HIGH COURT OF HIMACHAL PRADESH AT SHIMLA Arb.C. No.: 67 of 2002. Reserved on: 3.6.2008. Decided on: 3.7.2008. The Executive Engineer ………Objector/Petitioner. Versus M/s Civil Engineer and Consultants ………Respondent/Claimant. Coram: The Hon’ble Mr.Justice V.K. Ahuja, Judge. Whether approved for reporting? No. For the Objector/petitioner: Mr.J.S. Guleria, Law Officer. For the respondent: Mr.Suneet Goel, Advocate. V.K. Ahuja, J: This judgment shall dispose of the objections filed by the Executive Engineer, National Highway Division, HPPWD, Solan under Section 34(3) of Arbitration and Conciliation Act, 1996. Briefly stated the facts of the case are that the petitioner has filed objections under Section 34(3) of the Arbitration and Conciliation Act, 1996 against the award passed by the Arbitrator Shri B.S. Parmar, S.E. (Arbitration), HPPWD, Solan, dated 18.5.2002/24.5.2002. The facts alleged by the petitioner ___________ 1.Whether reporters of Local papers may be allowed to see the judgment? Yes. - 2 - are that the petitioner entered into a contract with the respondent on the basis of tender offered at contracted cost of Rs.20,32,366/- for execution of work “Construction of 14.5 mtrs.(changed to 21 mtrs) RCC T-beam over Barog Nallah on Barog Bye Pass” vide agreement No.9 of 1995-96. The disputes arose between the parties relating to the said work, which were referred for arbitration to S.E.(Arbitration), HPPWD, Solan on 18.9.2001, pursuant to the request of the respondent. It was alleged that the work was awarded to the claimant on 11.8.1995 with reckoned date of start of 26.8.1995 with time limit of one year for its completion. The work was required to be completed by 25.8.1996 as per agreement, but it was completed on 30.4.1998 at cost of Rs.26,79,593/-. It was further alleged that final bill of the claimant/respondent was finalized on 30.4.2002 but the respondent had already drawn interim payment of 27,06,411/- against the final cost ascertained at Rs.26,79,593/- and thus it was alleged that excess payment amounting to Rs.26,818/- has been made to the respondent apart from other recoverable legitimate amount of Rs.49,267/- and as such a sum of Rs.76,085/- had become recoverable from the contractor/respondent under Clause 29 of the agreement. The Arbitrator made his award on 18.5.2002 with corrigendum dated 24.5.2002 and the petitioner filed objections to the said award made by the Arbitrator. It was alleged that the award was against the Public Policy of India since the Arbitrator had not considered the pleadings of the parties relating to claim Nos.1, 3, 14, 15, 16 and 17. It was alleged that it was not a reasoned award as required under Section 31 of the Arbitration and Conciliation Act, 1996 and the agreement and, thus, it was against the Public Policy. The award was accordingly challenged in regard - 3 - to claims mentioned above on various pleas as detailed in the petition. It was also alleged that the Arbitrator had erred himself by carrying out corrections in his award by allowing additional interest as per the corrigendum issued by him and the objection petition may be allowed and the award passed may be set aside. In reply, the respondent denied the allegations and pleaded that no excess payment has been drawn by him and no amount is recoverable from the respondent. It was also pleaded that the respondent was told of the increase in the span and the width of the bridge only after the tender had been accepted and the award made by the Arbitrator is not against the Public Policy and it does not suffer from any patent error and as such is not liable to be set aside. On the pleadings of the parties, the following issues were settled by this Court: 1. Whether the impugned award is against the Public Policy of India? OPO 2. Whether the impugned award dehors the Clause 12(a) of the Contract Agreement and unreasoned? OPO 3. Whether the Corrigendum dated 24.5.2002 issued by the Arbitrator, amending the award, is against the provisions of Section 30(3) and 33 of the Arbitration and Conciliation Act. If so, its effect. 4. Relief. The parties were given opportunity to lead evidence by way of affidavits, if any, but no affidavits were filed and only the record of the Arbitrator was called for. - 4 - I have heard the learned counsel for the parties and have gone through the record of the case. Issues No.1, 2 and 3: In support of these issues, the learned Law Officer has submitted that the objections have been filed in regard to the claims No.1, 3, 14, 15, 16 and 17, which were passed against the State. The submissions were made individually in regard to various claims submitting that the claims were not sustainable except relating to foundation, which were covered under Clause 2 and while awarding the claims, the Arbitrator had exceeded his jurisdiction. It was submitted that the length and width of the bridge was increased subsequently and the contractor was only entitled to Rs.25,000/- per negotiation but he was awarded a sum of Rs.29,000/-, which was against the terms and conditions of the agreement. It was also submitted that the contractor was not entitled to price escalation or loss of profit and in giving its award, the Arbitrator had exceeded his jurisdiction. It was also submitted that the Arbitrator had arbitrarily granted interest at the rate of Rs.18%, which was not permissible and as such the said award was liable to be set aside. On the other hand, the learned counsel for the respondent had submitted that the objections in regard to different claims have been filed by the petitioner as if this Court was sitting in appeal as against the order passed by the Arbitrator and there has to be no reappraisal of the evidence led before the Arbitrator, which approach cannot be said to be correct. It was submitted that the only ground on which the objections can be considered is if the award was against the Public Policy, as provided under Section 34(b) of the Act and only - 5 - this plea could be considered if the award was against the Public Policy or was unreasonable. The Arbitrator has given cogent reasonings for each claim and as such those findings do not call for an interference by this Court. To substantiate his plea, the learned counsel for the respondent had placed reliance on the following decisions. The decision in M/s Khub Chand Tyagi v. State of H.P. and another, 2004 (1) Shim.L.C. 279, shows that a learned Single Judge of this Court had observed as under: “Arbitrator specifically in its reasoning stated that he came to conclusion after reading all documents on record data made available during the proceedings of the case. Contention that arbitrator misappreciated or read evidence out of context cannot gone into unless it is shown that award is not at all referable to material on record. Court will not reappraise the evidence to come to a different conclusion. Arbitrator chosen by parties who made this award on the basis of best judgment as per record available. It is not open to parties that more/less amount ought to have been awarded against their claims.” It is, therefore, clear that the Arbitrator is the sole Judge of the quality as well as the quantity of evidence and it is not open for the court to take upon itself the task of being a Judge on the evidence led before the Arbitrator. The decision in Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd., (2003) 5 Supreme Court Cases 705, shows that the phrase ‘Public Policy’ of India was considered by their Lordships and it was held that it should be given a wider and not a narrow meaning. It was held that the court can set aside the award if it is: (i) contrary to (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (ii) is patently illegal or (iii) - 6 - is so unfair and unreasonable that it shocks the conscience of the court. However, illegality of a trivial nature can be ignored. The decision in H.P. State Forest Corporation Ltd. v. M/s Charan Singh and Company, 2003 (1) Shim. L.C. 460, shows that a Division Bench of this Court had held that the award of Arbitrator was based upon proper appreciation of evidence, oral as well as documentary. Well reasoned award of the Arbitrator ought not to have been interfered with by Single Judge. It was held that the scope for interference by the Court with an award is limited. A perusal of the award shows that the Arbitrator has given reasons for award. The main reasons given may be reproduced as under: “The major cause of action raised by the Claimant/Firm for seeking the said arbitration was that the scope of the work was completely changed as per schedule of quantity of the contract agreement with the variation of span and width of the bridge to double as compared to the drawing and design relating to the contract documents. They pleaded that there was a huge variation in the quantities beyond the deviation limit as well as the typical type of form work was to be executed with the result the Firm/Claimant claimed the compensation for damages by way of the award in their favour. The claim petition further adds that they were paid less on account of the change in the design of the bearings and for claim under Clause 10-CC in the final bill prepared at a very later stage.” In regard to objections filed regarding claim Nos.1 and 3, the findings have been given together by the Arbitrator. In regard to claim Nos. 1 to 6, he has clearly mentioned that the span of the bridge was increased from 14.5 metres to 21 metres and width from 7.5 metres to 12 metres, which was after the agreement was entered into in between the parties. It was mentioned that since the scope of the work was changed, a meeting was held by the Superintending Engineer in the presence of Executive Engineer and the - 7 - Contractor and they agreed to the terms and conditions laid down by the Claimant/Firm in view of the various points including their claims under the provisions of Clause 12 and 12-A of the Agreement. Accordingly, under claim No.1, the Arbitrator held that the claim of Rs.11,670/- put up by the respondent is justified and the same was awarded in his favour. In regard to claim awarded under claim No.3, the Arbitrator had specifically mentioned that the claimant has rightly claimed for additional rates beyond deviation limit of 15% of individual items since the quantity stipulated in the agreement were found to be almost double due to increase in span and width of bridge to double standard. Accordingly, a sum of Rs.29,891/- was awarded in favour of the claimant under this claim. Coming to the objections in regard to claim No.14, it was observed that the claimant/Firm have claimed that there was change of Elastomeric neoprene bearings in numbers as well as in volume due to the change of span and width of the bridge. The rates were demanded and the Engineer-in-Charge prepared the analysis for the changed dimensions which were approved by the Superintending Engineer, at the rate of Rs.27,250/- per bearing. The rate earlier recommended by the Engineer-in-Charge was Rs.29,976/- and payment was made at reduced rate of Rs.27,250/- as recommended by the Superintending Engineer, but in the final preparation of bill, the rate was reduced to Rs.20,000/- after 3-1/2 years and once this rate had been agreed by the Department, its reduction at subsequent stage was not justified and accordingly, the Arbitrator had found that this rate was reduced without any reason and accordingly, the respondent was held entitled to a sum of Rs.79,808/-. - 8 - Coming to the claim in regard to claim No.15, it has been duly considered by the Arbitrator and he concluded that a sum of Rs.21,026/- was justified on the basis of the loss of profit at the rate of 15% only. The claim under claim No.16 was duly considered by the Arbitrator and he had given the reasons and concluded that the Firm is liable to be compensated for the amount claimed as Rs.18,258/- and for refund of empty bags amounting to Rs.26,820/-. Coming to the claim No.17 under Clause 10CC for Rs.2,05,943/-, the Arbitrator considered the evidence and found that the escalation relating to 5th running bill to 10th running bill is Rs.46,106/-, which was justified and awarded in favour of the claimant-Firm against the sum of Rs.2,05,943/- claimed by the respondent. I have mentioned the reasons given under different claims to show that the claims were duly considered by the Arbitrator and he had considered the pleas raised and had given the reasonings for awarding the amount under these claims also. It cannot be said that any of these claims were arbitrarily allowed by the Arbitrator without mentioning the plea put up by the petitioner or the respondent and accordingly the claims were awarded in favour of the respondent. This Court is not sitting in appeal and there cannot be reappraisal of the evidence or the reason given and the award in question is well reasoned award and there is no question of interference of this Court by considering the each claim separately since there is nothing on record to show that the award passed was against the Public Policy for any reason whatsoever. Coming to the corrigendum issued by the Arbitrator and the plea raised in this Court, it is clear that the Arbitrator had allowed future interest to the - 9 - claimant till realization at the rate of 18% per annum. It was submitted by the learned Law Officer that in 1996 when the interest was awarded at the rate of 18%, the normal interest being paid by the Government on GPF etc. was 13.5% and the award of interest at the rate of 18% can be said to be arbitrary and deserves to be reduced accordingly. To substantiate this point, the learned Law Officer placed reliance upon the decision in Krishna Bhagya Jala Nigam Ltd. v. G. Harischandra Reddy and Another, (2007) 2 Supreme Court Cases 720, which shows that the interest was awarded by the Arbitrator at the rate of 18%. It was held that it should be reduced to 9% in view of substantial reduction of interest rate after economic reforms in the country. The award was dated 25.6.2000 and the agreement, in question, was dated 27.11.1993. On the other hand, the learned counsel for the respondent had submitted that notice was required to be issued by the Arbitrator if either of the parties approaches the Arbitrator for correction of an error within 30 days from the date of arbitration award as provided in Section 33(3) of Arbitration and Conciliation Act, 1996. Thus, it was submitted that in case an application was filed by a party, then a notice only was required, but since the error was corrected by the Arbitrator of his own, therefore, the said order awarding interest does not call for an interference by this Court. No decision was cited by the learned Law Officer to show that the error in regard to non-granting of the interest cannot be corrected under Section 33(3) by the Arbitrator by passing the supplementary award or by way of corrigendum and as such it has to be held that the order passed by the Arbitrator by way of - 10 - corrigendum was within his capacity. However, keeping in view the facts of the case and the above case law, it is clear that the award of 18% interest can be said to be excessive and as such it is reduced to 9%, as awarded in the above case. The objections filed in this regard are partly accepted to this extent only and issues No.1 and 2 are decided against the petitioner and in favour of the respondent. Issue No.3 is partly decided in favour of the petitioner. In view of the my findings on issues No.1 to 3, the objection petition is partly allowed in so far as findings under Issue No.3 are concerned and the interest awarded at the rate of 18% is reduced to 9%. The objection petition stands disposed of accordingly. In view of the final disposal of the main petition, all the pending miscellaneous applications, if any, shall also stand disposed of. July 3, 2008. (V.K. Ahuja), (TILAK) Judge.