UNION OF INDIA Vs. KAMAL CONSTRUCTION

JUDGEMENT

(1.) The respondent No. 1 had been entrusted with a contract to be executed for the E. C. Railway. The contract was rescinded which compelled the respondent to move this Court challenging the action of the railways in rescinding the contract as arbitrary. This Court directed the parties to go for arbitration. Respondent then filed a reference application before this Court and accordingly, this Court referred the matter for arbitration. After due notice to the parties and by a considered order, the Arbitrator gave his award on 31-1-2007, inter alia, holding that cancellation of respondent's contract by the petitioner could not be justified. Respondent was not responsible for delay rather petitioner railways itself was responsible for the delay in execution of the contract. The Arbitrator also held that forfeiting of security consequentially could not have been ordered. In respect of the work, the Arbitrator gave an award in favour of the respondent to the extent of about Rs. 6 lacs towards unpaid bills and settlement. On 9-2-2007, the award was communicated to the railways. On 2-3-2007 railways sought a clarification from the Arbitrator. The clarification was not in respect of the substance of arbitration or the orders of arbitration. The railways pointed out that subsequent to cancellation of respondent's contract, they had issued fresh tender at risk and cost of the respondent because of respondent's delay in executing the contract. Under this head, they were to realise from the respondent an amount of about Rs. 8 lacs whereas under award they were to pay about Rs. 6 lacs to the respondent. Railways sought a clarification as to the consequence of the risk and cost clause. It is thus apparent that railways had no objection to the award as such. They wanted some clarification with regard to effect of the award on the other transactions.

(2.) In my view, there was no requirement of any clarification inasmuch as the moment the Arbitrator held that the contract was unjustifiably terminated and the delay was caused by the railways, the question of invoking risk and cost clause vanished. The Arbitrator instead of outright rejecting the clarification as sought for rejected the same on 2-4-2007 saying that it was not filed in proper form. On 23-4-2007, railways again filed an application for clarification in proper form this time. This was rejected by order dated 1-8-2007 by the Arbitrator. Railways waited for six months seeking further clarification to the clarification from the Arbitrator and then on 7-2-2008 filed an appeal against the arbitral award before the Sub-Judge, Khagaria. In the meantime, the arbitral award not being implemented, the respondent filed an application for execution thereof before the Sub-Judge, Begusarai. Railways sought for stay of execution proceeding which was rejected. Steps were not taken to challenge that order or to seek stay from the appellate Court. Subsequently, when the executing Court issued a letter to the railways requiring railways to implement the award, this writ application has been filed on the ground that appeal having been filed, there could be no execution and the filing of appeal would amount to stay of the award. Reliance has been placed on the judgment of the Apex Court in the case of National Aluminum Co. Ltd. v. Pressteel & Fabrication (P) Ltd. and Anr., 2004 1 SCC 540 and in particular para 10 thereof and also on the case of National Buildings Construction Corporation Ltd. v. Lloyds Insulation India Ltd., 2005 2 SCC 367 suggesting of the propositions that the moment an appeal is filed, the arbitral award cannot be given effect to. Both judgments are with regard to interpretation of Section 36 of the Arbitration and Conciliation Act, 1996. There cannot be question of any quarrel with the proposition but the question is whether that law applies at all in the facts of this case.

(3.) The first misconception is that from an award there is an appeal as a matter of right. The scheme of the Act is to make the award a final determination and there is a very small window open to challenge the award under the provision that is contained in Section 34 of the Act and the ground are to be found in sub-section (2) thereof. As would be seen from the facts as noted above, the railways had not taken steps for challenging the award within three months of the award as provided in sub-section (3) of Section 34. It was for clarification on something which was totally irrelevant. The award is dated 31 -1-2007 and admittedly so-called appeal is filed on 7-2-2008 about a year later and exactly a year after its communication. If we read the provisions of Section 36 of the Act, then we would find that it clearly provides that where the time for making an application to set aside the arbitral award under Section 34 has expired, Court could execute the award. The time to challenge the award as noted above is stipulated in Section 34(3) and is three months. Thus, admittedly and undisputedly the application challenging the award was not filed within the time specified and thus by application of Section 36 itself, the award is executable and there is no question of automatic stay which would have been the case if the challenge was made within stipulated period.