\ Oivision Bendl IN THE HIGH COURT OF CHHATnSGARH AT BILASPUR ARBITRATION APPBALNO. 55 OF 2011 APPELLANT <\ State Power Generation Company Limited, .^M^ .. Head Quarter, Raipur, through its /"^y / Additional Supermtendmg Engineer, \^/\'y ^ Maintenance - I, Chhattisgarh State Power Generation Company Limited, Korba (East), CSPGCL, Korba, Tahsil & District Korba (CG). ^\YA'y ^ ^^ RESPONDENT/ ICLAIMANT Versus 'M/s A.P.Nirman Ltd., through its Managing Director Shri Gopi Ram Agrawal, Resident of A.P. Bhawan (G.S. House), Main Road, Korba, Tahsil & District Korba (CG). MEMO OF APPEAL UNDER SECTION 37 (11 (bl OF THB ARBITRATION AND CONCILIATION ACT, 1996 ^ .-<^" ./r" ^ HIGH COURT OF CHHATTISGARH AT BILASPUR D.B.: Hon'ble Shri Justice Satish K. Aanihotri and Hon'ble Shri Justice Radhe Shyam Sharma Arbitration Appeal No.55 of 201 1 Appellant Respondent versus Chhattisgarh State Power Generation Company Limited M/sA.P. Nirman Ltd. Present: Shri B.D.Guru, counsel for the appellant. Shri Manoj Chouhan,counsel forthe respondent. Appeal under Section 37(1 )(b) ofthe Arbitration and Conciliation Act, 1996 ORAL ORDER (Passed on 7 December, 2011) Per Radhe Shvam Sharma. J.: The appellant Chhattisgarh State Power Generation Company Limited has preferred the instant appeal against order dated 23-3- 2011 passed by the District Judge, Korba in Civil Suit (Arbitration Case) No.23A/2007, whereby the learned District Judge has rejected the application of the appellant moved under Section 34 of the Arbitration and Conciliation Act, 1996 (henceforth 'the Act, 1996') for setting aside award dated 14-1-2007. 2. Facts of the case, as projected in it, in brief, are that the appellant invited tenders for the work of raising height of Pond No.2 of Permanent Ash Pond, Risda, Korba (East). After compiling with the formalities, the work, which was for the value of Rs.79,88,425/-, was awarded to respondent M/s A.P. Nirman Ltd. on 23-3-1998. Agreement for the said work was signed on 29-8-1998. According to ^« ^. -^. the agreement, the work was to be completed within 11 months including the period of rainy season. After execution of the agreement, the respondent did not start the work soon. For belated start of the work, the respondent expressed technical difficulties. The respondent was not carrying on the work. The appellant wrote two letters to the respondent on 9-3-1999 and 26-4-1999 stating that the respondent has done only meagre work. Upto end of June, 1999, the respondent completed the work worth Rs.4,60,000/- only. From July, 1999, the respondent completely stopped the work. Upto 25-8-1999, the respondent had completed only 7% of the work and failed to submit the revised construction programme. The appellant sent a number of reminders to the respondent to complete the work, but the respondent declined to do so showing that it would resume the work only after the disputes are resolved. The appellant informed by a letter to the respondent to complete the work, otherwise, the work would be entrusted to some other institution under Section 3(c) of the Tender Agreement and excess expenditure, if any, would be recovered from the respondent. In spite of all these, no improvement was seen in the attitude of the respondent. Finally, on 9-3-2000, the appellant rescinded the contract. The respondent moved an application under Section 11(6) of the Act, 1996. Learned Justice Shri A.S.V. Moorthy (Retired) was appointed as Sole Arbitrator by this Court's order dated 2-9-2005. The learned Sole Arbitrator, by award dated 14-1-2007, directed the appellant to pay Rs.8,40,150/- to the respondent and also awarded interest at the rate of 12% per annum from 1-8-2000 till realization. r^r /€?-. ^•^ ^l. ^^ 3. The respondent opposed the application of the appellant under Section 34 of the Act, 1996 before the learned District Judge stating that the said application was not maintainable and as such, was liable to outright rejection on the ground that the same did not fall within the purview of provisions of Section 34 of the Act, 1996. The award passed by the learned Sole Arbitrator was a reasoned award. 4. The learned District Judge, after hearing both the parties, rejected the application under Section 34 of the Act, 1996 and affirmed the award dated 14-1-2007, holding that the award passed by the learned Sole Arbitrator was a well-reasoned award and did not call for any interference. 5. Shri B.D.Guru, learned counsel for the appellant argued that the learned Sole Arbitrator did not consider the case of the appellant properly. The award passed by the learned Sole Arbitrator is contradictory. The conclusion of the tearned Sole Arbitrator that the appellant committed breach of conditions of the contract and recovery under the Head "Risk and Costs" can be justified to the extent of 50% and, therefore, the appellant is liable to pay a sum of Rs.8,40,150/- along with interest @ 12% per annum from 1-8-2000 till realization to the respondent, is self-contradictory. Therefore, the order passed by the learned District Judge is absolutely illegal. The learned District Judge failed to assign any reason for affirming the award. The award passed by the learned Sole Arbitrator is perverse and illegal. The award dated 14-1-2007 passed by the learned Sole ^^ ,^. yji>.:. i ;^1 i y ^- \^} Arbitrator and the impugned order dated 23-3-2011 passed by the learned District Judge deserve to be set aside. 6. Shri Manoj Chouhan, learned counsel for the respondent argued that the learned Sole Arbitrator considered the pleadings made by both the parties in correct perspective. The findings arrived at by the learned Sole Arbitrator in sub-paragraphs (b) and (c) of paragraph 5.20 of the award are based on facts and as such the award passed by him is well-founded on facts and law. Hence, the award dated 14-1-2007 passed by the learned Sole Arbitrator and the impugned order dated 23-3-2011 passed by the learned District Judge do not warrant any interference by this Court and the appeal deserves to be dismissed. 7. We have heard learned counsel appearing for the parties at length and have perused the material available on record with utmost circumspection. 8. In Oil and Natural Gas Corporation Limited vs. Saw Pipes Limited, 2003 (2) Arb.LR 5 (SC) = AIR 2003 SC 2629, the Hon'ble Supreme Court observed thus: "55. It is true that if the arbitral tribunal has committed mere error of fact or law in reaching its conclusion on the disputed question submitted to it for adjudication then the Court would have no jurisdiction to interfere with the award. But, this would depend upon reference made to the arbitrator; (a) If there is a general reference for deciding the contractual dispute between the parties and if the award is based on erroneous legal proposition, the Court could interfere; (b) It is also settled law that in a T- A^'^ /^J 1 '"%a i case of reasoned award, the Court can set aside the same if it is, on the face of it, erroneous on the proposition of law or its application; (c) If a specific question of law is submitted to the arbitrator, erroneous decision in point of law does not make the award bad,so as to permit of its being set aside, ynless the Court is satisfied that the arbitrator had proceeded illegally. 56. In the facts of the case, it cannot be disputed that if contractual term, as it is, is to be taken into consideration, the award is, on the face of it, erroneous and in violation of the terms of the contract and thereby it violates Section 28(3) of the Act. Undisputedly, reference to the arbitral tribunal was not with regard to interpretation of question of law. It was only a general reference with regard to claim of respondent. Hence, if the award is erroneous on the basis of record with regard to proposition of law or its application, the Court will have jurisdiction to interfere with the same. 57. Dealing with the similar question, this Court in M/s Alopi Parshad and Sons Ltd. V. The Union of India, (1960) 2 SCR 793 observed that the extent of jurisdiction of the Court to set aside the award on the ground of an error in making the award is wetl defined and held thus:- "The award of an arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a note appended by the arbitrators, stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous — Champsey Bhara and Company v. Jivaraj Balloo Spinning and Weaving Company Limited [LR 50 IA 324]. If however, a specific question is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not make the award bad on its face so as to permit of its being set aside — In the matter of an arbitration between King and Duveen and others [LR (1913) 2 KBD 32] and Government of Kelantan v. Duff Development Company Limited[LR1923AG395]." \^ 9. In Mcdermott International Ine. vs. Burn Standard Co. Ltd. and ors., 2006 (2) Arb.LR 498 (SC) = (2006) 11 SCC 181, the Hon'ble Supreme Court observed thus: "52. The 1996 'Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it. 55. Another important change which has been made by reason of the provisions of the 1996 Act is that unlike the 1940 Act, the arbitrator is required to assign reasons \ in support of the award. A question may invariably arise as to what would be meant by a reasoned award. 56. In Bachawat's Law of Arbitration and Conciliation, 4th Edn., pp. 855-56, it is stated: "... 'Reason' is a ground or motive for a belief or a course of action, a statement in justification or explanation of belief or action. It is in this sense that the award must state reasons or the amount awarded. The rationale of the requirement of reasons is that reasons assure that the arbitrator has not acted capriciously. Reasons reveal the grounds on which the arbitrator reached the conclusion which adversely affects the interests of a party. The contractual stipulation of reasons means, as held in Poyser and Mills' Arbitration. In re, 'proper, adequate reasons'. Such reasons shall not only be inte!ligible but shall be a reason connected with the case which the court can see is proper. Contradictory reasons are equal to lack of reasons. The meaning of the word 'reason' was explained by the Kerala High Court in the contest of a reasoned award.. .. 'Reasons are the links between the materials on which certain conclusions are based and the actual conclusions....' A mere statement o reasons does not satisfy the requirements of Section 31(3). Reasons must be based upon the materials submitted before the Arbitral Tribunal. The Tribunal has to give its reasons on consideration of the relevant materials while the irrelevant material may be ignored.... •d "\, '^•'^\" y 'i '.^ ^^^y^ 8 Statement of reasons is a mandatory requirement unless dispensed with by the parties or by a statutory provision." 57. In Konkan Rly. Corpn. Ltd. v. Mehul Construction Co., (2000) 7 SCC 201, this Court emphasized the mandatoriness of giving reasons unless the arbitration agreement provides otherwise." 10. In Steel Authority of India Limited vs. Gupta Brothers Steel Tubes Limited, 2009 (3) Arb.LR 466 (SC) = (2009) 10 SCC 63, the Hon'ble Supreme Court observed thus: "29. The legal position is no more res integra that the arbitrator having been made the final arbiter of resolution of disputes between the parties, the award is not open to challenge on the ground that arbitrator has reached at a wrong conclusion. The courts do not interfere with the conclusion of the arbitrator even with regard to construction of a contract, if it is a possible view of the matter. The words "no award shall be set aside" in Section 30 mandate the courts not to set aside the award on the ground other than those specified in Section 30. In a case such as this, where the arbitrator has given elaborate reasons that compensation Clause 7.2 is not attracted or the breaches for which the compensation has been claimed by the respondent and such view of the arbitrator is a possible view, we are afraid in the circumstances, award is not amenable to correction by the court." 11. In Ravindra Kumar Gupta and Company vs. Union of India, (2010) 1 SCC 409, the Hon'ble Supreme Court observed thus: ^ "9. The law with regard to scope and ambit of the jurisdiction of the courts to interfere with an arbitration award has been settled in a catena of judgments of this Court. We may make a reference here only to some of the judgments. In State ofRajasthan v. Puri Construction Co. Ltd., (1994) 6 SCC 485, this Court observed as follows: (SCC p. 500, para 26) "26. The arbitrator is the final arbiter for the dispute between the parties and it is not open to challenge the award on the ground that the arbitrator has drawn his own conclusion or has failed to appreciate the facts. In Sudarsan Trading Co. v. Govt. ofKerala, (1989) 2 SCC 38, it has been held by this Court that there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the arbitrator to grant a particular remedy. One has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction. Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. (emphasis in original) Whether a particular amount was liable to be paid is a decision within the competency of the arbitrator. By purporting to construe the contract the court cannot take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the court. Where the reasons have been given by the arbitrator in making the award the court cannot examine the reasonableness of the reasons. If the parties have selected their own forum, the deciding forum must be Xi-A i /fi"~""^ 1 .11 ^ '^ •^•.es^^ (S? 10 conceded the power of appraisement of evidence. The arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be for the court to take upon itself the task of being a Judge on the evidence before the arbitrator. 12. In State of Rajasthan vs. Nav Bharat Construction Company, 2010 (1) Arb.LR 178 (SC) = (2010) 2 SCC 182, the Hon'ble Supreme Court observed thus: "17. The jurisdiction of the court to set aside an award under Section 30 of the Act has now been settled by a catena of decisions of this Court as well as by the different High Courts in India. Taking those principles into consideration, it would thus be clear that under Section 30 of the Act it must be said that the court is not empowered to reappreciate the evidence and examine the correctness of the conclusions arrived at by the umpire in considering an application for setting aside the award. 18. In this connection, we may refer to a decision of this Court in Bhagawati Oxygen Ltd. v. Hindustan Copper Ltd., (2005) 6 SCC 462. In that decision, this Court observed in para 25 as follows: (SCC pp. 472-73) "25. This Court has considered the provisions of Section 30 of the Act is several cases and has held that the court while exercising the power under Section 30,cannot reappreciate the evidence or examine \ correctness of the conclusions arrived at by the arbitrator. The jurisdiction is not appellate in nature and an award passed by an arbitrator •^u'rj y '. 11 cannot be set aside on the ground that it was erroneous. It is not open to the court to interfere with the award merely because in the opinion of the court, another view is equally possible. It is only when the court is satisfied that the arbitrator had misconducted himself or the proceedings or the award had been improperly procured or is 'otherwise' invalid that the court may set aside such award." 19. Similarly, in Food Corporation of India v. Chandu Construction, (2007) 4 SCC 697, in which one of us (Chatterjee, J.) was also a party, it was held that when the arbitrator or the umpire as the case may be, had ignored the specific terms or had acted beyond the four corners of the contract, it was open for the court in the exercise of its power under Section 30 of the Act to set aside the award on the ground that the arbitrator could not ignore the law or misapply the terms of the contract in order to do what he thought was just and reasonable." 13. The ratio of law laid down by the Hon'ble Supreme Court in the afore-stated cases makes it very evident that an award passed by an Arbitrator can be set aside only under the provisions of Section 34 of the Act, 1996. 14. Shri B.D.Guru, learned counsel for the appellant argued that the Sole Arbitrator erred in awarding the interest at the rate of 12% per annum from 1-8-2000 till realization. The learned District Judge failed to assign any reason for entitlement of interest by the respondent. •^., " 12 15. The learned District Judge held in paragraph 14 of the impugned order that the learned Sole Arbitrator has rightly awarded interest at the rate of 12% per annum from 1-8-2000 till realization after due consideration of the demand made by the respondent for an interest of 18% per annum. The interest awarded is as per the existing rate of interest at that time. 16. In Mannalal Prabhudayal vs. Oriental Insurance Co. Ltd., AIR 2006 SC 3026, it has been held thus: "13. As far as arbitration proceedings are concerned, it is well established that an arbitrator, in absence of any prohibition in an arbitration agreement, has power to award interest. Though it is not a "court" within the meaning of Section 34 of the Code of Civil Procedure, 1908 an arbitrator has power to grant reasonable rate of interest at all the three stages; i.e., pre-reference period, pendente lite and post-award period." 17. The learned Sole Arbitrator awarded the interest under his discretionary power, which is neither arbitrary nor excessive, therefore, it does not call for any interfQrence. 18. For setting aside the arbitral award under Section 34 of the Act, 1996 law is provided under sub-sections (2) and (3) of Section 34 of the Act, 1996. The learned District Judge, after carefully going through the award passed by the learned Sole Arbitrator, categorically held that the learned Sole Arbitrator, in exercise of his jurisdiction, awarded a sum of Rs.8,40,150/- along with the interest @ 12% per annum from 1-8-2000 till realization in favour of the respondent, which cannot be said to be unreasonable and /•'••"•,. ^-^ T^ t 13 excessive. The learned counsel appearing on behalf of the appellant could not indicate any ground available under sub-sections (2) and (3) of Section 34 of the Act, 1 996 for challenging the arbitral award passed by the learned Sole Arbitrator. 19. Therefore, in considered opinion of this Court, the reasons assigned by learned District Judge for rejecting the application of the appellant under Section 34 of the Act, 1996 are strictly in accordance with law and there is no ground available to the appellant to assail the findings of the learned Sole Arbitrator arrived at by him in the award. 20. For the reasons aforesaid, the appeal, being devoid of merit, deserves to be and is accordingly dismissed. No order as to costs. Sd/- Satish K. Agnihotri Judge Gppal -^ Y / Sd/- R.S. Sharma Judge