Jammu, Oct 6: In AA No.3/2022 titled Jammu Development Authority through its Vice-Chairperson Versus Saral Sugam Sewa Society, New Delhi, 62 through its State Secretary, J&K,after hearing a DB of HON’BLE MR. JUSTICE SANJEEV KUMAR, JUDGE HON’BLE MR. JUSTICE PUNEET GUPTA, JUDGE ordered as:-
JUDGMENT Sanjeev Kumar-J
1. This appeal under Section 37 of the J&K Arbitration and Conciliation Act, 1997 [“the Act”] arises from the judgment dated 03.11.2021 passed by a Single Bench of this Court in an application filed under Section 34 of the Act titled Jammu Development Authority v. Saral Sugam Sewa Society, whereby 2 the application of the appellant-authority for setting aside an award of the sole arbitrator has been dismissed.
2. Before we advert to the grounds of challenge urged by the learned counsel appearing for the appellant-authority, we deem it appropriate to state few material facts germane to the disposal of this appeal.
3. The appellant entered into an agreement/Memorandum of Understanding (MOU) with the respondent-society on 15.12.2008 to undertake the work of operation, management and maintenance of 28 public toilets on pay and use basis for a period of five years. The contract was to commence w.e.f. 22.12.2008 and was to remain valid till 21.12.2013.
It is important to note that prior to the appellant-authority entering into MOU with the respondent-society, the appellant-authority had an arrangement on similar lines with M/s Sulabh International Social Service Organization [M/s Sulabh International”] in terms of MOU executed on 14.02.2006 for maintenance and operation of public toilets on 22 sites. The aforesaid arrangement was later on terminated by the appellant vide order No.SE/JDA/2471-75 dated 16.12.2008.
4. Feeling aggrieved, M/s Sulabh International filed two writ petitions before the learned Single Bench; one challenging the MOU entered by the appellant with the respondent-society; and 3 the other challenging the order of the appellant dated 16.12.2008 terminating the arrangement with it. M/s Sulabh International succeeded in obtaining interim relief in both the writ petitions.
As per the claim of the respondent-society, which is not refuted by the appellant, possession of all twenty eight sites was handed over to the respondent on 22.12.2008.
The respondent further claimed that after passing of the interim directions by the Court, M/s Sulabh International assisted by the officers of the appellant- authority took back the possession of twenty two sites 24.12.2008 and the respondent-society was left only with six sites.
On the contrary, case of the appellant is that the respondent-society, which was handed over six sites, could not operate and maintain the public toilets even on these sites.
5. Having regard to the respondent-society‟s failure to maintain even six sites, the appellant-authority vide its communication No.JDA/Litg./2010/ 440 dated 12.05.2010 called upon the respondent to discuss the matter and for taking decision to make an alternative arrangement for maintenance of public toilets at litigation free six sites.
On failure of the respondent-society to attend the office of the appellant-authority, the respondent- society was put on notice to show cause as to why the contract allotted in its favour be not cancelled.
Having found no response from the respondent-society, appellant-authority, claimably acting in larger public interest and public convenience, cancelled 4 the arrangement/MOU made with the respondent-society and revived the arrangement already made with M/s Sulabh International with additional conditions by withdrawing the order of termination of M/s Sulabh International passed on 15.12.2008.
However, the respondent-society, feeling aggrieved of such action of the appellant-authority, challenged its termination as also the revival of MOU with M/s Sulabh International by filing OWP No.1154/2010. The writ petition was opposed by the appellant by filing its objections.
6. Be that as it may, while the writ petition was pending consideration of the learned Single Judge, the appellant-authority and the respondent-society arrived at an agreement that the claims of the respondent-society arising out of the MOU dated 15.12.2008 may be adjudicated upon by Sh. Sunil Sethi, Senior Advocate as sole arbitrator. Learned Single Judge took note of the agreement arrived at between the parties and accordingly, disposed of OWP No.1154/2010 referring the respondent-society and the appellant-authority to arbitration.
Pursuant to the notice issued by the arbitrator, both the parties caused their appearance before the learned Arbitrator. The respondent-society filed its claims before the learned Arbitrator with the following reliefs:- a) To revoke/revive the contract dated 15.12.2008 entered into between the appellant-authority and the respondent- 5 society for operation and maintenance of as many as 28 toilet blocks situated across the entire Jammu city. b) To allow the respondent-society to work on the sites, which were allotted to them vide MOU dated 15.12.2008. c) Any other relief, order or direction which the Arbitrator deems fit and appropriate in the nature and circumstances of the instant case.
9. Learned Arbitrator considered the entire matter and came to the conclusion that the respondent-society had not been fairly treated and the contract entered into with it by the appellant-authority was wrongfully terminated. The arbitrator did not allow the respondent-society to continue with the operations for balance period of the contract for the reason that M/s Sulabh International was not party to the arbitration and was executing the contract qua all the 28 toilet blocks pursuant to the revival of their contract and cancellation of the MOU with the respondent- society.
The arbitrator, however, agreed with the respondent- society that on account of this action of the appellant-authority, respondent-society had suffered loss. The claims put forth by the respondent-society by way of evidence affidavit were accepted with modification and the respondent-society was held entitled to a sum of Rs.34,23,473/- along with interest @ 9% to be reckoned w.e.f. 02.05.2012 till realization of the amount.
Accordingly, the Arbitrator passed its award on 02.01.2013.
10. The Jammu Development Authority did not accept the award of the Arbitrator and filed a petition under Section 34 of the Act before the learned Single Bench. The award of the arbitrator was assailed by the appellant-authority
11. It was urged that the respondent-society could not have been granted such relief without M/s Sulabh International being party in the arbitration and without providing an opportunity of being heard.
The arbitrator has noticed this aspect and expressed his inability to put the respondent-society back in the execution of the work without first declaring the arrangement made by the appellant-authority with M/s Sulabh International bad in the eye of law.
12. Learned Single Judge after discussing the entire matter in light of the rival contentions addressed before it, came to the conclusion that the appellant-authority had failed to show any perversity or error of fact or law apparent on the face of the record. Vide order and judgment impugned in this appeal, the petition filed by the appellant-authority under Section 34 of the Act was dismissed.
13. The appellant-authority is aggrieved and has called in question the impugned judgment as also the award of the sole Arbitrator 9 Sh. Sunil Sethi, Senior Advocate on the ground, which it had pleaded and urged before the learned Single Judge.
14. Heard learned counsel for the parties and perused the material on record.
15. First, the facts which are not in dispute before us. 16. Indisputably, an agreement/MOU was entered into by the appellant-authority with the respondent-society on 15.12.2008 to undertake the work of operation, management and maintenance of 28 public toilets for a period of five years commencing from 22.12.2008. At the time of execution of MOU dated 15.12.2008 with respondent-society the appellant-authority had an arrangement with M/s Sulabh International in terms of MOU executed between them on 14.02.2006. This was, however, in respect of 22 sites.
37. Learned arbitrator could not have gone beyond the terms of reference and awarded the sums not claimed in the claim petition or supplemented by filing additional claims.
There was absolutely no opportunity granted to the appellant-authority to object to the claims and their quantification and, therefore, in the process, learned arbitrator also acted in violation of the principles of natural justice and decided the claims of the respondent- society without providing adequate opportunity to contest the same to the appellant-authority.
38. Viewed from any angle, the award passed by the arbitrator challenged before the learned Single Judge was bad in the eye of law and liable to be set aside.
Learned Single Judge did not appreciate these aspects and landed in serious error in upholding the award, which was not only against the public policy of the State but was beyond the terms of reference and absolutely perverse.
After quoting various Apex Court Judgements DB said that the award can be only set aside under this sub-head if the arbitrator construes the award in a way that no fair-minded or reasonable person would do & added that we do not wish to discuss the legal position more, as the judgment aforementioned takes care of all aspect of challenge to arbitral award by resort to Section 34 of the Act. Suffice for us to say and hold that the arbitral award passed by the sole arbitrator in the instant case was liable to be set aside on the grounds enumerated in Section 34 of the Act, in particular, grounds mentioned under Subsections 2(a) (iv) and 2(b(ii) thereof.
Not only the arbitrator has passed award not falling within the terms of the submission to arbitration and in respect of matters beyond the scope of the submission to arbitration but has also rendered his award which is in conflict with public policy of State.
The Single Bench, with great respect, has failed to appreciate all these aspects of the case.
42. For the reasons given above, we allow this appeal and set aside the judgment impugned dated 03.11.2021. As a result, arbitral award dated 02.01.2013 passed by the learned arbitrator is also set aside. Parties are left to bear their own costs.
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