F.A.O No.3585 of 2007 1
IN THE HIGH COURT OF PUNJAB AND HARYANA
F.A.O No.3585 of 2007
Date of Decision: 27.11.2009
Railway Board through its Chairman, Rail Bhavan, Raisina Road, Rail Bhavan, New Delhi.
Punjab State Electricity Board through its Chairman, The Mall, Patiala
CORAM : Hon'ble Ms. Justice Nirmaljit Kaur
Present:- Mr. Puneet Jindal, Advocate
for the appellants.
Mr. R.P. Bhatt, Sr. Advocate
with Mr. Gagandeep Singh, Advocate
for the respondent.
1. Whether Reporters of Local Newspapers may be allowed to see the judgment ?
2. To be referred to the Reporters or not ?
3. Whether the judgment should be reported in the Digest ?
NIRMALJIT KAUR, J.
This is an appeal against the order dated 21.05.2007 passed
by the Additional District Judge, Patiala, whereby, the objection petition
filed by the objectors under Section 34 of the Arbitration and Conciliation
Act, 1996 against the award dated 21.11.2003 passed by the sole
Arbitrator, was dismissed.
The facts, in short, are that there is a dispute between the
Punjab State Electricity Board (for short `the PSEB'), an undertaking of the
Punjab Government, and the Railways, a Central Government undertaking.
The PSEB is engaged in generation and supply of electricity. It has thermal F.A.O No.3585 of 2007 2
plants and power houses at various places which require coal. The
Railways carry coal from the mine-heads to the power houses/thermal
plants for which the PSEB is liable to pay the freight. As per the rules of the
Railways, freight can be paid either on `to-pay' basis or `pre-paid' basis. In
the former, freight is paid on receipt of goods at the destination while under
the later, it is paid in advance at the time of booking of goods. Under the
`to-pay' basis, a surcharge is also levied by the Railways. The rate of
surcharge was originally 5% but was increased from time to time. After
1995, the rate of surcharge is 15%.
A scheme was framed by the Northern Railways which came
to be known as "PROCEDURE AND MODALITIES ON THE SCHEME OF
ADVANCE PAYMENT ON FREIGHT CHARGES OF COAL TRAFFIC
BOOKED TO THE POWER HOUSES OF PUNJAB STATE ELECTRICITY
BOARD WITH THE BENEFIT ON NON-NEVY OF SURCHARGE OF 5%
OTHERWISE LEVIABLE ON "TO PAY TRAFFIC." This scheme was
extended from time to time. The parties were being governed/regulated by
the said Scheme and this aspect has also been conceded before the
Arbitrator. In the case of PSEB, Railway Board authorized the General
Manager, Northern Railway in January, 2001 to change the Scheme of
1992. The PSEB was consistently representing that there was no
justification for levying 15 % surcharge on such transactions as long as
sufficient deposit was available to cover the pre-paid freight. Therefore, the
respondent requested the Railway Board to interpret the scheme correctly.
Accordingly, a proposal was sent to the Board for taking its decision for the
withdrawal of 15% surcharge since the cascading effect had led to the
accumulation of outstanding against the power houses. The Railway Board
called a meeting of MT and FC to discuss the issue on 19.01.2001. The
MT and FC directed CCM and FA & CAO that correct interpretation of the
scheme be got approved from the General Manager, Northern Railway. F.A.O No.3585 of 2007 3
The General Manager, Northern Railway was duly authorised to take the
decision for withdrawal of 15% surcharge and outstanding against the
Thermal Power Houses. Thus, the Railway Board authorized General
Manager, Northern Railway to take the decision for the interpretation of
scheme for the advance payment of scheme and withdrawal of outstanding
dues against the Thermal Power houses. The FA, CAO and Chief
Commercial Manager, in a joint meeting dated 19.01.2001, recorded as
" The Members directed that the CCM and FA & CAO should jointly take all steps essential to streamline the current as well as old outstanding, keeping in view the basic need to ensure that the essential requirements of the railway is that the actual freight accrued is realized fully. They said the General Manager is fully competent to take a final decision in case of any dispute arising with the powerhouses in the interpretation and application of the provisions of the scheme with the concurrence of FA & CAO. The Railway may formulate its own "JPO" for the
applicability of the scheme."
The General Manager, Northern Railway, in pursuance of the
authority conferred upon him by the Railway Board, approved the scheme
for the advance deposit of freight. The members of Railway Board were
also of the view that as long as the freight of last rake is available as
advance deposit with the Railway, the levy of surcharge of 15% is not
logical. On 02.03.2001, the General Manager, Northern Railway sent the
proposal to the Railway Board for the confirmation of the meeting dated
19.01.2001, whereby, the Railway Board delegated the powers to the
General Manager, Northern Railway to take the decision on the
interpretation of the scheme. On 15.05.2001, the Railway Board sent the
confirmation for the meeting held on 19.01.2001 and confirmed the
decision of the General Manager, Northern Railway for the interpretation of F.A.O No.3585 of 2007 4
the advance payment of the scheme for its implementation. Though, vide
letter dated 16.08.2001, a letter (annexure P-12 in CWP No.2518 of 2002)
was received from Divl. Railway Manager (Comm.), Railways that they
cannot make the adjustment of surplus amount of 15% rebate without
approval of Railway Board. Accordingly, C.W.P. No.2518 of 2002 was filed
in February 2002 in this Court with one of the prayers as follows :
" Issue an appropriate writ order or direction to the Railways Authorities to implement its decision of withdraw of 15%."
Suddenly, the Board took the decision vide letter dated
15.05.2002 that the decision of the implementation of the revised
interpretation of the advance payment of scheme was rejected by the
It was the case of P.S.E.B that till such time any amount of
freight is available, the surcharge could not be levied. However, it was the
case of the railways that non payment of freight periodically in terms of the
arrangement entitles to claim surcharge from the Board. On 17.12.2002,
the learned Single Judge of this Court in above Civil Writ Petition recorded
that the only dispute which remains to be settled in the writ petition is as to
whether prior to 27.7.2002, any surcharge was leviable and, if so, what
amount was to be levied. On 28.03.2003, both the parties agreed that the
matter be referred to the sole arbitrator Mr. P.K. Bahri, retired Judge of the
Delhi High Court to decide the dispute "whether the PSEB is liable to pay
any surcharge or freight for the period prior to 27.07.2002 and, if so, what
was the amount so payable." The writ petition was disposed of in the
abovesaid agreed terms.
The Arbitrator upheld the interpretation of the scheme as given
by the General Manager as delegation of the Board and concluded as F.A.O No.3585 of 2007 5
"34. Thus, I conclude that the revised interpretation of the scheme as given by the General Manager as delegation of the Board is final and binding on the parties.
35. I thus make the award as follows :-
1. That the parties are bound to act in terms of the order of the General Manager, Northern Railways.
2. That the parties shall work out the
accounts in terms of the revised interpretation of the scheme given by the General Manager.
3. That the parties shall bear their own costs of these proceedings."
Aggrieved with the above, the objection petition was filed
under Section 34 of the Arbitration and Conciliation Act, 1996, which was
dismissed vide order dated 21.05.2007 passed by the Additional District
Judge, Patiala. The appellant-Railway Board has, therefore, impugned the
award dated 21.11.2003, as well as, the order dated 21.05.2007 passed by
the Additional District Judge, Patiala, through the present appeal.
While challenging the same, Mr. Puneet Jindal, learned
counsel for the appellant, raised the following arguments :-
(a) The dispute in hand is not referable to Arbitration, therefore, the award is liable to be set aside under Section 34(2)(a)(v) read with Section 34(2)(b)(i) of the Arbitration Act, as the dispute is between two Government Organisations. The Objector is a Department of Central Government and all earnings are deposited in the Consolidated Fund of India. On the other hand, the Writ Petitioner/respondent is a statutory Board created under the Indian Electricity Act, 1948. The State Government holds the entire capital of the petitioner Board, thus the present dispute is between two Government entities. The present dispute, therefore, could not have been heard F.A.O No.3585 of 2007 6
either by the Court of Law or Arbitrator appointed by a Count unless the same is referred before the High Powered Committee constituted under the Chairmanship of the Cabinet Secretary as per order/directions passed by Hon'ble the Apex Court in the case of Oil & Natural Gas Corporation Ltd. vs. Saw Pipes Ltd. 2003(5) Supreme Court Cases 705. The Court and the Arbitrator were, therefore, not competent to hear and decide the present dispute. (b) The Arbitrator in the impugned award Annexure P-2 has failed to decide the specific dispute referred to him by this Court in its order dated 28.03.2003 (Annexure P-1), the award, therefore, is liable to be set aside in view of Section 34(2)(iv) of the 1996 Act. It was submitted that the Arbitrator has not determined the amount payable by the petitioner to the Objector/respondent. On the other hand, the effect of the Award is to be set aside/quash the Scheme of 1992, which was never the subject matter of the dispute referred. In fact, it is the express case of the Objector/applicant that the State Electricity Board is always at liberty to opt out of the 1992 Scheme and that option has never been exercised by the PSEB till date. The Scheme was introduced and extended from time to time on the request by PSEB in writing to the applicant/objector. During the currency of Scheme, the conduct of the parties has to be strictly governed by the express terms and conditions of the Scheme and by no other mode. It was further stated that admittedly, this agreement continued to operate on the request of the claimant was recorded by the Arbitrator but inspite of the same, went on to given an award contrary to the finding.
(c) Learned counsel for the appellants also submitted that the General Manager had no authority to interpret the scheme. It was required to be approved by the Board which was never done. Hence, the Arbitrator could not have relied upon the same and has in fact wrongly F.A.O No.3585 of 2007 7
concluded that the said scheme was duly approved by the Board. The Railway Board had never approved the revised interpretation of the Advance Payment Scheme. It is patent that no proposal involving expenditure effecting Railway revenue can be sanctioned without the prior concurrence of Financial Commissioner, Railway Board. Accordingly, the proposal of the Northern Railway was considered and not acceded to. This letter bears the reference of G.M., Northern Railway letter dated 19.04.2001, as well as, letter of even number dated 15.05.2001. The Railway Board very categorically stated that neither the provisions of modified Advance Payment Scheme were considered nor any revised interpretation was accepted. In this view of the matter, the competent Authority i.e. the Railway Board, under whose administrative control the Northern Railway functions regretted the changed Scheme envisaged by the Northern Railway vide letter dated 15.05.2002. The Railway Board categorically held that the Board has neither modified the provisions of the Scheme nor considered any revised interpretation.
(d) The impugned award is liable to be set aside being against public policy of India under Section 34(2)(b)(ii) as below :-
i) The award is in violation of contract between the parties, the Arbitrator is bound by the
Express terms and conditions of the contract as per Section 28(3) of the Act.
ii) In case, award is accepted, it will amount to discrimination qua other Rail users especially State Electricity Board and Power Houses
situated in the various parts of the country. Appellant sought to draw attention towards
Section 70 of the Railway Act, 1989.
Learned counsel for the parties have been heard.
Taking up the first argument of learned counsel for the F.A.O No.3585 of 2007 8
appellants that the Arbitrator was not competent to hear and decide the
present dispute since the dispute was between two Government
Organisations and the same should be decided by the High Powered
Committee in terms of the decision of Hon'ble the Apex Court, in the case
of Oil & Natural Gas Corporation Ltd. (supra). Learned counsel for the
respondent submitted that it was not open to the appellants to raise the
question at this stage.
It is not denied that the appointment of the Arbitrator was
made by the mutual consent of both the parties vide Order dated
28.03.2003 passed in C.W.P. No.2518 of 2002 by the learned Single
Judge of this Court. As per Section 4 of the Arbitration and Conciliation Act,
1996, the appellants were required to take the objection before the
Arbitrator at the first instance. The same was not done. Thus, they are
deemed to have waived of their right to challenge the jurisdiction of the
Arbitrator at this stage. The matter was referred to the Arbitrator by this
Court in the presence of both the parties. The parties did not object to the
same. No appeal against the said order was filed. Subsequently, they
submitted themselves to the jurisdiction of the Arbitrator. No objection was
raised even at that stage. Thus, the Arbitrator was competent to hear the
dispute and it was well within his jurisdiction to decide the same. The
judgment rendered by the Hon'ble Apex Court in the case of Oil & Natural
Gas Corporation Ltd. (supra), will not apply to the facts of the present case
as the dispute herein was referred to the Arbitrator with the consent of the
appellants. Now, after the award is against the appellants-Railway and the
objections are rejected, the appellants cannot seek to reopen the entire
issue over again. In the judgment of Hon'ble the Apex Court, rendered in
the case, titled as Hindustan Construction Co. Ltd. vs. Governor of
Orissa and others 1995 (3) Supreme Court Cases 8, it is held as under :-
" In the facts and circumstances of the case, F.A.O No.3585 of 2007 9
the State Government could not be permitted to challenge the jurisdiction of the Special Arbitration Tribunal after it had submitted to its jurisdiction merely because the award went against it. It hardly behoves the State Government to question the jurisdiction of the Special tribunal at such a belated stage merely because the award was not to its liking. The State Government cannot be permitted to behave like an ordinary dishonest litigant who takes an off chance hoping to succeed and if the outcome is not to his liking to turn back and question the Special Tribunal's jurisdiction. The High Court should not have permitted such a somersault."
While taking up the second point raised by learned counsel for
the appellants that the Arbitrator has failed to decide the specific dispute,
referred to him, by this Court and the same tantamount to quashing of the
Scheme 1992 which was never the subject matter of the dispute, learned
counsel for the respondent submitted that the award deals with the precise
question formulated by the learned Single Judge and the Sole Arbitrator
duly dealt with the issues formulated and after considering the entire
submissions made by both the parties, rendered the decision on merits and
within the frame work of the law and facts.
The concept of dispute has been defined as one to cover all
disputes arising out of an agreement. The dispute, herein, referred to
before the Arbitrator as also reproduced by the Arbitrator is as under :-
" Thus, as observed by me in my order
dated 17.12.2002, the only dispute which remains to be settled in this petition is as to whether the PSEB is liable to pay any surcharge on freight for the period prior to 27.07.2002 and if so, what was the amount so payable."
In order to arrive at a conclusion as to whether the PSEB is
liable to pay any surcharge on freight for the period prior to 27.07.2002 and
if so, what was the amount so payable will include the matters incidental, F.A.O No.3585 of 2007 10
connected, interlict, interdependent with the dispute between the parties.
The Arbitrator, in fact, resolved the disputes in a most judicious manner.
The dispute as referred to by this Court as apparent from the order
reproduced above, was directed to look at the dispute from all angles and
decide the same after hearing the parties and therefore, it cannot be said
that the Arbitrator acted beyond the scope of arbitration as referred to him.
The Arbitrator cannot be restrained from looking into the scheme which
was relied upon by the respondents for withdrawing of the 15% surcharge
and as interpreted by the General Manager. It was necessary for proper
adjudication of the dispute referred to him especially when the
interpretation of the scheme by the General Manager was directly related
to the question as to whether the PSEB is liable to pay all surcharge on
freight from the period prior to 27.07.2002 or not. As already stated in the
facts above, the precise prayer before this Court in C.W.P. No.2518 of
2002, in pursuance to which the arbitrator was appointed was, to issue an
appropriate writ or direction to the Railway Authorities to implement its
decision of withdraw of 15%. Thus, it cannot be said under any
circumstances that the arbitrator went beyond the dispute referred to it.
Even in the case of M.P. Housing Board v. Progressive
Writers & Publishers AIR (2009) Supreme Court 1585, Hon'ble the
Supreme Court in paras 26 and 27, held as under :-
"26. We cannot accept the contention of the Board that no additional issue could have been framed by the arbitrator on his own for its decision. In a reference made under Section 23, arbitrator's power to determine the lis between the parties is much wider. The arbitrator has all the powers which the court itself would have in deciding the issues in the suit. The court's power to frame an additional issue if it is just and necessary for deciding the matter in dispute cannot be denied and so also of F.A.O No.3585 of 2007 11
the arbitrator where disputes between the parties pending adjudication on suits have been referred to arbitrator for determination.
27.In the light of the settled legal principle, we are of the opinion that the arbitrator was not bound to adopt only the issues submitted by the parties but was well within his jurisdiction to frame such other issue or issues as may be just and necessary for the purpose of disposal of the reference made under Section 23 of the Act. We accordingly find no merit in the submissions made by the learned senior counsel that the arbitrator exceeded his jurisdiction and committed grave legal misconduct in framing said issue and determining the same."
Learned counsel for the appellants went on to finally argue that
the award did not decide the dispute as the dispute relates to the period
01.07.1998 to 27.07.2002 being the total period. The first period is from
01.07.1998 to 31.03.2001 for which the original scheme would be binding
and the second part of the period is from 01.04.2001 to 27.07.2002 for
which the scheme as per the revised interpretation is applicable. Thus, the
question of quantification of the accounts, as per the appellants, still
remains. The same is not correct in view of the following directions made in
the award :
1. That the parties are bound to act in terms of the order of the General Manager, Northern
2. That the parties shall work out the accounts in terms of the revised interpretation of the scheme given by the General Manager.
3. That the parties shall bear their own costs of these proceedings.
It is, therefore, evident from direction No.2 that the accounts
were to be now worked out in terms of revised interpretation of the
scheme. Both the parties had already filed their statements before this F.A.O No.3585 of 2007 12
Court. Both on account of freight becoming due after charging 15% charge
and also the account position when the freight is not charged. The
calculation, in itself, is a mere formality. Both the parties have already
submitted the account before this Court and the amount which is due in
case 15% freight is charged and in case, the same is not charged, is
already indicated in the pleadings.
The third argument of the learned counsel for the appellants
that the award has the effect of setting aside the scheme is ill-founded as
the same was in fact only an interpretation of the General Manager of the
Railways himself. A perusal of the same, which has been reproduced in the
Grounds of Appeal, itself, makes it clear. The relevant part of the note
dated 19.01.2001 reads thus :-
" They said the General Manager is fully competent to take a final decision in case of any dispute arising with the powerhouses in the interpretation and application of the provisions of the scheme with the concurrence of FA & CAO."
Learned counsel for the appellant while raising his third
argument at this stage, however, submitted that under no circumstances, it
can be said that the General Manager had a right to take decision. A
meeting dated 19.01.2001, in fact, had taken place between the Member
Traffic and Financial Commissioner of the Railway Board and they never
empowered the General Manager, Northern Railway to withdraw 15%
surcharge as has been wrongly assumed and referred to the operative part
of the record note dated 19.01.2001.
The argument of the learned counsel for the appellants was
that the said interpretation of the General Manager was not approved by
the Board. The Arbitrator, having taken entire communication and record
as well as the evidence, came to the conclusion as follows :
" 32. This assertion of the Board is hardly
F.A.O No.3585 of 2007 13
understandable. The Board has not cared to examine the facts in correct perspective. The proposal of PSEB for not giving any rigid interpretation to the scheme which resulted in imposition of 15% surcharge even though amount as advance deposit would be
available covering the freight of coal rakes at a particular time, was examined by the Board in the meeting dated 19.01.2001. The directions given by MT & FC in that meeting were quite clear that the General Manager can take the final decision in regard to interpretation of the scheme in consultation with FA & CAO. Thus there was no occasion for the Board to examine the revised interpretation of the Scheme thereafter when the General Manager who was given the power to take a final decision, had taken the final decision. That decision was not taken subject to any confirmation by the Board in respect of revised interpretation of the scheme. The Board was only required to confirm the minutes of the meeting dated 19.01.2000 which it did confirm."
The letter dated 15.05.2001 annexed with the present appeal,
filed by the appellants, shows that the approval was duly granted by the
Board. The said letter is a communication by the Director Traffic
Commercial to the General Manager (Commercial), Northern Railways,
New Delhi, in response to a D.O. letter dated 03.04.2001, which reads as
" It is confirmed that a meeting was held on 19.01.2001 under the chairmanship of the then Member Traffic and Financial Commissioner for Railways when the issue of cascading effect arising on account of levy of surcharge under the scheme of Advance payment of freight applicable to the State Electricity was discussed. It is confirmed that in this meeting Board had directed the Chief Commercial Manager and the FA & CAO/Northern Railway to take a decision with the approval of their F.A.O No.3585 of 2007 14
Thus, the contention of the learned counsel for the appellant
cannot be accepted in view of the facts that the General Manager acted as
the delegate of the Board. Hence, the delegate deciding the same on
behalf of his principle will amount to the decision of the Board. The
appellant-Board, therefore, cannot refuse to accept the same.
In the case of State of Orissa v. Commissioner of Land
Records and Settlement, Cuttack AIR 1998 Supreme Court 3067,
Hon'ble the Supreme Court in para 25 held as under :-
"25. We have to note that the Commissioner when he exercises power of the
board delegated to him under Section 33 of the Settlement Act, 1958, the order passed by him is to be treated as an order of the Board of Revenue and not as that of the Commissioner in his
capacity as Commissioner. This position is clear from two rulings of this Court to which we shall presently refer. The first of the said rulings is the one decided by the Constitution Bench of this Court in Roop Chand v. State of Punjab, 1963 Suppl (1) SCR 539: (AIR 1963 SC 1503). In that case, it was held by the majority that where the State Government had, under Section 41(1) of the East Punjab Holdings (Consolidation and Prevention of Frag-mentation) Act, 1948, delegated its appellate powers vested in it under Section 21(4) to an `officer', an order passed by such an officer was an order passed by the State Government itself and `not an order passed by any officer under this Act' within Section 42 and was not revisable by the State Government. It was pointed out that for the purpose of exercise of powers of revision by the State under Section 42 of that Act, the order sought to be revised must be an order passed by an officer in his own right and F.A.O No.3585 of 2007 15
not as a delegate of the State. The State
Government was, therefore, not entitled under Section 42 to call for the records of the case which was disposed of by an officer acting as its
And further observed that for all intents and purposes, the
order of the delegate is to be treated as an order of the principal itself and
was also held that the said decision cannot be reviewed by the principal
and went on to hold thus :
"27. The basis of the above cases is that the order of the delegate is to be treated, for all intents and purposes, as an order of the principal itself here, the Board of Revenue and hence the Board cannot revise an order passed by the delegate the Commissioner.
28. It may be argued that if the order of the delegate is tantamount to the order of the principal, then the principal can review such an order of the delegate. This appears to be plausible at first blush but is, in our opinion, not correct because of the intervention of another fundamental principle relating to `review' of orders. The important principle that has to be kept in mind here is that a review application is to be made only to the same Judge or if he is nor physically available to his successor."
Thus, by no stretch of imagination, it could have been said that
the decision of the General Manager Railways was not the decision of the
Board. Similar was the view held in the case of M/s OCL India Ltd. v.
State of Orissa AIR 2003 Supreme Court 2148. Thus, it is apparent that
the Arbitrator went on to decide the issue by applying his mind to the
pleadings and evidence before him and terms of the contract and then
passed a duly considered award.
The Arbitrator, therefore, in accordance with Section 28(3) of
the Arbitration and Conciliation Act, 1996 gave the award in terms of the F.A.O No.3585 of 2007 16
scheme as interpreted by the General Manager as a delegate of the Board.
The same was held to be final and binding on the parties.
Thus, the last argument that the award is in violation of the
contract as the Arbitrator was bound by the expressed terms and
conditions of the Contract as per Section 28(3) of the Arbitration and
Conciliation Act, 1996 and the same is against the public policy has no
In the case of Oil & Natural Gas Corporation Ltd. vs. Saw
Pipes Ltd. 2003(5) Supreme Court Cases 705, the Hon'ble Apex Court, in
para 31, while giving a wider meaning to the "public policy" discussed
the same as under :-
"31. Therefore, in our view, the phrase
"public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case it is required to be held that the award could be set aside if it is patently illegal. The result would be --- award could be set aside if it is contrary to:
(a) fundamental policy of India law; or
(b) the interest of India; or
(c) justice or morality; or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that F.A.O No.3585 of 2007 17
award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void."
In the facts of the present case, while interpreting of the
scheme, as to whether the surcharge of 15% on the amount of the freight
can be levied when the deposit i.e. the amount in advance covering the
freight charges is already available with the railways, the Arbitrator simply
upheld the interpretation of the scheme as given by the General Manager
as being delegate of the Board. The said interpretation was as per the
rates and charges fixed by the Central Government and any different
interpretation would have been in fact in consistent with the rates and
charges fixed by the Central Government. Once the amount of deposit
remain sufficient to cover the amount of freight due at the relevant date,
there is no rationality that any party can be made liable to pay surcharge.
Thus, any interpretation contrary to what has been given by the General
Manager of the Railways rather would have been against the public policy.
Thus, the award can be set aside only on the ground of public policy, if it is
patently illegal and illegality goes to the root of the matter and the illegality
is not trivial or the award shocks the conscience of Court. In this case,
none of the shortcomings exist. To say that the Arbitrator had no
jurisdiction to interpret the scheme, will not be correct as the terms of the
contract can be expressed or implied. The conduct of the parties would
also be a relevant factor in the matter of construction of a contract. The
construction of the contract agreement is within the jurisdiction of the
arbitrator having regard to the wide nature, scope and ambit of the
arbitration agreement and he cannot be said to have misdirected himself in
passing the award by taking into consideration the conduct of the parties. It
is also trite that correspondences exchanged by the parties are required to F.A.O No.3585 of 2007 18
be taken into consideration for the purpose of construction of a contract.
Interpretation of a contract is a matter for the arbitrator to determine, even
if it gives rise to determination of a question of law. When there is no loss
of freight, the penal clause of 15% surcharge cannot be invoked. The
reliance was placed upon a decision arrived at by the General Manager,
Northern Railways, which, in no certain terms was that 15% surcharge may
not be levied against powerhouse till the time, deposit amount is available
with the Railways to cover the freight charges. Thus, the award is in
accordance with the Contract/Scheme as interpreted by the delegate of the
Board which is a fair and just.
Even otherwise, the Court has a limited jurisdiction under the
Arbitration and Conciliation Act, 1996. In the case of McDERMOTT
INTERNATIONAL INC. Versus BURN STANDARD CO. LTD. AND
OTHERS 2006(11) Supreme Court Cases 181. Hon'ble the Supreme Court
advised that the supervisory roles of the Court for the review of the arbitral
Court is to be kept at the minimum level and guided as under :-
"52. The 1996 Act makes provision for the
supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration again if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the court at minimum level and this can be justified as parties to the agreement make a conscious decision to exclude the court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it."
Hon'ble the Apex Court, in the judgment McDERMOTT F.A.O No.3585 of 2007 19
INTERNATIONAL INC. (supra) went on to hold as under :-
"115. A court of law or an arbitrator may insist on some proof of actual damages, and may not allow the parties to take recourse to one formula or the other. In a given case, the court of law or an arbitrator may even prefer one formula as against another. But, only because the learned arbitrator in the facts and circumstances of the case has allowed MII to prove its claim relying on or on the basis of Emden Formula, the same by itself, in our opinion, would not lead to the conclusion that it was in breach of Section 55 or Section 73 of the Indian Contract Act."
Hon'ble the Supreme Court, in the case of G. Ramachandra
Reddy and Company vs. Union of India and another 2009(6)
Supreme Court Cases 414, went on so far to hold in para 19 of the said
"19. We may, at the outset, notice the legal principles governing the dispute between the parties. Interpretation of a contract may fall within the realm of the arbitrator. The Court while dealing with an award would not reappreciate the evidence. An award containing reasons also may not be interfered with unless they are found to be perverse or based on a wrong proposition of law. If two views are possible, it is trite, the court will refrain itself from interfering."
Similar view point was stated in the case of Steel Authority
of India Ltd. v. Gupta Brothers Steel Tubes Ltd. 2009(3) Arb. LR 466
There is nothing in the award requiring intervention by the
Court. Thus, the award is in accordance with the dispute referred to it. The
Arbitrator had the jurisdiction to interpret the contract and accept the
scheme as approved by the General Manager for the just decision of the
dispute and the said interpretation is not only fair and just but is in F.A.O No.3585 of 2007 20
accordance with law.
Consequently, the appeal has no merit and the same is
dismissed with no order as to cost.
27.11.2009 JUDGE gurpreet