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Judgment
Heard Mr. Deepak Sinha, counsel appearing on behalf of the appellant.
Heard Mr. Ghulam Mustafa, counsel appearing on behalf of the respondent.
This appeal is directed against the judgment dated 28th February, 2007 passed by Shri Praveen Kumar Sinha, learned Sub Judge II Ranchi in Miscellaneous Case No. 3 of 2000 whereby the learned court has allowed the application under section 34 of the Arbitration and Conciliation Act, 1996 on contest with cost and consequently the award of the learned Sole Arbitrator Mr. Justice S. Roy(Retired) passed on 30.03.2000 and corrected on 29.5.2000, both have been set aside.
Counsel for the appellant submits that there was an award and a subsequent rectified award, both of which were challenged before the learned court below and the learned court below has set aside both the award as well as rectified award.
Counsel submits that so far as finding in connection with rectified award dated 29.5.2000 is concerned, he is not pressing the same before this court. He is confining this appeal to the setting aside of the main award which is dated 30.03.2000.
The brief background of the case is as follows: -
A. M/s Heavy Engineering Corporation Limited entered into an agreement with M/s S.G. Enterprises in terms of the Letter of Intent dated 27.01.1994, pursuant to Tender Notice dated 29.03.1993, for making operation and maintenance of the Oxygen Plant and to ensure supply of Oxygen to various Units of the Plants of M/s HEC Ltd. Disputes arose between the parties and the matter was referred for arbitration to the sole Arbitrator.
B. Both the parties alleged breach of contract against each and the respondent also filed counter claim. The learned arbitrator allowed some of the claims and some of the counter claims by a reasoned award dated 30.03.2000.
C. Claimant filed application under Section-33 of the Arbitration and Conciliation Act, 1996, praying for modification of the Award. The award was modified vide order dated 29.05.2000 passed by the learned arbitrator.
D. The respondent-M/s Heavy Engineering Corporation Ltd. filed an application u/s 34 of the Act, 1996 to set aside the Award dated 30.03.2000 as well as subsequent order dated 29.05.2000, which was numbered as Arb. Misc. Case No. 3 of 2000 . The petition under section 34 of Arbitration and conciliation Act , 1996 was allowed vide impugned order dated 28.02.2007 by the Court of the learned Sub Judge-II, Ranchi, and both the Award dated 30.03.2000 as well as subsequent order dated 29.05.2000 were set-aside.
E. That the appellant had also filed an application under Section 34 of the aforesaid Act of 1996 praying to set aside the Award dated 30.03.2000 as well as subsequent order dated 29.05.2000 which was registered as Arb. Misc. Case No. 5 of 2000.
F. It has been stated by the counsel for the respondent that the hearing of Misc. Case No. 3 of 2000 and Case No. 5 of 2000 were going on simultaneously in the of the Court of Sub Judge-II, Ranchi. However the Misc. Case No: 5 of 2000 was withdrawn by the present appellant vide order dated 22.01.2007.
G. Both the parties were heard in the main Petition u/s 34 of the Act of 1996 in Misc. Arb. Case No: 3 of 2000 and the learned Court below passed its order dated 28.02.2007 whereby and whereunder, the Award dated 30.03.2000 as well as the order dated 29.05.2000, both passed by the learned Arbitrator, were set aside.
Counsel for the appellant submits that arbitration award was a well speaking award and every aspect of the matter was taken care of by the learned Arbitrator. However the learned arbitrator had passed an order of rectification of the award vide another order dated 29.05.2000. Both, the Award dated 30.03.2000 as well as the order dated 29.05.2000 passed by the learned Arbitrator, were subject matter of Misc. Case No. 3 of 2000 before the court of learned Sub-Judge, II, Ranchi and the learned court below has set-aside both of them vide impugned order dated 28.02.2007.
Counsel further submits that the learned court below framed the following issues for consideration.
(i) Is the award dated 30.03.2000 bad due to illegality or error is apparent on the face of it?
(ii) As to whether corrections made under Section 33(i) (a) of the Arbitration and Conciliation Act, 1996 by the learned court below dated 29.5.2000 is without jurisdiction?
The learned counsel for the appellant submits that he is confining the present appeal only to issue no. 1 which was framed by the learned court below and so far as issue no.2 as decided by the learned court below is concerned, he has no grievance.
He further submits that so far as findings regarding issue no. 1 is concerned, upon reading of the entire impugned order it would appear that original award has been set aside on the ground that the Arbitrator had entertained the application for rectification of award and had actually rectified the award. Learned court below has observed that since the learned Arbitrator had reviewed the award, therefore it shows that he had misconducted himself and on this ground, the learned court below has set aside the original award also.
He further submits that scope of challenge to the original award and the scope of challenge to the rectified award are totally distinct and merely because the learned Arbitrator wrongly entertained the application for rectification of the award that by itself cannot be a ground to set aside the original award if the original award does not come within any of the grounds provided for setting aside of the award under Section 34 of the Arbitration and Conciliation Act, 1996. Counsel further submits that merely because rectified award is set aside the same cannot be a ground to set aside the original award by holding that the original award was itself incorrect in view of the finding of the learned Arbitrator in the rectified award. Counsel further submits that so far as issue no. 1 is concerned, no ground as provided under section 34 of Arbitration and conciliation Act, 1996 was made out for setting aside the original award and accordingly the learned court below has erred in setting aside the original award.
Counsel appearing on behalf of the respondent on the other hand submits that one of the primary issue which was there for consideration before the learned Arbitrator was as to who had committed the breach of contract first and this would attract Section 54 and 55 of the Indian Contract Act, 1872, particularly in view of the fact that the party who is guilty of breach cannot be given advantage of his own conduct. Counsel further submits that the learned Arbitrator by rectifying his own award had himself indicated that there were certain errors and he himself was not satisfied with the award and accordingly it seems that the learned court below has rightly passed the impugned judgment.
After hearing counsel for the parties and after considering the materials available on record, this court finds that the first issue framed by the learned court below related to the legality and validity of the award dated 30.3.2000 passed by the learned Arbitrator and the second issue related to the legality and validity of the rectifications done in the award vide order dated 29.05.2000 passed by the learned arbitrator under section 33 of the aforesaid Act of 1996.
The learned court below has taken up issue no. (ii) first and decided the same vide para 7 of the impugned judgement . The learned court below considered that the scope of Section 33 of aforesaid Act of 1996 is very limited and ultimately held as under:-
"Thus the learned sole Arbitrator has committed breach of neglects of the duty and responsibility, acts contrary to the principles of equity and good conscience and also acts without jurisdiction or exceeds to it by modifying the Award by making corrections under section 33 (1) (a) of the Act, 1996 and accordingly with this finding I hold that the corrections made on 29.05.2000 in the aforesaid paras by which the sole Arbitrator has rejected the given counter claim to the Applicant/respondents did not subsist in the eye of law and it not within the ambit of Section 33 (1) (a) of the Arbitration and Conciliation Act, 1996 and accordingly this issue is decided in favour of the Applicant."
Issue no. (i) as framed by the learned court below was decided vide para 8 of the impugned judgement. The learned court below while deciding the issue no. 1 referred to the judicial pronouncement in connection with the scope of interference with the award and has clearly observed that the court cannot reappraise the evidence and does not sit in appeal over the conclusions of the Arbitrator. However, while considering he issue no. (ii) the learned court below observed that the court can interfere if there is some illegality in the award appearing on the face of it and also observed that in a case Arbitrator admitted improper evidence and were mislead by it, it amounts to their committing an error of law patent on the face of the award. While considering issue no. (i) in the aforesaid background the learned court below observed that the award is a speaking award and reason has also been given and the entire issue no. 1 has been decided by referring to the fact that the Arbitrator had entertained the petition under Section 33 of the Arbitration and Conciliation Act, 1996 and had reviewed the order and in this background came to the following finding which has been quoted hereunder:-
"Thus, admittedly the learned arbitrator has admitted that the aforesaid claims which have been rejected by him by making correction dated 29.05.2000 are bad and cannot be allowed as they have already been recovered from R.A. bills 16th, 17th and 18th which are part of Annexure R/64. Thus, the arbitrator on the face of the Award arrived at an inconsistent conclusion even on his own findings as per Award dated 30.03.2000 and correction made in Award dated 29.05.2000 it would amount to misconduct. Thus, by reviewing the Award in disguise manner with the help of section 33 (1) (a) of the Act, 1996 the learned Arbitrator has committed breach and neglect of duty and responsibility and acts contrary to the principle of equity and good conscience and also act without jurisdiction or exceeds it and proceed on extraneous circumstances and thus he has legally misconducted and there is error or illegality apparent on the face of award and thus, the Award cannot be sustained as corrected on 29.05.2000 or without correction also and it is liable to be set aside on the basis of aforesaid guiding principles and accordingly this issue is decided in favour of the applicants/respondents. "
This court finds that the learned court below while deciding issue no. 1 based its finding on the fact that the review petition was entertained and decided and the learned court below was of the view that the arbitrator arrived at inconsistent conclusion as per Award dated 30.03.2000 and correction dated 29.05.2000. This court further finds that the learned court below while setting aside the original award held that the learned Arbitrator had misconducted himself in as much as the learned Arbitrator had entertained the rectification application beyond the provisions of law and held that same was without jurisdiction and accordingly held that the learned Arbitrator himself was not satisfied with his own finding.
This court is of the considered view that the grounds for setting aside the corrections made in Award under section 33 of Arbitration and Conciliation Act, 1996 vide order dated 29.05.2000 has nothing to do with grounds for setting aside the Award dated 30.03.2000. This court is of the considered view that the learned court below erred in law while setting aside the Award dated 30.03.2000 on the basis of error committed by the learned arbitrator in entertaining the petition for rectification/correction of award and in passing order dated 29.05.2000 for rectification of Award. This court fully agrees that the argument advanced by the counsel appearing on behalf of the appellant that scope of challenge to the original award and scope of challenge to the rectified award are totally distinct and merely because rectified award was wrongly passed the same by itself cannot be a ground to set aside the original award as has been done in the instant case.
Accordingly, the impugned order setting aside the Award dated 30.03.2000 is fit to be set-aside to the extent it relates to the Award dated 30.03.2000.
This court further finds that following issues were framed by the learned Arbitrator at the stage of arbitration proceedings:-
(i) Whether there has been breach of the terms and conditions of the contract by the claimants or by the respondents or by both?
(ii) Whether the termination of contract by the respondents is valid?
(iii) Whether the respondents are entitled to encash the Bank Guarantee furnished by the claimants and forfeit the earnest money and security deposit on the plea that the claimants have violated the terms and conditions of the contract?
(iv) Are the claimants entitled to the amount claimed by them under different heads?
(v) Are the Respondents entitled to the amount claimed by them under different heads?
(vi) Which of the parties shall bear the cost of this proceeding?
One of the issues which was framed by the learned Arbitrator is as to whether there has been breach of terms and conditions by the claimant or by the respondent or by both. It is important to note that the issues were framed by the learned Arbitrator after conclusion of submission of the parties and with consent of the parties, as is apparent from the award itself. This court finds that there was no such issue framed by the learned Arbitrator as to who had breached the contract first and accordingly the learned Arbitrator did not return any such finding as to which party had breached the contract first. The learned Arbitrator recorded a finding that it is clear that both parties committed breach of the terms of contract and issue was accordingly decided. Accordingly, the only argument raised by the respondent before this court in support of setting aside of award dated 30.03.2000 that in view of provisions of Section 54 and 55 of the Indian Contract Act, the appellant was guilty of first breach and therefore they were not entitled to claim any damage/compensation, is beyond the scope of section 34 of Arbitration and Conciliation Act, 1996. The point as to which party was first guilty of breach is purely factual and cannot be a ground for setting aside the award under section 34 of Arbitration and Conciliation Act, 1996. There is no dispute that the courts do not sit as an appellate authority to the arbitration Award. This court is of the considered view that no ground has been made out by the respondent to sustain the impugned order setting aside the award dated 30.3.2000. This court is of the considered view that the learned court below erred in law in setting aside the award dated 30.3.2000.
As a result of the aforesaid findings by this court, the impugned order dated 28.02.2007, passed in Misc. Case No. 3/2000 is hereby partly set aside only to the extent it relates to setting aside of the award dated 30.3.2000. This appeal is partly allowed.