High Court
Legal Reasoning
ARBA-4-2012.odtIN THE HIGH COURT OF JUDICATURE AT BOMBAYBENCH AT AURANGABADARBITRATION APPEAL NO. 4 OF 2012Manish Dharshibhai Parmar...AppellantVersusThe Executive Engineer...Respondent***• Mr. A. K. Gawali, Advocate for the Appellants• Mr. Ruturaj Patil, Advocate for Respondent ***CORAM:R. M. JOSHI, JDATE:MARCH 18, 2025PER COURT : 1.At the outset, it needs to be recorded thatthe Counsels for both sides were heard and Appeal isreserved for judgment. In view of the fact that thereis reference pending for decision before Hon’bleSupreme Court as to whether the Arbitral Award can bemodified or has to be set aside in toto, an option wasgiven to the parties for deferment of the pronouncementof this judgment till the reference is decided by theHon’ble Supreme Court. Learned Counsels for both sides,on instructions, made statement that without waitingfor the decision on reference, present Appeal bedecided. Hence, this Appeal is decided. UmeshPAGE 1 OF 11 ARBA-4-2012.odt2.This Appeal is filed under Section 37 of theArbitration and Conciliation Act, 1996 (for short ‘theAct’) taking exception to the judgment and order dated09.12.2011 passed by the Principal District Judge, Beed(for short ‘PDJ’) in Misc. Civil Application (RJE) No.55/2009 whereby the award passed by the sole arbitratordated 20.12.2008 in respect of the disputes arising outof execution of work in respect of contract LCB No.53/1989-90 came to be set aside. 3.The facts, which are necessary for the properappreciation of the rival contentions, are reproducedin nutshell as under:Appellant participated in the tender for thework of Pohner Branch Canal, balance earthwork andlining from K.M. 9 to 12 off-taking at RD 13805 M ofMajalgaon Right Bank Canal and was selected as thecompetent bidder who has quoted to execute the work at9.28% below the estimated cost of Rs. 31,72,409/-.Accordingly, contract was executed between ExecutiveEngineer and Appellant. On 31.12.1989 Appellant givenmachinery advance by the Respondent on which interestwas charged at the rate 18% p.a. It is the case of theUmeshPAGE 2 OF 11 ARBA-4-2012.odtAppellant that due to the increase in the quantitiesand extra items, the Appellant had to work for 20months over and above stipulated period of contract,for which he was granted six times extension underclause 51. It is claimed by the Appellant that thecontractor therein is responsible for the saidextensions and extension has been given without anyreason. Appellant was paid a sum of Rs. 1,23,67,107/-for the entire work executed by him as against expectedamount of Rs. 28.77 lacs. It is further case of theAppellant that since there was breach of reciprocalterms by Respondent, Appellant invoked clause 52 of thecontract which provided for in house mechanism forseeking redressal of his grievance by approachinghierarchy of officers as contemplated in clause no. 52.Thus, it is the case of the Appellant that afterexhausting the remedies available under clause 52,Appellant invoked provisions of clause 53 andappointment of sole arbitrator came to be done. 4.The proceedings of Arbitral Tribunal commencedfrom 24.03.2005. In all 13 meetings were held. Evidencewas placed before the Arbitrator. The Arbitral TribunalUmeshPAGE 3 OF 11
Legal Reasoning
ARBA-4-2012.odtafter scrutinizing the material on record and accordingto the Appellant, by giving adequate opportunity ofhearing to both sides, passed award dated 28.12.2008partly allowing the claim of the Appellant. This awardcame to be assailed in an Application under Section 34of the Act before the PDJ by Respondent. Appellantappeared in the said proceeding and filed writtenstatement and cross-objection, being aggrieved by theaward passed by the Arbitrator of denial of interestfor a particular period. The PDJ by passing impugnedorder dated 09.12.2011 set aside the award. It is thecase of the Appellant that the said order came to bepassed by exceeding the jurisdiction of the Tribunal tocause interference in the award as contemplated bySection 34 of the Act.5.Learned Counsel for the Appellant submits thatthe jurisdiction of the District Court under Section 34of the Act to cause interference in the impugned awardbefore it was extremely limited and that except for theprovision of sub-section 2 of Section 34, there was noscope for causing interference therein. He drewattention of the Court to the claim Petition filedUmeshPAGE 4 OF 11 ARBA-4-2012.odtbefore the Arbitral Tribunal and the response of theRespondent. According to him, in rejoinder it wasspecifically claimed by the Appellant herein that allclaims were already raised before the Authorities asprovided by clause 52 of the contract and that therewas no new claim made in the statement of claim. It wascontended that there was only increase in the amountsand no different/additional claim was made by theAppellant. It is his submission that the District Courthas committed error in considering the said claims tobe fresh claims and for non compliance of clauses 51and 52 of the contract, award passed by the Tribunalcame to be interfered with. It is further argued thatthe Arbitral Tribunal after giving opportunity ofhearing and after scrutinizing the documents in detail,has passed reasoned award and that in absence of casebeing made out to cause interference therein within thescope of Section 34, the order impugned cannot sustain.In so far as the cross-objection filed before DistrictCourt is concerned, the same was to the extent thatsole arbitrator has failed to award interest at therate 18% p.a. for the pre reference/pre pendente liteperiod i.e., from 1st notice under clause 52 datedUmeshPAGE 5 OF 11 ARBA-4-2012.odt13.09.2000 till appointment of the sole arbitrator. Insupport of his submissions, he placed reliance onfollowing judgments: McDermott International Inc vs.Burn Standard Co. Ltd and Others, (2006) 11 SCC 181,Bombay Slum Redevelopment Corporation Private Limitedvs. Samir Narain Bhojwani, (2024) 7 SCC 218 & MunicipalCorporation of Greater Mumbai and Others vs. M/s JyotiConstruction Company, 2003(4) Mh.L.J. 25.6.Learned Counsel for Respondent supported theimpugned order with contention that the award passed bythe Arbitral Tribunal, which is contrary to the termsof the agreement, is vitiated and therefore, is rightlyinterfered with. It is his submission that in thestatement of claim there is no case sought to be madeout by the Appellant before Arbitral Tribunal that theclaim amount is only by way of increase in the amountand not a fresh claim. By drawing attention of theCourt to the relevant material on record, it is arguedthat admittedly no claim was made under clauses 51 and52 of the contract before the concerned Authorities inrespect of entire claim. Thus, it is his contentionthat the entire claim was certainly not tenable beforeUmeshPAGE 6 OF 11 ARBA-4-2012.odtthe Arbitral Tribunal. According to him, in view of theprevailing position of law as per the judgment ofHon’ble Supreme Court in case of The Project Director,National Highways Nos. 45E and 220, National HighwaysAuthority of India Vs. M. Hakeem and Ors, 2021 (9) SCC1 that the award cannot be modified and has to be setaside in entirety. He, therefore, submits that thereis no reason or justification to cause interference inthe impugned order. Moreover, it is his submission thatthe PDJ has recorded cogent reasons for causinginterference in the impugned award before it and hence,appeal be dismissed. 7.At the outset, this Court is required toconsider the scope of Section 37 of the Act which hasbeen determined by the Hon’ble Supreme Court in case ofBombay Slum Redevelopment Corporation Private Limited(supra). It would be relevant to refer to paragraph 26of the said judgment, which reads thus:“26. The jurisdiction of the AppellateCourt dealing with an appeal Under Section37 against the judgment in a petition UnderSection 34 is more constrained than thejurisdiction of the Court dealing with apetition Under Section 34. It is the dutyof the Appellate Court to consider whetherUmeshPAGE 7 OF 11 ARBA-4-2012.odtSection 34 Court has remained confined tothe grounds of challenge that are availablein a petition Under Section 34. Theultimate function of the Appellate CourtUnder Section 37 is to decide whether thejurisdiction Under Section 34 has beenexercised rightly or wrongly. While doingso, the Appellate Court can exercise thesame power and jurisdiction that Section 34Court possesses with the same constraints.”It is thus clear that the scope & jurisdictionunder Section 37 of the Act is even limited than theone under Section 34 of the Act.8.It is settled position of law that any awardpassed by the Tribunal, which is contrary to the termsof the contract, is not sustainable as the same isconsidered against the public policy. In this regard,reference can be made to the judgment of Hon’bleSupreme Court in case of Indian Oil Corporation Limitedvs. Shree Ganesh Petroleum Rajgurunagar, (2022) 4 SCC463. It would be relevant to take note of paragraph 46of the judgment, which reads thus:“46. In Associate Builders (supra), thisCourt held that an award ignoring the termsof a contract would not be in publicinterest. In the instant case, the award inrespect of the lease rent and the leaseterm is in patent disregard of the termsUmeshPAGE 8 OF 11 ARBA-4-2012.odtand conditions of the lease agreement andthus against public policy. Furthermore, inAssociate Builders (supra) the jurisdictionof the Arbitral Tribunal to adjudicate adispute itself was not in issue. The Courtwas dealing with the circumstances in whicha Court could look into the merits of anaward.”9.Here in this case, record indicates that theclaim was made before the Authorities under clauses 51and 52 to the extent of Rs. 254.45 lacs. Whereas thestatement of claim came to filed for Rs. 474.41 lacs.It is pertinent to note that neither in the statementof claim nor in the rejoinder before the ArbitralTribunal, it is claimed by the Appellant that theamount so claimed is increased on account ofmiscalculation or error in computation. It is sought tobe claimed by Counsel for the Appellant that items inrespect of which claim was made remained the same. Thequestion arises before this Court is as to whether itis sufficient for the Appellant to claim so in order toseek enhancement of the claim which was never madebefore concerned Authorities under clauses 51 and 52 ofthe conditions of contract. In this regard reference ismade by the Counsel for the Appellant to the case ofUmeshPAGE 9 OF 11 ARBA-4-2012.odtMcdermott International Inc (supra). Perusal of thesaid judgment indicates that in the said proceeding noobjection was raised to the enhanced claim before theArbitral Tribunal, which in the instant case dulyraised before the Tribunal. Apart from this, havingregard to the facts of the said case, it can be saidthat there was a issue of miscalculation and not theadditional claim. Herein this case, objection wasraised by filing written statement to the enhancedclaim so also in the statement of claim it is notcontended by the Appellant that on account of error incalculation the enhancement has taken place. It isimmaterial as to whether the claim is in respect of thesame items. The question is that if the claim is inrespect of same items but for different period, it hasto be first raised before the Authorities asnominated/contemplated under clauses 51 and 52 of thecontract. Admittedly, this has not been done. Thus,this Court, therefore, finds substance in thecontention of learned Counsel for Respondent that theclaim before the Arbitral Tribunal ought not to havebeen entertained in entirety. Once a case is made outfor causing interference even in the portion/part ofUmeshPAGE 10 OF 11 ARBA-4-2012.odtthe award, in view of the present settled position oflaw, the award needs to be set aside in entirety andcannot be modified.10.Having regard to the aforestated reasons, thisCourt finds no reason to cause interference in theimpugned order in its extremely limited jurisdictionunder Section 37 of the Act. Hence, Appeal standsdismissed. (R. M. JOSHI, J.) UmeshPAGE 11 OF 11