Research › Browse › Judgment

Kerala High Court · body

1990 DIGILAW 22 (KER)

State of Kerala v. Gopalakrishnan

1990-01-18

MANOHARAN, THOMAS

body1990
Judgment :- Thomas, J. 1.This appeal is in challenge of a judgment pronounced in terms of the award passed by an Arbitrator. Disputes arose between the respondent and The Government of Kerala in respect of a contract work entrusted to the respondent, as per agreement dated 25-10-79, for construction of a Hostel Building for "Government School for the Blind, Deaf and Dumb" at Trivandrum. Reference was made to the Arbitrator at the intervention of the court. The Arbitrator in the award held that there was delay in handing over site for construction, that the Superintending Engineer (Building and Local Works) committed default in supplying materials within stipulated time and that the respondent is entitled to some increase for the work done during extra contractual period. The Arbitrator directed The State of Kerala to pay a sum of Rs.5,92,000/- besides refund of the deposit of Rs.35,300/- with interest accrued thereon in settlement of all liabilities of either party in regard to the work. 2. The award is attacked on the grounds, inter alia, that it is vague and unexecutable, and that the Arbitrator has misconducted himself by traversing beyond the confines of the contract. In the original agreement, it was stipulated that the work should be completed on 7-10-81, but the time limit was subsequently extended up to 30-9-82 and was again extended up to 10-11-83 by mutual agreement. As the work was not completed even after the extended period, the contract was terminated on 6-11-85. Claims were thereafter raised by the respondent which were repudiated. On application, those disputes were referred to arbitration as aforesaid. 3. Learned Government Pleader invited our attention to Clause (10) of the Notice inviting tenders for work, in which the following stipulation has been incorporated: "Government will not, however, after acceptance of the contract rate, pay any extra charges for lead or for any other reasons, in case contractor is found later on to have misjudged the materials available". He laid stress on the following clause in the Supplemental agreement dated 18-8-83". The contractor shall not claim any enhanced rate of compensation whatsoever or on account of such extra items due to the increase in rate of labour or materials or on any other grounds". This was sought to be read along with Clause (3) of the "Special Conditions" attached to the Notice inviting tenders. The contractor shall not claim any enhanced rate of compensation whatsoever or on account of such extra items due to the increase in rate of labour or materials or on any other grounds". This was sought to be read along with Clause (3) of the "Special Conditions" attached to the Notice inviting tenders. The said clause reads thus: "Intending tenders are expected to inspect the site before tendering and ascertaining the exact nature of the work to be done. No plea for extra rates of any kind over and above the rates quoted by them will be considered". On the strength of the aforesaid clauses, learned Government Pleader contended that the Arbitrator has over stepped his authority by holding that the respondent is entitled to some increase for the work done during the extra contractual period. Reference was made to the decision in Alopi Parshad v. Union of India (AIR 1960 S.C.588). The supreme Court rejected the contention that "the arbitratiors were justified in ignoring the express terms of the contract prescribing remuneration payable to the agents and in proceeding upon the basis of quantum merit". Their Lordships pointed out that in the codified law of contracts in India, there is nothing which justifies the view that a change of circumstances, completely out side the contemplation of parties at the time when the contract was entered into, will justify a court in departing from the express terms thereof. Emphasis was laid by learned Government Pleader on the following observation of the Supreme Court in Sudarsan Trading Co., v. Government of Kerala (1989 (1) KLT 534 = AIR 1989 S.C. 890): "But an award which ignores express terms of the contract is bad". 4. On the other hand learned counsel for the respondent contended that there is no term in the contract either express or implied preventing the respondent from claiming increased rates consequent to the increase in prices or due to inflation, and the clauses referred to by the learned Government Pleader must be confined to the specific situation mentioned in those clauses alone. eg.- In Clause (10) of the Notice inviting tenders, the restriction that Government will not pay any extra charges is confined to those matters where the contractor would have misjudged materials because a duty is case on every tenderer in the said clause to inspect the site of the proposed work including the quarries to satisfy himself about the quality and availability of materials. Similarly, he argued that the relevant clause in the Supplemental agreement containing restrictions against claim for enhanced rate of compensation are confined to extra items not covered by the original agreement. According to the learned counsel, the restriction contained in clause (3) of the Special conditions is evidently with respect to the work done in the site. 5. As the reference became final, since it was not challenged, it is not within the competence of the court to consider whether the interpretation made by the Arbitrator regarding different clauses of the agreement is good or bad, valid or invalid. The finding of the Arbitrator that default was committed by the appellants in handing over the site for construction is not open question, since the award passed by the Arbitrator is a non-speaking award. the question of sustainability of the claim does not affect the arbitrability of the claim. At the stage of dealing with an application for filing arbitration agreement, what the court has to satisfy itself is about the existence of a valid agreement and also that dispute or disputes have arisen with regard to the subject-matter of the agreement. At that stage the court is not concerned with the question whether the claim of a party to the arbitration agreement is sustainable or not. That question falls within the province of the Arbitrator. In Wazir Chand v. Union of India (AIR 1967 S.C. 990), a contention was raised that since the claim was barred by limitation, no reference to arbitration can be made. Dealing with the contention, their Lordships stated thus: "After an agreement is filed in court and the matter is referred to the arbitrator, it is for the arbitrator to decide by the application of the law contained in the Limitation Act, whether the claim is barred. Dealing with the contention, their Lordships stated thus: "After an agreement is filed in court and the matter is referred to the arbitrator, it is for the arbitrator to decide by the application of the law contained in the Limitation Act, whether the claim is barred. But S3791) does not confer authority upon the court to reject the application for filing arbitration agreement under S.20 of the Arbitration Act because the claim is not made within three years from the date on which the right to apply arose. In dealing with the application for filing an arbitration agreement, the court must satisfy itself about the existence of a written agreement which is valid and subsisting and which has been executed before the institution of any suit and also that a dispute has arisen with regard to the subject-matter of the agreement which is within the jurisdiction of the court. But the court is not concerned in dealing that application to deal with the question whether the claim of a party to the arbitration agreement is barred by the law of limitation". In Union of India v. M/s. L.K. Ahuja & Co. (AIR 1988 S.C.1172), the Supreme Court held that the question whether a claim subsists or not is arbitrable. 6. In Sudarsan Trading Co.'s case (cited supra), Sabyasachi Mukharji, J. (as he then was) has further observed that "once there is no dispute as to what is the interpretation of that contract, is a matter for the arbitrator and on which court cannot substitute its own decision". while referring to a Division Bench decision of this Court in State of Kerala v. Poulose (1987 (1) KLT 781) the Supreme Court, in the aforementioned case, has also observed that this is not a correct position in law to say that it was possible for the court to construe the terms of the contract to come to a conclusion whether an award made by the arbitrator was possible to be made or not. In the opinion of their Lordships, the court has no jurisdiction to substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. "By purporting to construe the contract the court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction". "By purporting to construe the contract the court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction". While referring to yet another Division Bench decision of this Court in State of Kerala v. Raveendranathan (1987 (1) KLT 604), the Supreme Court has held that "in so far as the court held therein that an arbitrator deciding a dispute under the contract is bound by the contract the court is right, but the Court cannot substitute the decision of the arbitrator as to what was meant by the contract". To the aforesaid extent, the Division Bench decision was held to be not correct. "The High Court seems to have fallen into an error of deciding the question on interpretation of the contract. In the aforesaid view of the matter, we are of the opinion that the High court was in error. It maybe stated that if no a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the court in the manner done by the High Court in the instant case". 7. If the arbitrator has jurisdiction to go into the question whether the claimant is entitled to damages, as a consequence of the delay in execution of the contract, the Arbitrator has also jurisdiction to decide whether increase in prices should be taken into account in assessing quantum of damages. In this case, the Arbitrator has held that there was delay in handing over site for construction and that the Superintending Engineer has committed default in supplying materials. It is not disputed that the arbitrator was well within his competence to decide all those questions. Hence it cannot be held that the Arbitrator has over stepped his jurisdiction by estimating the quantum of damages taking into consideration the increase in prices of rates. 8. In P. M. Paul v. Union of India (AIR 1989 S.C.1034), a similar question was raised. The disputes referred to arbitration in that case were, who was responsible for the delay and what are the repercussions of the delay in completion of the building etc. 8. In P. M. Paul v. Union of India (AIR 1989 S.C.1034), a similar question was raised. The disputes referred to arbitration in that case were, who was responsible for the delay and what are the repercussions of the delay in completion of the building etc. It has been held that "once it was found that the arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the respondent, the respondent was liable for the consequences of the delay, namely, increase in prices". The result of the foregoing discussion is that the Arbitrator has not over stepped his jurisdiction and hence award is not liable to be set aside. Accordingly, we dismiss this appeal, No costs.