TaxTMI 
TaxTMI 
1999 (9) TMI 770
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.... removal, transportation including loading and unloading, disposal dumping dozing, levelling etc. of over-burden at the specified dump yards including final dressing of the mine benches, faces and sides etc. and incidental mining of rock phosophate ore encountered during the excavation of over-burden and its transportation to ore-stacks etc. from the footwall, western portion and eastern portions of 'D' Block of the Jhamarkotra mines including drilling, blasting, loading, transportation, unloading etc. with the leads and lifts involved in connection therewith, more particularly described in the said contract for the period of three years and three months, that is, from 13-3-1981 to 12-6-1984 for the quantity of 21.15 lakhs cubic meter subject to plus minus 10 per cent at the fixed rate of Rs. 35.80 (Rupees Thirty-five and eighty paise) all inclusive per cubic meter in respect of over-burden and/or ore actually excavated mined, removed etc. 3. The respondent No. 1 vide its letter dated 7-9-1983, raised certain disputes and claimed reimbursement and/or additional payments and/ or compensation on account of escalation of cost of work and breach of contract by the appellant.....
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....o (8) are as under:- 5. Did the Arbitrator fail correctly to consider clauses 17 and 18 of the Agreement and the Contract Labour (Abolition and Regulation) Act, 1970? 6. Did the Arbitrator fail to apply his mind to consider pleadings, documents and evidence? 7. Whether the award is bad as the learned sole Arbitrator failed to apply his mind to documents and decide the dispute on per unit basis? 8. Is the award perverse? Has it been improperly procured and is it otherwise invalid as mentioned in the objection petition? 7. Thereafter, the District Judge, rejected the contentions raised by the appellant and declared the award as the rule of court and passed the decree. That was challenged by filing the appeal before the High Court. 8. Before the High Court, it was contended that the District Judge acted without jurisdiction in accepting the interim as well as the final award as it was required to be set aside as the arbitrator had ignored the fixed date as mentioned in clauses 17 & 18 of the agreement and thereby he has travelled beyond his jurisdiction. It was also pointed out that by doing so the arbitrator has legally misconducted himself. It was also submitted th....
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....present case, arbitration clause is of widest amplitude and it provides that 'all disputes and differences arising out of or in any way touching or concerning the contract whatsoever shall be referred to the sole arbitration'. Hence, the award passed by the arbitrator cannot be held to be without jurisdiction or it cannot be held that arbitrator has travelled beyond his jurisdiction. He also submitted that award is a non-speaking one and, therefore, also the Court cannot go behind the said award for finding out the mental process of the arbitrator for awarding the said sum. He submitted that the award only depends upon interpretation of the clauses of the agreement between the parties. It is his further contention that, in any case, jurisdictional question was not raised properly before the arbitrator or before the District Court and the appellant allowed the arbitrator to proceed with the proceedings without raising its objection of jurisdiction or competence. By the reference letter dated 5-2-1985, the arbitrator was empowered 'to decide all claims raised by the contractor vide its letter dated 7-9-1983'. He also submitted that even the committee appointed by the ....
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....harge, may require drilling of additional holes by the contractor before blasting is taken up. The holes not drilled as per the approved drilling pattern shall not be taken up for blasting. On receipt of written requisition from the contractor in the prescribed proforma duly signed by the authorised representative of the contractor to the company not less than 2 days prior to intended date of blasting, blasting will be done by the Company as and when felt necessary and convenient by the Engineer-in-charge. The company shall make available the blasting material, its transportation, blasting accessories and blasting crews including blaster/s. In case the company is not in a position to arrange for the same, the contractor shall make his own arrangements for the same without any liability and obligation on the company. The company shall deduct the actual landed cost of all explosives ex-Jhamarkotra as may be used in the course of blasting plus five per cent value of the landed cost of explosives as blasting charges from the contractor's running Bill/s or any amount that may be found due and payable to the contractor or the security amount. It is agreed and understood by the contra....
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....e remuneration that is payable by the company to the contractor under this contract. The contractor shall be only entitled to the payment of composite rate as aforesaid and no other or further payment of any kind or item, whatsoever, shall be due and payable by the company to the contractor under this agreement except as aforesaid. The rates aforesaid shall remain firm, fixed and binding during the currency of this agreement till the issue of final certificate irrespective of any fall or rise in the cost of mining operations of the work covered by this contract or for any other reason or any account or any ground whatsoever. Provided, however, that the company has agreed to freeze the issue rate of diesel as on 13-3-1981, at the rate of Rs. 2.78 (Rupees Two and seventy eight paise only) per litre and the company shall issue the diesel subject to availability and its convenience to the contractor against the surrender of permit/s of the equipment by him at the frozen rate of Rs. 2.78 per litre during the currency of this contract even if there by any rise in the cost of diesel after execution of this agreement subject to a ceiling of 1.3 litres (one point three litre) for one ....
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....n: "We signed the contract with a clear understanding that the rate under this contract is firm and final and we shall get no escalation in our rates, except in case of diesel, which will be supplied to us by the Company at a frozen rate. With the passage of time our cost calculations went hayway for reasons which were beyond our control." 5.(i) From the beginning of the contract we had paid wages equivalent to RSMML wages instead of Minimum wages. The difference between the two on an average in the last 25 months works out to Rs. 75,000 per month, against an average production of 40,000 cu.m. per month. Thus the additional cost works out to Rs. 1.80 per cu.m. (ii) Unforeseen and difficult operating condition in the footwall and its effect on the cost of operation: "The work in footwall area of 'D' block is a major constituent of the contract both quality and quantity wise. While the contract is termed as a 'Turnkey' contract, at least in the footwall the work cannot, by any stretch of imagination, be considered as 'Turnkey', as the operation in that area is totally controlled by the Principal employer." In fact, it was beyond our imagination ....
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....t footwall or in other words to present rate of Rs. 35.80 per cu.m. was retrospective effect." 13. On the basis of the claims made in the letter dated 7-9-1983, respon-dent filed claim statement for 8 items which is tabulated by the High Court in its judgment. Claim No. Description of claim Relief claimed 1. Claiming for increase in rate for excavation work at the Footwall area demand for escalation in the existing rates of excavation. In all claim under this item Claimed reimbursement @ Rs. 25.40 per cu.m. up to Aug. 83 thereafter @ 63.56 per cu.m.. Over and above the contract rate of Rs. 35.80 cu.m. quantified for Rs. 1,36,43,218 2. Claim for increase in costs of work due to use of high explosives instead of use of ANFO mixture. Claimed reimbursement @ Rs. 1.80 per cu.m. for all excavation done/to be done under the contract using high explosives instead of ANFO mixture. 3. Claim for reimbursement for losses suffered due to non-availability of explosive Claim reimbursement of Rs. 22.55 lacs by way of loss during the period February, 1963 to May 1983 4. Claim for reimbursement of additional costs for mining and transport of ore. Claim....
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....s that he has given due weightage to all the documents placed and argument submitted before him 'as regards admissibility as well as quantum of each claim by going through details of work done under each item of claims as filed before me'. (4)In the letter dated 7-9-1983, the Contractor himself has clarified, admitted and stated thus: "We signed the contract with a clear understanding that the rate under this contract is firm and final and we shall get no escalation in our rates, except in case of diesel, which will be supplied to us by the company at a frozen rate. With the passage of time our cost calculations went hay way for reasons which were beyond our control." (5)The appellant in his detailed reply before the arbitrator to the claims made by the contractor has pointed out and relied upon clauses 17 & 18 for contending that contractor was not entitled to any such claim under the contract. (6)Before the District Judge also, the issues pertaining to clauses 17 & 18 as stated above were raised. (7)Before the High Court also, it was contended that arbitrator made award against the stipulations of the agreement between the parties and thereby travelled beyo....
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....of aforesaid stipulations and also part of clause 18 which, inter alia, provides as under: "Save and except as aforesaid the contractor shall not be entitled to raise any claim and/or dispute on account of any rise in the price of oil, lubricants, tyres, tubes, explosives, spares, etc. statutory or otherwise or increase in the wages or minimum wages or on any other ground or reason or account, whatsoever." 19. Apart from the aforesaid specific stipulations, even the contractor has admitted in his letter dated 7-9-1983 that the contract was signed with clear understanding that the rate under the contract was firm and final and that no escalation in rates except in case of diesel would be granted. 20. Despite the admission by the contractor, it is apparent that arbitrator has ignored the aforesaid stipulations in the contract. In the award, the arbitrator has specifically mentioned that he has given due weightage to all the documents placed before him and has also considered the admis- sibility of each claim. However, while passing the award basic and fundamental terms of the agreement between the parties are ignored. By doing so, it is apparent that he has exceeded his juri....
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....9-1983. This reference to the arbitrator also clearly provides that reference was with regard to the dispute arising between the parties on the basis of the agreement dated 14-5-1981. It nowhere indicates that the arbitrator was empowered to adjudicate any other claims beyond the agreement between the parties. No such issue was referred for adjudication. Even the arbitrator in his interim award has specifically stated that he was appointed to adjudicate the disputes between the parties arising out of the agreement dated 14th May, 1981. 23. However, the learned senior counsel, Mr. Ashok H. Desai, submitted that award is a non-speaking one and the arbitration clause, in this case empowers the arbitrator not only to decide all disputes arising out of the contract but also to decide all disputes in any way touching the contract whatsoever, hence, the arbitrator is not required to confine himself only to the terms of the contract but can pass appropriate award so as to do justice between the parties including awarding damages suffered by the contracting parties. Therefore, award cannot be said to be without or beyond jurisdiction. He further submitted that the award passed by the arb....
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....ng at his valuation, he has included the depreciation and appreciation of the property, the arbitrator has travelled outside his jurisdiction and the award was on that account liable to be set aside. This was not a case in which the arbitrator has committed a mere error of facts or law in reaching his conclusion on the disputed question submitted for his adjudication. It is a case of assumption of jurisdiction not possessed by him, and that renders the award, to the extent to which it is beyond the arbitrator's jurisdiction, invalid. The award must fail in its entirety as it was not possible to sever from the valuation made by the arbitrator, the value of the depreciation and appreciation included. In a concurring judgment, Hidayatullah, J. after considering the decision in Chempsey Bhara & Co.'s case (supra) observed that the first point is, therefore, to decide what were the limits of the arbitrator's action as disclosed by the reference and the deed of partnership and then to see what the arbitrator has actually done and not what he may have stated loosely in his award. This is the only way in which the excess of jurisdiction can be found. If the interpretation of th....
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.... because the circumstances in which the contract was made, altered. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of event which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous." 27. Thereafter, the Court distinguished the decision in Tarapore Co. v. Cochin Shipyard Ltd. [1984] 2 SCC 680. In said case, there were no specific clauses which barred consideration of extra claims in events of price escalation. At this stage, we would mention that in Tarapore Company's case (supra) this Court after considering the various decisions has held that a spe....
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....t case, is also very widely worded and that all disputes in any way touching or concerning the contract whatsoever are required to be referred to the arbitration. Therefore, reference of the dispute to the arbitrator cannot be termed as without jurisdiction. Still the question would be whether arbitrator will have authority or jurisdiction to grant damages or compensation in teeth of stipulation providing that no escalation would be granted and that contractor would only be entitled to payment of composite rate as mentioned and no other or further payment of any kind or item whatso- ever, shall be due and payable by the company to the contractor; the rates wherever fixed are binding during the currency of the agreement irrespective of any fall or rise in the cost of the work covered by the contract or for any other reason or on any account or any other ground whatsoever. In the said case, there was no such specific agreement or stipulation. Further, the Court has also given a finding that it was a case where a specific question of law touching upon the jurisdiction of the arbitrator was referred for the decision of the arbitrator by the parties. Hence, the Court held that in such a....
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....xceeded his jurisdiction and evidence of matters not appearing on the face of it, will be admitted in order to establish whether the jurisdiction had been exceeded or not, because the nature of the dispute is something which has to be determined outside the award -whatever might be said about it in the award or by the arbitrator... It has to be reiterated that an arbitrator acting beyond his jurisdiction - is a different ground from the error apparent on the face of the award." 32. Further, dealing with the non-speaking award and also for the claims on the ground of escalation of price, due to various reasons including payment of minimum rates of wages payable to various categories of workers, this Court in Associated Engg. Co. v. Government of Andhra Pradesh JT 1991 (3) SC 123 referred to the contract clauses and set aside the award by holding:- "This conclusion is reached not by construction of the contract but by merely looking at the contract. The umpire travelled totally outside the permissible territory and thus exceeded his jurisdiction in making the award under those claims. This is an error going to the root of his jurisdiction: See Jivarajbhai Ujamshi Sheth v. Chint....
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....ontemplated by it with regard to which a reference to an arbitrator was contemplated nor so, when the award was non-speaking one, by observing thus: "Firstly, the award is not a totally non-speaking one inasmuch as it gives a resume of the incentive scheme and the agreement between the parties as also the items of the claim made by the respondent. Of course while fixing the amount found payable by the appellant, no reasons are recorded. Secondly, if there is any challenge to the award on the ground that the arbitrator had no jurisdiction to make the award with regard to a particular item inasmuch as it was beyond the scope of reference, the only way to test the correctness of such a challenge is to look into the agreement itself. In our opinion, looking into the agreement for this limited purpose is neither tantamount to going into the evidence produced by the parties nor into the reasons which weighed with the arbitrator in making the award". 35. In Tarapore & Co. v. State of M.P. JT 1994 (2) SC 162, this court again considered whether the arbitrator has exceeded his jurisdiction in award- ing extra payment to the contractor on account of payment of enhanced wages to labour ....
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....rded as one within jurisdiction and observed 'needless to say that if arbitrator goes beyond jurisdiction, the same would amount to misconduct'. 38. In T.N. Electricity Board v. Bridge Tunnel Constructions JT 1997 (3) SC 467, the contractor had set up the claims raised at rates higher than the contracted rates and twice the rate for the work done after the expiry of the contract period. For those claims, dispute was raised and the matter was referred to the arbitrator. The Civil Court made the award rule of the court. The High Court confirmed the same. In appeal, this court set aside the award and while discussing various contentions, observed as under: "If the arbitrator decides a dispute which is beyond the scope of his reference or beyond the subject-matter of the reference or he makes the award disregarding the terms of reference or the arbitration agreement or terms of the contract, it would be a jurisdictional error beyond the scope of reference; he cannot clothe himself to decide conclusively that dispute as it is an error of jurisdiction which requires to be ultimately decided by the Court." 39. In New India Civil Erectors (P.) Ltd. v. Oil& Natural Gas Corp....
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....neer [1994] 5 Scale 67 and observed that in that case arbitrator was required to decide the claims referred to him having regard to the contract. Hence, his jurisdiction was expressly limited to decide claims under the terms of the contract but in the case which was considered by the Court, there was no clause in the contract which prevented the arbitrator from examining the claims put up before the arbitrator. Considering the aforesaid aspect, in our view, this judgment also would have no bearing in the present case, as there are express prohibitions and stipulations in the contract for non-payment of extra amount on any ground whatsoever. In the present case, the rates were to remain firm, fixed and binding irrespective of fall or rise in cost of mining operation of the work covered by the contract or for any other reason. The contract was for composite rate and it stipulated that no other or further payment of any kind of item whatsoever was payable by the company to the contractor. 42. From the resume of the aforesaid decisions, it can be stated that: (a)It is not open to the court to speculate, where no reasons are given by the arbitrator, as to what impelled arbitrator ....
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....parties and the arbitrator has to adjudicate as per the agreement. This aspect is absolutely made clear in Continental Construction Co. Ltd.'s case (supra) by relying upon the following passage from Alopi Parshad v. Union of India [1960] 2 SCR 703 which is to the following effect; "There it was observed that a contract is not frustrated merely because the circumstances in which the contract was made, altered. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract GBPt rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of event which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous." (i)The arbitrator coul....