TaxTMI 
TaxTMI 
2002 (7) TMI 800
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....1. The same contractor by another agreement no.CECZ/GOA/40 of 1991-92 was entrusted with the work of construction of married accommodation for MCOs/CPOs and JCOs at Goa. The work order was placed vide letter no.8305/88/E-8, dated 5-2-1992. The date of commencement of the work was 24-2-1992 and the work was to be completed by 23-2-1994. Before the work could be completed certain differences/disputes arose between the parties. Under Clause 70 of the General Conditions of the Contract all disputes [(other than those for which the decision of the CWE (Commander Works Engineer) or any other person is by the contract expressed to be final and binding)] shall, after written notice by either party to the contract to the other of them, be referred to sole arbitration of an Engineer Officer to be appointed by the Authority mentioned in the tender document. In the said clause it was further provided that unless both the parties agree in writing, such reference shall not take place until and unless after completion or alleged completion of the work or termination or determination of the contract under Conditions 5, 56 and 57 thereof. The contractor gave notice for appointment of arbitrator s....
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....1-94. 20 mm/12.5mm 2268 cm @ ₹ 250/-per cm ₹ 5,67,000/- 40 mm-100 cm @ ₹ 230/- per cm ₹ 23,000/- ----------------- Rs.5,90,000/- ============ (ii) For the quantities of stone aggregate brought after 24-01-94, reimbursement for increase in rates shall be made at the rate of ₹ 250/- per cm for 20mm/ 12.5 mm, Rs.230/- per cm for 40 mm, and ₹ 225/- per cm for 63-40 mm. This reimbursement shall be made in each RAR for the actual quantity brought at site. (iii) Reimbursement/refund on variation in prices of material/fuel and labour wages, as per conditions 18 and 19 of special condition on pages 111 to 116 of the contract shall also be paid in RARs for the stone aggregates stone metal stone chipping brought after 24-01-94 as per the said conditions, excepting that the value of WO as in condition 18(a) for stone aggregate stone metal/stone chipping shall be taken as on 24- 01-94 or any date immediately after 24-01-94 as published by the Economic Adviser, Govt. of India. CLAIM NO.2 Reimbursement of additional costs in excavation encountering rock other than soft/disintegrated rock/laterite rock, ₹ 14,00,000/- 14.7 Union of I....
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....claim of reimbursement/refund on variation of prices, as per conditions 18 and 19 of special condition of CA, this should also be paid, as the value of work done is increased on account of this factor, I award as under :- (a) A sum of ₹ 1,83,718/- towards reimbursement on variation of prices as per conditions 18 and 19 of special condition of CA for the works done upto 24-01-94 which is ₹ 2,03,00,000/- as above should be paid to the contractor by the Union of India. (b) Reimbursement/refund on variation of prices for works done beyond 24-01-94 shall also be made on the principle that the value of work done including material collected, as assessed in the normal manner, shall be increased by 9% to cater for the restriction and reimbursement/ refund shall be worked out on this increased value of work done including material collected as per conditions 18 and 19 of the special condition of CA and paid to the contractor by the Union of India in RAR as per condition 18 and 19 ibid. CLAIM NO.4 Interest in SL 1 to 3 above. Amount not indicated Interest on claim no.1 to 3 (Past, Pendente lite and future) (i) Past interest I allow a sum of ₹ 7,75,920/- for past in....
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....sement of additional costs in excavation encountering rock other than soft/disintegrated rock/laterite rock, ₹ 12,00,000/- 14.7 Union of India shall pay to the contractor M/s.Shyama Charan Agarwala & Sons as per details given below :- (i)Additional payment . For works already executed using chisels. (a)Excavation (Schedule A Part l) 3870 cm @Rs.138.41 per cm ₹ 5,35,646.70 (b)Excavation in column pits 640 cm @ ₹ 138.41 percm. - ₹ 88,582.40 (c)Excavation over areas (Schedule A part V item I) 150 cm. @ ₹ 260.14 per cm. - ₹ 39,021.00 ------------------- TOTAL ₹ 6,63,250.10 ============== (ii)For excavation works yet to be executed using Chisels : (a)Additional payment for Schedule A Part I for excavation at applicable rates as in item (i) above. (b)Net payment (extra over) for item 7 Schedule A Part III @ ₹ 197.12 each earthing over and above the rate given in item 7 of Schedule A Part III. (c) Net payment for item 1 Schedule A Part V@ ₹ 260.14 per cm. Reimbursement on variation of prices as per conditions 18 and 19 of special condition of CA shall be paid as under :- (d) ₹ 41,367.51/- shall be paid on ....
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....inalized. Therefore, claim of pendente lite interest is rejected. (iv) Future interest This is allowed. The Union of India shall pay interest @ 18% per annum if the amount of award as in item (i) of claim no.1, item (i) and (iii) (a) of claim no.2 and item (i) and (iii) (a) of claim no.3 is not paid within 30 days from the date of Award, till payment of the award or decree from the Court, whichever is earlier. If the award is not paid within 30 days as above, interest will be calculated from the date of award to the date of payment or decree from the Court whichever is earlier. The contractor filed a petition under Section 14 of the Arbitration Act, 1940 (for short 'the Act') seeking a direction to the arbitrator to file the final Award dated 28th February, 1994 with all records in the Court so that the Award could be made Rule of the Court with interest @ 24% p.a. from the date of decree till payment. Notice of the said petition was given to the UOI who filed an application under Sections 30 and 33 of the Act raising certain objections against the Award. The objections filed by the UOI were rejected by the Civil Judge, Senior Division, Vasco-da-Gama vide judgment dated 8th Ap....
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....ed rock. The High Court further held that the Arbitrator had totally overlooked Clause 3.3.4 while coming to the conclusion on the basis of Clauses 3.3.2 and 3.3.3 alone. The High Court was of the view that the Arbitrator had not only misinterpreted the relevant clauses totally ignoring the Clause 3.3.4, but had also taken 'undue' interest in the matter in order to find out the classification of the strata which in fact, in view of Clause 3.3.4 would not have much relevance. The High Court held that the Arbitrator had misconducted himself and therefore, the Award against claim no.2 was totally unwarranted and invalid. According to the High Court, the view taken by the Arbitrator could not be said to be a possible view on the interpretation of Clauses 3.3.2, 3.3.3 and 3.3.4 read together. The High Court summed up its finding as follows : "For the aforesaid reasons, we are of the opinion that the Award under claim no.2 in both the Appeals cannot be sustained and is liable to be set aside." [see para 25 at page 36] In respect of claim no.3, the High Court took note of Clauses 2, 3, 3.1, 3.2 and 3.3.3 of the Special Conditions in which provisions were made for inspection....
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....greement, then it was not open to it to interfere with the Award since there was no error of law apparent on the face of the award and the matter relating to interpretation of the conditions in the agreement was within the jurisdiction of the arbitrator. Shri Anoop G.Chaudhary, learned senior counsel appearing for the UOI contended that the award of the arbitrator so far as part of the claim no.1 and claim nos.2 and 3 are concerned was contrary to the specific conditions provided in the agreement, and therefore, was patently erroneous and uncalled for. Shri Chaudhary further contended that the arbitrator being a creature of the agreement could not ignore the relevant stipulations in the contract nor could he travel beyond the terms of the contract. In the circumstances, Shri Chaudhary submitted, the judgment of the High Court does not call for interference by this Court in the appeal filed by the contractor under Article 136 of the Constitution of India. The provision for appeals against the orders passed under the Act is contained in Section 39 of the Act. The said Section is quoted hereunder : "Appealable orders.-(a)An appeal shall lie from the following orders passed und....
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.... if otherwise proper on the ground that the decision appeared to it to be erroneous. The award of the arbitrator was ordinarily final and conclusive, unless a contrary intention was disclosed by the agreement. The award was the decision of a domestic tribunal chosen by the parties, and the civil courts which were entrusted with the power to facilitate arbitration and to effectuate the awards, could not exercise appellate powers over the decision. Wrong or right the decision was binding, if it be reached fairly after giving adequate opportunity to the parties to place their grievances in the manner provided by the arbitration agreement. This Court reiterated in the said decision that it was now firmly established that an award was bad on the ground of error of law on the face of it, when in the award itself or in a document actually incorporated in it, there was found some legal proposition which was the basis of the award and which was erroneous." This Court in the case of Municipal Corporation of Delhi vs. M/s.Jagan Nath Ashok Kumar & Anr., (1987) 4 SCC 497, considered the reasons given in a speaking award and scope for the interference with such award. This Court in that c....
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....ion reference was made to the observations in Hindustan Steel Works Construction Ltd. vs. C.Rajasekhar Rao, (1987) 4 SCC 93. Drawing a distinction between the disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised, this Court observed : "An award may be remitted or set aside on the ground that the arbitrator in making it, had exceeded 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 arbitration. See in this connection, the observations of Russel on The Law of Arbitration, 20th edn., p.427. Also see the observations of Christopher Brown Ltd. v. Genossenchaft Oesterreichischer (1954) 1 QB 8, 10 and Dalmia Dairy Industries Ltd. vs. National Bank of Pakistan (178) 2 Lloyd's Rep.223. 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. In Halbury's Laws of England I....
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....ing the point on lack of jurisdiction of the arbitrator held that when the conditions in the agreement specifically prohibited granting claim or damages for the breaches mentioned therein it was not open to the arbitrator to ignore the said conditions which were binding on the contracting parties; that by ignoring the same he has acted beyond the jurisdiction upon him; that it is settled law that the arbitrator derives authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be an arbitrary one; that this deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action. This Court further observed that the Arbitration Act does not give any power to the arbitrator to act arbitrarily or capriciously; that his existence depends upon the agreement and his function is to act within the limits of the said agreement. In para 17 of the judgment this Court made the following observations : "It is to be reiterated that to find out whether the arbitrator has traveled beyond his jurisdiction and acted beyond the terms of the agreement b....
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....ion of the contract, that is an error within his jurisdiction; but if he wanders outside the contract and deals with matter not allotted to him, he commits a jurisdictional error and an umpire or arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. This Court referring to N.Chellappan v. Secy., Kerala SEB, (1975) 1 SCC 289, held that the principle was unexceptionable. Summing up its decision, this Court observed : "However, from a reading of the decisions of this Court referred to earlier it is clear that when an award is made plainly contrary to the terms of the contract not by misinterpretation but which is plainly contrary to the terms of the contract it would certainly lead to an inference that there is an error apparent on the face of the award which results in jurisdictional error in the award. In such a case the courts can certainly interfere with the award made by the arbitrator." Considering the scope of Section 30 of the Act, this Court in the case of Indu Engineering & Textiles Ltd. vs. Delhi Development Authority, (2001) 5 SCC 691, enumer....
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....ng of claim statement, the High Court set aside the award on two grounds : (i) Such a claim did not form part of terms of reference, though the contractor had filed claim in respect of stone aggregate to be brought in future and (ii) the future claim in respect of stone aggregate would be subject to various factors including market conditions and whether the shortage continued. In our view the view taken by the High Court cannot be sustained. It is clear from the arbitration clause viz. clause 70 that all disputes between the parties to the contract (other than excepted matters) can be referred to arbitration. The contractor did make a claim in respect of future period also. The document appointing the Arbitrator would show that the Arbitrator was required to decide the disputes arising between the parties. It is not possible to hold that the claim No.1 in so far as it relates to future period during which the contract work continued is beyond the scope of reference or outside the ambit of arbitration clause. The aim of arbitration is to settle all the disputes between the parties and to avoid further litigation. There is no legal justification in restricting the scope of arbitrat....