The High Court of Chhattisgarh at Bilaspur Bench has ruled that the Arbitrator is the final authority on facts as well as interpretation of contract, unless the view taken is wholly unreasonable or beyond the scope of the contract. Looking to the limited scope of Section 37 of the Arbitration Act, the Court dismissed the appeal filed by South Eastern Coalfields Limited, observing that the findings of the Sole Arbitrator do not suffer from any patent illegality, and the award was neither arbitrary nor perverse.
The Division Bench comprising Justice Rajani Dubey and Justice Radhakishan Agrawal observed that the scope of interference under Section 34 and Section 37 of the Arbitration Act is extremely limited, and the Court does not sit in appeal over the findings of the Arbitrator and cannot re-appreciate evidence or substitute its own interpretation merely because another view is possible. Interference is permissible only when the award is vitiated by patent illegality, perversity, or is in conflict with the fundamental policy of Indian law or the most basic notions of justice or morality.
The Bench found that the Sole Arbitrator minutely examined the entire material available on record, including oral and documentary evidence, and rendered a reasoned award. Further, the Commercial Court rightly found that the cause of action arose on June 30, 1994, which was the extended period of contract, and the respondent invoked the arbitration clause on July 27, 1996, which was within three years from the date when the cause of action arose.
Further, the Bench noted that the Arbitrator did not ignore the vital/substantial evidence led by the parties and minutely appreciated the oral and documentary evidence, deciding every claim as per the evidence and entitlement of the respondent company. There is nothing on record to demonstrate that the Arbitrator has ignored vital evidence, taken into account irrelevant material, or rendered findings which are so arbitrary or irrational that no reasonable person would arrive at such conclusions.
The award reflects a plausible and reasoned view based on the material before the Arbitrator, and no valid ground was raised by the appellants which provides under Sections 34 and 37 of the Arbitration Act, added the Bench.
Thus, in light of the principles laid down by the Supreme Court in Associate Builders vs. Delhi Development Authority [(2015) 3 SCC 49], the Bench said that the Court cannot interfere with an arbitral award merely on the ground that another interpretation is possible or that the evidence could have been appreciated differently. The Arbitrator is the final authority on facts as well as interpretation of contract, unless the view taken is wholly unreasonable or beyond the scope of the contract.
The Bench explained that the Commercial Court has rightly recorded its finding that reasons mentioned by the Sole Arbitrator were genuine and the approach of the Arbitrator is neither arbitrary nor capricious. The award is well reasoned and is in great detail on the basis of material facts and the finding rendered by it are those which fall within the terms and conditions of the contract. The findings of the Sole Arbitrator do not suffer from any patent illegality.
Briefly, the Appellants (South Eastern Coalfields Limited) and the respondent-company (M/s M. K. Chaterjee) entered into a contract on Nov 09, 1990 for the construction of 250 units of miners’ quarters (D/S), including development work at Khurasia Colliery in the Chirmiri Area of SECL (Chhattisgarh). Prior to the execution of the agreement, the Chief Engineer of the appellants issued a provisional letter of acceptance dated Feb 28, 1990. Subsequently, the Additional Chief Engineer issued a work order dated March 31, 1990, requiring the contractor to deposit an additional sum of Rs. 66,227/- towards 1% security deposit, making a total initial security deposit of Rs. 1.66 lakhs. It was further stipulated that 5% of the gross value of running account bills would be deducted towards security deposit, aggregating to Rs. 8.31 lakhs.
The stipulated period for completion of the work was 18 months, to be reckoned from the 10th day of issuance of the letter of intent or from the actual date of handing over of the site, whichever was later. The respondent sought extension of time on multiple occasions, and the appellants granted extensions up to June 28, 1992, Dec 31, 1992, Sep 30, 1993, and Sep 30, 1994.
During the subsistence of the contract, disputes arose between the parties, and the respondent invoked the arbitration clause as stipulated in the Contract. The appellants failed to appoint an Arbitrator, and consequently, the respondent filed an application under Section 11(6) of the Arbitration Act, 1996 before the High Court, pursuant to which a Sole Arbitrator was appointed, who passed the arbitral award on Feb 05, 2017 holding that the respondent is entitled for retention amount and also for refund of security deposit & bank guarantee.
The order passed by the Sole Arbitrator was subjected to challenge before the Commercial Court, Naya Raipur, which dismissed the application of the appellants on the ground that the order passed by the Sole Arbitrator is not against the public policy of India. The Appellants therefore approached the High Court under Section 37 of the Arbitration and Conciliation Act, read with Section 13 of the Commercial Courts, Commercial Court Act, 2015, challenging the order passed by the Commercial Court.
Appearances:
For Appellant: Senior Advocate H.B. Agrawal and Advocate Vinod Deshmukh
For Respondent: Senior Advocate Sharmila Singhai and Advocate Kanchan Kalwani.
