THE HIGH COURT OF SIKKIM : GANGTOK
(Civil Appellate Jurisdiction)
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DIVISION BENCH: THE HON’BLE MR. JUSTICE BISWANATH SOMADDER, CHIEF JUSTICE
THE HON’BLE MR. JUSTICE BHASKAR RAJ PRADHAN, JUDGE
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Arb. A. No. 1 of 2022
Union of India
Represented by Executive Engineer,
Border Road Project, Division II. CPWD,
Above Post Office,
Chungthang,
North Sikkim 737120.
– ….. Appellant
versus
M/s M.G. Contractors Pvt. Ltd.,
M.G. House,
1721, Sector-4,
Panchkula Haryana 134109.
– ….. Respondent
Appeal under section 37 of the Arbitration & Conciliation Act, 1996
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Appearance:
Ms Sangita Pradhan, Deputy Solicitor General of India with Ms Purnima
Subba and Ms Natasha Pradhan, Advocates for the appellant.
Mr. Zangpo Sherpa, Mr. Bhaichung Bhutia and Mr. Mohan Sharma,
Advocates for the respondent.
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and
Arb. A. No. 2 of 2022
M/s M.G. Contractors Pvt. Ltd.,
M.G. House, 1721, Sector-4,
Panchkula 134109 (Haryana),
–
Through Shri Prem Chand Das, C/o Manoranjan Das,
Resident of C/o: Manoranjan Das, Dabgram, Dabgram 2,
Near Health Centre, Madhya Hatiya Danga,
Dabgram (P), Police Station Bhakti Nagar,
–
Jalpaiguri, West Bengal 735135.
–
(Authorised Representative)
….. Appellant
2
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
versus
Union of India
Represented by Executive Engineer,
Border Road Project, Division II (CPWD),
–
Above Post Office,
Chungthang,
North Sikkim 737120.
– ….. Respondent
Appeal under section 37(1)(b) of the Arbitration &
Conciliation Act, 1996
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Appearance:
Mr. Zangpo Sherpa, Mr. Bhaichung Bhutia and Mr. Mohan Sharma,
Advocates for the appellant.
Ms Sangita Pradhan, Deputy Solicitor General of India with Ms Purnima
Subba and Ms Natasha Pradhan, Advocates for the respondents.
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rd
Date of hearing : 3 May, 2024
th
Date of judgment : 28 May, 2024
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J U D G M E N T
Bhaskar Raj Pradhan, J.
1. We propose to dispose the above two connected appeals
under Section 37 of the Arbitration and Conciliation Act, 1996
assailing the final judgment dated 27.12.2021, one filed by the
Union of India and the other by M/s M.G. Contractors Pvt. Ltd. The
Union of India is aggrieved by the finding and grant of Claim no.7;
associate interest under Claim No.13 and associate GST under Claim
No.14, by the learned Sole Arbitrator and the challenge to it as
being barred by limitation which has been rejected by the Learned
Commercial Court, North Sikkim at Mangan. M/s M.G. Contractors
Pvt. Ltd. assails the impugned judgment to the extent that the
3
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
learned Commercial Court suo motu modified the Award dated
23.03.2021 passed by the learned Arbitrator.
2. Before we deal with the issues raised in the two
connected appeals, a brief summary of facts is necessary. Tender
was invited by CPWD, Chungthang, for construction of ITBP road
sometime in the year 2010. In response, M/s M.G. Contractors Pvt.
Ltd. submitted its tender which was found to be lowest, accepted
and awarded in its favour. The value of work awarded under the
contract was Rs.70,65,65,490/- (Rupees seventy crores, sixty-five
lakhs, sixty-five thousand, four hundred and ninety only) which was
24.55% above the estimated cost put to tender of
Rs.56,72,94,653/- (Rupees fifty-six crores, seventy-two lakhs,
ninety-four thousand, six hundred and fifty-three only). Twenty-four
nd
months to be reckoned from 22 day after the date of issue of
acceptance letter dated 10.09.2010 was the time allowed for
carrying out the work. The stipulated date of start of work was
02.10.2010 and the date of completion was 01.10.2012. The
Agreement was executed in the year 2011. The work was delayed
due to various reasons and finally completed on 30.06.2015. Certain
disputes arose between the parties and M/s M.G. Contractors Pvt.
Ltd. invoked Arbitration Clause 25 of the Agreement. The Sole
Arbitrator was appointed who entered reference vide letter dated
14.03.2020. M/s M.G. Contractors Pvt. Ltd. made 15(fifteen) claims
by filing their Statement of Claims. The Union of India did not prefer
any counter-claim. The total claim made by M/s M.G. Contractors
Pvt. Ltd. was Rs.29,11,26,419/- (Rupees twenty-nine crores, eleven
4
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
lakhs, twenty-six thousand, four hundred and nineteen only) along
with interest, GST and cost as actual.
3. Claim No.7 was for an amount of Rs.8,16,41,135/-
(Rupees eight crores, sixteen lakhs, fourty-one thousand, one
hundred and thirty-five only) claimed as due and payable for
escalation compensation for period October 2012 to June 2015.
4. Claim No.13 was for interest at the rate of 18% from
due date to date of payment.
5. Claim No. 14 was the claim for GST at applicable rate as
per actual on the claim amounts.
6. The learned Sole Arbitrator vide his Award dated
23.3.2021, awarded a sum of Rs.12,80,94,368/- (Rupees twelve
crores, eighty lakhs, ninety-four thousand, three hundred and sixty-
eight only) along with interest and GST under Claim No.13 and
Claim No.14 in favour of M/s M.G. Contractors Pvt. Ltd. The Sole
Arbitrator did not grant Claim Nos. 2, 4, 5, 8, 10, 11 and 12.
7. The Union of India filed an application under Section 34
of the Arbitration and Conciliation Act, 1996 before the learned
Commercial Court, being Arbitration Case No. 1 of 2021, in the
matter of Union of India vs. M/s M.G. Contractors Pvt. Ltd. The
Union of India prayed for setting aside Claim No.7 and associate
interest under Claim No. 13 and associate GST under Claim No.14
5
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
granted in favour of M/s M.G. Contractors Pvt. Ltd on the ground
that it was barred by limitation. The Union of India categorically
asserted That the applicant had accepted the claim
“
No.1,2,3,4,5,6,8,9,10,11,12,15 and associated interest under claim
13 and associated GST amount under claim 14
.”
8. By the impugned judgment dated 27.12.2021, the
learned Commercial Court concluded that the Award delivered by
the learned Sole Arbitrator under Claim No.7 and associate interest
under Claim No.13 and associate GST under Claim No.14 are not
barred by law of limitation. We shall refer to this part of the
impugned judgment as its first part.
9. The learned Commercial Court, however, was of the
opinion that the decision given under Claim No.13, awarding interest
at the rate of 8% per annum to the claimant under Claim No.1, 3, 6,
7 and 9 with effect from 17.02.2020 till the date of Award, i.e.,
23.03.2021, is contrary to the provisions of Section 31(7)(b) of the
Arbitration and Conciliation Act, 1996. Accordingly, the learned
Commercial Court modified the Award to the extent that M/s M.G.
Contractors Pvt. Ltd. is entitled for interest under Claim No. 1,3,6,7
and 9 at the rate of 8% per annum with effect from 23.03.2021 till
payment of Award as per Section 31(7)(b) of the Arbitration and
Conciliation Act, 1996 barring the time period consumed during
proceedings of the case before the learned Commercial Court. The
learned Commercial Court, however, did not find any illegality in
awarding Claim No.14. Thus, the Application under Section 34 of the
6
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
Arbitration and Conciliation Act, 1996 was partly allowed. We shall
refer to this part of the impugned judgment as the second part.
10. The pivotal ground on which the Union of India
challenges the impugned judgment is that since the learned Sole
Arbitrator had himself considered Claim No.7 as a damage claim, as
such, cause of action ought to have been reckoned from the last day
of hindrance, i.e., the last day of breach of contract on 30.03.2015
instead of last day of bill on 09.03.2017 as per Article 55 of the
Schedule to the Limitation Act, 1963. Although, the Union of India in
its statement in defence had not taken the plea of limitation, it is
submitted that the Sole Arbitrator had himself held that it was a
duty cast upon him to examine whether the claims were barred by
limitation and further he would be examining whether each of the
claims was barred by limitation. However, the Sole Arbitrator failed
to examine whether Claim No.7 was barred by limitation.
11. We are of the considered view that both these appeals
can be disposed of in terms of the judgment of the Hon’ble Supreme
Court in Project Director, National Highways No.45E and 220,
National Highways Authorities of India vs. M. Hakeem and
1 2
another and S.V. Samudram vs. State of Karnataka and Another .
In both these judgments, the Hon’ble Supreme Court has held that
Section 34 does not empower the Court to modify the award passed
by the Arbitrator.
1
(2021) 9 SCC 1
2
(2024) 3 SCC 623
7
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
12. In M. Hakeem (supra), the Hon’ble Supreme Court held
that Section 34 of the Arbitration and Conciliation Act 1996 is
modelled on the UNCITRAL Model Law on International Commercial
Arbitration, 1985, under which no power to modify an award is
given to a Court hearing a challenge to an award. It was further held
that Section 34 of the Arbitration and Conciliation Act, 1996
provides only for setting aside awards on very limited grounds, such
grounds being contained in sub-section (2) and (3) of Section 34.
Secondly, as the
marginal note of section 34 indicates, “recourse” to
a Court against an arbitral award may be made by an application for
setting aside such award in accordance with sub-sections (2) and
(3). Noting the use and meaning of the word “recourse”, it was held
where the right itself is truncated, enforcement of such truncated
right can also be only limited in nature and therefore an application
can only be made to set aside an award. The Hon’ble Supreme Court
held that there can be no doubt that given the law laid down by it,
Section 34 cannot be held to include within a power to modify the
award.
13. In S.V. Samudram (supra), against the total 11 claims,
amounts were awarded against 9 claims. The State of Karnataka
preferred a petition under Section 34 of the Arbitration and
Conciliation Act, 1996. The award passed by the learned Arbitrator
was modified and the State of Karnataka was directed to pay
Rs.3,71,564/- (25% of tender amount) along with Rs.10,000/- as
costs towards the Arbitration at 9% interest. The High Court vide its
judgement under challenge before the Hon’ble Supreme Court
8
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
confirmed the modification of the arbitral award dismissing the
application on the part of the appellant claimant. The Hon’ble
Supreme Court was required to consider: Whether the modification
of the arbitral award as carried out by the learned Civil Judge as
confirmed by the High Court was, justified within law? While doing
so, the Hon’ble Supreme Court examined its expositions on the
scope to interfere with arbitral award under Sections 34 and 37 of
the Arbitration and Conciliation Act, 1996. It noted that in M.
Hakeem (supra), the Hon’ble Supreme Court had categorically held
that any Court under Section 34 would have no jurisdiction to
modify the arbitral award which at best, given the same to be in
conflict with the grounds specified under Section 34, would be
wholly unsustainable in law. It was also noted
that the Hon’ble
Supreme Court categorically observed that any attempt to “modify
an award” under Section 34 would amount to “crossing the
Lakshman Rekha”. The Hon’ble Supreme Court also noted its
decision on the same issue in Dakshin Haryana Bijli Vitran Nigam
3
Ltd. vs. Navigant Technologies (P) Ltd. and the fact that the
principle stood reiterated in Larsen Air Conditioning & Refrigeration
4
Co. vs. Union of India .
14. In the proceedings before the learned Commercial
Court, whose judgment is impugned in Arb. A. No. 1 of 2022, the
application under Section 34 of the Arbitration and Conciliation Act,
1996, was not for setting aside the Award as the Union of India
categorically accepted the award of Claim Nos.
3
(2021) 7 SCC 657
4
(2023) 15 SCC 472
9
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
1,2,3,4,5,6,8,9,10,11,12,15 and associate interest under Claim 13
and associate GST under Claim No.14. Thus, the Union of India
cannot seek the setting aside of Claim No.7 and associate interest
under Claim No.13 and associate GST under Claim No.14 granted in
favour of M/s M.G. Contractors Pvt. Ltd. That, in effect, would be to
seek modification of the Award by the learned Commercial Court,
which had no power to do so.
15. In Arb. A. No.2 of 2022, the contention of M/s M.G.
Contractors Pvt. Ltd. that the learned Commercial Court suo motu
modified the Award to the extent M/s M.G. Contractors Pvt. Ltd. is
entitled for interest under Claim Nos. 1,3,6,7 and 9 at the rate of
8% per annum with effect from 23.03.2021 till payment of Award as
per Section 31(7)(b) of the Arbitration and Conciliation Act, 1996,
barring the time period consumed during proceedings of the case
before the learned Commercial Court which was impermissible, must
be accepted.
16. We are also of the opinion that in a proceeding under
Section 37 of the Arbitration and Conciliation Act, 1996, we are not
authorised to disturb concurrent findings of facts and law by the
learned Sole Arbitrator and the learned Commercial Court. The
learned Sole Arbitrator in paragraph 19.4 has concluded that the
work was completed on 30.06.2015, bill was finalised on 9.03.2017
and arbitration was sought before the Chief Engineer of the Union of
India on 17.02.2020 and thus, the arbitration was invoked within
limitation period of three years from the date of finalisation of the
10
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
bill. The learned Commercial Court once again examined the issue
raised by the Union of India, the relevant clauses and concluded
that M/s M.G. Contractors Pvt. Ltd. completed its work on
30.06.2015 and finalised the bill on 09.03.2017. Accordingly, the
learned Commercial Court was also of the opinion that the Award
under Claim No.7 and its associate interest under Claim No.13 and
associate GST under Claim No.14 was not barred by the law of
limitation. In the circumstances, the Union of India has failed to
make out a case for interference either under Section 34 or under
Section 37 of the Arbitration and Conciliation Act, 1996.
17. We are, therefore, of the view that the first part of the
impugned judgment of the learned Commercial Court, vis-(cid:224)-vis, the
challenge of the Union of India in its application under Section 34 of
the Arbitration and Conciliation Act, 1996 need not be interfered
with. The applications by the Union of India under Sections 34 and
37 were not maintainable. Accordingly, we dismiss Arb. A. No. 1 of
2022.
18. The second part of the impugned judgment, however,
reflects that the learned Commercial Court on its own examined the
Award minutely and modified the Award, vis-(cid:224)-vis, Claim No.13.
While doing so the learned Commercial Court exceeded its
jurisdiction and crossed the “Lakshman Rekha”. In view of the
expositions of the law by the Hon’ble Supreme Court in M. Hakeem
(supra) and reiterated in S.V. Samudram (supra), we have no
11
Arb. A. No.1 of 2022
Union of India vs. M/s M.G. Contractors Pvt. Ltd.
&
Arb. A. No.2 of 2022
M/s M.G. Contractors Pvt. Ltd. vs. Union of India
hesitation in setting aside the impugned judgment to the extent it
modifies the Award. Accordingly, Arb. A. No. 2 of 2022 is allowed.
19. The two appeals before us stand disposed of
accordingly.
20. Parties to bear their respective cost.
(Bhaskar Raj Pradhan) (Biswanath Somadder)
Judge Chief Justice
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