of the Arbitrators, there ought to have been a finding by the arbitrators in respect of those issues, either at the preliminary stage or final stage.
50. Issues not 14 to 16, ought to have been treated as preliminary issues and in our view those issues had to be answered prior to consideration of other issues albeit as per the arbitrators order after the recording of evidence.
51. We have also found that the umpire has been a silent spectator in the entire award. The umpire has not decided anything.
52. Sri. Ariga, learned counsel for appellant contends that the award has been passed and it was not required to be a reasoned award and in view of the statement made by the arbitrators that all the issues have been considered, it must be presumed that the arbitrators have considered all the issues including issues 14, 15 and 16 and have answered them in the negative since they have proceeded to passing of the award in favour of the claimant. We cannot agree with such a contention, as there can be no such presumption which can be drawn, the arbitrators have to give a finding on each issue with reasons or otherwise.
53. It is clear that the arbitrators have misconducted themselves in the instant case and as such, the award has to be set aside and remanded for fresh consideration. Further, since the award has left undertermined many of the matters referred to arbitrators, in terms of Section 16(1)(a) of the Act, the award has to be remitted to the arbitrators for fresh consideration and determination.
54. We had put this across to the learned counsel for the parties and they informed us that the arbitrators are not available. We had also called upon the parties to let us know the name of their nominees for the purpose of appointment of fresh arbitrators, without prejudice to the contentions urged by them.
55. Learned counsel for the Respondent has submitted a list with three names. We hereby appoint Sri.Justice V.Jagannathan, Retired Judge of this Court as an arbitrator on behalf of the respondent, whose name is found mention in the list supplied.
56. The learned counsel for the claimant has however stated that he would not want to nominate any arbitrator since he would persist with his submission and appointment of an arbitrator by him would prejudice his case. In view of those submissions, we hereby appoint Sri.Justice A.V.Chandrashekhar, Retired Judge of this Court as an arbitrator on behalf of the claimant.
57. The Arbitrators so appointed shall appoint an umpire of their choice.
58. Since the evidence has been recorded and the documents have been marked, we request the arbitrators to proceed from that stage and render a finding on all the issues in accordance with law within a period of six months from the date on which the umpire is appointed.
59. In view of the above, we pass the following:
ORDER i) The appeals are disposed of.
ii) The order and decree dated 15.12.2000 passed in Arbitration Case No.40/94 by the VI Additional City Civil Judge, Bangalore is set- aside and the matter is remanded to the Arbitrators now appointed for fresh reconsideration.
iii) Sri.Justice V.Jagannathan, Retired Judge of this Court is appointed as Arbitrator on behalf of the respondent.
iv) Sri.Justice A.V.Chandrashekhar, Retired Judge of this Court is appointed as Arbitrator on behalf of the claimant.
v) The Arbitrators so appointed shall appoint an Umpire.
vi) The Arbitrators are requested to pass an award within six months from the date of appointment of an Umpire.
vii) The arbitration will be held in the Arbitration Centre, Khanija Bhavan, Bengaluru.
viii) Registry is directed to send a copy of this Judgment to the above Arbitrators.
ix) The office is directed to forward a copy of this order to the Director, Arbitration Centre to take necessary steps to inform the Arbitrators so appointed and for the conduct of further proceedings.
MFA No.1020 of 2001 c/w MFA No.1792 of 2001 are disposed of accordingly.
Parties to bear their own costs.
Sd/- JUDGE Prs*/ln Sd/- JUDGE