STATE OF KARNATAKA v. HINDUSTAN CONSTRUCTION CO. , LTD
1983-08-17
G.N.SABHAHIT, R.S.MAHENDRA
body1983
DigiLaw.ai
( 1 ) THIS appeal by the plaintiffs is directed against the judgment and decree dt. 29. 7. 1976 passed by the Third Additional Civil Judge. Bangalore City, in Original Suit No 150 of 1974 on his file, rejecting the application made under S. 30 read with section 33 of the ARBITRATION ACT, 1940, 1940 and directing that a decree be passed in terms of the award passed by the Arbitrators ( 2 ) THE Karnataka State entered into two agreements dated 21. 9 1960 and 24. 11. 1960 with the respondent/defeadant M/s. Hindustan Construction Co , ltd. , in the matter of construction of pressure Twin Tunnels at Vodenbyle and their approaches under the agreement dated 21. 9. 1960, referred to as part I, and construction of Surge Tanks and Penstock Tunnels under agreement dt. 24. 11. 1960, referred to as Part I disputes having arisen with regard to refund of payment of certain amount, the Contractor issued notice of arbitration dated 4. 3. 1971 under Clause 51 of the General Condition of the contract. The claimants appointed Shri n. D. Daftary as an Arbitrator on their behalf and the State of Mysore appointed Shri S. G. Balekundry, Chief engineer, as their Arbitrator. Reference was entered upon on 14. 5. 1971 and Arbitrators made an award on 28. 4. 1972 allowing certain claims made by the Contractor and they filed an application under Section 17 of the arbitration ACT, 1940, 1940, before the Civil court, Bangalore City, to make the award into a decree of the Court. In the said proceeding, the State of Karnataka, through the Engineer-in-chief (Electrical), Power Corporation limited and the Chief Engineer, S. V. P. Cell. Water Development Organisation, made an application under Section 30 read with Section 33 of the ARBITRATION ACT, 1940, 1940, to declare the award produced into Court by the Arbitrators as one made without jurisdiction and to set aside the same According to them, the Arbitrators has misconducted themselves in the proceeding. ( 3 ) THE proceeding was registered as original Suit No. 150 of 1974. Affidavits of the parties were filed and the learned Civil Judge raised the, following issues as arising for his consideration in the suit. (1) Whether the Arbitrators had no jurisdiction to arbitrate into the claim of the defendant? (2) Whether the Arbitrators have misconducted themselves in passing the impugned award?
Affidavits of the parties were filed and the learned Civil Judge raised the, following issues as arising for his consideration in the suit. (1) Whether the Arbitrators had no jurisdiction to arbitrate into the claim of the defendant? (2) Whether the Arbitrators have misconducted themselves in passing the impugned award? (3) Whether the plaintiff is estopped from challenging the jurisdiction of the Arbitrators? (4) Whether the award is liable to be set aside? (5) What order? ( 4 ) THE learned Civil Judge, appreciating the material placed before him. in the light of the arguments addressed before him answered Issue No. 1 holding that the Arbitrators had jurisdiction to adjudicate. He answered Issues Nos. 2, 3 and 4 in the negative and, in that view, the learned civil Judge dismissed the application to set aside the award and thereupon directed that a decree be passed in terms of the award. Aggrieved by the said judgment and decree, the State has instituted the above appeal before this Court. ( 5 ) THE learned Advocate General strenuously urged before us that the arbitrators could not entertain the dispute for adjudication and he further submitted alternatively that even if they had jurisdiction, they misconducted themselves in the proceeding. Hence, he submitted that the award passed by the Arbitrators should be set aside on allowing the appeal. ( 6 ) AS against that, the learned Advocate appearing for the respondent defendant (contractor) argued supporting the judgment and decree passed by the lower Court. ( 7 ) THE points, therefore, that arise for our consideration in the appeal are: (1) Whether the Court below was justified in holding that the Arbitrators had jurisdiction to entertain and adjudicate upon the dispute? and (2) whether the lower Court was justified in holding that the State of Karnataka failed to establish that the Arbitrators misconducted themselves during the proceeding? ( 8 ) CLAUSE 51 of the contract provides for arbitration. It was, however, contended before us that the subject - matter being of a technical nature, it was not amenable for adjudication before the Arbitrators, but that the opinion of the Chief Engineer was final.
( 8 ) CLAUSE 51 of the contract provides for arbitration. It was, however, contended before us that the subject - matter being of a technical nature, it was not amenable for adjudication before the Arbitrators, but that the opinion of the Chief Engineer was final. The learned Civil Judge has dealt with this aspect in detail and has rightly pointed out that payment, of dues could not be a technical matter as contained in Clause) 20, that the last sub-clause (f) in Clause 20, speaking, of any subject arising out of the contract should be construed ejusdem generis with sub-clauses (a) to (e) which speak of technical matter and that therefore the dispute regarding dues under escalation clause would not fall within the purview of Clause 20 and, as such, the subject-matter was amenable for adjudication under Clause 51 of the Contract We see no reason to differ We agree with the finding so given by the learned Civil Judge, and we hold that the subject-matter was amenable for adjudication before Arbitrators. ( 9 ) THE learned Advocate General submitted that the decision of the Arbitrators is contrary to the terms in the contract and, as such, they have committed an error, which is apparent on the face of the record and, so, he submitted that they mis- couducted themselves in the proceeding and their award is liable to be set aside. ( 10 ) AS against that, the learned Advocate appearing for the respondent defendant (Contractor) urged on us that there was no legal error apparent on the face of the record and this Court was not sitting in appeal, and that the jurisdiction of this Court was very much restricted and it has to confine itself to what was contained in S. 30 of the ARBITRATION ACT, 1940, 1940, in the matter of setting aside the award. ( 11 ) THE moot point, therefore, that arises for our consideration is: 'whether there is any error of law apparent on the face of the record and what is the scope in finding out if there is an error apparent on the face of the record? ( 12 ) IN order to appreciate the rival contentions raised before us, it would be necessary to read the award in question. It is set down herein below for easy reference: "before the Arbitrators 1.
( 12 ) IN order to appreciate the rival contentions raised before us, it would be necessary to read the award in question. It is set down herein below for easy reference: "before the Arbitrators 1. Sri S. G. Balekundry, Chief engineer, PWD Irrigation (North), dharwar. 2. Sri N. D. Daftary, Consulting engineer, 2, Ashok Nagar Society, llth Road, North South: Juhu Parle dev. Scheme, Bombay-56. Claimants: Mjs Hindustan Construction Co. , Ltd. , Construction House walchand Hirachand Marg, Ballard estate, Bombay-1. Represented by Sri V. Narasimhamurthy, advocate, Bangalore, Assisted by Sri Rajaram v. Iyer and Shri vidwans. Respondents: The State of Mysore represented by Advocate General for mysore and assisted by the Chief Engineer, Water Resources Development organisation and the Engineer-in-Chief, (Elecl), Mysore Power Corporation ltd. , Bangalore. This is a reference started with the notice of arbitration dt. 4. 3. 1971 issued by M/s. H. C. C. Ltd. , relating to their contract for (1) construction of Pressure Twm Tunnels and their approaches under the Agreement dt. 21st Sept. 1960, and (2) construction of Surge Tanks and penstock Tunnels, under the Agreement dt 24th November 1960. Under clause 51 of the General Conditions of the contract, the claimants appointed N. D. Daftary, as an Arbitrator on be-half of the claimants and the State of Mysore appointed Sri S. G. Balekundry, Chief engineer, as their Arbitrator. The reference was entered upon on 14th May 1971. In the Preliminary meeting of the Arbitrators, which was held at Dharwar on 14. 5. 1971, they appointed Sri V. B Manenkar, at Umpire with his consent. Subsequently, 3 more sittings were held at Bangalore. During the course of the third sitting the Award was made and published. The claimants filed two statements of claims under their letter dt 10th july 1911 1971 as under : 1. Part I Regarding pressure Twir tunnels their approaches. Rs. 1,04,157. 12 3. Part II Regarding Surge Tanks and Penstock Tunnels and Supplementary contract, for rs. 2,28,608. 08 the Chief Engineer, Water Resources development Corporation and the engineer in Chief (Elecl.) Mysore power Corporation Ltd, on behalf of the Respondents filed their Counter statements in reply on 18. 8. 71. In the second hearing add at Bangalore on 19. 12. 1971 the Statements of claims and the counter-statements were gone through and the counsel were heard with regard to their respective statements.
8. 71. In the second hearing add at Bangalore on 19. 12. 1971 the Statements of claims and the counter-statements were gone through and the counsel were heard with regard to their respective statements. Since the time for making and publishing the Award as per the ARBITRATION ACT, 1940 had expired, the claimants were asked to file an application before the Civil Judge, Bangalore, for extension of time by 8 months from the date of its last expiry i. e. , 14. 9. 1971. The extension of time as prayed for was granted and was communicated to the Arbitrators by the Advocate for Claimants on 24. 2. 1972. In the mean-time both parties supplied the necessary particulrs regarding the claims as asked for. Both parties stated that they have no witnesses to produce in support of the case in this reference. No witness was therefore examined. We perused the records carefully and heard arguments advanced by both the Counsel. As stated earlier, the Claimants had claimed interest charges on the amount recovered from them in excess under the Escalation Clause. However, the claim for interest was withdrawn by the claimants subsequently and necessary declaration to that effort was made on behalf of the claimants at the 3rd sitting at Bangalore. This was recorded, the respondents having no objection. We hereby unanimously make the following Award: award part I1. Claim on amoumnt of esclation Clause 6. The claimants have claimed a refund of Rs. 1, 04, 157. 12, which they alleged were wrongly recovered from them by the respondents. We award refund of Rs. 12,564-00 (Rupees twelve Thousand five hundred sixty four only ). 2. The, claimants have claimed interest at 12% on sums due to them. Later on they withdrew the claim in view of Clause 20 of the Contract agreement. The claim is therefore recorded and we award Nil. 3. Costs: No costs are demanded. So no costs are a warded. PART II1. Claim on account of 1% rebate: the claimants have claimed reimbursement of Rs. 2,048. 78 (i. e. 89,900. 70 wrongly deducted less Rs. 87,851,92 actually deductable) vide para 9 of the claim statement. The respondents have submitted that there is no dispute or controversy between the parties in this matter' respondents having admitted the claim. Both the parties have confirmed this position before us.
2,048. 78 (i. e. 89,900. 70 wrongly deducted less Rs. 87,851,92 actually deductable) vide para 9 of the claim statement. The respondents have submitted that there is no dispute or controversy between the parties in this matter' respondents having admitted the claim. Both the parties have confirmed this position before us. No proceedings were therefore held as far as this claim is concerned and the matter was recorded. 2. Claims on account of Escalation clause 6: the claimants claimed Re. 2,26,559. 00 as due to them because of excess recovery already effected by the respondents. We award to the claimants a sum of rs. 2, 06,072 - (Rupees Two lakhs, six thousand and seventy two) only which the respondents are directed to refund to the claimants at an early date. 3. Costs: No costs are demanded, so no costs awarded. 4. Interest: No interest is awarded nor is any claimed, the claim originally preferred in this connection being subsequently withdrawn. Fees and Expenses of. Arbitrators and their Stenographer Etc. We award as under: i) Fees of Arbitrators and their stenographer should be shared by the two parties on 50:50 basis. ii) Expenses of Arbitrator Sri N. D. Daftary should be met by the claimants M/s. Hindustan Construction co. , Ltd. , in full. iii) Expenses of Arbitrator Sri S. G. Balekundry and their Stenographer sri Y. S. Vajandar should be met by the respondents, the Government at mysore. iv) Cost of Stamps for award should be met by the two parties equally. v) Cost of Miscellaneous expenses should be borne by the two parties equally. I. Fees of Arbitrators and their stenographer are as under: ( 21 ) THAT being so, it is obvious that this Court cannot look into the clauses of the contract 1o find out whether what the arbitrators have awarded is legal or illegal. ( 22 ) IN fine, it may be stated that where any difference is referred to an arbitrator, normally his decision should stand. There is an exception to this rule and that is an error of law apparent on the face of the award either because a question of law arises on the face of the award or upon some paper accompanying or forming part of the award.
There is an exception to this rule and that is an error of law apparent on the face of the award either because a question of law arises on the face of the award or upon some paper accompanying or forming part of the award. An error of law on the face of the award means that we can find in the award or document actually incorporated or accompanying jt some legal proposition which on its consideration could be said to be erroneous. This exception cannot be extended to a mere narrative in the award. A mere narration of matrials in general terms in an award without particularising any document or any piece of evidence will not permit an investigation into the terms of the contract or other materials placed before the arbitrator to discover whether there is error on the face of the award. Similarly, where the terms ot the contract are stated in the award for the only purpose to earmark the origin of the disputes which had arisen between the parties, it would be impermissible to hold that the arbitrator had incorporated in the award any material for his conclusion and that would be enough for the Court to consider sucn material to test whether there is error apparent on the face of the award. It is the duty of the arbitrator to look into all evidence and materials placed before him and, if in the narrative he makes mention of this fact, it can never be equated to his consideration of any particular piece of evidence or document, for the purpose of his conclusion That is what is done on the facts of the present case. ( 23 ) IT may further be noted that in the award in question in the present case is not a speaking award. It is not a reasoned one and it is settled law that the awards could be non speaking a unreasoned. Bungo Steel Furniture v union of India ; (7) and Allen Berry and Co. , v. Union of India; (3 ). The present award is one such. ( 24 ) THE jurisdiction of the Court in interfering with non speaking awards is very narrow.
Bungo Steel Furniture v union of India ; (7) and Allen Berry and Co. , v. Union of India; (3 ). The present award is one such. ( 24 ) THE jurisdiction of the Court in interfering with non speaking awards is very narrow. When parties agree and entrust the disputes arising between them to arbitration, they are deemed to have taken a decision to have implicit faith in the decision of the arbitrator, be he a layman or a man wellversed in law. To a large extent, the jurisdiction of the ordinary Courts, for interfering with the conclusions arrived at by the arbitrator both on question of fact and on questions of law, is ousted by the agreement. What is contained in Section 30 of the arbitration ACT, 1940 is an exception. ( 25 ) IT is settled law that the Court will be extremely slow in either finding fault with a non-speaking award much less in interfering with it or attempting to substitute its views, - for it is recognised in this country, that awards need not be speaking awards. Whether it is desirable that arbitrators should give casons or parties should insist on them give reasons are matters to be repulated by statutory provisions and not by judicial pronouncements, however salutary or desirable they may be. ( 26 ) IN A. M. Nair and Co. v. Gordkandas sagarmull (8), the jurisdiction of courts in interfering with awards is outlined by the Supreme Court of India in para-9 of the judgment thus:"it, therefore, we come to the conclusion that both the disputes raised by the respondents fall within the scope of the arbitration clauses, then there is an end of the matter, for the arbitrators would have jurisdiction to adjudicate on the disputes, and we are not concerned with any error of law or fact committed by them or any ommission on their part to consider any of the matters. In this view, it would not be for us to determine the true construction of the contract and find out whether the respondents' contention is correct or not. Once the dispute is found to be within the scope of the arbitration clause, it is no part of the province of the court to enter into the merits of the dispute".
In this view, it would not be for us to determine the true construction of the contract and find out whether the respondents' contention is correct or not. Once the dispute is found to be within the scope of the arbitration clause, it is no part of the province of the court to enter into the merits of the dispute". ( 27 ) AS stated above, in Bungo Steel furniture v. Union of India, (7) the aspect of jurisdiction is further elucidated in para -9 of the judgment thus:"it is now a well settled principle that if an arbitrator, in deciding a dispute before him, does not record his reasons and does not indicate the principles of law on which he has proceeded, the award is not on that account vitiated. It is only when the arbitrator proceeds to give his reasons or to lay down principles on which he has arrived at his decisions that the Court is competent to examine whether he has proceeded contrary to law and is entitled to interfere if such errror in law is apparent on the face of the award itself. " ( 28 ) IN Firm Madanlal Roshanlal v. Hukumchand Mills, (9) the Supreme court was called upon to set aside an award on the ground that there were errors of law apparent on the face of the award. The request was declined by the Supreme Court thus:"in the present case, the arbitrator give no reason for the award. We do not find in the award any legal proposition which is the basis of the award, far less a legal proposition which is erroneous. It is not possible to say from the award that the arbitrator was under a misconception of law. The contention that there are errors of law on the face of the award is rejected. " ( 29 ) THESE observations of the Supreme Court of India apply on all fours to the facts of the present case. ( 30 ) THUS, we are constrained to hold that this Court has no jurisdiction to look into the clauses of the contract to find out whether what the arbitrators have awarded is legal or not. There is no error of law apparent on the face of the award.
( 30 ) THUS, we are constrained to hold that this Court has no jurisdiction to look into the clauses of the contract to find out whether what the arbitrators have awarded is legal or not. There is no error of law apparent on the face of the award. Hence, there is no substance in the contention, raised before us by the learned Advocate General that the arbitrators have miconducted themselves or the proceedings. ( 31 ) IN the result, the appeal is liable to be dismissed and we dismiss the same. We make no order as to costs of this appeal on the peculiar facts of this case as it involves mainly questions of law. --- *** --- .