Case: State Of Orissa Vs. M/S Samantary Constn.Pvt.Ltd

It was also submitted that termination of the contract itself was justified and the Contractor wrongly relied upon the report of the Chief Engineer which was inadmissible in view of Section 81 of the Act. Reference was made to Explanation to Section 34 to the effect that if the award was in violation of Section 81, the same will be in conflict with the public policy of India which is a ground for setting aside the award under Section 34(2)(b)(ii). 15. Learned counsel for the respondents-Contractor supported the view taken by the High Court. It was pointed out that Section 81 of the Act had no relevance as the said section was in part III dealing with conciliation. The conciliation commenced, under Section 62, by acceptance of a written invitation to conciliate and if the parties thereafter appoint a Conciliator who proceeds as per the procedure laid down under the said Chapter of the Act. No such procedure having been followed, the letter of the Chief Engineer cannot be treated to be covered by Section 81 of the Act. The said letter could not be treated to be irrelevant or inadmissible in evidence. In any case, the decision of the Arbitrator with regard to its admissibility and reliability had to be accepted as final. 16. Having considered the rival submission and perused the record, we are of the view that the appeal deserves to be partly allowed. 17. Undoubtedly, the award of the Arbitrator may not be interfered with on the ground that the same was erroneous or on the ground that a different view could be taken on merits of the controversy. In considering an objection to the award, the Court does not sit in appeal over the decision on merits. However, patent error or perversity could certainly provide basis for interference. 18. In Saw Pipes Ltd. (supra), it was held that the expression ‘public policy of India’ has to be construed as being consistent with : (a) fundamental policy of Indian law; or(b) the interest of India; or(c) justice or morality; or(d) if it is patently illegal. 19. In ONGC vs. Western Geco International Ltd. (2014 (9) SCC 263 ), it was observed that the expression ‘fundamental policy of Indian law’ refers to the principles providing basis for administration of justice and enforcement of law in this country which included judicial approach, i.e. not acting arbitrarily or whimsically and acting in a fair, reasonable and objective manner without taking into account any extraneous consideration, following the principles of natural justice, i.e. taking a decision by due application of mind and by recording reasons and taking rational decision which can be decided on the touchstone of Wednesbury (Associated Provincial Picture Houses Ltd. vs. Wednesbury Corpn. (1948) 1 KB 223 : (1947) 2 ALL ER 680 (CA)). 20. In P.R. Shah, Shares & Stock Brokers (P) Ltd. vs. B.H.H. Securities (P) Ltd. (2012 (1) SCC 594 ), it was observed that dealing with an objection to an award, a court does not sit in appeal over the award by reassessing or reappreciating the evidence. 21. The above principles are well recognized and have been reiterated recently in Navodaya Mass Entertainment Ltd. vs. J.M. Combines (2015 (5) SCC 698 ) and Associate Builders vs. Delhi Development Authority (2015 (3) SCC 49 ). 22. Coming to the present case, while we do not find any merit in the contention that Section 81 of the Act vitiated the award on account of inadmissibility of the letter of the Chief Engineer, we do find merit in the contention that there is non application of mind in awarding the amount of Rs.3 crores towards the hire charges. Under the 1996 Act, the award is required to be a reasoned one unless the parties agree that no reasons are to be given or the award is based on agreement (Section 31(3)). The Arbitrator ought to have ascertained the total value of the machinery. Any reasonable person dealing with a claim on account of loss caused by the wrongful seizure of machinery or equipment will certainly enquire into the total value thereof. The hire charges may, at times furnish the basis for determining the compensation but such determination cannot normally exceed the price of the equipment as the loss caused cannot normally be more than the price of the equipment itself. In absence of such examination, the award can certainly be held to be perverse or based on non application of mind. In this view of the matter, either the parties have to be left free to have this issue re-determined which may further delay the matter or we may ourselves determine the claim based on the material on record. The latter course has been suggested by learned counsel.23. Learned counsel for the appellant has pointed out that as per invoice of purchase of the excavator, the price was Rs.27,34,134.75. In respect of the said machinery, claim of the Contractor is Rs.44,77,525/- only upto 31st October, 1989 out of the total claim of Rs.68,44,332/-. The claim could not be upheld beyond the price even if depreciation was not considered. On that basis total claim under Item No.18, on the date of the seizure could not exceed Rs.50 lakhs which appears to be the price of the machinery.24. Taking an overall view including the interest component upto the date of award (as the interest has been awarded only from the date of award) claim of the Contractor could be assessed at Rs. 1 crore 25 lakhs. We are conscious that we are not to substitute our opinion for that of the Arbitrator but since this part of the Award is outrightly perverse and not based on application of minds, we modify the award in respect of Item No.18 to Rs.1 crore 25 lakhs as on the date of the award instead of Rs.3 crores. Subject to this modification, the award is upheld in all other respects. Final calculation and adjustment may be made accordingly before the Executing Court.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]17. Undoubtedly, the award of the Arbitrator may not be interfered with on the ground that the same was erroneous or on the ground that a different view could be taken on merits of the controversy. In considering an objection to the award, the Court does not sit in appeal over the decision on merits. However, patent error or perversity could certainly provide basis for interference.Coming to the present case, while we do not find any merit in the contention that Section 81 of the Act vitiated the award on account of inadmissibility of the letter of the Chief Engineer, we do find merit in the contention that there is non application of mind in awarding the amount of Rs.3 crores towards the hire charges. Under the 1996 Act, the award is required to be a reasoned one unless the parties agree that no reasons are to be given or the award is based on agreement (Section 31(3)). The Arbitrator ought to have ascertained the total value of the machinery. Any reasonable person dealing with a claim on account of loss caused by the wrongful seizure of machinery or equipment will certainly enquire into the total value thereof. The hire charges may, at times furnish the basis for determining the compensation but such determination cannot normally exceed the price of the equipment as the loss caused cannot normally be more than the price of the equipment itself. In absence of such examination, the award can certainly be held to be perverse or based on non application of mind. In this view of the matter, either the parties have to be left free to have this issue re-determined which may further delay the matter or we may ourselves determine the claim based on the material on record. The latter course has been suggested by learned counsel.23. Learned counsel for the appellant has pointed out that as per invoice of purchase of the excavator, the price was Rs.27,34,134.75. In respect of the said machinery, claim of the Contractor is Rs.44,77,525/- only upto 31st October, 1989 out of the total claim of Rs.68,44,332/-. The claim could not be upheld beyond the price even if depreciation was not considered. On that basis total claim under Item No.18, on the date of the seizure could not exceed Rs.50 lakhs which appears to be the price of the machinery.24. Taking an overall view including the interest component upto the date of award (as the interest has been awarded only from the date of award) claim of the Contractor could be assessed at Rs. 1 crore 25 lakhs. We are conscious that we are not to substitute our opinion for that of the Arbitrator but since this part of the Award is outrightly perverse and not based on application of minds, we modify the award in respect of Item No.18 to Rs.1 crore 25 lakhs as on the date of the award instead of Rs.3 crores. Subject to this modification, the award is upheld in all other respects. Final calculation and adjustment may be made accordingly before the Executing Court.