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A. Chinnadurai, Handloom Contractor, Government College of Engineering 1st Gate, Salem v/s M/s. Indian Oil Corporation Ltd., rep. by its General Manager, Indian Oil Bhavan, Chennai & Another

    Original Petition No. 322 of 2010

    Decided On, 08 July 2019

    At, High Court of Judicature at Madras


    For the Petitioner: S. Rajendra Kumar, M/s. Norton & Grant, Advocates. For the Respondents: R1, V. Anantha Natarajan, Advocate.

Judgment Text

(Prayer:- This Original Petition has been filed under section 34 of the Arbitration and Conciliation Act to set aside the Arbitral Award passed in Arbitration Proceedings No.KR/ARB/5 dated 16.04.2009 by the Second Respondent.)

Aggrieved over the Award passed by the sole Arbitrator dated 16.04.2009, the present petition has been filed.

2. The Claimant was awarded work for Handling and Housekeeping works at LPG Bottling Plant for a period of two years from 01.10.2000 to 30.09.2002 and the value of the work is Rs.55,40,000/- and an agreement was entered into between the Claimant and the Respondent on 18.10.2000. As per the contract 5 lakhs cylinders have to be filled per month. Clause 7 of the Contract permits the Claimant to employ their own labour. However, the Plant Manager prevented the Claimant from employing the labourers of their choice and forced to engage the erstwhile labourers who are not efficient and co-operative. The work was commenced with the existing contract labourers. Though the bills were claimed as per the work order for a sum of Rs.5 lakhs, but the bills were passed only as per actual filling. As the Claimant’s workmen were not allowed, he filed a Writ Petition in W.P.No.4037 of 2001 before this Court to permit him to engage his own labourers. The Writ Petition was allowed on 20.04.2001. Despite the Order, in September 2001, the Plant Manager interfered with the employment of labourers by the Claimant and there was a drop in production. On 06.12.2001, the Claimant issued notice to the respondent raising claim of Rs.10,96,814/-. However, the respondent terminated the contract by letter dated 02.02.2002 in an arbitrary manner. Hence, the Claimant claimed Rs.50,000/- notional income per month and the Claimant has claimed Rs.24,76,814/- with 18% interest before the Arbitration.

3. It is the case of the respondent that the Claimant had failed in fulfilling the Contractual obligations and violated the statutory regulations. The Claimant had defaulted in payment of PF and ESI to the statutory authorities and wages for the labourers engaged by them and the same were paid by them. According to them, a sum of Rs.4,67,416/- has to be paid by the repondent. Hence, the respondent raised the counter claim. It is the further contention of the respondent that on several occasions, the contract labourers engaged by the Claimant had struck work and bottling operation had been affected. On account of this, the Corporation has suffered loss which has been informed to the Claimant then and there. Due to the work stoppage, not only loss was suffered, but also incurred additional cost on account of making alternative arrangements.

4. The learned Arbitrator has framed as many as 14 issues and the issues are as follows :

1. Whether the Corporation was engaging a single contractor for Handling, House-keeping and loading -unloading of LPG cylinders?

2. Whether the Corporation segregated Handling and House Keeping from Loading and unloading and issued separate tenders therefor?

3. Whether the refusal of the contract labourers for segregation was brought to the knowledge of the respondent by the claimant through various correspondences?

4. Whether the respondent exhibited hesitation in interfering in the above issue?

5. Whether the claimant was allowed to employ his own labourers as per clause 7 of the agreement?

6. Whether the Plant Manager of the Respondent insisted that the claimant should employ the existing contract Labourers before the Assistant Labour Commissioner in the conciliation proceedings?

7. Whether the claimant was allowed to execute the contractual obligations to the fullest extent prior to 20.04.2001, the date on which the claimant has got an Order from the High Court of Madras for engaging labourers of his own choice?

8. Is the letter dated 10.12.2001 executed by Plant Manager of the Respondent?

9. Whether the Respondent considered the reply dated 09.01.2002 by the claimant to its Show Cause Notice dated 04.01.2002 before cancelling the Contract?

10. Whether any opportunity as given by the respondent before canceling the contract in favour of the claimant?

11. Whether the Plant Manager of the Respondent issued letter dated 16.05.01? Whether the action taken by the Claimant pursuant to the letter dated 16.05.01 was faulted by the respondent?

12. Whether the respondent is entitled to an award of counter claim with interest?

13. Whether the Plant manager confiscated Rs.54,000/- from Mr.C.Muniraj?

14. Whether the respondent returned the security deposit to the claimant on termination of the contract?

Finally, the Arbitrator allowed the claim of the Claimant for a sum of Rs.5,54,861/-. Similarly, the Arbitrator has also allowed the counter claim for a sum of Rs.4,49,959/- and both the amounts carried the interest at the rate of 18% per annum. As against which the present petition has been filed.

5. The main contention of the learned counsel for the petitioner is that the respondent previously engaged a single contractor for handling, loading and unloading of LPG cylinders. Only in the year 2000, the respondent segregated the handling and housekeeping from loading and unloading. The previous labourers, who were working under the previous contractor, refused to co-operate and they also started Union. When the Claimant requested to permit him to bring his own labourers, it was not allowed. Thus, Clause 7 of the Agreement was violated by the respondent. Despite the Order of the Writ Court, the Claimant was not permitted to engage his own labourers. The Plant Manager dismissed 3 labourers after obtaining medical certificate, due to that the contract labourers went on strike. Further, the entire breach was committed by the respondent and the termination of the contract is also not according to law. No opportunity was given to the petitioner before the termination of the contract. Hence, submitted that the Arbitrator has not considered this aspect and the Award is liable to be set aside.

6. Whereas, the learned counsel for the respondent submitted that they have only claimed compensation of Rs.24 lakhs before the Arbitrator. The termination of the contract is not an issue before the Arbitrator and the said issue has been raised for the first time before this Court. Similarly, the Arbitrator has considered the nature of the work done by the petitioner and allowed the claim on the actual basis as the entire claim was based on the assumption for unfinished work. The learned Arbitrator has considered the entire aspects and rightly allowed a part of the claim and also the counter claim. Hence, prayed or dismissal of this petition.

7. Originally, the claim has been filed claiming Rs.24,76,814/- and the claim is as per the contract for a period of two years. The fact remains that the contract stipulate for filling of 5 lakhs cylinders per month. It is an admitted fact that the petitioner could not achieve in filling 5 lakhs cylinders. It is the contention of the petitioner that since his own employers were not permitted to be employed, he could not achieve it. Despite the Order of the Writ Court, the same was continued. Therefore, he could not engage his own labourers and thereby, the claimant claimed the amount as a compensation. Though Clause 7 stipulates that the petitioner can employ their own employers, it is an admitted fact that there were unrest among the casual labourers and others, therefore, there was some disturbance in the work. However, without doing the actual work, the Claimant cannot claim compensation merely on the basis of the contract. It is for them to prove the nature of liability sustained by them.

8. Loss or profit has to be proved in the manner known to law. The Arbitrator has rightly found that the bills have been paid as per the materials and allowed the counter claim for certain aspects and also the claim. The counter claim has been allowed on the basis of the statutory charges paid by the respondent. It is also an admitted fact that the labourers went on strike, which resulted in the breach of contract. Except claiming compensation in general, no evidence, whatsoever, has been adduced before the Arbitrator with regard to the breach of contract. Therefore, those issues cannot be adjudicated for the first time before this Court under section 34 of the Arbitration and Conciliation Act.

9. Similarly, validity of the termination of contract is also not an issue before the Arbitrator. In the absence of any dispute with regard to the termination being raised before the Arbitrator, the claimant cannot be permitted to raise the same at this stage. These are all the matters to be decided based on evidence and without establishing actual loss or profit, the claimant cannot expect compensation, merely on the basis of the contract value alone. Therefore, this Court cannot re-appreciate the entire arbitration proceedings, particularly, when the termination is not an issue before the Arbitrator.

10. It is now well settled that the award can be interfered only when the grounds set out under Section 34 of the Arbitration Act is made out. Scope of interference under Section 34 of the Arbitration and Conciliation Act 1996 is discussed in Oil and Natural Gas Corporation Ltd., v. Saw Pipes Ltd., [2003 (5) SCC 705], wherein the Honoruable Apex Court has held that an Award can be set aside if it is contrary to:

a) fundamental policy of Indian law; or

b) the interest of India; or

c) justice or morality; or

d) if it is patently illegal

Award could also be set aside if it is s

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o unfair and unreasonable that it shocks the conscience of the court. 11. In the judgment in Associate Builders Vs. Delhi Development Authority reported in 2015 (3) Supreme Court Cases 49 the Apex Court explained the term patent illegality and held that patent illegality must go to the root of the matter, Public Policy violation should be so unfair and unreasonable as to shock the conscience of the Court. The supervisory role of the Court under Section 34 is to be kept at a minimum level and interference is envisaged only in case of fraud or bias, violation of natural justice, etc., If the Arbitrator has gone contrary to or beyond the express of law of the contract or granted relief in the matter not in dispute that would come within the purview of Section 34 of the Arbitration and Conciliation Act 1996. 12. Considering the above well settled position of law, I am of the view that the claimant has not made out any ground to interfere with the well reasoned Award passed by the Arbitrator. 13. Accordingly, this Original Petition is dismissed. No cost.