Partly allowed

Union of India v. M/S Rnr Constructions

Karnataka HC10 Nov 2021COMAP/5/2021

Case brief

AI extract

What is this about?

The High Court of Karnataka allowed an appeal filed by the appellant against a Commercial Court judgment that dismissed a Section 34 application challenging an arbitrator's award. The High Court set aside the impugned order because the lower court failed to provide reasoned findings on the contentions regarding jurisdiction and public policy, citing precedents requiring explicit reasons in such ap

What did the court decide?

The impugned judgment and decree dated 05.09.2020 were set aside. The matter was remanded to the Commercial Court to frame specific points and decide with valid reasons.

Union of India Vs M/S Rnr Constructions — Arbitration | Karnataka HC (2021)

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IN THE HIGH COURT OF KARNATAKA AT BENGALURU

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DATED THIS THE 10^th DAY OF NOVEMBER, 2021

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PRESENT

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THE HON’BLE MR. JUSTICE ALOK ARADHE

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AND

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THE HON’BLE MR. JUSTICE ANANT RAMANATH HEGDE

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COMAP NO.5/2021

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BETWEEN:

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UNION OF INDIA No.2, D C AREA, MES ROAD, YESHWANTHPURA POST BENGALURU - 560 022 REP. BY ITS GARRISON ENGINEER (AF) MAJOR ANAND KUMAR TIWARI AGED ABOUT 34 YEARS MARATHAHALLI, KEMPAPURA, YEMALUR POST BENGALURU - 560 037. ... APPELLANT

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(BY SRI.UNNIKRISHNAN M, ADV.)

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AND:

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M/S RNR CONSTRUCTIONS A PARTNERSHIP FIRM HAVING ITS REGISTERED OFFICE AT 1^ST FLOOR, NO.17, 4^TH MAIN, 7^TH CROSS, MALLESWARAM,

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BENGALURU - 560 003.

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REPTD. BY ITS MANAGING PARTNER MR RAMAN N V

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SRI SATISH CHANDER SOLE ARBITRATOR ADDITIONAL DIRECTOR GENERAL (RETIRED), A1,601, WINDSOR AVENUE NEAR RUBY HALL CLINIC WANOWRIE, PUNE - 411 022.

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... RESPONDENTS

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(BY SRI. A MURALI & ANDRE PETER, ADV FOR R1, V/O DATED 15.2.21 NOTICE TO R.2 DISPENSED WITH)

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THIS APPEAL IS FILED UNDER SECTION 13(1)(A) OF THE COMMERCIAL COURTS ACT TO SET ASIDE THE JUDGEMENT AND DECREE DATED 05.09.2020 IN COM.AS. NO.102/2018 PASED BY THE HON'BLE LXXXIII ADDITIONAL CITY CIVIL & SESSIONS JUDGE AT BENGALURU(CH-84), ANNEXURE - B DISMISSING THE APPEAL FILED BY THE APPELLANT UNDER SECTION 34 OF THE ARBITRATION AND CONCILIATON ACT, 1996 AND ETC.

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THIS APPEAL COMING ON FOR FURTHER HEARING THIS DAY, ANANT RAMANATH HEGDE J., DELIVERED THE FOLLOWING:

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J U D G M E N T

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Instant appeal is filed invoking Section 34 of the Arbitration and Conciliation Act, 1996 (for short 'Act of

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1996') challenging the judgment and decree dated 05.09.2020 passed by the LXXXIII Additional City Civil & Sessions Judge at Bengaluru (CH-84) wherein the Commercial Court has rejected application under Section 34 of the Act, 1996 filed by the present appellant.

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Brief facts of the case can be summerized as under:

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Appellant and the first respondent entered into a contract. First respondent was required to carry out certain construction work specified in the said contract. The contract also provided for a dispute resolution mechanism in the event of any dispute in relation to the work specified in the contract. The time was also stipulated for completion of the construction work. The work was not completed within the stipulated time. The first respondent sought extension on eight occasions.

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The extension was granted by the appellant without

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demur. These facts are not in dispute.

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The first respondent claims that on account of delay in carrying out work, which according to the first respondent was for the reasons beyond his control, the first respondent had to incur additional expenses for completing the work. Since demand of first respondent for payment of additional expenses incurred by him was not met, the first respondent sought appointment of arbitrator and matter was referred to arbitration.

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Second respondent- arbitrator after hearing both the parties, passed an award on 28.03.2016 and directed the present appellant to pay sum of Rs.1,10,36,425/- to the first respondent of this petition along with interest @ 12% p.a.

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This award passed in proceeding COM.A.S.No.102/2018 was questioned by the appellant

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by invoking Section 34 of the Act of 1996 before the Commercial Court LXXXIII Additional City Civil and Sessions judge at Bengaluru. The appellant in the said proceeding under Section 34 of the Act of 1996 raised several contentions questioning the award. Two main contentions raised by the appellant, relevant for consideration in this case and which are the specified grounds under Section 34(2) (a) of the Act of 1996 are,

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(a) that arbitrator has exceeded his jurisdiction in awarding the compensation in favour of the 1^st respondent;

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(b) that the award passed by the arbitrator is in conflict with the public policy of India.

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The Commercial Court after hearing both the

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parties in terms of the impugned judgment dated 05.09.2020 has dismissed the application.

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Finding fault with the said judgment, appellant

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is before this Court in the form of instant appeal.

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Heard the learned counsels for both the

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parties.

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After hearing both the counsels, the question that needs to be answered by this Court is, "Whether the Commercial Court has correctly dealt with the contentions raised by the plaintiff in Com.A.S. No.102/2018?"

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The counsel for the appellant would submit that though the appellant has raised the contention that the arbitrator has exceeded his jurisdiction in passing the award and the award is in conflict with public policy of India, the Commercial Court has not applied its mind to the said contentions and without assigning reasons has come to the conclusion that there is no scope to interfere with the award passed by the arbitrator.

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The attention of this Court is drawn to the

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impugned judgment. Though the judgment runs into 24 pages comprising 21 distinct paragraphs, the reasons for the judgment are said to have been provided from paragraph No. 9 onwards. The reading of paragraphs 9 to 16 of the impugned judgment would indicate that the learned Commercial Judge has reiterated the facts found in paragraphs No.2 to 8 of the impugned judgment. In paragraph No.17 a reference has been made to the contention relating to award being in conflict with public policy of India, which is a ground raised by the appellant. However, in the same paragraph the learned Judge without assigning any reasons has come to the conclusion that the award is not in conflict with public policy.

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In paragraph No.18 again a reference has been made to the contention relating to violation of

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public policy and contention relating to arbitrator exceeding his jurisdiction. Again, in the said paragraph there is a conclusion to the effect that the award is not in conflict with public policy and arbitrator has not exceeded his jurisdiction. The reasonings for such conclusion are not forth coming in the judgment.

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The learned counsel appearing for the first respondent would support the impugned judgment and has urged that the onus of establishing the ground of award being opposed to the public policy and the arbitrator exceeding the jurisdiction is on the appellant and same having not been established by the appellant, the learned Commercial Judge is justified in dismissing the application. The learned advocate for the first respondent would further contend that the scope for interference under Section 34 of Act of 1996 is limited

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and no ground is made out to allow the application filed by the appellant.

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Learned counsel for the first respondent also urged that the arbitrator has taken into consideration the factor for delay in executing the construction work and has come to the conclusion that delay in completing the construction work is not an account of the fault of first respondent. Thus, he urges the Court to confirm the impugned judgment and decree.

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There is no dispute that the scope for interference under Section 34 of Act of 1996 is limited. The position of law in this regard is well settled. The challenge under Section 34 of the Act of 1996 is available only in respect of grounds enumerated in the said section. Thus, while exercising jurisdiction under Section 34 of the Act of 1996, the first thing that is required to be considered by the Court is to consider

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whether grounds urged in the application fall within the ambit of Section 34 of Act of 1996. If so, the next question that is required to be considered is whether the applicant is able to establish any of the grounds available under Section 34 of the Act of 1996. If, the grounds urged in application under Section 34 do not fall within the ambit of Section 34 of Act of 1996, then there is no scope for any interference in the award passed by the arbitrator. The Court has to assign reasons to come to the conclusion that grounds urged in the application are not available under Section 34 of the Act of 1996.

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If the grounds urged in the application attract Section 34 of Act of 1996, then the Court is required to consider whether the grounds are established on the basis of materials available on record.

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At this juncture, it is useful to refer to the judgments touching the question involved in the case.

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This Court in the matter of UNION OF INDIA vs M/S. WARSAW ENGINEERS decided on 17.04.2021 in COMAP No.25 of 2021 had an occasion to consider similar question and after having dealt with the provision of law and the judgment of the Hon'ble Apex Court of India in DYNA TECHNOLOGIES PRIVATE

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LIMITED vs CROMPTION GREAVES LIMITED reported in 2019(20) SCC 1 has held that it is incumbent upon the Court dealing with an application under Section 34 of Act of 1996 to record the reasons for deciding the case under Section 34 of the Act of 1996. The relevant paragraph No.16 in the matter of

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UNION OF INDIA vs M/S. WARSAW ENGINEERS

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cited supra is extracted hereunder:

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16. Thus, while dealing with the petition under Section 34 of the said Act of 1996 for arriving at a correct conclusion, the Judicial Officer as stated earlier, must precisely record the submissions canvassed in support of the petition. It is not necessary to reproduce the submissions verbatim. The

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substance of the grounds urged must be briefly recorded. As a remedy of an appeal is available against the judgment and order in a petition under Section 34 of the said Act of 1996, recording of the submissions made across the Bar helps the Appellate Court to decide the appeal properly. If the submissions are not properly recorded, it gives a scope to an argument that a particular submission was made before the concerned Court but the same has not been considered. If such submissions are made as per the settled law, the Appellate Court has to relegate the aggrieved party to the same Court for making any appropriate application as the Appellate Court cannot decide what transpired before the Court which has passed the impugned order".

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This Court in the matter of Larsen and Toubro Limited Vs. Geodesic Techniques Private

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Limited involving similar question has emphasized the importance of the reasoned order in judicial proceedings . Paragraph No.11 of the said judgment which is extracted hereunder:

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11. It is well settled in law that reason is the heartbeat of every conclusion and absence of reasons renders the orders

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lifeless. The requirement of assigning reason ensures transparency and fairness in decision making. The reasons act as a link between the mind of the decision maker and the issue, which arises for determination. The Supreme Court has emphasized the requirement of new recording of reasons in support of the conclusions in ' BHAGAR RAJA VS. UNION OF INDIA AND OTHERS', AIR 1967 SC 1606, and it has been held that reasons recorded in support of the conclusions must be explicit and intelligible. It has further been held that reasons have to be proper, relevant, germane and should dealt with arguments advanced, points raised and issues involved. The requirement of assigning the reasons also helps the appellate court in ascertaining as to the grounds, which weighed with the authority in coming to a particular conclusion. (See: 'VISHNU DEV SHARMA VS. STATEOF U.P. & ORS', (2008) 3 SCC 172).

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Having regard to the ratio laid down in the aforementioned judgments, it is apparent that the Commercial Court though has come to the conclusion that arbitrator has not exceeded his jurisdiction and award is not in conflict with public policy. Such

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conclusion is not supported by any reasoning. Thus, impugned order insofar as the above referred two contentions is virtually not a speaking order.

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Thus, the impugned judgment and decree does not pass the test laid down in terms of the Judgments referred above. The learned commercial Court has not adverted its mind to the contention raised by the appellant in a way it should have been. Under the circumstances, this Court is of the opinion that the appeal is required to be allowed in part and requires to be remitted to the trial Court with a direction to decide the case in the light of the guidelines laid down in the aforementioned judgments. The trial Court is directed to frame two points for consideration as under and to give finding on these two points with valid reasons:

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(a) Whether the plaintiff establishes that the arbitrator has exceeded its

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jurisdiction in passing the award in favour of first respondent.

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(b) Whether the plaintiff further establishes that the award of the learned arbitrator is in conflict to the public policy of India in terms of Section 34 (2)(A) OF THE ACT, 1996.

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Accordingly, the appeal is allowed in part

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and the judgment and decree dated 05.09.2020 passed by LXXXIII Additional City Civil & Sessions Judge at Bengaluru in Com.A.S.No.102/2018 is set-aside and the matter is remanded back to the LXXXIII Additional City Civil & Sessions Judge at Bengaluru to decide the case in the light of directions made above.

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