Case Note & Summary
The Arbitration Petition under Section 34 of the Arbitration and Conciliation Act, 1996 was filed by the Municipal Corporation of Greater Mumbai to challenge an arbitral award dated 24 September 2007. The award directed the Corporation to pay Rs.66,51,987.69 along with interest to Hindustan Construction Company Ltd. for work executed under a construction contract for aerated lagoons at Bhandup and Ghatkopar. The contract was awarded in 1996, and the work was completed in 2001. The Corporation issued a taking over certificate on 14 March 2001 and, after the defects liability period ended on 3 March 2002 and rectification of minor defects, defects liability certificates were issued on 16 April 2002. In June/July 2003, new defects were noticed, leading to a meeting on 15 September 2004. The Corporation retained the amount due, alleging the contractor had agreed to rectify defects at its cost. The contractor invoked arbitration. The arbitral tribunal found that the taking over and defects liability certificates conclusively established satisfactory performance, and the subsequent alleged defects arose long after the liability period. The tribunal allowed the contractor's claim for the balance and dismissed the Corporation's counterclaim. In the Section 34 petition, the Corporation argued that the tribunal erroneously relied on an unproved report of Dr. Katti and wrongly rejected the minutes of the 15 September 2004 meeting as not proved, violating natural justice. The High Court analysed the tribunal's reasoning and held that the foundation of the award was the contractual certificates, not Dr. Katti's report. As for the minutes, the Corporation failed to produce the original or any justification for secondary evidence; the witness admitted non-production and undertook to trace the original but did not. The tribunal's finding that the minutes were not proved was justified. The court also recalled the principle in Bareilly Electricity Supply Co. Ltd. v. The Workmen that while an arbitral tribunal is not bound by strict rules of evidence, it must observe principles of natural justice and cannot act on what is not evidence. Finding no perversity, illegality, or violation of natural justice, the court dismissed the petition and upheld the arbitral award.
Headnote
A) Arbitration - Challenge to Award - Scope of Interference Under Section 34 - Arbitration and Conciliation Act, 1996, Section 34 - The court held that the arbitral tribunal's findings on facts and evidence are not to be reappreciated unless the award is perverse, arbitrary, or illegal. The tribunal's conclusion that the contractor had performed the work satisfactorily based on the taking over and defects liability certificates issued by the employer was a plausible view and not open to interference (Paras 8-9). B) Evidence - Proof of Documents - Secondary Evidence - Indian Evidence Act, 1872 - The arbitral tribunal found that the employer failed to prove the minutes of the meeting dated 15 September 2004 as the original signed minutes were not produced, and no justification for leading secondary evidence was given. The court upheld this finding, noting that the witness admitted non-production and failed to trace the original (Paras 8, 10). C) Natural Justice - Reliance on Unproved Documents - Principles of Natural Justice - Arbitration and Conciliation Act, 1996, Section 18 - Relying on Bareilly Electricity Supply Co. Ltd. v. The Workmen, the court held that an arbitral tribunal must observe principles of natural justice, and cannot act on what is not evidence. However, the petitioner's contention that the tribunal relied on an unproved report (Dr. Katti's report) was rejected because the award was based on contractual certificates, not that report (Paras 9). D) Contract Law - Construction Contracts - Defects Liability Period and Certificates - Conditions of Contract, Clauses 49.2, 62.1 - The taking over certificate and defects liability certificates issued by the employer evidenced that the contractor had completed the work in accordance with the contract and rectified all defects. The tribunal rightly held that the contractor could not be held liable for defects noticed after the expiry of the defects liability period and after unconditional certificates were issued (Paras 4, 8).
Issue of Consideration
Whether the arbitral award suffered from perversity or illegality in its appreciation of evidence, particularly regarding the proof of the minutes of meeting dated 15 September 2004 and the report of Dr. Katti, warranting interference under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The court found no merit in the challenge and dismissed the arbitration petition. The arbitral award was upheld. The court held that the tribunal was justified in finding the minutes not proved and that the award was based on proper evidence.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 34
- Scope of interference with arbitral award
- Arbitral tribunal's appreciation of evidence
- Principles of natural justice
- Secondary evidence
- Proof of documents
- Contractual obligations under taking over certificate and defects liability certificate
