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CASE NO.: Appeal (civil) 9405  of  1995.

PETITIONER: RAMACHANDRA REDDY & CO.

       Vs.

RESPONDENT: STATE OF A.P.  & ORS.

DATE OF JUDGMENT:       27/02/2001

BENCH: U.C.Banerjee, Brijesh Kumar, G.B.Pattanaik

JUDGMENT:

PATTANAIK,J. L.....I.........T.......T.......T.......T.......T.......T..J

     Claimants  are the appellants against the judgment  of the Andhra Pradesh High Court, arising out of an arbitration proceeding.   The North work excavation of approach  channel of  Srisailam Project had been awarded to the claimants  for different  amounts indicated in the contract.  The  contract itself  contained  an  arbitration  clause.   Dispute  being raised  on different items of claim, those disputes had been referred  to  a  panel  of  arbitrators  and  the  panel  of arbitrators,  ultimately  passed an award where-under  claim Items  1, 2 and 3 stood rejected.  So far as claim item  No. 4  is  concerned, the same was allowed in part.  Claim  Item No.  5 was claim of interest and the arbitrators allowed the interest  @  12 per cent per annum over the amount  awarded. Claim  Item No.  6 was the claim of cost and the arbitrators directed  that  each party will bear its own cost.   Against the  award of the arbitrators, rejecting claim item Nos.  1, 2 and 3, the claimants filed an objection in the Civil Court and  sought  for remittance under Section 16 on  the  ground that  the  arbitrators have left undetermined the claims  of the  claimants on item No.1, 2 and 3 on an erroneous view of the relevant clauses of the agreement.  Claimants also filed an  application  under  Section  14 to  make  the  award  in relation  to  claim allowed by the arbitrators as a rule  of Court.   The  State of Andhra Pradesh also filed a  petition under  Section  30 of the Arbitration Act to set aside  that part  of the award which allowed the claim of the contractor to  the extent of Rs.57,000/-.  All these applications which were  registered  as  O.S.   No.   1094/86,  O.P.104/87  and O.P.424/87  were  disposed  of by a common judgment  of  the learned  Vth Additional Judge, City Civil Court,  Hyderabad. The  said learned Judge made the award in relation to  claim item  No.4  a rule of Court.  But he set aside the award  in relation  to  claim item Nos.  1,2,3 and 5and  remitted  the same  for  reconsideration  to  the  panel  of  arbitrators. Against the aforesaid Judgment of the Additional Judge, City Civil  Court,  remitting the disputes/claims in relation  to claim  items 1, 2, 3 and 5 to the panel of arbitrators,  the

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State  of Andhra Pradesh preferred appeals under Section  39 of  the  Arbitration  Act.  The High Court by  the  impugned judgment set aside the order of the Additional Judge, so far it  relates to remitting the claim item No.  1 to the  panel of  arbitrators  for reconsideration.  So far as claim  item Nos.   2  and  3 are concerned, the High  Court  upheld  the direction  of the Additional Judge, but, appointed a retired Chief  Justice  of the Court as arbitrator to arbitrate  the claim items 2 and 3 and a part of claim item No.  5 relating to  interest.  In this appeal filed by the claimants, we are concerned  only  with claim item No.1.  The legality of  the award  in  relation to claim items 2 and 3 are  the  subject matter of an appeal, which is pending in this Court.

     Claim  Item No.  1 relates to increase in quantity  of hard  rock  abnormally and on this head, the  claimants  had claimed Rs.93, 76, 990/-.  The claimants statement that was filed before the arbitrator, makes out a vague claim on this score  without  indicating  the  basis   for  the  claim  in question.   In  respect of the aforesaid quantity  of  extra excavation  on  hard rock, the State of Andhra  Pradesh  had made  the  payment  in terms of Clause 25 of Schedule  C  of Section  2  of  the agreement as per its letter  dated  21st October,  1981.   Notwithstanding  the   said  payment,  the claimants  had  made the extra claim on the ground that  the quantity  of  excavation of hard rock being abnormally  high and  much  beyond the anticipated quantity indicated in  the agreement  and  even much in excess of the so-called 25  per cent  of the work as per the GOMS No.  2289 dated 12.6.1968, the claimants are entitled to a separate rate for such extra excavation  and  the  arbitrators failed to  exercise  their jurisdiction  in  not  granting the claim and on  the  other hand,  rejecting  the same.  The High Court in the  impugned judgment  however, referring to clause 59 of the  agreement, which  deals with delay and extension of time and in view of the  letters of the Superintending Engineer dated 15th July, 1980   and   19th  May,  1983,   came  to  hold   that   the contractor-claimant  will not be entitled to be paid at  any higher   rate  for  such   additional  excavation  work  and accordingly  set aside the order of the learned trial Judge, remitting  the claim item No.  1 for being re-disposed of by the arbitrator.

     Mr.   P.P.Rao,  the learned senior counsel,  appearing for  the appellant, contended that the High Court  committed serious  error  in referring to clause 59 as well as to  the letter  dated 15th July, 1980 and 19th May, 1983, in  coming to  the conclusion that the claimant-contractor will not  be entitled  to be paid at any higher rate for the extra amount of  excavation made by him.  Mr.  Rao further submitted that under GOMS No.  2289 dated 12.6.1968, a deviation limit upto a  maximum of 25 per cent being permissible, for any work in excess  of that limit, the contractor is entitled to claim a higher rate and that being the position, the arbitrators had committed  an  error apparent on the award in  refusing  the claim  and  the High Court committed error in setting  aside the  order of remittance passed by the Additional Judge.  In support  of  this  contention, reliance was  placed  on  the judgment  of  this Court in the case of S.  Harcharan  Singh vs.  Union of India, 1990(4) SCC 647.  Mr.  Rao also further urged  that in view of the recommendations of the  Executive Engineer  notwithstanding  the  continued objection  of  the claimant, expressing inability to continue with the abnormal

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increase  in the hard rock excavation, it must be held  that the  payment  at a higher rate for the additional or  excess quantity  of excavation was implied and failure on the  part of the arbitrator to consider the same, constitutes an error on  the face of the award and as such the learned Additional Judge   was   justified   in   remitting  the   matter   for reconsideration   of  the  arbitrator.    Mr.   Rao   lastly submitted  that  for  this excess of  excavation  work,  the contractor was entitled to be paid in accordance with Clause 63  of  the  agreement, which has not been  noticed  by  the arbitrator  and  adjudged  from that stand point,  the  High Court  also  committed error in setting aside the  order  of remittance made by the learned Additional Judge.

     Ms.  K.  Amreswari, appearing for the respondent State of  Andhra  Pradesh,  on the other hand contended  that  the power  of interference of the Court under Sections 30 and 33 as  well as under Section 16 is of a limited nature and  the Court  would  be justified in interfering with the  reasoned award  of an arbitrator, if the award contains any  apparent error  on the same.  If the impugned award is examined  from the  aforesaid  stand point, the conclusion is  irresistible that  it  did  not  contain any error  and,  therefore,  the interference of the Court was not warranted.  Ms.  Amreswari further  contended  that the claimants nowhere in the  claim petition  had  made  out  a case  that  for  the  additional quantity  of excavation work, they are entitled to the  rate as  per  clause 63 of the agreement which was urged for  the first time in this Court and, therefore, the said contention should  not be allowed to be raised.  Ms.  Amreswari further urged  that clause 63 will have no application for the extra item of excavation made by the contractors since that clause applies to any supplemental item, which are found essential, incidental  and inevitable during the execution of the  work and  by no stretch of imagination, the additional excavation which  is  the subject matter of claim in claim item No.   1 can be held to be supplemental item.  Ms.  Amreswari further submitted  that  for this additional quantity of  excavation the  claimant having been paid for in accordance with clause 25  of the agreement, the further claim of the contractor is not  arbitrable  at all and, High Court therefore was  fully justified  in setting aside the order of remittance made  by the Additional Judge.  Ms.  Amreswari further contended that the  claim  for  payment of higher rate for  the  work  done beyond  the  agreement is not at all sustainable in view  of the positive letter of the authorities dated 15th July, 1980 and  19th  May, 1983, while allowing extension of  time  for completion  of  the work, as has been held by this Court  in the  case of Ch.Ramalinga Reddy vs.  Superintending Engineer and  Anr.   1999(9) SCC 610, and, therefore, the High  Court was  fully  justified in interfering with the directions  of the  sub-  ordinate Judge in remitting the said  claim  item No.1   for  fresh  arbitration.    Mrs.   Amreswari   lastly submitted  that  a  bare scrutiny of the order  of  the  Vth Additional  Judge,  City Civil Court,  Hyderabad,  remitting claim  items  Nos.   1, 2 and 3  for  reconsideration  would indicate  that no reasons had been given for such remittance and  on the face of it, the said judgment of the Civil Court tantamounts  to  gross error of jurisdiction in  interfering with  an  award and transgressing the scope  and  limitation provided  under Sections 30 and 16 and, therefore, the  High Court was justified in correcting the said error in appeal.

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     Under the Arbitration Act, Section 16 is the provision under   which   the   Court  may   remit   the   award   for reconsideration   of  an  arbitration   and  necessity   for remitting  the  award  arises when there are  omissions  and defects in the award, which cannot be modified or corrected. Remission  of an award is in the discretion of the Court and the  powers of the Court are circumscribed by the provisions of Section 16 itself.  Ordinarily, therefore, a Court may be justified  in remitting the matter if the arbitrator  leaves any  of  the  matters undetermined or a part of  the  matter which  had  not been referred to and answered and that  part cannot  be  separated  from   the  remaining  part,  without affecting  the decision on the matter, which was referred to arbitration or the award is so indefinite as to incapable of execution  or that the award is erroneous on the face of it. Discretion  having been conferred on the Court, to remit  an award,  the  said discretion has to be judicially  exercised and an appellate Court would not be justified in interfering with  the  exercise of discretion unless the discretion  has been  misused.  What is an error apparent on the face of  an award  which  requires  to be corrected has  always  been  a subject  matter of discussion.  An error of law on the  face of  the award would mean that one can find in the award or a document  actually incorporated thereto stating the  reasons for a judgment some legal propositions which is the basis of the  award and which can be said to be erroneous.  Documents not  incorporated  directly  or indirectly  into  the  award cannot  be  looked into for the purpose of finding  out  any alleged error.  The courts are not to investigate beyond the award   of  the  arbitrators   and  the  documents  actually incorporated  therein and, therefore, when there would be no patent  error on the face of the award, it would not be open for  the court to go into the proceedings of the award.   If the  application  for  remittance  filed  by  the  claimants invoking  jurisdiction  of  the court under  Section  16  is examined  from the aforesaid stand point and if the order of the  learned  Civil  Court, remitting claim Item No.   1  is tested  in  the  light of the discussions  made  above,  the conclusion  is irresistible that no case for remittance  had been  made  out  and the learned trial Judge  exercised  his discretion  on  the grounds which does not come  within  the four-corners  of  the  provisions  of   Section  16  of  the Arbitration  Act.  In fact no reasons had been ascribed  for interference with the award, rejecting claim Item No.  1 and for  remittance of the same.  The High Court being the Court of appeal, was therefore, fully justified in exercise of its appellate  power  in correcting the error made by the  Civil Judge in remitting claim item No.  1.

     Let  us  now examine the contentions of Mr.   P.P.Rao, the  learned  senior counsel, appearing for  the  appellant. The  learned counsels contention in fact centres round  the question  as  to  whether  for the  additional  quantity  of excavation  work,  the contractor would be entitled to at  a higher  rate in accordance with Clause 63 of the  agreement. Mrs.  Amreswari, appearing for the State was fully justified in  her  submissions  that this contention  had  never  been raised   either   before  the   arbitrator  or  before   the subordinate  Judge  or even before the High Court.  In  fact the  claim  petition filed before the arbitrator  is  rather cryptic  and absolutely vague, not indicating on what  basis the  additional claim is made, though the foundation for the claim  was there, namely there had been an increased  amount of  excavation  work  beyond the agreement.  It is  in  this

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connection,  Mr.   Rao had relied upon the two decisions  of this  Court  in the case of S.Harcharan Singh vs.  Union  of India,  1990(4) SCC 647 and National Fertilizers vs.   Puran Chand Nangia 2000(8) SCC 343.  But before examining the said contention, it would be appropriate for us to extract Clause 63,  which was the sheet anchor of the argument of Mr.  Rao. Clause 63 reads as under:

     Cl.63.   Payment  for  additions and  deductions  for omissions:   (A)  The  contractor is bound  to  execute  all supplemental  items that are found essential, incidental and inevitable during the execution of the work, at the rates to be  worked out as detailed below:  (a)For all items of  work in  excess  of  the quantities shown in schedule  A  of  the tender  the rates payable for such items shall be either the tender rates or the standard schedule of rates for the items plus  or minus the overall tender percentage accepted by the competent  authority  which  ever  is  less.   (b)For  items directly  deducible from similar items in the agreement, the rates shall be derived by adding to or substracting from the agreement rate of such similar items, the cost of difference in  quantity of material or labour between the new items and the  similar  items  in  the   agreement,  worked  out  with reference to the Schedule of rates adopted in the sanctioned estimate  plus  or  minus  the  overall  tender  percentage. (c)For new items which do not correspond to any items in the agreement, the rates shall be standard schedule rate plus or minus  the over all tender percentage.  The terms  standard schedule  of rates used in the above subclauses (a), (b)  & (c)  means  the  schedule of rates on which  the  sanctioned estimate  was  prepared.  (d)In the event of  the  Executive Engineer  and the Contractor failing to agree on a rate  for such  additional  work, the Executive Engineer may,  at  his option  either:   (i)employ other parties to carry  out  the additional  work  in the same manner as provided  for  under clause 48, or (ii)the contractor shall execute the work upon written  orders from the Executive Engineer and the cost  of labour  and  materials  plus 10 per cent  thereon  shall  be allowed  therefor, provided that the vouchers for the labour and  materials  employed  shall have been delivered  to  the Executive  Engineer or his representative within seven  days after such work shall have been completed.  If the Executive Engineer  considers that payment for such work on the  basis of  the  vouchers  presented is unduly high, he  shall  make payment  in  accordance with such valuation as he  considers fair  and reasonable and his decision to the matter shall be final,  if  the  amount involved in  additional  payment  is Rs.1000  or less, for each occasion on which such additional works  shall  have been authorised.  If such amount  exceeds Rs.1000,  the contractor shall have the right to submit  the matter   to   arbitration  under   the  provisions  of   the arbitration  clause  73.   (e)If,  in  the  opinion  of  the Executive  Engineer  a rate for the additional work  is  not capable  of being properly arrived at prior to execution  of work,  or  if  the  work is not capable  of  being  properly measured,  then the cost and payment thereof shall be  dealt with as provided for in the preceding sub- clause (d)(ii).

     In  the  case  of S.  Harcharan Singh  vs.   Union  of India,  1990(4)  SCC  647, on which Mr.   Rao  had  strongly relied  upon,  this  Court  had  quoted  clause  12  of  the agreement  in  paragraph 8 of the judgment and referring  to the  standard  form of contract of the Central Public  Works Department, specifically permitting for a limit of variation called  deviation limit up to a maximum of 20 per cent, it

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was  held  that the contractor has to carry out the work  at the  rate stipulated in the contract upto such limit but for work  in excess of that limit he has to be paid at the rates to  be determined in accordance with clause 12A, under which the  Engineer in-charge can revise the rates, having  regard to  the prevailing market rates.  The Court also referred to the  letters of the Executive Engineers, the  Superintending Engineer and the Additional Chief Engineer recommending that the  additional work may be confined to 20 per cent and  for the  extra  quantity  of  additional work, he  may  be  paid remuneration  at the increased rate taking into account  the increased  cost  of  the  execution of work  on  account  of peculiar  nature of the work.  We fail to understand how the aforesaid decision will be of any assistance to the claimant in  the  present case, where there is no clause like  Clause 12A  nor  is there any letter from the  competent  authority agreeing to payment at a higher rate for the additional work beyond  the limit of 25 per cent as provided under the  GOMS No.2289 dated 12.6.1968.  Arbitrator being a creature of the agreement,   unless   agreement   either   specifically   or inferentially  provides for a higher rate to be awarded  for any  additional  or excess work done by the  contractor,  it would not be permissible for the arbitrator to award for the so-called  additional work at a higher rate.  In the case in hand,  not  only  there  is no  letter  from  the  competent authority,  namely  the  Superintending  Engineer  that  the contractor  would  be  paid  at  any  higher  rate  for  the additional excavation of rock, though the Executive Engineer had  indicated that he has recommended to the Superintending Engineer.    But  such  recommendation   of  the   Executive Engineer,  who  was not competent to decide the question  of awarding a higher rate for the excess quantity of excavation will  not clothe any jurisdiction on the arbitrator to award the  contractor  at a higher rate nor would it  entitle  the contractor to get a higher rate for the claim in question on the basis of agreement.  Now coming to the very clause, upon which  Mr.   Rao relied upon, we find that the  said  clause relates   to  supplemental  item,   which  have  been  found essential, incidental and inevitable during the execution of the  work.  The excavation of hard rock cannot be held to be a  supplemental  item and on the other hand, is an  item  of work  tendered and accepted, and as such clause 63 will have no  application  to the claim item No.1.  Mr.  Rao had  also relied  upon  the  decision  of   this  Court  in   National Fertilizers  vs.   Puran  Chand  Nangia,  2000(8)  SCC  343, wherein  this  Court  had held that an interpretation  of  a particular  clause  of the agreement must be such, so as  to balance  the  rights  of both parties and when  a  variation clause  permits  the employer to make variation in the  work upto  a specified limit, beyond the said limit, the claimant could  be paid at a higher rate.  The Court in the aforesaid case  was  examining  the  principle  of  integrity  of  the contract  and  refused  to interfere with the  award  merely because  arbitrator  had  granted  an  escalation.   In  the aforesaid  case, the Court was examining whether it would be permissible  for  interfering  with  an award  which  was  a non-speaking  one merely because the arbitrator had  awarded the  claim  at an escalated rate for the excess quantity  of work  and  since the award itself was a non-speaking  award, the  court held that it is not permissible to probe into the mental  process  of the arbitrator and then interfered  with the same.  Then again the question of granting a higher rate for  any  extra quantity of work executed by the  contractor would  at all arise only when the contract provides for such escalated  rate either expressly or by implication as in the

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case  of  S.   Harcharan Singh 1990(4) SCC  647,  where  the competent   authority   had   agreed   for   the   same   by correspondence.   But in the case in hand, when there is  no such  acceptance by the competent authority, and there is no provision  in  the contract, permitting such escalated  rate for  the additional quantity of excavation made and in  view of  our  rejecting  the contention raised on  the  basis  of clause   63,  the  conclusion  is  irresistible   that   the contractor  will  not be entitled to a higher rate  for  the additional  excavation  work and as such the High Court  was fully  justified in setting aside the direction of the trial judge,  remitting the claim item No.  1 for  reconsideration and  we see no infirmity with the said direction of the High Court  to be interfered with.  We also find sufficient force in  the  submission  of Mrs.  Amreswari,  relying  upon  the letters  of the competent authority, specifically intimating that the grant of extension of time will not in any way make the  contractor  eligible  for  any   extra  claim  due   to escalation  in  rates of labour and materials or due to  any other  reasons  under any circumstances and the decision  of this  Court in Ramalinga Reddy, 1999(9) SCC 610 supports the aforesaid  contention.  In the aforesaid premises, we do not find  any merits in this appeal, requiring our  interference with  the  impugned judgment of the High Court.  The  appeal fails and is

     dismissed  but  in the circumstances there will be  no order as to costs.