Union Of India vs M/S. Susuka Pvt. Ltd.

Union of India ….Appellant(s)

VERSUS

M/s. Susaka Pvt. Ltd. & Ors. …Respondent(s)

JUDGMENT

Abhay Manohar Sapre, J.

1. This appeal is filed by the Union of India

against the final judgment and order dated

11.02.2005 passed by the High Court of Bombay in

Appeal (Ld) No.666 of 2003 in Arbitration Petition

No.96 of 2003 whereby the Division Bench of the

High Court allowed the appeal filed by respondent

No.1 herein and set aside the order dated

21.04.2003 passed by the Single Judge in

Arbitration Petition No.96 of 2003. Signature Not Verified Digitally signed by ASHA SUNDRIYAL Date: 2017.12.08 16:21:25 IST Reason: 1

2. The issue involved in the appeal is short and,

therefore, it is not necessary to set out the entire

factual scenario of the case except to the extent

necessary to appreciate the issue.

3. In short, the question, which arises for

consideration in this appeal, is whether the Arbitral

Tribunal was justified in awarding interest on

various claims for different periods to the claimant

(respondent No.1), namely, (i) for a pre-reference

period, i.e., 04.03.1996 to 05.05.1999 @ 15% p.a.;

(ii) pendent lite, i.e., for the period from 06.05.1999

to 09.09.2002 @ 12% p.a.; and (iii) post reference

period, i.e., 09.09.2002 till payment @ 18% p.a.,

total (first and second) Rs.12,89,033/- on the

awarded sum.

Brief facts:

4. A works contract (repairing work of 25 No.

stators of TAO-659 Traction Motors of Electric

Locomotives type WCAMI of Electric Loco

2 Shed-Valsad) was awarded by the Union of India

(Railways) - the appellant herein to respondent No.1

(claimant) on 19.12.1994.

5. In execution of the works contract, various

disputes arose between the parties. Since the

General Conditions of Contract (in short, “GCC”)

contained Clause 56(1) to decide the disputes

arising out of the contract through arbitration,

respondent No.1(claimant) invoked the arbitration

clause and filed an application in the High Court of

Bombay under Section 11(5) of the Arbitration and

Conciliation Act (hereinafter referred to as “the Act”)

praying therein for appointment of the Arbitral

Tribunal in terms of Clause 56(1) and to make a

reference to the Arbitral Tribunal for deciding the

disputes which had arisen between the parties.

6. The High Court, by order dated 27.07.2001,

with consent of both the parties allowed respondent

No.1's application and referred the various claims (1

3 to 17) made by the respondent (claimant) against

the appellant for their adjudication by the Arbitral

Tribunal, which consisted of three Arbitrators

(Railway Officials). The order making the reference

to the Arbitral Tribunal reads as under:

“There is no dispute that claims Nos. 1

to 13 which are mentioned in the letter dated 19th August, 1999, Exhibit “B” to the Application, are already referred for arbitration to Shri B.B. Verma, Presiding Joint Arbitrator & FA & CAO (I), Churchgate and two other Arbitrators, (i) Shri Arunendra Kumar, Jt. Arbitrator & CRSE, Churchgate and (ii) Shri S.K. Kulshrestha, Jt. Arbitrator & CE, N.F. Railway.

2. By Consent, claim at Sr. No. 16 (Claim No. 2.1) and at Sr. No. 17 (Claim No. 2.2) are also referred for arbitration to the same Arbitrators who shall decide these claims along with claim Nos. 1 to 15. They shall also be free to decide pre-reference interest, Pendente lite interest, further interest and costs considering the agreement. The Respondent shall be free to file counter-claim, if any.”

7. Parties submitted to the jurisdiction of the

Arbitral Tribunal, filed their statement of

claim/reply etc. and adduced evidence. The Arbitral

Tribunal, by their unanimous reasoned award dated

4 11.09.2002, partly allowed the claims of respondent

No.1 against the appellant as under:

Claim Brief Claim Amount No. Description Amount in awarded in Rs. Rs. 1.1 Loss 6,97,554 3,48,777 suffered due to under-utiliz ation of equipment purchased specially for this contract. 1.2 Material 3,00,723 3,00,723 purchased not utilized. 1.3 Loss of 4,65,409 2,32,703 Profit (Revised to Rs. 4,44,620) 1.4,1.5 & 1.4 4,65,409 3,41,830 2.1 –Overheads during 3,89,165 contracted period 3,06,748 under utilized- 1.5 –Overheads from 9.6.1995 to 4.3.1996 – 2.1 –Overheads from 5.3.1996 to 30.06.1996 1.7 & 2.2 1.7 – 3,28,085 1,64,042 Amount for the period 1.7.94 to

5 29.6.1996 1,24,174 2.2 – Amount for the period 5.3.96 to 30.09.1996 1.6 Payment 85,106 85,106 under price variation clause 1.8 & 2.3 Payment of As accrued 12,89,033 2.4 pre lite interest from 13.12.95 to 5.5.99 Total 27,62,214

8. The appellant-Union of India, felt aggrieved of

the Arbitral Award, challenged its legality by filing

an application under Section 34 of the Act in

Bombay High Court (Single Judge).

9. The Single Judge, by order dated 21.04.2003,

allowed the appeal in part and made two

modifications in the arbitral award with respect to

the date of award of interest on the claim of

respondent No.1 for damages and on the claim of

one purchase item. The Single Judge made the

interest payable from the date of award till

6 realization. So far as the challenge to other claims

including award of interest on such claims were

concerned, the Single Judge rejected the appellant’s

all objections and upheld the award in totality for all

purposes.

10. Respondent No.1 (claimant), felt aggrieved

against that part of the order of the Single Judge

which interfered in part in the arbitral award, filed

appeal before the Division Bench. So far as the

appellant-Union of India was concerned, they did

not file any appeal against that part of the order of

the Single Judge which had rejected substantially

their application filed under Section 34 of the Act.

In this view of the matter, the award to that extent

became final.

11. By impugned judgment, the Division Bench of

the High Court allowed respondent No.1’s appeal

and set aside the order of the Single Judge. It was

held that no ground under Section 34 of the Act had

7 been made out by the Union of India to modify the

award to the extent of awarding interest on the

claim. In other words, in the opinion of Division

Bench, the ground on which the limited interference

was made by the Single Judge for setting aside a

part of the Award in relation to award of interest

from a particular date on two (2) claims to

respondent No.1 (claimant) was not a ground falling

under Section 34 of the Act and, therefore, the order

of Single Judge was not legally sustainable. It was

accordingly set aside resulting in upholding of the

entire award and dismissal of Section 34 application

in its entirety. It is against this order, the Union of

India (Railways) felt aggrieved and filed the present

appeal by way of special leave in this Court.

12. Heard Ms. Kiran Suri, learned senior counsel

for the appellant and Mr. Vinay Navare, learned

counsel for respondent No.1.

8

13. Ms. Kiran Suri, learned senior counsel,

appearing for the appellant (Union of India) while

challenging the legality and correctness of the

impugned judgment has argued only one point.

14. According to learned counsel, the Arbitral

Tribunal mis-conducted in awarding interest on

various claims and, therefore, a ground to set aside

the arbitral award under Section 34 of the Act is

made out.

15. Placing reliance on Clause 13(3) of GCC,

learned counsel urged that since clause 13(3)

provides that no interest will be payable upon the

earnest money or the security deposit or amounts

payable to the contractor under the contract (except

Government securities), respondent No.1 (claimant)

was not entitled to claim interest on any of the

heads.

16. In other words, the submission was that the

Arbitral Tribunal mis-conducted in awarding

9 interest to respondent No.1 (claimant) on their

various claims when the clause 13(3) of GCC did not

allow them to claim any interest on the sums

payable under the contract except on Government

securities, if deposited with the appellant.

17. It was, therefore, her submission that the

award to this extent was not legally sustainable

and, therefore, it was liable to be set aside under

Section 34 of the Act. Learned counsel elaborated

this submission by placing reliance on the

provisions of the Act and some decided cases cited

at the Bar.

18. In reply, learned counsel for respondent No.1

(claimant) supported the impugned judgment and

contended that the aforementioned point urged by

the appellant was neither raised nor urged before

the Arbitral Tribunal nor the High Court, i.e., Single

Judge and also Division Bench and hence it cannot

be permitted to be raised, for the first time, in an

10 appeal under Article 136 of the Constitution for

want of any factual foundation and finding by any

Court on such plea.

19. Having heard learned counsel for the parties

and on perusal of the record of the case, we are

inclined to accept the argument of learned counsel

for respondent No.1 as, in our view, it has a force

and hence deserves acceptance.

20. It is not in dispute that the appellant did not

raise the plea based on clause 13(3) of the GCC

against respondent No.1 at any stage of the

proceedings either in their reply filed before the

Arbitral Tribunal or/and in submissions except

raising it, for the first time, before this Court in this

appeal.

21. On the other hand, we find that in Section 11

(5) proceedings, the appellant did not raise this

objection in their reply and instead gave their

express consent to refer the issue of award of

11 interest payable on various claims (1 to 17) to

Arbitral Tribunal considering the said claim to be

arbitrable under the contract.

22. In our opinion, the appellant could have

registered their objection before the Single Judge at

the time of making a reference to the Arbitral

Tribunal by pointing out Clause 13(3) of GCC or

could have reserved their right to raise such

objection before the Arbitral Tribunal. It was,

however, not done.

23. Not only that, we further find that the

appellant, in their reply, filed before the Arbitral

Tribunal also did not raise this plea and allowed the

Arbitral Tribunal to adjudicate the said issue on

merits.

24. If the appellant was so keen to place reliance

on clause 13(3) of GCC to defeat the claim of

respondent No.1 relating to the award of interest on

various claims, then it was necessary for the

12 appellant to have raised such plea specifically, in

their reply, before the Arbitral Tribunal. No such

plea was raised even before the Arbitral Tribunal.

25. Though we find that the appellant raised this

ground, for the first time, in Section 34 proceedings

[see-ground (cc)] before the Single Judge but again

this ground was not pressed at the time of

arguments. It is clear from the perusal of the Single

Judge’s order. Not only that, the appellant again

did not raise this plea before the Division Bench.

26. In the light of aforementioned factual scenario

emerging from the record of the case, we cannot

grant any indulgence to the appellant (Union of

India) to raise such plea for the first time here. In

our view, it is a clear case of waiver or/and

abandonment of a plea at the initial stage itself.

27. Everyone has a right to waive and to agree to

waive the advantage of a law made solely for the

benefit and protection of the individual in his

13 private capacity, which may be dispensed with

without infringing any public right or public policy.

Cuilibet licet renuntiare juri pro se introducto. (See

Maxwell on The Interpretation of Statutes 12 th

Edition at page 328)

28. If a plea is available-whether on facts or law, it

has to be raised by the party at appropriate stage in

accordance with law. If not raised or/and given up

with consent, the party would be precluded from

raising such plea at a later stage of the proceedings

on the principle of waiver. If permitted to raise, it

causes prejudice to other party. In our opinion, this

principle applies to this case.

29. In our opinion, the appellant is otherwise not

entitled to raise the plea on yet another ground. It

is not in dispute that the appellant’s application

filed under Section 34 of the Act was partly allowed

by the Single Judge only to the extent of two claims

regarding award of interest. In other words, the

14 application suffered dismissal substantially on all

other claims except two claims mentioned above.

However, despite suffering substantial dismissal,

the appellant did not file any appeal to challenge the

part dismissal of their application.

30. In this view of the matter, in our view, the

order of the Single Judge insofar as it resulted in

dismissal of the appellant’s application became final

and attained finality. In order to keep the issue

alive, the appellant was under obligation to file

regular appeal before the Division Bench against

that part of the Single Judge’s order by which their

application under Section 34 of the Act in relation to

all other claims had been dismissed. It was only

then in the event of dismissal of the appeal, the

issues raised therein could have been pursued in

appeal to this Court under Article 136 of the

Constitution and that too only on the grounds

15 raised therein and decided against the appellant. It

was, however, not done by the appellant.

31. In our opinion, therefore, this is yet another

infirmity which renders the appeal devoid of any

merit.

32. In our considered view, the grant of award of

interest on arbitrable claims by the Arbitral

Tribunal is not inherently illegal or against any

public policy or per se bad in law or beyond the

powers of the Arbitral Tribunal. In other words, it is

permissible to award interest in arbitrable claims by

the Arbitral Tribunal.

33. Indeed, Section 31(7) (a) and (b) of the Act

empowers the Arbitral Tribunal to award interest on

the awarded sum and secondly, it is always subject

to the agreement between the parties.

34. It is a well-settled principle in Arbitration Law

that the award of an Arbitral Tribunal once passed

is binding on the parties. The reason being that the

16 parties having chosen their own Arbitrator and

given him an authority to decide the specific

disputes arising between them must respect his

decision as far as possible and should not make any

attempt to find fault in each issue decided by him

only because it is decided against one party. It is

only when the issue decided is found to be bad in

law in the light of any of the specified grounds set

out in Section 34 of the Act, the Court may consider

it appropriate to interfere in the award else not. The

case at hand falls in former category.

35. This case reminds us of the apt observations

made by former Chief Justice M.C. Chagla in Firm

Kaluram Sitaram vs. The Dominion of India, AIR

1954 Bombay 50. That was also a case between the

Railways and private party (citizen) wherein the

learned Chief Justice, in his distinctive style of

writing, commented upon the manner in which the

Railway contested the case against the private party

17 (citizen) by raising some technical pleas and

observed as under:

“Now, we have often had occasion to say that when the State deals with a citizen it should not ordinarily rely on technicalities, and if the State is satisfied that the case of the citizen is a just one, even though legal defences may be open to it, it must act, as has been said by eminent judges, as an honest person.”

36. The aforementioned observations has full

application to the case at hand because here also,

the appellant (railways) pursued their technical

legal point up to this Court against respondent No.1

(claimant) without even raising it at any stage of

proceedings much less to find out whether it could

be made a ground under Section 34 of the Act to

seek its setting aside. All was being done to defeat

respondent No.1’s just claim of interest which was

rightly awarded by the Arbitral Tribunal and upheld

by the Courts below on other grounds.

37. Learned counsel for the appellant did not urge

any other point to attack the impugned judgment

18 including the reasoning given in support of the

award of interest except to urge the aforesaid point

to challenge its legality, which we have repelled by

not permitting the appellant to raise it in this

appeal.

38. In view of foregoing discussion, we find no

merit in the appeal, which thus fails and is

accordingly dismissed.

………...................................J. [ABHAY MANOHAR SAPRE]

…...

……..................................J. [NAVIN SINHA]

New Delhi;

December 08, 2017

19