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1985 DIGILAW 507 (ALL)

Jiwan Das v. Fertilizer Corporation of India Ltd. , Gorakhpur

1985-05-03

A.P.MISRA, K.C.AGRAWAL

body1985
JUDGMENT K.C. Agrawal, J. - On invitation, the plaintiff, Jiwan Das, submitted his tender for lifting coal ash, to the Fertilizer Corporation of India, Gorakhpur. The tender was accepted and the written contract was, thereafter, executed. Clause 3(ii) of the agreement provides for details of work to be done by the contractor. It has made a reference for the details of work to item No. 16 in Annexure I. Agreement clause 12, which has a bearing on the controversy in issue, is as under : "The total quantum of work would be 50000 MT of wet ash to be removed annually (30000 MT of ash production @ 100 MT per day and also already the existing coal ash stack containing approximately 20000 MT) FCI however, reserves the right to use the ash for its own purposes and also to dispose of the ash directly to other parties in case of failure of the contractor to lift the ash as per schedule." Relevant portion of Annexure I dealing with item No 16 is quoted below :- "The total quantum of work would be between 30000 MT Wet ash per annum to be removed @ 100 MT per day and also already existing coal ash stack containing approximately 20000 MT". 2. After the plaintiff removed 85296 MT coal ash, he was asked by the defendants to stop the work. The plaintiff, thereafter, entered into negotiation with the Fertilizer Corporation of India and agreed to lift coal ash at higher rates. But subsequently, a dispute arose between the plaintiff on the one hand and the defendants on the other, about the quantity of coal ash which could be removed under the agreement. Upon the dispute arising, the General Manager of the Fertilizer Corporation of India in terms of clause 38 of the agreement appointed Sri J.S.K. Bhagat through a letter dated 27th January 1981 as sole arbitrator to adjudicate and decide the dispute between the parties. The arbitrator gave his award on 4-8-1981. Upon the award being given, Fertilizer Corporation of India filed an objection under S. 30 of the Arbitration Act for setting aside the same. On 30th November, 1981, an application under S. 14 of the Arbitration Act was filed by the plaintiff for making the award a Rule of the Court. 3. The arbitrator gave his award on 4-8-1981. Upon the award being given, Fertilizer Corporation of India filed an objection under S. 30 of the Arbitration Act for setting aside the same. On 30th November, 1981, an application under S. 14 of the Arbitration Act was filed by the plaintiff for making the award a Rule of the Court. 3. The Civil Judge, I, Gorakhpur consolidated the two cases and decided the same by means of the impugned judgment dated 30th September, 1982. He allowed the objection filed under S. 30 of the Arbitration Act by the Fertilizer Corporation of India, and by allowing the same, set aside the award. The application under S. 14 was consequently rejected. Aggrieved by the judgment of the Civil Judge I, the plaintiff has filed the present appeal under S. 39 of the Arbitration Act and has made the prayer that the order allowing the objection under S. 30 of the Arbitration Act be set aside. 4. The question that arises for determination is about the quantity of coal ash which could be removed by the plaintiff. The plaintiff claimed that he was justified to remove 100000 MT coal ash within a period of two years, whereas the defendants Fertilizer Corporation pleaded that the plaintiff was entitled to remove only 80000 MT coal ash. The plaintiff claimed that as he had removed 85296 MT coal ash and the remaining quantity of 14704 MT could not be removed due to the illegal attitude of the defendants, he was entitled to damages for the same. 5. The Arbitrator had held the entitlement of the plaintiff to remove 100000 MT coal ash and on that basis held that the defendant was liable to pay Rs. 3,51,278/- as damages. 6. Before the court below, to the objection under S. 30 of the Arbitration Act, the plea taken by the Fertilizer Corporation was that the Arbitrator having ignored clause 3(ii) of the Agreement and Schedule 16 to the same, committed a grave error which amounted to misconduct and, as such, the award being perverse, was liable to be set aside. On behalf of the plaintiff, the argument was that clause 12 of the agreement was conclusive about the right of quantum of coal ash which the plaintiff could remove. Under that clause, the plaintiff was entitled to remove 50000 MT coal ash annually. On behalf of the plaintiff, the argument was that clause 12 of the agreement was conclusive about the right of quantum of coal ash which the plaintiff could remove. Under that clause, the plaintiff was entitled to remove 50000 MT coal ash annually. Therefore, since the contract was for a period of two years, he could not be estopped lawfully before removing 100000 MT coal ash. 7. The learned Civil Judge allowed the objection by holding that the arbitrator committed an error apparent on the face of the record while holding that the plaintiff was entitled to remove 100000 MT coal ash. The Civil Judge also held that since there was no evidence on record to show the sharp increase in the coal price or its scarcity, the arbitrator misconducted himself by assuming these facts in favour of the plaintiff and in holding the Corporation liable for damages in the sum of Rs. 3,51,278/-. On these findings, the award was set aside. 8. In this appeal, the learned counsel for the plaintiffs contended that the view taken by the arbitrator about the interpretation of the award was correct and, as such, the Civil Judge while deciding the objection under S. 30 could not reverse the same. Controverting the argument of the plaintiffs, the learned counsel for the defendant Corporation urged that the arbitrator while interpreting the agreement had overlooked to consider clause 3(II) and item No. 16 of Annex. I to the same and, as such, the finding having been given by ignoring the other provisions of the agreement suffered from the mistake apparent on the face of the record and, as such, the Civil Judge had ample jurisdiction under S. 30 of the Arbitration Act, to set aside the same. In this connection, the learned counsel for the defendants also urged that the arbitrator was guilty of misconduct and, as such this was an additional ground to set aside the award. 9. The settled rule of construction of an agreement is that in connecting the intention from the instrument, the deed must be read and interpreted as a whole. In this connection, the learned counsel for the defendants also urged that the arbitrator was guilty of misconduct and, as such this was an additional ground to set aside the award. 9. The settled rule of construction of an agreement is that in connecting the intention from the instrument, the deed must be read and interpreted as a whole. Lord Davey in N.E. Ry v. Hastings 1900 AC 260 at p. 269 has stated : "The deed must be read as a whole in order to ascertain the true meaning of its several clauses and that the words of each clause should be so interpreted as to bring them into harmony with the other provisions of the deed if that interpretation does no violence to the meaning of which they are naturally susceptible." 10. In the instant case, what did the arbitrator do was only to consider clause 12 which has been quoted by us above. Relying on clause 12, the arbitrator emphasised on the use of word "annually" and found that 50000 MT coal ash should be removed by the plaintiffs each year. By virtue of clause 3(II) of the agreement, item No. 16 has the same force as clause 12 itself and it could not be relegated to a secondary place as was done by the arbitrator. In fact, the learned counsel for the Corporation was not right in arguing that item No. 16 had been omitted from consideration by the arbitrator. The arbitrator had considered the same but had ignored it by observing it to be ambiguous. 11. On consideration of clauses 3(ii), 12 and item No. 16 of Annex. I, we find ourselves in agreement with the view of the learned Civil Judge that the arbitrator committed a mistake apparent on the face of the record in concluding and interpreting in favour of the plaintiff by solely relying upon the word "annually" used in clause 12. In clause 12 the total quantum of work to be done was 50000 MT. The details of 50000 MT coal ash which could be removed by the plaintiff have been divided into two parts. One is 30000 MT of ash production and the other is existing coal containing 20000 MT. In this way, the total quantity was made out at 50000 Mt. This 20000 MT was the quantity to be removed in the first year. One is 30000 MT of ash production and the other is existing coal containing 20000 MT. In this way, the total quantity was made out at 50000 Mt. This 20000 MT was the quantity to be removed in the first year. This 20000 MT was existing coal ash on the date on which the agreement was written. The expression "existing" shows that it could be only in respect of the year in which the agreement was executed and was not and could not be in respect of the second year when the same could not be said to be in existence. The fact that the total quantity liable to be removed has been divided into two parts i.e. 30000 MT and 20000 MT, would show that in the second year since there could be no existing coal, the plaintiff could not have exercised his right of removal of the coal ash. In this year, his right would be confined to 30000 MT coal ash. The word "annually" has unnecessarily been considered by the arbitrator to be a guiding factor in interpreting clause 12. While doing so, he omitted to consider the words "already existing". 12. Item No. 16 while giving the total quantum of work clearly provides that only 30000 MT coal ash was to be removed at the rate of 100 MT per day. Had the intention of the parties to the agreement been for removal of 50000 MT per annum, the quantity of removal of 100 MT per day would have been different. This supplies necessary clue to the interpretation of the agreement. Over and above 30000 MT per annum, the plaintiff was entitled to remove existing coal ash stack approximately 20000 MT. This 20000 MT was a special feature of the first year and had nothing to do with the second year. The arbitrator while holding the plaintiff to be entitled to 50000 MT per year committed an error which is apparent on the face of the record. His finding is in fact perverse and perversity amounts to misconduct. In Nag Tok v. Nag Kuaim (1912) 14 Ind Cas 978 (UB), it has been held : "Perversity is misconduct and a Court would be justified in setting aside an award on that ground." The learned Civil Judge had jurisdiction under S. 30 of the Arbitration Act and, therefore, to set aside the same. 13. In Nag Tok v. Nag Kuaim (1912) 14 Ind Cas 978 (UB), it has been held : "Perversity is misconduct and a Court would be justified in setting aside an award on that ground." The learned Civil Judge had jurisdiction under S. 30 of the Arbitration Act and, therefore, to set aside the same. 13. Learned counsel for the plaintiff urged that the Civil Judge failed to appreciate that he was not hearing an appeal from the decision of the arbitrator. He was hearing an objection to set aside the award under S. 30 of the Arbitration Act. It was not open to the Civil Judge to set aside the award only because he thought that he will come to a different conclusion. The learned counsel contended that the mere dissent of the Court from the arbitrator's conclusion on construction does not empower it to set aside the award. 14. In this case, we are clearly of opinion that only one and one interpretation of the agreement was apparent to be taken and as the arbitrator took a view wholly untenable, he committed a mistake apparent on the face of the record in doing so. As to the power of the Court to set aside an award, the general rule is that if a question of law itself is referred to the arbitrator, the award given by him cannot be set aside on the sole ground that there was an error of law apparent on the face of the record. If, however, the question arises in a case where there is no specific reference of question of law but while deciding the dispute on merits, the Court would be empowered to set aside the award on the finding that there is a mistake on the face of the record. In this connection, reference may be made to the judgment of the Supreme Court Tarapore and Company v. Cochin Shipyard Ltd., AIR 1984 SC 1072 . It held : "....The discussion leads to the inescapable conclusion that a specific question of law touching the jurisdiction of the arbitrator was specifically referred to the arbitrator and therefore, the arbitrator's decision is binding on the parties and the award cannot be set aside on the sole ground that there was an error of law apparent on the face of the award. It is also established that the claim for compensation made by the arbitrator which led to the dispute was covered by the arbitration clause. The quantum of compensation awarded by the arbitrator was never disputed nor questioned. Therefore, the High Court was clearly in error in reversing the decision of the trial Court." 15. In this case, the Supreme Court had referred to a large number of its as well as English decisions and maintained the distinction where the specific question submitted to the arbitrator is that of law and cases where the award or any document incorporated in the award, there is found some legal proposition which is the basis of the award and which is erroneous. In the first case, the court does not have jurisdiction or power to set aside the award whereas in the other, it may do so. In the first category, the cases cited by the Supreme Court are Alopi Parshad & Sons Ltd. v. Union of India, AIR 1960 SC 588 ; Union of India v. A. L. Rallia Ram, AIR 1963 SC 1685 ; Kapoor Nilokheri Co-op. Dairy Farm Society Ltd. v. Union of India, AIR 1973 SC 1338 ; and N. Chellappan v. Secretary, Kerala State Electricity Board, AIR 1975 SC 230 . 16. In the second category, the cases considered were Champsey Bhara & Co: v. Jivraj Balloo Spinning and Weaving Co., AIR 1923 PC 66 ; Hirji Mulji v. Cheong Yue Steamship Co. Ltd., 1926 All ER Rep 51; Jivarajbhai Ujamshi Seth v. Chintamanrao Balaji, AIR 1965 SC 214 and Dr. S. B. Dutt v. University of Delhi, AIR 1958 SC 1050 . 17. After having discussed these cases, the Supreme Court held that when the reference is a question of law, the award of the arbitrator cannot be set aside even if it does not accord with the view of the Court on the sole ground that there is error of law apparent on the face of it. Where an error on the face of the record is committed while deciding the dispute on merits on a question of law, the Courts have been recognised to have power under S. 30 of the Arbitration Act to set aside the award. 18. In Dr. S. B. Dutt v. University of Delhi (supra), the arbitrator gave by his award a direction to enforce the contract of personal service. 18. In Dr. S. B. Dutt v. University of Delhi (supra), the arbitrator gave by his award a direction to enforce the contract of personal service. This was stated as an error of law apparent on the face of the award and the award was set aside. 19. For what we have said above, we find that as instant is not a case where any question of law was referred but the dispute as a whole had gone to the arbitrator, the Court on the finding that the award suffers from an error on the face of the record, could set it aside. For this view, we make a reference to the decision of the Privy Council in Champsey Bhara and Company v. Jivraj Balloo Spinning and Weaving Company Ltd., AIR 1923 PC 66 that : "the extent of the jurisdiction of the Court to set aside an award on the ground of an error in making the award is well-defined. The award of an arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a note appended by the arbitrators, stating the reasons for his decisions, there is found some legal proposition which is the basis of the award and which is erroneous." In addition to what we have said above, the court below set aside the award also on the ground that the damages payable by the defendants to the plaintiff were determined without any evidence on record. The arbitrator while awarding the damages took into consideration the fact of sharp increase in the price of the coal and its scarcity in the market. The defendants had argued before the court below that there was no evidence on record to show the sharp increase in the price of the coal or its alternative scarcity. The defendants had further pointed out that since there was no file of the new tender before the arbitrator, he wrongly allowed the damages in accordance with the price of the tender up to 14-11-1980. 20. The defendants had further pointed out that since there was no file of the new tender before the arbitrator, he wrongly allowed the damages in accordance with the price of the tender up to 14-11-1980. 20. Before us, the learned counsel for the plaintiff urged that as the arbitrator could take judicial notice of rise in price of the coal and import personal knowledge while fixing the quantum of damages liable to be paid by the defendant to the plaintiff and, as such, in doing so, he could be held guilty of misconduct. As we have affirmed the finding of the learned Civil Judge on the first point, we are not called upon to express our concluded opinion on the second. We, only wish to note that the Arbitrator was not justified in assuming some of the facts in favour of the plaintiff about the rise in coal price without any evidence being brought on record to that effect. He should have confined himself to the materials available on record and not to have determined the quantum of damages on his ipse dixit. 21. In the result, the appeal fails and is dismissed with costs. The judgment and decree of the court below are confirmed.