Girish Reddy v. Principal Chief Engineer Central Railway, Mumbai

The only contention raised by Mr.Rao appearing in support of this petition is based on ground (g). It is contended that the contract condition and more particularly condition No.6.2 is totally unconscionable and 2 opposed to the public policy. The contract is one sided contract. The agreement is on printed form and foisted upon the Contractor. Such a one sided contract, when parties are unequal in bargaining power, is clearly unconscionable contrary to the public policy and, therefore, hit by section 23 of the Contract Act, coupled with Article 14 of Constitution of India. 3] It is not in dispute before me that the Arbitral Tribunal is a creature of the contract between the petitioner and respondents. The respondents had awarded a contract of replacing of turn outs of 1x12 numbers 1x8-1/2 with MBC, Slippers under the control of AEN (E), Akola section. The contract was awarded on 26th March 1999. The Arbitral Tribunal was appointed as there were disputes between the petitioner and respondents. It was urged that maintainance charges of 100 labours for 300 days at Rs. 100/- per eight hours from 27th September 1999 to 30th July 2000, have not been disbursed. The claim is also towards office maintainance expenses, refund of security deposit, tools and machinery loss and compensation. In all there are five claims out of which claim No.3 towards refund of security deposit has been partially allowed. The rest of the claims have been rejected on the basis of clause 6.2 of the contract which reads thus:= 3 “6.2 If the works are stopped or delayed due to shortage of material or some other reason on railway’s account, the contractor will have no claim for any compensation whatsoever on account of such delay or stoppage of work.” 4] While assigning reasons for rejection of the claim, the Tribunal has considered the reply furnished by Railways and the documents placed on record. Apart from holding that there is no substantiation of claim of employing 100 labour, it is held by the Tribunal that the claim itself was not admissible, considering the contract condition 6.2 reproduced above. However, the claim of refund of security deposit having not been disputed and even the amount admitted by parties, the Award to that extent is made. 5] Clause 6.2 states that if the work is stopped or delayed due to 4 shortage of material or for some other reason on Railways count, the contractor will have no claim for any compensation whatsoever, on account of such delay or stoppage of work. The award is based upon the terms and conditions of the contract. It is not the case of Mr.Rao that the Tribunal has travelled beyond the same or acted contrary to the same. It is his case that the contract stipulation itself is unconscionable and opposed to public policy so also violative of Article 14 of the Constitution of India. I am afraid that this contention cannot be considered in the facts of this case in the jurisdiction that is conferred upon this Court under section 34 of the Act. Mr.Rao does not dispute that the forum for challenging the contract stipulation was not the Tribunal nor this petition. The challenge could have been raised elsewhere. 6] However, a faint attempt is made by Mr.Rao to rely upon section 34(2)(a)(ii) of the Act. The same reads as under:- “34(2)(a)(ii) : The Arbitration Agreement is not valid under the law to which the parties have subjected it or failing any indication thereon, under the law for the time being in force.” 5 7] If ground (g) of this petition is placed in the forefront and more particularly in the backdrop of this provision, I am afraid, that the argument is not well founded. It is not the case of Mr.Rao that the agreement is not valid under the law under which the parties have subjected the same or under any law for the time being in force. His argument is that there is a clause for arbitration in the agreement which is not being challenged but there is a stipulation in the agreement which makes the claim of the present nature non arbitrable. In other words, the prohibition in the contract to entertain and consider the claims of the present nature is violative of public policy. That is a distinct matter. Then, the Arbitration agreement itself will not be invalid. It is not the case of the petitioner that clauses 62 to 64 of the contract which provide for arbitration are invalid under the law to which the parties have subjected the same. In these circumstances, the Award cannot be set aside by taking recourse to section 34(2)(a)(ii) of the Act. 8] Reliance is placed on the decisions reported in A.I.R. 1986 S.C. 1371 (Central Inland Water Transport Corporation Vs. Brojo Nath 6 Ganguly) and Life Insurance Corporation Vs. Consumer Education and Research Centre and Ors. reported in A.I.R. 1995 S.C.1811. These decisions have been rendered in the backdrop of, firstly a service contract wherein the Central Inland Water Corporation could have dismissed a permanent employee without any enquiry and summarily. In that decision itself, the Supreme Court made an exception with regard to commercial contract and observed that the rigour will be inapplicable in case of commercial contracts where parties with open eyes execute the agreements. 9] In the case of LIC , the challenge was to one of the stipulation in the contract between the insurer and insured. The insurer was LIC which was a public body. The finding that there was clear discrimination between one set of employees and another without any reasonable basis and the classification being wholly illusory having no rational nexus with the object sought to be achieved, that the Supreme Court struck down the subject stipulation. These decisions cannot be of any assistance to Mr.Rao. They would have assisted him provided it was permissible for the Arbitral Tribunal so also for this Court to ignore the contract. That being plainly impermissible, I do not see how reliance upon these decisions can be of any assistance. 7 10] Resultantly, the petition fails and it is dismissed without any order as to costs. (S.C.DHARMADHIKARI, J)