Supreme Court Limits Arbitrators' Award, Clarifies Contract Clause Interpretation

The Supreme Court set aside the majority award by the arbitrators, except for a specific sum payable to the respondent. The Court found that the arbitrators exceeded their jurisdiction by including amounts for wage revisions beyond the contract terms. The interpretation of Clause 2.03 of the contract was pivotal, with the Court ruling that wage revisions post a certain date were irrelevant. The valid and invalid parts of the award were severed, allowing the respondent's claim for the balance amount due on the final bill. The appellant's defense based on limitation was withdrawn, and the respondent was awarded Rs. 8,63,953/- with interest.

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Issues Involved:
1. Validity of the majority award by the arbitrators.
2. Interpretation of Clause 2.03 of the contract.
3. Jurisdiction of the arbitrators in making the award.
4. Severability of the valid and invalid parts of the award.

Summary:

1. Validity of the Majority Award by the Arbitrators:
The appeal was directed against the High Court of Bombay's order, which restored the majority award passed by the arbitrators. The appellant contended that the award was contrary to Clause 2.03 of the contract and was barred by limitation. The High Court, however, found the interpretation by the majority of the arbitrators to be logical and upheld the award.

2. Interpretation of Clause 2.03 of the Contract:
The core issue was the interpretation of Clause 2.03, which stipulated that the rates for the first year were to remain firm regardless of any wage revisions. For the second year, rates were to remain firm, taking into account statutory wage increases up to 15th January 1984. The appellant argued that any wage revisions after this date, even if retrospective, were irrelevant. The High Court's contrary view was deemed erroneous by the Supreme Court, which emphasized that the contract did not envisage rate escalation based on wage revisions post-15th January 1984.

3. Jurisdiction of the Arbitrators in Making the Award:
The Supreme Court reiterated that arbitrators have no jurisdiction to make an award against the specific terms of the contract. Citing precedents, it was held that arbitrators must act within the limits of the agreement, and any award contrary to the contract terms is arbitrary and without jurisdiction. The award by the arbitrators, which included amounts for wage revisions beyond the stipulated date, was thus unsustainable.

4. Severability of the Valid and Invalid Parts of the Award:
The Supreme Court considered whether the valid part of the award could be severed from the invalid part. The respondent's claim for escalation due to wage increases was disallowed, but the claim for the balance amount due on the final bill was upheld. The appellant's defense based on limitation was withdrawn, and the Supreme Court allowed the claim for Rs. 8,63,953/- with interest, separating it from the inadmissible claims.

Conclusion:
The appeal was allowed in part, setting aside the majority award except for the sum of Rs. 8,63,953/-, which was payable to the respondent with interest at 9% p.a. from 1st April 1985 until the date of payment. Each party was to bear its own costs throughout the proceedings.

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