State of Kerala v. M. P. Varghese — 1991 DIGILAW 388 (KER)

JUDGMENT Radhakrishna Menon, J. 1. The respondents in O.P. (Arb) No. 8/85 before the Sub Court, Kottarakkara, are the appellants 2. The appeal arises out of an application under S.30 of the Arbitration Act to set aside the award by the Arbitrator. Of the claims 'a' to 'j' considered and disposed of by the arbitrator by the award, only claims a. b and e survive for consideration in this appeal. Claim 'a' relates to the demand by the contractor for 35 per cent increase in the quoted rate for all works done by him after 1st July 1982, the date of revision of schedule of rates in P.W.D. This work indisputably was carried out after the period originally agreed upon by the parties. Claim 'b' is in respect of the claim falling under the head 'rehandling charges for 18250m3 of earth at a rate of 17.50m3 and claim 'e' relates to the short/excess conveyance charges, the contractor had to meet to collect stores from sources other than the departmental store at Punalur as specified in the agreement. 3. These are the claims that were allowed by the arbitrator by the award, which has become the rule of court as is seen from the judgment and decree under attack in the appeal. That part of the award allowing claims 'b' and 'e', in our view, is beyond challenge because the findings based on which those claims were allowed cannot be said "to be perverse. The grounds urged by the appellants in this regard thus do not make out any misconduct on the part of the arbitrator in allowing these claims. 4. The case of the appellants in regard to claim 'a' in the light of the arguments of the learned Government Pleader requires to be considered a little elaborately. The said case can briefly be stated thus : According to the appellants, the claimant is not entitled to demand enhancement in rates for the work he did after the expiry of the period agreed upon under the original agreement. In support of this argument, the appellants rely on the supplemental agreements from where it can be seen that the contractor has specifically agreed that he will not lay any claim based on the enhanced rates for the work, he would carry out after the expiry of the period originally agreed upon. In support of this argument, the appellants rely on the supplemental agreements from where it can be seen that the contractor has specifically agreed that he will not lay any claim based on the enhanced rates for the work, he would carry out after the expiry of the period originally agreed upon. The arbitrator nonetheless, has allowed enhancement of 20 per cent over and above the originally agreed rates for all works executed by the contractor/ measured by the Department, during the extended period. The award for this reason is bad in law, is the further argument of the appellants. 5. To put it differently, the Government Pleader argues, in passing the award in contravention of the provisions of the supplemental agreements, the arbitrator must be held to have misconducted and hence that part of the award is liable to be set aside. It is the further case of the Government Pleader that in view of the supplemental agreements, the arbitrator must be held to have no jurisdiction to allow the enhancement of 20 per cent over and above the originally agreed rates. 6. The counsel for the respondent refuted the above contentions. According to him in order to set aside the award, it should be established that the award is based on wrong proposition of law. No such ground is established and if that be the position, the award is beyond challenge is the further submission of the learned counsel. His further argument is that since the supplemental agreements have not been incorporated into the award, the same cannot be looked into by the court in order to find out whether the arbitrator has misconducted himself in making the award. 7. Before we go into the competing contentions, we would like to state the principle of law which is well established. A reference in this connection to the following decisions of the Supreme Court as also the Division Bench ruling of this court is profitable: (i) M/s Sudarsan Trading Co. 7. Before we go into the competing contentions, we would like to state the principle of law which is well established. A reference in this connection to the following decisions of the Supreme Court as also the Division Bench ruling of this court is profitable: (i) M/s Sudarsan Trading Co. v. Government of Kerala ( AIR 1989 S.C. 890 ) (ii) Food Corporation of India v. Joginderpal Mohinderpal ( AIR 1989 SC 1263 ) (ii) Reserve Bank of India v. M/s Raj Engineering Contractor [ILR 1991 (2) Kerala 47] This court in Reserve Bank's case ILR 1991 (2) Kerala 47, after reviewing the law on the subject has concluded thus: "Counsel for the respondent submitted that even if we accept the whole argument of counsel for the appellant that there is an error of construction of certain clauses of the contract and that results in passing an award under claim No. 4 that itself will not be sufficient to set aside the award. To support this submission, he referred us to AIR 1989 S.C. 268 (U.P. Hotels etc. v. LT. P. State Electricity Board) wherein the Supreme Court observed that 'even assuming that there was an error of construction of the agreement or even that there was an error of law in arriving at a conclusion, such an error is not an error which is amenable to correction even in a reasoned award under the law. In order to set aside an award, there must be a wrong proposition of law laid down in the award as the basis of the award'". In Sudarsan Trading Co.'s case AIR 1989 S.C. 890 ., the Supreme Court has observed thus: "............Therefore, it appears to us that there are two different and distinct grounds involved in many of the cases. One is the error apparent on the face of the award, and the other is that the arbitrator exceeded his jurisdiction. In the latter case, the courts can look into the arbitration agreement but in the former, it cannot, unless the agreement was incorporated or recited in the award............" As regards the jurisdictional aspect, the Supreme Court in the same decision has stated the law thus: "............It has to be reiterated that an arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award. In Halsbury's Laws of England (4th Edn. Vol. In Halsbury's Laws of England (4th Edn. Vol. 2 para 622) one of the misconducts enumerated is the decision by the arbitrator on a matter which is not included in the agreement or reference. But in such a case one has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction............" In Food Corporation of India's case AIR 1989 SC 1263 the Supreme Court has stated thus: "In the instant case, the arbitrator has chosen to make a speaking award, that is to say he has given reasons for his conclusion. Whether he is obliged to give such reasons or not is another matter but since the arbitrator had chosen to give the reasons, unless it is demonstrated to this Court that such reasons are erroneous as such as propositions of law or a view which the arbitrator has taken is a view which it could not possible be sustained on any view of the matter, then the challenge to the award of the arbitrator cannot be sustained. As has been emphasised in Sudarsan Trading v. Government of Kerala, (1989) 1 J.T. 339 ; ( AIR 1989 S.C. 890 ) that an award could be set aside if the arbitrator has misconducted himself or the proceedings or has proceeded beyond jurisdiction. It could also be set aside where there are errors apparent on the face of the award. But these are separate and distinct grounds. In case of errors apparent on the face of the award, it can only be set aside if in the award there is any proposition of law which is apparent on the face of the award namely, in the award itself or any document incorporate in the award. See the observations of the Judicial Committee in Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd., (1923) 50 Ind, App. 324: (AIR 1923 P,C. 66)" It is therefore clear that in order to see aside an award, either of the two grounds stated hereunder shall be established: (1) there should exist errors apparent on the face of the award and (2) the arbitrator exceeded his jurisdiction. v. Jivraj Balloo Spinning and Weaving Co. Ltd., (1923) 50 Ind, App. 324: (AIR 1923 P,C. 66)" It is therefore clear that in order to see aside an award, either of the two grounds stated hereunder shall be established: (1) there should exist errors apparent on the face of the award and (2) the arbitrator exceeded his jurisdiction. In case of errors apparent on the face of the award it can only be set aside if in the award there is any proposition of law which is apparent in the award itself or any document incorporated in the award. In the latter case the court however, shall keep in mind the distinction between an error committed within the jurisdiction and the error in excess of jurisdiction or beyond jurisdiction. The error committed within the jurisdiction can be a ground only if it is shown that it is an error apparent on the face of the award. In such cases, the award can be set aside only if it is established that the error committed is in respect of a proposition of law based on which the award is passed. The question as to whether the error was committed in the exercise of the jurisdiction not vested in the arbitrator, can however, be decided by the court only with reference to the documents, relevant in that regard. These principles embolden us to hold that the learned counsel for the respondent is well founded in his submission that the grounds urged in the appeal are not sufficient to set aside the award. 8. Notwithstanding the above position, the learned Government Pleader referred the following sub clauses in Clause.52 of the agreement and submitted that the arbitrator is bound to state the reasons if the amount awarded is Rs. 1 lakh and above. It reads: "All award shall be in writing and in case of awards amounting to Rs. 8. Notwithstanding the above position, the learned Government Pleader referred the following sub clauses in Clause.52 of the agreement and submitted that the arbitrator is bound to state the reasons if the amount awarded is Rs. 1 lakh and above. It reads: "All award shall be in writing and in case of awards amounting to Rs. 1,00 lakh and above such awards shall state the reasons for the amount awarded." ' Dilating on this aspect he argued that the arbitrator has not quantified the amount the contractor is entitled to as per claim 'a' and therefore to the said extent the arbitration award cannot be said to be passed in accordance with law-On going through the award, we are satisfied that the arbitrator in fact has made it clear as to what amount the contractor is entitled to under this head. The arithmetical calculation alone is left out. This cannot be said to provide a ground to set aside the award. He then made reference to S.14 (2) of the Arbitration Act and argued that the court is empowered to look into the correctness of the award with reference to the depositions and documents which the arbitrator had taken into account while passing the award-This section read: "14. Award to be signed and filed : * * * * * (2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such party or if so directed by the Court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been taken and proved before them, to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the award". It is true that this sub-section says that the arbitrator or the umpire filing the award before the court shall produce the depositions and documents, he had taken into account while passing the award. It is true that this sub-section says that the arbitrator or the umpire filing the award before the court shall produce the depositions and documents, he had taken into account while passing the award. The insistence on the production of the depositions and the documents by this section, according to the learned Government Pleader, is suggestive that the court which considers the legality of the award, has the power to reappraise the facts and evidence and on such reappraisal if the court is satisfied that the arbitrator has not considered them in the right perspective, the court has always the power to set aside the award. The ingenuous argument, we should say, cannot be taken cognizance of in the light of the decisions of the apex court cited above. 9. Whatever that be, in the instant case it cannot be said that the arbitrator exceeded his jurisdiction in passing the award. What the arbitrator has done is only to enhance the rate by 20 per cent over and above the rates originally agreed upon. This dispute cannot be said to be outside the agreement. If that be so, the court has no jurisdiction to find out whether, in arriving at the decision, the court acted correctly or incorrectly. 10. The learned Government Pleader then argued that whatever be the position as regards the incorporation of the relevant documents in the award, if it is established that the arbitrator has found jurisdiction and made the award wandering away from contract into regions far from his ken, then it should be held that the arbitrator has misconducted himself in making the award. In support of this argument the Government Pleader relied on a Division Bench ruling of this court in State of Kerala v. Poulose 1987 (1) KLT 781 . The above principle appears to have been approved by the Supreme Court by the order in Civil Appeal No. 2009 of 1990. We shall in this connection reproduce relevant parts of the order: "Special leave granted. Heard learned counsel for the parties. The above principle appears to have been approved by the Supreme Court by the order in Civil Appeal No. 2009 of 1990. We shall in this connection reproduce relevant parts of the order: "Special leave granted. Heard learned counsel for the parties. We are of the view that the High Court was right in holding that the claim No. 2 was not tenable and that claim is taken to have been rightly rejected........." In order to appreciate the above verdict of the Supreme Court, it may be necessary to refer to that part of the judgment of this court touching upon claim No. 2: "Bearing these principles in mind, we shall examine the impugned order to ascertain if there is an error of law appearing on the face of it, and if there is misconduct under S.30 of the Act. We think there is; because, the arbitrator ignored the provisions of the contract under which he derived jurisdiction. If an arbitrator, even in a non speaking award decides, contrary to the basic features of the contract, that would vitiate the award. When the contract itself is final in regard to certain matters, it is not open to the arbitrator to ignore it, go beyond it, find jurisdiction and make an award, wandering away from the contract into regions far beyond his ken. In the case on hand, rates are fixed by contract, also stating that nothing over and above the said rates will be payable. The supplementary agreement relied on by the respondent, leads to no different conclusion.". The Supreme Court in another decision in M/s Sudarsan Trading Co. v. Government of Kerala AIR 1989 SC 890 (this judgment was delivered prior to the pronouncement of the order in Civil Appeal 2009/1990), touching upon the above principle high lighted in Poulose's case 1987 (1) KLT 781 has observed thus: , "The High Court in the judgment under appeal referred to the decision of the Division Bench of the Kerala High Court in State of Kerala v. Poulose ( 1987 (1) KLT 781 ) (supra). Our attention was also drawn to the said decision by the counsel for the respondents that if an arbitrator or the umpire travels beyond his jurisdiction and arrogates jurisdiction that does not vest in him, that would be a ground to impeach the award. Our attention was also drawn to the said decision by the counsel for the respondents that if an arbitrator or the umpire travels beyond his jurisdiction and arrogates jurisdiction that does not vest in him, that would be a ground to impeach the award. If an arbitrator, even in a non speaking award decides contrary to the basic features of the contract, that would vitiate the award, it was held. It may be mentioned that in so far as the decision given 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 our opinion, this is not a correct proposition in law and the several decisions relied by the learned Judge in support of that proposition do not support this proposition. Once there is no dispute as to the contract, what is the interpretation of that contract is a matter for the arbitrator and on which court cannot substitute its own decision." (emphasis supplied) The ratio discernible from the above decision of the Supreme Court makes it difficult to take cognizance of the argument of the learned Government Pleader. It is all the more so because the documents, the Government Pleader pressed into service in support of the argument, admittedly have not been incorporated in the award. It should in this connection be remembered that it is by now well established by the pronouncement of the apex court that the documents which are not incorporated in the award, cannot be looked into for the purpose of deciding the issue whether an arbitrator has misconducted in making the award. Since the supplemental contracts pressed into service by the Government Pleader to sustain the argument, admittedly have not been incorporated in the award, it is unnecessary for this Bench to go into the question as to whether the arbitrator while making the award has wandered away from the contract into regions far beyond his ken. The above argument of the counsel also therefore is rejected. No. other question arises for consideration. M.F.A. fails. Accordingly the same is dismissed.