THE GAUHATI HIGH COURT (THE HIGH COURT OF ASSAM : NAGALAND : MIZORAM AND

ARUNACHAL PRADESH) Writ Petition (C) No. 2711 OF 2012

GUWAHATI MUNICIPAL CORPORATION, PANBAZAR, GUWAHATI - 781001, THROUGH ITS COMMISSIONER. ………… Petitioner

-Versus-

1. M/S. INTERNATIONAL CONSTRUCTION LTD., DUGAR BUILDING, HB ROAD, FANCY BAZAR, GUWAHATI, TROUGH ITS MD. 2. MR. NC DEKA BE, FIE, FICA, P.G. DIP (SURREY, UK) COMMISSIONER & SPL. SECRETARY (RETD.), PWD, GOVT. OF ASSAM, OPP. NEHRU STADIUM, DR. B BAROOAH ROAD, GUWAHATI – 781007.

….…… Respondents

Writ Petition (C) No. 2789 OF 2012 GUWAHATI MUNICIPAL CORPORATION, PANBAZAR, GUWAHATI - 781001, THROUGH ITS COMMISSIONER. ………… Petitioner

-Versus-

1. M/S. SPM ENGINEER LTD., DUGAR BUILDING, HB ROAD, FANCY BAZAR, GUWAHATI, TROUGH ITS MD. 2. MR. NC DEKA BE, FIE, FICA, P.G. DIP (SURREY, UK) COMMISSIONER & SPL. SECRETARY (RETD.), PWD, GOVT. OF ASSAM, OPP. NEHRU STADIUM, DR. B BAROOAH ROAD, GUWAHATI – 781007.

….…… Respondents

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 2 of 28

Writ Petition (C) No. 2790 OF 2012 GUWAHATI MUNICIPAL CORPORATION, PANBAZAR, GUWAHATI - 781001, THROUGH ITS COMMISSIONER. ………… Petitioner

-Versus-

1. M/S. ZOOM INDUSTRIAL SERVICES LTD., DUGAR BUILDING, HB ROAD, FANCY BAZAR, GUWAHATI, TROUGH ITS MD. 2. MR. NC DEKA BE, FIE, FICA, P.G. DIP (SURREY, UK) COMMISSIONER & SPL. SECRETARY (RETD.), PWD, GOVT. OF ASSAM, OPP. NEHRU STADIUM, DR. B BAROOAH ROAD, GUWAHATI – 781007.

….…… Respondents

BEFORE

THE HON’BLE MR. JUSTICE UJJAL BHUYAN

For the Petitioner : Mr. B Singh, Advocate. Mr. SC Keyal, Advocate. For the Respondents : Mr. BR Bhattacharjee, Sr. Advocate. Mr. GN Sahewalla, Sr. Advocate. Mr. SR Ganguli, Advocate.

Date of Hearing : 30.10.2013. Date of Judgment : 05.05.2014

Judgment & Order (CAV)

Issue raised in all the three writ petitions i.e., WP(C)

Nos.2711/2012, 2789/2012 and 2790/2012 being identical, those were

heard together and are being disposed of by this common order.

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 3 of 28

02. In all the three writ petitions, Guwahati Municipal

Corporation (GMC) is the writ petitioner. In WP(C) 2711/2012, the

contesting respondent i.e., respondent No. 1 is M/s. Industrial

Construction Ltd, in WP(C) No. 2789/2012, it is M/s. SPM Engineers

Ltd; whereas in WP(C) No.2790/2012, it is M/s. Zoom Industrial

Services Ltd. All the three writ petitions seek quashing of arbitral

awards dated 20.01.2004, passed by the respondent No. 2 as the

Arbitrator as well as the proceedings in the money execution cases

instituted by the claimants/respondent No. 1 in all the three cases for

execution of the arbitral awards. The challenge has been made on the

sole ground of the arbitral awards being vitiated by fraud and

collusion.

03. For the sake of convenience, facts relating to WP(C)

No.2711/2012 are briefly referred to hereunder.

04. GMC invited tender vide Notice Inviting Tender (NIT),

dated 01.02.1990 for execution of the work ‘improvement of existing

water supply’ in the city of Guwahati. A company called M/s.

International Pumps & Projects (I) Pvt. Ltd. had participated in the

tender and whose tender was accepted. The said company informed

the petitioner that for effective and speedy implementation of the

contract work, it would be executed by its associate company called,

International Pumps and Projects (Eastern) Pvt. Ltd. The associate

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 4 of 28

company was awarded the formal work order on 05.10.1990.

Subsequently, on 20.09.1993, the associate company was taken over

by a company called, M/s. SPML Industries Ltd. On 04.08.1994, M/s.

SPML Industries Ltd., changed its name to M/s. Subhas Capital City

Ltd and finally on 08.06.1998, the name was changed to M/s.

International Construction Ltd. (respondent No. 1).

05. Differences and disputes arose between respondent No. 1

and the petitioner with regard to execution of the contract. The

completion date of the contract work was extended from time to time,

but the entire work could not be completed for various reasons. These

were disputed by the parties.

06. Respondent No. 1 moved the Commissioner of GMC in

September, 2001, to be precise on 10.09.2001, seeking his

intervention for resolution of the disputes by way of arbitration in

terms of the agreement entered into between the parties. Since the

matter could not be amicably settled, respondent No. 1 moved this

Court for appointment of an Arbitrator under section 11 (6) (c) of the

Arbitration and Conciliation Act, 1996 (briefly the Act hereafter) vide

Arbitration Petition Nos. 17, 18 and 19 of 2001. This Court after

hearing learned counsel for both the sides and after going through the

agreements entered into between the parties while disposing the

above arbitration petitions, held that there was an arbitration clause in

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 5 of 28

the agreements. Since there was failure on the part of the

Commissioner to act as Arbitrator, the Hon’ble Chief Justice, vide his

common order dated 26.03.2002 decided to appoint an Arbitrator

under section 11 (6) (c) of the Act. As the dispute related to

engineering contract, it was felt that it would be better if an engineer

was appointed as an Arbitrator. Since respondent No. 2, a retired

Commissioner & Special Secretary to the Govt. of Assam, Public Works

Department, was an empanelled arbitrator in the list of arbitrators

maintained by the Indian Council of Arbitration, Assam, he was

appointed as the Arbitrator in all the three cases.

07. In the present case, the arbitration proceeding was

registered as Arbitration Case No. 18/2001 and the first hearing was

held on 25.04.2002. The arbitration proceeding was contested by both

the sides, whereafter the Arbitrator passed the award on 20.01.2004,

awarding a sum of Rs. 1,14,02,150.00 and other incidental amounts

with interest at the rate of 12% per annum in favour of respondent

No. 1.

08. Respondent No. 1/claimant as the decree holder instituted

execution proceedings for execution of the award dated 20.01.2004,

passed in Arbitration Case No. 18/2001, in the Court of District Judge,

Kamrup at Guwahati. The said execution case was registered as

Execution Case No. 30/2004.

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 6 of 28

09. Objection filed by the petitioner as judgment debtor was

dismissed by the executing Court vide order dated 27.03.2006.

Petitioner thereafter filed a petition on 21.04.2012 before the

executing Court to dismiss the execution case and/or for stay of the

execution proceeding. The said prayer was made on the ground that

certain documents were obtained subsequently which showed that the

arbitral award was obtained by the decree holder fraudulently.

10. Learned District Judge, Kamrup at Guwahati passed order

on 21.04.2012 itself, dismissing the said petition filed by the

petitioner.

11. Aggrieved thereby, petitioner has filed the present writ

petition for quashing the award as well as the execution proceeding

including the order dated 21.04.2012.

12. Contention of the petitioner is that the arbitral award was

obtained by fraud and collusion between respondent No. 1 on the one

hand, lawyer and certain officials of the petitioner and the Arbitrator

on the other hand. The claims made by respondent No. 1 were bogus,

based on forged and fabricated documents. Since the impugned award

is vitiated by fraud, the same cannot be sustained, and question of

executing such award does not arise.

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 7 of 28

13. This Court, by order dated 07.06.2012 issued notice and

passed an interim order to the effect that since fraud has been

alleged, Money Execution Case No. 30/2004, pending in the Court of

District Judge, Kamrup, should remain stayed.

14. Respondent No. 1 has filed affidavit. Maintainability of the

writ petition has been questioned. Writ would not lie for quashing of

an award as well as against a private party. Petitioner had adequate

and efficacious remedy under the Act, which it did not pursue. There

is delay in resisting the award and filing of the writ petition which

reflects lack of bonafide. On merit, it is submitted that arbitration

proceeding was initiated on orders of the Hon’ble Chief Justice by

appointment of respondent No. 2 as Arbitrator. The arbitration

proceeding was contested by the parties, whereafter award was

passed. Petitioner did not challenge the award under section 34 of the

Act. The award has attained finality. The same cannot be challenged

now on the false plea of fraud. Though fraud has been alleged, no

material has been placed before the Court to prove such allegation.

Executing Court was justified in rejecting the objection filed by the

petitioner. Petitioner acted on the basis of an undated complaint

received on 19.04.2012 written by one person called Prashanta

Changkakati without any verification. Strongly denying any wrong

doing, respondent No. 1 seeks dismissal of the writ petition both on

the ground of maintainability as well as on merit.

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 8 of 28

15. Petitioner has filed rejoinder-affidavit to the counter-

affidavit filed by respondent No. 1. While reiterating the contentions

made in the writ petition, petitioner has contended that the procedure

adopted by the arbitral tribunal was not fair, rather it was conducted

in a manner unknown to law. It is also contended that respondent No.

1 had filed a writ appeal against stay order granted by the Single

Bench, but the same was dismissed. It is further contended that

respondent No. 1 had raised 16 claims for a total amount of

Rs.22,42,10,322.00, excluding interest, out of which

Rs.1,94,77,619.00 was awarded to the respondent No. 1 excluding

interest. In addition to the above, interest was also awarded

separately at the rate of 12% per annum, which would come to

Rs.1,07,38,994.00 (approximately).

16. Heard Mr. B Singh, learned counsel for the petitioner and

Mr. BR Bhattacharjee, learned Senior Counsel assisted by Mr. SR

Ganguli, learned counsel along with Mr. GN Sahewalla, learned Senior

Counsel for the respondents. None appeared for the respondent No. 2.

17. Learned counsel for the petitioner has based his entire

argument on fraud. He has submitted that respondent No. 1 had

colluded with the lawyer of the petitioner as well as the Chief Engineer

and the Arbitrator also became a party to the fraud. Most of the claims

were allowed on admission. He submits that fraud vitiates everything

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 9 of 28

and, therefore, the impugned award cannot be allowed to stand. He

further submits that petitioner has lodged FIR against the respondent

No. 1. Even the Govt. of Assam has taken serious note of the matter

and the matter is being investigated. He has referred to a number of

decisions, including the one reported in (2000) 3 SCC 581, UNITED

INDIA INSURANCE COMPANY LTD. VS. RAJENDRA SINGH & ORS., in

support of his submission that if any benefit has been obtained by way

of fraud, the same cannot be allowed to be sustained by taking

technical plea. High Court has plenary powers to undo the mischief

caused by fraud and collusion.

18. Mr. Bhattacharjee, learned Senior Counsel appearing for

the respondent No. 1, at the outset, questioned the maintainability of

the writ petition. The award having not been challenged, even though

effective and adequate statutory remedy was available, had attained

finality. The plea of fraud taken by the petitioner is an afterthought to

resist the execution proceeding. He asserts that there was no fraud in

the passing of the award, which was passed following the procedure

laid down under the law. Petitioner has made serious allegations of

fraud against its own lawyer and Chief Engineer, that too, after the

lawyer had expired. Referring to the various documents on record,

learned Senior Counsel submits that contrary to what is being

contended by the petitioner, it was because of the effort of the lawyer

that the petitioner was quite successful in the arbitration proceeding,

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 10 of 28

inasmuch as what was finally awarded was a fraction of what was

claimed by the respondent No. 1. Perhaps this would explain why the

award was not challenged under section 34 of the Act. He submits

that the so called complaint dated 19.04.2012 was an engineered

document, which was immediately lapped up by the petitioner and

was used to file the belated objection in the executing Court. To give it

a bonafide look, the said complaint was forwarded to the police

authorities for registration of criminal case without any independent

verification of the complaint by the petitioner. Referring to various

provisions of the Act and the decision of the Apex Court in the case of

VENTURE GLOBAL ENGINEERING VS. SATYAM COMPUTER SERVICES

LTD. & ORS., reported in (2010) 8 SCC 660, he submits that fraud is a

question of fact which has to be proved and demonstrated. Mere

insinuation or allegation would not constitute fraud. Contending that

the writ petition is an abuse of the process of the Court, Mr.

Bhattacharjee, learned Senior Counsel for the respondent No. 1 seeks

dismissal of the writ petition with exemplary costs.

19. In his reply, Mr. Singh, learned counsel for the petitioner

submits that objection regarding maintainability of the writ petition

based on the ground of availability of alternative remedy and finality of

award would not be tenable inasmuch as the award having been

obtained through fraudulent means would be non est in the eye of

law. In the facts and circumstances of the case, no amount of

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 11 of 28

technical plea raised by respondent No. 1 can repel the challenge and

sustain the award.

20. I have heard learned counsel for the parties and I have

also perused the materials on record.

21. Before proceeding further, it would be apposite to refer to

those provisions of the Act which are relevant for the present case.

22. The Act was enacted to consolidate and amend the law

relating to arbitration, both domestic and international and for

enforcement of foreign arbitral awards, after repealing the earlier

Arbitration Act, 1940. The Act also deals with conciliation proceedings

and matters connected therewith or incidental thereto. Section 4 of

the Act deals with waiver of right to object. It says that a party to an

arbitration should know that any provision relating to arbitration from

which the parties may derogate or any requirement under the

arbitration agreement has not been complied with and yet proceeds

without stating his objection to such non-compliance without undue

delay or if a time limit is provided for stating that objection within the

prescribed period of time, shall be deemed to have waived his right to

object. Section 11 of the Act deals with appointment of Arbitrator and

lays down the procedure for such appointment. Under sub-section (6),

if an Arbitrator is not appointed as per the agreed procedure, a party

may request the Chief Justice or any person or institution designated

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 12 of 28

by him, to appoint the Arbitrator and such appointment shall be final.

Appointment of an Arbitrator can be challenged on the grounds

mentioned in section 12. Under sub-section (3), an Arbitrator may be

challenged if justifiable doubts arise as to his independence or

impartiality or on the ground of lack of qualification. The arbitral

tribunal shall lay down its own procedure which will not be bound by

the provisions of the Civil Procedure Code, 1908 or by the Indian

Evidence Act, 1872. Section 25 deals with default of a party. If the

claimant does not submit its statement of claim, the arbitral tribunal is

empowered to terminate the proceedings. Likewise, if the respondent

does not submit its statement of defence or fails to appear or produce

documentary evidence, the arbitral tribunal shall continue with the

proceedings and make the arbitral award. Under section 34 of the Act,

a party may apply for setting aside of an arbitral award by making an

application before the Principal Civil Court of the district having

jurisdiction over the arbitration proceeding. Various grounds are

mentioned on the basis of which an arbitral award may be questioned

under section 34. As per section 34 (2) (b) (ii), if an arbitral award is

in conflict with the public policy of India, it may be set aside by the

Principal Civil Court. As per the explanation below the said sub-section,

it is declared that an award would be construed to be in conflict with

the public policy of India, if the making of the award was induced or

affected by fraud or corruption or was in violation of section 75 or

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 13 of 28

section 81. While section 75 relates to confidentiality clause, section

81 deals with admissibility of evidence in other proceedings. Under

section 35, an arbitral award would be final and binding on the parties,

subject to any challenge under section 34. Enforcement of arbitral

award is provided in section 36, which says that after the period of

making an application under section 34 has expired, the award shall

be enforced under the Civil Procedure Code in the same manner as if

it were a decree of the Court. Section 37 is the appellate provision.

23. Having broadly noticed the provisions of the Act relevant

for the present case, we may now turn to the facts of the case.

24. It is not disputed that there were differences and disputes

between petitioner and respondent No. 1 relating to execution of the

contract in question so much so that respondent No. 1 had to

approach the Hon’ble Chief Justice of this Court for appointment of

Arbitrator. The Hon’ble Chief Justice noticed the dispute between the

parties which could not be amicably settled and passed order dated

26.03.2002, appointing respondent No. 2 as the Arbitrator in exercise

of the power conferred under section 11(6) (c) of the Act. As already

noticed above, the Arbitrator convened the first hearing on

25.04.2002. From 25.04.2002, the proceedings continued and finally

culminated in the making of the award on 20.01.2004. In other words,

the proceedings lasted for almost two years. During the entire

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 14 of 28

proceedings, not only the lawyer of the petitioner was present, he was

assisted by the Chief Engineer, Water Works, GMC and other

engineers from time to time. They were throughout in touch with the

Commissioner, GMC pertaining to the arbitration proceedings. Minutes

of the day to day proceedings were also forwarded to the

Commissioner, GMC by the Arbitrator.

25. I am of the view that at this stage, details of the claims

lodged by the claimant would not be required to be gone into as this

Court is not examining the award as an appellate court. Suffice it to

say that respondent No. 1 made 16 claims for various amounts before

the Arbitrator. According to the rejoinder-affidavit of the petitioner, the

total amount claimed by the respondent No. 1 was

Rs.22,42,10,322.00, out of which the Arbitrator awarded

Rs.1,94,77,619.00. According to the petitioner, out of the aforesaid

amount, an amount of Rs.70,03,664.00 was awarded on the alleged

admission of the petitioner and a further amount of Rs.6,97,000.00

was awarded on the ground that petitioner could not place any

document relating to the said claim. Against claim of 21%, pre-suit,

pendente lite and future interest, the Arbitrator awarded 12% per

annum pre-suit and pendente lite interest and 18% per annum as

future interest. A perusal of the award would show that majority of the

claims raised by respondent No. 1 were not granted by the Arbitrator.

It further indicates that at the instance of the Arbitrator negotiations

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 15 of 28

were held between the parties for settlement of the dispute, but

conciliation was not possible. In this connection, a meeting was also

held in the office of the Commissioner, GMC on 18.07.2003.

26. Coming to the claims of respondent No. 1, in all, the

respondent No. 1 made 16 claims. Though details of the claims need

not be gone into, the headings of the claims and the decision of the

Arbitrator may be briefly noticed. Claim No. 1 and claim No. 6 were

taken up together as the GMC had admitted a part of the principal

amount claimed against claim No. 1 and the full amount against claim

No. 6. Claim No. 1 is ‘claim for an amount of Rs.44,46,337.00 towards

work done bills’, whereas claim No. 6 is ‘claim for 5% amount withheld

on account of certificate of completion and commissioning

(Rs.41,09,079.00)’. Under Claim No. 1, the Arbitrator awarded Rs.

35,91,585.00 and the full amount under Claim No. 6 as the said

amount was admitted by the GMC to be payable to the respondent No.

1. Against claim No. 2 which is ‘claim for payment due to extra work

done beyond scope of original agreement (Rs.7,61,000.00)’, the

Arbitrator found that the said claim was not maintainable and

accordingly rejected the same. Claim Nos. 3,4 & 5 are as under: -

“Claim No. 3 : Claim for interest on delayed payments Rs.1,77,87,201.00 upto 30.03.2000.” “Claim No. 4 : Claim for interest on delayed payment of 1st installment of mobilization advance (Rs.3,22,666.00).”

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 16 of 28

“Claim No. 5 : Claim for interest on delayed payment of 2nd installment of mobilization advance (Rs.7,16,261.00).”

Against claim No. 3, Arbitrator held that the claimant was entitled to

interest on delayed payment and held that the interest would be

calculated at the rate of 12% per annum. However, claim Nos. 4 & 5

were disallowed. Claim No. 7 is ‘claim for escalation for work done and

supply made after 1994 (Rs.15,00,000.00)’. Under this claim, the

Arbitrator awarded Rs.3,74,805.00. Claim Nos. 8 to 13 are as under:-

“Claim No. 8 : Claim for an amount of Rs.15,23,74,103.00 on account of damages.” “Claim No. 9 : Claim for an amount of Rs. 1,71,03,225.00 on account of compensation for payment of idle time suffered.” “Claim No. 10 : Claim for an amount of Rs. 2,00,000.00 on account of compensation for additional bank charges for bank guarantee during the extended period of contract.” “Claim No. 11 : Claim for an amount of Rs. 40,00,000.00 on account of compensation towards depreciation of machinery/equipment etc. during the extended period of contract.” “Claim No. 12 : Claim for an amount of Rs. 16,74,000.00 on account of expenses incurred for visits to and from the site in the extended period.” “Claim No. 13 : Claim for an amount of Rs. 58,59,000.00 towards expenditure incurred on hiring of accommodation during the extended period.”

The above claims were taken together as those related to claim of

compensation for prolongation of the contract period and losses

suffered due to the same. The Arbitrator held that GMC had breached

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 17 of 28

the contract which led to prolongation of the contract period. It was

also found that un-rebutted documentary evidence on record had

clearly revealed the fact that GMC had grossly delayed in making

payment on time. The Arbitrator calculated the period of delay to be

the period from 05.06.1992 to 08.04.1996 i.e. the date when the

claimant submitted the incomplete final bill. The Arbitrator awarded

Rs.1,14,02,150.00 against Claim Nos. 8 & 9, but held that claimant

would not be entitled to any further amount under claim Nos. 10 to

13. Accordingly claim Nos. 10 to 13 were rejected. Thus for claim

Nos.8 to 13, against the claim of Rs. 18,12,10,328.00, the sum

awarded was 1,14,02,150.00. Claim No. 14 is for ‘claim on account of

loss of goodwill (Rs.1,31,07,450.00). The Arbitrator, however, declined

to award any amount under this claim and rejected the same. Claim

No. 15 is ‘claim for pre-suit, pendente lite and future interest at the

rate of 21%’. After holding that the claimant was entitled to payment

of interest, the Arbitrator held that pre-suit and pendente lite interest

to the claimant would be at the rate of 12% per annum, which would

be calculated from the various dates mentioned in the award. It was

further held that the claimant would be entitled to future interest at

the rate of 18% per annum on the principal amount awarded from the

date of award till the date of payment. Claim No. 16 is ‘claim for an

amount of Rs.2,50,000.00 on account of costs’. But the Arbitrator

declined to award any cost, leaving the parties to bear their own costs.

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 18 of 28

27. Thus even from a cursory glance at the award, it is seen

that many of the claims made by the claimant were rejected. As

pointed out by the GMC in its reply-affidavit, against total claim of

Rs.22,42,10,322.00, the Arbitrator awarded only Rs.1,94,77,619.00.

Though we are not concerned with the quantum of the award, yet the

fact that the Arbitrator had awarded only a fraction of what was

claimed cannot be overlooked. Full participation of the GMC in the

arbitration proceeding cannot also be overlooked. It is evident from

the award that the lawyer representing the GMC was assisted by the

Chief Engineer and other staff of GMC throughout the proceeding with

the Commissioner being kept abreast of the proceedings on regular

basis.

28. When a copy of the award was forwarded to their lawyer

by the Chief Engineer, Water Works, GMC for opinion, the lawyer

replied back on 12.07.2004, firstly, clarifying that he was not the

Standing Counsel, GMC and secondly, on the legal opinion sought for,

he stated that he had discussed the matter with the Commissioner,

GMC about the possibility of an out of Court settlement, but not much

headway was made in this regard. He finally stated that for a variety

of personal reasons, he had decided not to deal with arbitration cases

any further and declined to tender any advice. Request was also made

to take away the briefs from his custody. This was a letter of

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 19 of 28

12.07.2004. The Chief Engineer also put up a note before the

Commissioner on 28.08.2004 stating that the award goes in favour of

GMC and, therefore, process for out of Court settlement may be

initiated. It was pointed out that representative of respondent No. 1

had approached the Chief Engineer for out of Court settlement and he

opined that it was a good proposal which was in the best interest of

GMC. What followed thereafter has not been brought on record.

However, the materials on record do not indicate that GMC had sought

for legal opinion of any other counsel or that any view was expressed

to challenge the award under section 34 of the Act.

29. In the meanwhile, as the award was not complied with and

as no headway was made for out of Court settlement, respondent No.

1 initiated execution proceedings in the year 2004 itself under section

36 of the Act. It further appears that objection filed by the petitioner

as judgment debtor was dismissed by the executing Court on

27.03.2006. Long thereafter, notification dated 22.06.2011 was issued

by the Commissioner and Secretary to the Govt. of Assam, Guwahati

Development Department constituting a ‘Bids Finalization Committee’

with the following members: -

Joint Secretary to the Govt. of Assam, Guwahati Development Department : Chairman. Joint Commissioner, Guwahati Municipal Corporation : Member.

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 20 of 28

Chief Engineer, GMC : Member. Standing Counsel, GMC : Member. Sr. FA to the Govt. of Assam, Guwahati Development Department : Member.

for settlement of amount of the awards dated 20.01.2004 in the three

arbitration cases. By a corrigendum issued on 30.06.2011, the

Commissioner & Secretary clarified that ‘Bids Finalization Committee’

should be read as ‘Awards Negotiation Committee’. It was further

mentioned that Joint Commissioner, GMC would be the Member

Secretary of the said Committee.

30. What steps the Award Negotiation Committee took

regarding the awards in question or the outcome of such steps are not

known, as nothing has been placed on record. But what is clear is that

the Committee was constituted for settlement of the amount made by

the awards and not for scrutiny of the awards. In other words, the

objective was to negotiate on the quantum of the awards and not to

challenge the basis of the awards. Be that as it may, surprisingly, a

complaint written by one Prashanta Changkakati, Guwahati – 3

addressed to the Commissioner, GMC without any date, suddenly

appeared, which is available on record. Though there is an

endorsement dated 19.04.2012 on the body of the complaint, it is not

known as to whose endorsement it was as the endorsement was

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 21 of 28

without any official seal. There is no description of who Prashanta

Changkakati was and the address given was also very vague, as he

simply described himself as Prashanta Changkakati, Guwahati-3. He,

however, alleged that respondent No. 1 had entered into a criminal

conspiracy with officials of GMC to misappropriate public money by

forgery and cheating. In the course of the complaint, the said

Prashanta Changkakati stated that the accused-company got an

Arbitrator appointed without an arbitration clause. The complainant

further went on to say that having ‘secured’ appointment of an

Arbitrator i.e., respondent No. 2, the accused-company filed claims

based on forgery and fabricated documents. The complainant called

for a comprehensive enquiry into the matter, threatening that if the

Commissioner failed to take action, he would approach the High Court

and the Supreme Court for a Court monitored CBI enquiry.

31. Without entering into the substance of the allegations

made by the complainant, it is evident, as already noticed, that the

complainant did not disclose his identity. He also did not disclose as to

how, in what manner and in what capacity he had come to know

about the alleged forgery and cheating by respondent No. 1. The GMC

Commissioner or the other authorities of GMC ought to have been

careful and circumspect when the said complainant stated that the

accused-company got an Arbitrator appointed without an arbitration

clause and that it had ‘secured’ appointment of respondent No. 2 as

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 22 of 28

the Arbitrator when the fact is that it was because of the judgment

and order of the Hon’ble Chief Justice dated 26.03.2002, which held

that there existed an arbitration clause in the contract agreement, the

Arbitrator was appointed. It was further held that the named

Arbitrator i.e., Commissioner, GMC had failed to enter into the dispute

referred and, therefore, the Hon’ble Chief Justice proceeded to appoint

an Arbitrator under section 11 (6) (c) of the Act. This is what was held

by the Hon’ble Chief Justice in his judgment and order dated

26.03.2002:-

“ Really speaking it is to be seen whether the parties to the agreement intended that any disputes arising between them should be decided by a particular person after holding an enquiry in the nature of judicial enquiry and after hearing the cases of respective parties. If such is the intention, then it is an arbitration clause irrespective of the fact that the words ‘arbitrator’ or ‘arbitration’ are not used in such clause. In the present case, reading of the clauses 26 and 30, as well as clause D-6.21 of the agreements quoted above, it is apparent that it was envisaged that any dispute arising out of the agreements, the decision thereon shall be taken by the Commissioner. Consequently, I do not agree with the contention of the learned counsel for the respondent, GMC, and hold that there exists an arbitration clause. In Arbitration Petition No. 17/2001, the first communication which was received after September 10, 2001 from the Commissioner, GMC is dated 13.11.2001. Admittedly, it is after 30 days of the receipt of the notice dated 10th September, 2001. In Arbitration Petition No. 18/2001, the notice dated 10.09.2001 was duly received by the respondent, but there was no reply to it till the filing of the petition, i.e., 18.10.2001. In Arbitration Petition No. 19/2001, the learned counsel for the respondent referred to a communication dated 28th September, 2001, from the Commissioner, GMC. In that communication, reference is being made to the Chief Engineer’s letter dated 13.03.2001,

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 23 of 28

which was addressed to the applicant asking them to attend the office of the Chief Engineer along with copy of the agreement and other relevant documents in respect of the work ‘Labour charge and supply of barge, installation of MS pipeline for Kamakhya Water Supply Scheme’ on 15.03.2001 at 3:00 p.m. The communication dated 28th September, 2001 is not in response to the notice dated 10th September, 2001 in which disputes were referred. This petition was filed on 18.10.2001. From the aforesaid facts, I am of the considered view that the named arbitrator, i.e., the Commissioner, GMC failed to enter upon the reference and act as an arbitrator within 30 days of the receipt of the notices dated 10.09.2001. In view of the above, I proceed to appoint an arbitrator under section 11(6)(c) of the Act. The matter relates to engineering disputes and it would be better if some engineer is appointed as an arbitrator. One such arbitrator is in the list of arbitrators maintained by the Indian Council of Arbitration, Assam. In these three cases, Mr. N. C. Deka, Commissioner, PWD (Retd), opposite Nehru Stadium, Dr. B. Barooah Road, Guwahati, is appointed as arbitrator.”

Thus, on the face of it, the allegation made by the complainant

that the accused-company got an Arbitrator appointed without an

arbitration clause or that it had ‘secured’ appointment of an Arbitrator,

is not only untenable and false, but is also highly contemptuous.

Inspite of that, the Commissioner or other higher authorities of GMC

did not think it necessary to verify the antecedents of the complainant

and the genuineness of the complaint. Instead, he got a FIR

registered against respondent No. 1 though the Joint Commissioner,

GMC and the entire complaint was enclosed as the first information.

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 24 of 28

32. Be that as it may, it was only after receipt of the alleged

complaint on 19.04.2012 that the GMC filed an objection immediately

thereafter on 21.04.2012 before the executing Court seeking stay of

the execution proceeding. Learned District Judge, Kamrup, Guwahati

by his order dated 21.04.2012 dismissed the said petition. It was held

as under: -

“The parties are present. The judgment-debtor has filed a petition No.580/12 with a prayer to stay execution proceeding of this case.

I have heard learned counsel for both sides. Learned counsel for judgment-debtor has referred

to the provisions of Section 47 of the CPC to justify his prayer for stay of the proceeding. The judgment-debtor has alleged in the instant petition that the arbitral award was fraudulently obtained by the decree-holder. This is the sole ground on which he has prayed to stay the execution proceeding.

I have visited the provisions of Section 47 of the CPC and I have not found therein that any provision is made therein to condone such a prayer. The provisions of Section 47 have given the power to the Court to decide dispute between the parties arising out of the execution proceeding. The dispute, alleged in the petition between the parties, does not appear to have arisen out of this execution proceeding. In fact the judgment-debtor has challenged the arbitral award which is put to execution in this execution proceeding on the ground that the arbitral award was obtained fraudulently. That being so, the judgment-debtor, instead of resorting to the option of filing a separate suit seeking declaration that the arbitral award was fraudulently obtained or to the provisions for appeal against the arbitral award, has preferred to file this petition which has no approval of the provisions referred to by the learned advocate for the judgment-debtor, as indicated above. The learned advocate for judgment-debtor has also made a prayer to this court to exercise its inherent power u/s 151 of the CPC. The provision of section 151 of the CPC cannot be applied in the instant case in view of the fact that there is a legal provision available for judgment-debtor either

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 25 of 28

to prefer an appeal against the arbitral award or to file a separate suit seeking a declaration.

Accordingly, I am not inclined to exercise the power of this court u/s 151 of the CPC.

The petition stands dismissed, accordingly, after hearing both sides.

Since no out of Court settlement has taken place in this execution proceeding the decree-holder will take steps within 7 days for issuance of the writ.”

33. The executing Court was right in saying that the petitioner

ought to have filed a separate suit for declaring the award as being

fraudulently obtained or it could have challenged the award under

section 34 of the Act on the ground that the arbitral award is in

conflict with the public policy of India, which has been explained to

mean making of the award by fraud or corruption. Petitioner chose not

to take recourse to any of the aforesaid two legal options open to it.

For eight years i.e., from January, 2004 when the award was made to

19.04.2012 when the so-called complaint was received, petitioner

never raised any objection that the award was vitiated by fraud. From

the documents placed on record, it is evident that fraud was alleged

for the first time in the complaint received on 19.04.2012. As already

noticed above, without making any preliminary verification or enquiry

about the antecedent of the complainant or the veracity of the

complaint, petitioner accepted the complaint as if it was a gospel truth

and immediately filed the petition before the executing Court not to

execute the award alleging fraud. This itself raises doubt about the

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 26 of 28

bonafides of the complaint and the action taken by the petitioner

based thereon.

34. There is no dispute to the proposition of law advanced on

behalf of the petitioner that an award obtained by fraud is a nullity

and that the High Court has got plenary powers to set at nought an

award obtained through fraud. No amount of technicalities or delay

can sustain or rescue an award obtained by fraud from judicial

excision. The Apex Court very rightly pointed out in the case of

RAJENDRA SINGH (Supra), that fraud and justice never dwell

together. However, having said that, it must also be borne in mind

that fraud is essentially a question of fact which has to be

proved/demonstrated to the satisfaction of the Court by the party

alleging fraud. Section 17 of the Indian Contract Act, 1872, defines

fraud. It reads as under: -

“17. ‘Fraud’ defined – Fraud’ means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract: -

(1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; (2) the active concealment of a fact by one having knowledge or belief of the fact; (3) a promise made without any intention of performing it; (4) any other act fitted to deceive;

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 27 of 28

(5) any such act or omission as the law specially declares to be fraudulent.

Explanation – Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence, is, in itself, equivalent to speech.”

35. Section 17 of the Indian Contract Act, 1872, has to be read

with the provisions of section 34 (2) (b) (ii) of the Act. When a

challenge is made to an arbitral award on the ground of the award

being induced or affected by fraud, this has to be proved in the

appropriate court either by filing application under section 34 of the

Act or by filing an independent suit. Admittedly, petitioner has not

availed any of the above remedies. Even in the present writ petition,

the pleadings as to fraud are extremely bald and general in nature to

warrant or justify coming to any conclusion that fraud or collusion had

played a part in making of the award. On the contrary, it is the

inordinate delay on the part of the petitioner in making the allegation

of fraud and the manner in which the allegation of fraud had surfaced

through an anonymous complaint which was immediately acted upon

by the petitioner without even any initial verification raises question

mark about the bonafides of the petitioner itself in instituting a very

belated challenge to the arbitral award by clutching on to the only

ground that could be available to sustain such a challenge at this

belated stage i.e., fraud.

WPC Nos. 2790, 2789 & 2711 Of 2012 Page 28 of 28

36. For the aforesaid reasons, this Court is not inclined to

accede to the contentions advanced on behalf of the petitioner. This

petition is, therefore, devoid of any merit and is accordingly dismissed.

Interim order passed by this Court on 07.06.2012 stands vacated.

37. For the grounds and reasons mentioned above, the other

two writ petitions i.e., WP(C) No.2789/2012 and WP(C) No.2790/2012

are also dismissed. Stay order passed in those cases on 12.06.2012

are also vacated. No costs.

Judge

Beep!