Union of India v. BS Sangwan

1. This is an appeal filed under Section 37 (1) (C) of Arbitration and conciliation Act, 1996 read with Section 13(1) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 for setting aside the judgment dated 05.09.2017 as well as the impugned arbitration award dated 21.01.2017.

2. The necessary facts as noticed by the learned Single Judge are as under:-

3. Post handing over the inventories, the respondent raised the claim with respect to keeping watch and ward of railway property round the clock for a period between 30.04.2010 to 31.03.2012 during which time, as per the case of the respondent, the respondent had deployed watch and ward for the area in question. Since the claim of the respondent was not settled, the respondent invoked the arbitration clause and since the appellant herein failed to appoint an arbitrator, a petition under section 11 of the Arbitration and Conciliation Act, 1996 was filed. A retired District Judge was appointed as a sole arbitrator, who rendered his Award on 21.01.2017. Objections to the Award stand dismissed by a learned Single Judge of this Court, which has led to the filing of the present appeal.

4. Learned counsel for appellant submits that the learned Single Judge has failed to take into account that in the agreement entered into between the parties, there was no provision as an extra item for watch and ward. It is the submission of learned counsel for the appellant that it was the sole duty and responsibility of the respondent, who has been awarded the work to deploy watch and ward and no separate item was either provided for or could have been claimed. It has been strenuously urged before this Court that the learned Arbitrator as also the learned Single Judge has failed to take into account that no amount can be paid to the respondent in the absence of the sanction which was not accorded. Counsel contends that undue importance has been given to communications i.e. Ex.CW1/15 being letter dated 01.10.2010 written to Deputy Chief Engineer, CW1/16 being letter dated 04.10.2010, Ex.CW1/18 being letter dated 09.11.2010, CW1/19 being letter dated 23.12.2010 and Ex.CW1/20 being copy of office note for necessary administrative approval for the N.S. item. Learned counsel for the appellant also contends that the learned Single Judge as also the learned Arbitrator completely loss tract of the fact that in fact these were internal office notings and communications, on which no reliance could have been placed. Counsel submits that the respondent had only produced documents selectively and respondent has relied on PP[1] but suppressed the main document PP[6], thus, the learned Arbitrator and the learned Single Judge have been misled.

5. Mr. Haider, learned counsel for respondent, who enters appearance on an advance copy, submits that there is no infirmity in the Award as also the judgment passed by the learned Single Judge which would require interference in the present appeal. It is contended that neither the award nor the judgment of learned Single Judge is perverse or irrational. Counsel further submits that the award is based on evidence and PP[1], relied upon by the respondent. He submits that all the PPs were filed by the respondent and in case the appellant wanted to rely on some of its own documents, the appellant was not prevented from doing so. Counsel further submits that based on the documents, the learned Single Judge dismissed the objections filed by the appellant herein. Learned counsel also relies upon various judgments in support of his contention that while hearing the objection to the award, the Court would not sit as a Court of appeal and even errors of fact cannot be corrected. He further submits that it is the settled law that the arbitrator is the ultimate master of the quality and quantity of the evidence at the time when he would deliver the award. Learned counsel for the respondent submits that the learned Single Judge has referred to each and every relevant document and has even extracted copy of PP[1], which was duly signed and, as per which, the financial sanction was to be accorded.

6. We have heard learned counsel for the parties and considered their rival submissions and have also given a thoughtful consideration to the matter. It is no longer res integra that the scope for interference in an appeal under section 37(1) (C) of the Arbitration and Conciliation Act, 1996 is narrow. In order to succeed, the appellant must establish that the finding of the Arbitrator is based on no evidence or the Arbitrator has taken into account material which is irrelevant or has ignored vital evidence. The only argument which has been raised before us is that there was no sanction and that deployment of watch and ward was not part of the original agreement and thus, the respondent-claimant could not raise such a claim. The communications i.e. Ex.CW1/15 letter dated 01.10.2010, Ex.CW1/16 letter dated 04.10.2010, Ex.CW1/18 letter dated 09.11.2010, Ex.CW1/19 letter dated 23.12.2010 and Ex.CW1/20 copy of office note for necessary administrative approval are the documents relied upon by arbitrator and noticed by learned Single Judge to reach a conclusion that respondent was called upon orally to deploy watch and ward round the clock as there were various incidents of theft. The reading of these documents would show that the section between Rewari to Rohtak was theft prone. The documents placed on record also show that material was removed and in fact two rails were found cut in the middle by hacksaw blade which is apparent by reading of letter dated 04.10.2010. The letters would also show that the department did not have sufficient manpower and staff for deploying as watch and ward round the clock to prevent theft. We also find that besides PP[1], copies of other PPs, were also placed on record and in fact in PP[3], various queries have been raised including as to whether the contractor was responsible for maintenance as per past precedents. We have referred to this PP only to satisfy ourselves that this was not a decision taken without any application of mind but was a decision after full satisfaction and based on replies received with respect to queries raised, we may note that in reply to query 3 and 4, it has been stated “similar item of watch and ward have already been provided in one of the unit of construction organization”, in query 5 it has been stated “since the risk in the shape of cost of P.Way material is huge may be few crores, therefore calling open tender for security of P.Way material may not be economical as compared to proposed item rate”. The submission made by learned counsel for appellant that final sanction was not granted, is misplaced. We deem it appropriate to reproduce para 17 of the judgment of learned Single Judge wherein he has taken note of the fact that railway often gives oral instructions to contractors to carry out works and formal sanction comes at a much later stage. An illustration has been given where work of this type of contract was completed in the year 2012 while sanction was granted in the year 2014. Para 17 of judgment passed by learned Single Judge reads as under:-

17. The respondent has filed the claim for watch and ward staff deployed stating that it was on the directions of the petitioner and has relied on various evidence including the above documents. During the course of arguments before this court, the court had pointed out to learned counsel for the respondent that it would not be possible for the respondent to claim payment for the work done in the absence of formal contract with petitioner, which is a Government Organization. The learned counsel for the respondent had pointed out that it is the norm in Railways that number of additional works are done by the contractors on oral instructions of the officers of the petitioner and the formal sanctions comes at a much later stage. It was pointed out that even in the present contract number of additional items were done on oral instructions of the officers of the petitioner. He submits that the work was completed on 05.12.2012. However, the sanction of all these additional items done on oral instructions was given in a note dated 27.08.2014. The said note reads as follows: “Notes:

1. Total items 70 (Seventy) only i.e. 70 (Seventy) only 61 (Sixty one) items under Group „B‟ non-schedule items & 09(Nine) only under Group ASOR – 1996 items. 2. All items and conditions of agreement No.74- W/6/159/WA/TKJ dated 01.07.2009 will remain the same.

3. The amount of agreement will increase/decrease from Rs.6,84,80,133.08 after availing 2.71% unconditional rebate on all items to Rs.7,16,85,828.52 after 2.71% rebate.

4. No claim decease/increase quantities. Signature of the contractor/s (Rakesh Yadav) M/s B.S.Sangwan Dy.Chief Engineer/Const. 4, G.F. Harry Plaza Tilak Bridge, New Delhi Near HDFC Bank, for and on behalf of the Subhash Chowk, Sonepat President of India (Haryana) Executive Engineer/ Const, Northern Railway, Rohtak. Rates & quantities Technically checked. (SSE/C/Estt.TKJ) Rates Checked. WA/C/TKJ OS/W/C/TKJ”

7. We may also note that in this case it is the stand of the appellant that watch and ward was to be provided by the contractor respondent herein. We find no force in the submission so made for the reason that in case the watch and ward was the responsibility of the respondent, there would be no reason by the appellant to appoint M/s Deepak Enterprises on 21.01.2012 for the same purpose and call upon the respondent to handover the inventories to the newly appointed contractor. We say at the cost of the repetition that in case according to the appellant, watch and ward was the responsibility of the contractor, sure enough, they would not have appointed Deepak Enterprises on 21.01.2012. Reading the PPs and communications which have been relied upon by the respondent, we do not find any objection was raised before the learned Single Judge that the said PPs could not be relied upon or that the said documents were either procured or not genuine, thus, the objections sought to be urged before us today is misplaced.

8. It is no longer res integra that the scope of judicial interference in an application under Section 34 of the Arbitration and Conciliation Act, 1996 is limited in nature. It has further been held that the scope of interference while deciding an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 is even more restrictive in nature. The Supreme Court of India has consistently held that an arbitration award should not be lightly interfered with. (See Renusagar Power Co. Ltd. v. General Electric, (1994) Supp. 1 SCC; ONGC v. Saw Pipes, (2003) 5 SCC 705, Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445; and Associate Builders v. DDA, (2015 3 SCC 49).

9. While deciding an appeal it must be kept in mind that the Arbitrator/Tribunal is the final arbiter on facts as well as law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Sections 34 or 37 of the Act. In the case of P.C.L Suncon (JV) v N.H.A.I.,2015 SCC Online Del 13192, in para 24, it was held that: