Belmark Constructions, Monghyr v. State Of Bihar — 1993 DIGILAW 216 (PAT)

Judgment Radha Mohan Prasad, J. 1. The present appeal has been filed under section 39 (I) (vi) of the Arbitration Act, 1940 (hereinafter referred to as the Act) against the judgment and decree dated 21-8-1981 passed by shri Gauri Shankar Chaube, Subordinate Judge, Jamui, in Title Suit No.15 of 1980 refusing to pass a decree in terms of the award and dismissing the suit of the plaintiff. 2. According to the appellant, the short facts of the case are that on 25-6-1971 an agreement was entered between the appellant and the Executive engineer, Water Ways Division, Jamui on behalf of the Governor of Bihar in respect of the contract of earth work and damfill and spill way works of Kailash Ghat Reservoir Scheme. The work was to commence on 25-6-1971 and to be completed in twenty four months. However, the same could not be completed and the parties blamed each other for non-completion of the same. Ultimately, on 23-1-1974 the contract work was rescinded which gave rise to a dispute between the parties with regard to the terms of the contract. Thereafter a notice under Sec.80, c. P. C. read with Sec.8 of the Act was served upon the respondent for entering into the arbitration and decision by an arbitrator as per the agreement, who was the Superintending Engineer, Water Ways Division, deoghar. Having not received any reply from the responcent on 21-1-1977 an application under Sec.8 of the Act to appoint in independent arbitrator was filed by the appellant in the court of Sub-Judge, Jamui, which was registered as Misc. Case No.4 of 1977. The respondent also appeared in the said case. On 6-10-1978 Shri Ram Anugrah Prasad Sinha, Ex-Government Pleader, Monghyr was appointed as Arbitrator with the consent of the parties. A direction was given to him to file the award within four months of the receipt of the reference. On 7-3-1979 a writ was issued which was received by the arbitrator on 13-3-1979. After, examination of the witnesses adduced by the parties and hearing them the award was issued on 24-1-1980 with respect to the claim of the appellant awarding Rs.2,79,934/- under different heads. The details are as follows : 2_550_BLJ2_1993.htm It is stated that both the parties participated in the proceeding before the arbitrator without challenging his appointment/authority. After, examination of the witnesses adduced by the parties and hearing them the award was issued on 24-1-1980 with respect to the claim of the appellant awarding Rs.2,79,934/- under different heads. The details are as follows : 2_550_BLJ2_1993.htm It is stated that both the parties participated in the proceeding before the arbitrator without challenging his appointment/authority. 3 In view of the provisions of Sec.31 (4) of the Act the appellant -filed Title Suit No 15 of 1980 for making the award rule of the Court. It appears that later on 21-5-1980 an objection purporting to be under sections 30, 31 and 33 of the Act was filed by the respondent and the aforementioned Misc. Case No.4/77 was allowed to be transmitted on the records of the title suit. Thereafter on 21-8-1981 the impugned judgment, setting aside the award and dismissing the suit of the plaintiff was delivered, mainly, on the grounds that the arbitrator misconducted himself in making award and that there was inherent lack of jurisdiction in him inasmuch as there was complete non-compliance of the provisions contained in Sec.8 of the Act, which deals with power to appoint arbitrator or umpire. 4. The court below has held that the Superintending Engineer, Water ways Division, Deoghar, who was appointed arbitrator as per Clause 23 of the agreement dated 25-6-1971, never refused or neglected to enter into arbitration nor he had become incapable of doing so. Further, it has been held that no notice under Sec.8 (2) of the Act was served on the other party or the arbitrator before revocation or appointment of the present arbitrator as per the mandatory provisions of sub-section (2) of section 8 of the Act. Thirdly, the act of entering into reference was without any jurisdiction. 5. This appeal has been filed by the appellant against the aforesaid judgment setting aside the award, and dismissing the suit. This matter was earlier heard by a learned single Judge, who, by this order dated 19-8-1986. Thirdly, the act of entering into reference was without any jurisdiction. 5. This appeal has been filed by the appellant against the aforesaid judgment setting aside the award, and dismissing the suit. This matter was earlier heard by a learned single Judge, who, by this order dated 19-8-1986. referred the matter to be heard by a Division Bench for decision on the points formulated in the order dated 19-8-1986 which run as follows: " (1) Whether while invoking the jurisdiction of a court under section 8 (1) (b) of the Arbitration Act the party is required to notice the arbitrator also, and if he is required to do so whether the award made becomes void ab initio and the party by participating in the proceeding before the arbitrator does not waive the objection (2) Whether the writ issued amounts to a reference to arbitrator or merely amounts to appointment of a fresh arbitrator under section 8 (1) (b) of the Act ?" 6. Section 8 of the Act provides powers of a Court to appoint arbitrator or umpire, if the appointment is not made within fifteen clear days after service of the notice, as required under sub-section (1 ). In the present case, as per Clause 23 of the agreement in case of any dispute or difference between the parties or either of them upon any question mentioned therein, then either party was required to give notice to the other party of such dispute or difference which could be referred to the Super intending Engineer of the circle and his decision thereof is to be final and binding on all the parties It is an admitted fact that a notice though purporting to be under Sec.80, CPC read with Sec.8 of the Act was served on the State of Bihar through the Collector of the district to refer the dispute to the Superintending Engineer, Water Ways Division, deoghar for adjudication of the dispute In terms of Clause 23 of the agreement and on failure of the State of Bihar to do so, the appellant filed an application under Sections 5 and 8 of the Act for revocation of the authority of the appointed arbitrator and to appoint an independent arbitrator to adjudicate upon the dispute between the parties in which the aforementioned order dated 6-10-1978 was passed by the Subordinate judge Jamui. 7. 7. Thus, in my opinion, the State of Bihar or its authority having not acted in response to the notice aforementioned, lost its right to get the matter adjudicated by the arbitrator in terms of Clause 23 of the agreement. The court had full jurisdiction to appoint an arbitrator of its choice. Therefore, the court below has committed error of law in holding that the appointment of the present arbitrator after revocation of the authority of the respondent to appoint arbitrator is without jurisdiction. The finding of the court below that the plaintiff-appellant never approached the appointed arbitrator to enter upon reference to adjudicate the disputes is baseless. In fact, from the reading of Clause 23 of the agreement, it would appear that it was the duty of the other party to refer the dispute to the Superintending Engineer of the circle and not of the party raising a dispute. Thus, if the dispute raised by a party gives notice of dispute to other party and if the other party accedes to the grievance raised in the dispute, then there would be no question of making reference to the appointed arbitrator. But in case the other party does not agree to the grievance/dispute raised by the party, then it is obligatory on the part of the other party to refer the matter to the appointed arbitrator for his decision thereon. 8. It is true that if the provisions contained in Sectiou 8 of the said act are strictly construed, then in the facts of the present case, there may be some difficulty in holding that the court had power to appoint arbitrator, But in the background of the conduct of the State of Bihar by not giving any reply to the notice given by the appellant, in my opinion, the Court was justified in appointing the arbitrator. This action of the court can also be held to be justified in view of the provisions contained in sub-section (4) of Sec.20 of the Arbitration Act as in the facts of the present case it can safely be held that the parties did not agree upon reference having been made to the appointed arbitrator in terms of the agreement. This action of the court can also be held to be justified in view of the provisions contained in sub-section (4) of Sec.20 of the Arbitration Act as in the facts of the present case it can safely be held that the parties did not agree upon reference having been made to the appointed arbitrator in terms of the agreement. The Supreme Court in the case of N. Chellappan V/s. Secretary Kerala State Electricity Board and another, AIR 1975 SC 230 held that while passing an award, an umpire or an arbitrator makes a mistake of law or of fact, then that cannot be a ground for challenging the authority of the award. It is only when an erroneous proposition of law is stated in the award and the same forms the basis of the award that the award can be set aside and remitted on the ground of error of law apparent on the face of the record. 9. The other submission which has been made by Mr. Buxi S. R. P. Sinha, learned Counsel appearing for the appellant is that it is not open to the respondents to question the competency of the arbitrator after having participated in the miscellaneous case. Learned Counsel also submitted that it is well settled that the parties submitting to the arbitrators jurisdiction cannot resile. He placed reliance on the decision of this court Union of India V/s. Laxmi Narayan, 1981 BBCJ 178 . 10. Learned Counsel also referred to the order dated 6th October, 1978 passed in Misc. Case No.4/77 in this regard whereby after hearing the Counsel for both the parties the authority of the appointed arbitrator was revoked and an independent arbitrator was appointed. The subordinate Judge, Jamui in the said order after considering the entire matter came to the conclusion that the ground existed for exercising its power to revoke the authority of the appointed arbitrator and to appoint an independent arbitrator. The court below has also noticed that the learned a. G. P. appearing for the respondents did not challenge the competency of the present arbitrator. The court below has also noticed that the learned a. G. P. appearing for the respondents did not challenge the competency of the present arbitrator. The validity of the order of the Subordinate judge was never questioned and the parties, including the respondents, fully participated in making of the award but later when the suit was filed for making the award rule of the Court it appears that an objection regarding the competency of the present arbitrator was raised. In my opinion, it was not open to the parties, including the respondents to question the competency of the arbitrator after submitting to its jurisdiction. 11. The Supreme Court in the case of N. Chellappan V/s. Secretary, kerala State Electricity Board and another (supra) held that the party submitted to the jurisdiction of the umpire and took part in the proceeding before him without any demur will be precluded from his acquiescence from challenging the award for lack of jurisdiction. Thus, in my opinion, the court below has committed error in holding that the arbitrator lacked inherent jurisdiction. 12. Learned Counsel for the State has submitted that the finding of the court below that the compensation for extra work was illegally granted and thereby the arbitrator misconducted in giving award is correct and justified. The claims of the appellant before the arbitrator and the claims allowed by the arbitrator are as follows: -Claim of the appellant before Arbitrator (Page 161, Application under Sec.5/8 of Arbitration Act) 12_550_BLJ2_1993.htm 13. In graded filter gravels have to be used with sand. In the agreement it is not mentioned as to from where the contractor will bring the gravels for the use of the same in graded filter. Ultimately, the contractor wanted to use local stone materials, but it has come in evidence that the contractor was ordered to bring gravels from Govindpur (Koderma) for which also the contractor submitted representations quoting rate for approval. But it appears that though the Executive Officer had recommended for fixing rates for such gravels also but it is not known as to what happened to the same. Thus, it is manifest that some extra work outside the contract had been done by the contractor for which he has claimed rs.56,162/- and the same has also been taken into account for awarding a compensation of Rs.2 lacs In lump sum. Thus, it is manifest that some extra work outside the contract had been done by the contractor for which he has claimed rs.56,162/- and the same has also been taken into account for awarding a compensation of Rs.2 lacs In lump sum. It is not in dispute that there was no rate prescribed for those extra additional work and thus, in my opinion, the arbitrator should not have taken into account the aforementioned amount as against the extra work for awarding a lump sum compensation. However, this by itself cannot be a ground to hold that the arbitrator had misconducted in making the award. In my opinion, the said amount could have been deducted while making the award rule of the court and preparing the decree. 14. As tegards the finding on the vagueness of the award given by the court below, it is difficult to accept the same. The court below in the preceding paragraphs has itself clearly found that the total claim for the extra work besides the contract was Rs.56,162/- and if the said amount is excluded from Rs 2,45,157/- the total amount of compensation within the contract as claimed by the plaintiff-contractor comes to Rs 1,88,995/-only. Having given the said specific finding I am unable to appreciate as to how the court below could come to the conclusion that the entire award is vitiated on the ground of vagueness and unintelligibility, I do not find any difficulty in deducting the amount of Rs.56,162/- which has been awarded as against the extra work claimed to have been done by the appellant outside the contract/agreement from the total lump sum amount awarded by the arbitrator. Learned Counsel for the appellant also very fairly conceded that the aforementioned amount awarded by the arbitrator can be deducted from the lump sum amount of Rs.2 lacs allowed by the arbitrator as compensation. I am, therefore, of the view, that the subordinate Judge, Jamul is not justified in holding that the arbitrator had misconducted in making the award specially in view of the settled principle which has also been noticed by him that in considering the award the court should approach it with a desire to support rather than to destroy it by calling it illegal. In the facts and circumstances of this case. I do find that there was/is anything in this matter which would not have been reasonably possible. 15. In the facts and circumstances of this case. I do find that there was/is anything in this matter which would not have been reasonably possible. 15. Be that as it may, in the facts and circumstances of the case, the interest of justice also demands that the compensation awarded by the arbitrator now after lapse of about 20 years of raising a claim by him should not have been interfered with on mere technicalities. 16. Accordingly, this appeal is allowed. The impugned order is set aside and the matter is remitted back to the Subordinate Judge, Jamui for making the award rule of the Court and after deducting the amount of compensation awarded by the arbitrator for extra work outside the contract and also for preparation of the decree in respect of the same. However, in the facts and circumstances fhsre shall be no order as to costs. Appeal allowed.