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Judgment
P.D. Waingankar, J.—This appeal is preferred under Section 37(2) of the Arbitration and Conciliation Act, 1996 against the judgment and decree dated 05.04.2014 in Arbitration Suit No. 1/2008 on the file of Principal City Civil Judge at Bangalore.
Brief facts which gave rise to this appeal are stated as under:--
"The appellant-M/s. Telecommunications Consultants India Limited awarded the twelve projects to the respondent-company in the year 1999-2000 in Bangalore Telecom District Jurisdiction for trenching, laying PVC pipes, construction of manholes along the route in pursuance of an agreement entered between the appellants and respondent. Out of the twelve projects, the respondent-contractor completed eleven projects. Work against one project No. BGT-22/2K was cancelled by BSNL due to non-availability of ROW permission from the concerned local authorities which was informed to the respondent. The respondent was therefore asked to arrange for return of balance pipes and the pipes meant for BGT-22/2K project. Instead of returning the pipes, the respondent reported theft of some quantity of pipes. The respondent submitted copies of pipes receipt voucher against which pipes were issued to the respondent for all the projects in order to claim insurance. The respondent putforth huge claims towards storage and transportation charges for the PVC pipes which the appellants declined to pay. A dispute arose between the parties. In terms of the Arbitration Clause in the agreement, the dispute was referred for Arbitration. The Arbitrator entered the reference. Both the parties putforth their claims before the Arbitrator and placed supporting documents. The learned Arbitrator Sri. Murali Mohan passed an award dated 29.08.2007 directing the appellant-M/s. TCIL to pay Rs. 4,95,993/- to the respondent-contractor towards storage/handling charges for PVC pipes supplied for project BGT-22/2K on or before 30.09.2007 with 18% simple interest per annum from 01.08.2003 to 31.08.2007 on principal amount of Rs. 2,85,875/-. Accordingly, the award amount has been paid by the appellants to the respondent by issuance of a cheque for Rs. 4,95,993/- in full and final settlement as per the award. After receipt of the amount, the respondent-contractor filed a suit under Section 34 of the Arbitration and Conciliation Act on the file of Principal City Civil Judge, Bangalore. It was contested by the appellant-TCIL. The learned Principal City Civil Judge upon hearing the submission made by both the learned counsel appearing for the parties and upon going through the material on record and the award passed by the Arbitrator decreed the suit by judgment and decree dated 05.04.2014 awarding a sum of Rs. 35,76,317/- with interest at 12% per annum from 27.03.2001 as prayed for by the respondent-contractor."
Challenging the legality and correctness of the judgment and decree, this appeal is preferred by the appellants contending that the Civil Court exceeded the jurisdiction conferred upon it in the matter of interference in the Arbitration Award, the suit filed under Section 34 of the Arbitration and Conciliation Act (hereinafter referred to as Act'' for short) was barred by time, the Civil Court could not have substituted its view in place of the view taken by the Arbitrator which is not permissible under law, that the respondent-contractor having received the award amount towards full and final settlement of the claim without protest is estopped from challenging the award and that the Civil Court has dealt with the award as if it is an Appellate Court and has passed a decree and thereby the judgment and decree have led to miscarriage of justice.
Upon securing the records we have heard the learned Senior Counsel Sri. Aditya Sondhi for appellants and Sri. S. Subramanya learned counsel appearing for the respondent. Perused the records.
The learned Senior Counsel Sri. Aditya Sondhi, for appellants would submit that the suit filed by the respondent-contractor under Section 34 of the Act was barred by limitation provided under Section 34(3) of the Act, the appellants having accepted the money due under the award passed by the Arbitrator without demur and reservation of his right to challenge the award was estopped from challenging the award and that the Court under Section 34 of the Act has power either to set aside the award or to accept the award. But in the case on hand, the Civil Court instead of resorting to the above course has interfered with the award as if an Appellate Court and totally replaced the view taken by the Arbitrator who is the final judge selected by the parties. On these counts, the learned Senior Counsel has sought to set aside the judgment and decree and remand the matter for reconsideration.
The learned Senior counsel relied upon the following decisions in support of his arguments;-
"1) McDermott International Inc. Vs. Burn Standard Co. Ltd. and Others,
2) (2005) 13 Supreme Court Cases 373 in the case of Sushila N. Rangta v. Mita M. Sheth.
3) Pooran Chand Nangia Vs. National Fertilizers Ltd., "
The learned counsel for the respondent-contractor, on the other hand, would submit that the award passed by the Arbitrator was opposed to the public policy and that the Arbitrator has not looked into the terms and conditions of the contract in its proper perspective and as such the Civil Court has rightly interfered in the award passed by the Arbitrator within the scope of Section 34 of the Act and rightly passed the judgment allowing the entire claim putforth by the respondent. The learned counsel also submitted that the suit under Section 34 of the Act was filed well within the time and merely because the respondent-contractor received the award amount without demur or reservation cannot preclude the respondent from challenging the award and that there is no merit in the appeal filed by the appellants and hence the learned counsel has sought for dismissal of the appeal.
Upon hearing the submissions made by both the learned counsel and on perusal of the material on record the point that would arise for our consideration is
"Whether the judgment and decree passed by the Civil Court are sustainable in law?"
Before proceeding to answer the point for consideration, it has to be stated that the parties by incorporating Arbitration Clause in the contract consciously excluded the jurisdiction of the Civil Court. Having submitted to the jurisdiction of the Arbitrator, the parties are bound by the decision of the Arbitrator. The parties cannot be allowed to make a back door entry to the Civil Court under the guise of Section 34 of Act when the award goes wrong. Ultimately, the decision of the Arbitrator is final and binding on both the parties. However, the award can be set aside by the Civil Court only if the grounds mentioned in Section 34 of the Act are made out. Further, it has to be stated that the scope of interference by the Civil Court in Arbitration award is very limited. It is as good as supervisory jurisdiction since the scope to interfere is further reduced under the Arbitration and Conciliation Act.
Bearing in mind this accepted proposition of law, let us proceed to examine the judgment and decree passed by the court below and the contentions taken by the appellants.
The first ground on which the judgment and decree passed by the court below is challenged is that the petition filed under Section 34 of the Act was barred by limitation. Even then, the Court below entertained the petition and decided on merits without deciding the question as to the limitation that too when the petition was not accompanied by an application for condonation of delay.
The second ground on which the judgment and decree are called in question is that the respondent-contractor received the award amount without demur without reserving right to challenge the award and therefore he was precluded from the challenging the award passed by the Arbitrator. In the decision reported in Pooran Chand Nangia Vs. National Fertilizers Ltd., , in head note A it is held as under:--
"A. Arbitration Act, 1940 - Ss. 30 and 8 -Ground for setting aside award - Lack of jurisdiction of arbitrator - Acquiescence by parties - Appellant accepting the money due under the award without demur -Held, once the appellant submitted to the jurisdiction of the arbitrator unequivocally and accepted the award, he cannot challenge the same - Further held, if he desired to challenge the award he should have reserved his right to do so - Arbitration and Conciliation Act, 1996 - Ss. 34 and 11 -Acquiescence."
Yet another ground on which the award is called in question is that the court below under the guise of Section 34 of the Act could either accept the award as it is or to quash the award in its entirety leaving the parties free to begin the arbitration again if it is so desired. In the case on hand the Court instead of following the course open, interfered with the award and replaced its view in place of the view taken by the Arbitrator. It has been held in head note B of the judgment of the Supreme Court reported in McDermott International Inc. Vs. Burn Standard Co. Ltd. and Others, , and others as under:--
"B. Arbitration and Conciliation Act, 1996 - S. 34 - Relief that may be granted - Held, court cannot correct errors of arbitrator(s) - It can only quash the award leaving the parties free to begin the arbitration again if it is so desired"
All these grounds on which the judgment and decree are challenged though urged before the Court below, the Court below has neither discussed nor appreciated nor gave its finding on these aspects. All these contentions raised by the appellants goes to the very maintainability of the petition under Section 34 of the Act. The learned Judge conveniently ignored all these vital aspects canvassed and decreed the suit as if it is an Appellate Court and allowed the claim of the respondent-contractor in its entirety. It is for this reason and with an intention to do complete justice to both the parties we deem fit to set aside the judgment and decree passed by the court below without expressing our opinion as to the merits or otherwise of the grounds raised by the appellants and to remand the matter for fresh disposal in the light of the observation made by the Court as above during the course of the judgment.
For the foregoing reasons, the appeal filed by the appellants is allowed. The judgment and decree dated 05.04.2014 passed in Arbitration Suit No. 1/2008 on the file of the Principal City Civil Judge, Bangalore, is hereby set aside. The matter is remanded to the Principal City Civil Judge, Bangalore, for rehearing and disposal afresh in the light of the observation made by this court during the course of the judgment as expeditiously as possible within a period of six months from the date of the first appearance of the parties.
Both the parties are directed to appear before the Principal City Civil Judge, Bangalore, on 29.01.2016 at 11.00 a.m. in person or through their counsel without waiting for the notice of the Court.