Umesh Chandra Panigrahi vs State of Chhattisgarh and Others

I.M. Quddusi, J.—The applicant/petitioner has filed this petition u/s 19 of the C.G. Madhyastham Adhikaran Adhiniyam, 1983 against the award dated 1-3-2006 passed by the C.G. Madhyastham Adhikaran, Raipur in Ref. Petition No. 64/2005. Brief facts of the case are that the applicant is a registered contractor. His tender was accepted in respect of construction of four units of laboratory blocks and wire fencing for two barracks including W/S, S/F and electrification at open Jail Masgaon. Agreement was entered into between the parties in the year 1991. Accepted rate of work was 35% above C.S.R. of Bastar Circle. The period of completion of work was 11 months and accordingly, the work was to be completed by 30-5-1992. The work order was given on 30-5-1991.

According to the applicant, the work was completed on 30-11-1993 and the final bill amounting to Rs. 16,54,216/- was submitted. There was some dispute regarding payment. Therefore, the petitioner in view of Clause 29 of the Agreement submitted an application before the Executive Engineer PWD. The Executive Engineer did not proceed with the application/representation submitted by the petitioner. As the request of the applicant was not acceded to, he moved the Arbitration Tribunal for redressal of his grievance and adjudication of the dispute. During the proceedings, all the documents were produced before the Tribunal. It is urged that initially the proceedings before the Tribunal were conducted in terms of Clause 29 of the Agreement which provides for constitution of Tribunal consisting of an Officer belonging to the rank of Chief Engineer, but subsequently the Chief Engineer did not participate in the proceedings. The applicant raised objection regarding constitution of the Tribunal but the same was not heard and ultimately the Tribunal vide order dated 1-3-2006 passed the award.

Learned counsel for the applicant submits that in case of dispute or differences between the parties pertaining to works contract. Clause 29 of the Agreement provides that the State Government shall constitute an Arbitration Board which shall consist of 3 members one of whom shall be chosen from the officers belonging to the department not below the rank of Superintending Engineer and in the instant case without there being any such technical member, the constitution of the Tribunal consisting of one Hon''ble High Court Judge (Retd.) and one District Judge (Retd.) was itself defective and as such the decision rendered by the Tribunal consisting of two members is illegal and void ab-initio. He further submits that the inclusion of the officer of a technical department is not just a mere formality, it was with a view and purpose that the matter bears technical interpretation and as the person having technical knowledge was not included in the Arbitration Board, the decision of the Tribunal was bad in law and it is liable to be set aside. He placed reliance on a decision of the Apex Court in Northern Railway Administration, Ministry of Railway, New Delhi Vs. Patel Engineering Company Ltd., wherein it has been held in paras 12 to 13 as under:

A bare reading of the scheme of Section 11 of Arbitration and Conciliation Act, 1996 shows that the emphasis is on the terms of agreement being adhered to and/or given effect as closely as possible. In other words, the Court may ask to do what has not been done. The Court must first ensure that the remedies provided for are exhausted. It is true as contended by Mr. Desai that it is not mandatory for the Chief Justice or any person or institution designated by him to appoint the named arbitrator or arbitrators. But at the same time, due regard has to be given to the qualifications required by the agreement and other considerations.

The expression "due regard" means that proper attention to several circumstances have been focused. The expression "necessary" as a general rule can be broadly stated to be those things which are reasonably required to be done or legally ancillary to the accomplishment of the intended act. Necessary measures an be stated to be the reasonable steps required to be taken.

In all these cases at hand the High Court does not appear to have focused on the requirement to have due regard to the qualifications required by the agreement or other considerations necessary to secure the appointment of an independent and impartial arbitrator. It needs no reiteration that appointment of the arbitrator or arbitrators named in the arbitration agreement is not must, but while making the appointment the twin requirements of sub-section (8) of Section 11 have to be kept in view, considered and taken into account. If it is not done, the appointment becomes vulnerable. In the circumstances, we set aside the appointment made in each case, remit the matters to the High Court to make fresh appointments keeping in view the parameters indicated above.

Further in Indian Oil Corporation Ltd. and Others Vs. Raja Transport (P) Ltd., vide Para 43 the decision rendered in Northern Railway Administration v. Patel Engineering Co. Ltd. (supra) came up for consideration and Hon''ble the Apex Court has quoted the above paragraphs. In para 48, the scope of section 11 of Arbitration and Conciliation Act, 1996 has also been summarized, which reads as under:

(i) Where the agreement provides for arbitration with three arbitrators (each party to appoint one arbitrator and the two appointed arbitrators to appoint a third arbitrator), in the event of a party failing to appoint an arbitrator within 30 days from the receipt of a request from the other party (or the two nominated arbitrators failing to agree on the third arbitrator within 30 days from the date of the appointment), the Chief Justice or his designate will exercise power under sub-section (4) of section 11 of the Act.

(ii) Where the agreement provides for arbitration by a sole arbitrator and the parties have not agreed upon any appointment procedure, the Chief Justice or his designate will exercise power under sub-section (5) of Section 11, if the parties fail to agree on the arbitration within thirty days from the receipt of a request by a party from the other party.

(iii) Where the arbitration agreement specifies the appointment procedure, then irrespective of whether the arbitration is by a sole arbitrator or by a three member Tribunal, the Chief Justice or his designate will exercise power under Sub-section (6) of Section 11, if a party fails to act as required under the agreed procedure (or the parties or the two appointed arbitrators fail to reach an agreement expected of them under the agreed procedure or any person/institution fails to perform any function entrusted to him/it under that procedure).

(iv) While failure of the other party to act within 30 days will furnish a cause of action to the party seeking arbitration to approach the Chief Justice or his designate in cases falling under sub-sections (4) and (5), such a time-bound requirement is not found in sub-section (6) of Section 11. The failure to act as per the agreed procedure within the time-limit prescribed by the arbitration agreement, or in the absence of any prescribed time-limit, within a reasonable time, will enable the aggrieved party to file a petition u/s 11(6) of the Act.

(v) Where the appointment procedure has been agreed between the parties, but the cause of action for invoking the jurisdiction of the Chief Justice or his designate under clauses (a) (b) or (c) of sub-section (6) has not arisen, then the question of the Chief Justice or his designate exercising power under sub-section (6) does not arise. The condition precedent for approaching the Chief Justice or his designate for taking necessary measures under sub-section (6) is that:

(i) a party failing to act as required under the agreed appointment procedure; or

(ii) the parties (or the two appointed arbitrators) failing to reach an agreement expected of them under the agreed appointment procedure; or

(iii) a person/institution who has been entrusted with any function under the agreed appointment procedure, failing to perform such function.

(vi) The Chief Justice or his designate while exercising power under sub-section (6) of Section 11 shall endeavour to give effect to the appointment procedure prescribed in the arbitration clause.

(vii) If circumstances exist, giving rise to justifiable doubts as to the independence and impartiality of the person nominated, or if other circumstances warrant appointment of an independent arbitrator by ignoring the procedure prescribed, the Chief Justice or his designate may, for reasons to be recorded ignore the designated arbitrator and appoint someone else.

Learned counsel for the State/respondents 1 & 2 submits that the award sought to be revised by the applicant has been passed by the Tribunal, therefore, the proceedings conducted and the award passed by the Tribunal are within the jurisdiction so vested in it and there was no illegality or material irregularity in the award passed by the Tribunal warranting interference by this Court. He further submits that the powers of the Court in revisional jurisdiction are limited and therefore, no interference is called for in this revision. He placed reliance in Masjid Kacha Tank, Nahan Vs. Tuffail Mohammed, wherein Hon''ble the Apex Court held that u/s. 115 of the CPC the High Court cannot reappreciate the evidence and set aside the concurrent findings of the courts below by taking a different view. Interference with findings of fact only justified if perverse or if there was non-appreciation or non-consideration of the material evidence on record. He has also placed reliance in Management of Kalpataru Vidya Samasthe (R) and Another Vs. S.B. Gupta and Another, and Khushro S.Gandhi and Others Vs. N.A. Guzder and Others,

Here the question arises as to whether the statute, that is, C.G. Madhyastham Adhikaran Adhiniyam, 1983 facilitates the appointment of Chief Engineer or such an officer of the State Public Works Department as one of the members of the Tribunal and whether such appointment would have been in consonance with the terms of the agreement regarding arbitration and what would be the effect of non-inclusion of Chief Engineer in the Tribunal for deciding the dispute in question. Therefore, it is purely a legal question which comes within the revisional jurisdiction of this Court.

In the above context, it is relevant here to refer to Section 3 of the C.G. Madhyastham Adhikaran Adhiniyam, 1983 (for short ''the Act'', 1983) which provides for constitution of Tribunal. It further provides that the State Government shall by notification constitute an Arbitration Tribunal for resolving all such disputes or differences pertaining to works contract or arising out of or connected with execution, discharge or satisfaction of any such works contract.

Section 4 of the Act, 1983 is relevant and quoted herein below:

Chairman and members of Tribunal and their qualifications.--(1) Subject to sub-sections (2) and (3), the State Government may appoint a Chairman and as many members to the Tribunal as it may consider necessary.

(1-a) The State Government may, in consultation with the Chairman, designate one of the Judicial Members as the Vice-Chairman who in the event of occurrence of any vacancy in the office of the Chairman by reason of his death, resignation, leave or otherwise, shall during such vacancy, discharge the functions of the Chairman.

(2) No person shall be appointed as Chairman of the Tribunal, unless he is or has been a Judge of a High Court.

(3) No person shall be qualified for appointment as a member of the Tribunal, unless-

(i) he is or has been a District Judge of not less than seven years standing, or

(ii) he is or has been a Revenue Commissioner or has held a post equivalent to the rank of Revenue Commissioner for a total period of not less than five years, or,

(iii) he is or has been:

(a) Chief Engineer in the service of the State Government in Public Works, Irrigation or Public Health Engineering Department, or

(b) A Chief Engineer in the service of the Madhya Pradesh Electricity Board, or

(c) A Senior Deputy Accountant General of the Office of the Accountant General, Madhya Pradesh,

For a period of not less than five years:

(provided that in the case of clause (iii), in exceptional circumstances, the State Government may, relax the prescribed minimum period of five years to three years).

Hon''ble the Supreme Court in Bharat Sanchar Nigam Ltd. and Another Vs. BPL Mobile Cellular Ltd. and Others, has held that in Para 35 that "the rights and liabilities of the parties have been laid down under the Act as also the Rules framed thereunder. An agreement/contract may be entered into, subject to the provisions of a statute or the rules framed thereunder. The contract, itself, may refer to the statutory provisions or refer to the same by way of incorporation by reference. A contract qua contract must be consensual. It must meet the statutory requirements and reasons under the provisions of the Contract Act. When a contract is entered into by and between the parties, what is determinative is enforcement of the terms and conditions to be governed by the Contract subject to the application of the statute and statutory provisions. Whereas a statutory contract would be governed by a statute, other contracts would not."

Herein in the present case, according to the petitioner, clause 29 of the Arbitration Agreement provides that if any party is aggrieved by the decision of the Chief Engineer, he can refer such disputes for arbitration by an Arbitration Board to be constituted by the State Government, which shall consist of three members of whom one shall be chosen from among the officers belonging to the department. According to him, sub-clause (a) of Clause 29 of the Agreement further provides that no person other than the aforesaid Arbitration Board constituted by the Government (to handle cases of all Technical Departments) shall act as Arbitrator and if for any reason that is not possible, the matter shall not be referred to Arbitration at all.

In sub-clauses (a) & (c) of Clause (iii) of sub-section 3 of Section 4 of C.G. Madhyastham Adhikaran Adhiniyam, 1983 it has also been clearly mentioned that Chief Engineer in service of the State Government in Public Works, Irrigation or Public Health Engineering Department, or a Senior Deputy Accountant General of the Office of the Accountant General, Madhya Pradesh shall be qualified for appointment by the State Government as a member of the Tribunal.

In the instant case, the concerned department is PWD and therefore, according to the agreement if the Chief Engineer or such an officer belonging to PWD would have been appointed by the State Government for the purpose of dealing with the instant case, there would not have been violation of any statutory provisions and the terms of the agreement could be complied with in consonance with the statue. It is urged by the learned counsel for the applicant that the State Government in exercise of the powers conferred u/s 3 of the Act constituted the Arbitration Tribunal consisting of a Chairman and two members and when one of the members i.e., officer of the Concerned Department has not participated in the proceedings, the applicant raised objection regarding constitution of the Tribunal but the same was not heard and ultimately the Tribunal vide order dated 1-3-2006 passed the award.

In view of the above discussion, we are of the opinion that in absence of Chief Engineer or such an officer of the State Public Works Department as provided in the Act, 1983 or in arbitration agreement, the constitution of Tribunal was not proper and the decision rendered by the said Tribunal consisting of Chairman and one Member without there being an Officer of the concerned Department is not in accordance with the terms of the Agreement entered into between the parties especially when the statute facilitates the appointment of Chief Engineer of the State Public Works Department in the Arbitration Tribunal. Therefore, the impugned award dated 1-3-2006 passed by C.G. Arbitration Tribunal deserves to be set aside and is hereby set aside. In the result, the revision is allowed. No order as to cost(s).