Superintending Engineer, (Randb) National High Way Circle, Nellore v. Dega Ramalinga Reddy
2004-09-24
BILAL NAZKI, GOPALA KRISHNA TAMADA
body2004
DigiLaw.ai
BILAL NAZKI, J. ( 1 ) THESE are two appeals directed against the common judgment and decree of the Trial Court. CM A No. 1045 of 1991 arises out of judgment and decree in OP No. 24 of 1989, whereas other CMA No. 1 106 of 1991 arises out of judgment and decree in OP No. 8 of 1989. OP No. 8 of 1989 was filed by dega Ramalinga Reddy, contractor under sections 14 (2) and (3) of the Arbitration act (for short "the Act"), which was allowed and OP No. 24 of 1989 was filed by superintending Engineer under Section 30 of the Act which was dismissed. The parties shall be referred as department and contractor . Since the department lost both the OPs, they have filed these two appeals. Both the appeals were heard together and are being disposed of by this common judgment. ( 2 ) FACTS. The contractor entered into a contract with the department on 7. 10. 1982 for construction of approach road to bridge at M. 48/2 and M. 48/5 of Madras-Calcutta road, N. H. Division under agreement No. 33/ 82/83. The contractor commenced the work, but did not complete, therefore disputes arose between the parties. According to the department, the contractor committed breach of contract, therefore they invoked clause 61 of the preliminary specifications to Andhra Pradesh Standard Specifications, resumed possession of the site and called for fresh tenders to complete the balance of work at the risk and costs of the contractor and got the work completed. The contractor put forward certain claims and sought for settlement of those claims under arbitration. The matter was referred to a panel of arbitrators named in the agreement. As the arbitrators did not enter upon the reference, the contractor filed OP No. 26 of 1985 for appointment of a sole Arbitrator. The Court below, by its order dated 5. 2. 1989, appointed sri T. Krishna Murthy, a retired Chief engineer as the sole Arbitrator to settle the dispute. The Arbitrator entered upon the reference and after due enquiry passed an award on 5. 2. 1989. ( 3 ) THE contractor put forward 12 claims before the Arbitrator. The Arbitrator awarded Rs. 33,542/- under 1st claim, rs. 2,25,020/-under 2nd claim, Rs. 2,00,007/- under 3rd claim, Rs. 3,02,842/- under 4th claim and Rs. 8,000/- under 11th claim. The Arbitrator rejected the Claims 5 to 10.
2. 1989. ( 3 ) THE contractor put forward 12 claims before the Arbitrator. The Arbitrator awarded Rs. 33,542/- under 1st claim, rs. 2,25,020/-under 2nd claim, Rs. 2,00,007/- under 3rd claim, Rs. 3,02,842/- under 4th claim and Rs. 8,000/- under 11th claim. The Arbitrator rejected the Claims 5 to 10. Claim No. 12 related to future interest. According to the Arbitrator, he was not clear about the legal position with regard to the future interest, therefore he refrained from passing any award with regard to future interest. The contractor filed OP No. 8 of 1989 to make the award rule of the court. He also prayed that Claim No. 12 be decided by the Court. ( 4 ) THE department resisted the claim of the contractor made in OP No. 8 of 1989. It also filed OP No. 24 of 1989 for setting aside the award passed by the Arbitrator. The claim of the department was that since the contractor had not completed the work in accordance with the terms and conditions of the agreement, it was entitled to recover the difference of the amount incurred by the department by entrusting the work to another contractor. The arbitrator had failed, to consider the said aspect while passing the award and therefore the award had been visited in material irregularities. It also stated that the Arbitrator was clearly wrong in assuming that the contractor had done some work after the final bill was paid to him on 18. 5. 1984. The arbitrator also failed to note that the total work done by the contractor had been checked, measured and payment had been made to him. The observation of the arbitrator that the site was not handed over to the contractor was also not correct. The entire site had been handed over to him on 29. 11. 1982, although land acquisition proceedings were pending. While the contractor maintained that the Arbitrator had taken all aspects of the claims and come to the conclusion that the procedure followed by the department in invoking the Clause 60 or 61 of the preliminary specifications to Andhra Pradesh Standard specifications was irregular and this conclusion was based on the evidence produced before the Arbitrator. ( 5 ) FOLLOWING points were framed by the Trial Court: (1) Whether there is any error apparent on the face of the award?
( 5 ) FOLLOWING points were framed by the Trial Court: (1) Whether there is any error apparent on the face of the award? (2) Whether the Arbitrator misconducted himself or misconducted the proceedings? (3) Whether the Arbitrator acted beyond the scope of reference in respect of any of the claims made by the claimant? (4) Whether the claimant is entitled for future interest as claimed? (5) Whether the award is liable to be set aside on any other ground? ( 6 ) THE law is well settled that the award can be set aside only if the grounds under Section 30 of the Act are present and those grounds are that an Arbitrator misconducted himself or the proceedings, or that an award was made after the issue of an order by the Court superseding the arbitration, or that an award was improperly procured or otherwise invalid. The Trial court has come to the conclusion that the Arbitrator had not committed any error which was apparent on the face of the award as he neither misconducted himself nor the proceedings while allowing the claims 1 to 4. On the question of future interest, the Trial Court granted interest @ 18% p. a. , on the amounts awarded from the date of award till payment. ( 7 ) NOW in the light of the judgments of the Supreme Court it has to be seen whether the Arbitrator misconducted himself or the proceedings or whether there was any mistake apparent on the face of the award. In this connection, reference may be made to a judgment of the Supreme Court reported in Maharashtra State Electricity Board v. Sterilite Industries (India) and another, (2001) 8 SCC 482 . The Supreme Court reiterated its view taken in Union of India v. A. L. Rallia Ram, AIR 1963 SC 1685 and madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd. , AIR 1967 SC 1030 . The view was that the Arbitrator s award both on facts and law is final; there is no appeal from his verdict; the Court cannot review his award and correct any mistake in his adjudication, unless the objection to the legality of the award is apparent on the face of it. The Supreme Court also referred to a judgment of the Privy Council reported in champsey Bhara and Company v. Jivraj balloo Spg. and Wvg. Co.
The Supreme Court also referred to a judgment of the Privy Council reported in champsey Bhara and Company v. Jivraj balloo Spg. and Wvg. Co. Ltd. , AIR 1923 pc 66. The judgment of the Privy Council was referred in order to understand the meaning that could be attributed to error of law on the face of the award. The Privy Council had held:"an error in law on the face of the award means, in Their Lordships view, that 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. "the Supreme Court held:"we are of the view that unless the error of law sought to be pointed out by the learned counsel for the petitioners in the instant case is patent on the face of the award, neither the high Court nor this Court can interfere with the award. " 8. In State of Rajasthan v. Puri construction Co. Ltd. and another, (1994) 6 scc 485 , the Supreme Court held: "it is well settled that if a question of law is referred to Arbitrator and the Arbitrator comes to a conclusion, it is not open to challenge the award on the ground that an alternative view of law is possible. "in Para-30 of the same judgment the Supreme Court stated:"in the State of Orissa v. Lall Bros. (1988) 4 scc 153 , it has been held that an award is conclusive as a judgment between the parties and the Court is entitled to set aside an award only if the Arbitrator has misconducted himself in the proceedings or when the award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35 of the Arbitration Act or where an award has been improperly procured or is otherwise invalid under Section 30 of the Act. An award may be set aside by the court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument, it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion.
An award may be set aside by the court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument, it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion. " ( 8 ) IN Pure Helium India (P) Ltd. v. Oil and Natural Gas Commission, 2004 aild 73 (SC) = (2003) 8 SCC 593 , the question was directly considered by the Supreme Court as to whether the jurisdiction of an Arbitrator to interpret the contract can be subject-matter of an objection under Section 30 of the Act. In Para-27 it said:"construction of the contract agreement, therefore, was within the jurisdiction of the learned Arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, thus, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties as also the circumstantial evidence. " ( 9 ) SIMILARLY in U. P. Hotels and others v. U. P. State Electricity Board, (1989) 1 scc 359 , the Supreme Court held:"even assuming however, that there was an error of construction of the agreement or even that there was an error of law in arriving at a conclusion, such an error is not an error which is amenable to correction even in a reasoned award under the law. Reference may be made to the observations of this court in Coimbatore. Distt. P. T. Samgarn v. Bala Subramania Foundry, AIR 1987 SC 2045 , where it was reiterated that an award can only be get aside if there is an error on its face. Further, it is an error of law and not mistake of fact committed by the Arbitrator which is justiciable in the application before the Court. Where the alleged mistakes or errors, if any, of which grievances were made were mistakes of facts if at all, and did not amount to error of law apparent on the face of the record, the objections were not sustainable and the award could not be set aside.
Where the alleged mistakes or errors, if any, of which grievances were made were mistakes of facts if at all, and did not amount to error of law apparent on the face of the record, the objections were not sustainable and the award could not be set aside. " ( 10 ) THE Supreme Court referred to the observations made in a judgment reported in delhi Municipal Corporation v. M/s. Jagan nath Ashok Kumar, AIR 1987 SC 2316 , where it reiterated that reasonableness of the reasons given by an Arbitrator in making his award cannot be challenged. In Para-19 the Supreme Court laid down:"in order to set aside an award, there must be a wrong proposition of law laid down in the award as the basis of the award. " ( 11 ) IN Indu Engineering and textiles Ltd. v. Delhi Development Authority, (2001) 5 SCC 691 , the Supreme Court held in Para-7:"this Court, while dealing with the power of Courts to interfere with an award passed by Arbitrator, had consistently laid stress on the position that an Arbitrator is a Judge appointed by the parties and as such the award passed by him is not to be lightly interfered with. In the case on hand the only question that arose for consideration was whether the appellant was entitled to claim the enhanced price of hard coke for the quantity supplied by it to the respondent. Under the contract a specific quantity of the material was to be supplied during the period fixed under the agreement. Right from the beginning while submitting the tender the appellant had included a price escalation clause in which it was stipulated that any escalation of the price after submission of the tender will entitle the supplier to claim higher price from the other party. This clause was subsequently reversed only to the effect that the price escalation will be applicable when there is statutory enhancement in the price of the commodity. No dispute was raised before the Arbitrator or the Court that the escalated price claimed by the appellant was not the statutorily enhanced price of hard coke. It was also not in dispute that even accepting the appellant s claim for escalated price of the commodity, it was entitled to the claim only in respect of a part of the quantity supplied and not the entire quantity.
It was also not in dispute that even accepting the appellant s claim for escalated price of the commodity, it was entitled to the claim only in respect of a part of the quantity supplied and not the entire quantity. In these circumstances, the arbitrator had not attached importance to the non-mention of the enhanced price of hard coke in course of negotiations between the parties. The view taken by the Arbitrator, in the circumstances of the case, was a plausible one and the same could not be said to be suffering from any manifest error on the face of the award or wholly improbable or perverse one. As such it was not open to the Court to interfere with the award within the statutory limitations laid down in Section 30 of the act. The learned Single Judge, therefore, rightly declined to interfere with the award passed by the Arbitrator and made it rule of the Court. " ( 12 ) IN Continental Construction Ltd. v. State ofu. P. , (2003) 8 SCC 4 , the Supreme court relied on its earlier judgment in State of U. P. v. Allied Constructions, (2003) 7 scc 396 . It referred to Para-4 at Page 398 with its approval:"any award made by an Arbitrator can be set aside only if one or the other term specified in Sections 30 and 33 of the arbitration Act, 1940 is attracted. It is not a case where it can be said that the Arbitrator has misconducted the proceedings. It was within his jurisdiction to interpret Clause 47 of the agreement having regard to the fact situation obtaining therein, (sic) It is submitted that an award made by an Arbitrator may be wrong either on law or on fact and error of law en the face of it could not nullify an award. The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for Arbitrator to determine. Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set aside. The arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence.
Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in Section 30 is satisfied, an award cannot be set aside. The arbitrator is a Judge chosen by the parties and his decision is final. The Court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. As error apparent on the face of the records would not imply closure scrutiny of the merits of documents and materials on record. Once it is found that the view of the Arbitrator is a plausible one, the court will refrain itself from interfering. " ( 13 ) IN B. V. Radha Krishna v. Iron India ltd. , AIR 1997 SC 1324 , the Supreme Court held:"the Court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusions or if the award is based upon any legal proposition which is erroneous. " ( 14 ) IT also held that appraisement of evidence by the Arbitrator is ordinarily never a matter which the Court questions and considers. It may be possible that on the same evidence the Court may arrive at a different conclusion than the one arrived at by the Arbitrator, but that by itself is no ground for setting aside the award. ( 15 ) NOW in the light of the case-laws, let us see what are the objections to the award as argued before this Court and as mentioned in the memorandum of appeal. The grounds mentioned in the memorandum of appeal are: (1) "the lower Court ought to have held that the Respondent No. 1 is not entitled to claim any extra lead charges under Claim no.
The grounds mentioned in the memorandum of appeal are: (1) "the lower Court ought to have held that the Respondent No. 1 is not entitled to claim any extra lead charges under Claim no. 4 as per the foot note under Schedule-D of the agreement; (2) The lower Court ought to have held that the reasoning given by the Arbitrator under claim No. 4 is not correct and proper; (3) The lower Court ought to have held that the Respondent No. l has not done any work beyond May, 1984 and that he is not justified in making Claim No. 1; (4) The lower Court ought to have held that the respondent is not entitled to refund of the deposits under Claim No. 2, as he failed to complete the work within a stipulated time; (5) The lower Court ought to have held that the Respondent No. l is not entitled to full amount under Claim No. 3 as per the terms of the agreement, until he completes the contractual work; (6) The Court below ought to have seen that the Arbitrator has not assigned any reasons for awarding the huge amounts and the said award is void in law; (7) Other grounds will be raised at the time of hearing;" ( 16 ) NONE of the grounds can be agitated before this Court in the light of the judgments of the Supreme Court mentioned hereinabove. Therefore the appeals on this ground have to fail. ( 17 ) NOW coming to the question of awarding interest @ 18% P. A. from the date of award, although the Arbitrator was of the view that the contractor deserves award of interest, but he did not pass any award in view of the conflict in judgments of various Courts on this question. The Trial Court, however, awarded the interest. ( 18 ) IN Jagdish Rai and Brothers v. Union of India, (1999) 3 SCC 257 , the supreme Court held in Paras 3 and 4:"3. The claim for interest not having been made before the Court in which proceedings for making the award the rule of the Court were pending would certainly disentitle the appellant for making such a claim during first three stages of pre-arbitration and post-arbitration that is between award and filing of application inasmuch as several considerations will have to be examined before award of interest and at what rate.
Therefore, when the award had not been challenged for not granting interest, the award could not be upset to that extent. The view taken by the High Court appears to be correct to that extent. However, that is not the end of the matter. The High Court ought to have further examined whether the appellant was entitled to any interest after the decree was made in terms of the award. The Courts have taken the view that award of interest under Section 34 CPC is a matter of procedure and ought to be granted in all cases when there is a decree for money unless there are strong reasons to decline the same. In the present case the appellant had made a claim for interest before the arbitrator but the same had been denied and no reasons are forthcoming thereto. Whatever that may be, at any rate after the sub-Judge made an award the rule of the court the decree ought to contain a provision for making payment of interest. If such payment had not been made, appropriate correction of the decree could be ordered to be made when an application had been made before the High Court. 4. We are conscious of the fact that the appellant had not preferred any appeal against the order made by the Court of Sub-Judge which made the award the decree of the Court but did not grant any interest. Even so, the grant of interest being a matter of procedure and the appellant having made an application before the High Court in that regard, we do not think there is any impediment to grant the same by bringing decree of Subordinate Court in conformity with law, namely, by awarding appropriate interest. " ( 19 ) HOWEVER, the learned Counsel for the department submits that the interest @ 18% p. a. awarded by the Trial Court was exorbitant even if it was held to be within the power of the Court. ( 20 ) IN B. V. Radha Krishna v. Iron India ltd. (supra) in Para-16 the Supreme Court held: "on the question of interest we think the learned Counsel for the appellant is right in placing reliance on Section 3 (l) (b) of the interest Act.
( 20 ) IN B. V. Radha Krishna v. Iron India ltd. (supra) in Para-16 the Supreme Court held: "on the question of interest we think the learned Counsel for the appellant is right in placing reliance on Section 3 (l) (b) of the interest Act. The appellant-Company (sic) had issued notice on 14-6-1984, demanding payment of the specified amount and interest on that specified amount at the rate of 21% per annum from 1-4-1983, till payment. Section 3 (1) (b) of the Interest Act, 1978 reads as follows:"3. Power of Court to allow interest : (1) in any proceedings for the recovery of any debt or damages or in any proceedings in which a claim for interest in respect of any debt or damages already paid is made, the court may, if it thinks fit, allow interest to the person entitled to the debt or damages or to the person making such claim, as the case may be, at a rate not exceeding the current rate of interest, for the whole or part of the following period, that is to say, (a ). . . . (b) If the proceedings do not relate to any such debt, then, from the date mentioned in this regard in a written notice given by the person entitled or the person making the claim to the person liable that interest will be claimed, to the date of institution of the proceedings" ( 21 ) IN Gujarat Water Supply and sewerage Board v. Unique Erectors (Gujarat) (Private) Limited and another, AIR 1989 SC 973 , the Supreme Court held that in cases arising subsequent to commencement of the Interest Act, 1978 the Arbitrator was entitled to award interest for the period prior to the commencement of the arbitration proceedings i. e. , from the date when the claim became due till the date of Arbitrator entering upon the reference. ( 22 ) IN Superintending Engineer, sornasila Project, Nellore District and another v. R. Ramana Reddy, AIR 1990 AP 283 , the High Court held that the Arbitrator also could grant interest subsequent to the date of award.
( 22 ) IN Superintending Engineer, sornasila Project, Nellore District and another v. R. Ramana Reddy, AIR 1990 AP 283 , the High Court held that the Arbitrator also could grant interest subsequent to the date of award. ( 23 ) IN view of these judgments, the arbitrator or the Court was not powerless to award interest, but in the facts and circumstances of the case and in the changed commercial scenario, we feel 18% interest from the date of award till payment is too excessive. We, therefore, limit it to 6% p. a. ( 24 ) WITH this modification in the rate of interest, the appeals are dismissed. No costs.