State Of A. P. v. Universal Engineering Corporation, Hyd.
2001-09-19
P.S.NARAYANA
body2001
DigiLaw.ai
P. S. NARAYANA, J. ( 1 ) THESE two matters arise out of a common judgment as against the orders made in OP No. 313/88 on the file of i Senior Civil Judge, City Civil Court, hyderabad and OS No. 835/88 on the file of the same Court. OP No. 313/88 was filed by the appellant under Sections 30 and 33 of the Arbitration Act, 1940 to set aside the award dated 21-4-1988 whereas suit OS no. 835/88 was instituted to make the said award the rule of the Court. The petitioner- appellant in CMA No. 2230/2001 is the first defendant in OS No. 835/88 and for the purpose of convenience the parties will be referred to as plaintiff and "1st defendant" as arrayed in OS No. 835/88 and the arbitration Act, 1940 will be referred to in short as "act" here in after. The averments made in the written statement by the 1st defendant in OS No. 835/88 virtually are the averments made by the 1st defendant as petitioner in OP No. 313/88. The pleadings of the respective parties are as follows : the plaintiff had pleaded that the plaintiff is a registered partnership firm carrying on business of engineering contracts. It has entered into an agreement with the government relating to the design, manufacture, supply, transportation and erection in position 4 sets of service gates and 4 sets of emergency gates for the right flank canal, head regulator at Ch. 183. 63 of L. M. Dam under an agreement No. 10/79- 80/gvc. JV/79-80/gvc. IV-79-80 dated 24-5-1979. The said agreement contains arbitration clauses for settlement of disputes between the parties. The committee of arbitrators nominated in the agreement originally consists of Chief Engineer, Right canals, Nagarjuna Sagar, Dy. Secretary to government, Finance and Planning (FW) dept. , Director of Accounts, Srisailam project. The committee was subsequently replaced by another committee consisting of chief Engineer, Investigation, Irrigation dept. , and Director of Accounts, Srisailam project and this committee was also replaced by mutual agreement by a committee consisting of Chief Engineer, Irrigation, I and gad Department, Joint Secretary to government, Finance and Planning (FW) dept. , and Director of Accounts, Srisailam project. The plaintiff could not complete the work in time as the civil works to be provided by the first defendant were not ready to the required level.
, and Director of Accounts, Srisailam project. The plaintiff could not complete the work in time as the civil works to be provided by the first defendant were not ready to the required level. The first defendant asked the plaintiff to erect the gates at intermediate level to protect the regulator structure against monsoon using gantry arrangements assuring extra payment. The work was completed in record time and a commendation letter was issued by the first defendant. When a claim petition was submitted by the plaintiff to the first defendant he was advised to go for arbitration. Accordingly the matter was referred to defendants 2 to 4. Both parties filed their respective claims and an award was passed on 21-4-1988, by allowing claim no. l and rejecting the other claims. The arbitrators also awarded simple interest of 10 per cent from the date of award till the date of payment or date of decree whichever is earlier. There are no valid grounds either to remit, set aside or modify the award, hence prayed to make the said award as rule of Court with future interest at 18 per cent per annum from the date of award". ( 2 ) THE 1st defendant had filed a detailed written statement specifying that the tender of the plaintiff was accepted and agreement was executed on 24-5-1979 and the site was handed over on 4-6-1979 and that the plaintiff had subsequently executed the supplemental agreement dated 19-5-1981 with regard to erection of four number structural frames and stainless stell liners for top seal 8 logging beams which are connected items to the main contract and they were executed by the plaintiff through the supplemental agreement. In terms of agreement the plaintiff was required to submit detailed drawings and specifications of all the work within one month but the plaintiff furnished only two sets of drawings with his letter dated 29-6-1979 which were not sufficient for approval. Hence the further copies of drawings were called for and designs and drawings were finally approved on 26-2-1980. There was no delay on the part of department in approving the designs and drawings.
Hence the further copies of drawings were called for and designs and drawings were finally approved on 26-2-1980. There was no delay on the part of department in approving the designs and drawings. The plaintiff did not make proper arrangements to complete the work due to his own difficulties and addressed a letter dated 8-8-1984 and at the request of plaintiff time was extended for the completion of the balance work with specific undertaking that he should not claim any excess cost or expenditure. The plaintiff ultimately completed the work beyond the agreement period causing much inconvenience to the department and the department was put to huge losses. The plaintiff filed a fictitious claim before the arbitrators for which the defendant filed rebuttal statement. Then the plaintiff filed rejoinder and the defendant filed relies to the rejoinder. Ignoring the several objections raised by them, the arbitrators passed award and allowed claims 1 and 5 preferred by plaintiff. The suit award is liable to be set aside as it is unjust, illegal and contrary to law. They did not give reasons for allowing the claim. The error is apparent on the face of record and it is liable to be set aside. There is no justification on the part of the arbitrators to award the amount of rs. 50,000/- under claim No. l towards reimbursement of the expenditure said to have been incurred by the plaintiff to form the rap to the required level to enable them to erect the gates without going for steel structures for erection and removal of the same after completion of erection. They failed to appreciate the fact that the contractor was required to erect the gates and handover the same to the department in complete manner. They have also ignored the fact that the proposal of erecting of gates with the help of gantry cranes arrangements was out of the three alternatives submitted by the plaintiff and it was informed through letter dated 19-4-1982 that the claim of additional work and expenditure should not be made a condition for proceeding with the gates erection before the onset of floods.
The observation of the arbitrators that the work of erection of gates was done at the intermediate level at enormous extra cost with the approval of the department and assurance of giving additional payment and the department derived the benefit of storing water and prevented damage to the canal lining down stream side is contrary to the real facts and circumstances of the case. The arbitrators also did not properly appreciate the terms and conditions of agreement and connected plans and erroneously came to conclusion that the work of erecting service gates will have to be stated after erection of embedded parts upto plus 933 ft. in the civil structure which was under construction by some other agency and they have wrongly interpreted the letter dated 30-5-1982. The arbitrators have no power, jurisdiction or authority to award interest". ( 3 ) ON the strength of these pleadings in the suit the following issues were framed:- 1. Whether the award is vitiated and liable to be set aside for the reasons claimed by Dl? 2. Whether the award is liable to be made the rule of the Court? 3. To what relief? on the respective pleadings of the parties in op No. 313/88 the following point was framed : "whether the award dated 21-4-1988 is liable to be set aside as contended by the petitioner". Ex. Al and A2 were marked. Ex. Al is the award dated 21-4-1988 and Ex. A2 is the claim statement dated 11-6-1987. The Court below after appreciating both questions of fact and questions of law had arrived at a conclusion that OS. No. 385/88 has to be decreed and had accordingly made the award the rule of the Court granting future interest at the rate of 10% per annum from the date of decree till date of realization and had dismissed OP No. 313/88 and aggrieved by the said orders made in the common Judgment, the present CMA. and CRP are preferred.
No. 385/88 has to be decreed and had accordingly made the award the rule of the Court granting future interest at the rate of 10% per annum from the date of decree till date of realization and had dismissed OP No. 313/88 and aggrieved by the said orders made in the common Judgment, the present CMA. and CRP are preferred. ( 4 ) THE learned Government Pleader for arbitration had vehemently contended that the Court below had totally erred in accepting the award relating to Claim No. l and granting the amount and the learned counsel also had contended that there is absolutely no evidence to allow the claim and with all vehemence had stressed on the aspect that it is contrary to the terms of the agreement and the learned Counsel also further contended that the arbitrators had no jurisdiction to entertain such a claim i. e. , claim No. l, which is contrary to the terms of the agreement and the learned Counsel also had drawn my attention to Clause 59 of the APDSS. The learned Counsel had drawn my attention to the relevant paragraphs of the impugned order and had contended that the approach of the Court below is totally erroneous especially in the light of the ratio laid down in Superintending Engineer v. P. Radha Krishna Murthy, 1996 (3) ALT 1137 and Grid Corporation of Orissa Ltd. and another, AIR 1999 SCW 2303 . ( 5 ) SRI Prabhakar, the learned Counsel representing the plaintiff had contended that if the award is read as a whole the arbitrators had applied their mind and granted the amount which is within the purview of the terms of the agreement and not beyond the terms of the agreement and the extra claim in fact had been rejected and Clause 59 is not applicable and the learned Counsel also had drawn my attention to Hindustan construction Company v. State of Jammu and Kashmir, AIR 1992 Jandk 2192; coimbatore District Podu Thozillar Samgam v. Bala Subramania Foundry and others, air 1987 SC 2045 , Food Corporation of india v. Joginderpal Mohinderpal and another, AIR 1989 SC 1263 , Ms. Arosan enterpries Ltd. , v. Union of India and another, AIR 1999 SC 3804 , State of rajasthan v. Puri Construction Co. Ltd. and another, (1994) 6 SCC 485 and Ms.
Arosan enterpries Ltd. , v. Union of India and another, AIR 1999 SC 3804 , State of rajasthan v. Puri Construction Co. Ltd. and another, (1994) 6 SCC 485 and Ms. Arosan enterprises Ltd. v. Union of India and another, 1999 (7) JT 122 and had submitted that there is no error apparent on the face of the record warranting any interference with the award made by the arbitrators which is perfectly within the domain of the jurisdiction of the arbitrators. ( 6 ) HEARD both the Counsel and also perused the records. Before discussing the other contentions, it may be relevant to have a look into that portion of the award dated 21-4-1988 marked as Ex. Al. In fact, the arbitrators on this aspect had observed as follows in the award : "the arbitrators have examined the exhibits, photos filed by the claimant and considered the following points to be there in this issue. 1. Examination of the Agreement Bond and connected plans revealed that the work of erecting service gates will have to be started after erection of embedded parts upto +993 in the civil structure which is under construction by another agency. 2. Lr. No. D3/23430/82-l dated 30-5-1982 of the Chief Engineer, SRSP. , Hyderabad addressed to the respondent wherein it was expressed that (1) the contractor of gates work is understood to have completed the supply part of work but erection part is tied up with civil work; (2) The civil work as it is lagging behind the schedule has to be raised by only a couple of meters and since there is still time for monsoon it would have been advisable to complete the civil work even departmentally so that the contractor could be prevailed upon to do the erection work which was shows that the claimants are expected to do the erection work only after the completion of civil work etc. , upto +993 . 3. The claimants have after receiving the departmental acceptance vide Lr. No. TS/ tl/2498 dt. 19-4-1982 have reiterated their claim for payment of extra financial involvement (soon after submission of details of the expenditure to be done in due course) vide their Lr. No. UEC/82-83/ 120 dt. 26-4-1982 which is within 15 days of cause of action or acceptance of the department to the proposals. 4. The Executive Engineer, CD No. 2, lmd vide Lr. No. CD2/d3/300/dl/l528-30 dt.
No. UEC/82-83/ 120 dt. 26-4-1982 which is within 15 days of cause of action or acceptance of the department to the proposals. 4. The Executive Engineer, CD No. 2, lmd vide Lr. No. CD2/d3/300/dl/l528-30 dt. 4-3-1983 has intimated the claimants that all the civil works of head regulator including approach bridge are completed and requested the claimants to start the work of erection of hoist equipment. All the above points show that (1) the claimant has taken up the work of lowering the gates at an intermediate level i. e. , r-925 (as per A. B.) with gantry crane arrangement with the acceptance of the department and with an indication of the payment of the extra cost involved; (2) The department has taken the advantage of getting the work done at different type of circumstances duly not negativing any extra payment towards this but leaving a hope of payment at a latter date which led the claimant to go ahead with the work involving some extra expenditure otherwise not required had the civil work and other connected works get completed by that time. The Superintending Engineer/gvciv. , lmd/respondent during the hearing has expressed that it would cost about rs. 80,000/- (approximately) to form the approach/ramp to the required level to enable them to erect the gates without going for steel structures for erection and removal of the same after completion of erection. Hence the claimants deserve reimbursement of the expenditure incurred by them on this account to a reasonable extent and as such an amount of Rs. 50,000/- (Rupees fifty thousands only) is awarded". he very nature of order passed by the arbitrators clearly goes to show that the arbitrators had perfectly applied their mind and had arrived at a just conclusion and at any stretch of imagination it cannot be said that this claim falls outside the purview of the terms of the contract.
50,000/- (Rupees fifty thousands only) is awarded". he very nature of order passed by the arbitrators clearly goes to show that the arbitrators had perfectly applied their mind and had arrived at a just conclusion and at any stretch of imagination it cannot be said that this claim falls outside the purview of the terms of the contract. In the decision referred (1) above a Division bench of this Court was pleased to observe that the award which does not consider the crux of the issue or an award bordering on perversity is liable to be struck down under section 30 read with Section 31 of the arbitration Act, 1940 and in such circumstances it falls within the legitimate domain of the Court to set aside the award as suffering from an error in law apparent from the award and the non-application of mind to the crucial question is an instance of legal misconduct and the award is liable to be set-aside on that ground. In the present case, it cannot be said that there was any non-application of mind. In fact, the Court below while discussing these aspects at paragraphs 10 and 11 and also paragraph 12 had given detailed reasons why in the facts and circumstances the award has to be made the rule of the Court and declined to set aside the award since there are no grounds to interfere with the award made by the arbitrators. In the decision referred (4) supra the Apex Court held that an award can be set aside only if there is error of law apparent on the face of the award and even mistake of fact is not amenable for correction. In the decision (3) supra, it was held that in case the arbitrator is shown to have exceeded his jurisdiction or travelled beyond the contract or there is error apparent on the face of the award it is not liable to be set aside. In the decision referred (5) supra, it was held by the Apex court that unless the arbitrator had committed a mistake in interpretation of the arbitration clause and of law and had arrived at any wrong conclusion, the Court cannot interfere with the award.
In the decision referred (5) supra, it was held by the Apex court that unless the arbitrator had committed a mistake in interpretation of the arbitration clause and of law and had arrived at any wrong conclusion, the Court cannot interfere with the award. In the decision ( 7 ) REFERRED above it was held by the Apex court that since an arbitrator is a Judge by choice of the parties and more often than not a person with little or no legal background, adjudication of disputes by an arbitrator by way of an award can be challenged only within the limited scope of several provisions of the Arbitration Act and the legislature in its wisdom has limited the scope and ambit of the challenge to an award in the Arbitration Act and by and large Courts have disfavoured interference with arbitration awards on account of error of law and fact on the score of misappreciation and misreading of the materials on record and have shown definite inclination to preserve the award as far as possible. In the decision referred (8) supra, the Apex Court held that the common phraseology error apparent on the face of the record does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The court as a matter of fact cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties and if the view of the arbitrator is a possible view, the award or reasoning contained therein cannot be examined. In the award in question clearly shows that the arbitrators had determined the disputes relating to the claims made by the claimant based on documentary evidence recording valid and cogent reasons. The plaintiff had preferred five claims and the first claim is towards the erection of gates at intermediate level with gantry arrangements to an extent of Rs. 92,000/- with interest of Rs. 74,520/-, totaling to rs. 1,66,520/- and out of this amount, the arbitrators had granted only Rs. 50,000/- recording proper reasons why they had arrived at such a conclusion.
The plaintiff had preferred five claims and the first claim is towards the erection of gates at intermediate level with gantry arrangements to an extent of Rs. 92,000/- with interest of Rs. 74,520/-, totaling to rs. 1,66,520/- and out of this amount, the arbitrators had granted only Rs. 50,000/- recording proper reasons why they had arrived at such a conclusion. The superintending Engineer had addressed a letter to the plaintiff on 19-4-1982 that the claim of additional work and expenditure would be examined in course of time and the same will be recommended to the higher authorities and have requested the plaintiff to proceed with the work as per the method suggested by him and the work done by the plaintiff for erection of gates with the help of gantry arrangements is well justified one since the department also had derived benefit out of it and in such circumstances the award supported by reasons at any stretch of imagination cannot be said to be perverse. Further, as far as the claim of interest is concerned, it is not seriously disputed even by the learned government Pleader. In the facts and circumstances of the case and in view of the fact that the Court below had taken all the aspects into consideration after examining exs. Al and A2 and also other material available on record, I do not see any reason to interfere with the common order made by the Court below in OP No. 313/88 and OS no. 835/88 dated 13-4-1988. Accordingly, both the CMA and the CRP are bound to fail and are dismissed, but in the facts and circumstances of the case there is no order as to costs.