THE HONOURABLE MR v. L.Helen M/s.T.T.N. & Sons Main Road Valliyoor Thirunelveli District – 627 1172

IN THE HIGH COURT OF JUDICATURE AT MADRASDATE: 29-11-2007CORAM:THE HONOURABLE MR.JUSTICE K.RAVIRAJA PANDIAN ANDTHE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMANO.S.A.NO.257 OF 20041. The Chairman and Managing Director Tamil Nadu Civil Supplies Corporation Limited, 42, Thambusamy Road Kilpauk, Chennai – 600 010.2. The Senior Regional Manager Tamil Nadu Civil Supplies Corporation Limited, Thirunelveli. .. AppellantsVersus1. L.Helen M/s.T.T.N. & Sons Main Road Valliyoor Thirunelveli District – 627 1172. K.Kannayiram Arbitrator C/o.Tamil Nadu Civil Supplies Corporation Limited, Flat No.10 'A' Block Sarojini Apartment No.140, Sarojini Street T.Nagar, Chennai – 600 017.. Respondents(2nd Respondent given up)For Appellant :: Mr.N.Kannadasan Addl.Advocate General for M/s.V.SelvanayagamFor Respondents :: Mr.R.Gandhi,Senior Counsel for M/s.A.R.Nixon for R1Prayer: Original Side Appeal No.257 of 2004 preferred against thejudgment and decree made in O.P.No.188 of 2002 dated 26.9.2003 passed bythe single Judge. https://hcservices.ecourts.gov.in/hcservices/ JUDGMENTK.RAVIRAJA PANDIAN,J.This appeal is filed against the order dated 26.9.2003 passed by thelearned Single Judge in O.P.No.188 of 2002 setting aside the award passedby the Arbitrator dated 21.9.2001 non-suiting the first respondent forthe claim made before him in the arbitration proceedings and granted a sumof Rs.25,87,500/- in respect of the first contract and Rs.27,46,990/- inrespect of the second contract without interest.2. The learned Additional Advocate General appearing for theappellants contended that the learned Single Judge has miserably erred ingranting the relief as claimed by the first respondent while setting asidethe award, which is beyond the scope of Section 34 of the Arbitration andConciliation Act, 1996. Section 34 empowers the Court only to set asidethe award on the stated contingencies. It never granted any power to theCourt to pass an award treating the Court as an arbitrator. 3. However, Mr.Gandhi, learned Senior Counsel appearing for the firstrespondent submitted that the order of the learned single Judge isperfectly correct and it is based on the interpretation of clause 43 ofthe agreement entered into by the parties. 4. The material facts relevant for disposal of the appeal are asfollows:The first respondent was appointed as a transport contractor by theappellant and to that effect agreements were entered into between theappellant and the first respondent on 17.7.1996 for the year 1996-97 andon 9.12.1997 for the year 1997-98. Clause 43 of the agreement providedthat the rate offered by the successful tenderer and approved by the TamilNadu Civil Supplies Corporation would be final and would be in force tillthe contract period in question and it further provided that the ratesapproved by the Tamil Nadu Civil Supplies Corporation shall be revised inthe case of upward/downward revision of diesel price by Government duringthe currency of the period of the contract to the extent necessary asmight be approved by the Tamil Nadu Civil Supplies Corporation. 5. It is the further case of the appellants that the first respondentclaimed hike in the agreed charge of transportation due to the increase inthe diesel price. Thus, a dispute arose and the same was referred to thearbitrator - the second respondent herein and taken up as Arbitration CaseNo.4 of 2001. 6. The first respondent made a claim of Rs.44,50,500/- for the year1996-97 and Rs.40,65,540/- for the year 1997-98 on the ground of increasein the diesel price. 7. The arbitrator by his award dated 21.9.2001 disallowed the claimof the first respondent on the ground that the first respondent has notpaid any increased charges to the lorry owners whose lorries wereoperated by the first respondent for the purpose of the appellant https://hcservices.ecourts.gov.in/hcservices/ Corporation and has not passed on the burden of increase in the dieselprices to the vehicle owner but only paid the contracted price. As such inspite of the availability of the provision for increase of rates due tothe escalation of diesel prices, non-suited the first respondent for theclaim. 8. Aggrieved by the said award, the first respondent filed O.P.No.188of 2002 under Section 34 of the Arbitration and Conciliation Act, 1996 toset aside the award passed in Arbitration Case No.4 of 2000 dated21.9.2001. 9. The learned Single Judge upon hearing the parties has set asidethe award passed by the arbitrator on the interpretation of clause 43 ofthe agreement to the effect that it is established that as diesel pricehas been increased during the relevant period, the first respondent isentitled to escalation notwithstanding the fact that the escalated dieselcost has not been paid to the lorry owner, and passed an award in favourof the first respondent as aforesaid. The correctness of the said order iscanvassed before this Court.10. We heard the argument of the learned counsel on either side andperused the materials on record.11. The relevant clauses of Section 34 of the Arbitration andConciliation Act reads as follows:"34. Application for setting aside arbitral award: - (1)Recourse to a Court against an arbitral award may be made only byan application for setting aside such award in accordance withsub-section (2) and sub-section (3).(2) An Arbitral award may be set aside by the Court only if-(a) the party making the application furnishes proof that -(i) a party was under some incapacity; or(ii) the arbitration agreement is not valid under the law towhich the parties have subjected it or, failing any indicationthereon, under the law for the time being in force; or(iii) the party making the application was not given propernotice of the appointment of an arbitrator or of the arbitralproceedings or was otherwise unable to present his case; or(iv) the arbitral award deals with a dispute notcontemplated by or not falling within the terms of the submissionto arbitration, or it contains decisions on matters beyond thescope of the submission to arbitration:Provided that, if the decisions on matters submitted toarbitration can be separated from those not so submitted, onlythat part of the arbitral award which contains decisions onmatters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitralprocedure was not in accordance with the agreement of theparties, unless such agreement was in conflict with a provisionoft his Part from which the parties cannot derogate, or, failingsuch agreement, was not in accordance with this Part; or (b) the Court finds that -(i) the subject-matter of the dispute is not capable of https://hcservices.ecourts.gov.in/hcservices/ settlement by arbitration under the law for the time being inforce, or (ii) the arbitral award is in conflict with the publicpolicy of India.Explanation: - Without prejudice to the generality of sub-clause(ii) of clause (b), it is hereby declared, for the avoidance ofany doubt, that an award is in conflict with the public policy ofIndia if the making of the award was induced or affected by fraudor corruption or was in violation of section 75 or section 81.(3) ....(4) ....."12. Thus, it could be seen that an application under Section 34 ofthe Arbitration and Conciliation Act, 1996 can be filed only for settingaside the arbitral award.13. The Apex Court in the case of MC.DERMOTT INTERNATIONAL INC. VS.BURN STANDARD CO.LTD., AND OTHERS, (2006) 11 SCC 181 has held thus:"In terms of the 1996 Act, a departure was made so far as thejurisdiction of the court to set aside an arbitral award isconcerned vis-a-vis the earlier Act. Whereas under Sections 30 and33 of the 1940 Act, the power of the court was wide, Section 34 ofthe 1996 Act brings about certain changes envisaged thereunder.Section 30 of the Arbitration Act, 1940 did not contain theexpression "error of law...." The same was added by judicialinterpretation. .... The 1996 Act makes provision for thesupervisory role of courts, for the review of the arbitral awardonly to ensure fairness. Intervention of the court is envisaged infew circumstances only, like, in case of fraud or bias by thearbitrators, violation of natural justice, etc. The court cannotcorrect errors of the arbitrators. It can only quash the awardleaving the parties free to begin the arbitration again if it isdesired. So, the scheme of the provision aims at keeping thesupervisory role of the court at minimum level and this can bejustified as the parties to the agreement make a conscious decisionto exclude the court's jurisdiction by opting for arbitration asthey prefer the expediency and finality offered by it..... Thearbitral award can be set aside if it is contrary to (a)fundamental policy of Indian law; (b) the interests of India; (c)justice or morality; or (d) if it is patently illegal or arbitrary.Such patent illegality, however, must go to the root of the matter.The public policy violation, indisputably, should be so unfair andunreasonable as to shock the conscience of the court. Lastly, wherethe arbitrator, however, has gone contrary to or beyond theexpressed law of the contract or granted relief in the matter notin dispute, would come within the purview of Section 34 of theAct."(underline supplied) https://hcservices.ecourts.gov.in/hcservices/

14. It is also a well established legal principle that so long as thearbitrator has decided the matter in accordance with the terms of thecontract and has acted within his authority, and according to theprinciple of fair play, the award of the arbitrator is ordinarily finaland conclusive and power of the Court to set aside the award is restrictedto the incenses set out under Section 34 of the Arbitration Act and thereappraisal of the evidence by the Court is not permissible. Usefulreference can be had to the judgments of the Supreme Court in ISPATENGINEERING & FOUNDRY WORKS VS. STEEL AUTHORITY OF INDIA LIMITED, (2001) 6SCC 347 and ONGC LIMITED VS. SAW PIPES LIMITED, (2003) 5 SCC 705. 15. Thus, under the provisions of the Act, if any one of the abovecontingencies is there in the award passed by the arbitrator, the Courtexercising the jurisdiction under Section 34 of the Act can set aside theaward. It cannot take the role of the arbitrator and pass an award. 16. On behalf of the first respondent, the decision of the SupremeCourt in the case of RAJASTHAN STATE MINES AND MIERNALS LIMITED VS.EASTERN ENGINEERING ENTERPRISES AND ANOTHER, (1999)9 SCC 283 has beensought to be pressed into service. We have gone through the said judgment,which is no way relevant to the facts of the present case. 17. In the facts of the present case, the learned single Judge hasinterpreted Clause 43 in favour of the first respondent and on that groundset aside the arbitral award, which non-suited the claim. To that extent,there may not appears to be any illegality or arbitrariness attributableto the order of the learned single Judge. However, the subsequent aspectof the order of the learned single Judge granting the award in favour ofthe first respondent is beyond the power and jurisdiction vested on theCourt under Section 34. 18. In view of the reasoning stated above and in the light of thedecisions of the Supreme Court to the effect that the Court cannot correctthe error of arbitrator and it could only quash the award leaving theparties free to begin the arbitration again, if it is so desired by them,the impugned order of the learned single judge is set aside and the appealis allowed. However, there is no order as to costs.uskSd/Asst. Registrar/true copy/Sub Asst.RegistrarTo1.The Sub Asst.Registrar Original Side,High Court,Madras. + One cc to Mr. V. Selvanayagam, Advocate SR 70600+ One cc to Mr. A.R. Noxo, Advocate SR 70966RS (co)sg 06/12/07 O.S.A.NO.257 OF 200429.11.2007