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1987 DIGILAW 156 (BOM)

Municipal Corporation of Greater Bombay v. V. M. Jog Constructions (Private) Ltd

1987-04-22

H.SURESH

body1987
JUDGMENT - H. SURESH, J.:---This petition is to set aside an award made by an arbitrator. The relevant facts are as follows :--- The petitioners, Municipal Corporation of Greater Bombay, gave a contract to the respondents after inviting tenders. The contract was for the purpose of execution of civil works in respect of Love Grove Waste Water Treatment Facility under Bombay II Sewerage Project. They were also to carry out various construction works and in the process they were also to do certain excavation work for the purpose of construction. The contract, amongst other things, provides for removal of excavated stock and it says that if they are to be removed beyond 300 meters from the site and upto a distance of 3 k.ms., they will be entitled to a certain lead charge. It is the case of the respondents that the "site" would be the various construction works which were to be carried out in the said Love Grove compound and, therefore, on the basis of the said contention they claimed that the distance would have to be calculated from each work. As against this the petitioners contended that the "site" as contemplated under the agreement would comprise the entire property of Love Grove compound and, therefore, if there was any transportation of excavated material beyond 300 meters from the said entire compound, then only the respondents would be entitled to claim their charges. 2. The agreement also provides for referring the dispute to arbitration. But it also provides for a mode or a method whereby the dispute would be referred in a particular manner. In other words, firstly the parties have to approach the Municipal Commissioner and if the Municipal Commissioner does not give decision within a period of 90 days then such a dispute may be referred to arbitration. They are referred to as conditions Nos. 96 and 97 of the general conditions of the contract for civil works. 3. Before I deal with respective contentions I must mention that the term "site" has been defined in the general conditions of contract and the said definition is as follows :--- "4(i). They are referred to as conditions Nos. 96 and 97 of the general conditions of the contract for civil works. 3. Before I deal with respective contentions I must mention that the term "site" has been defined in the general conditions of contract and the said definition is as follows :--- "4(i). The "site" means the land and other places on, under, in or through which the permanent works or temporary works are to be executed and any other lands and places provided by the Municipal Corporation for working space or any other purpose as may be specifically designated in the contract as forming part of the site." This definition is important inasmuch as the parties hereto ultimately referred this question as to what is meant by "site" to the arbitrator whose decision parties agreed to accept as final and binding. In the present case the learned arbitrator, after taking into account all the circumstances and evidence, has given his finding which the petitioners contend to contrary to the very definition of "site" as given in the general conditions of contract. 4. Initially the respondents made a claim that upto May 31, 1983 they had excavated and transported a total quantity of 37,850 cubic meters and they were entitled to their charges as provided under the agreement and as claimed by them. This claim was not accepted by the Corporation, the petitioners. Accordingly the respondents raised a dispute by a letter dated January 12, 1984. In the said letter they contended that there are in all 16 independent structure (sub-works) and that each of the structure is an independent site and should be treated as such for payment purposes, and accordingly they are entitled to be paid for the same. However since that was not accepted by the petitioners, after discussion with them, the respondents agreed by way of settlement that the total quantity of the excavated and transported material could be reduced to 25,203 cubic meters and accordingly a sum of Rs. 6,30,090/- would be payable to them. They further pointed out that even this approach was not acceptable to the petitioners and therefore, they requested for justice as provided under Clause No. 96 of the general conditions of the contract. 5. 6,30,090/- would be payable to them. They further pointed out that even this approach was not acceptable to the petitioners and therefore, they requested for justice as provided under Clause No. 96 of the general conditions of the contract. 5. Thereafter we have a letter dated 2-2-1984 which is from the Chief Engineer of the Corporation which says that by the direction of the Commissioner that the claim for the payment towards lead charges for excavated materials to be transported beyond 300 meters lead cannot be admitted whenever material is transported within the site, as the entire work should be treated as a single site as per the contract condition. The respondents thereafter, by their letter dated April 12, 1984, addressed to the Chief Engineer, pointed out that since the Corporation was not willing to accept their contention, the matter will have to be referred to the arbitration as per the provisions of Clause No. 97 of the general conditions of the contract agreement. Accordingly they served a notice to refer the matter to the arbitration and they formulated the points to be referred to arbitration on the basis of their contentions as follows : "1. Each structure for which a separate Bill of Quantity is provided in the Contract Agreement is to be treated as an independent site and the extent of site will be limited to the plan area of the structure. 2. Payment of transport charges amounting to Rs. 6,30,090/- for a quantity of 25,203 M 3 of Earth-Work excavation transported beyond the initial lead of 300 M to be released to us. 3. Any other issue relevant to above subject." They also suggested the names of two arbitrators out of whom both parties finally accepted Shri M.D. Deshmukh, Chief Engineer and Secretary to the Government of Maharashtra as arbitrator. The Municipal Commissioner by his letter dated November 19, 1984, addressed to the arbitrator agreed to have the dispute referred to the said arbitrator and in terms of the points as formulated by the respondents and as stated above were referred to the arbitrator. 6. Thereafter the arbitrator entered upon the reference and the parties have been heard extensively in the matter and evidence also was lead before the arbitrator. 7. While initially the claim preferred under the said point of dispute was to the extent of Rs. 6. Thereafter the arbitrator entered upon the reference and the parties have been heard extensively in the matter and evidence also was lead before the arbitrator. 7. While initially the claim preferred under the said point of dispute was to the extent of Rs. 6,30,090/-, the respondents when they preferred their claim as per the directions given by the arbitrator they claimed a sum of Rs. 9,78,150/- towards the lead charges for transportation of 38,126 cubic meters of excavated material beyond initial lead of 300 meters and within 3 km.s. in respect of the work done upto May, 31 1983. They also claimed a further sum of Rs. 5,00,000/- towards the transportation of 20,000 cubic meters quantity of excavated material beyond the initial lead of 300 meters for the work done after May 31, 1983. They further claimed compound interest at the rate of 20% over the above amounts for the period over which this amount became due and remained unpaid. They also asked for costs. I may mention here that when the respondent preferred this claim they had expressly stated in the said claim that though they had initially agreed to accept payment for a quantity of 25,203 cubic meters as proposed by the Chief Engineer, that was done as and by way of settlement of their claim for the work done upto May 31, 1983 and it was on that basis they stated that they were entitled to claim a sum of Rs. 6,30,090/-. However, since the petitioners did not accept the said settlement, the respondents pointed out before the arbitrator that they were not bound by such settlement and that, therefore, they were entitled to claim the actual quantity of the excavated material and transport as stated above. What is important here is that even at that stage when the respondents made such a claim in excess of Rs. 6,30,090/- the petitioners had not objected to such a claim on the basis that arbitrator's reference was to the extent of only Rs. 6,30,090/- and not above. In other words, the parties have clearly understood that the dispute was with regard to the meaning of the word "site" and on that being determined by the arbitrator the rest is all a matter of calculation and the respondents would be paid accordingly. 6,30,090/- and not above. In other words, the parties have clearly understood that the dispute was with regard to the meaning of the word "site" and on that being determined by the arbitrator the rest is all a matter of calculation and the respondents would be paid accordingly. I may mention here that to this claim of the respondents, the petitioners had filed their reply, In this reply they have not pointed out that the respondents could not have made any claim for any material in excess of 25, 203 cubic metres. 8. Later on, there is a further claim by the respondents which is set out by the letter dated May 9, 1985 wherein they included charges for lead charges beyond a period of May 31, 1983 and as upto February 28, 1985. 9. Thereafter there is a letter from the arbitrator dated May 24, 1985 which is addressed to the petitioners with a copy to the respondents in which the arbitrator spelt out certain issued for determination by him and they are as follows : "1. Is it one composite work or collection of several component works capable of being executed independently of one another? 2. Does the specified lead force disposal material of 300 meters apply to them individually of wholly? 3. Is the site or the works area clearly defined or indicated? 4. Is the disposal area clearly defined or indicated? 5. Are the quantities of excavation and disposal worked out for Tender realistically? 6. Is the area within the Lovegrove compound sufficient for depositing the material permanently or temporarily during the execution of the work? 7. Are the estimated rates worked out realistically for the quantities of excavation Backfilling grading disposal which by themselves would actually by involved in the execution of the work? 8. Whether any compensation is payable to the contractors on account of transportation beyond the free lead of 300 meters? If so, what would be the quantity and the rate for the same?" Both the parties have understood these points of statement of issues, as the arbitrator called them, and they have given their replies to each of these issues. After taking into account the entire arguments and after taking into account the submission made on behalf of either side and after taking into account the evidence led before the learned arbitrator, the arbitrator made his award dated July 12, 1985. After taking into account the entire arguments and after taking into account the submission made on behalf of either side and after taking into account the evidence led before the learned arbitrator, the arbitrator made his award dated July 12, 1985. The award is a reasoned award and the learned arbitrator has given reasons on the basis of the issues as formulated by him and as set out above. In this award he negatived the contention of the petitioners that the site would mean the entire LoveGrove compound, but instead he came to the conclusion that the site would be each of the civil work to be carried out by the respondents. Accordingly, on the basis, of his finding he has allowed a claim restricted to 66,819 cubic meters at the rate of Rs. 25/- per cubic meter as claimed by the respondents and accordingly he has given an award for a sum of Rs. 16,70,475/- plus the price variation amount payable as per the contract provisions. He has not granted the compound interest claimed by the respondents as there was no provision for payment of the said interest. He has also not given the costs to the respondents. I may mention here that under the contract the total quantity provided for excavation was 97,670 cubic meters and as against that, the respondents had claimed a lead charges for 66,819 cubic meters which the learned arbitrator has allowed. April 22, 1987 10. This award is being challenged on the ground that the arbitrator has decided the question of "site" wrongly inasmuch as he has not understood the meaning of the term as given in the definition itself. It is also contended that the arbitrator has travelled beyond the reference when he gave an award in excess of Rs. 6,30,090/- and that, therefore, this award should be set aside. 11. Mr. Mehta appearing for the petitioners submitted that what was referred to the learned arbitrator was a question of fact and that while deciding that question of fact if he has made a mistake and if he has decided the same contrary to the legal position that becomes an error apparent on the face of the record. He submitted that if it is a specific question of law for the decision of the arbitrator, it is true, the petitioners cannot challenge the same. He submitted that if it is a specific question of law for the decision of the arbitrator, it is true, the petitioners cannot challenge the same. But where it is not a specific question of law but is a specific question of fact or a question of fact mixed with law and in determination of the same if the arbitrator makes a mistake and decides contrary to law, such an error can be considered as an error of law apparent on the face of the award and on the basis of such an error the award can be set aside. 12. In this connection it is interesting to note what the petitioners have in fact pleaded in their petition, which is slightly different from what is argued at the Bar. The relevant portion of the petitioners contention in this behalf is as follows : "The findings relate also to questions of interpretation of contract conditions which are questions of law. The decision of the Arbitrator on the interpretations of contract condition are questions of law and is erroneous in law and the said errors are apparent on the face of the proceedings and the award." 13. If, therefore, as pleaded by them what was a question of law, the legal position is very clear. In such a case the Court cannot set aside the award on the ground of an error of law apparent on the face of it, even though the decision of the arbitrator may not accord with the law as understood by the Court; see (M/s. Tarapora Co. v. Cochin Shipyard Ltd., Cochin)1, reported in A.I.R. 1984 S.C. 1072. Assuming it is not a question of law as such but it is a question of interpretation of a particular point, then, in that event, I must draw the attention of the petitioners to the following passage in that very judgement at page 1082 and it is as follows : "that where a question of construction is the very point referred for arbitration, then the decision of the arbitrator upon that point cannot be set aside by the Court only because the Court would itself have come to a different conclusion." Perhaps, to this rule the exception could be this viz., where an arbitrator decides on evidence which is inadmissible or on principles of construction which the law does not contenance see (Champsey Bhara Co. v. Jiraj Balloo Co.)2, reported in A.I.R. 1923 Privy Council, 66. However, before me nothing has been pointed out as to how the learned arbitrator came to the conclusion on the basis of any evidence which was at any time inadmissible. 14. Mr. Mehta submitted that when the arbitrator spelt out the various points for final determination he had clearly misdirected himself and that is how he arrived at a conclusion which was contrary to law. In particular he pointed out that nobody had referred any question to the arbitrator as whether what was entrusted to the respondents was one composite work or collection of several component works capable of being executed independently of one another. He, therefore, submitted that the learned arbitrator's approach was wholly wrong inasmuch as he took into account considerations which are not relevant for the purpose of deciding the issue before him. He also submitted that the simplest thing for the arbitrator was to consider the definition of the word "site" as given in the contract itself and in that event the entire position would have been so clear and he could have come to the right conclusion. 15. I am not able to appreciate this contention advanced by Mr. Mehta on behalf of the petitioners. When the arbitrator spelt out various points in dispute which he described them as "statement of issues", It was not by way of traversing outside the reference. He had to give a finding as to the meaning of "site". In that process he split up the various factors for determination, cumulatively enabling him to arrive at the meaning of the word "site". In fact the parties understood this analysis when each of them sought to give their answers to those issues. I for one, perhaps, would have formulated those issues in a different way. But that is neither here not there. It is for the arbitrator to analyse and to arrive at his own conclusions in such manner as he knows proper. Mr. Mehta points out that in the reasons given in support of the award there is not even a mention of the definition of the word "site" as given in the contract. But, I think, that should not matter. Just because it was out of sight, in the award it cannot be said it was out of mind of the arbitrator. Mehta points out that in the reasons given in support of the award there is not even a mention of the definition of the word "site" as given in the contract. But, I think, that should not matter. Just because it was out of sight, in the award it cannot be said it was out of mind of the arbitrator. He has taken all facts into account and has arrived at a decision which should necessarily become final and binding on both the parties. 16. This takes me to the other contention of Mr. Mehta viz., that the learned arbitrator could not have made an award for any amount in excess of Rs. 6,30,090/-. Here again I find no substance in this contention for various reasons. Firstly the respondents had made it very clear that they had suggested this figure of Rs. 6,30,090/- on the basis of the material of 25,203 cubic meters and by way of settlement before the matter was referred to the arbitrator. But when the Municipal Commissioner decided to refer the matter for arbitration obviously that was on the basis that there was no settlement. That is how, when the matter was referred to the arbitrator and the parties were directed to file their statements and replies, the respondents had clearly set out their claim, not on the basis of 25,203 cubic meters, but on the basis of the actual excavation and transported materials as actually done by them upto may 31, 1983. I must further mention that while the dispute was pending the work had not been suspended and, therefore, they were carrying out the further of excavation and also naturally they were transporting the material. That is how later on they claimed further amount on the basis of extra lead charges for the charge even after May 31, 1983. The petitioners had never objected to this at any time even before the arbitrator. They had filed their replies to the statement of the claim all on the basis that the definition of the word "site" would not cover the claim of the respondents, and not on any other that the respondents were not otherwise entitled to the said claim as such. 17. In the present case the main issue was one relating to the definition and the meaning of the word "site". Once that is decided the rest is all a matter of calculation. 17. In the present case the main issue was one relating to the definition and the meaning of the word "site". Once that is decided the rest is all a matter of calculation. When the dispute arose the work was in progress and, therefore, on such calculation in respect of further excavated materials and transport charges the respondents could have preferred. Mr. Setalwad appearing for the respondents drew my attention to an unreported judgment of Justice Pendse of the Arbitration Petition No. 142 of 1982 (Indian Rare Earths Limited v. M.N. Dastur and Company (P.) Ltd.)3, decided by him on March 3, 1983 wherein also similar question had arisen. The learned Judge observed that if the arbitrator had initial jurisdiction it is possible for the parties to feed the existing jurisdiction by an enlargement of the scope of the reference. In that connection the learned Judge had referred to a case reported in A.I.R. 1963 S.C. page 90 (Orient Weaving Mills v. Union of India)4. The relevant observations are at page 98 an they are as follows: "In both these cases there was a valid submission on which the arbitrators proceeded to act. Before them the parties filed statement and therein they put forward a claim which was not actually covered by the reference and invited them to give their decision thereon. The party against whom the award had gone contended that the arbitrators had acted without jurisdiction in deciding that claim. In overruling this contention the Court held that it was open to the parties to enlarge the scope of a reference by inclusion of a fresh dispute, that they must be held to have done that when they filed their statements putting forward claims not covered by the original agreement, that these statements satisfied the requirements of section 2(a) of the Arbitration Act, and that it was competent to the arbitrators to decide the dispute. The point to be noticed is that in both these cases there was no want initial jurisdiction but a feeding of existing jurisdiction by an enlargement of the scope of the reference. That this does not involve any question of jurisdiction in the arbitrators will be case from the scheme of the Act. 18. In my view technically speaking in the present case there is not even an enlargement of the scope of the reference. That this does not involve any question of jurisdiction in the arbitrators will be case from the scheme of the Act. 18. In my view technically speaking in the present case there is not even an enlargement of the scope of the reference. It is only a matter of additional calculation for the subsequent period. If there is anything wrong in the calculation, it is for the petitioners to point out. In any event the said claim would fall within the 3rd point as referred to the Arbitrator for, viz. "any other issue relevant to above subject". 19. In the result both the contentions advanced by Mr. Mehta in support of the petition do not survive. However, I must mention that in the present petition there are one or two other grounds; but at the same time I must make it clear that these grounds have not been canvases before me and I must naturally presume that they were not worthwhile pursuing, and the petitioners have not pressed those other grounds as set out in the petition. 20. In the result, this petition stands dismissed with no order as to costs. Petition dismissed. -----