Tamil Nadu Water Supply & Drainage Board vs M/S. Satyanarayana Brothers Pvt. Ltd

Tamil Nadu Water Supply & Drainage Board ... Appellant

Vs.

M/s. Satyanarayana Brothers Pvt.Ltd. ... Respondent

O R D E R

1. In order to overcome the shortage of drinking water in

the City of Chennai, the Government of Tamil Nadu

formulated a scheme known as "Veeranam Project" to provide

drinking water to the city. Tenders were invited for the

said scheme and ultimately, the tender submitted by the

respondent M/s. Satyanarayana Brothers Pvt. Ltd. was

accepted. The work undertaken could not be completed

within the stipulated time and the respondent sought 2

extension to complete the work. Though the time was

extended, the respondent could not complete the same on

account of disputes which were ultimately referred to the

arbitration of two arbitrators appointed by the parties.

The arbitrators appointed Hon'ble Mr. Justice K.S.

Palaniswamy, a retired Judge of the Madras High Court, as

their umpire. On account of disagreement between the

arbitrators the matter was referred to the umpire who held

that the respondent was entitled to Rs.40,02,591/- from the

appellant and after allowing the deduction for the same the

respondent was liable to pay to the appellant a sum of

Rs.2,69,93,674/- with interest @9% per annum from the date

of the Award. Out of the said Award, only a sum of

Rs.5,000/- was awarded as damages for breach of contract.

2. The Award was filed by the umpire in the Madras High

Court and was numbered as O.P.No.428/79. While the

appellant filed Application No.560/80 in the said

O.P.No.428/79 praying for a decree to be passed in terms of

the Award, the respondent being aggrieved by the Award,

filed O.P.No.122/80 for setting aside the Award. The

learned single Judge allowed the prayer for setting aside

the Award and consequently, the other application filed by 3

the appellant for a decree to be passed in terms of the

Award was dismissed. C.S.No.176/78, which had been filed

by the appellant, was also dismissed.

3. Thereafter, the appellants preferred appeals, being

O.S.A.Nos.248 of 1989 and 59 of 1993, against the order of

the Single Judge. The said appeals were allowed by the

Division Bench of the High Court by its order dated

18/10/2001 and a decree was passed in terms of the Award

dated 10th September, 1979, passed by the umpire.

Aggrieved by the order dated 18/10/2001, by which OSA

248/89 and 59/93 had been initially allowed by the Division

Bench, the respondent filed SLP(C)Nos.2096-2097 of 2002.

The said special leave petitions were re-numbered as

C.A.Nos.9136-9137 of 2003, and were disposed of by this

Court on 18/11/2003. The matter was remitted to the

Division Bench of the High Court and on remand, the

Division Bench dismissed the said appeals, holding that

foreign exchange was to be obtained by the joint efforts of

the appellant and the respondent and that the Government

was not extending time reasonably but in a piece meal

manner. Accordingly, the High Court held that the

respondent had not committed any breach of the contract. 4

Aggrieved by the said order dated 24th March, 2004, the

appellant preferred these appeals (C.A.Nos.2880-2881/05),

which were dismissed by this Court on 7th February, 2007.

By consent of parties, the Hon'ble Mr. Justice S. Mohan, a

retired Judge of this Court was appointed as Sole

Arbitrator to decide the disputes between the parties. The

learned Arbitrator submitted his Award on 26th October,

2007, holding that the respondent/claimant would be

entitled to a sum of Rs.15,84,933.76p. Thereafter, the

parties were given the opportunity of filing their

respective objections to the said Award and ultimately the

matter has come up for the acceptance of the Award.

4. At the very outset, it was sought to be urged on behalf

of both the parties that the said Award dated 26th October,

2007 was not acceptable to either party on account of an

erroneous understanding of the respective cases made out by

the parties. While the appellant questioned the rejection

of its case that the respondent had no claim against the

appellant and the innocuous finding that the breach

committed by the contractor was no longer available in view

of the earlier decision, the respondent-contractor

questioned the Award on the ground that its just claims had 5

been wrongly rejected in respect of damages suffered in

view of the stoppage of the work on account of the

appellant's failure to provide necessary assistance for

obtaining foreign exchange for completion of the project.

5. Both the parties are aggrieved by the Award on the

ground of non-application of mind by the Arbitrator to the

material before him. It is the common ground of the

parties that the learned Arbitrator misconducted himself in

appreciating the case made out by of the respective parties

vis-a-vis the materials on record. We have considered the

submissions made and we have also looked into the Award,

which indicates that the learned Arbitrator had legally

misconducted himself thereby attracting the provisions of

Section 30(a) of the Arbitration Act, 1940. We,

accordingly, set aside the Award and remit the matter to

the learned Arbitrator for a fresh decision. However, in

place of Justice S. Mohan, who had submitted his Award, we

appoint Justice Shivraj Patil, a retired Judge of this

Court to be the sole Arbitrator to consider the matter and

pass a fresh Award in the light of the judgment of this

Court dated 07/02/2007 in C.A.Nos.2880-2881 of 2005 and

file the same in this Court. The learned Arbitrator shall 6

be entitled to settle his fees and other expenses which

are to be equally shared by the parties and work out the

procedure to be followed in conducting the arbitration

proceedings. The learned Arbitrator is requested to make

his Award expeditiously, but preferably within a period of

six months from the date of entering upon the reference.

................................................J. (ALTAMAS KABIR)

................................................J. (CYRIAC JOSEPH) New Delhi Dated: November 05, 2009.