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The Arbitration Act, 1940
Section 30 in The Arbitration Act, 1940
Section 39 in The Arbitration Act, 1940

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Bombay High Court
H vs M/S Ramdas Construction Company on 18 September, 2008
Bench: V. A. Naik

FA 276/00 1 Judgment IN THE HIGH COURT OF JUDICATURE AT BOMBAY, rt

NAGPUR BENCH, NAGPUR.

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First Appeal No. 276/2000

C

1. The General Manager

Western Coalfields Limited

N.C.D.C. Jaripatka, Nagpur.

2. The Managing Director, h

Western Coalfields Limited

Coal Estate, Civil Lines, Nagpur.

ig APPELLANTS .....VERSUS.....

H

1. M/s Ramdas Construction Company, Through its Partner, JS Verma,

Surana Layout, Chaoni, Nagpur.

y

2. Shri S.D. Bedekar,

51/1, Khare Town, Nagpur. RESPONDENTS ba

Shri M.P. Badar, counsel for the appellants. Shri A.S. Jaiswal, counsel for the respondent no.1. om

CORAM: SMT.VASANTI A.NAIK, J.

DATE : 18th SEPTEMBER, 2008.

B

ORAL JUDGMENT

This is an appeal under the provisions of Section 39 of the Arbitration Act of 1940.

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2. Few facts giving rise to the appeal are stated thus----- rt

The Western Coalfields Limited had invited tenders for the ou

work of walling and roofing of Patansawangi scheme at Sillewara Colliery from experienced contractors. The estimated cost of the work was C

Rs.1,88,000/- and the duration of the work was from 08.04.1976 till 07.06.1976. The respondent Firm, M/s Ramdas Construction Company h

(hereinafter referred to as 'the Firm' for the purpose of brevity) submitted ig

its tender on 15.03.1976 and the same was accepted at its item wise H

quoted rate at the total cost of Rs.3,30,040/-. The work order was issued in favour of the Firm. An agreement was executed by the parties. The y

agreement contained an arbitration clause and in case of a dispute, the ba

same was required to be referred to the Arbitrator nominated by the Managing Director of Western Coalfields Limited. om

3. A dispute arose between the Executive Engineer of the B

Western Coalfields Limited and the Firm about the execution of the work. The Firm filed an application before the Civil Judge (Senior Division), Nagpur for appointment of an Arbitrator and by an order dated 30.07.1982 Shri S.D. Bedekar, Retired Engineer of Public Works ::: Downloaded on - 09/06/2013 13:52:16 ::: FA 276/00 3 Judgment Department was appointed as an Arbitrator. The Firm filed its claim rt

before the Arbitrator. The Western Coalfields Limited also filed a ou

reply to the claim statement. It appears from the record that the Arbitrator considered the claim statement to be the examination-in-chief C

and directed the Western Coalfields Limited to cross-examine the witness of the Firm, on the same. Copies of certain communications h

exchanged between the parties were placed on record. On 25.09.1991, ig

the Arbitrator passed a non speaking award directing the Western H

Coalfields Limited to pay a sum of Rs.5,38,859.28 Paise to the Firm. Since it was a matter under the Arbitration Act, 1940, the Western y

Coalfields Limited filed an application under Section 30 of the ba

Arbitration Act before the Civil Judge (Senior Division), Nagpur for setting aside the award. The Civil Judge (Senior Division), Nagpur, om

however, rejected the application filed by the Western Coalfields Limited by the judgment and order dated 05.05.2000. The award B

of the Arbitrator and the judgment passed by the Civil Judge (Senior Division), Nagpur on 05.05.2000 are challenged in the instant appeal.

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4. Shri M.P. Badar, the learned counsel for the appellants, rt

submitted that the judgment and the award are liable to be set aside as ou

the Arbitrator had misconducted himself and the proceedings. It is submitted on behalf of the appellant that the Arbitrator illegally granted C

the entire claim of the Firm by the award dated 25.09.1991 though there was no evidence whatsoever to support the claim, as also the award. It is h

submitted on behalf of the appellants that this is a case of no evidence ig

and the Arbitrator has thus misconducted himself in granting the claims H

of the Firm in totality. The counsel for the appellant then submitted that there was no evidence whatsoever to grant the major claim of Rs.40,000/- y

towards loss of reputation and loss of profit, specially when by the reply ba

to the claim statement, the Western Coalfields Limited had asked the Firm to strictly prove the same. The counsel for the appellant then om

submitted that the claim petition was as vague as it could be and in the absence of any examination-in-chief and in view of the cross-examination B

which totally devastated the case of the Firm, there was no reason to grant the three major claims towards loss of reputation and profit, damages for idle labour and water charges. The counsel for the appellant submitted that the evidence of the Firm's witness in the cross- ::: Downloaded on - 09/06/2013 13:52:16 ::: FA 276/00 5 Judgment examination not only shattered the case of the Firm but, also showed that rt

there was no evidence available with the Firm to make the inflated ou

claims. The counsel for the appellants relied on the judgment reported in AIR 1987 Delhi 148 to canvass that an award based on no evidence, is C

liable to be set aside.

h

5. Shri Anand Jaiswal, the learned counsel for the Firm, supported ig

the judgment passed by the Civil Judge (Senior Division), Nagpur as also H

the award passed by the Arbitrator. The counsel for the Firm, submitted that this Court cannot test the correctness or otherwise of the award y

passed by the Arbitrator as none of the conditions for setting aside the ba

award under Section 30 of the Arbitration Act, 1940 are satisfied in this case. According to the counsel for the Firm, the award passed by the om

Arbitrator could not have been challenged merely because it was a non speaking one. It is submitted on behalf of the respondent that it is not for B

this Court to consider whether the evidence before the Arbitrator was sufficient or not for granting the claims made by the Firm and an award cannot be set aside merely because the Court is of the view that the evidence on record is not sufficient for granting the claims. It is submitted ::: Downloaded on - 09/06/2013 13:52:16 ::: FA 276/00 6 Judgment on behalf of the Firm that the Arbitrator was entitled to carve out and rt

follow his own procedure in the arbitration proceedings and the ou

Arbitrator had, therefore, considered the claim statement of the Firm as the examination-in-chief and permitted the appellant to cross-examine the C

witness of the Firm on the claim statement. The counsel for the Firm then submitted that the grounds for interference under the Act of 1940 are h

restricted to those enumerated in Section 30 and it would not be within ig

the jurisdiction of this Court to reconsider the evidence tendered by the H

parties for testing the correctness of the award passed by the Arbitrator. The counsel for the respondent no.1 relied on the decision of the y

Supreme Court reported in 2001(5) SCC 691 to canvass that the ba

conclusion of the Arbitrator on facts, even if found to be erroneous in the opinion of the Court, cannot be interfered with. The counsel for the om

respondent no.1 also relied on the decision reported in 2007(3) SCC 99 to canvass that the Court cannot speculate that the view of the Arbitrator B

as to evidence, was unjust where no reasons are recorded by the Arbitrator. The counsel for the Firm, therefore, sought for the dismissal of the appeal.

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6. On hearing the learned counsel for the parties and on perusal rt

of the Record & Proceedings and the judgment and award impugned ou

in the instant case, it is necessary to consider whether the Arbitrator has misconducted himself and whether the award is liable to be set C

aside.

h

7. To consider these questions, it is necessary to consider few ig

facts:

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A statement of claims was filed by the Firm before the Arbitrator. By claim no.1, the Firm had claimed an amount of Rs.3,068/- y

towards 1% rebate on quoted rates. By the second claim, the Firm had ba

claimed an amount of Rs.61,362/- for non utilisation of machinery, labour, overheads, etc. Under the claim no.3, an amount of Rs.15,500/- om

was also claimed for idle labour, staff, machinery, transport, etc. It appears from the claims statement that claim no.2 and claim no.3 were B

overlapping. An amount of Rs.4,200/- was claimed for recovery of two tons of steel which was not supplied to the Firm, under claim no.4. Under claim no.5, the Firm claimed an amount of Rs.1,880/- towards the cost of material lost due to landsliding. An amount of Rs.2,760/- was ::: Downloaded on - 09/06/2013 13:52:16 ::: FA 276/00 8 Judgment claimed for 34500 bricks which remained at the work site after rt

completion of the work. An amount of Rs.11,357/- was claimed for ou

removal of G.I. Pipes laid by the Firm. Rs.1,562/- was claimed for fixing 48 cable hooks. An amount of Rs.1,089/- was claimed for lead and lift. C

Under claim no.10, an amount of Rs.3,616/- was claimed for refilling work done along the walls. An amount of Rs.2,202/- was claimed for h

filling the boulders with sand.

ig Under claim no.13, an amount of Rs.40,000/- was claimed on the ground that the claimant had suffered H

loss of profit and loss of reputation because of the arbitrary action of the Western Coalfields Limited. Lastly, under the 14th claim, interest @ 24% y

was sought on the aforesaid amounts. The claims statement merely ba

mentioned the Heads under which the claims were made and the amount claimed under each head.

om

8. The Western Coalfields Limited had filed a detail reply to the B

claim statement and denied each and every claim made by the Firm. Elaborate submissions were made in the reply for denying the claim of the Firm. Certain explanations were given in the reply to the claim statement for rejection of the claim. In fact, the claim statement was extremely ::: Downloaded on - 09/06/2013 13:52:16 ::: FA 276/00 9 Judgment vague and cryptic and mentioned only the heads under which the claim rt

was made and the amount claimed under that particular head whereas, ou

the reply was explanatory. No details of the claim under any of the 14 heads were given in the claim statement. In this background, it was C

necessary for the Firm to tender oral and documentary evidence to substantiate the claim statement. However, no oral evidence in the form h

of examination-in-chief is tendered by the Firm in this case and the ig

cryptic claim statement is itself considered to be the examination-in-chief. H

No documents whatsoever are produced by the Firm on record. It is necessary to take the examples of the three major claims made by the y

claimant. Claim No.13 as made in the claim statement is reproduced as ba

under :

CLAIM NO.13 : Due to arbitrary action of the respondent, we om

suffered loss of profit, loss of reputation. We claim Rs.40,000/- on this count. The reply to CLAIM NO.13 is as under : B

The claim of Rs.40,000/- is denied. It is without foundation. If at all the claimant has suffered any loss, it is because of his negligence and slackness in getting the work executed. The claimant may be put to strict proof in respect of the loss of profit and loss of reputation. ::: Downloaded on - 09/06/2013 13:52:16 ::: FA 276/00 10 Judgment

9. I have already stated hereinabove that there is no proof rt

whatsoever in this regard either oral or documentary. Not a single ou

document was produced before the Arbitrator to show the loss of profit or loss of reputation. No oral evidence was tendered on this aspect. There C

was no examination-in-chief and claim no.13 merely stated the head of the claim and the amount sought thereunder. In fact, when the witness h

of the Firm was cross-examined, and was asked as to whether he would ig

like to furnish the Profit and Loss account and also Income Tax returns, H

the witness stated in his cross-examination that it was not necessary to file the Profit & Loss account on record and the Income Tax returns were y

also not relevant for deciding the claims. Thus, except for the stray ba

sentence made in claim no.13, and the amount of Rs.40,000/- quoted against the claim, there is nothing on record to show that the Firm was om

entitled to claim an amount of Rs.40,000/-, which is one of the three major claims of the Firm. It is impossible to gauge, in the absence of B

evidence as to what was the reputation of the Firm and what was the loss caused to the reputation of the Firm. This claim could not have been granted by the Arbitrator on the mere asking of the Firm and in the absence of evidence.

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10. Similarly, on the second major claim of Rs.61,362/- and also rt

Rs.15,500/- which is an overlapping claim, it is necessary to consider ou

whether there was slightest evidence on record to grant the same. It is merely stated in claim no.2 and claim no.3 that the Firm was entitled to C

the two aforesaid amounts due to idle machinery, shuttering material, idle labour, staff, etc. It is necessary to state at the cost of repetition that h

as there was no oral evidence tendered by the Firm in this regard, it was ig

impossible to gauge as to how these amounts could be arrived at and H

whether the machinery was really idle. Not a single document was produced on record in regard to these claims also. No muster rolls were y

produced, no receipts were produced, no vouchers were produced and no ba

account books were produced. In the claim statement, there was no break up of the claim for the damage suffered under various items like om

idle machinery, idle labour, shuttering material, staff, etc. In the absence of any break up, any oral or documentary evidence and specially in view B

of the admissions of the witness of the Firm in his cross-examination, totally demolishing the case of the Firm, the grant of the claims in their entirety clearly show that the Arbitrator is guilty of misconduct and the award is liable to be set aside. It is necessary to note that though a notice ::: Downloaded on - 09/06/2013 13:52:16 ::: FA 276/00 12 Judgment of production of documents was issued to the Firm, the documents were rt

not produced before the Arbitrator. In fact, the witness of the Firm had ou

admitted in his cross-examination that he could not tell from whom the machinery was hired and how much charges were paid to the idle C

labourers. It is rather interesting to read the cross-examination of the witness of the Firm which reveals that this is not only a case of no h

evidence but, is a case where the evidence is contrary to the claim made ig

by the Firm. The amount claimed by the Firm under all the heads was H

about 1,53,000/- and the Arbitrator had granted a lump sum of Rs.1,47,670/-. This shows that barring a small amount, there was a grant y

of almost all the claims.

ba

11. Normally, this Court would not have looked into the om

evidence tendered by the parties on record while considering an appeal under Section 39 of the Arbitration Act, 1940 but, since the B

counsel for the appellant had submitted that the award of the Arbitrator was not based on any evidence, this Court was constrained to consider every document from the record of the Arbitrator to find out whether there was slightest evidence to support the ::: Downloaded on - 09/06/2013 13:52:16 ::: FA 276/00 13 Judgment award. Unfortunately, for the Firm, there was none. Though it is rt

true as submitted on behalf of the respondent-Firm that this Court ou

would not have jurisdiction to consider the question of sufficiency or insufficiency of the evidence for passing the award, it is equally C

true that this Court can always consider whether it is a case of no evidence or absolute absence of evidence. An Arbitrator cannot act h

arbitrarily. Since, this is a case of no evidence, it could be said that the ig

award is a product of total non application of mind and is perverse. H

The Arbitrator has not conducted himself in a manner as will subserve the interest of justice.

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ba

12. The case is covered under the provisions of Clause (a) and second part of clause (c) of Section 30 of the Act of 1940. Hence, by om

allowing this appeal, I hereby set aside the award passed by the Arbitrator on 25.09.1991 as also the judgment passed by the 6th Joint Civil Judge B

(Senior Division), Nagpur on 05.05.2000 in Special Civil Suit No.933/1991. I hold that these arbitration proceedings have come to an end.

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order as to costs.

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JUDGE

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APTE

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