HP.STATE ELECTRICITY BOARD Vs. RAMESH KUMAR

JUDGEMENT

(1.) THESE objections under Section 34 of the Arbitration and Conciliation Act, 1996, hereinafter referred to as "The Act" are laid by the Himachal Pradesh State Electricity Board, hereinafter referred to as "The Board" through its Additional Superintending Engineer, Transmission Division. 2. It appears the work C/o one block of 4 Nos. Type 1 Quarters at 132 KV Sub Station Darlaghat, District Solan", was awarded to the respondent Ramesh Kumar, hereinafter referred to as the Contractor", by an agreement dated May 2, 1994. The stipulated date of commencement of the work was May 17, 1994 and work was to be completed within six months, i.e. by November 17, 1994. A dispute regarding certain claims arose between the contractor and the Board, which was referred to the sole arbitration of Shri J.P. Gupta, the then Superintending Engineer of the Board. The arbitrator made his impugned award on March 5, 2001 whereby he allowed certain claims of the contractor. Dissatisfied, the Board has filed these objections. 3. The award is challenged on the grounds: (a) That the award is not a reasoned award as contemplated under Section 31 of the Act; (b) The award of the Arbitrator is against the express terms of the contract agreement between the Board and the Contractor and therefore, against the Public Policy of India. 4. According to the contractor, the award is reasoned which was made after consideration of all the documents on record and is in accordance with the contract agreement. 5. The following issues were settled on the respective contentions raised by the parties.

(2.) WHETHER the award is not in accordance with the provisions of Section 31 of the Arbitration and Conciliation Act, 1986.

(3.) RELIEF . 6. The parties rely upon the award made by the Arbitrator and related documents including affidavits filed by them. 7. I have heard Mr. J.S. Bhogal learned Senior Advocate assisted by Mr. Suneet Goel, Advocate for the objector and Mr. Burathoki, learned counsel for the respondent. 8. My findings on the issues are: Issues No. 1 and 2. Both these issues are taken up together as they are inter - connected. 9. A perusal of Section 34 of the Act shows that an award can only be set aside if it falls within the mischief of section 2(a) or 2(b) of Section 34 of the Act which is reproduced for convenience: "34. Application for setting aside the arbitral award." (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub -section (3). (2) An arbitral award may be set aside by the Court only if - (a) a party was under some incapacity, or (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected to it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (1V) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or the Court finds that - (i) the subject matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India. Explanation: - Without prejudice to the generality of sub -clause (ii), it is hereby declared, for the avoidance of any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 or Section 81...." 10. Claim No.1 (Labour losses of Rs. 1,51,415/ -) The Contractor raised a claim of rupees 1,51,415/ - for "Labour losses" due to the late handing over of the site to him. The arbitrator concluded that the site was not ready to commence the work as stipulated in the contract agreement, i.e, May 17, 1994 to November 15, 1994, his Labour remained idle. The arbitrator reasoned that it was the responsibility of the contractor to mobilize the "Labour at site and when labour was deployed, the site of work was not handed over and the contractor on 27.94 was asked that over when it became ready. In the circumstances, after scrutiny of the record of deployment of labour detained at site, a lump sum compensation of rupees 20,000/ - is hereby awarded to the contractor for a limited period only and as one time payment". 11. In my view, this is not a reasoned award. Sub -section (3) of Section 31 clearly mandates that the arbitral award shall state the reasons upon which it is based. Unless the parties have agreed that (i) no reasons are to be given, or (ii) the award is an arbitral award on agreed terms under Section 30. Admittedly, the present case does not fall under either of the category. The arbitrator was bound to give reasons on which he based his award. Merely saying that the work commenced late because the site was not handed over to the contractor is no reason in the eyes of law. 12. The arbitrator does not say a word that how he worked out the figure of rupees 20,000/ -. He is silent about the rates of the labour at the given time. He did not say a word about the kind of labour, which was deployed by the Contractor. To say that lump sum compensation of rupees 20,000/ - is awarded for the loss of labour without referring to the material on record does not disclose any reasoning. 13. This Court in H.P. Housing Board and another -v - Vijay Construction Works O.M.P. (M) No.11 of 2000 decided on 12.12.2000 interpreting the expression "State the reasons upon which it is based " in section 31 of the Act observed that in the context" expression" must mean the premise on which conclusion is based which must be traced to the available data. The "reasons" must be the outcome of an -act of objective thinking and logical analysis of the available material justifying the conclusions. The Supreme Court in Union of India v. Mohan Lal 1973 (2) SCC 836 observed: "Reasons are the links between the materials on which certain conclusions are based and the actual conclusions". 14. In the present case, in respect of all the claims, the Arbitrator has indeed not referred to any material on record. 15. Having said that, I am of the view that lump sum amount of rupees 20,000/ - awarded to the Contractor for the labour which remained idle as the site was not handed over the contractor against claim of rupees against claim of rupees 1,51,415/ - should not be disturbed particularly when the matter is pending for the last several years. 16. Claim No.2: (Losses on account of material and Labour: Rs. 1,89,412/ - The arbitrator has made an award of rupees 50,000/ - for the losses on account of material and labour against claim of rupees 1,89,412/ -. The only reason, which weighed with the arbitrator was that the respondent delayed the star to the work for nearly one year as the site was not handed over and in the mean while did not compensate the contractor for the increased rate of material and labour. The award is not only bereft of any reason as discussed in the preceding paras but also without jurisdiction as the arbitrator under Claim No. 1 had made an award of rupees 20,000/ - for the loss of the labour. Such loss indeed could not be claimed twice. There is no foundation for the claim for the loss of material .It is not referable to any material on record an the award under this claim is liable to be set aside. 17. Claim No.3. (Outstanding payment of work done after After 2nd running bill: Rs. 54,521/ - 18. The arbitrator has made an award of rupees 50,000/ - against the claim of rupees 54,521/ - against this claim. The arbitrator in his award against this claim reasoned: The due amount of standing payment due to the contractor was agreed by the respondent to be paid to the Contractor but was never paid to him. In view of the fact whether the site was actually changed or not, lump -sum amount of Rs. 50,000/ - is awarded to the claimant contractor as one time full and final settlement". 19. It may be noticed that not only that the award against this claim is without any reason whatsoever and not referable to any material on record. It is also not fathomable for what default on the part of the Board this, claim has been raised by the contractor. The award against this claim is liable to be set aside. 20. Claim No.4. (Refund of security deposited: Rs. 15,300/ -)/ Against this claim, the arbitrator has directed the refund of security to the contractor amounting to rupees 15,300/ - on the ground that "there has been breach of contract on the part of the respondent". Clause 3 (a) of the contract agreement provides for the termination of the contract agreement and forfeiture of the security deposit in the discretion of the Engineer -in -charge, which shall be conclusive. It appears that the arbitrator directed the refund of the security as there was no fault on the part of the Contractor for not completing the work within the stipulated period under the contract agreement as the site was not given to the contractor within the time stipulated and the period of the completion of the work was extended. The award under this claim is maintained. 21. Claim No.6. (Losses on account of retaining wall constructed By M/s Abuja Cement Company). 22. The Arbitrator has made an award of Rupees 50,000/ - under this claim against the claimed amount of rupees 1 ,00,600/ - According to the arbitrator: "The work done by the Contractor at site was inspected jointly in the first hearing and on the basis of which it may hardly be agreed to the extent of damage claimed by the Contractor. After assessing overall factors, a sum of Rs. 50,000/ - on account of labour and material as one time payment is awarded to the contractor1 23. It is noticed that the award made under this claim is not informed by any reasons. It is not referable to any material on record. How and why any loss was caused to the Contractor by the retaining wall of a third party, i.e., M/s Abuja Cement Company is not spelled out. If said wall fell or damaged any property of the Contractor, then how the Board is liable to compensate the contractor remains mystery. The award made by the arbitrator this is untenable and without jurisdiction. 24. Claim No.8. (loss of profit: Rs. 54, 255/ -). The contractor has claimed rupees 54,255/ - on account of loss of profit. The arbitrator allowed this claim on the ground that the contractor was not "allowed to be paid" against the completed work and ultimately the work was "left abandoned". The award made against this claim is uninformed by reasons and not referable to any material on record. It appears this claim was raised by the contractor for the profit, which he might have earned by completing the work which he left abandoned according to the arbitrator. The arbitrator has not referred to any material on record to j show that the contractor sustained such a loss. The award also is against the public policy as this claim is not referable to the contract agreement: