RAJ KUMAR Vs. FOOD INSPECTOR

JUDGEMENT

(1.) This arbitration appeal filed by the claimant (hereinafter referred to as the Contractor) raises interesting questions of law. The undisputed facts are that the works pertaining to strengthening of Chandigarh-Mandi-Manali road NH- 21 in K.M. 105/0 to 127/0 was awarded by the respondent-State in favour of the Appellant-Contractor. The contract provided that in case the deviation in the work was beyond 30% the contractor would be entitled to claim payment for the works in excess of 30% of the awarded quantity at market rate. The agreement entered into between the parties also contained an arbitration clause. The contractor claimed that he had in respect of certain works been required to carry out work in excess of the prescribed deviation of 30% and therefore he was entitled to be paid for such works in excess of the stipulated deviation at the market rates. The Engineer in-charge recommended the case of the contractor to the Chief Engineer. However, the latter did not agree with the views of the Engineer in-charge and came to the conclusion that the deviation was less than 30% taking into consideration the total value of the contract. Not satisfied with the rejection of his claim by the Chief Engineer the Contractor filed a petition before Hon'ble the Chief Justice of this Court for referring the dispute to the Arbitrator. This petition was registered as OMP(M) No. 35 of 2001. The Hon'ble Chief Justice disposed of this petition vide order dated 5th July, 2001 and the Chief Engineer in terms of Clause 25 of the Agreement was directed to appoint an Arbitrator. The Chief Engineer vide his order dated 6.8.2001 appointed the Superintending Engineer, Arbitration Cell, Solan as the Arbitrator to decide the claims of the claimant and counter claims, if any, of the respondents. The Arbitrator entered into reference and the first proceedings were held on 15.11.2001 on which date the claimant was directed to submit his claim. The claim was contested by the State and the State also raised a counter claim. The State relied upon a letter dated 16.3.2001 sent by the Chief Engineer, National Highway Division, HPPWD, Shimla rejecting the claim of the contractor mainly on the ground that the 30% deviation should be in respect of the entire awarded amount and not in respect of particular items. Second hearing was conducted by the Arbitrator on 27.12.2001. The Arbitrator conducted the 3rd hearing on 15.2.2002. On 21.2.2002 the Executive Engineer sent a letter to the Superintending Engineer, copy of which is on the file of the arbitration proceedings. In this letter the Executive Engineer stated that the Superintending Engineer, Arbitration Cell, HPPWD, Solan i.e. the Arbitrator Er.B.S. Parmar was the Engineer in-charge of the works in question and should not have been appointed as Arbitrator to decide the claims. The Superintending Engineer in turn sent a letter dated 4th March, 2002 to the Chief Engineer informing him that the Arbitrator had been the Engineer in-charge during the execution of the work and should not have been appointed the arbitrator. The Chief Engineer vide his office order dated 23.5.2002 superseded the appointment of the Superintending Engineer, Arbitration Cell, Solan and appointed the Superintending Engineer, D-III, Office of the Engineer-in-Chief, HPPWD as the Arbitrator. A copy of this order was sent to Er.B.S. Parmar, Superintending Engineer, Arbitration Cell, Solan. However, the Arbitrator himself issued an order on 3.6.2002 that his appointment could not be superseded by the Chief Engineer on the ground that the Chief Engineer after making the appointment had become functus officio and could not cancel his appointment. The Arbitrator thereafter continued with the arbitration proceedings and ultimately gave the award dated 21.6.2002 awarding a sum of Rs. 23,78,800/- in favour of the contractor along with interest @ 18% p.a.

(2.) The State filed objections under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act) challenging the award. One of the main grounds of challenge was that the Arbitrator was himself the site Engineer/Engineer in-charge of the execution of the works which gave rise to the disputes in question. According to the State the Arbitrator had himself made certain recommendations in favour of the Contractor and therefore his appointment was improper and further the Arbitrator should have disclosed his interest in the matter in terms of Section 12 of the Act. It was also alleged that since the order appointing the Arbitrator had been superseded by the Chief Engineer the award delivered by him was void. Other objections were also raised but we are not concerned with the same in the appeal.

(3.) The learned Single Judge came to the conclusion that the order of supersession passed by the Chief Engineer was improper since the Chief Engineer had no jurisdiction to pass such an order after the appointment of the Arbitrator. However, the learned Single Judge held that the award of the learned Arbitrator was opposed to the Public Policy of India and violated the provisions of Section 12 of the Act inasmuch as the Arbitrator had not disclosed to the parties the circumstances likely to give rise to justifiable doubts as to his independence or impartiality. On this ground alone the award was set-aside vide judgment of the learned Single Judge dated 5.9.2005.