Nagarjuna Construction Co. Limited v. The General Manager (Lube Expansion Project), Madras Refineries Limited, Manali, Madras and another
2002-04-29
K.SAMPATH
body2002
DigiLaw.ai
ORDER: The original petitions arise out of two awards - one in respect of Work Order No.9067/WO/01, and the other in respect of Work Order No.8820/WO/904/90. 2. The claimant in both the matters is one and the same. The respondents are also one and the same. 3. Pursuant to an invitation to tender, published by the first respondent, the claimant submitted its tender and was awarded the work of sight grading roads for phase I and fencing for Lube Expansion Project at the first respondent’s factory at Manali, in and by the first respondent’s telegraphic acceptance, dated 6.7.1990. A formal agreement was also executed between the applicant and the first respondent. The time for completion of the work was ten months from the said day. However, the work was completed only on 30.11.1991. During the course of execution of the work and after the completion thereof, certain disputes arose between the applicant and the first respondent. The claimant invoked the arbitration clause in the agreement between the parties and the first respondent nominated the second respondent as arbitrator. The arbitrator entered upon the reference made and published his award on 5.4.1993 awarding a sum of Rs.29,09,423.13 together with interest thereon to the claimant in Work Order No.9607/WO/1. The claimant filed O.P. No.237 of 1993 for a direction to the second respondent to file the original Award, dated 5.4.1993 into Court so as to enable the claimant to obtain a decree in terms of the award. O.P. No.562 of 1993 has been filed by the first respondent to set aside the award. 4. Again, pursuant to an invitation to tender, published by the first respondent, the claimant submitted its tender and was awarded the civil and structural works for the Additional Tankage Project at the first respondent’s factory at Manali, in and by the first respondent’s telegraphic acceptance, dated 20.3.1990. A formal agreement was also executed between the applicant and the first respondent. The time for completion of the work was nine months from the said day. However, the work was completed only on 14.8.1991. Disputes arose between the claimant and the first respondent. The claimant invoked the arbitration clause and the first respondent nominated the second respondent as arbitrator. The arbitrator entered upon the reference and passed an award on 2.4.1993 for a sum of Rs.15,38,777 together with interest thereon in favour of the claimant.
However, the work was completed only on 14.8.1991. Disputes arose between the claimant and the first respondent. The claimant invoked the arbitration clause and the first respondent nominated the second respondent as arbitrator. The arbitrator entered upon the reference and passed an award on 2.4.1993 for a sum of Rs.15,38,777 together with interest thereon in favour of the claimant. O.P. No.238 of 1993 has been filed for a direction to the second respondent to file the original Award into Court so as to enable the claimant to obtain a decree in terms of the award. O.P. No.561 of 1993 has been filed by the first respondent to set aside the award, dated 2.4.1993. 5. The objections raised by the first respondent to the awards are as follows: The learned arbitrator failed to consider the mandatory provisions of the General and Special Conditions of the contract and in particular Clause 70 providing for seven days notice failing which claims would stand extinguished. The claimant had failed to give its mandatory notice and consequently its claim could not have been considered at all. Equally the grounds on which the claim would be barred under Clause 91 would also apply to Clause 70. When once the contract required certain things to be done before any claim could be entertained, it was necessary that those things were done without which the arbitrator would have no jurisdiction to award any compensation in respect of such claims. The learned arbitrator in considering the said clauses clearly erred in holding that Clause 91 required the Engineer-in-charge to intimate the contractor about changes and variations. Over looking that once changes and variations were intimated, it was for the contractor to immediately make any claim under Clause 91 or under Clause 70 within the prescribed time limit, and if the contractor continued with the work without making any claim, he was deemed to have waived his right and could not subsequently file a claim. Although claims could be referred after completion of the contract, the requirement of giving the necessary notice must be complied with before an arbitrator could have jurisdiction to entertain the same. Again, claim for extra rates in terms of Clause 70 of the General Condition of Contract entered into between the parties, could be made only when the value of alteration, addition, substitution, etc.
Again, claim for extra rates in terms of Clause 70 of the General Condition of Contract entered into between the parties, could be made only when the value of alteration, addition, substitution, etc. exceeded plus or minus 25% of the total contract value, and unless the above limits were crossed in the total contract value, the contractor would not be entitled to claim any extra rates. The learned arbitrator erred in holding that Clause 85 and Clause 70 were vague and uncertain. He also erred in holding that Clause 85.7 was defective, vague and uncertain. It was also not a lump sum contract and over looking this the learned arbitrator had erred in applying rules of a lump sum contract to the unit rate contract which amounted to an error apparent on the face of the record. As regards claim No.2, no claim was preferred as per Clause 91 within the time stipulated and the learned arbitrator had no jurisdiction to award claim No.2. Unless the provisions of Clause 91 were satisfied, the learned arbitrator had no jurisdiction to award compensation. The learned arbitrator failed to note, if a delay had occurred in spite of the best efforts of both the parties, there could be no award of compensation in the absence of any finding of negligence for breach of contract on the part of the first respondent. The award by the learned arbitrator in a sum of Rs.7,90,650 in respect of claim No.3, on account of idle labour, equipment, machinery was also erroneous. The mandatory provisions of Clause 91 had not been satisfied. The learned arbitrator failed to note that the provisions of Clause 65 read with Clause 91 would prohibit payment of compensation unless the requirements of these Clauses were satisfied. 6. The stand of the first respondent in respect of the other claim is almost identical to the stand taken by it in the first one. It is also to be noted that the first respondent raised an objection that the claimant had given a no claims certificate and after he had given a no claims certificate, it was not open to the arbitrator to hold that the claim was admissible for arbitration. 7. Let us now notice the case of the claimant.
It is also to be noted that the first respondent raised an objection that the claimant had given a no claims certificate and after he had given a no claims certificate, it was not open to the arbitrator to hold that the claim was admissible for arbitration. 7. Let us now notice the case of the claimant. (a) The conclusion reached by the arbitrator is not in any manner erroneous in law or vitiated by an error apparent on the face of the record. The award is also not otherwise invalid. The arbitrator has made a detailed and well considered award after taking into account the evidence, both oral and documentary of the parties as well as their submissions, and there is absolutely no ground for interference. (b) As regards the question that whether after giving a no claims certificate, the question could be referred to arbitration and decided by the arbitrator. This particular aspect was referred to the arbitrator and the arbitrator after going through the records and hearing the arguments held that the claim was admissible for arbitration. The arbitrator had considered the various provisions in the contract between the parties and arrived at a conclusion which he was entitled to do. (c) As regards the seven days notice stipulated in Clause 70, it is not a statutory limitation, but only a contractual arrangement and the party could either expressly or by implication waive or relax such a stipulation. The various claims raised by the claimant were entertained by the first respondent and referred to arbitration without any reservation or qualification. The first respondent having conceded that the arbitrator had jurisdiction to entertain the claims on merits, on an interpretation of Clause 70, the arbitrator correctly held that even conceding that notice within seven days was necessary as per Clause 70, still, the first respondent had, by its own conduct, waived the requirement of such a notice and the claim would not be in any manner extinguished. This aspect was specifically raised as a question of law before the learned arbitrator and he having quoted a finding on this, it was not open to the first respondent to re-agitate the question before this Court. The arbitrator had also considered the scope and effect of Clause 91 and rejected the first respondent’s contention that the claims would be barred under Clause 91.
The arbitrator had also considered the scope and effect of Clause 91 and rejected the first respondent’s contention that the claims would be barred under Clause 91. In the letter by the first respondent, dated 12.7.1992 it had specifically requested the arbitrator to adjudicate upon the merits of the claims preferred by the claimant and that would preclude the first respondent from contending that the arbitrator had no jurisdiction to award any compensation in respect of such claims. Again, the arbitrator on a proper interpretation of Clause 91 had come to the conclusion that under the contract there were reciprocal rights and obligations of the parties, and that one such obligation would be for the first respondent to intimate the claimant regarding the changes and variations. Clause 70 did not make it mandatory in nature for any such notice being given and it also did not contain any provision that in the absence of such notice, the contractor would not be able to maintain his claim. Clause 91 also provides that the Engineer-in-charge had to give full details of the work as well as the extent of such work so that it would be possible for the contractor to give a notice containing full particulars of the nature of claims with full details of the amount claimed, and in the instant case the first respondent by its own action had prevented the claimant from complying with the provisions of Clause 91 and having done so, it could not seek to rely on Clause 91. There is no error in the conclusion reached by the arbitrator in respect of both the claims. 8. Mr.S.Ramasubramaniam, learned senior counsel for the first respondent, reiterated the various contentions raised in the O.Ps. for setting aside the respective awards and submitted that having given a ‘no claims certificate’, the claims were not admissible and consequently not arbitrable. The learning senior counsel also disputed the claim made on behalf of the claimant that the specific question was raised as a question of law before the arbitrator. In this connection, the learned counsel relied on the judgment of the Supreme Court in Thawardas Pherumal v. Union of India, (1955)2 M.L.J. (S.C.) 23: A.I.R. 1955 S.C. 468: (1995)2 S.C.R. 448: 1995 S.C.J. 445, where it was held as follows: "Sec.16(1)(c) covers cases in which an error of law appears on the face of the award.
In this connection, the learned counsel relied on the judgment of the Supreme Court in Thawardas Pherumal v. Union of India, (1955)2 M.L.J. (S.C.) 23: A.I.R. 1955 S.C. 468: (1995)2 S.C.R. 448: 1995 S.C.J. 445, where it was held as follows: "Sec.16(1)(c) covers cases in which an error of law appears on the face of the award. But in determining what such an error is, a distinction must be drawn between cases in which a question of law is specifically referred and those in which a decision on a question of law is incidentally material (however necessary) in order to decide the question actually referred. If a question of law is specifically referred and it is evident that the parties desire to have a decision from the arbitrator about that rather than one from the Courts, then the Courts will not interfere, though even there, there is authority for the view that the Courts will interfere if it is apparent that the arbitrator has acted illegally in reaching his decision, that is to say, if he had decided on inadmissible evidence or on principles of construction that the law does not countenance or something of that nature". 9. A perusal of the awards leaves one with no doubt that the specific question was referred to arbitration and the arbitrator found that the point was arbitrable. I do not find any material supporting the stand of the learned senior counsel that the arbitrator was not asked to decide any question of law. The claims raised by the claimant were entertained by the first respondent and referred to arbitration without any reservation or qualification. The question of law having been referred to the arbitrator for his decision, as pointed out by the Supreme Court in Thawardas Pherumal’s case, (1955)2 M.L.J. (S.C.) 23: A.I.R. 1955 S.C. 468: (1995)2 S.C.R. 448: 1995 S.C.J. 445, the decision by the arbitrator is final and it is not open to the first respondent to re-open or re-agitate the question in this regard. 10. In M/s.Kapoor Nilokheri Co-operative Dairy Farm Society Limited v. Union of India, A.I.R. 1973 S.C. 1338, it has been held by the Supreme Court that were an arbitrator is called upon to decide the effect of the agreement, he has really to decide a question of law, i.e., of interpreting the agreement, and hence, his decision is not open to challenge. 11.
11. In M/.Tarapore and Company v. Cochin Shipyard Limited, Cochin, A.I.R. 1984 S.C. 1072, the Supreme Court held as follows: "On a conspectus of these decisions, it clearly transpires that if a question of law is specifically referred and it becomes evident that the parties desired to have a decision on the specific question from the arbitrator about that rather than one from Court, then the Court will not interfere with the award of the arbitrator on the ground that there is an error of law apparent on the face of the award even if the view of law taken by the arbitrator does not accord with the view of the Court. This view of law taken in England was stated by this Court to be the same in this country and since the decision in Thawardas’s case, (1955)2 M.L.J. (S.C.) 23: A.I.R. 1955 S.C. 468: (1995)2 S.C.R. 448: 1995 S.C.J. 445, which follows earlier decisions in England and India, it has not been departed from. The view canvassed for by Mr.Pai that common law Courts were very reluctant to part with its jurisdiction has hardly any relevance where a specific question of law including the one touching the jurisdiction of the arbitrator is referred to the arbitrator for his decision. Even if the decision of the arbitrator does not accord with the view of the Court, the award cannot be set aside on the sole ground that there is an error of law apparent on the face of it." 12. Again, as regards the interpretation given to Clauses 70 and 91 by the arbitrator, I do not find any formidable objection that can be raised for concurring with the view taken by the learned arbitrator. During the course of the argument it was practically conceded by the learned Senior Counsel that there were inconsistencies in the relevant Clauses in the agreement between the parties. There is substance in the contention raised by the learned counsel for the respondent that Clause 70 in the agreement between the parties is not a statutory limitation, but, only a contractual stipulation. The learned arbitrator chose to interpret the Clauses in a manner which would be logical and should be applied to the facts of the cases before him, for arbitration.
The learned arbitrator chose to interpret the Clauses in a manner which would be logical and should be applied to the facts of the cases before him, for arbitration. The learned arbitrator on an interpretation of Clause 91 has come to the correct conclusion that there were reciprocal rights and obligations of the parties and that one such obligation would be for the first respondent to intimate the claimant regarding the changes and variations, that Clause 70 was not mandatory in nature and in case the contractor did not comply with the requirements of Clause 70, he would still be able to maintain his claim, and so far as Clause 91 is concerned, it presupposed that the Engineer-in-charge to order work on the contract and the order should contain the full particulars of the work as well as the extent of such work so that it would be possible for the contractor to give a notice containing full particulars of the nature of claims with full details of the amount claimed and it has been found by the learned arbitrator that the Engineer-in-charge had never given any such order with full details and therefore the claimant was handicapped and could not give any such notice with full particulars. The finding by the arbitrator is that the first respondent by its own action had prevented the claimant from complying with the provisions of Clause 91 and having done so, it could not be sought to rely on Clause 91 to refuse relief to the claimant. An exclusion Clause or a Clause seeking to restrict or limit the liabilities of the parties is to be strictly construed and the first respondent did not satisfy the arbitrator of having complied with all the requirements before seeking to place reliance on the restrictive portions of such Clause. The arbitrator has held that the first respondent has waived any objection under the said Clause. 13. None of the criteria under Sec.30 of the Arbitration Act, 1940 is satisfied in the instant case warranting interference by this Court. When once it is found that the arbitrator had been asked to arbitrate the matter, including the question whether a particular item was arbitrable, and if the arbitrator gives a finding on that, it is binding and it is not open to review by the Court. 14.
When once it is found that the arbitrator had been asked to arbitrate the matter, including the question whether a particular item was arbitrable, and if the arbitrator gives a finding on that, it is binding and it is not open to review by the Court. 14. It is also well established that the High Court cannot substitute its own view in the place of arbitrator’s view. It cannot examine the matter as a regular appellate Court. Interpretation of contract is a matter for the arbitrator and the amounts awarded by him were by taking a possible view of the contracts and it is not possible for the Court to substitute its own decision. A possible view taken by the arbitrator is not amenable to interference. In the instant case the construction by the arbitrator is conceivable and possible. Reasonableness of reasons given by an arbitrator in making his award also cannot be the subject matter of decision by this Court. He has not exceeded his jurisdiction and has acted within jurisdiction. Consequently, O.P. Nos.561 and 562 of 1998 are dismissed and O.P. Nos.237 and 238 of 1993 are allowed. There will be decrees in terms of the award.