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2007 DIGILAW 384 (UTT)

STATE OF UTTARANCHAL v. TRILOK AND COMPANY

2007-07-17

B.C.KANDPAL, P.C.VERMA

body2007
JUDGMENT Hon’ble P.C. Verma, J. Hon’ble B.C. Kandpal, J. Appeal No. 265 of 2004 has been preferred under Section 39 of Indian Arbitration Act, 1940 (hereinafter referred to as ‘the Act’) by the appellant/State against the judgment and decree dated 3.12.2003 passed by the learned Additional District Judge/Fast Track Court-II, Haridwar in Original Suit No. 115/1998, whereby the objections filed by the petitioner/appellant under Section 34 of the Act were dismissed. However, the court below modified the rate of pendente lite interest from 10 per cent per annum to 6 per cent per annum and cost of litigation was also modified from Rs. 80,000/- to Rs. 1,000/-. 2. Appeal No. 62 of 2004 has been filed by the appellant M/s Trilok Chand Gupta & Co. under Section 39 of the Act against the same order dated 3.12.2003 passed by the Additional District Judge, Haridwar in Original Suit No. 115/1998 and Misc. Case No. 96/1998, whereby the arbitral award was modified and rate of interest as well as the cost of litigation was reduced. 3. The facts and controversy involved in both these appeals are same and inter-related, hence they are being decided vide this common order. We will refer to the facts in appeal no. 265 of 2004 for brevity. 4. Facts, in brief, as set up by the appellant/State are that respondent M/s Trilok Chand Gupta & Co. is a registered partnership firm. A tender for construction of civil works of Intake and Penstock for Chilla Power House was invited and the appellant’s tender for the said work having been accepted, an agreement number 17/SE/76-77 was arrived at between the respondent firm and the State on 22.3.1977. The period stipulated for the completion of work was 18 months from the date of start of the work i.e. 28.3.1977. The execution of contract work amongst other items involved excavation, RCC work and shuttering. It appears that the respondent firm was required to do the aforesaid works in excess of what was earlier agreed upon, for which it claimed extra payment. The execution of contract work amongst other items involved excavation, RCC work and shuttering. It appears that the respondent firm was required to do the aforesaid works in excess of what was earlier agreed upon, for which it claimed extra payment. When the department rejected the claim for extra payment, the respondent firm tried to prevail upon the opposite party to refer the matter for arbitration as per agreement and when it failed in its efforts to get the matter referred for arbitration, the respondent firm took recourse to Section 20 of the Act and filed an application before the Civil Judge, Roorkee. While the application of the respondent firm was pending before the said court, the appellant/State approached the Legal Remembrancer to the State of U.P. for arbitration in the matter and Sri P.K. Sareen was appointed as the Arbitrator. Consequent upon the transfer of Sri P.K. Sareen, Sri Y.R. Tripathi was appointed as sole Arbitrator in the matter. 5. The said contract could not be completed within the stipulated time of 18 months and the same expired on 27.9.1978. The work could ultimately be completed on 30.6.1980 for which the time limit for execution was formally extended by the appellant/State. The case of the claimant firm for extra payment was that though it was required to excavate one metre deep but in many cases the excavation was done more than one metre at the direction of the Engineer Incharge. The respondent firm claimed extra payment of Rs. 8,41,313.20 under three heads – Rs. 87,500/- for excavation of more than one metre cube depth, Rs. 49,974.20 for RCC work and a sum of Rs. 7,03,839/- for having incurred extra expenditure due to increase of more than 25 per cent in the quantities of work agreed upon. Besides, it also claimed pendente lite and future interest as also the costs of the arbitration. 6. 87,500/- for excavation of more than one metre cube depth, Rs. 49,974.20 for RCC work and a sum of Rs. 7,03,839/- for having incurred extra expenditure due to increase of more than 25 per cent in the quantities of work agreed upon. Besides, it also claimed pendente lite and future interest as also the costs of the arbitration. 6. The appellant/State resisted the claim of the respondent/claimant firm on the grounds, inter alia, that the respondent firm was supposed to execute the increased quantity of work in view of clause 2.11, that only nominal steel bars were provided to neutralize the effect of temperature and shrinkage in mass plain cement concrete, which did not bring the cement concrete work executed by the claimant/respondent within the ambit of R.C.C. and that the claimant/respondent firm as per requirement of the agreement did never negotiate for the rate of extra work executed by it under the agreement. Rather it waived its right by issuing the ‘No Objection Certificate’ and that through letter dated 14.5.1980, the respondent firm had agreed to execute the extra work on the rates agreed at the time of execution of the agreement. 7. The learned Arabitrator after framing the points for determination and after considering the evidence and documents adduced on the record gave his award on 30.6.1998, whereby claimant/respondent firm’s claim for recovery of Rs. 3,39,000/- from the appellant/State was allowed along with interest @ 10 per cent per annum from 1.6.1980, the date of commencement of arbitration till the date of award. Further interest on the sum of Rs. 3,39,000/- @ 6 per cent per annum till the payment of the said amount or a decree is passed on the award was also awarded. A sum of Rs. 80,000/- was imposed on the appellant/State as costs of the arbitration to the claimant/respondent firm. 8. The respondent firm filed Original Suit No. 115/98 before the court below for making the award of the learned Arbitrator dated 30.6.1998 rule of the Court, while the appellant/State being aggrieved with the award of the learned Arbitrator preferred objections under Section 30/33 of the Act for setting aside the said award. 8. The respondent firm filed Original Suit No. 115/98 before the court below for making the award of the learned Arbitrator dated 30.6.1998 rule of the Court, while the appellant/State being aggrieved with the award of the learned Arbitrator preferred objections under Section 30/33 of the Act for setting aside the said award. The appellant/State challenged the award of the Arbitrator on the grounds, inter alia, that the learned Arbitrator travelled beyond his jurisdiction, that the learned Arbitrator committed legal misconduct in not considering the material documents and in awarding the interest and cost of arbitration, that the learned Arbitrator has acted on conjectures and surmises and has ignored the relevant clauses of the agreement and that the award is beyond the scope of reference. The court below rejected the objections taken by the appellant/State and vide its judgment and order 3.12.2003, made the award of the learned Arbitrator rule of the Court but simultaneously reduced the rate of pendente lite interest from 10 per cent per annum to 6 per cent per annum and the cost of arbitration was also reduced from Rs. 80,000/- to Rs. 1000/-. 9. The respondent firm did not file any objection against the award of the Arbitrator before the learned Additional District Judge, Haridwar. 10. Feeling aggrieved with the aforesaid order of the Additional District Judge, the appellant/State as well as the respondent firm, both has come up in appeal before this Court. 11. We have heard learned Counsel for the parties and perused the record. 12. Learned Counsel on behalf of the appellant/State argued that the learned Arbitrator has committed gross legal misconduct in giving the award and the quantity of earthwork was increased for which the contractor/respondent firm was supposed to execute as per clause no. 2.11 of the contract and, therefore, the learned Arbitrator had no jurisdiction to ignore the contents of this clause. It is also the contention of the learned Counsel for the appellant/State that the award is beyond the scope of reference. As such, the award of the arbitrator is liable to be set aside. 13. 2.11 of the contract and, therefore, the learned Arbitrator had no jurisdiction to ignore the contents of this clause. It is also the contention of the learned Counsel for the appellant/State that the award is beyond the scope of reference. As such, the award of the arbitrator is liable to be set aside. 13. For the sake of convenience, clause 2.11, which provides deviations, alteration and addition to the work, is reproduced below : “2.11 DEVIATIONS, ALTERATIONS & ADDITION TO THE WORK The contractor shall not in any way alter any of the works without the previous written consent of the Engineer-in-charge but the Engineer-in-charge may from time to time and at any time during the progress of the work, without any notice to the sureties by any writing under his hand, direct any deviations, alternations or additions to be made from, in or to the works or any part thereof or may direct the contractor to curtail or to omit any of the work or to execute any new or substitute work or to commence and execute the work or any part thereof in such order and manner as he shall think fit. Any such directions of the Engineer-in-charge and any deviations, alteration, addition and omission made in pursuance thereof shall not vitiate this contract or be made the ground for any claim for compensation for alleged loss or profit in respect of omitted works (except as hereinafter provided) for extra payment or additional work or any works so directed to be omitted shall be omitted and any deviation so directed to be made shall be made to the satisfaction of the Engineer-in-charge in the same manner as if such works had been originally included in or omitted from the specifications except that the value of the same whether by way of additions or deductions shall be estimated by the Engineer-in-charge according to the schedule of prices where applicable or otherwise treated as an extra item. The contractor shall not however on account of any such modified new or extra works executed by or for the Government be entitled to claim relief from the obligation to executing other works stipulated in the contract. Provided that deviations, alterations and additions to the works, as aforesaid will be limited 25% (plus or minus twenty five per cent of the total value of the contract of schedule of the bids). Provided that deviations, alterations and additions to the works, as aforesaid will be limited 25% (plus or minus twenty five per cent of the total value of the contract of schedule of the bids). The value of the contract for this shall be Rs. 1,03,38,020/-. “For variation above 25% of the contract value the rates will be negotiable.” 14. It is crystal clear from the above-quoted clause that for variation above 25 per cent of the contract value the rates were negotiable, whereas it is proved from the materials available on record that the respondent firm did execute approximately 50 per cent more work than that stipulated in the contract bond. As such, the contention of the learned Counsel for the appellant/State that the Arbitrator has ignored the provisions given in clause 2.11 of the contract in giving his award is found to be without any substance and is rejected. 15. Further, for deciding this controversy, we would refer to the relevant part of Section 34 of the Act which reads as under : “34. Application for setting aside arbitral award. – (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). Further, for deciding this controversy, we would refer to the relevant part of Section 34 of the Act which reads as under : “34. Application for setting aside arbitral award. – (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3). (2) An arbitral award may be set aside by the Court only if – (a) the party making the application furnishes proof that – (i) the party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration : Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or (v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or (b) the Court finds that – (i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or (ii) the arbitral award is in conflict with the public policy of India.” 16. The Hon’ble Supreme Court in the case UPSEB v. Searsole Chemicals Ltd. reported in 2001 (3) SCC page 397 has held as under : “When the arbitrators have applied their mind to the pleadings, the evidence adduced before them and the terms of the contract, we do not think, it is within our scope to reappraise the matter as if this was an appeal, and it is clear that where two views are possible. In this case there is no such scope hence the view taken by the arbitrators would prevail.” 17. In case Ispat Engineering & Foundry Works v. Sail reported in 2001 (6) SCC page 347, the Hon’ble Apex Court has further held as below : “In the event, however, there are reasons, interference would still be not available unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. This Court went on to record that in the event, however, two views are possible on a question of law, the court would not be justified in interfering with the award of the arbitrator if the view taken recourse to it a possible view…….. The Court as a mater of fact, cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties.” 18. An award made by an arbitrator can be set aside if the arbitrator acts beyond jurisdiction and in order to determine whether the arbitrator has acted in excess of his jurisdiction what has to be seen is whether claimant can raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit to the parties to raise a point before the arbitrator and if there is a specific bar in the contract to the raising of the point then the award passed by the arbitrator in respect thereof would be in excess of his jurisdiction. In our opinion, neither of the conditions referred to above stand satisfied to hold that the arbitrator had acted in excess of his jurisdiction. The arbitrator has limited his adjudication on the points of reference made to him. According to us the arbitrator has confined his award within the framework of the reference made to him and did not exceed the jurisdiction conferred upon him. Further, in view of above legal position, the scope of the Court to decide the objections under Section 34 of the Act is very limited. 19. A perusal of the impugned order dated 3.12.2003 reveals that the learned Additional District Judge has dealt with each and every objection take by the appellant/objector at length and in accordance with settled proposition of law. 19. A perusal of the impugned order dated 3.12.2003 reveals that the learned Additional District Judge has dealt with each and every objection take by the appellant/objector at length and in accordance with settled proposition of law. Further, in view of the facts and circumstances of the case, the court below has rightly reduced the pendente lite interest from 10 per cent per annum to 6 per cent per annum and the cost of arbitration from Rs. 80,000/- to Rs. 1,000/-. We are in total agreement with the findings of the court below. 20. Furthermore, we do not find that there existed any material on record to show that the arbitrator while making the award ignored any material documents or that the umpire acted arbitrarily, irrationally or capriciously. 21. The objector/appellant has utterly failed before the Trial Court to prove any misconduct on the part of the Arbitrator on the basis of which, the award can be said to be invalid. We do not find any misconduct on the part of the arbitrator. We are in total agreement with the findings of the lower court. 22. For the foregoing reasons, we do not find any merit in the objections raised by the learned Counsel for the appellant/State. Accordingly, both the appeals stand dismissed. The order dated 3.12.2003 passed by the Additional District Judge, Haridwar is upheld. There will be no order as to costs.