H.P. Housing and Urban Development v. Surinder Singh

18.06.2022. The award was affirmed by the learned District Judge on 08.08.2023. Feeling aggrieved, the appellants have now instituted this appeal under Section 37 of the Act.

3. Submissions:- 3(i). Learned counsel for the appellants has not disputed that:- (a). The award work was to be completed by the respondent within 18 months and the period was to be reckoned from the 15th day of the issuance of award letter, i.e. work was to be completed by 04.05.2020. (b). As per item No.21 of the Schedule of Quantity, the wood work was to be carried out by the respondent using 2nd class deodar wood. (c). After award of the work, Drawing bearing No.188, was supplied by the Architect of the appellants to the respondent-Contractor. In the drawing, for item No.21, 4 type of the wood to be used in the construction was changed from 2nd class deodar wood to Ivory Coast Wood. (d). The respondent started staking Ivory Coast Wood in order to complete the wood work as per the Drawing bearing No.188. (e). Since, in terms of the drawing provided by the office of Chief Executive Officer-cum-Secretary of the appellants the Executive Engineer, HIMUDA Dharamshala Division, item No.21 was to be executed using Ivory Coast Wood instead of 2nd class deodar wood, the Executive Engineer called for quotations of Ivory Coast Wood from different timber traders of District Kangra. (f). The work was completed by the respondent- Contractor by 01.10.2019 and in accordance with the drawing against item No.21, i.e. by using Ivory Coast Wood. (g). Performance certificate was issued respondent-Contractor on 16.12.2019, certifying that the work had been completed by him in all respects. The performance certificate issued by the appellants assessed the capability of the contractor as ‘very good’. 3(ii). Learned counsel for the appellants submits that the contract provided use of 2nd class deodar wood and not Ivory Coast Wood, therefore, even though the drawing had 5 been supplied by the appellants to the respondent- Contractor for using Ivory Coast Wood instead of 2nd class deodar wood, the respondent-Contractor was required to wait for the approval of the rates for Ivory Coast Wood. Instead of waiting for the approval of the rates for use of Ivory Coast Wood, the respondent-Contractor mischievously carried out the work using the Ivory Coast Wood and raised exorbitant bill against item No.21. 3(iii). Learned counsel for the appellants further submitted that the respondent had been advised by the appellants to wait for the formal approval of the competent authority before using the Ivory Coast Wood. The use of Ivory Coast Wood instead of 2nd class deodar wood, as provided under the agreement, amounts to re-writing the contract, specifically Clause 12 thereof. Learned Arbitrator has not looked into this aspect. The award suffers from patent illegality. Learned District Judge has also not considered this facet in its proper perspective. 3(iv). Learned counsel also raised the plea that the respondent by using Ivory Coast Wood against item No.21 had actually committed fraud upon the appellants. 6 Prayer was accordingly made for setting aside the award dated 18.06.2022 and the judgment passed by the learned District Judge on 08.08.2023. 3(v). Learned Senior Counsel for the respondent- Contractor defended the award as also the judgment passed by the learned District Judge. It was also submitted that plea of fraud, as is being sought to be raised now, was neither urged before the learned Arbitrator nor before the learned District Judge. It has also not been taken as a ground in the present appeal. Placing reliance upon several decisions of the Hon’ble Apex Court and this Court, it was contended that the view taken by the learned Arbitrator is a plausible view, which has been affirmed by the learned District Judge and as per settled legal position, no interference with the same is called for.

4. Consideration:- Heard learned counsel for the parties and considered the case file. 4(i). Patent illegality in the Award/re-appreciation of evidence/jurisdiction. 4(i)(a). It is by now well-settled that the scope of Appellate Court exercising jurisdiction under Section 37 of the Act to review findings in an award, 7 narrow/limited, the award has been upheld or substantially upheld under Section 34. [Ref. Larsen Air Conditioning and Refrigeration Company vs. Union of India2] In Konkan Railway Corporation Ltd. Vs. Chenab Bridge Project Undertaking3, it was held that jurisdiction of the Court under Section 37 of the Act is akin to that under Section 34 of the Act. The Courts ought not to interfere with arbitral award in a casual and cavalier manner. Mere possibility of an alternative view on facts or interpretation of contract does not entitle Courts to reverse findings of the Arbitral Tribunal. Relevant paragraphs from the decision are as follows:- “19. Therefore, the scope of jurisdiction under Section 34 and Section 37 of the Act is not akin to normal appellate jurisdiction.4 It is well-settled that courts ought not to interfere with the arbitral award in a casual and cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the Arbitral Tribunal.5 In Dyna Technologies Private Limited v. Crompton Greaves Limited6, this Court held: “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted 2 Civil Appeal No.3798 of 2023, decided on 11.08.2023 3 2023(9) SCC 85 4 UHL Power Company Ltd. v. State of Himachal Pradesh (2022) 2 SCC (Civ) 401, para 15. See also: Dyna Technologies Pvt Ltd v. Crompton Greaves Limited (2019) 20 SCC 1, para 24, 25. 5 ibid; Ssangyong Engineering. & Construction Company Ltd. v. National Highways Authority of India (NHAI) (2019) 15 SCC 131; Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd., (2019) 7 SCC 236, para 11.1. 6 (2019) 20 SCC 1 8 being a possibility by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.

25. Moreover, umpteen number of judgments of this Court have categorically held that the courts interfere with an award merely should not because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.”

25. The principle of XX XX XX interpretation of contracts adopted by the Division Bench of the High Court that when two constructions are possible, then courts must prefer the one which gives effect and voice to all clauses, does not have absolute application. The said interpretation is subject to the jurisdiction which a court is called upon to jurisdiction under exercise. While exercising Section 37 of the Act, the Court is concerned about the jurisdiction that the Section 34 Court exercised while considering the challenge to the Arbitral Award. The jurisdiction under Section 34 of the Act is exercised only to see if the Arbitral is perverse or manifestly Tribunal’s view arbitrary. reinterpreting the contract on an alternative view does not arise. If this is the principle applicable to exercise of jurisdiction under Section 34 of the Accordingly, question 9 Act, a Division Bench exercising jurisdiction under Section 37 of the Act cannot reverse an Award, much less the decision of a Single Judge, on the ground that they have not given effect and voice to all clauses of the contract. This is where the Division Bench of the High Court committed an error, in re-interpreting a contractual clause while exercising jurisdiction under Section 37 of the Act. In any event, the decision in Radha Sundar Dutta (supra), relied on by the High Court was decided in 1959, and it pertains to proceedings arising under the Village Chaukidari Act, 1870 and Bengal Patni Taluks Regulation of 1819. Reliance on this judgment particularly for interfering with the concurrent interpretations of the contractual clause by the Arbitral Tribunal and Single Judge under Section 34 of the Act is not justified.” In Bombay Slum Redevelopment Corporation Pvt. Ltd. Vs. Samir Barain Bhojwani7, the Hon’ble Apex Court emphasized that supervisory role of Courts is very restricted in dealing with appeals under Section 37 of the Act. Scope of interference in a petition under Section 34 of the Act is very narrow. Jurisdiction under Section 37 of the Act is narrower. By their own volition, the parties choose to go before the Arbitral Tribunal instead of availing remedy before the traditional Civil Courts. Therefore, Courts must be very conservative while dealing with arbitral awards and confine themselves to the grounds strictly available under Section 34 of the Act. 7 (2024) 7 SCC 218 10 4(i)(b). In Reliance Infrastructure Ltd. vs. State of Goa8, Hon’le Apex Court held that ‘patent illegality’ in the award calls for interference but a mere illegality is not patent illegality. It ought to be apparent on the face of the award and not the one which is culled out by way of a long drawn analysis of pleadings and evidence. Relevant paragraphs of the decision relevant to the context are under:- “57. As noticed, arbitral award is not an ordinary adjudicatory order so as to be lightly interfered with by the Courts under Sections 34 or 37 of the Act of 1996 as if dealing with an appeal or revision against a decision of any subordinate Court. The expression “patent illegality” has been exposited by this Court in the cases referred hereinbefore. The significant aspect to be reiterated is that it is not a mere illegality which would call for interference, but it has to be “a patent illegality”, which obviously signifies that it ought to be apparent on the face of the award and not the one which is culled out by way of a long-drawn analysis of the pleadings and evidence.

58. Of course, when the terms and conditions of the agreement governing the parties are completely ignored, the matter would be different and an award carrying such a shortcoming shall be directly hit by Section 28(3) of the Act, which enjoins upon an Arbitral Tribunal to decide in accordance with the terms of contract while taking into account the usage of trade applicable to the transaction. As said by this Court in Associate Builders vs. DDA9, if an Arbitrator construes the term of contract in a reasonable manner, the award cannot be set aside construction. The possibility of interference would arise only if the construction of the Arbitrator is such which the deduction drawn reference