REPORTABLE IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 2424 OF 2002

Delhi Development Authority       .... Appellant (s)

Versus

M/s R.S. Sharma & Co., New Delhi       .... Respondent(s)

JUDGMENT

P. Sathasivam, J.

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1) This  appeal,  by  special  leave,  is  directed  against  the

judgment and final order dated 10.8.2001 passed by the High

Court  of  Delhi  at  New  Delhi  in  FAO(OS)  No.  104  of  1996,

whereby the Division Bench of the High Court had set aside

the order passed by the learned single Judge in favour of the

Delhi  Development  Authority  –  the  appellant  herein  and

directed that the Award passed by the Arbitrator be made a

rule of the Court along with interest @ 12% p.a. from the date

of the decree till the date of payment on the entire amount as

awarded by the Arbitrator.     

2) The facts, in a nutshell, are as under:

On 18.4.1990,  an Agreement  was entered  into  between  the

appellant-Delhi Development Authority (hereinafter referred to

as  “DDA”)  and  the  respondent  –  M/s  R.S.  Sharma  &  Co.

(hereinafter referred to as “the Company”) for carrying out the

work for  development  of  the land at  Pappankalan (Dwarka)

Project in South-West Delhi, Phase I  according to the terms

and conditions mentioned in the contract.  On disputes having

arisen during execution of the work, mainly with respect to

the  extra  cartage,  the  same  were  referred  to  the  Sole

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Arbitrator,  Shri  A.P.  Paracer,  Additional  Director  General

(Retd.),  C.P.W.D.,  for adjudication.   During the pendency of

the arbitration proceedings, the work was still being executed

by the Company.   13 Claims (including additional claims) for

a  sum of  Rs.  55.19  lacs  approximately  were  raised  by  the

Company   before the Arbitrator.  Claim Nos. 1 to 3 were on

account  of  extra  lead  involved  in  procurement  of  stone

aggregate specified in agreement Item No.2 i.e., supplying and

stacking of graded stone aggregate of size range 90 mm to 40

mm at site.   While  additional  Claim Nos.  1  to 3 pertain  to

extra lead involved in bringing stone specified in agreement

Item  Nos.  3  &  4  i.e.,  supplying  and  stacking  of  stone

screenings/chipping  at  site  12.5  mm nominal  size.   Under

Claim  No.1,  the  respondent-Company  claimed  an  extra

amount of Rs.30/- per cubic meter over and above the rates

mentioned in the Agreement  Item No.2 on account  of  extra

lead involved in the procurement of the stone aggregates from

the quarries at Nooh in Haryana instead of quarries at Delhi.

Under  Claim  No.3,  the  respondent-Company  sought

declaratory  Award  to  the  effect  that  for  all  quantities  of

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aggregate to be brought from Nooh in future, they are entitled

to  additional  lead @ Rs.30/-  per  cubic  meter  excluding the

quantity already claimed under Claim No.2.  Similarly, under

Additional claim Nos. 1 to 3, the respondent-Company claimed

the rate of Rs.30 per cubic meter for extra lead involved in

bringing stone, specified in agreement item Nos. 3 & 4, from

the quarries at Nooh (Haryana).   On 29.7.1992, the Arbitrator

made  the  Award  in  favour  of  respondent-Company.   Suit

No.2981  of  1992  was  filed  by  the  respondent-Company  for

making the Award a rule of the Court.  Cross Objections were

filed by DDA.  On 25.9.1995, the learned single Judge of the

Delhi High Court set aside the Award with respect to Claim

Nos. 1 to 3 as well as Additional Claim Nos. 1 to 3 and made

the  remaining  part  of  the  Award  a  rule  of  the  Court  and

awarded interest @ 12% p.a. from the date of the decree till

the date of payment by DDA.  Aggrieved by the judgment of

the learned single Judge, the Company filed FAO (OS) No.104

of 1996 before the Division Bench for setting aside the order to

the extent it deals with Claim Nos.  1-3 and for making the

Award  dated  27.9.1992  a  rule  of  the  Court.   The  Division

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Bench of the High Court of Delhi, vide order dated 10.8.2001,

set aside the order of the learned single Judge to the extent by

which the Award of the Arbitrator on Claim Nos. 1 to 3 and

Additional  Claim Nos.  1 to 3 were set  aside and the Award

made by the Arbitrator on aforesaid Claims were made a rule

of the Court.  The Respondent – Company was also awarded

interest  @ 12% p.a.  from the date  of decree  till  the date  of

payment on the entire amount as awarded by the Arbitrator.

Aggrieved by the said judgment, the present appeal is filed by

DDA before this Court.

3) Heard  Mr.  Amarendra  Sharan,  learned  Additional

Solicitor  General,  appearing  for  the  appellant  and  Mr.  U.A.

Rana, learned counsel, appearing for the respondent.   

4) Mr.  Amarendra  Sharan,  learned  Additional  Solicitor

General,  appearing  for  the  appellant-Delhi  Development

Authority,  vehemently contended that the Division Bench of

the  High  Court  was not  justified  in  setting  aside  the  order

passed by the learned single Judge with respect to Claim Nos.

1-3 and additional claim Nos. 1-3 inasmuch as the Arbitrator

had clearly failed to advert  to clause 3.16 of the Agreement

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which does not provide for extra cartage.  According to him,

clause 3.16 of the Agreement stipulates that the contractor is

responsible for all the extra leads over and above the rate of

payment  specified  in the  Agreement.   He  further contended

that  since  the  Arbitrator  failed  to  take  note  of  the  relevant

condition, namely, clause 3.16, which prohibits extra cartage

over  and  above  the  rate  of  payment  specified  in  the

Agreement, there is a clear error apparent on the face of the

Award and liable to be set aside in terms of Section 34(2) of

the Arbitration and Conciliation Act, 1996 (hereinafter referred

to as “the Act”).  On the other hand, Mr. U.A. Rana, learned

counsel  appearing  on  behalf  of  the  respondent,  while

supporting the order of the Division Bench contended that in

view of the fact that stone was brought from Nooh in Haryana

which was found to be more blue, better in appearance and

quality, the Arbitrator was fully justified in making the Award

in  favour  of  the  respondent  herein  on  Claim Nos.  1-3  and

additional  Claim  Nos.  1-3.   He  also  submitted  that  the

Arbitrator is the sole Judge of the quality as well as quantity

of evidence and the Courts cannot judge the evidence placed

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before the Arbitrator.  In the absence of plausible ground in

terms of Section 34(2) of the Act, the learned single Judge is

not  justified  in  setting  aside  the  award  of  the  Arbitrator.

Thereby, he prayed for dismissal of the appeal.

5) We have  considered  the  rival  contentions,  perused  the

relevant  materials  including  the  terms  of  the  Agreement,

award of the Arbitrator and the orders passed by the learned

single  Judge  as  well  as  by the  Division  Bench  of  the  High

Court.

6) The work relating to development of land at Pappankalan

(Dwarka) Project in South West Delhi, Phase-I  was awarded

under Agreement No. 6/EE/WD 10-A/90-91/DDA to M/s R.S.

Sharma & Co.- respondent herein.  During the execution of

the said work, certain disputes arose between the parties and

ultimately they were referred to Mr. A.P. Paracer, Additional

Director  General  (Retd.)  C.P.W.D.  for  adjudication.   After

adjudication,  the  Arbitrator,  on  29.7.1992,  made  and

published his Award.  The said Award was filed in Court and

after issuance of notice, DDA filed its objections.  The main

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dispute relates to Claim Nos. 1-3 and additional Claim Nos. 1-

3 wherein the claimant had claimed extra rate of Rs.30/- per

cubic  meter  over  and  above  the  rate  agreed  to  in  the

Agreement  under  Item  Nos.  2,  3  and  4  for  extra  cartage

involved in bringing the stone aggregate from Nooh quarries to

Delhi.  According to the claimant, it was required to use Delhi

quartz stone conforming to CPWD specifications and as the

claimant had obtained blue quartz stone from Nooh quarries

in Haryana and since DDA had failed to indicate the approved

quarry at Delhi for obtaining supplies of Delhi quartz stone,

the claimant was entitled to extra rates at the rate of Rs.30/-

per cubic meter for procurement of stone aggregate from the

quarries  at  Nooh  in  Haryana.   According  to  DDA,  the

Arbitrator  has  misconstrued  and  misunderstood  the

Agreement  between  the  parties,  particularly,  clause  3.16.

Though  the  learned  single  Judge  set  aside  the  Award  in

respect of claim Nos. 1-3 and additional Claim Nos. 1-3 on the

ground that there were  no material  before  the Arbitrator  to

accept  those claims,  the Division Bench,  reversed the same

and confirmed the Award as granted by the Arbitrator.   

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7) In order to consider the rival contentions, it is useful to

refer the relevant provisions of the Act.  Chapter VII of the Act

deals  with  ‘Recourse  against  Arbitral  Award’.   Section  34

enumerates  various  grounds/circumstances  on  which  the

Award can be set aside by the Court 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 subsection (3).

(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 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

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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.

Explanation.  -Without  prejudice  to  the  generality  of  sub- clause  (ii),  it  is  hereby declared,  for  the  avoidance of  any doubt, that an award is in conflict with the public policy of India if the making of the award was induced or affected by fraud  or  corruption  or  was  in  violation  of  section  75  or section 81.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which  that  request  had  been  disposed  of  by  the  arbitral tribunal:

Provided  that  if  the  Court  is  satisfied  that  the applicant was prevented by sufficient cause from making the application within the said period of  three months it  may entertain  the  application  within  a  further  period  of  thirty days, but not thereafter.

(4)  On receipt of an application under sub-section (1),  the Court may, where it is appropriate and it is so requested by a  party,  adjourn  the  proceedings  for  a  period  of  time determined  by  it  in  order  to  give  the  arbitral  tribunal  an opportunity  to  resume the  arbitral  proceedings  or  to  take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.”

8) The grounds/ circumstances mentioned in sub-section(2)

of Section 34 have been considered by this Court in various

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decisions.   In  Grid Corporation of Orissa Ltd. & Anr.  vs.

Balasore Technical School, (2000) 9 SCC 552, this Court in

paragraph 3 held as under:

“3. In this case, the High Court is of the view that a civil court does not sit in appeal against the award and the power of the court when an award is challenged is rather limited. The award of the arbitrator is ordinarily final and conclusive as long as the arbitrator has acted within his authority and according  to  the  principle  of  fair  play.  An  arbitrator’s adjudication  is  generally  considered  binding  between  the parties for he is a tribunal selected by the parties and the power  of  the court  to set  aside the award is  restricted to cases set out in Section 30 of the Arbitration Act. It is not open to the court to speculate where no reasons are given by the  arbitrator,  as  to  what  impelled  him  to  arrive  at  his conclusion.  If  the  dispute  is  within  the  scope  of  the arbitration clause it is no part of the province of the court to enter into the merits of the dispute. If the award goes beyond the reference or there is an error apparent on the face of the award it  would certainly be open to the court to interfere with such an award. In New India Civil Erectors (P) Ltd. v. Oil &  Natural  Gas  Corpn.(1997)  11  SCC  75   this  Court considered a case of a non-speaking award. In that case the arbitrator  had  acted  contrary  to  the  specific stipulation/condition  contained  in  the  agreement  between the parties. It was held that the arbitrator being a creature of the  contract  must  operate  within  the  four  corners  of  the contract and cannot travel beyond it and he cannot award any amount which is ruled out or prohibited by the terms of the  agreement.  In  that  contract  it  was  provided  that  for construction of  a housing unit,  in measuring the built-up area,  balcony  areas  should  be  excluded.  However,  the arbitrator included the same which was held to be without jurisdiction. In the same manner it was also held that the price would be firm and not subject to any escalation under whatsoever  ground  till  the  completion  of  the  work  and awarding  any  sum  as  a  result  of  escalation  was  not permissible. To the same effect is the decision in Associated Engg. Co. v. Govt. of A.P. (1991) 4 SCC 93. It was stated that if the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if  he

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wanders  outside  the  contract  and deals  with  matters  not allotted  to  him,  he  commits  a  jurisdictional  error  and  an umpire  or  arbitrator  cannot  widen  his  jurisdiction  by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. A conscious disregard of the law or the provisions of  the  contract  from  which  he  has  derived  his  authority vitiates  the  award.  The  principle  of  law  stated  in  N. Chellappan case on which strong reliance has been placed by the learned counsel for the respondent would make it clear that except in cases of jurisdictional errors it is not open to the  court  to  interfere  with  an  award.  That  proposition  is unexceptionable. However, from a reading of the decisions of this Court referred to earlier it is clear that when an award is made plainly contrary to the terms of  the contract not by misinterpretation but which is plainly contrary to the terms of the contract it would certainly lead to an inference that there is an error apparent on the face of the award which results in jurisdictional error in the award. In such a case the courts can certainly interfere with the award made by the arbitrator.”

9) In  General  Manager,  Northern  Railway  &  anr.  vs.

Sarvesh Chopra, (2002) 4 SCC 45,  it is worthwhile to refer

the  following  conclusion  as  observed  in  paragraph  10  as

under:  

“10. It  was next submitted by the learned counsel for the respondent that if this Court was not inclined to agree with the submission of  the  learned counsel  for  the respondent and the interpretation sought to be placed by him on the meaning of “excepted matter” then whether or not the claim raised by the contractor is an “excepted matter” should be left to be determined by the arbitrator. It was submitted by him that while dealing with a petition under Section 20 of the  Arbitration  Act,  1940  the  court  should  order  the agreement to be filed and make an order of reference to the arbitrator  appointed by the parties leaving it  open for  the arbitrator to adjudicate whether a claim should be held to be

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not entertainable or awardable, being an “excepted matter”. With this submission too we find it difficult to agree. While dealing with a petition under Section 20, the court has to examine:  (i)  whether  there  is  an  arbitration  agreement between the  parties,  (ii)  whether  the  difference  which has arisen is one to which the arbitration agreement applies, and (iii)  whether  there  is  a  cause,  shown  to  be  sufficient,  to decline  an  order  of  reference  to  the  arbitrator.  The  word “agreement”  finding  place  in  the  expression  “where  a difference  has  arisen to  which  the  agreement  applies”,  in sub-section (1) of Section 20 means “arbitration agreement”. The  reference  to  an  arbitrator  on  a  petition  filed  under Section 20 is not a function to be discharged mechanically or ministerially  by  the  court;  it  is  a  consequence  of  judicial determination,  the  court  having  applied  its  mind  to  the requirements of Section 20 and formed an opinion, that the difference sought to  be  referred to arbitral  adjudication is one to which the arbitration agreement applies. In the case of  Food Corpn. of India relied on by the learned counsel for the respondent, it has been held as the consistent view of this Court that in the event of the claims arising within the ambit of “excepted matters”, the question of assumption of jurisdiction  by  any  arbitrator  either  with  or  without  the intervention of the court would not arise. In Union of India v. Popular Builders (2000) 8 SCC 1 and Steel Authority of India Ltd. v.  J.C. Budharaja, Govt. and Mining Contractor  (1999) 8 SCC 122,  Ch. Ramalinga Reddy v.  Superintending Engineer (1999) 9 SCC 610 (para 18) and Alopi Parshad and Sons Ltd. v. Union of India (1962) 2 SCR 793 at p. 804 this Court has unequivocally expressed that an award by an arbitrator over a claim which was not arbitrable  as  per the terms of  the contract entered into between the parties would be liable to be set aside.  In  Prabartak Commercial Corpn. Ltd. v.  Chief Administrator,  Dandakaranya  Project (1991)  1  SCC  498  a claim  covered  by  “excepted  matter”  was  referred  to  the arbitrator in spite of such reference having been objected to and the arbitrator gave an award. This Court held that the arbitrator  had  no  jurisdiction  in  the  matter  and  that  the reference of the dispute to the arbitrator was invalid and the entire proceedings before the arbitrator including the awards made by him were null and void.”

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10) In  State  of  Rajasthan  vs.  Nav  Bharat  Construction

Co.,  (2006)  1 SCC 86,  this  Court  in paragraph 27 held  as

under:

“27. There  can  be  no  dispute  to  the  well-established principle set out in these cases. However, these cases do not detract from the law laid down in  Bharat Coking Coal Ltd. case or  Continental Construction Co. Ltd. case. An arbitrator cannot  go  beyond  the  terms  of  the  contract  between  the parties.  In  the  guise  of  doing  justice  he  cannot  award contrary to the terms of the contract. If he does so, he will have misconducted himself. Of course if an interpretation of a term of the contract is involved then the interpretation of the arbitrator must be accepted unless it is one which could not be reasonably possible. However, where the term of the contract  is  clear  and  unambiguous  the  arbitrator  cannot ignore it.”

11) In  Hindustan  Zinc  Ltd.  vs.  Friends  Coal

Carbonisation, (2006) 4 SCC 445, the following principles laid

down in paragraphs 13 and 14 are relevant for the disposal of

the present case:

“13. This Court in ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 held that an award contrary to substantive provisions of law or the provisions of the Arbitration and Conciliation Act, 1996 or against the terms of the contract, would be patently illegal,  and  if  it  affects  the  rights  of  the  parties,  open  to interference by the court under Section 34(2) of the Act. This Court observed: (SCC pp. 718 & 727-28, paras 13 & 31)

“13. The question, therefore, which requires consideration is—whether  the  award  could  be  set  aside,  if  the  Arbitral Tribunal  has  not  followed  the  mandatory  procedure prescribed under Sections 24, 28 or 31(3), which affects the rights of the parties. Under sub-section (1)(a) of Section 28 there  is  a  mandate to  the Arbitral  Tribunal  to  decide  the

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dispute in accordance with the substantive law for the time being in force in India.  Admittedly,  substantive  law would include the Indian Contract Act, the Transfer of Property Act and  other  such  laws  in  force.  Suppose,  if  the  award  is passed  in  violation  of  the  provisions  of  the  Transfer  of Property Act or in violation of the Indian Contract Act, the question would be—whether such award could be set aside. Similarly,  under  sub-section  (3),  the  Arbitral  Tribunal  is directed to decide the dispute in accordance with the terms of the contract and also after taking into account the usage of  the  trade  applicable  to  the  transaction.  If  the  Arbitral Tribunal ignores the terms of the contract or usage of the trade applicable to the transaction, whether the said award could be interfered. Similarly, if the award is a non-speaking one and is in violation of Section 31(3), can such award be set aside? In our view,  reading Section 34 conjointly with other  provisions of  the  Act,  it  appears  that  the  legislative intent could not be that if the award is in contravention of the provisions of  the  Act,  still  however,  it  couldn’t  be  set aside by the court. If it is held that such award could not be interfered,  it  would  be  contrary  to  the  basic  concept  of justice.  If  the  Arbitral  Tribunal  has  not  followed  the mandatory  procedure  prescribed  under  the  Act,  it  would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34.

* * * 31. … in our view, the phrase ‘public policy of India’ used

in  Section  34  in  context  is  required  to  be  given  a  wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is,  on the  face  of  it,  patently  in  violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to  narrower  meaning  given  to  the  term “public  policy”  in Renusagar  case,  it  is  required  to  be  held  that  the  award could be set aside if it is patently illegal. The result would be —award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or

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(d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.”

14. The High Court did not have the benefit of the principles laid  down  in  Saw  Pipes,  and  had  proceeded  on  the assumption that award cannot be interfered with even if it was contrary  to  the terms of  the contract.  It  went  to  the extent of holding that contract terms cannot even be looked into for examining the correctness of the award. This Court in Saw Pipes has made it clear that it is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.”

12) From  the  above  decisions,  the  following  principles

emerge:

(a) An Award, which is  

(i) contrary to substantive provisions of law ; or

(ii) the  provisions  of  the  Arbitration  and  Conciliation Act, 1996 ; or

(iii) against the terms of the respective contract ; or

(iv) patently illegal, or

(iv) prejudicial to the rights of the parties,  

is open to interference by the Court under Section 34(2) of

the Act.

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(b) Award could be set aside if it is contrary to :

(a) fundamental policy of Indian Law; or

(b) the interest of India; or

(c) justice or morality;  

(c) The Award could also be set aside if it is so unfair

and unreasonable  that it  shocks the conscience of  the

Court.   

(d) It  is  open  to  the  Court  to  consider  whether  the

Award is against the specific terms of contract and if so,

interfere with it on the ground that it is patently illegal

and opposed to the public policy of India.   

13) With  these  principles  and  statutory  provisions,

particularly, Section 34(2) of the Act, let us consider whether

the Arbitrator as well as the Division Bench of the High Court

were justified in granting the Award in respect of Claim Nos.

1-3  and  additional  Claim  Nos.  1-3  of  the  claimant  or  the

appellant-DDA  has  made  out  a  case  for  setting  aside  the

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Award in respect of those claims with reference to the terms of

the Agreement duly executed by both parties.   

14) The main dispute relates to extra cartage that is, stone

brought from Nooh, Haryana.  It is the stand of the claimant

that apart from the Agreement dated 18.4.1990, both parties

were agreed to abide by the conditions mentioned in the letter

dated 10.4.1990 of the claimant – M/s R.S. Sharma & Co. to

the Chief  Engineer (WZ),  DDA, Vikas Minar,  New Delhi.   In

paragraph 6 of the said letter, it was stated as under:

“6.  We  will  use  Delhi  Quartz  stone  as  per  CPWD specifications  and  specifications  mentioned  in  the  tender documents.   This  condition  has  been  accepted  by  the Department in the case of Ist lowest tenderer for this work.”

15) It  is  stated  by  the  learned  counsel  appearing  for  the

claimant that since the DDA has not approved Delhi Quartz

stone  which  was  not  as  per  CPWD  specifications  and

specifications mentioned in the tender document, stones were

brought  from  Nooh,  Haryana  which  satisfied  those

specifications.   As  rightly  pointed  out  by  the  learned  ASG

appearing for DDA, there is no specific clause in the terms of

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agreement  for  extra  cartage  for  bringing  stones  from

elsewhere.   In  this  regard,  the  appellant  heavily  relied  on

clause 3.16 of the Agreement which reads as under:

“3.16  -  The collection and stacking of material shall include all leads.  The rates quoted by the contractor shall hold good irrespective  of  the  source  from  which  the  material  are brought so long as they conform to the specifications.  The closure of particular quarry will not entitle the contractor to any revision in the rates.”

16) The perusal of the Award of the Arbitrator as well as the

judgment  of the Division Bench clearly  shows that they did

not advert to the above clause 3.16.  It is relevant to point out

that  the  extra  cartage  has  been  awarded  by  the  Arbitrator

without adverting to clause 3.16 of the Agreement, hence, the

learned single Judge was wholly justified in partially setting

aside the Award in respect of the claims with respect to the

extra cartage.   We also perused the pleadings and evidence

placed on record pertaining to Claim Nos. 1-3 and additional

Claim  Nos.  1-3.  As  rightly  observed  by  the  learned  single

Judge,  there  was no material  on record to substantiate  the

case of the claimant, viz., DDA had insisted upon the claimant

for using the stone aggregates brought from Nooh in Haryana.

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In  those  circumstances  and of  the  fact  that  the  terms and

conditions of the Agreement are binding on both the parties,

in the absence  of specific  clause with regard to payment of

extra  cartage  and  in  view  of  clause  3.16,  the  respondent-

claimant  cannot  claim  extra  cartage  @  Rs.30/-  per  cubic

meter  on the  ground of  extra  lead  involved  in bringing  the

stone aggregates from Nooh in Haryana.  The Division Bench

like the Arbitrator proceeded on the sole basis that DDA had

compelled  the  claimant-Company  from  bringing  the  stone

aggregates from Nooh in Haryana and committed an error in

affirming the erroneous conclusion arrived at by the Arbitrator

insofar  as  the  additional  claims  are  concerned.   As  rightly

pointed out by the learned Additional  Solicitor General,  the

Division Bench proceeded on an erroneous premise that the

appellant-DDA has nowhere stipulated where the stone was to

be  brought  from.   It  is  true  that  DDA  had  given  certain

specifications required to be conformed.  Further, the cost of

the work was irrespective of the source or lead from where the

stone  was  brought.   The  award is  completely  silent  on the

relevant clause viz. clause 3.16 of the Agreement which makes

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it  clear  that  the  contractor  is  wholly  responsible  for  all  the

extra  leads.   In  fact,  the  Arbitrator  has  given  no  reason

whatsoever so far as the rate claimed for the extra lead by the

claimant and has verbatim accepted the claim without giving

any justification for the same.  We are satisfied that this is an

error apparent on the face of the record as well as contrary to

the terms of the Agreement.   

17)   For the sake of brevity, we point out that in terms of

clause  3.16  of  the  Contract,  it  is  the  responsibility  of  the

Contractor  to  collect  and  stock  the  material  and  the  rates

quoted by him including all  leads irrespective  of the source

from where the material  was brought.  However,  if  DDA had

refused to accept the stone aggregate brought to site by the

contractor from a quarry in Delhi and insisted upon bringing

the material from Nooh quarry, Haryana, the Contractor will

be entitled to the extra lead for bringing the said material from

Nooh.   As  rightly  pointed  out  by  learned  counsel  for  the

appellant, in the present case, there is nothing on record to

show  that  the  Department  had  insisted  upon  bringing  the

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stone aggregate only from Nooh.  Hence,  the contractor will

not be entitled to the increased rates for extra lead.  Without a

specific request or additional clause, the Arbitrator in respect

of Claim Nos. 1-3 and additional Claim Nos. 1-3 proceeded on

the wrong assumption that the Department had insisted upon

the use of stone aggregate to be brought from Nooh, hence,

the learned single Judge is perfectly right in holding that there

is an error apparent on the face of the Award and the Award is

liable  to be  set  aside.   As stated earlier,  the Arbitrator  has

ignored  clause  3.16  of  the  contract  and  made  a  departure

from the contract while granting relief in respect of Claim Nos.

1-3 and additional Claim Nos. 1-3 and the same, in our view,

cannot be sustained.

18) Under these circumstances, we allow the appeal of DDA

and set aside the judgment and order dated 10.8.2001 passed

by  the  Division  Bench  in  FAO  (OS)  No.  104  of  1996  and

restore the order of the learned single Judge insofar as  

Claim Nos. 1-3 and additional Claim Nos. 1-3 are concerned.

There shall be no order as to costs.

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   ..…………………………………J.    (P. Sathasivam)     

         .…………………………………J.                                                    (Aftab Alam) NEW DELHI                              August 26, 2008.     

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