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PETITIONER: K.   P. POULOSE

       Vs.

RESPONDENT: STATE OF KERALA & ANR.

DATE OF JUDGMENT21/04/1975

BENCH: GOSWAMI, P.K. BENCH: GOSWAMI, P.K. ALAGIRISWAMI, A. BHAGWATI, P.N.

CITATION:  1975 AIR 1259            1975 SCR  214  1975 SCC  (2) 236  CITATOR INFO :  D          1989 SC 606  (8)

ACT: Arbitration Act, s. 30 (a)-Scope of.

HEADNOTE: For  the construction of three overhead  reservoirs  tenders were invited.  The appellant was the successful tenderer for the  work.   The  notification  inviting  tender,.,  gave  a description  of  the soils at the places  of  constructions. Sometime later, however, the Research Institute of the State Government  recommended  a different mode of  foundation  in respect of one reservoir and the department accordingly gave instruction   to   the  appellant  to  adopt   the   process recommended  by  the  Research  Institute.   The   appellant executed the work in accordance with the recommendations  of the  Research Institute and claimed a higher payment on  the ground  that  the work done by him was not included  in  the original  design  because when he submitted  his  tender  he assumed  the  site conditions to be as  represented  in  the Schedule  to  the  notification.   The  Department,   having refused  the claim. the dispute was referred to  Arbitration under cl. 34 of the tender notification.  The Chief Engineer who was the, sole Arbitrator gave a speaking order based  on an examination of the documents. The  High  Court set aside the judgment of  the  Subordinate Judge and restored the order of the Arbitrator. On appeal to this Court it was contended that the Arbitrator was,   guilty   of  legal  misconduct  in   conducting   the proceedings  in that the material documents were  absolutely ignored  by  the  Arbitrator, resulting  in  miscarriage  of justice. Allowing the appeal. HELD : Under s. 30(a) of the Arbitration Act an award can be set aside when an Arbitrator has misconducted himself or the proceedings.    Misconduct   under  s.  30(a)  has   not   a connotation  of moral lapse.  It Comprises legal  misconduct which is complete if the Arbitrator on the face of the award arrives  at  an  inconsistent conclusion  even  on  his  own finding  or arrives at a decision by ignoring very  material documents  which throw abundant light on the controversy  to

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help a just and fair decision.  It is in this sense that the Arbitrator has misconducted the proceedings in this case. In  the instant case the two documents which the  Arbitrator failed  to consider were material documents to arrive  at  a just  and fair decision to resolve the  controversy  between the Department and the appellant.  In the background of  the controversy  in  this case even if the  Department  did  not produce  these  documents  before  the  Arbitrator  it   was incumbent upon him to get hold of all the relevant documents including  those  two documents for the purpose  of  a  just decision.   The  award, therefore, suffers from  a  manifest error apparent ex facie. [218ABC]

JUDGMENT: CIVIL APPELLATE JURISDICTION CIVIL APPEAL No. 1485 OF 1974 Appeal  by special leave from the judgment and decree  dated 29-1-73 of the Kerala High Court in A.S. No. 357 of 1972. S.V.  Gupte, C. J. Balakrishnan and A. S.   Nambiar,  for the appellant. 215 T.  S.  Krishnamurthy  Iyer  anti K.  R.  Nambiar,  for  the respondents. The Judgment of the Court was delivered by GOSWAMI, J.--This is an appeal by special leave against  the judgment of the Kerala High Court setting aside the judgment of the Subordinate Judge, Ernakulam and restoring the  award of  the Arbitrator who had earlier refused the claim of  the appellant. The  appellant  (briefly the contractor)  was  a  successful tenderer  for  construction of three zonal  R.C.C.  Overhead Reservoirs,  two  in  Matencherry  and  one  in  Cochin,  in connection  with  the Ernakulam  Mattencherry  Water  Supply Scheme.   In  the  schedule  annexed  to  the   notification inviting  tenders  under the heading ’Site’, it  was  stated that "the soil at the site for Reservoir No. 1 and Reservoir No.  2 is loose clay and for Reservoir No. 3,  sandy".   The tenderer  was  to execute an agreement on  a  stamped  paper before  commencing  work.  It appears later  on  the  Kerala Engineering Research Institute, Poochi.  Soil Mechanics  and Foundation Division (briefly the Research Institute) submit- ted a report (Ext.  P. 10 dated September 14, 1965) that the sub-soil  at  the  three  places chosen  as  sites  for  the reservoirs upto 16 in showed that the top soil was sand, the middle layer clay, and the bottom layer, silty sand or sand. It was stated that the clay found at the three places was of a  highly compressible nature and hence pile foundation  was preferable and that as the top strata was sandy, jetting had to be resorted to for driving the piles through this strata. After  receipt  of the opinion of  the  Research  Institute, respondent  No.  2  (hereinafter  to  be  described  as  the Department) gave instructions to the contractor to adopt the process  of  jetting  for  driving piles  for  the  tank  at Thoppumpady  which  is alone in dispute in  this  case.   On October  7, 1965, the Chief Engineer after scrutinising  the pile  design of the contractor wrote to him, inter alia,  as follows :               "The  piles as per design submitted with  raft               like   cap  may  be  adapoted  for   tank   at               Thoppumpady where the length of pile suggested               by  the research division is in the region  of               30   ft................  Jetting  has  to   be               resorted  to  in the top  strata  where  sandy               layer  is  met with....  Your  statement  that

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             piles  of  more  than 30 ft.  length  is  very               difficult  to  be driven in Ernakulam  is  not               quite convincing to the Department.               Any how a decision will be taken on this  only               after  ascertaining the details regarding  the               practical  difficulties if any  from  agencies               actually engaged in such type of works in  the               locality.               Meanwhile you may please execute the agreement               and  start  the  work  on  the  Reservoir   at               Thoppumpady  receiving  further   instructions               from   Executive  Engineer,   Public   Health,               Alwaye" (Ext.  P. 1). On February 21, 1966, the contractor wrote to the  Executive Engineer  informing  him  that as per  instructions  of  the Research Institute and 10 SC/75-15. 216 site conditions he provided jetting arrangements for driving the  piles although the process of jetting was not  included in  his tender.  He enclosed the details of  expenditure  on that account and mentioned that for the pile casting he used extra reinforcement for additionally strengthening the head of  piles due to the site, condition.  He pointed  out  that this  was not included in his original design.  The sum  and substance of the contractor’s grievance was that he  assumed the  site condition to be as represented in the schedule  to the notification inviting tenders and submitted his original design on that basis and since, however, the site  condition was found to be different and on the advice of the  Research Institute  jetting  had to be resorted  to  involving  extra expenditure  he was entitled to claim additional amount  for the  work of jetting.  The Department, however, refused  the claim  which led to the arbitration under; clause 34 of  the tender notification.  The Arbitrator was the Chief Engineer. It  appears the award was based on examination of  documents and after hearing arguments of the parties. The award with which we are concerned is a speaking one  and gives  the reasons for the decision against the  contractor. Mr.  Gupte,  the learned counsel for the  appellant  submits that  the  Arbitrator  was guilty  of  legal  misconduct  in conducting  the  proceedings.  He submitted  that  two  very material documents, Exts., P. 11 and P. 16, were  absolutely ignored  by  the  Arbitrator  resulting  in  miscarriage  of justice.  On the other hand Mr. Krishnamurthy Iyer submitted that  these  documents  were  not  even  marked  before  the Arbitrator;  they  were marked only before  the  Subordinate Judge.  According to him, therefore, there is no  foundation for the grievance. We have been taken through all the relevant documents by the learned  counsel  for both sides and we are  satisfied  that Ext.  P. 11 and Ext.  P. 16 are material documents to arrive at  a  just  and fair decision to  resolve  the  controversy between   the  Department  and  the  contractor.    In   the background  of  the  controversy in this case  even  if  the Department  did  not  produce  these  documents  before  the Arbitrator it was incumbent upon him to get hold of all  the relevant documents including Exts.  P. 11 and P. 16 for  the purpose of a just decision.  Ext.  P. 1 1 dated September 8, 1966, is a communication from the Superintending Engineer to the  Chief Engineer with regard to the objections raised  by Audit in connection with the construction of the reservoirs. The  following extract will explain the position then  taken by the Department:-               "The contention of the Accountant General that

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             jetting  was resorted to by the contractor  to               facilitate  the  driving of the piles  is  not               correct.   Had  it not been  for  jetting,  it               would not have been possible for the piles  to               reach  the  required  depth  of  30’,  passing               through  sandy strata and we would  have  been               constrained to stop with a smaller depth viz.,               upto  the point of refusal for penetration  of               the pile by hammering.  It was, therefore,  in               the interest               217               of the work that jetting was insisted upon  by               the   Department   for  pile   driving.    The               contractor  had  to resort  to  jetting  under               instructions from the Department.               The  Accountant  General has stated  that  the               department  is  not  bound to  pay  extra  for               adopting  the  method  of  jetting  for   pile               driving.   This does not appear correct  since               the  method  of  jetting was  adopted  in  the               interest  of  the department in  view  of  the               sandy stratum obtaining at the site as against               the  indication given by the  department  that               the soil is clayey upto a depth of nearly  200               ft.   No  doubt, the contractor was  asked  to               ascertain  the  nature of the soil;  but  this               does   not  imply  that  he  was  to   conduct               exploratory    borings    to    confirm    the               classification given by the department in  the               tender within the short span of time available               for submitting tenders". Earlier  also  on  July 25, 1966, as per  Ext.   P.  16  the Executive  Engineer  had  written  to  the  Chief   Engineer wherefrom paragraph 4 is revealing               "Even  though while inviting tenders  for  the               work  there was a condition that the  tenderer               should  examine the soil condition it was  not               expected, of them to do soil testing in detail               within the period available to them to  tender               for  the work.  A clear  indication  regarding               the nature of the strata that is likely to  be               met  with  was also furnished at the  time  of               inviting   tenders.   After   complete ,oil               investigation  the  strata  was  found  to  be               different   from   that   furnished   by   the               department  and  so in  my  opinion  technical               specification    has    changed.     In    the               circumstances jetting clone by the  contractor               can be considered as an extra item". We now come to the Award.  Although the Arbitrator has  held that  "jetting, however, is not an authorised extra  covered by  the  agreement", he has made the  following  significant observation  which is inconsistent with his conclusion  that the  contractor  has  no right for  extra  payment  for  the jetting :               "The Chief Engineer has rejected the claims of               the ’contractor on grounds of non-inclusion of               this  (jetting)  in the  agreement  which  was               executed subsequent to the direction issued by               the  department to adopt jetting.   The  Chief               Engineer’s  decision totally ignores the  next               sentence  in  that letter ’Meanwhile  you  may               execute the agreement’.  By this sentence  the               issue  of  extra payment for jetting  is  left               open   even   after  the  execution   of   the

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             agreement". If the above is the conclusion of the Arbitrator,  rejection of the claim on the ground that "jetting, however, is not an authorised  extra  covered  by  the  agreement"  cannot   be anything but rationally inconsistent.  The award, therefore, suffers from a manifest error apparent ex facie. 218 Under  section 30(a) of the Arbitration Act an award can  be set aside when an Arbitrator has misconducted himself or the proceedings.   Misconduct  under  section 30(a)  has  not  a connotation  of moral lapse.  It comprises legal  misconduct which is complete if the Arbitrator on the face of the award arrives  at  an  inconsistent conclusion even  on.  his  own finding  or arrives at a decision by ignoring very  material documents  which throw abundant light on the controversy  to help a just and fair decision.  It is in this sense that the Arbitrator  has misconducted the proceedings in  this  case. We  have, therefore, no hesitation in setting aside such  an award.  In the result the judgment of the High Court is  set aside  and that of the Subordinate Judge is  restored.   The award of the Arbitrator thus stands quashed.  The Arbitrator will  complete  the proceedings after  considering  all  the relevant  documents  including Ext.  P. 11 and Ext.   P.  16 after  giving  opportunity to the parties.   The  appeal  is allowed with costs. P.B.R.                                      Appeal allowed.