BOARD OF TRUSTEES v. SUNSHINE ENTERPRISES — 1991 DIGILAW 49 (CAL)

PRABIR KUMAR MAJUMDAR, J. ( 1 ) THE Court : This is an application under sections 30 and 33 of the Arbitration Act for setting aside an award dated 15th May 1990 made and published by the Sole Arbitrator Mr. D. M. Mukherjee in the arbitration matter being Award Case No. 380 of 1990. ( 2 ) SOMETIME in August 1983 the respondent was allotted the work by the petitioner for supplying and laying 150 mm dia inlet pipeline from additional tubewell to the R. C. Overhead resorvoir at Raichawk Fish Harbour. The value of the contract was to the extent of Rs. 67,555/ -. In. November, 1983 a formal agreement was entered into and the contract included the Tender, General Conditions of Contract, Special Conditions of Contract, Condition of Contract, Conditions of Tender specifications, Bill of quantities and Schedule of rates. ( 3 ) DISPUTES and differences, however, arose between the parties in respect of the said contract entered into by and between the parties. By a letter dated 31st January, 1987 the respondent being the claimant raised claims on four counts of a total sum of Rs. 1,34,000/ -. This letter was addressed to Chief Engineer of the petitioner. By the said letter, the respondent called upon the petitioner to make payment of the amount claimed by the said letter or alternatively to refer the disputes and claims to the arbitration within 30 days from the receipt of the said letter. ( 4 ) BY a letter dated 23rd December, 1987, the petitioner requested Mr. D. M. Mukherjee Retired Chief Engineer (Agricultural) of Government of West Bengal to act as an arbitrator in the matter of dispute that has arisen in the execution of the agreement. The said Mr. Mukherjee was requested to act as an arbitrator upon an agreement between the petitioner and the respondent. ( 5 ) THE respondent sometime in March, 1988 submitted statement of claim to the arbitrator for Rs. 8,43,820/ -. The petitioner sled a counter statement of fact denying or disputing the claims of the respondent. On 15th May 1990, the said arbitrator Mr. D. M. Mukherjee made and published the award in favour of the respondent for Rs. 2,98,982/- with interest at the rate of 10% per annum on the awarded amount of Rs. 8,43,820/ -. The petitioner sled a counter statement of fact denying or disputing the claims of the respondent. On 15th May 1990, the said arbitrator Mr. D. M. Mukherjee made and published the award in favour of the respondent for Rs. 2,98,982/- with interest at the rate of 10% per annum on the awarded amount of Rs. 2,98,982/l from the date of the award till the date of payment or till the date of decree whichever is earlier. The said award also stipulated that no party should have any other claim whatsoever against the other. The petitioner has challenged this award by this application on several grounds. ( 6 ) MR. Suresh Prasad Majumdar, the learned Counsel for the petitioner has submitted that in view of the provision contained in 68 (a) of the General Conditions of Contract and 68 (b) thereof, the arbitrator cannot entertain the reference and also in view of the fact that no such reference has been made by the Chief Engineer, Mr. Majumdar submits that it is a condition precedent. Under the provisions of the said clause 68 the dispute has to be referred to after the decision is arrived at by the Engineer. Under clause 68 (a) of the General Conditions of Contract the decision of the Engineer in regard to the disputes, matter claims demands or question arising out of or connected with the interpretation of the contract including the meaning of specifications, drawings, designs and instructions or as to the quality of workmanship or as to the materials used in the work or the execution of the work or the abandonment or breach of the contract the decision of the Engineer shall be final and binding on all parties to the contract. Under Clause 68 (b) if the contract is dissatisfied with such any decision of the Engineer, he shall within 15 days after receiving of such decision require that the matter shall be referred to an arbitrator to be agreed upon between the parties or falling agreement, to be nominated on the application of either party by the President for the time being of the Institution of Engineers (India) and any such reference shall be deemed to be a submission to arbitration within the meaning of the Indian Arbitration Act, 1940. The Award of the Arbitrator shall be final and binding on all the parties. The Award of the Arbitrator shall be final and binding on all the parties. ( 7 ) IT has been contended by the learned Counsel for the respondent Mr. Arun Deb that the petitioner should not be allowed to take this point at this stage 'after fully participating in the arbitration proceedings and after contesting each and every claims of the Claimants i. e. the respondent herein. In this connection, he has referred to a decision of the Supreme Court in the Case of Pawan Roy v. CODA, reported in AIR 1988 SC 205 . Mr. Deb submits that in any event by a letter dated 31st January, 1987 the respondent raised claims after dispute had arisen between the parties in respect of the contract and called upon the petitioner to make payment for the amount claimed by the respondent or alternatively to refer the dispute or claims to the arbitration. He also submits that by a letter dated 23rd December, 1987 the petitioner upon agreement between the parties requested the said Sole Arbitrator Mr. D. M. Mukherjee to act as an arbitrator in the matter of dispute that has arisen in the execution of the contract agreement, Mr. Deb therefore, submits that the provisions contained in both in section 68 (a) and 68 (b) of the General Conditions of Contract have been complied with. The said two letters are on record. ( 8 ) THE next objection taken by Mr. Majumdar on behalf of' the petitioner is that in any event the claim before the arbitrator was barred by the provision of section 120 of MAJOR PORT TRUSTS ACT, 1963. This point was also before the arbitrator and the petitioner took this point specifically in paragraph 6 of its counter claim which is at page 35 of the petition. Since this point has been specifically taken before the arbitrator and was considered in the reference, the petitioner should not be allowed to take this point it may be presumed that the arbitrator had considered this point a question of fact on evidence. The question whether a claim is barred by law of limitation or any special law of limitation is entirely within the competence of the arbitrator to decide. In my view, this point has no substance. ( 9 ) MR. Majumdar has next submitted that the learned Arbitrator had considered certain documents ignoring the law of the land. The question whether a claim is barred by law of limitation or any special law of limitation is entirely within the competence of the arbitrator to decide. In my view, this point has no substance. ( 9 ) MR. Majumdar has next submitted that the learned Arbitrator had considered certain documents ignoring the law of the land. In making this submission Mr. Majumdar is aware of the proposition of law that in a non speaking award, which the instant award is, unless the document is referred to or appealed to be award, the court cannot look into the Contract or any other document to find out which documents exactly were considered by the arbitrator. But Mr. Majumdar has, submitted that it with appear from the award that there is a reference to the document and in view of' such reference to the documents the court can look into and consider the documents in order to find out whether the learned arbitrator had come to a right decision upon consideration of the provision of the contract of the document referred to in the award. Mr. Majumdar has in support of this contention cited a decision of the Supreme Court in the case of Continental Construction Company Ltd. v. State of Madhya Pradesh, reported in AIR 1988 SC 1166 Mr. Majumdar has in this connection also cited a decision of Andhra Pradesh High Court reported in AIR 1990 AP 294 . ( 10 ) MR. Deb appearing for the respondent has repelled this contention by contending that the Court cannot look into the contract or any document unless there, is any reference to the contract or any document in the award or the same is appended to the award. Mr. Deb has cited a decision of Supreme Court in the case of State of Orissa v. M/s. Lal and Brothers reported in AIR 1988 SC 2018 and also another decision of the Supreme Court in the case of Hind Builders v. Union of India, reported in AIR 1990 SC 1340 Mr. Deb has also submitted that in the impugned award there is no reference to any document except by way of narration, and it is impossible to find out from the, instant award as to which particular document or documents the learned arbitrator had ignored or had improperly accepted. Deb has also submitted that in the impugned award there is no reference to any document except by way of narration, and it is impossible to find out from the, instant award as to which particular document or documents the learned arbitrator had ignored or had improperly accepted. It may be noted here that Continental Construction case has been referred to and explained in State of Orissa v. Lall Brothers, reported in AIR 1988 SC 2018 ( 11 ) MR. Majumdar has next submitted that the respondent claimant claimed compensation or damages which was not within the scope of the reference and the learned arbitrator committed a mistake of law in awarding damages or compensation to the claimant and on this ground of misconduct the award is liable to be set aside. Mr. Majumdar has also submitted that the arbitrator is also guilty of misconduct in giving award in respect of the claims which are not arbitrable or cannot be taken into account by the arbitrator being excepted ,matters under the terms of the contract. Mr. Majumdar has not, however, pointed out what are the excepted matters under the contract. ( 12 ) MR. Deb appearing for the respondent in reply to this contention has submitted that there is no reference to the contract in the award nor from the award it would appear that the arbitrator has taken into consideration any excepted matter, if any, under the agreement entered into between the parties. Mr. Deb has also submitted that there has been Claim for Compensation and/or damages which, according to Mr. Deb, his client is entitled to claim for the breaches committed by the respondent. But it would not appear from the award whether the learned arbitrator has allowed the claim or not. Assuming the learned arbitrator has allowed such clam according to Mr. Deb, the learned arbitrator is entitled to do so since it is a dispute relating to or arising out of the contract or in any way concerning the contract. Mr. Deb has also submitted that since the impugned award is a non-speaking award, the Court should not speculate as to how and in what manner the learned Arbitrator has arrived at his conclusion. Mr. Deb has in this connection, referred to a decision of the Supreme Court reported in AIR 1989 SC 890 Sudarsan Trading Co. v. Government of Kerala. Deb has also submitted that since the impugned award is a non-speaking award, the Court should not speculate as to how and in what manner the learned Arbitrator has arrived at his conclusion. Mr. Deb has in this connection, referred to a decision of the Supreme Court reported in AIR 1989 SC 890 Sudarsan Trading Co. v. Government of Kerala. ( 13 ) THE last submission of Mr. Majumdar on behalf of the petitioner is that in any event the learned arbitrator in awarding interest on the awarded amount of Rs. 2,98,982/- with effect from the date of the award till the date of payment or till the date of decree whichever is earlier, committed an error which would appear on the face of the award and on this the award with regard to the interest is liable to be set aside. Mr. Majumdar has cited in this connection, the decision of the Supreme Court in Executive Engineer, Irrigation, Galimala v. Abhaduta Jena, AIR 1988 SC 1520 ( 14 ) MR. Deb on the point of interest has submitted that the law as settled by the Supreme Court recently is that the arbitrator is not competent to award interest in respect of the period from the commencement of the reference till the date of the award which is known as pendente lite interest. But it has not been held by the Supreme Court that the arbitrator is 'not competent to award interest on the awarded sum from the date of the award till the date of payment or till the date of decree. Mr. Deb has cited in this comection a decision of the Supreme Court in Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) P. Ltd. AIR 1989 SC 973 ( 15 ) I have considered the respective submissions of the parties, I have already indicated above that the impugned award is, a non-speaking award. After setting out the recitals the learned arbitrator has made the award as follows :-"now, therefore, I Sri Durga Mohan Mukherjee, the Sole Arbitrator of the disputes referred to me for adjudication do hereby decide, determine the award as follows :- (a) The respondent, Board of Trustees of the Port of Calcutta shall pay to the Claimant M/s. Sunshine Enterprises the sum, of Rs. 2,98,982/- (Rupees two lacs ninety eight thousand nine hundred and eighty two) only. 2,98,982/- (Rupees two lacs ninety eight thousand nine hundred and eighty two) only. (b) The respondent, Board of Trustees of the Port of Calcutta shall pay to the Claimant, M/s. Sunshine Enterprises simple interest at the rate of 10% (Ten percent) per annum on the Award of amount of Rs. 2,98,982/- with effect from the date of award on the disputes after my arbitration till the date of payment or till the date of decree whichever is earlier ; (c) Save as aforesaid in respect of matters before me, no party shall have my other claim whatsoever against the other. In witness whereof, I Shri Durga Mohan Mukherjee, the said Arbitrator, have set my hand to this my Award, this 15th day of May, 1990. Sd/- (D. M. Mukherjee) sole Arbitrator. ( 16 ) BY the said award the respondent Board of Trustees of the Port of Calcutta is directed to pay to the Claimant M/s. Sunshine Enterprises the sum of Rs. 2,98,982/ -. The said award further provided that the respondent Board of Trustees of the Port of Calcutta would also pay to the Claimant M/s. Sunshine Enterprises simple interest at the rate of 10% per annum on the awarded amount of 2,98,982/- with effect from the date of the award till the date of payment of the award till the date of payment or till the date of decree whichever is earlier. The said impugned award also stipulated that no party should have any other claim whatsoever against other. ( 17 ) IT is now settled law that the award cannot be set aside or remitted if there is no error of law appearing on the face of the award. It is also well settled that an error in law on the face of the award means you can find in the award or a document actually incorporated thereto, as. for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. See Champsey Bhara and Co. v. Jivraj Ballao, Spg. and Wvg. Co. Ltd. AIR 1923 Privy Council 66, Union of India v. Ralliaram, AIR 1963 SC 1685 This view has been discussed and approved in various subsequent decisions of the Supreme Court. See Champsey Bhara and Co. v. Jivraj Ballao, Spg. and Wvg. Co. Ltd. AIR 1923 Privy Council 66, Union of India v. Ralliaram, AIR 1963 SC 1685 This view has been discussed and approved in various subsequent decisions of the Supreme Court. ( 18 ) IT is also the law that mere reference to the contract in the award is not to be held as incorporation of it , see M/s. Allen Berry and Co. Pvt. Ltd. v. Union of India , AIR 1971, SC 696. A reference may also be made to 1962 (2) All ER 53 Giacomo Costo Fu Andrea v. British Italian Trading Ltd. where Diplock L. J. speaking for the court observed "it seems to be, therefore, that on the cases, there is none which compels us to hold that a mere reference to the contract in the award entitles us to look at the contract. It may be that in particular cases a specific reference to a particular clause of a contract may incorporate the contract or that clause of it, in the award. I think that we are driven back to first principles in this matter, namely, that an award can only be set aside for error which is on its face. It is true that an award can incorporate another document so as to entitle one to read that document as part of the award and, by reading them together, find an error on the face of the award". This observation has been taken with approval by the Supreme Court in Allen Berry and Co'. s case (Supra) AIR 1971, SC 696. The Supreme Court in Allen Berry's case has observed that "the question whether a contract or a clause of it is incorporated in the award is a question of construction of the award. The test is, does the arbitrator come to a tiding on the wording of the contract. If he does, he can be said to have impliedly incorporated the contract or a clause in it whichever be the case. But a mere general reference to the contract in the award is not to be held as incorporating it. The principle of reading contracts or other documents into the award is not to be encouraged or extended on. If he does, he can be said to have impliedly incorporated the contract or a clause in it whichever be the case. But a mere general reference to the contract in the award is not to be held as incorporating it. The principle of reading contracts or other documents into the award is not to be encouraged or extended on. ( 19 ) THE Supreme Court also proceeds to observe that "the rule thus is that as the parties choose their own arbitrator to be the Judge in the dispute between them; they cannot, when the award is good on the face of it, object to the decision either upon the law or the facts. Therefore, even when an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or any document appended to or incorporated in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake". ( 20 ) THEREFORE, it appears that the law is clear on the point and in this background if one looks at the award challenged in this proceeding, he will not find any error on the face of the award, far less an error of law on the face of the award. Again, no one would also find from this impugned award any legal proposition of law being the basis of the award and which one can say is erroneous. ( 21 ) THE award can also be set aside on the ground of legal misconduct of the arbitrator i. e. arbitrator has made his award exceeding his jurisdiction or that he has made his award without any evidence supporting his conclusion and in violation of the principle of natural justice i. e. without giving any opportunity to the aggrieved party to state his case. ( 22 ) IT has been contended on behalf of the petitioner that the arbitrator has no authority to entertain the reference and he was not lawfully appointed in terms of the arbitration agreement contained in clauses 68 (a) and 68 (b) of the General Conditions of Contract. It has been submitted on behalf of the petitioner that the learned arbitrator failed to consider that the claim of. It has been submitted on behalf of the petitioner that the learned arbitrator failed to consider that the claim of. the respondent was not referred to by the Engineer in terms of Clause 68 (a) and there being no existing dispute the question of arbitration could not arise. 1 have referred to above the terms of Clause 68 (a) and Clause 68 (b ). The petitioner should not be allowed to raise this contention at this stage in view of their letter dated 23rd December, 1987 which is annexed to the affidavit-in-opposition filed on behalf of the respondent in the proceeding. This letter is addressed to andarbitrator Mr. D. M. Mukherjee, and this is as follows :chief Engineer's 15, Strand Road, calcutta-1 23rd December, 1987. PD/ 190/24/3292. Shri D. M. Mukherjee, retd. Chief Engineer (Agri.) , 370/1/f, Netaji Subhas Road, calcutta-700 047. Dear Sir, sub : In the Matter of disputes differences and claims in connection with tender for supplying and laying 150 mm dia. inlet pipe line from additional tubewell to the r. C. Overhead Reservoir at Roychowk Fish Harbour, (Contractor. M/s. Sunshine Enterprise) arbitration thereof it has jointly been agreed upon between contractors and the Calcutta Port Trust to request you to act as an "arbitrator" in the matter of dispute that has arisen in the execution of the contract agreement for the subject work. You are requested to convey your acceptance at an early date. Yours faithfully sd/- Chief Engineer. No. PD/ 190/24/3292. Copy to M/s. Sunshine Enterprises, P-72, Senhati, Behala, Calcutta-34, for information with reference to their letter No. S/fh/31 dated 30. 11. 87. Sd/- chief Engineer. ( 23 ) IT will also appear that by a letter dated 20th April, 1987 the respondent requested the Chief Engineer, Calcutta Port Trust to refer the disputes or differences raised in the petitioner's letter dated 31st January, 1987 to an agreed arbitrator for arbitration as contained in Clause 68 (b) of the General Conditions of Contract. By the said letter the respondent also called upon the petitioner to send a list of approved arbitrators containing the names of 15 to 20 Arbitrators, out of which the respondent could make a choice as the agreed arbitrator. By a letter dated 20th July, 1987, the petitioners forwarded a list of approved arbitrators to the respondent. By the said letter the respondent also called upon the petitioner to send a list of approved arbitrators containing the names of 15 to 20 Arbitrators, out of which the respondent could make a choice as the agreed arbitrator. By a letter dated 20th July, 1987, the petitioners forwarded a list of approved arbitrators to the respondent. It will appear that the name of the sole arbitrator who has made this award, now challenged in this proceeding, will appear against Serial No. 7 and by a letter dated 23rd December, 1987, which I have set out above, the parties jointly agreed to request said D. M. Mukherjee to act as an arbitrator in the matter of disputes that has arisen in the execution of the contract. Therefore, there is no substance in this contention made on behalf of the petitioner. ( 24 ) THE next contention of the petitioner is that the learned arbitrator is guilty of legal misconduct inasmuch as he exceeded his jurisdiction in giving award on the disputes which are not arbitrable and further the arbitrator wrongly allowed compensation which was not within the scope of the arbitration. I have already indicated that there is no reference to the contract nor any document is appended to the award and it is the law sow that the court cannot look into the contract or any document not incorporated to the award in order to find out whether the learned Arbitrator has committed any legal, misconduct or that the learned arbitrator has taken into the consideration some claims not arising out of the contract. I have already indicated that this award is not a speaking award and the learned arbitrator has not chosen to give his reasons which he is not bound to do so unless the parties provide for in the arbitration agreement that the arbitrator should indicate his reasons in the award. I have also indicated above, that this award has not made any reference to any contract, more so, the arbitrator did not come to a finding on the wording of the contract which test is laid down in Allen Berry case, AIR 1971 SC 696 (Supra ). It is also not possible or open to speculate whether in awarding the awarded sum, the learned arbitrator has taken into consideration the claims for damages or compensation. It is also not possible or open to speculate whether in awarding the awarded sum, the learned arbitrator has taken into consideration the claims for damages or compensation. It is no misconduct on the part of the arbitrator to come to an erroneous decision. ( 25 ) LOOKING at the impugned award, I find it impossible to hold that the learned arbitrator has committed my legal misconduct as alleged by the petitioner. ( 26 ) ON the question of interest, it has been contended on behalf of the petitioner that the learned arbitrator committed an error of law which would appear from the face of the award, in awarding interest on the awarded amount from the date of award till payment or the date of decree, whichever is earlier. It is now settled law that the arbitrator is not competent to award pendente lite interest i. e. from the date of the reference till the date of the award as has been held by the Supreme Court in Abhaduta Jena's case, AIR 1988 SC 1520 (supra ). It will appear from the said decision that the Special Leave to appeal was granted under Article 136 of the Constitution limited to the question on award of interest during the period prior to the reference and during the pendency of the arbitration proceedings. It is also stated in the judgment that Special leave was not granted in regard, to the award of interest subsequent to the date of the Arbitrator's Award. In a subsequent decision in Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) P. Ltd. , AIR 1989 SC 973 , the Supreme Court has laid down that in a reference made after the commencement of the Interest Act, 1978, interest for the period prior to the commencement of arbitration proceedings can be granted by the arbitrator and also interest from the date of the award to the date of the 'decree can also be granted. What all the arbitrator is prohibited from granting is the interest pendente lite, that is, the period from the date or the commencement of the proceedings to the date of the award. This decision of the Supreme Court in AIR 1989 SC 973 clearly lays down that claimant is entitled to interest for both the antecedent and subsequent periods. What all the arbitrator is prohibited from granting is the interest pendente lite, that is, the period from the date or the commencement of the proceedings to the date of the award. This decision of the Supreme Court in AIR 1989 SC 973 clearly lays down that claimant is entitled to interest for both the antecedent and subsequent periods. Considering this view taken by the Supreme Court in a later decision, I do not find any reason to interfere with this part of the award as well with regard to the interest. ( 27 ) I hold that there is no infirmity in the award. This award ought to be upheld and is hereby upheld. ( 28 ) FOR the reasons aforesaid, the application for setting aside the award is dismissed with cost. Interim order, if any, is vacated. The Counsel for the Petitioner prayed for stay of Operation of this Judgment and order. Prayer is refused. Application dismissed.