Research › Search › Judgment

Delhi High Court · body

2008 DIGILAW 972 (DEL)

R. S. Avtar Singh and Co. v. National Projects Construction Corporation Ltd.

2008-10-15

HIMA KOHLI

body2008
JUDGMENT Hima Kohli, J. 1. This order shall dispose of the objections filed by the respondent/objector under Sections 30 & 33 of the Arbitration Act, 1940 (in short ‘the Act’) against an award dated 3. 6. 1993 passed by the sole arbitrator, Shri G. K. Saxena, wherein the learned arbitrator directed the respondent/objector to pay Rs. 13,87,160/- to the petitioner/claimant in full and final settlement of all the dues and claims mentioned in its statement of claims and the counter-claims of the respondent/objector, along with the interest @ 15% per annum from 2. 7. 1993, to the actual date of payment of award or the date of decree whichever was earlier. 2. In a nutshell, the facts of the case are that the respondent/ objector awarded a contract in favour of the petitioner/claimant for work of construction of four food grains godowns of total capacity of 19,580 metric tones with ancillary buildings including canteen block, lavatory block and isolation shed, which were to be constructed at Partapur at a cost of Rs. 97,73,738. 90 paise. The godowns were meant for use by the Food Corporation of India (FCI). The respondent/objector had undertaken the work of construction of godowns at various places on behalf of FCI and in turn, entered into a contract with the petitioner/claimant dated 6. 2. 1985 for a sub-contract for carrying out the aforesaid work. The period of completion for the work was stipulated as 7 months, as indicated in the letter of intent dated 17. 11. 1984. The stipulated date of completion of work was 16. 6. 1985. However, the work was not completed by the due date. 3. Disputes and differences arose between the parties with respect to the work, pursuant to which initially, Mr. T.S. Murthy was appointed as a sole arbitrator by the Chairman and Managing Director of the respondent/objector, vide letter dated 4. 5. 1989, to adjudicate all the disputes between the parties. The said sole arbitrator entered upon reference and gave an award dated 31. 7. 1990 for Rs. 19,91,418/-in favour of the petitioner/claimant and against the respondent/objector. The said award was filed in this Court and notice was issued to both the parties. While the petitioner/claimant did not file any objections, however, the respondent/objector filed objections to the award which were upheld by a judgment dated 31. 3. 7. 1990 for Rs. 19,91,418/-in favour of the petitioner/claimant and against the respondent/objector. The said award was filed in this Court and notice was issued to both the parties. While the petitioner/claimant did not file any objections, however, the respondent/objector filed objections to the award which were upheld by a judgment dated 31. 3. 1992 passed in CS(OS) No. 2464A/1990 on the ground that the sole arbitrator had mis-conducted himself in the proceedings and deprived the respondent/ objector of a reasonable opportunity of hearing. 4. The aforesaid judgment dated 31. 3. 1992 was challenged by the petitioner/claimant, who filed an appeal, registered as FAO(OS) No. 92/1992. The said appeal was dismissed by a Division Bench, vide order dated 17. 9. 1992 with a direction to the respondent/objector to appoint another arbitrator within a period of 3 weeks from the date of the order. Under these circumstances, the Chairman and Managing Director of the respondent/objector passed an order dated 7. 10. 1992 appointing Shri G. K. Saxena as a sole arbitrator to decide the disputes and differences between the parties afresh. Shri G. K. Saxena entered into reference on 16. 4. 1993 and passed a non-speaking lump sum award of Rs. 13,87,160/- in favour of the petitioner/claimant and against the respondent/objector, as indicated above, which is under challenge by the respondent/objector herein. 5. In the objections filed by the respondent/objector, six grounds have been taken to assail the award, which include the ground that the learned Arbitrator did not give a reasonable opportunity to the respondent/objector and did not call for the records or peruse the documents placed on the record of the earlier proceedings. The second ground taken to assail the award is that from a bare reading of the award, it is not possible to find out which claim has been allowed and which has been dis-allowed as there were 14 claims raised by the petitioner/claimant and that the sole arbitrator acted illegally in passing the lump sum award, without any calculation or basis. The third objection raised is that the Arbitrator acted without jurisdiction in entertaining new claims/variated claims and adjudicating them without evidence, which was not permissible. 6. The fourth ground taken to assail the award is against the grant of future interest. The third objection raised is that the Arbitrator acted without jurisdiction in entertaining new claims/variated claims and adjudicating them without evidence, which was not permissible. 6. The fourth ground taken to assail the award is against the grant of future interest. The fifth ground taken is that the learned Arbitrator acted beyond the terms of reference as set out in his appointment letter and lastly, an objection is taken to the effect that there are errors on the face of the award and the same is liable to be set aside. The aforesaid objections were filed by the respondent/objector on 14. 9. 1993. After pleadings were completed, the following issues were framed on 14. 2. 1994: In view of the objections filed in the award whether the award is liable to be set aside as well as the petition. Relief. 7. Thereafter, as per the practice followed in respect of proceedings under the old Arbitration Act, the evidence by way of affidavits were filed by the respective parties in support of the objections. Written submissions were filed on behalf of the respondent/objector on 10. 7. 2002, in which the submissions made in the objections were reiterated. However, when the case was argued, the grounds taken to assail the award were entirely different from those urged in the present objections. 8. Counsel for the respondent/objector contended that Part III of claim No. 1 which was in respect of the claim raised on account of statutory increase in price of steel as announced by the Joint Plant Committee on 21. 2. 1985 and the claim No. 4, raised on account of escalation of cost of material, labour and fuel amounting to Rs. 36,18,430. 23 paise, were barred by Clause 12 of the contract governing the parties. He further urged that the claim No. 5 raised by the petitioner/claimant on account of abnormal increase in quantities beyond the agreement quantities at enhanced rates, amounting to Rs. 3,87,741. 01 paise and claim No. 6 raised on account of loss of profit due to abnormal reduction of quantities, amounting to Rs. 78,574. 83 paise were barred by Clause 32 of the General Conditions of Contract. In respect of Claim No. 7, which was raised on account of chowkidary charges incurred, amounting to Rs. 2,64,000/-, it was contended that the same was barred by Clause 13 (b) of the contract. 9. 78,574. 83 paise were barred by Clause 32 of the General Conditions of Contract. In respect of Claim No. 7, which was raised on account of chowkidary charges incurred, amounting to Rs. 2,64,000/-, it was contended that the same was barred by Clause 13 (b) of the contract. 9. Lastly, it was contended that Claim No. 8 raised on account of prolongation of contract due to breach thereof by the respondent/objector, amounting to Rs. 97,33,877. 83 paise, could not have been entertained by the learned Arbitrator as there was no clause in the contract for raising such a claim. In support of his contention that the respondent/objector was entitled to take the aforesaid grounds to assail the impugned award even in the course of arguments, counsel for the respondent/objector submitted that the aforesaid objections were those which could not have been entertained by the learned Arbitrator in view of the fact that there was a specific bar to raising such claims in the contract governing the parties and hence the decision of the learned Arbitrator was without jurisdiction. In support of the said contention, he relied on the following judgments: Associate Engineering Co. v. Government of Andhra Pradesh and Anr. [1991]2SCR924 ; and 10. Counsel for the respondent/objector submitted that the grounds urged by him were purely questions of law and could be raised at any point of time and hence, the same were not barred by limitation. He submitted that since the learned Arbitrator did not have the jurisdiction to deal with matters which were barred under the contract, the issue goes to the root of the matter and such an objection is one raised under Section 33 of the Act, in which case, law of limitation has no application. In support of the aforesaid contention, counsel for the respondent/objector relied on the following two judgments: DDA v. Jagan Nath Ashok Kumar 2000 VII AD (Delhi) 757; and State of Orissa v. Sri S.C. Roy (Dead) by LRs. JT 2001 (5) SCC 267. 11. It was further submitted by the counsel for the respondent/ objector that since the learned Arbitrator had given a non-speaking lump sum award, it is not discernable as to how much amount the sole Arbitrator had awarded towards the claims which were either barred or were beyond the terms of agreement between the parties. JT 2001 (5) SCC 267. 11. It was further submitted by the counsel for the respondent/ objector that since the learned Arbitrator had given a non-speaking lump sum award, it is not discernable as to how much amount the sole Arbitrator had awarded towards the claims which were either barred or were beyond the terms of agreement between the parties. According to the counsel, had the learned Arbitrator given some indication in his award that the claim Nos. 1 (Part III), 4, 5, 6, 7 and 8 were not taken into consideration being barred by the terms of contract, in that eventuality, the court could have arrived at a conclusion that the learned Arbitrator segregated the impermissible claims from those which were permissible and in such circumstances, a lump sum award could perhaps not have been interfered with. He stated that as no such procedure was adopted by the learned Arbitrator and the award is non-speaking and silent on the said issue, it is not possible to make any deduction and hence the entire award was liable to be set aside. In support of the aforesaid submissions, he relied on the judgments reported as Punjab State Electricity Board v. Punjab Pre-Stressed Concrete Works 2001 (VI) AD SC 33 and Tamilnadu Electricity Board v. Bridge Tunnel Constructions 1997 III AD SC 458. 12. The aforesaid objections raised on behalf of the respondent/objector to assail the award, were vehemently opposed by the counsel for the petitioner/claimant who contended that none of the aforesaid objections find mention in the grounds taken to assail the award. He submitted that the respondent/objector cannot be permitted to urge such grounds in the course of arguments which do not find specific mention in the objections, particularly, since the same were not even taken in the written submissions which were filed much later i. e. in the year 2002. In support of his submission that the objections if not specifically taken in the grounds could not be urged in the course of oral arguments and ought not to be taken notice of, counsel for the respondent/objector relied on the following judgments: Bijendra Nath Srivastava (Dead) Through LRs v. Mayank Srivastava and Ors. AIR1994SC2562 . S.C. Sood & Co. v. DDA 75(1998)DLT691 Mrs. Leelawati Singh and Anr. v. State and Ors. 75 (1998)DLT694 Bhagat Construction Co. v. DDA 2001 Arb. LR 375 (Delhi) 13. AIR1994SC2562 . S.C. Sood & Co. v. DDA 75(1998)DLT691 Mrs. Leelawati Singh and Anr. v. State and Ors. 75 (1998)DLT694 Bhagat Construction Co. v. DDA 2001 Arb. LR 375 (Delhi) 13. On merits, it was stated by the counsel for the petitioner that claim No. 1 raised before the learned Arbitrator was on account of bill for work done amounting to Rs. 63,80,919. 68 paise. The said claim comprised of bills attached thereto and was stated to have been prepared in four parts. Part I comprised of items physically executed on ground. Part II comprised of extra items physically executed on ground. Part III comprised of statutory increase in price of steel as announced by the Joint Plant Committee on 21. 2. 1985. Part IV comprised of credit for materials lying at the site as on 2. 9. 1987. It was submitted that Part III of claim No. 1 which the counsel for the respondent/objector stated is barred by Clause 12 of the contract governing the parties, is based on account of actual difference between the prices announced by the Joint Plant Committee and those prevalent prior to the announcement. Counsel for the petitioner submitted that he had enclosed as Ex. C-58, copy of a letter dated 30. 10. 1985 issued by the respondent/objector to the petitioner intimating it that they had taken up the matter with regard to the statutory increase in price of steel with FCI and that difference in cost due to the said statutory increase could be paid to the petitioner only when the same was approved by FCI. He submitted that there is a fallacy in R.S. Avtar Singh and Co. vs. National Projects Construction Corporation Ltd. (15.10.200... Page 7 of 11 the argument raised on behalf of the respondent/objector to the effect that Part III of claim No. 1 was barred by Clause 12 of the contract for the reason that the claim raised by the petitioner was not on account of increase in the cost of material as covered under Clause 12, but on account of statutory increase of prices of steel, the basis of which was entirely different. Hence, as per the counsel for the petitioner, the bar of Section 12 did not apply. 14. Hence, as per the counsel for the petitioner, the bar of Section 12 did not apply. 14. In respect of the objection taken by the respondent/objector to claim No. 4 raised on account of escalation of cost of material, labour and fuel, counsel for the petitioner submitted that the said claim was protected under Clause 5 of the contract, readwith Clause 10CC of the CPWD Manual. Clause 5 of the NIT stipulated that the work shall be carried out as per the specifications and provisions of CPWD/FCI unless otherwise directed by the Engineer-in-Charge. He referred to Clause 10CC enclosed as Ex-C-18 to the statement of claim which mandates that if the price of materials, not being materials supplied by the Department, and/or wages of labour increase, the contractor shall be compensated for such increase in terms of the said clause. It was stated on behalf of the petitioner that the compensation for escalation and price of material and labour was worked out by his client on the basis of the formula given in Clause 10CC and hence reliance placed by the counsel for the respondent/objector on Clause 12 of the contract without adverting to Clause 5 thereof, was misplaced. 15. As regards the objection raised by the counsel for the respondent/objector to the effect that claim No. 5 based on abnormal increase in quantities beyond the agreement quantities at enhanced rates and claim No. 6 on account of loss of profit due to abnormal reduction of quantities was barred by Clause 32 of the General Conditions of the Contract, counsel for the petitioner stated that the quantities given in the contract were approximate in nature as the date of floating the tender was 29. 9. 1984, whereas the date of awarding the contract was 6. 2. 1985, on which date the quantities were actually fixed. He submited that the said Clause 32 was not applicable after the quantities were fixed as the Clause 32 specified that the quantities noted in the schedule of quantities were approximate. 16. 9. 1984, whereas the date of awarding the contract was 6. 2. 1985, on which date the quantities were actually fixed. He submited that the said Clause 32 was not applicable after the quantities were fixed as the Clause 32 specified that the quantities noted in the schedule of quantities were approximate. 16. In respect of claim No. 7 raised on account of chowkidary charges incurred by the petitioner, counsel for the petitioner submitted that the plea raised on behalf of the respondent/objector that the said claim was barred by Clause 13(b) of the contract, was misconceived for the reason that the said clause permitted the respondent to provide watch and ward work at a fixed monthly rate, the cost of which was liable to be recovered from the sub-contractor. He stated that the said claim was raised on account of chowkidary charges for the period 1. 9. 1987 to 30. 4. 1991 which was the period beyond the period of contract which expired in the year 1985. He submitted that the period of contract was unilaterally extended by the respondent/objector till 1987. However, possession of the site was not taken over by the respondent/objector as a result of which the petitioner employed chowkidar at the site for security purposes. He stated that the expenses incurred for the said chowkidary charges was not related to the contract period and could not be held to be barred by the terms of the contract. 17. The plea raised on behalf of the respondent/objector that claim No. 8 raised on account of prolongation of contract due to breach thereof by the respondent/objector could not be entertained by the learned Arbitrator as there was no clause in the contract for raising such a claim, was answered by the counsel for the petitioner by stating that even if it is assumed that there was no contract for raising such a claim, there was no clause in the contract specifically barring such a claim and that when a contract does not cover a claim, the same is maintainable and cannot be stated to be barred. 18. I have heard the counsels for the parties and carefully considered the rival submissions. 18. I have heard the counsels for the parties and carefully considered the rival submissions. The old Arbitration Act contemplates objections to an award, under two provisions, i. e. , Section 30 which permits an award to be set aside on the ground that the arbitrator mis-conducted himself or the proceedings or that an award was made after the issue of an order by the court superseding the arbitration or after arbitration proceedings have become invalid under Section 35 and lastly that the award had been improperly procured or was otherwise invalid. The second ground for seeking to set aside an award is contemplated under the provisions of Section 33 of the Act which permits a party to challenge an award on the ground of the existence or validity of an arbitration agreement or an award for deciding the question on affidavits. When a ground taken to challenge an award is on the basis of jurisdictional error, there is no embargo on the power of the court to examine the contract and consider whether or not the arbitrator has exceeded his jurisdiction, because the nature of the dispute is one which has to be determined outside the award. 19. It is settled law that the arbitrator derives his authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be an arbitrary one. The function of the arbitrator depends upon the agreement and it is his duty to act within the limits of such an agreement. To find out whether the arbitrator has travelled beyond his jurisdiction and acted beyond the terms of the agreement between the parties, the agreement is required to be looked into. However, it is equally true that the interpretation of such a particular condition of the agreement would be well within the jurisdiction of the arbitrator. The opposition raised by the counsel for the petitioner to the grounds urged by the counsel for the respondent/objector for assailing the award in the course of arguments, without taking such grounds in the objections filed before the Court has to be examined in the light of whether the same fall under Section 30 of the Act or under Section 33 of the Act. It is also well settled law that an objection raised to the effect that the arbitrator did not have jurisdiction to deal with “excepted matters” can be raised at any time as the same goes to the root of the matter, and can be taken even at the time of arguments for the reason that the law of limitation has no application to the objections raised under Section 33 of the Act. Refer: Jagan Nath Ashok Kumar (supra) . The counsel for the petitioner has challenged the award on the ground of jurisdictional error. The said plea has to be determined outside the award, by examining the contract governing the parties. Hence, the plea of the counsel for the petitioner that grounds taken by the counsel for the respondent/objector in the course of arguments cannot be considered, is turned down. Even the judgements referred to by him are not on this point and therefore, of no assistance to him. Rather, in the case of Bhagat Construction Co. (supra), relied on by the counsel for the petitioner, the same point was reiterated by a Division Bench of this Court as indicated above. 20. To decide as to whether the arguments raised by the counsel for the respondent/objector as to the lack of inherent jurisdiction of the arbitrator to deal with the matter and his contention that the award in respect of such claims is a nullity, it is necessary to examine the contract in question. 21. In the present case, a perusal of the terms and conditions of the NIT would show that apart from the clauses mentioned by the counsel for the respondent/objector to state that certain claims raised by the petitioner were on the face of it, barred by the contract, namely, Clauses 12, 13(b) and 32, the same have to be read in the light of Clause 5 thereof which stipulates that the work shall be carried out as per specifications and provisions of CPWD/FCI, unless otherwise directed by Engineer-in-Charge. Thus counsel for the petitioner is justified in stating that if the terms and conditions of the provisions of CPWD provided for claim of escalation of prices of labour and material as stipulated therein, the petitioner was entitled to raise such a dispute. Thus counsel for the petitioner is justified in stating that if the terms and conditions of the provisions of CPWD provided for claim of escalation of prices of labour and material as stipulated therein, the petitioner was entitled to raise such a dispute. It is not the case of the counsel for the respondent/objector that the Engineer-in-Charge had issued directions contrary to the provisions of CPWD in the present case. Thus keeping in mind the terms and conditions of the contract, it cannot be held that the learned Arbitrator exceeded his jurisdiction in any manner or that even if the award given was nonspeaking, he ought to have, in the first instance, excluded the claims barred under the contract before dealing with the matter. 22. The argument of the counsel for the petitioner that whatever is not excluded specifically by the contract, can be subject matter of claim by the contract is not acceptable. However, if the same flows as a necessary concomitant to what was agreed upon, the Courts can assume that to be a part of the contract between the parties. In the present case, claim No. 8 raised on account of prolongation of contract due to breach thereof can be considered as concomitant to what was agreed upon and thus a part of the contract. In the present case, it cannot be stated that the conditions contained in the contract completely prohibit granting claims raised by the petitioner under claim Nos. 1(iii), 4, 5, 6 & 7 and that the learned Arbitrator ignored the conditions and acted beyond the jurisdiction conferred upon him. Hence the same cannot be treated as an ‘error going to the root of his jurisdiction’. It could at best be stated to be a case where, while the learned Arbitrator remained within the parameters of the contract, he construed the provisions of the contract to deal with the claims of the parties. In such circumstances, where the question is of interpretation of the terms of the contract, the award cannot be interfered with unless reasons for giving the award disclose an error apparent on the face of it. 23. It has been repeatedly held that even an error of construction of contract, committed by the Arbitrator, is an error within his jurisdiction. In such circumstances, where the question is of interpretation of the terms of the contract, the award cannot be interfered with unless reasons for giving the award disclose an error apparent on the face of it. 23. It has been repeatedly held that even an error of construction of contract, committed by the Arbitrator, is an error within his jurisdiction. If the case of the respondent/objector is taken at the highest, at best it could be urged on behalf of the respondent/objector that the learned Arbitrator committed an error of construction of the contract. While the Court can examine the claims to find out whether the same were within the disputes referable to the arbitrator, it is not for the Court to find out whether in arriving at the decision, the learned Arbitrator acted correctly or incorrectly for the reason that any such attempt of construing the contract cannot enlarge the scope of interference by the Court to say whether a particular amount was liable to be paid or damages liable to be sustained as the same is beyond its jurisdiction. Such a decision is purely within the competency of the learned Arbitrator and the Court cannot take upon itself such a burden. The distinction between the disputes as to the jurisdiction of the arbitrator and disputes as to in what way that jurisdiction should be exercised, cannot be obliterated by the Court. While a dispute as to the jurisdiction of the arbitrator is an error which can be examined by the Court under Section 33 of the Act on the ground that the arbitrator has exceeded his jurisdiction, but a dispute as to the manner in which the jurisdiction is exercised, is an error within the jurisdiction of the arbitrator. Refer: Sudarsan Trading Co. v. Govt. of Kerela and Anr. (1998) 2SCC 38; SAIL v. J. C. Budhiraja AIR1999SC3275 24. In the present case, it cannot be said that the learned Arbitrator adjudicated upon matters outside the scope of his authority and that the award cannot stand. Having held as above, a natural fallout thereof would be the inevitable conclusion that the plea raised by the respondent/objector that the arbitrator was enjoined to decide the arbitrability of each and every claim set up by the petitioner, is liable to be turned down. 25. The learned Arbitrator has passed a non-speaking lump sum award in the present case. Having held as above, a natural fallout thereof would be the inevitable conclusion that the plea raised by the respondent/objector that the arbitrator was enjoined to decide the arbitrability of each and every claim set up by the petitioner, is liable to be turned down. 25. The learned Arbitrator has passed a non-speaking lump sum award in the present case. It is not in dispute that the contract governing the parties did not require the Arbitrator to render a speaking award. Considering the fact that the award in the present case is a non-speaking lump-sum award, the scope of interference by the Court is extremely limited. There are a number of judicial pronouncements wherein the legal position has been consistently followed that it is not open for the court to probe the mental process of the arbitrator and speculate, when no reasons are given by the arbitrator as to what impelled him to arrive at his conclusions: Ref: State of A.P. v. R. V. Rayanim, (1990) 1 SCC 433; Bijendra Nath Srivastava v. Mayant Srivastava and Ors. AIR1994SC2562 ; Sudarsan Trading Co. v. Government of Kerala and Anr. (1998) 2 SCC 38; Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering and Anr. AIR1999SC3627 ; State of Bihar and Ors. v. Hanuman Mal Jain (1997)11SCC40 ; D.D. Sharma v. UOI (2004)5SCC325 and Markfed Vanaspati & Allied Industries v. UOI VIII (2007) SLT 26. In view of the fact that in the present case, the learned Arbitrator was not under any obligation to give reasons in respect of the decision arrived at by him, he cannot be faulted for giving a non-speaking lump-sum award. It is not open for the Court to look for the reasons and examine whether they were right or erroneous. Only in the case of a speaking award, can the court look into the reasoning of the award. It is, therefore, not open to the court to probe the mental process of the arbitrator and speculate when no reasons have been given by the arbitrator as to what impelled him to arrive at a conclusion. Refer: Hindustan Steel Construction Ltd. v. Raj Sekhar Rao [1987]3SCR653 . The arbitrator being the sole judge of the quality as well as the quantity of the evidence, the Court cannot sit in appeal over the decision of the arbitrator by reappreciating evidence before the arbitrator. Refer: Hindustan Steel Construction Ltd. v. Raj Sekhar Rao [1987]3SCR653 . The arbitrator being the sole judge of the quality as well as the quantity of the evidence, the Court cannot sit in appeal over the decision of the arbitrator by reappreciating evidence before the arbitrator. Refer: MCD v. Jagan Nath Ashok Kumar [1988]1SCR180 Rather, endeavour should be made to support a non-speaking award as long as it adheres to the agreement governing the parties and is not invalidated due to the arbitrator’s misconduct. 27. In view of the aforesaid discussion, the objections raised by the respondent/objector are found to be devoid of merits and are rejected. The impugned award dated 3. 6. 1993 passed by Sh. G. K. Saxena is made rule of the Court. The petitioner shall be entitled to future interest @ 9% p. a. till realization. Decree be drawn accordingly. The suit is disposed of.