M/S S.D. SHINDE TR. PARTNER [APPELLANT(S)] Vs. GOVT. OF MAHARASHTRA & ORS. [RESPONDENT(S)]

CIVIL APPEAL NO(S). 6107-6108 OF 2017
(2JB, S. RAVINDRA BHAT and DIPANKAR DATTA JJ., delivered by S. RAVINDRA BHAT, J.

Facts: The present appeals challenge a common judgment of the Aurangabad Bench of the Bombay High Court . The appellant was aggrieved by the judgment of the trial court. The trial court had set aside an award made in the appellant’s favour awarding substantial amounts towards its claim, in the backdrop of a road construction contract. Both the trial court and the High Court held that the award was vitiated by the legal misconduct of the arbitrator under the old Arbitration Act. The courts concluded that the claim was time-barred since the disputes in relation to the contract originally awarded in 1983 with the stipulation of the work being completed within eighteen months were no doubt extended with parties’ consent. It was next held that the order referring the disputes to arbitration [by the Civil Judge (Senior Division)] were in relation to the works carried on by the contractor under the contract. The courts held that the award of amounts exceeded the terms of reference in respect of at least three items. Consequently, it could not be sustained.

Issue: Whether the arbitral award deserved interference by the trial court and high court?

Arguments on behalf of counsel for appellants: Mr. Vinay Navare

Learned senior counsel appearing for the contractor/appellant urged that the findings of the courts below are unsustainable. He submits firstly that as a matter of law, the finding with respect to the claims being time-barred in law is untenable and he relies upon the judgment of this Court reported as Major (Retd.) Inder Singh Rekhi v Delhi Development Authority. Learned counsel pointed out to specific findings of the Arbitrator on aspects such as delay on the part of the Engineer in handing over the site, delay in handing over drawings and deciding technical issues, shortage in cement supply, release of waters into the canal which impeded the work and their duration, shortage of finances and funds for timely release of interim payments, unabsorbed overheads or loss of profit. It is pointed out that all these claims were duly taken into account, and the findings of the High Court that the arbitrator travelled beyond the claim and the contract was without factual basis. Learned counsel urged the court to interfere with the findings arguing that the jurisdiction of the Civil Court to interfere with the factual findings and in the award as also on the interpretation placed by the Arbitrator, to the terms of the contract to be considered within the narrow confines of what is legitimately “legal misconduct”.

Arguments on behalf of counsel for respondents: Mr. Rahul Chitnis

Learned counsel relied on Clause 55A of the contract to urge that unless the claims were preferred within 30 days of expiry of the defect liability period, they could not be entertained. This condition required that no extra items or claims could be pressed unless they were sought within that period. In this case, the claim was not lodged within that period, as it was filed much later. Therefore, it was contractually barred, and the courts below correctly concluded it to be the case. Learned counsel also invited attention of this court to the observations of courts below, highlighting that the original contractor had died and all his legal heirs and representatives were not disclosed, and brought on the record, which became defective. It was lastly urged that in terms of the contract, claims for loss of profit and for overheads were inadmissible. The award granted the claim for overheads, which is in clear error, and consequently, it was rightly set aside by the courts below.

Held: The court allowed the present appeal and set aside the judgment of the high court and trial court and restored the arbitral award, while directing that respondents shall ensure full payment in terms of the award. It was observed that, “It is axiomatic that courts, while adjudging whether an arbitration award calls for interference has to be conscious that the arbitrator is the sole judge of facts; unless an error of law is shown, interference with the award should be avoided.”

Further, the court observed that, “It is also noteworthy that the scope of jurisdiction of a court, under Section 30/33 of the Act, never extended beyond discerning if the award disclosed an “error apparent on the face of the award” which is an “error of law apparent on the face of the award and not an error of fact. The error of law can be discovered from the award itself or from a document actually incorporated therein.” (Refer to Trustees of Port of Madras v Engineering Constructions12). In the facts of the present case, the award did not, facially disclose any error of law; damages were awarded in accordance with principles embodied in law, and the findings were based on the evidence placed before the tribunal. The ruling of the trial courts and the High Court is nothing short of intense appellate review, which is impermissible in law and beyond the courts’ jurisdiction.”