Allowed

M/S. Valecha Engineering Ltd. v. the Chief Engineer Irrigation Department

Bombay HC14 Jul 2014APP/823/2004

Case brief

AI extract

What is this about?

Appeal against an order setting aside an arbitration award. The High Court held the appellant was not bound to repeat the notice procedure for an enhanced claim arising from the same factual matrix already submitted during the contract's tenure.

What did the court decide?

Impugned order setting aside the arbitration award was set aside. The learned single judge was directed to decide the petition on remaining objections.

M/S. Valecha Engineering Ltd. Vs the Chief Engineer Irrigation… — Arbitration | Bombay HC (2014)

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IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

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APPEAL NO.823 OF 2004 IN ARBITRATION PETITION NO.101 OF 2004 IN AWARD NO.5 OF 2004

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M/s.Valecha Engineering Limited ...Appellant ...Ori.Respdt.

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V/s.

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The Chief Engineer (S.P.) (M.K.V.D.C.), Pune

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...Respondents ...Ori.Petitioner

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Mr.Kishore M. Jawle for the Appellant.

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Mr.Vijay D. Patil for the Respondents.

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CORAM : S.J. VAZIFDAR &

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A.K. MENON, JJ. DATE : 14TH JULY, 2014.

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P.C. :-

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This is an appeal against the order of the learned single Judge allowing the respondent's petition under section 30 of the Arbitration Act, 1940 (1940 Act), setting aside an award.

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The case and our judgment is summarised as follows :

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The parties entered into a construction contract. Clause 56

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provides that if the contractor (i.e. the appellant in this case) is dissatisfied with the decision of the Superintending Engineer, he

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shall within thirty days from the receipt of the decision indicate his decision to refer the dispute to arbitration, failing which the decision shall be final and conclusive. Clause 57 does not permit a reference to arbitration disputes in respect of which the decision is final or conclusive.

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The appellant being dissatisfied with the decision of the Superintending Engineer, admittedly issued a notice within thirty days of his decision to refer the dispute to arbitration. However, in the first arbitration, the Arbitral Tribunal held the claim to be premature,as the work was still going on. The appellant therefore, raised the claim again in the second arbitration after the work was over. The claim was merely enhanced on account of the further work from Rs.95,18,165/- to Rs.1,22,76,736/-.

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The Arbitral Tribunal rightly came to the conclusion that the provisions of clause 56 had therefore, been complied with on the first occasion and it was not necessary for the respondent to once again go through the whole process under clause 56, including indicating the decision to refer the disputes to arbitration.

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We have come to the conclusion that the view taken by the Arbitral Tribunal is the correct one. In any event the least that must be said is that the view of the Arbitral Tribunal is a possible one. It cannot by any stretch of imagination be held to be perverse. Thus

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even if we had construed the contractual provision differently, it would not have been open to us to substitute our reasoning for that of the Arbitral Tribunal.

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The learned Judge set aside the award merely by construing clause 56. The learned Judge did not hold that the Arbitral Tribunal's construction of these clauses was perverse and that the view taken by the Arbitral Tribunal was not a possible one. In fact the learned Judge did not even consider or examine the view taken by the Arbitral Tribunal. He merely construed the clause and set aside the award on the basis thereof.

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The parties had entered into a construction contract. For the purpose of this appeal, it is sufficient to quote clauses 56 and 57 of the Contract, which read as under :-

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"56. Settlement of Disputes - If the contractor considers any work demanded of him to be outside the requirements of the contract or considers any drawings, record or ruling of the Executive Engineer, Warna Dam Division, Warnavati on any matter in connection with or arising out of the contract or the carrying out of work to be unacceptable, he should promptly ask the Executive Engineer, Warna Dam Division, Warnavati in writing, for written instructions or decision. Thereupon the Executive Engineer, Warna Dam Division, Warnavati shall give his written instructions or decision within a period of 30 days of such request.

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Upon receipt of the written instructions or decision the contractor shall promptly proceed without delay to comply with such instructions or decision.

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If the Executive Engineer, Warna Dam Division,

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Warnavati fails to give his instructions or decision in writing within a period of 30 days of being requested or if the contractor is dissatisfied with the instructions or decision of the Executive Engineer, Warna Dam Division, Warnavati, the contractor may within 30 days after receiving the instructions or decision appeal upward to Superintending Engineer, Warna Project Circle, Kolhapur, who shall afford an opportunity to the contractor to be heard and to offer evidence in support of his appeal. This official shall give a decision within a period of 30 days after the contractor has given the said evidence in support of his appeal.

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If the contractor is dissatisfied with this decision, the contractor within a period of thirty days from receipt of the decision shall indicate his intention to refer the dispute to Arbitration, failing which the said decision shall be final and conclusive.

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Clause 57 in terms sets out that if the notice to the Arbitrator is not given the decision given in appeal becomes final. The opening portion of clause 57 reads thus :-

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"All disputes or differences in respect of which the decision is not final and conclusive, shall on the initiative of either party be referred to the adjudication of three arbitrators."

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Before referring to the award and the impugned judgment,

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it is necessary to note a few facts. The claim which the Arbitral Tribunal awarded was on account of the respondent not having made available rubble in sufficient quantities from the quarries indicated in the tender and also due to reduction of rock excavation. Prior to the present arbitration proceedings in which the award impugned in these proceedings was made, the petitioner had, after following the procedure under clause 56, invoked arbitration which is referred to as

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the first arbitration. In those proceedings, the petitioner had raised the said claim. In paragraph 3 of the impugned judgment, the learned Judge noted that the claim for rubble was submitted before the first Board of Arbitrators. It is further noted that the first award dated 21.06.1991 showed that when the reference was made to the first Board of Arbitrators, the appellant had claimed a sum of Rs.95,18,165/- for the quantities supplied upto June, 1987. As the work was still in progress, the Board of Arbitrators did not rule on this claim holding it to be premature. The work was thereafter completed in June, 1995 and the appellant submitted a fresh claim updating the quantities which was subsequently supplied leading to the claim being enhanced to Rs.1,22,76,736/-.

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The first arbitration proceedings were under the Arbitration Act, 1940. In respect of the second arbitration proceedings, an application was made under section 11 of the Arbitration & Conciliation Act, 1996 which was disposed of by an order dated 08.10.1999. Claim No.6 in those proceedings was the claim in question in this appeal and in the previous reference to arbitration which culminated in the award dated 21.06.1991. By an order dated 08.10.1999 as corrected by an order dated 14.01.2000, all the claims except the said claim viz. claim No.6 therein were referred to an Arbitral Tribunal. It appears from the order that this was in view of the

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respondent's contention that claim No.6 ought to be adjudicated in accordance with the provisions of the 1940 Act.

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In view of the above order dated 08.10.1999, the appellant filed Arbitration Suit No.4094 of 2000 under section 20 of the 1940 Act with respect to the said claim.

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The suit was disposed of by an order and judgment dated 04.12.2000. The contention which was raised in the present appeal and before the learned single Judge, was also raised in the said suit. It was left open to the parties to raise the contention in the arbitration. 7. The Arbitral Tribunal accordingly entered upon the reference and made the award in the present arbitration proceedings. The Arbitral Tribunal dealt with the present objection in detail. It was contended even before the Arbitral Tribunal that the matter falls outside the scope of the arbitration agreement in view of the decision of the Superintending Engineer having become final and conclusive. According to the respondent, the decision had become final and conclusive as the appellant had not given notice of intention to refer the dispute to arbitration within thirty days of the decision of the Superintending Engineer.

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The Arbitral Tribunal however, rightly rejected the contention. As noted by the Arbitral Tribunal and by the learned Judge, the claim had already been submitted to the first Board of

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Arbitrators / Arbitral Tribunal after fulfilling the requirement and following the procedure prescribed and within the period stipulated, in clause 56. The Arbitral Tribunal that made the first award merely held the claim to be premature on the ground that the work was yet to be completed. It was open therefore, to the petitioner to raise the same claim after the work was completed. This is precisely what the appellant did. The only difference was that the quantities were updated and as a result thereof, the claim was enhanced from Rs.95,18,165/- to Rs.1,22,76,736/-. The Arbitral Tribunal therefore, came to the conclusion that it was not necessary for the appellant to once again go through the procedure prescribed in clause 56 of the contract once again. The Arbitral Tribunal accordingly rejected the contention regarding the delay and concluded that the claim submitted can be adjudicated upon.

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The view taken by the Arbitral Tribunal was according to us the correct view. The contrary view taken by the learned Judge is not even a possible view. In any event the view taken by the Arbitral Tribunal was certainly a possible view. It cannot by any stretch of imagination be held to be perverse, absurd or unsustainable. The least that must be said in favour of the appellant is that even assuming that another view is possible, this Court would not be justified in substituting that view for the view of the Arbitral Tribunal.

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Even assuming that the view taken up by the Arbitral Tribunal involved a construction of clauses 56 and 57, it would make no difference. The Arbitral Tribunal was entitled, indeed bound to construe the terms of the contract. The Arbitral Tribunal's construction of the contract is in our view correct. It is in any event to say the least, a possible view. In the circumstances, we would not be entitled to set aside the award even assuming that we had construed the contract differently.

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The learned Judge held that the dispute raised was not arbitrable, as the decision of the Superintending Engineering dated 30.09.1995 had become final and conclusive as the appellant i.e. the claimant in the arbitration had not issued a notice of intention to refer the dispute to arbitration within thirty days of the decision. The decision of the Superintending Engineering dated 30.09.1995 having become final, it fell outside the purview of clause 57, which pertains to arbitration.

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The learned Judge came to this finding obviously on the basis that the first notice was not sufficient and that it was necessary for the appellant to have once again given a notice of his decision to refer the dispute to arbitration.

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The learned Judge has, with respect not approached the petition for challenging the award in the manner in which he ought to

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have. He has substituted his reasonings and construction of the contract for that of the Arbitral Tribunal which is not permissible. The learned Judge has not even held that the reasoning adopted by the Arbitral Tribunal is absurd or perverse. The learned Judge has in fact not even referred to the award and to the reasoning adopted by the Arbitral Tribunal. We are unable to agree with the learned Judge that the claim is beyond the jurisdiction of the arbitrator and that the award is required to be set-aside.

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Mr.Patil, the learned counsel appearing on behalf of the respondent stated that the appellant had itself thought it necessary to follow the procedure under clause 56 afresh. In this regard, he contended that the appellant had in fact once again followed the procedure under clause 56.

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Even assuming that the appellant had done so, it would make no difference in view of our findings that the appellant was not bound to do so.

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In the alternative, Mr.Patil submitted that the reference could have been made only to the extent originally claimed after following the procedure under clause 56 viz. Rs.95,18,165/- and that the balance claim of Rs.27,58,571/- (Rs.1,22,76,736.00 – Rs.95,18,165.00) could not be referred to arbitration.

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This aspect was not raised before the Arbitral Tribunal. It

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was not raised before the learned single Judge. It cannot be raised in the appeal.

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In the circumstances, the impugned order is set aside. As the learned Judge had not dealt with the other objections to the award, the learned single Judge shall decide the arbitration petition in respect of the other objections taken by the respondent. Needless to clarify that the point that has been dealt with by us in this judgment has attained finality and it will not be open to the respondent to raise the same contentions before the learned single Judge.

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No order as to costs.

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(A.K. MENON, J.) (S.J. VAZIFDAR, J.)

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M/S. Valecha Engineering Ltd. v. the Chief Engineer Irrigation Department

Case brief

What is this about?

What did the court decide?

M/S. Valecha Engineering Ltd. v. the Chief Engineer Irrigation Department

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Statutes considered

Parties & counsel

Coram

Case details

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