MANAGING DIRECTOR, M. P. STATE MINING CORPORATION LTD v. NARMADA
2008-07-30
R.K.GUPTA, R.S.GARG
body2008
DigiLaw.ai
Judgment R.S.GARG, J ( 1. ) This is an appeal under Section 37 of the Arbitration and Conciliation Act 1996 filed by the M.P. State Mining Corporation Limited, Bhopal, being aggrieved by the order dated 10.11.06 passed by the 6th Addl. District Judge, Bhopal, in Arbitration Case no. 36/2006 whereunder the learned lower court rejected the objections raised under Section 34. The result is that the award has attained finality under Section 35 of the Act. ( 2. ) The undisputed facts are that an agreement was entered into between the appellant no.1,Managing Director M.P. State Mining Corporation Limited, Bhopal, and the respondent no. 1 M/s. .Narmada Enterprises for lifting of sand from various specific places/mines for the period between 24.5.03 and 23.5.06. The contract was for a. period of 3-years during which the respondent, M/s. Narmada Enterprises was required to lift 56,51,000 sq meter of sand as per Clause 2 of the agreement. ( 3. ) Undisputedly during the validity of the period of the original contract, a supplementary agreement was also executed between the parties on 26.8.04 by virtue of which some more mines were allotted to respondent, M/s. Narmada Enterprises under the settled and existing terms and conditions. The non-applicant no. 1 M/s. Narmada Enterprises operated the sand mines in accordance with the terms of the contract but in December 2005 it chose to file WP No. 15828/05 seeking the following reliefs :- (a) "issue a writ in the nature of certiorari quashing the withdrawal order of supervision given to the Corporation Annexure P. 13 and P. 14. (b) a writ in the nature of mandamus directing the respondents : (i) To appoint a committee comprising of M.D. of the Mining Corporation and the Secretary of the Mining Department of the State Govt to investigate into the facts made in the writ petition and submit a report before the Honble Court. (ii) A writ in the nature of mandamus directing respondents to invoke clause 16 of the agreement and direct the respondent no.2 to grant extension of the time period of the contract as per proportionate lifting of the sand on the similar terms and condition.
(ii) A writ in the nature of mandamus directing respondents to invoke clause 16 of the agreement and direct the respondent no.2 to grant extension of the time period of the contract as per proportionate lifting of the sand on the similar terms and condition. (iii) A command to the respondents to call for the entire record of auctions made by the respondent no.3 and 4 of sand excavation in the district of Hoshangabad and Raisen nearby the petitioners mines for perusal of the Honble Court and cancel the contract of Ketu Dhan mines of Raisen District and direct the respondents to implement the circular of the State Government by not auctioning any mines within 10 kms loading of petitioner mines. (iv) To grant any other relief deemed fit in the circumstances." ( 4. ) The present appellant appeared before the Court and submitted that as the dispute was covered by the arbitration agreement the present respondent no. 1/petitioner of the said writ petition be asked to refer the dispute to the respondent no. 2 so that the matter is referred to the Arbitrator. The High Court disposed of WP No. 15828/05 with the following directions :- (i) "Petitioner may submit its dispute to respondent no.2 within a period of two weeks from today, supported by all necessary documents. (ii) Respondent no. 2 on receipt of the aforesaid dispute shall refer the matter to the arbitrator within a period of two weeks from the date of receipt of the dispute with a specific direction to the arbitrator to decide the dispute within a period of 60 days from the date of reference of the dispute. The arbitrator so appointed shall make all endeavor to decide the dispute within the time period as fixed by this Court." ( 5. ) Undisputedly M/s. Narmada Enterprises submitted its dispute to the present appellants who in terms of the directions issued in WP No. 15828/05 made a request to the Sole Arbitrator vide his letter dated 6.2.06 for a decision on the dispute raised by M/s. Narmada Enterprises in accordance with the provisions of Clause 19 of the Contract agreement. It is also not in dispute that after Arbitrator issued notices to the parties the present respondent M/s. .
It is also not in dispute that after Arbitrator issued notices to the parties the present respondent M/s. . Narmada Enterprises submitted its claim before the Sole Arbitrator with a specific prayer that he be granted extension of the contract period as per clause 16 till it is able to lift the quantity of sand which it could not lift because of the compelling reasons/circumstances. The appellant no.l Mining Corporation submitted before the Arbitrator that time was of.the essence of the contract and as there was no violation of the terms of the contract on the part of the appellant, the time could not be extended. ( 6. ) The arbitrator framed the point for determination as under .- "Whether the claimant is entitled to loss or extension of period of lease.?" ( 7. ) It is again not in dispute before us that on the basis of statement of claims and affidavits submitted by M/s. Narmada Enterprises and the reply and affidavit submitted by appellant no. 1, Mining Corporation, the sole Arbitrator Justice K.L. Israni, decided the dispute and made his award. The arbitrator directed the Mining Corporation to extend the period of lease from the date of expiry for about 15- 17 months in accordance with the terms contained in clause 16 of the agreement enabling the claimant to cope up with the losses suffered. ( 8. ) The award dated 3.5.06 being not palatable to the appellants they challenged the same by filing an application under Section 34 of the Act for setting aside the arbitral award. ( 9. ) From the order passed by the learned court below it appears that the questions raised before the lower court were that no right was conferred upon M/s. Narmada Enterprises to seek extension of the contract agreement under clause 16 because it could be invoked in special circumstances by mutual consent and even in those circumstances the final word was to be that of the Managing Director and proportionate increase in the quantity and amount of installment was a must. It was also submitted before the court below that the arbitrator erroneously assumed jurisdiction for extending the contract period under clause 16 without appreciating that the right to extend is vested in the Managing Director of the Mining Corporation. It was also submitted that the arbitrator erred in awarding claim made by the present respondent no. 1.
It was also submitted before the court below that the arbitrator erroneously assumed jurisdiction for extending the contract period under clause 16 without appreciating that the right to extend is vested in the Managing Director of the Mining Corporation. It was also submitted that the arbitrator erred in awarding claim made by the present respondent no. 1. From the order passed by the court below it appears that the objections were controverted by the respondent submitting that the grounds of challenge raised by the present appellant were beyond the scope and spirit of Section 34 of the Act. It was submitted that M/s. Narmada Enterprises suffered huge losses due to present appellants violating the terms of the agreement and the Arbitrator rightly compensated the present respondent no. 1 by directing the present appellant to extend the period. It was also submitted that the extension of the lease granted under Clause 16 was to enable the present respondent no.l to cope up the losses suffered by it and not to earn the profits. It was also contended that if the present appellants submitted before the High Court that the matter fell within the scope of arbitration under clause 19 of the agreement then after the award is madeT the appellants cannot be allowed to contend that the arbitrator had no jurisdiction. The lower court found that scope for interference under Section 34 of the Act was quite limited. The matter was referred to the arbitrator in accordance with the directions issued by the High Court in WP No. 14528/05, the present respondent was justified in contending that in accordance with the circulars of the Government terms of the agreement, mines within the periphery of 10 kms were to be leased out to the present respondent and as those were allotted in favour of private persons, the present respondent no.l suffered unnecessary losses. The lower court also found that in relation to the said additional mines a supplementary agreement was executed between the parties and the mines were allocated to the respondents. ( 10. ) The court below found that clause 16 of the agreement clearly provided for extension in the period of lease and therefore, the period could be extended by the Arbitrator. ( 11. ) The learned court below after hearing the parties and for the reasons aforesaid, rejected the objections and upheld the award. ( 12.
( 10. ) The court below found that clause 16 of the agreement clearly provided for extension in the period of lease and therefore, the period could be extended by the Arbitrator. ( 11. ) The learned court below after hearing the parties and for the reasons aforesaid, rejected the objections and upheld the award. ( 12. ) For proper appreciation of the dispute it would be appropriate to refer to some observations and the discussions made in order dated 15.12.05 passed in WPno. 15828/05. ( 13. ) In the said matter various reliefs were sought by M/s. Narmada Enterprises with a submission that the petitioner was entitled for lease of aforesaid adjoining areas but the State Govt leased out those areas to some other persons which caused huge losses to the petitioner and because of the said losses M/s. Narmada Enterprises was entitled to the benefit flowing from clause 16 of the agreement for extension of period of lease so that petitioner may make up its losses. The further observations are that the counsel for the Managing Director M.P., State Mining Corporation Limited submitted before the Court that under Clause 19 of the Agreement, the matter was required to be referred to the arbitrator and unless the petitioner made such a prayer he was not entitled to any relief from the court. On said objection the counsel for M/s. Narmada Enterprises agreed to refer the matter to arbitrator but however, made a submission that the period of lease was to expire on 23.6.06 therefore, the arbitrator be requested to conclude the arbitration proceedings within a period of 3 months. This was agreed too by the counsel for the Mining Corporation. The court as referred to above, directed that M/s. Narmada Enterprises shall submit its dispute to respondent no.2/Managing Director and respondent no. 2 Managing Director on receipt of the aforesaid dispute shall refer the matter to the Arbitrator within a period of 2 weeks with a specific direction to the arbitrator to decide the dispute within a period of 60 days from the date of reference of the dispute. ( 14. ) In the following-background it would now also be necessary to refer to clauses 15 and 16 of the agreement, which read as under :- ( 15.
( 14. ) In the following-background it would now also be necessary to refer to clauses 15 and 16 of the agreement, which read as under :- ( 15. ) From the perusal of clause 15 it would clearly appear that during currency of the agreement with the contractor if the corporation obtains/secures any other mines then the said mines would be included in the group of the contractor with a stipulation that the contractor shall maintain a separate account of the sand so excavated and shall also pay additional amount on the said sand. ( 16. ) It would be necessary to note that despite availability of the additional mines within the periphery of 10 kms, Mining Corporation did not offer the said mines to the respondent, therefore, a dispute arose and ultimately the mines were offered to the respondent. ( 17. ) Clause 16 which is the bone of contention has been translated by the respondent, reads as under :- "at the end of the contract, under special circumstances and with mutual concurrence, the Managing Director of the Corporation will have the right to extend the contract period in which proportionate increase in the contracted quantity and the amount of installment shall be imperative". It has been translated by the appellant as under :- "Clause 16 on conclusion of contract the Managing Director of the Corporation shall, under special circumstances have the right to extend the contract period with mutual consent and in such case it shall be mandatory to make proportional increase in quantity and amount of installment.
It has been translated by the appellant as under :- "Clause 16 on conclusion of contract the Managing Director of the Corporation shall, under special circumstances have the right to extend the contract period with mutual consent and in such case it shall be mandatory to make proportional increase in quantity and amount of installment. Or Clause 16: On conclusion of the contract, under special circumstances, the right of extending the contract period by mutual consent, shall be with the Managing Director in which eventuality it would be mandatory to make proportional increase in the contractual quantity and amount of installment." Official translator of the High Court has translated the said clause 16 as under :- "Clause 16 In special circumstances, after termination of contract, Managing Director of the Corporation is authorized to extend the period of contract by mutual consent, wherein enhancement of the contracted proportional quantity and amount of installment would be essential." A free translation of clause 16 can be "on conclusion of the contract, in the special circumstances, with the consent of the parties, the right to extend the period of lease would be with the Managing Director but in such case it would be imperative to increase the proportionate quantity and amount of installment. ( 18. ) In whatever manner clause 16 is translated, the sum and substance of clause 16 is that in the special circumstances of the matter, the Managing Director with the consent of the parties would be entitled to extend the period of lease and it would be imperative upon him to increase the proportionate quantity and the amount of installment. ( 19. ) Clause 16 according to Shri R.N. Singh, does not confer any right upon the respondent no. 1 to seek any extension, firstly because that does not create any right rather a legal right in favour of the respondent and secondly, because the Managing Director was competent to extend the period with the consent of the parties. ( 20. ) On the other hand Shri Sharma learned counsel for the respondent no.
1 to seek any extension, firstly because that does not create any right rather a legal right in favour of the respondent and secondly, because the Managing Director was competent to extend the period with the consent of the parties. ( 20. ) On the other hand Shri Sharma learned counsel for the respondent no. 1 submitted.that the question that the contractor had a right to seek extension of the lease period or not was a question raised before the High Court and because of the objection raised by the present appellants the High Court could not decide the matter and the matter wasdirected to be referred to the Arbitrator, therefore, at this stage the appellant cannot be allowed to say that the respondent no,1had no right to seek extension. ( 21. ) From a perusal of clause 16 it would clearly appear that the right to extend the period of the lease vests in the Managing Director of the Mining Corporation however, the discretion can be exercised by him in the, special circumstances of the case. In a given case if the special circumstances exist and the Managing Director illegally refuses to exercise his discretion then a person adversely affected can certainly, under the common law come to the court seeking specific performance of the contract or may ask the arbitrator to examine the circumstances to direct the Managing Director to extend the period of agreement. The right conferred upon the Managing Director is not a right which is available to a dictator who can for no good reasons refuse to exercise the discretion and that too without assigning any reasons. The power to exercise discretion always - vests in a authority so that to avoid illegality or injustice, it may pass orders to meet the requirement of the day. It is also to be noted that a fair understanding of clause 16 would make it clear that a party can always approach the Managing Director that in the special circumstances the period of the lease be extended. The special circumstances under which a party is claiming extension of the lease are within the knowledge of such party.
It is also to be noted that a fair understanding of clause 16 would make it clear that a party can always approach the Managing Director that in the special circumstances the period of the lease be extended. The special circumstances under which a party is claiming extension of the lease are within the knowledge of such party. If everything is left to the discretion of the Managing Director and it is held that a party cannot approach the Managing Director for extension, then it would lead to an illegality because the Managing Director would never know what are the special circumstances. The special circumstances may be of myriad nature. In a given set of the facts a very small lapse on the part of the Mining Corporation may provide a reason for extending the period of lease and in yet another case a lapse on the part of the Mining Corporation may not be a ground to extead the period of lease if the other party has also committed lapses. ( 22. ) A right is a generic and common word embracing whatever may be lawfully claimed. It is a just claim which may be lawfully claimed. It is a just claim and it- comprehends every right known to the law. It includes both corporeal and incorporeal rights. In civil society it is defined to mean which a man is entitled to have or to do, or to receive from others within the limits prescribed by law. A right is an interest which is recognized and protected by law. Taken as in an abstract sense, it is justice, ethical correctness or consonance with the rules of law or the principles of morals. A legal right is a claim enforceable by legal means against a person, community or authority. It is well founded and could be enforceable by sanction. A legal right is a capacity residing in one man of controlling with the assistance of the State/Court, the action of others; a right that may be enforced in a civil action: The term includes rights conferred by statute as well as agreements. It is an assertable claim, enforceable before courts and administrative agencies. In a wider sense, it is an advantage or benefit conferred upon a person by rule of law. ( 23.
It is an assertable claim, enforceable before courts and administrative agencies. In a wider sense, it is an advantage or benefit conferred upon a person by rule of law. ( 23. ) Clause 16 as understood would make it clear that the right to extend the period of lease on the terms would vests in the Managing Director but the contractor would always have a right to make an application to the Managing Director for extension of period of lease on the terms as provided under clause 16 and in case the Managing Director refuses to exercise his discretion either in an illegal manner or arbitrary manner then with the help and assistance of clause 19 of the agreement, the party aggrieved can always refer the matter to the Arbitrator for his decision on the subject. ( 24. ) In the present case, tie respondent no.l even otherwise was entitled to refer the matter to the arbitrator because the High Court directed the present appellant to submit the dispute before the Managing Director who in his turn was to refer the dispute to the arbitrator in WPNo. 15828/05. If the objection of the present appellant was that the High Court could not interfere in the matter, because of arbitration clause and as the subject in dispute was governed by the arbitration clause then at this stage the appellants cannot be allowed to raise the dispute. ( 25. ) It was then submitted by Shri R.N. Singh that the present matter squarely falls within the ambit of Section 34 of the Act therefore, this Court should interfere in the matter.
( 25. ) It was then submitted by Shri R.N. Singh that the present matter squarely falls within the ambit of Section 34 of the Act therefore, this Court should interfere in the matter. Section 34 (2) provides as under :- "Section 34(2) An arbitral award may be set aside by the court only if- (a) the party making the application furnishes proof that (i) a 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 decision 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. (3) xx xx xx (4) xx xx xx ( 26. ) The scope of Section 34{2} has been considered by the Supreme Court in the matter of Oil and Natural Gas Corporation Limited Vs. Saw Pipes Limited {2003} 5 SCC 705. in the said matter in paragraph 74, the Supreme Court had observed as under :- "74.
(3) xx xx xx (4) xx xx xx ( 26. ) The scope of Section 34{2} has been considered by the Supreme Court in the matter of Oil and Natural Gas Corporation Limited Vs. Saw Pipes Limited {2003} 5 SCC 705. in the said matter in paragraph 74, the Supreme Court had observed as under :- "74. In the result, it is held that: {A} {1} The Court can set aside the arbitral award under Section 34(2} of the Act if the party making the application furnishes proof that: {i} a 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. {2} The Court may set aside the award: {i} {a} if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, {b} failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act. {ii} if the arbitral procedure was not in accordance with: {a}the agreement of the parties, or {b} failing such agreement, the arbitral procedure was not in accordance with Part I of the Act. However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate. {c} If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
{c} If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract. {3} The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to: {a} fundamental policy of Indian law; or {b} the interest of India; or {c} justice or morality; or {d} if it is patently illegal. {4} It could be challenged: {a} as provided under Section 13 {5}; and {b} Section 16{6} of the Act. {B}{1} The impugned award requires to be set aside mainly on the grounds: {i} there is specific stipulation in the agreement that the time and date of delivery of the goods was of the essence of the contract; {ii} in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed; {iii} it was also explicitly understood that the agreed liquidated damages were genuine pre- estimate of damages; {iv} on the request of the respondent to extend the time-limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered; {v} liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor; {vi} there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable. {vii} In certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care of by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract." ( 27. ) In the matter of M. Anasuya Devi and Another Vs. M.Manik Reddy and Others {2003} 8 SCC 565, the Supreme Court again observed that Section 34 of the Act provides for setting aside of the award on the ground enumerated therein and none other. ( 28.
) In the matter of M. Anasuya Devi and Another Vs. M.Manik Reddy and Others {2003} 8 SCC 565, the Supreme Court again observed that Section 34 of the Act provides for setting aside of the award on the ground enumerated therein and none other. ( 28. ) From these two judgments, it would clearly appear that a party desirous to challenge the award, would be required to satisfy the Court that the arbitral award must be set aside for one or the more reasons enumerated under Section 34{2} {a}. The Court also has the jurisdiction to set aside the award if it comes to the conclusion that the dispute is not capable of settlement by arbitration under the law for the time being in force or the arbitral award is in conflict with the public policy of India. ( 29. ) It was submitted by Shri R.N.Singh, learned senior counsel for the appellants that the arbitrator had no jurisdiction to direct specific performance of the agreement by directing the appellants to extend the period of lease for a period of fifteen or seventeen months. ( 30. ) Shri Viplav Sharma, learned counsel for respondent No. 1, on the other hand, submitted that an arbitrator certainly would be entitled to issue a direction for specific performance of the contract. ( 31. ) In the matter of Olympus Superstructures Private Limited Vs. Meena Vijay Khetan and Others {1999} 5 SCC 651, the Supreme Court observed that merely because there is need for exercise of jurisdiction in case of specific performance, it cannot be said that only the Civil Court can exercise such a discretion. The Supreme Court approved the following observation made by the Calcutta High Court "merely because the Sections of the Specific Relief Act confer discretion on Courts to grant specific performance of a contract docs not mean that parties cannot agree that the discretion will be exercised by a Forum of their choice, if the converse were true, then whenever a relief is dependent upon the exercise of discretion of a Court by statute for example the grant of interest or costs, parties could be precluded from referring the dispute to arbitration". The Supreme Court candidly observed that dispute relating to specific performance of a contract can be referred to arbitration and Section 34{2} {b} {i}is not attracted. ( 32.
The Supreme Court candidly observed that dispute relating to specific performance of a contract can be referred to arbitration and Section 34{2} {b} {i}is not attracted. ( 32. ) In the matter of Rodemadan India Limited Vs. International Trade Expo Centre Limited {2006} 11 SCC 651, the Supreme Court placed reliance upon the judgment in the matter of Olympus Superstructures Private Limited {supra} and observed that such a contention would not be maintainable. Under the circumstances, we hold that an arbitrator appointed under the provisions of the Act would be entitled to grant specific performance of the agreement. ( 33. ) Placing reliance upon the judgments in the matters of Sikkim Subba Associates Vs. State of Sikkim {2001} 5 SCC 629 and Food Corporation Of India Vs. Chandu Construction and Another {2007} 4 SCC 697, it is next contended by Shri R.N.Singh, learned senior counsel for the appellants that an arbitrator is not a conciliator and is to decide the disputes submitted to him according to the legal rights of the parties and not according to what he may consider to be fair and reasonable. An arbitrator cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. According to the submissions, he is a Tribunal selected by the parties to decide their disputes according to law and the arbitrator is bound to follow and apply the law and if he does not, he can set right by the Court provided the error apparent on the face of the award. ( 34. ) Insofar as the above referred judgments of the Supreme Court are concerned, there cannot be a dispute in regard to their application. The question, however, would be that whether the arbitrator acted as a conciliator and decided the case after ignoring the law or misapplied it in order to do what he thought was just and reasonable. The award made by the arbitrator, which is a Tribunal selected by the parties, cannot be interfered with by a Court of law under Section 34 unless the grounds for setting aside the same are available to the parties challenging the correctness, validity and propriety of the said award. ( 35.
The award made by the arbitrator, which is a Tribunal selected by the parties, cannot be interfered with by a Court of law under Section 34 unless the grounds for setting aside the same are available to the parties challenging the correctness, validity and propriety of the said award. ( 35. ) To challenge the award, it was contended that the arbitrator had framed the issue that whether the claimant was entitled to loss or extension of period of lease and under the circumstances, the arbitrator could not extend the lease unless he had quantified the damages. It is also submitted that the arbitrator himself was not sure and certain that what were the losses and, therefore, he was not justified in directing extension for a period of fifteen to seventeen months. ( 36. ) It is also submitted by him that in accordance with the judgments of the Supreme Court and the requirement of the law is also that an arbitrator is obliged to give the reasons and as in the present matter, the arbitrator has not supplied any reason, the award is vitiated. Strong reliance is placed upon the judgment of the Supreme Court in the matter of MC Darmott International Inc. Vs. Burn Standard Company Limited and Others {2006} 11 SCC 181. ( 37. ) From the records, it would clearly appear that for the illegal action on the part of the appellants, the present respondent could not excavate or collect the sand because, the possession of mines to which the respondent was entitled was not given to him, the additional mines were in fact exploited by a third party, which caused immense loss to the respondent. The bid was for an amount of Rs.42,62,60,500/-. Undisputedly, the respondent had deposited a sum of Rs. 10,66,62,625/- by way of security deposit. ( 38. ) It is also clear from the records that certain directions were issued by the State Government that the mines situated within the periphery of ten kilometer would be alloted to a contractor but in the case of the respondent, the new mines were alloted to third party and ultimately the High Court had to intervene in the matter and direct the Collector, Hoshangabad to cancel the allotment of mines and attach the same with the mines of the claimant. ( 39.
( 39. ) From the records, it would also appear that the respondent had claimed before the arbitrator that he sustained a loss to the extent of Rs.17,23,63,381/-, The figures are not based on a simple guess work but in fact find support from Annexure A-21 filed before the arbitrator, a certificate issued by the Mining Corporation on 19.4.2006. From the said letter, it clearly appears that the respondent suffered a loss to the tune of Rs. 17,23,63,381/-. Once it is found that the respondent/contractor suffered loss because of the inaction or a wrong action on the part of the State Authorities and the Mining Corporation then the contractor certainly would be entitled to enforce Clause 16 of the agreement. ( 40. ) It is also to be seen from the records that identical Clause 16 of the. agreement has been applied in favour of Shri Shashank Chandak Exhibit A-22. in favour of Shri Purshottam Goyal vide order dated 1.7.2005 Exhibit A-23 on the ground that fifteen mines were alloted by Panchayat in favour of the private contractors, therefore, the Corporation had to face the competition with the private contractors, in favour of M/s.B.D.Bhanot and Sons, Jabalpur vide order dated 31.3.2006 Exhibit A-24 and in favour of Shri Ajay Singh vide Exhibit A-25. These extensions have been granted by the Managing Director exercising his authority and discretion under Clause 16 of the agreement. ( 41. ) Though, Shri R.N.Singh, learned senior counsel for the appellants has submitted that the arbitrator could not apply the principle of equity or equality because in a particular case, the Managing Director may find that special circumstances do subsist but in another case, he may hold that such circumstances do not exist. On principles, we would not disagree with the submissions made by Shri R.N.Singh, learned counsel for the appellants but a perusal of the case of the respondent and the cases of those contractors, whose period of lease was extended, it would clearly appear that on identical grounds as raised by the present respondent No. 1, the lease period was extended in favour of those contractors. ( 42. ) True it is that when the discretion is to be exercised by an authority then it would be free to exercise the discretion as it likes but that does not mean that such authority can exercise the discretion in illegal, unjudicious or arbitrary manner.
( 42. ) True it is that when the discretion is to be exercised by an authority then it would be free to exercise the discretion as it likes but that does not mean that such authority can exercise the discretion in illegal, unjudicious or arbitrary manner. Arbitrariness runs contrary to the justice, principles of equity and equality. If on the given set of facts, the discretion is exercised in favour of one party then on the same facts, an authority cannot refuse to exercise the discretion in favour of the other-party. ( 43. ) Section 28 of the Act relates to Rules applicable to subsistence of dispute. Sub-section 3 of Section 28 provides that in all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction. For the resolution of dispute in any commercial transaction, if the parties have not provided for the proper law/ procedure, which will govern the arbitral proceedings, nor have provided for the manner in which the dispute will be resolved, the resolution thereof shall be governed by the usages of the trade, which acquires sanctity because of adoption over a long period of time by the trading community. ( 44. ) In a case like present, when a party knows that in case it suffers losses, it can apply Clause 16 because on earlier occasions, the said Clause had been applied by the Managing Director in favour of third party then the expectation of the first party cannot be held to be illegal, presumptive or imaginary. When the earlier action on the part of the Managing Director in extending the period of lease provided a foundation in favour of the respondent No. 1 then it cannot be argued by the appellants that Section 28 {3} would not apply to the present case. ( 45. ) Submission of Shri R.N.Singh, learned senior counsel for the appellants that the principles on which or the facts on which the period was extended in favour of the four contractors, could not be made a foundation by the arbitrator for extending the period of lease, in our opinion, would run contrary to the principles of fair play and justice. ( 46.
( 46. ) Submission of Shri R.N.Singh, learned senior counsel for the appellants further is that the arbitration award does not give any reason as to why the period is fixed between fifteen to seventeen months. According to him, fixation of this period in itself shows that the arbitrator was not sure and certain and, therefore, the award deserves to be set aside. ( 47. ) Shri Viplav Sharma. learned counsel for respondent No. 1, on the other hand, submitted that in a period of thirty-six months, if the respondent No. 1 was to excavate or collect sand worth Rs.42,00,00.000/- then the monthly average of collection of sand was Rs.1.17 crores and if the respondent No. 1 had suffered losses to the tune of Rs. 17,00,00,000/- and plus then at the average of Rs. 1.17 crores per month, the respondent No. 1 would be entitled to extension for a period of fifteen months and to avoid any emergency or exigency, the period may be seventeen months. ( 48. ) In our opinion, the submission made by Shri Viplav Sharma, learned counsel for respondent No. 1 must be accepted. If the respondent was to excavate/collect the sand for an average of Rs. 1.17 crores per month then to cover-up the losses of Rs 17,00,00,000/- and odds, he would certainly be entitled to a period of fifteen to seventeen months. ( 49. ) At sometime, there was a confusion between the understanding of the parties that whether the respondent is entitled to excavate the sand for the money, whieb he has already paid and he is not required to pay any amount for the period of fifteen/seventeen months, Shri Viplav Sharma, learned counsel for respondent No. 1 fairly submitted before us that the loss of Rs. 17,00,00,000/- is suffered forever but, however, the respondent would be entitled to the extension for a period between fifteen/seventeen months on payment of the amount now fixed by the Managing Director. His submission however is that if the earlier agreement was at a particular rate then there can only be a reasonable escalation/increase in the contract amount. It is also submitted by him that if sand beyond the agreed quantity is excavated by the respondent then he would also be obliged to pay the additional amount to the appellants.
His submission however is that if the earlier agreement was at a particular rate then there can only be a reasonable escalation/increase in the contract amount. It is also submitted by him that if sand beyond the agreed quantity is excavated by the respondent then he would also be obliged to pay the additional amount to the appellants. His further submission is that the minimum period for extension can be fifteen months and the maximum period would be seventeen months and fixing of the said period would be within the sole discretion of the Managing Director. ( 50. ) After going through the award, we are unable to hold that the arbitrator has failed to give reasons in making the award in favour of the respondent. The judgment in the matter of MC Darmott International Inc. Vs. Burn Standard Company Limited {supra} would not apply to the present case because the arbitrator has clearly held that non-grant of the additional area to the petitioner, exploitation of the additional area by other contractors, overloading etc had led to the losses suffered by the respondent. The arbitrator has also found that the present appellants were acting in arbitrary and high-handed manner in not applying Clause 16 in favour of the respondent though on the same grounds, extension was granted to others. ( 51. ) We are also unable to hold that the arbitrator acted as a conciliator and not as an arbitrator. In our opinion, the arbitrator did not ignore the law or misapply it in order to do what he thought was just and reasonable. Infact, the arbitrator acted as a Tribunal and decided the matter in accordance with law and according to the legal rights of the parties. ( 52. ) It would also be necessary to refer to the judgment of the Supreme Court in the matter of Bharat Coking Coal Limited Vs. Annapurna Construction {2003} 8 SCC 154. In the said matter, the Supreme Court observed that there lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. According to the Supreme Court, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract.
In the said matter, the Supreme Court observed that there lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. According to the Supreme Court, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameter of the contract, his award cannot be questioned on the ground thai it contains an error apparent on the face of record. If there is a clear line of distinction between an error within the jurisdiction and error in excess of jurisdiction then the endeavour of the Court is always to find that what error the arbitrator had committed. ( 53. ) In the present matter, we are unable to hold that the arbitrator committed any error in excess of his jurisdiction. When Clause 19 of the agreement provided that in case of any dispute between the Corporation and the Contractor, the matter could be decided either by the Managing Director or by a person nominated by him under the Arbitration and Conciliation Act, 1996 then at this stage, the appellants would not be allowed to say that the question referred to the arbitrator could not be decided by him and he committed an error in excess of the jurisdiction conferred upon him. After giving our due and anxious consideration to the legal position, the facts of the case, the findings recorded by the arbitrator and the reasons assigned by the learned Court below, we are unable to hold that the appellants are entitled to any relief. ( 54. ) During course of the arguments, it was submitted by Shri Viplav Sharma, learned counsel for respondent No. 1 that the respondent has made a security deposit of Rs. 10,00,00,000/- or more with the appellants, the appellants are enjoying the same for more than two years, neither they have returned it, nor they are paying any interest on it, therefore, the appellants be directed to pay interest on the same and adjust the said security deposit towards the extended period. It was also contended that the appellants be asked to provide proper security so that the theft or illegal mining activities are not carried out by anybody. ( 55.
It was also contended that the appellants be asked to provide proper security so that the theft or illegal mining activities are not carried out by anybody. ( 55. ) In our opinion, the question of security deposit, payment of interest on the same, its adjustment towards the extended period and control over the theft and / or illegal mining are not the questions relating to the award or the scope of the dispute. We do not think that we are entitled or authorized to issue any direction in this behalf to the appellants. However, we would only observe that the respondent No. 1 if is entitled under the law to make such application for grant of such reliefs to the appellants then he can make such application to the department. However, it would be in the discretion of the appellants/Corporation to "pass appropriate orders on the said application/applications. It is made clear that in relation to the security deposit, interest over it, its adjustment towards the extended period of lease and control over the theft and/or illegal manner, this Court is not issuing any direction to the appellants but is leaving the same to their discretion with a hope that the appellants would act in accordance with law. ( 56. ) For the reasons aforesaid, the appeal deserves to and is accordingly dismissed but, however, with no orders as to costs. Appeal dismissed.