Judgment :- 1. The appeal is by the Kerala State Electricity Board, the defendant in the lower court, under S.39 of the Arbitration Act, against an order of the court below refusing to set aside an award by an Arbitrator made on a reference by court on the differences and disputes between the parties. In this judgment the plaintiff is referred to as the contractor and the defendant as the Electricity Board. The contractor entered into an agreement dated 26-9-1973 with the Electricity Board for the work of "Idukki H.E.P. Cement concrete filling and allied works behind steel liners in B.V.C. area, upper elbow points, surge bottom. Headrace portion etc". Under the above agreement, two items of work were entrusted to the plaintiff-contractor. The first item is: "Concrete filling behind steel liners using 40mm graded metal including mixing by means of concrete mixers, laying, consolidating using vibrators, cost of form works and scaffolding curing, furnishing, all diversions, drainage and dewatering charges etc., completed as per specification". The second item of work was providing M.S. reinforcement for the concrete work whenever necessary. This work, as specified in the agreement, was later found unsuitable and had to be done in a different pattern; and it was done through another agency. In view of that we are not concerned with that item of work in these proceedings. 2. The nature and mode of execution of the work is as follows:-M/s. Giovanola Binny Ltd. was entrusted with the work of laying penstock and steel liners through the underground tunnel connecting the reservoir dam with the power house at Moolamattom. The steel liners or pipes are 5 or 7 metres long and has a diameter of 4 metres. They would lay the pipes one after the other within the tunnel as per specifications. After each pipe is fixed in position, the space between all-round the pipe and the tunnel had to be firmly filled with concrete. After the concreting is complete, Giovanola would lay the next pipe, fix it properly and connect it to the former one by welding. After that, concrete is filled between alround that pipe and the tunnel. The work of concreting was entrusted to the contractor and the execution of the work required complete co-operation between Giovanola and the concreting contractors. 3. The contractor commenced the work on 1-9-1973 and actually completed the work on 13-12-1975.
After that, concrete is filled between alround that pipe and the tunnel. The work of concreting was entrusted to the contractor and the execution of the work required complete co-operation between Giovanola and the concreting contractors. 3. The contractor commenced the work on 1-9-1973 and actually completed the work on 13-12-1975. According to the contractor he had to do very many extra allied work not envisaged by the parties also in the process. The design of the work also was changed subsequently and so he could not carry on the items of work as per the schedule. All the items carried out by the contractor were allied or extra by which he had to incur extra cost. The details of the extra cost and the various heads under which they were incurred are furnished in the points of claims filed before the Arbitrator. Though the contractor had to incur a lot of extra expenses and though he made a demand for payment of the same to the Electricity Board, the disputes and differences were not settled, and so the parties agreed to settle the differences by arbitration proceedings. It was further agreed that Sri. M.U. Isaac, Retired Judge, High Court of Kerala shall be the Arbitrator in the place of the original Arbitrator mentioned in the agreement. The above agreement was reached between the parties in December, 1977. Though the parties agreed on the Arbitrator, they could not agree on the terms of references to be made to the Arbitrator and so the plaintiff-contractor filed O.S. (Arb.) 196/1978 before the Sub Court. Trivandrum under S.20 of the Arbitration Act for filing the agreement and to refer the disputes and differences between them to the appointed Arbitrator. Sri. M.U. Issac, Retired Judge, High Court of Kerala. After a protracted litigation before the Sub Court and the High Court, ultimately the court settled the following terms of references to be referred to the Arbitrator: 1. Is the plaintiff entitled to be paid at a higher rate in addition to his quoted rate for the work of allied item of scheduled item ' No.1 of the above agreement. "Concrete filling behind steel liners using 40mm graded metal including mixing by means of concrete mixers, laying consolidating using vibrators, cost of form working and scaffolding, curing, finishing, all diversion, drainage and dewatering charges etc.
"Concrete filling behind steel liners using 40mm graded metal including mixing by means of concrete mixers, laying consolidating using vibrators, cost of form working and scaffolding, curing, finishing, all diversion, drainage and dewatering charges etc. Complete as per specifications" on account of the changed circumstances as contended by him. If so, to what relief is the plaintiff entitled to. 2. What is the balance amount, if any, due to the plaintiff, from the defendant towards trimming the arch and side done by him pursuant to the above agreement. 3. What, if any, is the balance amount due to the plaintiff from the defendant towards trimming the bottom of surge and done by him pursuant to the above agreement. 4. What, if any, is the. amount due to the plaintiff from the defendant for the work of excavation and removing the consolidated muck near surge shaft, pursuant to the above agreement done by him. 5. What, if any, is the amount due to the plaintiff from the defendant on account of the payment made by him to his workers pursuant to the reimbursement of F.D.A. and its elements. Is not the plaintiff entitled to recover the said amount from the defendant. 6. What, if any, is the compensation due to the plaintiff from the Board on account of the alleged delay involved in completing the work due to the fault of the defendant. 7. What, if any, is the amount due to the plaintiff from the defendant on account of the major repair charges alleged to have been incurred by him towards repairing concrete pump mixers supplied by the defendant. 8. What is the amount, if any, due to the plaintiff towards cost of cement mortar used for lubricating the conveyor pipe. 9. What is the amount, if any, due to the plaintiff from the defendant towards the cost of rejected concrete. 10.What if any, is the amount due to the plaintiff from the defendant for the cost of 1/4" metal alleged to have been supplied to the defendant by him. 11. What is the amounts, if any, due to the plaintiff from the defendant towards loss and damages incurred for the work executed after the date of completion of the work done by him pursuant to the above agreement. 12.
11. What is the amounts, if any, due to the plaintiff from the defendant towards loss and damages incurred for the work executed after the date of completion of the work done by him pursuant to the above agreement. 12. What if any, is the amount due to the plaintiff for all works done in relating to or pursuant to the above agreement on final settlement of accounts, including the above claims, security and retention amounts? 13. Is not the plaintiff entitled to recover from the defendant interest for the sum/s found due to the plaintiff from the defendant on final settlement of accounts if any from the date of completion of the work viz. on 30-11-1975 or any subsequent date/ s. If so at what rate/s from which date/s and on what amounts. 14. Is not the plaintiff entitled to recover the costs of this arbitration from the defendant and if so, what is the amount thus due to the plaintiff from the defendant?" 4. The Arbitrator entered the reference on 18-10-1980. The parties filed detailed claim statement. Statement and documents were also produced before him. Before the Arbitrator the Board claimed that they are entitled to make certain recoveries from the contractor as per the agreement. They filed a statement before the Arbitrator regarding the amounts which they are entitled to recover from the contractor. After considering the pleadings and evidence in the matter, the Arbitrator by his speaking award dated 29-4-1982 rejected the claims under terms of reference Nos. 7,10 and 11 and awarded amounts under the other heads the details of which are given in Para.16 of the award. Under various heads the Arbitrator awarded an amount of Rs. 48,58,936.90 to the contractor. The Arbitrator also fixed the liability of the contractor to the Electricity Board at Rs. 20,22,047.28. On the basis of the above finding the Arbitrator held that the contractor would be entitled to get a sum of Rs. 28,36,890/- under terms of reference Nos.l to 12. The security furnished by the contractor was also directed to be released by the Electricity Board. On terms of reference No. 13, on the question of interest, the Arbitrator found that there is no provision for providing interest in the contract and that he will not be entitled to any interest for any period prior to the commencement of the arbitration proceedings.
On terms of reference No. 13, on the question of interest, the Arbitrator found that there is no provision for providing interest in the contract and that he will not be entitled to any interest for any period prior to the commencement of the arbitration proceedings. But taking the view that the principles underlying S.34 of the C.P.C. would apply to arbitration proceedings, he awarded interest at the rate of 18% on the amount found due from 18-10-1980 (the date on which he entered on the reference) till the date of passing the decree by the court, pursuant to the award. 5. The award was duly filed in court and the Board filed an application to set aside the award alleging that the award on the very face of it is against law, that the Arbitrator has misconducted himself and that he has gone beyond the scope of his jurisdiction. The lower court found that there are no grounds made out to set aside the arbitration award and rejected the application by judgment dated 28-2-1983. The Board has come up in appeal against the above judgment. 6. The learned counsel for the appellant-Electricity Board raised only two contentions before this Court, namely 1) that the Arbitrator misconducted himself in the proceedings by ignoring material documents produced before him and 2) that the awarding of interest during the pendency of the proceedings before the Arbitrator is an error apparent on the face of the record. We shall consider these two questions. On the first question the learned counsel argued that the Arbitrator has failed to consider material documents which were produced before him by the Electricity Board, that the non-consideration of the material documents by the Arbitrator is a misconduct and that the award is liable to be set aside on that ground. In this connection he relied on the decision of the Supreme Court in K.P. Poulose v. State of Kerala (AIR 1975 SC 1259) wherein it was observed as follows: "Under S.30(a) of the Arbitration Act an award can be set aside when an Arbitrator has misconducted himself or the proceedings. Misconduct under S.30(a) has not a connotation of moral lapse.
In this connection he relied on the decision of the Supreme Court in K.P. Poulose v. State of Kerala (AIR 1975 SC 1259) wherein it was observed as follows: "Under S.30(a) of the Arbitration Act an award can be set aside when an Arbitrator has misconducted himself or the proceedings. Misconduct under S.30(a) has not a connotation of moral lapse. It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision." 7. It is true that if the Arbitrator has failed to consider material and relevant documents in coming to his conclusion, it will be a misconduct making the award liable to be set aside. We were taken through the entire award wherein the Arbitrator has elaborately considered the matters in controversy in detail and counsel for the appellant was not able to pinpoint any relevant document which the Arbitrator failed to consider. In our opinion, the Arbitrator has considered all the documents and has come to a conclusion. Before the Arbitrator it was the admitted case of both parties, as could be seen from the award, that the contractor would be entitled to be paid at a higher rate than the contract rate for the work as done by him. The Arbitrator on a consideration of the facts and circumstances of the case and the evidence held that the delay in completing the execution of the work was caused wholly due to the default of Gionovala in laying the steel pipes in time and making the space available to the contractor for concrete filling as per the agreement. It is in this background that the Arbitrator proceeded to fix the rates that the contractor is entitled to. The court while considering the legality of an award by an Arbitrator is not entitled to sit in appeal over the reasoning of the award. It can set aside the award only if there is any misconduct, or any legal error apparent on the face of the award. We were not shown nor was it contended that there is any such infirmity in the award in question. The law on the subject is well-settled. In M/s. Hindustan Tea Co.
It can set aside the award only if there is any misconduct, or any legal error apparent on the face of the award. We were not shown nor was it contended that there is any such infirmity in the award in question. The law on the subject is well-settled. In M/s. Hindustan Tea Co. v. M/s. K. Sashikant (AIR 1987 SC 81) the Supreme Court observed as follows: "The objections which have been raised against the award are such that they cannot indeed be taken into consideration within the limited ambit of challenge admissible under the scheme of the Arbitration Act. Under the law, the Arbitrator is made the final arbiter of the dispute between the parties. The Award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion or has failed to appreciate facts." In State of Orissa v. M/s. Lall Brothers (AIR 1988 SC. 2018) the Supreme Court observed as follows: " An award may be set aside by the court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion." 8. Judged in the light of the above principles, an award can be set aside only if there is legal error apparent on the face of the record and we were not shown any legal infirmity on the face of the award. As stated earlier, the only ground that was pressed by the learned counsel for the appellant Board was that the Arbitrator did not consider certain material and relevant documents which were produced by the Electricity Board. But the counsel for the Board was not in a position to refer to the particular material document which the Arbitrator omitted to consider and no grounds have been made out to set aside the award. In the above view, the order of the court below refusing to set aside the award has only to be confirmed. 9. But the award of interest at 18% by the Arbitrator during the pendency of the arbitration proceedings stands on a different footing. The Arbitrator held that there is no provision in the contract or any other law which provides for payment of interest to the contractor.
9. But the award of interest at 18% by the Arbitrator during the pendency of the arbitration proceedings stands on a different footing. The Arbitrator held that there is no provision in the contract or any other law which provides for payment of interest to the contractor. The Arbitrator has held that it is a settled proposition that the principles underlying S.34 of the C.P.C. would apply to arbitration proceedings and that the Arbitrator may award interest on the principal sum adjudged from the date of commencement of the proceedings before him at such rates as he may deem reasonable within the limits provided in the Section. We are of the opinion that the Arbitrator committed a legal error in making this finding. The question as to the jurisdiction of the Arbitrator to award interest during the pendency of an arbitration proceeding came up before the Supreme Court in the decision reported in Executive Engineer Irrigation, Galimala v. Abnaduta Jena (AIR 1988 SC 1520). After elaborately considering the case law on the question, the Supreme Court held as follows: "In regard to pendente lite interest, that is, interest from the date of reference to the date of the award, the claimants would not be entitled to the same for the simple reason that the arbitrator is not a Court within the meaning of S.34 of the C.P.C., nor were the references to arbitration made in the course of suits. In the remaining cases which arose before the commencement of the Interest Act, 1978, the respondents are not entitled to claim interest either before the commencement of the proceedings or during the pendency of the arbitration. They are not entitled to claim interest for the period prior to the commencement of the arbitration proceedings for the reason that the Interest Act, 1839 does not apply to their cases and there is no agreement to pay interest or any usage of trade having the force of law or any other provision of law under which the claimants were entitled to recover interest.
They are not entitled to claim pendente lite interest as the arbitrator is not a Court nor were the references to arbitration made in suits." (underlining is ours) In view of the above decision it is clear that an Arbitrator is not a court within the meaning of S.34 of the C.P.C. and that the Arbitrator is not entitled to award interest during the pendency of the arbitration proceedings unless there is a provision in the agreement or in any other law which provides for interest. The Supreme Court has also laid down that the principles of S.34 C.P.C. will entitle a claimant to claim pendente lite interest if the reference to arbitration was made in suits. Counsel for the respondent - Contractor contended that the reference to arbitration was made in this case in a suit under S.20 and that as one of the terms of references was relating to interest also, the Arbitrator is entitled to award the same. We are not inclined to accept this contention. It is clear from the decision of the Supreme Court referred to above that the suits referred to therein are suits which come under S.21 of the Arbitration Act and not a suit under S.20 of the Arbitration Act. Under S.21 of the Act the interested parties in any suit may agree that any matter in difference between them in the suit shall be referred to arbitration, and they can apply to the court for an order of reference of the matter in difference to an arbitrator. In such circumstances, the arbitrator is a substitute for the court and the provisions of S.34 of the C.P.C. will apply to the proceedings before such an arbitrator. But in an application under S.20 there is no suit before the court in regard to the differences between the parties; the suit is only for filing an agreement in court and to refer the disputes and differences between the parties to the arbitrator to be appointed by court. Once reference having been made the function of the court under S.20 comes to an end and it is for the Arbitrator to decide the matter further whereas it is not so in so far as a reference under S.21 is concerned.
Once reference having been made the function of the court under S.20 comes to an end and it is for the Arbitrator to decide the matter further whereas it is not so in so far as a reference under S.21 is concerned. In that view of the matter, we are clearly of the view that an Arbitrator appointed under S.20 will be entitled to award pendente lite interest only if there is any provision in the agreement or any law which provides for the same or if the reference is to him in a suit between the parties. The mere fact that the terms of reference to the Arbitrator included the question of interest also will not make any difference. It is not anybody's case that any specific questions of law were referred to the Arbitrator, but that the terms of references were made only for the convenience of the parties and the Arbitrator for pinpointing the difference between them or in other words, the reference was only a general reference. If on such reference the Arbitrator commits an error of law, the court is entitled to set aside the award. As the award of interest by the Arbitrator from 18-10-1980 (the date of entering on the reference) till the date of the decree is clearly without jurisdiction and is an error of law committed by him, we set aside the award to that extent. In the result, we allow this appeal in part and set aside the award dated 29-4-1982 and the judgment of the lower court to the extent that interest during the pendency of the arbitration proceedings, namely from 18-10-1980 to the date of the decree is disallowed. In all other respects the decree of the court below is confirmed. The parties shall bear their costs in this appeal. Partly Allowed.