Full Judgment Text
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PETITIONER:
STATE OF ANNDHRA PRADESH
Vs.
RESPONDENT:
CHANDRASEKHARA REDDY & ORS.
DATE OF JUDGMENT: 22/09/1998
BENCH:
S.B. MAJUMDAR, M. JAGANNADHA RAO.
ACT:
HEADNOTE:
JUDGMENT:
J U D G M E N T
S.B. Majumdar. J :
Leave granted.
These appeals by special leave are preferred by the
State of Andhra Pradesh being aggrieved by a common judgment
and order dated 08.04.1996 of the High Court of Andhra
Pradesh in appeal against order of the Trial Court as well
as in companion civil revision petition arising out of the
very same judgment of the Trial Court. The question in
controversy between the parties in these appeals which were
finally heard by consent of learned counsel for the parties
is to the following effect :-
Whether the award of the arbitrator to the tune of
Rs. 38,32,697/- with 18% interest per annum from the date
of reference i.e. 27.06.1985 till payment in favor of
Respondent No.1 which was made rule of the court, was
legally justified or not.
A few relevant facts leading to these appeals
deserve to be noted at the outset. Respondent No.1
contractor had executed a works contract assigned to him for
laying distribution pipe to 32 fluoride affected villages in
Prakasam District of Andra Preadesh. A per the said
agreement dated 30.07.1980 executed by the executive
Engineer on behalf of the appellant-State granting the said
contract to Respondent No.1, the initial value of the work
was Rs. 8,52,335.66. The site in question was handed over
to Respondent No.1 contractor on 01.08.1980. The period of
work was twelve months. Some dispute arose between the
appellant-State on the one hand and Respondent No.1 on the
other. As there was an arbitration clause in the contract
for referring the dispute to arbitration for resolving the
same, the said clause got invoked between the parties. The
contention of Respondent No.1 Contractor was that the sole
arbitrator, as provided in the articles of agreement, being
the Superintending Engineer of Panchayat Raj, Hyderabad,
N.A.P. Guntur, could not act as arbitrator as he was
directly concerned with the contract work, he was required
to be substituted by some other arbitrator. Accordingly,
Respondent No.1 moved an application being C.P. No. 56 of
1984 under Section 8 of the Arbitration Act, 1940
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(hereinafter referred to a ’the Act) in the Court of II
Additional Judge, City Civil Court, Hyderabad for
substituting. The said petition was decided by the learned
Judge after hearing the parties by his order dated
25.02.1985. In place of sole arbitrator mentioned in the
contract one Shri T. Nabi Saheb, Superintending Engineer,
Retired. Ramchandranagar, Ananthapur, (Respondent No.2
herein) was appointed as soil arbitrator for adjudication of
disputes that had arisen between Respondent No.1 (Petitioner
before the court) and the appellant-State (first respondent
before the court) in respect of agreement dated 30.07.1980
relating to the work i.e. providing distribution pipe lines
to 32 fluoride affected villages in Prakasam District. The
arbitrator was directed to sign a copy of the minutes of the
order and enter upon reference in accordance with the
agreement and to make the award within four months from the
date of entering upon the reference pursuant to the said
agreement between the parties. It is not in dispute between
the parties that the said decision has become final.
Pursuant to the aforesaid order of the Trial Court,
the arbitrator entered upon the reference, heard the parties
and adjudicated upon the dispute by a non-speaking award and
on various heads submitted before him by Respondent No.1 for
adjudication, the aforesaid award of Rs. 38,32,697/- with
interest was passed by him on 25.10.1985. The said award
was submitted by Respondent No.1 for making it a rule of the
court by filing O.S.No.1420 of 1985. A notice was issued to
the appellant State authorities about the said filing of the
award by the Trial Court. The appellant-State filed O.P.
No.34 of 1988 on 26.02.1980 for setting award on various
grounds raised therein. That O.P. was moved under Section
30 of the Act raising diverse objections to the award. The
Trial Court took the view that the said application under
Section 30 of the Act raising objections was time-barred and
as there was no application for condonation of delay, the
objections could not be entertained on merits. However,
they were gone into on merits by treating them as a counter
of application of Respondent No. 1 which was registered as
O.S. No.35 of 1985 under which the award was sought to be
made the rule of the court. The Trail Court considered the
objections on merits and took the view that they were not
sustainable in law. Resultantly, the Trial Court made the
award rule of the court by its order dated 27.02.1989.
Against the said order of the Trail Court, as noted earlier,
the appellant-State filed an appeal from order as well as
civil revision application challenging the order of the
Trial Court making the ward rule of the court and also
rejecting the objections filed by the State as barred by
limitation. As both the appeal from order and by
limitation. As both the appeal from order and civil
revision petition raised common contentions, they were heard
together by a Division Bench of the High Court. The High
Court came to the conclusion that there was no substance in
either of them and consequently dismissed both of them by
its impugned common order dated 08.04.1996 and thus
confirmed the order of the Trail Court making the award rule
of the court. As noted earlier, it is the aforesaid common
order of the High Court that has resulted in these appeals.
RIVAL CONTENTION
Shri A. Raghuvir, learned Senior Counsel appearing
for the appellant-State raised two contentions in support of
these appeals. He submitted that the learned Trial Judge as
well as the High Court patently erred in taking the view
that the objections under Section 30 of the Act were barred
by 62 days. That in fact, the delay was only of 8 days,
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which deserved to be condoned in the interest of justice as
the advocate to whom the papers were entrusted by the
State-authorities for filing objections before the Trial
Court under Section 30 of the Act had suffered from a family
bereavement which required him to go out for one week. The
moment he came back, the objectors were filed. The delay in
filing the objections was, therefore, required to be
condoned in the interest of justice and that it was not
necessary that a petition to condone the delay was required
to be filed, as wrongly assumed by the Trial Court. He,
therefore, submitted may be remanded to Trail Court for
considering objections under Section 30 of the Act on
merits. He next contended that in any case the award was a
nullity being without jurisdiction as the procedure required
by preliminary specification no.73 which was binding on the
parties was not followed in the present case. That after
the order of the Trial Court substituting the arbicrator,
Respondent No.1 was required to move the Superintending
Engineer of the area who was in charge of the work in
question for referring the dispute to the newly appointed
arbitrator and till that was come the new arbitrator could
not assume jurisdiction to adjudicate upon the reference and
hence the arbitration proceedings before him and the final
award passed by him were nullities.
Shri P.P. Rao, learned Senior Counsel appearing for
the contesting respondent, on the other hand, submitted that
the question of condonation of delay in filing objections
under Section 30 of the Act does not survive at this stage
as the Trial Court had considered the objections on merits
by treating them as written statement to the suit files by
the respondent contractor for making the award rule of the
court.All these objections were found unsustainable on
merits both by the Trial Court as well as by the High Court.
So far as the second contention of the learned Senior
Counsel for the appellant-State is concerned, it was
submitted by Shri Rao for Respondent No.1 that no such
contention was ever canvassed before the arbitrator or even
raised in any objections filed under Section 30 of the Act,
not was such a contention placed before the Trail Court or
even before the High Court. That this contention raised a
highly disputed question of fact whether the Superintending
Engineer, Panchayat Raj, Ongile, could ever be approached by
Respondent No.1 - Contractor as per preliminary
specification no. 73 as according to him the concerned
Superintending Engineer was functioning at Guntur and that
the said Supterintending Engineer who was the sole
arbitrator as per the terms of the contract was supersended
and substituted by Shri Nabi Saheb as per the order dated
27.02.1989 passed by the Trail Court which had become final
between the parties. In any case the said decision of the
court itself directed the arbitrator to enter upon the
reference and, therefore, such a technical contention could
not be entertained for the first time in these appeals.
In view of the aforesaid rival contentions, the
following points arise for our consideration :-
(1)Whether the delay in filing objections under
Section 30 of the Act is required to be condoned in the
interest of justice and the proceedings are required to be
remanded to the Trail Court for fresh decision;
(2)Whether the arbitration award was without
jurisdiction and nullity in the absence of any reference by
the Superintending Engineer, Ongole, to the substituted
arbitrator Shri Nabi Saheb.
We shall proceed to deal with these points seriatim
:-
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POINT NO. 1
It is true that the learned Trial Judge held that
objections under Section 30 of the Act as moved on behalf of
the appellant-State were barred by 62 days. The said
finding was arrived at by the Trail Court on the ground that
the notice under Section 14(2) of the Act served on the
appellant-State on 18.12.1985 while the petition being
O.P.No.34 of 1988 was. However, Shri A. Raghuvir, learned
Senior Counsel for the appellant-State, vehemently contended
that there is a patent error in the aforesaid finding of the
learned Trial Judge. That in fact, the notice of the court
was served on 18.01.1986 on the Superintending Engineer,
Panchayat Raj, N.A.P Circle Ongole, Prakasam District, as
stated by him in his affidavit before the High Court and
accordingly the limitation for filling the objections would
expire on 17.02.1986. That the papers for filing Srinivasa
Rao s/o Shri Ranga Rao by the deponent within time. That
objections raised in O.P were within time but because the
learned advocate had to leave immediately from Hyderabad to
Bangalore as his close relative had expired, the O.P. could
be filed only on 25.02.1986 when the advocate returned to
Hyderabad on 24.02.1986. That is mentioned in the affidavit
of Shri L.K. Srinivasa Rao which was filed in the High
Court. Consequently, there was eight day’ delay in filing
objections which should have been condoned in the interest
of justice. We would have been required to closely examine
this contention to find out as to whether the delay was of
62 days or eight days. In either case, we would have been
inclined to condone the delay in the interest of justice as
a huge amount of public money is involved. It has to be
kept in view that though originally the claim of Respondent
No.1 was confined at that stage only to certain heads of
dispute which totally amounted to Rs.7,55,760/-, as per the
two letters written by the claimant to the Executive
Engineer dated 22.10.1983 and 24.10.1983, the claim before
the arbitrator got highly inflated to Rs.46,93,858/- and
towards the said claim ultimately Rs.38,34,097/- were
awarded by the arbitrator.
However, on the peculiar facts of this case, it is
not necessary for us to consider this question any further.
The reason is obvious. The learned Trial Judge in his
judgment while making the award rule of the court has
clearly held that through the objections under Section 30 of
the Act were barred by time, he thought it fir to consider
the question whether the award was to be set aside on any of
the grounds under Section 30 of the Act and having so
observed the learned judge proceeded to consider the
objections to the award on merits in details. Reasoning of
the Trail Court Judge is found in paragraph 6 of his
judgement wherein the objections were meticulously
considered and ultimately it was held that no doubt it
appeared that the contractor had made excessive claim before
the arbitrator but there was no material on record to point
out that the petitioner (present appellant) had taken the
same plea before the arbitrator. There was also no record
to show that they had brought the matter into consideration
of the learned arbitrator. The learned Judge also observed
that the award was a non-sperned one and on merits it could
not be interferred with by the court by sitting in appeal
over the findings of the arbitrator. The aforesaid
reasoning adopted by the learned Judge is well sustained in
the present case. When we turn to objections filed by the
appellant-State before the arbitrator, it become at once
clear that the appellant-State through it fit to join issue
on merits of the claim before the arbitrator. No argument
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was placed before the arbitrator to the effect that the
claim put forward before the arbitrator by the contractor
was in excess of the original claim before the arbitrator
and, therefore, could not be adjudicated upon. On the
contrary, in the counter filed on behalf of the
appellant-State before the arbitrator it was stated that
such claims that were required to be adjudicated upon by the
arbitrator were according to the appellant not justified.
The arbitrator considered those claims with reference to
their various sub heads and out of the total claim of Rs.
46,93,858/- as found in the claim statement before the
arbitrator and also the total claim at the time of rejoinder
amounting to Rs. 80,03,950/-, the arbitrator ultimately
reduced the grantable claim to Rs.38,34,097/-. In our view
Therefore, it cannot be said that the arbitrator had not
applied his mind to the relevant heads of the claim as put
forward by Respondent No.1 nor the State authorities ever
contended before the arbitrator that the excess claim could
not be adjudicated upon. Having chosen to join the issue on
merits of the claim, the award of the arbitrator had to be
treated as binding on the State-authorities. It is also
pertinent to note that the amounts claimed by the
respondent-claimant in his letters dated 22.10.1983 and
24.10.1983 did not amount to total final claims. On the
contrary, we find on the scrutiny of these letters that
Respondent No.1 Contractor had reserved liberty to put
forward further claim on topics of disputed items. The
matter would have stood differently, if these letters had
confined the total claim of Respondent No.1 to the amounts
mentioned therein. Then a further question would have
survived for consideration as to whether there was any
further material available to enhance the said claim before
the arbitrator but such was not the situation on the facts
of the present case. Consequently, the decision rendered by
the learned Trail Judge on merits of these objections
overruling them cannot be found fault with. In this
connection, learned Senior Counsel for the respondent
rightly invited our attention to a decision of learned
single Judge of Orissa High Court in the case of State of
Orissa & Anr. vs. M/s Civien Construction Co. & Anr (Air
1983 Orissa 48). wherein Hon’ble R.N. Misra. J. (as he
then was) in a similar situation held that as per the terms
of the notice when the amount of claim was subject to
further variations, if found necessary, addition claim could
be submitted by the claimant before the arbitrator. Once
this conclusion is reached, the result becomes obvious. The
question whether the delay in filing the objections under
Section 30 of the Act should have been condoned in the
interest of justice or not would have been condoned in the
interest of justice or not would pale into insignificance
and would be academic as the very same objections have been
considered on merits and rejected by the Trial Court and the
said rejection in our view is well sustained on the facts of
the present case. The first point for consideration is,
therefore, answered against the appellant and in favor of
the respondent by holding that there is no need to condone
the delay even in absence of a written application and
remand the proceedings for fresh decision as the said
question has become of academic nature.
POINT No.2
So far as this point is concerned, Shri
Raghuvir, learned Senior Counsel for the appellant,
vehemently contended placing reliance on a decision of this
Court in the case of Banwari Lal Kotiva vs. P.C. Aggarwal
[(1985) 3 SCC 255] that a reference to the newly appointed
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arbitrator had to be made after following the procedure laid
down by preliminary specification no. 73. It is not
necessary for us to closely examine this contention for the
simple reason that this contention immediately raises a
disputed question of fact as to whether Shri Nabi Saheb who
was appointed as a substituted arbitrator vice the
Superintending Engineer, Guntur, the sole arbitrator could
have been required to be issued a fresh reference by the
Superintending Engineer, Ongole. If the Superintending
Engineer, Ongole, was not in charge of the work and if the
contract work was done by Respondent No.1 under the
supervision and jurisdiction of the Superintending Engineer,
Guntur was substituted by Shri Nabi Saheb as the sole
arbitrator, there would remain no occasion for requiring
very same Nabi Saheb to refer the matter to himself for
adjudication. Realising this difficulty, Shri Raghuvir,
learned Senior Counsel for appellant, submitted that the
reference of dispute was required to be made not by the
Superintending Engineer, Guntur but by the Superintending
Engineer, Ongole under whose jurisdiction the work had to be
carried out. This contention was never raised either before
the arbitrator or before the Trail Court or in any case
before the High Court and it is too late now for the learned
Senior Counsel for the appellant to raise this contention
for the first time before us in these proceedings. But even
that apart, the order of the Trail Court substituting Shri
Nabi Saheb as the sole arbitrator in place of the
Superintending Engineer, Guntur, as early as 1985, has
become final. As we have noted earlier, the said decision
dated 25.02.1985 has clearly directed the arbitrator to sign
the copy of the minutes of the order and enter upon the
reference in accordance with the agreement. Thus, the
arbitrator got jurisdiction to enter upon the reference
pursuant to the order of the court which has become final
between the parties. Even on this ground, this contention
about the requirement of further reference by the
Superintending Engineer concerned does not survive for
consideration. Point No.2 also fails and is rejected.
These were the only contentions canvassed in support
of the appeals and as there is no substance in either of
them, the net result is that these appeals fail and are
liable to be dismissed and the award passed by the
arbitrator as made the rule of the court and as confirmed by
the High Court would stand untouched. However, as a huge
amount of public money was involved. through his counsel.
It was recorded by an order of this Court dated 05.09.1997
which reads as under :-
" Learned counsel appearing for
the respondents states on
instructions that he is prepared
to put an end to this litigation
by accepting 20% less out of the
total awarded amounts which by
now work up to
Rs.81,00,000/(Rupees Eighty one
lakh only) inclusive of interest
till date. Thus as a package
deal a lump sum amount of Rs.
61,00,000/- (Rupees Sixty one
lakh only) will be acceptable to
the respondents in full and final
satisfaction of their claim in
these cases. Learned counsel for
the respondents further states
that out of Rs.15,00,000/(Rupees
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Fifteen lakh only) which the
respondents have already received
form the petitioner towards the
award decree. According to him
now his dues will be only
Rs.46,00,000/(Rupees Forty six
lakh only) towards which
Rs.5,00,000/(Rupees Five Lakh
only) lying deposited in the
Lower Court will be adjusted and
the petitioner-State will have to
pay the balance amount of
Rs.41,00,000/- (Rupees Forty one
lakh only) towards the awarded
dues of the respondents if this
proposal is accepted by them.
At the request of learned
senior counsel appearing for the
petitioner, adjourned for a weeks
to get response of the
patitioner-State to this
proposal."
proposal."
As per the said fair stand and proposal for
compromise submitted on behalf of Respondent No.1 Contractor,
he had agreed to reduce the amount of the claim by 20%.
Unfortunately, that proposal was not accepted by the
State-authorities. However, Shri Rao, learned Senior Counsel
fairly stated that whatever may be the view of the
State-authorities regarding settlement of this dispute and
through it is ultimately found by this Court that the appeals
are liable to fail, he would leave it ti the Court for
reducing the amount of the award decree as earlier proposed
by Respondent No.1 before this Court. We appreciate the fair
stand taken by learned counsel for Respondent No.1., even
through the respondent had emerged successful in the present
proceedings. Consequently, while rejecting both the
contentions of learned counsel for the appellant in support
of the appeals, we deem it fit by consent of Respondent No.1,
as recorded in the order dated 05.09.1997 to direct that the
appeals will stand allowed to the limited extent that the
award decree amount as passed by the Trail Court and
confirmed by the High Court will stand reduced by 20% as
fairly agreed to by Respondent No.1 through his senior
counsel. After adjusting the amount withdrawn towards the
decretal dues and also after permitting Respondent No.1 to
withdraw Rs.5,00,000/- which are deposited in the Trail Court
towards the decretal dues, the net amount of Rs41,00,000/will
now remain payable by the appellant to Respondent No1. in
full and final satisfaction of his claim in the present
proceedings. The said balance amount of Rs.41,00,000/- will
have to be paid by the appellant to Respondent No.1 with 9%
interest thereon from 05.09.1997 till the actual payment to
Respondent No1. The award decree passed by the court below
and as confirmed by the High Court will stand modified to the
aforesaid extent by consent of the respondent-decree holder.
The appeals are partially allowed accordingly with no
order as to costs.