Dismissed

Jammu Development Authority v. Saral Sugam Sewa Society

J&K HC3 Nov 2021AA/13/2013

Case brief

AI extract

What is this about?

Arbitrator awarded damages to a respondent society against JDA for breach of a sanitation contract. JDA challenged the award claiming no earlier claim for damages. The court held the High Court does not sit in appeal and found no patent illegality, perversity, or error of law, dismissing the application.

What did the court decide?

The arbitration application seeking to set aside the award dated 02.01.2013 was dismissed.

Jammu Development Authority Vs Saral Sugam Sewa Society — Arbitration | J&K HC (2021)

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HIGH COURT OF JAMMU & KASHMIR AND LADAKH AT JAMMU

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Reserved on: 12.10.2021 Pronounced on: 03.11.2021

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AA No.13/2013

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Jammu Development Authority

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…..Appellant/Petitioner

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Through: Mr. Adarsh Sharma, Advocate

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Versus

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Saral Sugam Sewa Society

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.…. Respondent(s)

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Through: Mr. U.K. Jalali, Sr. Advocate with Ms Shivani Jalali, Advocate.

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Coram: HON’BLE MR. JUSTICE TASHI RABSTAN, JUDGE

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JUDGMENT

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1. This arbitration application, filed by the Jammu Development Authority, is directed against the award dated 02.01.2013 passed by the learned sole arbitrator, whereby the learned arbitrator has awarded an amount of Rs.34,23,473/along with 9% interest with effect from 02.05.2012, when the arbitrator entered upon the reference till the realization of the awarded amount in favour of respondent-society and against the Jammu Development Authority.

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2. The facts-in-short, as gathered from the file, are that the respondentsociety being an NGO entered into an agreement with JDA on 15.12.2008 for sanitation, operation and maintenance of public toilet blocks owned and constructed by the JDA at as many as 28 sites within the Municipality of Jammu, out of which six sites were to be maintained free of cost. Possession of these sites, as claimed by the respondent-society, was given on 22.12.2008. Before entering

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into a contract with the respondent-society, the JDA vide order dated 15.12.2008 terminated the contract with M/s. Sulabh International which was earlier maintaining 22 toilet blocks, out of these 28 toilet blocks. Against the said order, M/s. Sulabh International filed two writ petitions before this Court and a coordinate Bench of this court vide interim order dated 23.12.2008 stayed the operation of communication dated 15.12.2008 in OWP No.1018/2008. It is claimed that thereafter M/s. Sulabh International in connivance with JDA forcefully dispossessed the respondent-society from 22 toilet blocks, except for six sites where the services were being given free of cost by the respondent-society. The respondent-society continued to maintain six free sites till 26.04.2010 when the same were allotted to one M/s. Kashmira Singh & Sons, even when the agreement between the respondent-society and JDA for the free sites was operational. Thereafter, the JDA also terminated the contract of petitioner vide order dated 09.09.2010 and on the same very day entered into an agreement with M/s. Sulabh International for maintenance of these 22 toilet blocks.

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3. Aggrieved of the same, the respondent-society filed OWP No.1154/2010 challenging the order of termination and this Court vide order dated 18.04.2012 referred the matter to arbitration. Accordingly, both the parties participated in the arbitration proceedings, filed their claims and counter claims and also led evidence. The sole arbitrator after completion of arbitration proceedings passed the award dated 02.01.2013 in favour of respondent-society and against the JDA. Against the said award, the JDA has filed the present arbitration application seeking setting aside of the award.

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4. The main ground of challenge to the impugned award is that the respondent-society at no point of time either before this Court in OWP No.1154/2010 or before the learned arbitrator ever projected or claimed any

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damages, rather the plain case of respondent-society was that it was entitled to work as per the memorandum of understanding entered upon between the JDA and the respondent-society, and that the prayer of respondent-society before this Court as well as before the learned arbitrator was to seek quashment of the order whereby the contract of respondent-society was terminated and also quashment of memorandum of understanding entered upon between M/s. Sulabh International and the JDA. It is pleaded that only at the fag end of the proceedings when the matter was being repeatedly fixed for final arguments that the respondent-society for the first time claimed damages when it was allowed to file an additional affidavit. It is also pleaded that the respondent-society vide communication dated 09.03.2009 showed its inability to further continue with the operation, management and maintenance of the sites which were handed over to it for operation. Further, it is pleaded that the award is in conflict with the public policy of the State.

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5. I have heard learned counsel appearing for the parties, considered their respective contentions, gone through the file as well as the award dated 02.01.2013 passed by the learned arbitrator as also the record produced by the JDA.

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6. A perusal of the application filed under Section 34 of the J&K Arbitration and Conciliation Act reveals that the petitioner-JDA nowhere in the application has objected to the passing of award amounting to Rs.34,23,473/- along with 9% interest or that the amount awarded by the learned arbitrator is exorbitant; meaning thereby the petitioner-JDA has actually accepted the amount of award.

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7. However, a perusal of the instant application/petition reveals that the main ground of challenge to the impugned award is that since the respondentsociety at no point of time either before this Court in OWP No.1154/2010 or before

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the learned arbitrator ever projected or claimed any damages, as such passing of the impugned award on such a count is required to be set aside.

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8. Now the question arises for consideration is: whether the learned arbitrator was justified in allowing damages by way of impugned award when the respondent-society claimed damages only at the fag end of the proceedings, that too when the matter had already been fixed for final arguments. And, also, whether the respondent-society is entitled to claim damages/compensation.

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9. Admittedly, a perusal of the record so produced reveals that at the fag end of the proceedings when the matter was being repeatedly fixed for final arguments before the learned arbitrator that the respondent-society for the first time claimed damages/compensation by way of filing evidence affidavit dated 01.10.2012 before the learned arbitrator for the heavy losses incurred on account of breach of contract dated 15.12.2008. However, order dated 01.10.2012 passed by the learned arbitrator reveals that the petitioner-JDA did not object to the filing of evidence affidavit by the respondent-society claiming damages/compensation at the fag end of the proceedings, rather the petitioner-JDA opted to file reply affidavit in rebuttal; meaning thereby the petitioner-JDA accepted the filing of evidence affidavit by the respondent-society claiming damages.

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10. Further, the petitioner-JDA itself in paragraph (i), heading background, of the instant application has admitted that as per memorandum of understanding, the respondent-society was required to operate, manage and maintain 28 public toilet blocks for a period of five years to be commenced from 22.12.2008. Respondent-society also claimed before the learned arbitrator that possession of these sites was given to it on 22.12.2008; meaning thereby the possession of these 28 toilet blocks were actually given to respondent-society by the petitioner-JDA on 22.12.2008. However, the grievance of respondent-society is

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that after it was put in possession of these 28 public toilet blocks, one M/s. Sulabh International in connivance with JDA forcefully dispossessed the respondentsociety from 22 toilet blocks, except for six sites where the services were being given free of cost by the respondent-society.

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11. The grievance of petitioner is that after it was put in possession of these 28 toilet blocks, it was forcefully dispossessed from 22 toilet blocks by M/s. Sulab International in connivance with JDA after passing of stay order dated 23.12.2008 in OWP No.1018/2008 and in view of order dated 30.12.2008 in OWP No.1039/2008 filed by M/s. Sulabh International. The further grievance of respondent-society is that stay order dated 23.12.2008 was only with respect to toilet blocks at General Bus Stand Jammu, whereas interim order dated 30.12.2008 was only a direction to petitioner-JDA not to withdraw works of all sites from M/s. Sulabh International without adopting due course of law. However, the claim of respondent-society is that it was forcefully dispossessed from 22 toilet blocks by M/s. Sulab International in connivance with petitioner-JDA within days after it was put in possession of 28 toilet blocks on 22.12.2008 under the pretext of court orders; except for six toilet blocks which were to be maintained free of cost.

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12. Admittedly, the respondent-society was put in possession of toilet blocks-in-question on 22.12.2008 and the petitioner-JDA terminated its contract on 09.09.2010 when the same was allotted to M/s. Sulabh International vide communication No.558-59/JDA/General dated 09.09.2010 for maintenance of 22 toilet blocks. In paragraph (iii), heading background, of the instant petition/application, the petitioner-JDA has specifically averred that the respondent-society badly failed to maintain all the public toilets allotted and those handed over to it for maintenance, therefore, as averred in paragraph (iv), heading background, the petitioner-JDA had left with no alternative except to cancel the

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arrangement/MOU made with the respondent-society and revive the arrangement with M/s. Sulabh International vide communication dated 09.09.2010; meaning thereby, as per petitioner-JDA, for more than twenty months, i.e., since 22.12.2008 upto 09.09.2010, the 22 toilet blocks-in-question remained in possession of respondent-society and since it had badly failed to maintain the same, as such the contract came to be cancelled vide communication dated 09.09.2010. In support of these averments, the petitioner-JDA has also annexed an affidavit of Vice Chairman, JDA.

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13. However, in paragraph (F) of grounds of the instant petition/application, the averments made is “that the award/order impugned is liable to be quashed on the ground that admittedly all the sites remained with M/s. Sulabh International except allegedly six sites…”; meaning thereby the petitionerJDA has itself admitted that the 22 toilet blocks-in-question always remained with M/s. Sulabh International except for just few days. The petitioner-JDA has made two contradictory statements in the same petition/application filed under Section 34 of J&K Arbitration & Conciliation Act which is supported by the affidavit of Vice Chairman of JDA. Thus, the Vice Chairman concerned has committed the offence of perjury.

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14. Not only this, even in paragraph (2) of parawise reply of reply affidavit filed by Sarita Chouhan, Vice Chairperson, JDA, Jammu, it has been deposed that the petitioner-JDA allotted the contract to respondent-society, however, M/s. Sulabh International, social service organization, approached this Court and obtained the stay order and continued with the operation of the toilets; meaning thereby the petitioner-JDA has again itself admitted on oath that it was M/s. Sulabh International who all along had been maintaining the toilet blocks-inquestion even after the same was allotted to respondent-society. Once as per own

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admission of petitioner-JDA that M/s. Sulabh International had always been maintaining the 22 toilet blocks-in-question, then how could petitioner-society could be said to have badly failed to maintain 22 toilets blocks in question. Thus, here also the Vice Chairman concerned has committed the offence of perjury. It seems that the petitioner-JDA is trying to mislead the Court.

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15. As regards the contention of petitioner-JDA that the respondentsociety itself vide communication dated 09.03.2009 showed its inability to further continue with the operation, management and maintenance of the sites which were handed over to it for operation, it is to be seen here that the respondent-society was making a reference of six toilet blocks which were to be maintained free of costs, however, under the garb of this communication, the petitioner-JDA has been very cleverly trying to give an impression that the respondent-society was talking about those 22 toilet blocks which actually always remained under the possession of M/s. Sulabh International even after the same were allotted to respondent-society, as admitted by the petitioner-JDA itself. As regards these six toilets which were to be maintained free of costs, the petitioner-JDA has admitted in paragraph-4 of parawise reply of objections filed in response to OWP No.1154/2010 that the respondent-society had been properly maintaining those toilet blocks at General Bus Stand, Jammu in terms of paragraph-5 of Memorandum of Understanding dated 15.12.2008.

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16. Further, while allotting the contract of 28 toilet blocks in favour of respondent-society in terms of memorandum of understanding dated 15.12.2008, the stand of petitioner-JDA was that there were number of complaints against M/s. Sulabh International regarding non-maintenance/improper sanitation of toilets/urinals as well as overcharging by its staff and the same also surfaced in the media. The same was also the stand of petitioner-JDA in OWP Nos.1018/2008 and

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1039/2008. Even respondent-society had also placed on record before the learned Arbitrator a copy of letter dated 04.12.2010 by virtue of which Rs.20,000/- fine was imposed upon M/s. Sulabh International for not properly maintaining the sanitations at various sites; meaning thereby it was not the respondent-society rather it was M/s. Sulabh International who was not properly maintaining the toilet blocks properly. Therefore, when M/s. Sulabh International withdrew both the writ petitions on 27.08.2010 and this Court also vacated the interim orders, the petitioner-JDA in order to show its fairness was required to hand over the possession of 22 toilet blocks-in-question in favour of respondent-society in terms of memorandum of understanding dated 15.12.2008. But, instead, the petitionerJDA terminated the contract of respondent-society and allotted these 22 toilet blocks-in-question in favour of M/s. Sulabh International, which shows that both were hand in glove with each other.

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17. Further, the petitioner has also failed to show that the award of the learned arbitrator suffered from perversity or there was an error of law or that the arbitrator has otherwise mis-conducted himself. Petitioner was not able to point out any error apparent on the face of record. Learned Arbitrator has rightly appreciated the documents on record; terms and conditions of the contract in a perspective manner and provisions of the Arbitration and Conciliation Act. In the absence of any patent illegality being pointed out there was no scope for interference. There was no material on record to hold that by granting the claim as made, the award as passed was against the public policy of India. Each claim as made was individually examined and the findings recorded by the Arbitrator are confirmed.

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18. In this regard a useful reference can be made to the following observations of the Apex Court in paragraphs 11 and 12 of the decision of MMTC Ltd. vs. Vedanta Ltd. ( 2019 ) 4 SCC 163:

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“11. As far as Section 34 is concerned, the position is wellsettled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided Under Section 34(2)(b)(ii), i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.

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It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b) (ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA, (2015) 3 SCC 49). Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445; and McDermott International v. Burn Standard Co.Ltd., (2006) 11 SCC 181).

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It is relevant to note that after the 2015 amendments to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, Sub-section (2A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

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As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the Court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the Court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the Court under Section 34 and by the Court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.”

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In NTPC vs M/s Deconar Services Pvt. Ltd., Civil Appeal No.6483/2014 decided on 04.03.2021 , a three judge bench of the Supreme Court has, in line with the settled principle of minimum interference in arbitral awards, inter alia reiterated that in order to succeed in a challenge against an arbitral award,

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the party challenging the award must show that the arbitrator’s award suffered from perversity; or an error of law; or that the arbitrator had otherwise misconducted himself. The Court highlighted that merely showing that there is another reasonable interpretation or possible view on the basis of the material on record is insufficient to allow interference by the Court.

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19. Viewed thus, I do not find any merit in the present appeal and the same is, accordingly, dismissed along with connected application(s).

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20. Registry to send back the record against proper receipt.

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Jammu: 03.11.2021

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(Tashi Rabstan) Judge

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(Anil Sanhotra)

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Whether the order is reportable ? Yes Whether the order is speaking ? Yes