IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA. Arb. Case No.70 of 2004 along with Arb. Case No.8 of 2005 Date of Decision : March 20, 2009 Arb. Case No.70 of 2004 State of H.P. …....Objector. Versus: Madan Gopal ……..…claimant Arb. Case No.8 of 2005 Madan Gopal. …....Objector. Versus: State of H.P & Anr. ……..…respondents Coram: The Hon’ble Mr.Justice Sanjay Karol, Judge. Whether approved for reporting?1 Yes Arb. Case No.70 of 2004 For the objector : Mr. Vivek Thakur, Addl. A.G. with Mr. Anil Jaswal, Dy.A.G. For the respondent: Mr. J. S. Bhogal, Sr. Advocate with Mr. Suneet Goel, Advocate Arb. Case No.8 of 2005 For the objector : Mr. J. S. Bhogal, Sr. Advocate with Mr. Suneet Goel, Advocate. For the respondents: Mr. Vivek Thakur, Addl. A.G. with Mr. Anil Jaswal, Dy.A.G. SANJAY KAROL, JIDGE (Oral) The award passed by the Engineer Shri Y. R. Sharma, Arbitrator-cum-Superintending Engineer, Arbitration Circle HPPWD, Solan, in case titled as Madan Gopal Sharma v. Executive Engineer, pertaining to agreement No. 23 of 2000- 1 Whether reporters of Local Papers may be allowed to see the judgment? 2 2001 has been assailed by way of present objection petitions filed under Section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘the Act’). Shri Madan Gopal Sharma (hereinafter referred to as ‘the Contractor’) has filed the objection petition being Arbitration Case No. 8/2005 titled as Madan Gopal v. State of H.P. & Anr. and the State of Himachal Pradesh (for short ‘the State’) has filed the objection petition being Arbitration Case No. 70/2004 titled as State of H.P. v. Madan Gopal. Both are being heard and disposed of together. In relation to execution of work, ‘widening from existing 4 feet track to 7.45/8.95 mtrs. wide Totu Tara Devi road km. 0/0 to 4/105 (SH:-Cutting in earth work in Km. 0/270 to 0/495 including C/O R/Walls at RD 0-342 to 0-348” agreement No. 23 of 2000-2001 was entered into between the Contractor and the State. For the total tendered amount of Rs.12,65,773/-, work was to be completed within a period of three months (approx.). The work could not be completed upto 28th March, 2001 and the contractor claimed a sum of Rs.32 lacs (approx.) for the work carried out by him. Certain disputes having arisen between the parties, in accordance with the arbitration clause contained in the agreement, this court in Arbitration Case No. 37 of 2003, on 11.5.2004 referred the dispute for adjudication to the Superintending Engineer, Arbitration Circle, Solan. 3 The Arbitrator entered into reference on 25.5.2004 and called the parties to file their claim within a period of 15 days. The learned Arbitrator concluded the proceedings in two hearings and passed the impugned award on 31.8.2004. The award has been assailed by both the parties for distinct and different reasons. The Contractor has assailed the award, inter alia on the ground that while passing the impugned award fair opportunity of representation was not afforded to him. Section 24 of the Act stipulates as under:- “24. Hearings and written proceedings:- (1) Unless otherwise agreed by the parties, the arbitral tribunal shall decide whether to hold oral hearings for the presentation of evidence or for oral argument, or whether the proceedings shall be conducted on the basis of documents and other materials: Provided that the arbitral tribunal shall hold oral hearings, at an appropriate stage of the proceedings, on a request by a party, unless the parties have agreed that no oral hearing shall be held. (2) The parties shall be given sufficient advance notice of any hearing and of any meeting of the arbitral tribunal for the purposes of inspection of documents, goods or other property. (3) All statements, documents or other information supplied to, or applications made to the arbitral tribunal by one party shall be communicated to the other party, and any expert report or evidentiary document on which the 4 arbitral tribunal may rely in making its decision shall be communicated to the parties.” (Emphasis supplied) From the record, it is evident that the first hearing of the case was held on 3.7.2004 when, on that date itself the contractor filed his statement of claim. The State sought time to file reply which was allowed by 10 days and the Contractor was allowed time to file rejoinder. The Arbitrator fixed the next date of hearing for 23.7.2004. The State did not file its reply/counter claim within the stipulated period but handed over the same during the course of the second hearing, which was held on 23.7.2004. Record of the proceedings of the said hearing reveals that opportunity to filer rejoinder within 10 days was afforded to the Contractor with a right to the State to file sur-rejoinder. The order was peremptory in nature. Strangely, inspite of the same, on that date itself, with the consent of both the parties, the matter was finally heard and hearing closed. The Contractor was not represented by any counsel. Realizing the unusual procedure adopted and prejudice caused to him, immediately i.e. on 28.7.2004, the Contractor moved an application stating as under:- “This has reference to the proceedings of the hearing in the above case held on 23.7.2004 in which you have ordered the proceedings to be closed inspite of my request to fix another date in view of the absence of my counsel on 23.7.2004. It is submitted that though the respondent had been granted 10 days time from 3.7.2004 to file the 5 defence statement, the said directions had not been complied with and the defence statement was filed only on 23.7.2004 giving no time to the claimant to prepare his case in the light of the defence taken by the respondent. It was only on account of the fact that no defence statement had been filed that counsel for the claimant was not present during the hearing on 23.7.2004 as it was expected and required that the claimant would be given time to file a rejoinder to the defence statement this forum had granted him 10 days time from 23.7.2004 to file the rejoinder and had also granted the respondent a further period of a week to file any sur-rejoinder. However, inspite of the same this Hon’ble forum went ahead to close the proceedings. It is submitted that closing of the hearing in the absence of counsel for the claimant, especially when the case involved substantial amount and questions of law, has prevented the claimant from presenting his case in the proper perspective. It is, therefore, requested that the case be heard again, the accompanying rejoinder be taken on record and the claimant be afforded an opportunity to get his case argued by legal counsel.” (Emphasis supplied) Said application stood rejected by the Arbitrator vide orders dated 3.8.2004 on the ground that the Contractor had consented to the proceedings being closed on that date itself. No oral hearing was afforded even at this juncture. The rejoinder filed by the Contractor along with his application dated 28.7.2004 was, however, taken on record. The sur-rejoinder filed by the State to the said rejoinder was also taken on record 6 by the learned Arbitrator on 6.8.2004, when also no hearing was afforded. On 12.8.2004, the Contractor again moved an application requesting that he may be permitted to file written submissions and more particularly with reference to the sur- rejoinder a copy of which was received by him on 10.8.2004, as various legal aspects of the matter were required to be elaborated. No orders on the same were passed but the learned Arbitrator passed the impugned award on 31.8.2004. There is no doubt that the Contractor had consented to the matter being heard on 23.7.2004 itself but, however, it is also a matter of fact that the Contractor had no legal assistance on that day inasmuch as his counsel could not appear due to personal difficulty. Having acceded to the Contractor’s request of allowing him to file the rejoinder within 10 days from 23.7.2004, the matter ought to have been listed for hearing after the stipulated period was over, to enable the parties to complete their respective pleadings and then only the matter could have been heard. It is not the case of any of the parties that the parties had otherwise agreed not to hold oral hearing. Strangely enough after the matter was heard in person, the learned Arbitrator accepted the pleadings but did not fix any date of further hearing. The Arbitrator has to decide his procedure, but it has to be in consonance with the principles of natural justice. The Contractor had realized the consequence of the consent 7 which he had given and seeing the prejudice caused to him he had requested for effective representation and hearing through his counsel. At no point in time he had delayed the matter. In fact he filed the statement of claim on the very first date of hearing and it was the State who had faulted in adhering to the schedule fixed by the learned Arbitrator in completing the pleadings. Assuming that the learned Arbitrator, in his wisdom, thought it fit not to afford opportunity of oral hearing to the parties, then he could have at least waited for the Contractor to have filed his written submissions for which only 20 days time was sought. From the aforesaid discussion, in my considered view it cannot be held that the Arbitral Tribunal had afforded adequate opportunity of oral hearing to the parties to effectively represent their case. Further, there was no opportunity afforded to any of the parties to rebut the documentary evidence. They may have wanted to lead oral evidence. The record does not suggest that no such evidence was to be led. The Contractor had placed on record along with his rejoinder the decision of the Apex Court rendered in Civil Appeal No. 206 of 1961 titled as Union of India v. Khetra Mohan Banerjee. Noticeably, the Arbitrator has not even considered the same. There were issues which touched the legal interpretation of the contract and for which legal assistance was absolutely necessary. The matter was not to be decided only on the basis of documents. Opportunity to 8 rebut the pleadings and the documents had to be afforded to the parties. Anxiety to conclude the matter at the earliest has definitely resulted in violation of principles of natural justice. Statutory right of the parties to have an effective and meaningful oral hearing stands infringed. The Contractor, for legitimate reasons had repeatedly requested for hearing. Without understanding the implication and the prejudice it would cause to him, the Contractor’s consent to go ahead with the hearing on 23.7.2004 cannot be used against him to his disadvantage. The Apex Court in Kothari Filaments vs. Commissioner of Customs & Ors., (2009) 2 SCC 192, has held as under:- This aspect of the matter has been considered in Rajesh Kumar & Ors. v. Dy. CIT & Ors. [(2007) 2 SCC 181], wherein this Court held : “In any event, when civil consequences ensue, there is hardly any distinction between an administrative order and a quasi judicial order. There might have been difference of opinions at one point of time, but it is now well-settled that a thin demarcated line between an administrative order and quasi-judicial order now stands obliterated {See A.K. Kraipak and Ors. v. Union of India and Ors. [(1969) SCC 262] and Chandra Bhawan Boarding and Lodging, Bangalore v. State of Mysore and Anr. [AIR 1970 SC 2042] and S.L. Kapoor v. Jagmohan and Ors. [(1980 4 SCC 379]}. 49. Recently, in V.C. Banaras Hindu University v. Shrikant [2006 (6) SCALE 66], this Court stated the law, thus: 9 ‘51. An order passed by a statutory authority, particularly when by reason whereof a citizen of India would be visited with civil or evil consequences must meet the test of reasonableness'." It was observed : "55. Justice, as is well known, is not only be done but manifestly seem to be done.” 16. In S.L. Kapoor v. Jagmohan & Ors. [(1980 (4) SCC 379], this Court observed : "18. In Ridge v. Baldwin and Ors. [1964] AC 40 @ 68, one of the arguments was that even if the appellant had been heard by the watch committee nothing that he could have said could have made any difference. The House of Lords observed (at p.68) : `It may be convenient at this point to deal with an argument that, even if as a general rule a watch committee must hear a constable in his own defence before dismissing him, this case was so clear that nothing that the appellant could have said could have made any difference. It is at least very doubtful whether that could be accepted as an excuse.” In Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd. {2003(5) SCC 705}, the Apex Court has interpreted the provisions of Section 34(2)(iv)(b)(i) to hold that if the award passed is in violation of the provisions of law including the Arbitration and Conciliation Act, it would be in conflict with the public policy of India. It has been further held as under:- “If the Arbitral Tribunal has not followed the mandatory procedure prescribed under the Act, it 10 would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34. Such interpretation of Section 34(2)(a)(v) would be in conformity with the settled principle of law that the procedural law cannot fail to provide relief when substance law gives the right. The principle ______ is there cannot be any wrong without a remedy.” The award in violation of the provisions of Section 24 of the Act is liable to be set aside. The award can be faulted under Section 34(2)(iii) for the reason that the Contractor was otherwise unable to present his case. For the aforesaid discussions, the impugned award is set-aside on this ground alone. The matter is remitted back to the learned Arbitrator, who shall after affording an opportunity of hearing to the parties, decide the matter afresh on merits. It is clarified that other contentions raised by the parties in their respective objection petitions have not been considered. It shall be open for the parties to argue the same before the learned Arbitrator, who shall after affording opportunity of hearing decide the matter as expeditiously as possible and preferably before 30th June, 2009. Parties through their learned counsel are directed to appear before the Arbitrator on 16.4.2009. The Arbitrator shall then fix his schedule of hearing. 11 Record, along with a copy of the order be sent back immediately to the learned Arbitrator. Mr. Bhogal, learned Senior Counsel submits that he shall ensure that the matter is argued by him within one hearing. With the aforesaid observations, the petitions stand disposed of. ( Sanjay Karol ), Judge. March 20, 2009. (rana)