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1998 DIGILAW 287 (GAU)

Union of India v. D. D. Sarma

1998-09-15

N.C.JAIN, P.G.AGARWAL

body1998
P. G. Agarwal, J. — This appeal has arisen out of the judgment and decree dated 26.8.92 passed by the Assistant District Judge, Sonitpur, Tezpur in Money Suit (Arbitration) Case No. 12 of 1990. 2. The Chief Engineer, Project Vartak, Director General. (Border Roads) hereinafter referred to as ‘the Chief Engineer’ flouted a tender for construction of six permanent major bridges on Lekhabali Basar-Along Road in Arunachal Pradesh and the last date of filing tender was 25.8.1983. Respondent contractor Mr. DD Sarma hereinafter referred to as the contractor submitted a tender. Thereafter certain negotiations took place and the contractor offered certain concessions and ultimately the entire work amounting to Rs.1,91,35,000/- was allotted to the contractor after acceptance of the tender including the 25 numbers of corres­pondences between the parties. The contract agreement was duly signed between the parties and a number was allotted to the said contract being CE (P) Vartak/ MB-I/83-84. The work was duly completed by the contractor and payment was received within extended time granted by the Chief Engineer. 3. However, the contractor raised certain claims for refund of rebate and for compensation etc for delay in handing over of site by the Chief Engineer which resulted in loss. The latter disputed the claim whereupon a dispute arise between the parties. The dispute was referred to Brig SB Joshi, the sole Arbitrator who by his Award dated 5th October awarded certain amount. Thereupon the contractor filed a case being Money Suit (Arbitration) No.12 of 1990 before the Assistant District Judge, Sonitpur, Tezpur under sections 14 (2) and 17 of Arbitration Act, 1940 for short ‘the Act’. The learned Assistant District Judge after necessary hearing decreed the suit with costs alongwith interest at the rate of 18% from the date of the filing of Award till realisation thereof. Hence the present appeal. 4. We have heard the learned counsel for both sides and perused the entire case record. We have also perused the written argument, filed by Mr. Hari Deka, Advocate for the respondent and learned counsel for the appellant. 5. Hence the present appeal. 4. We have heard the learned counsel for both sides and perused the entire case record. We have also perused the written argument, filed by Mr. Hari Deka, Advocate for the respondent and learned counsel for the appellant. 5. Although the dispute between the parties is yet to be settled by this Court the learned counsel for both sides have atleast agreement on two counts - (1) That the Award made by the sole Arbitrator is a non speaking Award and as such the law governing the non speaking Award shall be applicable to the present case. (2) That although an objection was raised before the Assistant District Judge, Sonitpur that the Award has been made beyond time, in view of the admitted position that the extension was by mutual consent, the Award was made within the extended period. 6. Section 28 (2) of the Act is very clear on this point and relying on a decision of the Apex Court in the case of Hindustan Steel Works Construction Ltd vs. C. Rajasekhar Rai reported in (1987) 4 SCC 93 the Assistant District Judge held that the Arbitrator had made the Award within the stipulated time. 7. In this case the Chief Engineer has prayed for setting aside the Award under section 30 (a) of the Act which provides that an Award may be set aside if an Arbitrator or umpire has misconducted himself or the proceedings. 8. The word ‘misconduct’ has been defined by the Apex Court in the case of KP Poulose vs. State of Kerala reported in AIR 1975 SC 1259 the relevant portion of which reads as follows : "Misconduct under section 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." 9. The law regarding setting aside of a non speaking Award by the Arbitrator is more or less well settled. The first leading case on the point is that of Champsey Bhara and Company vs. Jivraj Balloo Spinning and Weaving Co Ltd reported in AIR 1923 PC 66. The law regarding setting aside of a non speaking Award by the Arbitrator is more or less well settled. The first leading case on the point is that of Champsey Bhara and Company vs. Jivraj Balloo Spinning and Weaving Co Ltd reported in AIR 1923 PC 66. The above decision was reiterated by the Apex Court in a number of decisions that is the case of Allen Berry and Co (P) Ltd vs. Union of India reported in AIR 1971 SC 696 ; Hindustan Tea Co vs. K. Sashikant Co reported in AIR 1987 SC 81 ; Coimbatore District Podu Thozillar Samgam vs. Bala Subraminia Foundry, reported in AIR 1987 SC 2045 . The law is well settled that an Award can only be set aside where there is an error of law apparent on the face of the record, when in the Award itself or in a document actually incorporated in it, there was found some legal proposition which was the basis of the award and which was erroneous. 10. In the light of the above, let us now consider whether there is a manifest error apparent on the face of the Award. The relevant portion of the award reads follows: "I award and direct that: A. Claims projected by the claimant ___________Award_____Amount payable (a) Claim No. 1 (a) Refund of Claim is partially established. The Rs.90,000 payment of sum offered as rebate cane Nallah bridge location was on account of placing work handed over on 15 Dec 1986 is after order foe all the six bridges as about 32 months against the contract and whole. Rs.5,40,000.00 this created undue problems to the contractor. (b) Claim No. 1 (b): Refund of rebate offered subject to the condition Claim is partially established. Rs.6,48,000 that 10% interest free mobilisation The cane Nallah bridge location was advance is paid in one lump sum handed over on 15 Dec 1986 and the and the work is allotted as a whole contractor had to face undue problems Rs.46,89,000 (c) Claim No. 1 (c) : Escalation as per terms of contract on claim l(a) Claim is not established since Nil and (b) considering these as part of escalation has been paid on the quoted lurnpsum and as calculation actual deployment of the resources. Rs.60,591 &Rs.5,26,131. Rs.60,591 &Rs.5,26,131. (d) Claim No. 2 Extra infractuous/uncontemplated Claim is partially established Rs.5,00,000/- expenses and loss of profit due to since the claimant had to enlargement of period of maintain an establishment for performance. Rs. 10,00,000. much longer period." 11. The contractor’s claims which is at Appendix A of the appointment of Arbitrator reads as follows : "Appendix A to HJ DGBR lettter No.DGBR/VRK/S/EB/ dated 8 Sept 89 A. Contractor’s claims from Department 1. (a) Refund of payment of sum offered as rebate on account of placing work order for all the six bridges as a whole Rs.5,40,000.00 (b) Refund of rebate offered subject: to condition that 10% interest free mobilisation advance is paid in one lump-sum and the work is allotted as a whole, Rs. 46,89,000.00 (c) Escalation as per terms of contract on (a) & (b) above considering these as part of quoted lumpsum. To be priced on awarded sum as per approved running 2. Extra infructuous/uncontemplated expenses & loss of profit due to enlargement of period of performance. ‘ Rs. 10,00,000.00 3. Pre arbitration interest, pendentilite interest & future interest on claim 1 & 2 above 24% per annum. To be claculated based on awarded sum. 4. Cost of reference Rs. 25,000.00 B. Department’s claim from contractor 1. Cost of arbitration Rs.50,000.00." 12. The learned counsel for the contractor has fairly submitted that vide their letter No.DDS/LKB/82-83 (I) dated 7.10.1983 they had offered a rebate of Rs.90.000/- per bridge to the Chief Engineer on the condition that the Department will give 10% mobilisation advance over the tender amount. The advance will not carry any interest and it shall be adjusted proportionately against the billed amount from time to time. There is no dispute that the contractor was given 10% interest free advance of Rs.19.135 lakhs in two instalments on 16.5.84 and 14.12.84 (para III) of page 8 of the written argument filed by the contractor). Thus a rebate of Rs.90,000/- was offered against interest free mobilisation advance and there is no allegation that no such advance was given. There is no finding about violation of the conditions by the Chief Engineer on this count. As a matter of fact the claimant did not allege any violation on that count and merely claimed refund on this count on the ground that the work was not allotted as a whole. 13. There is no finding about violation of the conditions by the Chief Engineer on this count. As a matter of fact the claimant did not allege any violation on that count and merely claimed refund on this count on the ground that the work was not allotted as a whole. 13. The claim under the Head 1 (b) for Rs.6,48,000/- was awarded by the Arbitrator holding that the claim is partially established. The cane Nallah bridge location was handed over on 15 December, 1986 and the contractor had to face undue problems. The claim of the contractor on this head was for Rs.46,89,000/-on the ground that the work was not allotted as a whole. The admitted position is that the discount was offered by the contractor vide their letter No.DDS/LKB/ 82-83 (T) 713 dated 22.11.1983. The stipulation offering the above rebate which finds place in the above mentioned letter reads as follows : "This rebate has been offered subject to our condition that the work is allotted to us by 31.12.1983 and if the work is allotted to us a whole, without breaking up the same partwise ... ." 14. As the deadline of 31.12.83 was later on extended by the contractor to 30.3.1984 vide their letter No.DDS/LKB/82-83(T) 742 dated 13.3.1984 apparently the work was allotted before the expiry of the said deadline. The contractor claimed refund of the entire amount of Rs.46,89,000/- on the ground that there was violation of the condition regarding 10% interest free mobilisation advance which was to be paid in one lumpsum and the work was not allotted as a whole. In the impugned Award the Arbitrator did not award the entire sum and did not discuss or gave a finding regarding the alleged violation of the two terms mentioned in the above mentioned letter. 15. As there was no decision by the Arbitrator regarding the alleged violation of payment of mobilisation advance and allotment of the work as a whole, this Court sitting in appeal will not enter into the said dispute. The learned counsel for the contractor has submitted that as the site for one bridge, the cane Nallah bridge location was handed over after about 32 months it can be inferred that the work was splitted up and it was not given as a whole. The learned counsel for the contractor has submitted that as the site for one bridge, the cane Nallah bridge location was handed over after about 32 months it can be inferred that the work was splitted up and it was not given as a whole. We are unable to accept the above submission for the simple reason that the tender was accepted for all the six bridges and the contract agreement was signed by the parties for all the six bridges. There was voluminous correspondences between the parties and even in all the letters sent by the contractor to the Chief Engineer, copies of which were filed by the contractor before us, the contractor himself has mentioned about the construction of six permanent bridges on Lekhabali Basar-Along Road. As the Arbitrator did not award the entire sum of Rs.46,89,000/- as claimed by the contractor it goes to show that the Arbitrator himself was not convinced about splitting up of the work allotment. There is no dispute at the Bar that the site of sixth bridges at Cane Nallah was handed over to the contractor after 32 months. This was due to the fact that the site selected for the bridge was found unsuitable and for technical reason the site had to be changed. 16. The Arbitrator did not award for escalation of the price holding that the escalation has been paid on the actual deployment of the resources. 17. Claim No.2 was for damages and loss of profit due to enlargement of period of performance and the Arbitrator awarded a sum of Rs.5,00,000/- holding that the claimant had to maintain an establishment for much longer period. Thus we find that all the 3 claims awarded by the Arbitrator was on only one ground, that is, loss/inconvenience/undue problems caused to the contractor for delayed handing over of site of the cane Nallah bridge. Considering the two offers of discount of the contractor as mentioned above it is apparent that the Arbitrator did not take that two documents into consideration and there is an error apparent on the face of the Award itself. The claim was not on the ground for which the Award was made. 18. There is another aspect of the matter. Considering the two offers of discount of the contractor as mentioned above it is apparent that the Arbitrator did not take that two documents into consideration and there is an error apparent on the face of the Award itself. The claim was not on the ground for which the Award was made. 18. There is another aspect of the matter. The total cost of the cane Nallah bridge was Rs.26,82,000/- and for delayed handing over of the site, the contractor claimed a sum of more than Rs.6 lakhs as escalation cost and the same was duly settled. For the same default, the Arbitrator has awarded a sum of Rs.5 lakhs as damages; but what laid the Arbitrator to award the said sum is not clear. But as this is a non speaking Award we do not propose to enter into the sufficiency or insufficiency of the said Award. But so far the Award of Rs.90,000/- under the head claim 1 (a) and the sum of Rs.6,48,000/- under head claim l(b), we find that this is arbitrary and unwarranted under the law. 19. The learned counsel for the contractor has referred to a decision of the Apex Court in the case of M/s Sudarsan Trading Co vs. Govt of Kerala reported in AIR 1989 SC 890 which reads as follows : "The next question on this aspect which requires consideration is that only in a speaking award the Court can look into the reasoning of the award. It is not open to the Court to probe the mental process of the Arbitrator and speculate, where no reasons are given by the Arbitrator, as to what impelled the Arbitrator to arrive at his conclusion. See the observations of this Court in Hindusthan Steel Works Construction Ltd vs. C. Rajasekhar Rao, (1987) 4 SCC 93 . In the instant case the Arbitrator has merely set out the claims and given the history of the claims and then awarded certain amount. He has not spoken his mind indicating why he has done what he has done; he has narrated only how he came to make the award. In absence of any reasons for making the award, it is open to the Court to itnterfere with the award. Furthermore, in any event, reasonableness of the reasons given by the Arbitrator cannot be challenged. In absence of any reasons for making the award, it is open to the Court to itnterfere with the award. Furthermore, in any event, reasonableness of the reasons given by the Arbitrator cannot be challenged. Appraisement of evidence by the Arbitrators is never a matter which the Court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of evidence. The Arbitrator is the sole judge of the quality as well as the quantity of evidence and it will not be - for the Court to take upon itself the task of being a judge on the evidence before the Arbitrator. See the observations of this Court in Municipal Corporation of Delhi vs. Jagan Nath Ashok Kumar, (1987) 4 SCC 497 : ( AIR 1987 SC 2316 )." 20. In view of the above decision which was reiterated in the case of State of Bihar & others vs. Hanuman Mai Jain reported in (1997) 11 SCC 40 , we are conscious of the limitation imposed on this Court while dealing with a non speaking Award and that is the reason for which we have refrained ourselves from interfering or disturbing the Award of Rs.5 lakhs by the Arbitrator in respect of claim No. 2. So far the Award in respect of claim No. 1 (a) and claim No. 1 (b) is concerned we are of the view that the Arbitrator did not apply his mind to the facts of the case and awarded various amounts only on one ground and which was even not agitated. In KP Poulose vs. State of Kerala (supra) the Apex Court had observed as follows: "In the instant case the Arbitrator has misconducted the proceedings by ignoring the two very material documents to arrive at a just decision to resolve the controversy between the Department and the contractor. Even if Department did not produce those documents before the Arbitrator it was incumbent upon him to get hold of all the relevant documents including the two documents in question for the purpose of a just decision. Further, he arrived at an inconsistent conclusion even on his own finding. The award suffered from a manifest error apparent ex facie. AIR 1973 Kerela 237 reversed." 21. Further, he arrived at an inconsistent conclusion even on his own finding. The award suffered from a manifest error apparent ex facie. AIR 1973 Kerela 237 reversed." 21. The facts in Union of India vs. Jain Associates & another reported in (1994) 4 SCC 665 are more or less identical to the present case. That was also a case of non speaking Award and the umpire mechanically awarded different amounts on same heading of damages. The Hon’ble High Court and the Apex Court considering the same held that the there was non application of mind by the umpire. We are also tempted to reproduce below the observations of the Apex Court regarding misconduct: " The word ‘misconduct’ in section 30 (a) does not necessarily comprehend or include misconduct of fraudulent or improper conduct or moral lapse but does comprehend and include actions on the part of the Arbitrator, which on the face of the award, are opposed to all rational and reasonable principles resulting in excessive award or unjust result or the like circumstances which tend to show non application of the mind to the material facts placed before the Arbitrator or umpire. In truth it points to fact that the Arbitrator or umpire had not applied his mind and not adjudicated upon the matter, although the award professes to determine them. Such situation would amount to misconduct. In the otherwords, if the Arbitrator or umpire is found to have not applied his mind to the matters in controversy and yet, has adjudicated upon those matters in law, there can be no adjudication made on them. The Arbitrator umpire may not be guilty of any act which can possibly be constructed as indicative of partiality or unfairness. Misconduct is often used, in a technical sense denoting irregularity and not guilty of any moral turpitude, that is, in the sense of non-application of the mind to the relevant aspect of the dispute in its adjudication." 22. As we are proposing to set aside the Award of the Arbitrator in respect of item No.l (a) and 1 (b) and maintain the same in respect of item No.2 let us consider whether the Award can be separated. As we are proposing to set aside the Award of the Arbitrator in respect of item No.l (a) and 1 (b) and maintain the same in respect of item No.2 let us consider whether the Award can be separated. In the case of M. Chelamayya vs. M. Venkataranam reported in AIR 1972 SC 1121 it was held that where a severable part of an Award can not be given effect to for a lawful reason, there is no bar to enforce the part of which effect could be justly given. In Union of India vs. Jain Associates (supra) the Apex Court in para 9 observed as follows: "It is true that if the bad portion of the award is severable from the good part the Court may set aside the bad part and uphold the rest of award. But when it hinges upon the state of mind of the Arbitrator or the umpire, the award being a non-speaking award, it is not reasonably certain as to what part of the award is good and vice versa. And if such a part cannot be separated then the whole award must be declared as invalid and it would be set aside on the ground of misconduct under section 30 (a) of the Act." 23. In view of the admitted delay in handing over the site for the cane Nallah bridge we are of the opinion that the Award of damages for Rs.5 lakhs to the contractor can be maintained and that portion of the award can be severed. 24. In the result the appeal is partly allowed. The Award in respect of Rs.5 lakhs is maintained and the Award for Rs.7,38,000/- set aside.