State of Kerala v. Ithappiri — 1977 DIGILAW 293 (KER)

JUDGMENT Chandrasekhara Menon, J. 1. This appeal is from the judgment of the 1st Additional Subordinate Judge, Ernakulam dismissing the application filed by the appellants I.A. 3457/74 for setting aside an award passed in arbitration proceedings and passing a judgment in terms of the award. 2. The arbitration related to a written agreement dated 11th December 1971 between the Executive Engineer, Public Health Construction Division II, Cochin -- 2nd appellant -- and the respondent regarding the work of 'water supply and sewage scheme to the Cochin Development area, laying sewers in Ernakulam Hospital Zone sections V and VI. The 2nd appellant was acting on behalf of the 1st appellant -- State of Kerala. In the course of the work under the contract, certain disputes and differences arose between the parties. According to the terms of the arbitration clause in the contract, these disputes were referred to the arbitration of the Government Arbitrator for engineering works, who accepted the appointment on 14th December 1973 and entered upon the reference on the said date. The respondent -- claimant made his claim relating to 19 items which was duly enquired into by the arbitrator who published his final award on 29th May 1974. Some of the claims were rejected. In respect of claim No. 5 the arbitrator released the claimant from responsibility of executing any further work without any penalty whatsoever. As regards claim No. 7 the arbitrator directed the appellants to pay a sum of Rs. 8,500 to the respondent as against the claim of Rs. 32,500. As regards claim No. 9, in respect of which the respondent has claimed Rs. 37,500 the arbitrator awarded Rs. 13,500. In claim No. 1, the arbitrator observed that the appellants had agreed to pay for this extra item, but had requested for time to fix the eligible rate by competent authority. While observing that it was unfortunate that the rate has not been finalised yet, the arbitrator directed the appellants to fix the rate for this item within a month and communicate the same to the respondent. The parties were directed to bear their respective costs. 3. While observing that it was unfortunate that the rate has not been finalised yet, the arbitrator directed the appellants to fix the rate for this item within a month and communicate the same to the respondent. The parties were directed to bear their respective costs. 3. The main grounds raised before the lower court for setting aside the Award were (1) that the reference is premature in that while the agreement stipulates reference to the Superintending Engineer through the Executive Engineer and obtaining his decision before reference to the arbitrator, the respondent had not made any such reference and therefore the reference is premature. (2) secondly, while the contract was terminated by the Superintending Engineer at the risk of the respondent due to the default of the latter, the arbitrator in dealing with claim No. 5 had released the respondent from the responsibility of executing any further work without any penalty whatsoever and the proceedings of the Superintending Engineer terminating the work was quashed. According to the appellants the Award on the claim is illegal and void. (3) Claim Nos. 7 and 9 relate to certain measurements alleged to have been omitted and enhanced claims made on that basis. These have been partly allowed by the Arbitrator. It is the contention of the appellants that these measurements had been recorded in the measurement books which had been accepted by the contractor and the Award of these claims are, therefore, illegal and unsustainable. (4) The grounds for making the award by the arbitrator had not been made known to the appellants. The lower court dismissed these contentions. The court said that, "no misconduct involving moral turpitude like corruption or bribery is alleged against the arbitrator. No case of fraudulent concealment or wilful misleading also is suggested. When none of these circumstances are alleged or setup the powers of the court to interfere with the award passed by the arbitrator is very limited. The court is not sitting in appeal over the decision of the arbitrator, who is the final authority both on question of facts and law. In this case the award is passed by the Government Arbitrator, who is even now continuing in office without any charge having been levelled against him; and it is the Government that has chosen to object the award. There is absolutely no error apparent on the face of the Award." 4. In this case the award is passed by the Government Arbitrator, who is even now continuing in office without any charge having been levelled against him; and it is the Government that has chosen to object the award. There is absolutely no error apparent on the face of the Award." 4. In regard to the question that the reference was premature the lower court said, "it is admitted that the respondent had sent an application to the Superintending Engineer on 25th September, 1973 detailing the claims in dispute and requesting him to consider the same arid settle them. He also stated that this was being sent in accordance with condition No. 73 which specifies "in cases where the Executive Engineer has entered into the contract on behalf of the Governor the dispute of difference shall in the first instance be referred by or through the Executive Engineer to the Superintending Engineer of the Circle, in which the work lies and his decision thereon obtained before and referring such dispute or difference to arbitration under this clause." The respondent had also sent another petition on 1st October 1973 to the Superintending Engineer. From the evidence of R.W. 1 before the Arbitrator, viz., the Executive Engineer, it is seen that the Superintending Engineer to whom the petitions were addressed had forwarded them to the Executive Engineer for report and that a report had been filed on 12th November 1973. The records show that the appellants had raised the question that the arbitration was premature which was referred by the Arbitrator to the claimant as seen from his letter in page 49 of the file to which the claimant had sent a reply stating that he had made the claims before the Superintending Engineer. Thereupon the Arbitrator granted a period of two months to the Superintending Engineer to take decision on the petition filed before him by the claimant. This time expired and on expiry of that the claimant respondent requested the Arbitrator to enter upon the reference. No objection was taken to the above said letter sent by the claimant. Thereupon the Arbitrator entered upon the reference on 14th December 1973. The Arbitrator in his examination said that the proceedings were not premature, since sufficient time had already been given to the Superintending Engineer to take a decision in the matter. No objection was taken to the above said letter sent by the claimant. Thereupon the Arbitrator entered upon the reference on 14th December 1973. The Arbitrator in his examination said that the proceedings were not premature, since sufficient time had already been given to the Superintending Engineer to take a decision in the matter. The lower court was of the view that in the circumstances of the case the appellants are estopped from raising the contentions that the proceedings were premature. 5. The lower court also did not accept the contention of misconduct of the Arbitrator in respect of claim Nos. 7 and 9. It had been agreed before the lower court that the Arbitrator did not visit the actual sites; but the Arbitrator in his deposition before lower court said that there could only be very slight difference regarding the sub soil condition from place to place. In this view the contentions of the appellants were rejected. It is in these circumstances that the appeal has been filed in this court. 6. In respect of interference with the Arbitration Award the powers of this court are extremely limited. We have discussed this question fully in Commander Works Engineers v. Eapen Varghese (ILR 1977 (2) Ker. 124) where in we had said: "It is well settled that a mistake in an arbitration award can be a ground of remission or setting it aside only when such mistake is apparent on the face of the award or of a document which forms a part of it. The principle is that as the parties choose their own Arbitrator, they cannot, when the award is good on the face of it, object to the decision either upon the law or the facts. Therefore, even when an Arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in a document appended to or incorporated in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake. Mere reference to the contract in the award is not to be held as incorporating it." 7. Mere reference to the contract in the award is not to be held as incorporating it." 7. It is not misconduct on the part of an Arbitrator to come to an erroneous decision, whether his error is one of fact or law, and whether or not his findings of fact are supported by evidence. In Chellappan v. Kerala State Electricity Board ( AIR 1975 SC 230 ). Justice Mathew speaking for the Bench said that an error of law on the face of the award means that you can find in the award or a document actually incorporated thereto, as, for instance, a note appended by the Arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you then say is erroneous. The court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out, whether or not the Arbitrator has committed an error of law. 8. In this case the Award is not a speaking Award. There cannot be any dispute that an Award can be in that form. It is not open to the court to speculate where no reasons are given by the Arbitrator, as to what impelled the Arbitrator to arrive at his conclusion. On the assumption that the Arbitrator must have arrived at his conclusion by a certain process of reasoning the court cannot proceed to determine whether the conclusion is right or wrong. We would say that it is not open to the court to attempt to probe the mental process by which the Arbitrator has reached this conclusion where it is not disclosed by the terms of the award. Therefore, no question of an error apparent on the face of the award will arise in such case. 9. The main contention that was put forth with considerable force by the learned counsel for the appellants Sri V. O. John was that the reference was premature, since before referring the dispute the claim should have been in first instance referred to the Superintending Engineer through the Executive Engineer and obtained decision as regards the dispute. 9. The main contention that was put forth with considerable force by the learned counsel for the appellants Sri V. O. John was that the reference was premature, since before referring the dispute the claim should have been in first instance referred to the Superintending Engineer through the Executive Engineer and obtained decision as regards the dispute. It might be noted that the Arbitrator had in the first instance when the matter was referred to him wrote to the counsel for the claimant that the Executive Engineer had reported that the Arbitration petition is premature as the dispute had not been referred to the Superintending Engineer through the Executive Engineer and his decision obtained as required by condition 73 of the contract. In reply to that the claimant had sent a reply stating that he had made the claims before the Superintending Engineer. The Arbitrator granted a period of two months to the Superintending Engineer to take a decision on the petition filed before him by the claimant. On the expiry of this two months period the claimant wrote to the Arbitrator (on 6th December 1973) copy of which was also given to the Executive Engineer pointing out to the expiry of the period of two months and requesting him to enter upon the reference. No objection to this letter was taken by the present appellants before the Arbitrator. 10. Condition No. 73 of the preliminary specification of M.D.S.S. specifies that "in cases where the Executive Engineer has entered into a contract on behalf of the Governor the dispute of difference shall in first instance be referred by or through the Executive Engineer to the Superintending Engineer of the circle in which the work lies and his decision thereon obtained before referring such dispute or difference to arbitration under this clause". It would appear that the claimant had sent an application to Superintending Engineer on 25th September 1973 detailing the claims in dispute with a request for settling them. He also stated that this was being sent in accordance with condition No. 73. Correcting certain typographical errors the claimant respondent sent another petition dated 1st October 1973 to the Superintending Engineer. These letters have been marked by the Arbitrator as C-15 and C-16. 11. The lower court said about this contention of the appellants: "According to the arbitrator who has been examined as RW-3, the proceeding were not premature. Correcting certain typographical errors the claimant respondent sent another petition dated 1st October 1973 to the Superintending Engineer. These letters have been marked by the Arbitrator as C-15 and C-16. 11. The lower court said about this contention of the appellants: "According to the arbitrator who has been examined as RW-3, the proceeding were not premature. Since sufficient time had already been given to the Superintending Engineer to take a decision in the matter. The evidence of RW-1 shows that the Executive Engineer had sent his report on 12th November 1973 regarding the disputes referred to in the petitions of the claimant. But no decision was taken by the Superintending Engineer. No doubt the petitions filed by the claimant were not routed by him through the Executive Engineer. But all the same it is admitted that those petitions were forwarded by the Superintending Engineer to the Executive Engineer and that the latter had sent his report. Therefore, substantially the requirements in condition No. 73 have been complied with. Moreover, the respondents after having participated in the proceedings without any protest whatever is not now competent to contend that the proceedings were premature. As a matter of fact if they had any objection to the arbitrator entering upon the reference, the respondents should have filed objection to the letter dated 6th December 1973. When the arbitrator entered upon the reference, the respondents participated in the proceedings without taking any objection and submitted the pleadings and adduced evidence and submitted their arguments in the matter. Now when it was found that the award was not fully acceptable to the respondent they contend that the proceedings were premature. I think that the respondents are estopped from raising any such contention on the merits also. I do not think that the proceedings were premature." 12. We have no hesitation in agreeing with this view. It is no doubt true that at the outset the Executive Engineer pointed out to the Arbitrator that the matter had not been in the first instance referred to the Superintending Engineer and his decision obtained. Subsequently, however after the Arbitrator gave the Superintending Engineer two months time to make a decision and then after the expiry of that period when the claimant wanted the Arbitrator to actually enter upon the reference no objection to further proceedings by the Arbitrator was taken by the appellants. Subsequently, however after the Arbitrator gave the Superintending Engineer two months time to make a decision and then after the expiry of that period when the claimant wanted the Arbitrator to actually enter upon the reference no objection to further proceedings by the Arbitrator was taken by the appellants. They thereafter fully participated in the proceedings and took the risk of a decision in their favour. 13. The Judicial Committee of the Privy Council observed in Chowdhari Murtaza Hossain v. Mt. Bibi Bechunnissa (Indian Appeal 209 at P.220): "....... .that the appellant, having a clear knowledge of the circumstances on which he might have founded an objection to the arbitrators proceeding to make their award, did submit to the arbitration going on; that he allowed the arbitrators to deal with the case as it stood before them, taking his chance of the decision being more or less favourable to himself, and that it is too late for him after the award has been made, and on the application to file the award, to insist on his objection to the filing of the award." In H. L. Assurance Co. v. Dalmia ( AIR 1965 Cal. 42 ) it was said: "all the cases cited above, establish the principle that if a party allowed an arbitrator to proceed with the reference, without objecting to his jurisdiction or competence, it would not be subsequently heard to say that the award should, be set aside on the ground that the arbitrator was not competent to decide the dispute in question." 14. In Pannalal v. State of Madhya Pradesh ( AIR 1963 MP 242 ) a Division Bench of the Madhya Pradesh High Court said that even though the original reference to arbitration was invalid, the parties laid their claim and counter claim before the Arbitrator, by such action the parties submitted to the Arbitrator and hence all contentions regarding invalidity of reference and want of jurisdiction of the arbitrator must be rejected. 15. The Head note in Union of India v. Mandal ( AIR 1958 Cal. 15. The Head note in Union of India v. Mandal ( AIR 1958 Cal. 415 (DB)) is pertinent in this connection: "A representation in order to attract the rule of estoppel need not always be a representation of a physical fact, but may as well be the representation of an attitude or a state of mind, inasmuch as, the state of a man's mind is as much a matter of fact as the state of his digestion. If a man, either by words or by conduct, has intimated that he consents to an act which has been done, and that he will offer no opposition to it, although it could not have been lawfully done without his consent, and he thereby induces others to do that from which they otherwise might have abstained, he cannot question the legality of the act he had so sanctioned, to the prejudice of those who have so given faith to his words, or to the fair inference to be drawn from his conduct. Generally speaking, if a party has an interest to prevent an act being done, and acquiesces in it, so as to induce a reasonable belief that he consents to it, and the position of others is altered by their giving credit to his sincerity, he has no more right to challenge the act to their prejudice than he would have had if it had been done by his previous license." 16. In Union of India v. Sen ( AIR 1963 Cal. 456 ) a learned Judge of the Calcutta High Court held: "When both the parties to a contract containing an arbitration clause fully knowing that the arbitrator does not answer to the description of the officer referred to in the arbitration agreement and is not competent to make an award, appear before such arbitrator, lead evidence and make application for extension of time to file an award they are estopped from challenging the award even though the arbitrator had no authority to make the award and was not competent to arbitrate under the arbitration clause in the contract." 17. A Division Bench of the Jammu and Kashmir High Court said in Assadulla v. Lassa Bava (AIR 1966 J and K 1 at 8). A Division Bench of the Jammu and Kashmir High Court said in Assadulla v. Lassa Bava (AIR 1966 J and K 1 at 8). "In the instant case all the parties, i.e. the Khadims Pirs and the Managing Committee placed their points of view before the arbitrator, argued their cases forcefully and on more than one date before the arbitrator. The arbitrator considered all the documents produced by the different parties as well as the arguments advanced by their learned counsel and then gave the award. The Khadims also as a party placed before the arbitrator all that they could possibly do. As is usual in such circumstances each party expected that the award would be favourable to it. When the Khadims found that the award was not as favourable to them as they thought, they made a grievance of it before the District Judge. But before the passing of the award they were quite satisfied with the proceedings and none of them ever objected to either the application for arbitration being incomplete, the reference being not proper or the proceedings before the arbitrator being vitiated in any way. They have now come forward with hypertechnical pleas to get the award vitiated. They are estopped to do so from their own conduct and their active participation in the matter of referring the whole dispute to the arbitrator and in conducting the entire proceedings before him." 18. Therefore, on this aspect of the matter, namely, whether the appellants could raise the question of lack of jurisdiction in the Arbitrator, we agree with the court below. 19. A question has incidentally been raised whether because of the change in the personnel of the Arbitrator pending proceedings, the proceedings are vitiated. The Arbitrator is appointed by virtue of his office and not by name; whoever be the incumbent of the office is entitled to go into the question or to continue the proceedings from the stage at which it was when he took charge. That is so held by a Division Bench of this Court in A.S. 503 and 517 of decision reported in Basant Lal v. Dominion of India ( AIR 1952 Cal. 340 ) and Doulat Ram v. State of Punjab (AIR 1959 Punj. 19). We respectfully agree. 20. In the light of the above discussion, we see no reason to upset the decision of the court below. 340 ) and Doulat Ram v. State of Punjab (AIR 1959 Punj. 19). We respectfully agree. 20. In the light of the above discussion, we see no reason to upset the decision of the court below. We dismiss the appeal with costs.