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CASE NO.: Appeal (civil)  8431 of 1997

PETITIONER: M/s. Continental Construction Ltd.                       

RESPONDENT: State of U.P.                                                    

DATE OF JUDGMENT: 22/09/2003

BENCH: CJI & S.B. Sinha.

JUDGMENT: J U D G M E N T  

W I T H  

C.A. No. 8453 of 1997

S.B. SINHA, J :

       These two appeals involving common questions of law and fact were  taken up for hearing together and are being disposed of by this common  judgment.   

FACTS:

       The parties hereto entered into a contract dated 20th August, 1964  for the purpose of construction of Obra dam, Power house, structures and  appurtenant works.  Disputes and differences having arisen between the  parties as regard supply of extra quantity of earth and rock, the matter  was referred to an arbitrator.

       As far back as on 23.8.1972, the appellant herein invoked the  arbitration agreement contained in Clause 17 of the contract in  connection with earthfill and rockfill which was recorded from 53rd  running bill upto the 88th running bill.  One Shri J.S. Pujji was  appointed as an arbitrator by the appellant.  As the respondent did not  appoint any arbitrator the appellant requested the said arbitrator to  proceed in the matter as a sole arbitrator whereupon he entered into a  reference.  The respondent herein filed application before the Court of  District Judge purported to be in terms of Sections 33 and 9 of the  Arbitration Act, 1940 which was allowed.  Being aggrieved by and  dissatisfied with the judgment of the District Judge, the appellant  filed appeal before the High Court of Allahabad.  The High Court by an  order dated 17.4.1980 directed that both the contractor and the State  Government shall nominate their respective arbitrators for resolving the  disputes with regard to the claim for extra charges for earth and rock  work made by the contractor for the period subsequent to 28.12.1967 and  15.6.1968 respectively.  The parties thereafter filed their respective  statements of claim, statements of defence and replications before the  arbitrators.  However, no award could be made by the learned arbitrator  within the statutory period as the disputes and differences were  referred to the Umpire in accordance with the arbitration agreement.   

       The Umpire was appointed by the Court of Civil Judge, Sonebhadra  with the consent of the parties.         

       The appellant herein filed a statement of claim for a sum of Rs.  43,50,958.48 on extra quantity of 8,45,319.471 cu. m. of earthfill

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excavated from the external sources obtained from borrow areas at the  rate of Rs. 880.91 per 100 cu.m.  It also made a claim of Rs.  26,47,746.34 for extra quantity of 1,66,524.927 cu.m. of rock excavated  from the external sources/quarries at the rate of Rs. 1590/- per 100  cu.m.  The Umpire appointed for determination of disputes between the  parties who was a retired Engineer-in-chief of the respondent herein  awarded a sum of Rs. 7,29,764.00 in respect of the claim for extra  quantity of earthfill and a sum of Rs. 8,74,256.00 in relation to its  claim for rockfill.  The appellant herein filed applications for making  the said awards as rule of the Court.  Respondent, however, filed  objections thereto in terms of Section 30 of the Arbitration Act, 1940.   By reason of an order dated 23.8.1995 the said applications of the  respondent were allowed and the awards were set aside by the Civil  Judge, (Senior Division) Mirzapur.  The appellant herein preferred  appeals thereagainst which were dismissed by the High Court inter alia  on the ground that in terms of the provisions of the contract the  appellant herein could not make any extra claim for supply of earth or  rock.   SUBMISSIONS:

       Mr. Shiv Kumar Suri, the learned counsel appearing on behalf of  the appellant would inter alia submit that the question as to whether  the claim as regards extra item of earth and rock work can be claimed or  not was considered by the Allahabad High Court in FAFO No. 155 of 1975  (M/s. Continental Construction (P.) Ltd. Vs. State of Uttar Pradesh and  Others) disposed of on 17th April, 1980 holding that such claim is  maintainable.  It was contended that the award being a non-speaking one,  the learned Civil Judge, Mirzapur and the High Court must be held to  have acted illegally and without jurisdiction in entering into the merit  of the matter.  The learned counsel would urge that the arbitrator had  the requisite jurisdiction to construe the contract independently and in  absence of any finding to the effect that the awards ex facie were  perverse, the same could not have been set aside by reason of the  impugned judgments.

       Our attention has been drawn to the fact that even before the  Umpire the respondent admitted that the appellant herein is entitled for  the extra items of admitted total quantity of earth and rock to the  extent of 8,45,319.471 cu.m. and 1,66,524.927 cu.m. respectively and  only in terms of such admission the awards have been passed.   

       The learned counsel would contend that from the awards it would  appear that although the claims of the appellant were for a sum of Rs.  43,50,958.48 and Rs. 26,47,746.34; the learned Umpire awarded only a sum  of Rs. 7,29,764.00 and Rs. 8,74,256.00 in its favour.   

       Mr. Subodh Markandeya, learned senior counsel appearing on behalf  of the respondents, on the other hand, would submit that the umpire was  bound by the terms of the contract and could not have travelled beyond  the same.  The learned counsel would contend that before the Civil  Judge, Mirzapur an affidavit was filed to the effect that the Department  has not admitted any claim of the opposite party.  In support of the  said contention, the learned counsel has produced before us the  affidavit of one Shri Uma Nath Misra filed in Case No. 91 of 1993 and 92  of 1993 in the Court of Civil Judge, Mirzapur.

FINDINGS:

       There is no dispute that there existed an arbitration agreement  between the parties as would appear from the fact of the matter, as  referred to hereinbefore, that the learned umpire passed a non-speaking  award.

       The Umpire in his award has recorded:

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"Claim No. 1 amounting to Rs. 43,50,958.48 (plus  interest and costs) on account of the work of  earthfill in Dam Embankment from the 53rd running  bill upto the 88th running bill, involving a  quantity of 10,33,702.306 cum of earthfill with  earth obtained from borrow area.  Against the  said quantity, the Respondents admitted the  quantity of 8,45,319.471 cu.m. for this claim  and this was accepted by the Claimants.  The  Claimants have claimed a rate of Rs. 420.91 per  100 cu.m. over and above the rate of Rs. 460.00  per 100 cu.m. provided in item No. 64 of the  schedule, and have furnished analysis of rates  for earthfill in Dam Embankment after borrowing  material from borrow areas and sources other  than the excavations of the Dam, Power House,  Spillway, Approach and Tail Race Channels.   Against this, I award Rs. 7,29,764.00 (Rs. Seven  lacs twenty nine thousand, seven hundred and  sixty four) only."

       A similar award has been passed in respect of claim of the  appellant relating to rock fill.  A bare perusal of the said awards  would clearly go to show that the respondent herein admitted a part of  the claim of the appellant which in turn was accepted by it.

       Such an admission presumably  was made having regard to the  documents which were filed by the parties before the Umpire as also  decisions of the Allahabad High Court in   The respondent did not raise  any question as regard the said admission of part of the quantity of  earth fill and rock fill before the Umpire.  A vague statement was made  that the claim of the appellant was not admitted while dealing with the  question as to whether the award should have been a reasoned one or not.  The submission that no such admission is made is not borne out from the  records.  On the other hand, such admission must have been made in view  of the documents maintained by the respondent as otherwise the exact  figure of earthfill or rockfill was not possible to be mentioned in the  awards.  

       In view of the order of the High Court dated 17.4.1980 the Umpire  was required to adjudicate upon the claim of the appellant.  For the  said purpose he was required to take into consideration the terms and  conditions of contract vis-‘-vis the conduct of the parties.  It is not  a case where the learned Umpire has travelled beyond the contract.

       The matter relating to construction of the contract and/ or  application thereof fell for consideration before the arbitrators.   According to the appellant, the work in question did not fall within the  purview of the excepted matter.  Determination of the said question was,  thus, clearly within the jurisdiction of the Umpire.

       The award is a non-speaking one.  It is trite that the Court while  exercising its jurisdiction under Section 30 of the Arbitration Act,  1940 can interfere with the award only in the event the arbitrator has  misconducted himself or the proceeding or there exists an error apparent  on the face of the award.

       The learned Civil Judge and the High Court have not found that the  Umpire acted arbitrarily, irrationally, capriciously or independent on  the contract.  No finding has been arrived at that the Umpire has made  conscious disregard of the contract which was manifest on the fact of  the award.  

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       The court exercises a very limited jurisdiction while adjudicating  upon an objection to the award in terms of  Section 30 of the  Arbitration Act, 1940.

       In the instant case, the Umpire has merely set out the claims,  given the history of the claims and awarded certain amount.  He has not  disclosed his mind indicating as to why he had done so or what was done.   The Courts, therefore, could not interfere with the award merely on ipse  dixit.

       In M/s. Sudarsan Trading Co. Vs. Government of Kerala and Another  [(1989) 2 SCC 38] this Court has laid down the law in the following  terms:

"But, in the instant case the court had examined  the different claims not to find out whether  these claims were within the disputes referable  to the arbitrator, but to find out whether in  arriving at the decision, the arbitrator had  acted correctly or incorrectly.  This, in our  opinion, the court had no jurisdiction to do,  namely, substitution of its own evaluation of  the conclusion of law or fact to come to the  conclusion that the arbitrator had acted  contrary to the bargain between the parties.   Whether a particular amount was liable to be  paid or damages liable to be sustained, was a  decision within the competency of the arbitrator  in this case.  By purporting to construe the  contract the court could not take upon itself  the burden of saying that this was contrary to  the contract and, as such, beyond jurisdiction.   It has to be determined that there is a  distinction between disputes as to the  jurisdiction of the arbitrator and the disputes  as to in what way that jurisdiction should be  exercised.  There may be a conflict as to the  power of the arbitrator to grant a particular  remedy."

       The question again came up for consideration before a three-Judge  Bench of this Court recently in State of U.P. Vs. Allied Constructions  [2003 (6) SCALE 265].  This Court held:

"Any award made by an arbitrator can be set  aside only if one or the other term specified in  Sections 30 and 33 of the Arbitration Act, 1940  is attracted.  It is not a case where it can be  said that the arbitrator has misconducted the  proceedings.  It was within his jurisdiction to  interpret Clause 47 of the Agreement having  regard to the fact-situation obtaining  therein.(sic)  It is submitted that an award  made by an arbitrator may be wrong either on law  or on fact and error of law on the face of it  could not nullify an award.  The award is a  speaking one.  The arbitrator has assigned  sufficient and cogent reasons in support  thereof.  Interpretation of a contract, it is  trite, is a matter for arbitrator to determine  (see M/s. Sudarsan Trading Co. versus The  Government of Kerala, AIR 1989 SC 890).  Section  30 of the Arbitration Act, 1940 providing for  setting aside an award is restrictive in its

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operation.  Unless one or the other condition  contained in Section 30 is satisfied, an award  cannot be set aside.  The arbitrator is a Judge  chosen by the parties and his decision is final.   The Court is precluded from reappraising the  evidence.  Even in a case where the award  contains reasons, the interference therewith  would still be not available within the  jurisdiction of the Court unless, of course, the  reasons are totally perverse or the judgment is  based on a wrong proposition of law.  As error  apparent on the face of the records would not  imply closer scrutiny of the merits of documents  and materials on record.  Once it is found that  the view of the arbitrator is a plausible one,  the Court will refrain itself from interfering."

       The aforementioned decisions constitute binding precedents.

       For the reasons aforementioned, we are of the opinion that the  impugned judgments cannot be sustained. The impugned judgments are,  therefore, set aside.  The awards made by the learned Umpire are  directed to be made rule of court.  These appeals are allowed  accordingly.  No costs.