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PETITIONER: STATE OF BIHAR & ORS.

       Vs.

RESPONDENT: HANUMAN MAL JAIN

DATE OF JUDGMENT:       17/07/1997

BENCH: S.B. MAJMUDAR, M. JAGANNADHA RAO

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T S.B. Majmudar . J.      Leave granted in both these Special Leave Petitions.      By consent  of learned advocates of parties the appeals were heard  finally and are being disposed of by this common judgment. The  appellants in both these appeals are State of Bihar and  its officers  in Rural  Engineering Organisation. Respondent in  both these  appeals is  also one and the same contractor. The  grievance raised  by the appellants centers round  the  orders  passed  by  learned  Subordinate  Judge, Chaibasa, making  awards rules  of the  Court in  two  Title Suits filed by the respondent against the appellants. These orders  of  the  learned  Subordinate  Judge  in  turn  were confirmed by  the High Court of Patna in appeal moved by the appellants and  that is  how the  appellants are  before  in these proceedings.  We shall  refer  to  the  respondent  as plaintiff and the appellants as defendants in latter part of this judgment.      The plaintiff  filed twp  Title  Suits  for  recovering money  dues  from  the  defendants,  in  the  Court  of  the Subordinate Judge,  Chaibasa. His  contention was that while carrying  out   contract  work   entrusted  to  him  by  the defendants he  had incurred  expenditure over  various extra items which  were not paid for by the authorities concerned. He  also   raised  certain   ancillary  claims  against  the defendants seeking  money decrees  against the defendants in both these suits.      The defendants  resisted the  suits on diverse grounds. After hearing  the parties  the Trial  Court  appointed  the Superintending  Engineer,  Rural  Engineering  Organisation. Works Circle,  Ranchi as  the sole  arbitrator to adjudicate upon the  disputes raised  in the suits. It was subsequently found  that   before  the   arbitrator  could   finish   the arbitration  proceedings  his  office  fell  vacant  due  to retirement.  Consequently   the  plaintiff   moved   another application under  the Arbitration  Act,  1940  (hereinafter referred to  as  ‘the  Act’)  for  appointment  of  a  fresh arbitrator. The  appellant-defendants agreed  to the name of one Shri  T. Ghosh,  retired Chief  Engineer to  act as sole arbitrator and  that is how the disputes between the parties

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in both these suits were referred to the said arbitrator who after hearing  the parties  gave his  award on 6th July 1992 for a  sum of  Rs. 3,99,400/-  in favour of the plaintiff in Title Suit No.7 of 1988 with 18% interest. He passed another award dated  7th July 1992 for a sum of Rs. 2,38,200/- along with interest and cost in favour of the respondent-plaintiff in Title Suit No.8 of 1988. The plaintiff moved applications under Section 20 of the Act in both the suits for making the awards rules  of the  Court. The defendants filed objections to these  awards under  Section 30  of the  Act. The learned Subordinate  Judge,  Chaibasa,  after  hearing  the  parties overruled the  objections of the defendants and decreed both the suits  in terms  of the  arbitration  awards.  As  noted earlier the  appellant-defendants being  aggrieved  by  both these award  decrees approached  the High  Court of Patna at Ranchi in  appeal. The  High Court  dismissed the appeal and confirmed the arbitration awards.      Learned senior  counsel Shri Sanyal in support of these appeals  placed   before  us   two   contentions   for   our consideration: 1.   The awards  which were made rules of the Court suffered      from patent  error of  law on the ground that Clause 11      of the  Agreement between  the parties was not complied      with by  the plaintiff  and hence  both the awards were      barred by  limitation as  per the second proviso to the      said Clause  and both  the Subordinate Court as well as      the High  Court had  patently erred  in relying upon 11      dehors the second proviso while confirming the awards. 2.   The award  of interest  by the  arbitrator was patently      erroneous and  without jurisdiction  as it was contrary      to the tender notice Clause 2.32 which prohibited grant      of such  interest on  the disputed  amounts.  Initially      when these  Special Leave  Petitions reached  admission      hearing before  a Bench  of this  Court  consisting  of      Hon’ble B.P. Jeevan Reddy and K.S. Paripoornan, JJ., an      order was  passed by  the said  Bench on  9th September      1996 adjourning  for three weeks the said Special Leave      Petitions to enable Shri Sanyal, learned senior counsel      for the  petitioners to produce the copy of the grounds      of appeal  before  the  High  Court  to  establish  the      following facts:      (i)  that the  State did  point out      that the  District Judge has quoted      a wrong proviso to clause 11 of the      contract  and   that  the   correct      proviso   to    clause   11   reads      altogether in a different manner.      (ii) that  a submission  was raised      in the  grounds of  appeal that  by      virtue  of   clause  2.32   of  the      tendered document no interest shall      be payable to the contractor.      Pursuant to the said order the appellants through their counsel have  produced the grounds of appeal before the High Court by way of compilation in Paper Book No.1. On a perusal of these  grounds it  is found  that  the  twin  contentions canvassed before us by Shri Sanyal in support of the appeals have in  terms been raised before the High Court in the Memo of Appeal being Ground No. VII. We have, therefore, examined these contentions  on merits  after hearing  learned counsel for both the sides. Contention No.1      So far as the applicability of second proviso to Clause 11 of  the Agreement is concerned Shri Sanyal was right when he contended  that Clause  11 as  extracted by  the  learned

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Subordinate Judge  in both  of his  judgments in  Title Suit Nos.7 and  8 of  1988 has been reproduced without the second proviso which  is a  part thereof.  The  second  proviso  to Clause 11  which is  found  in  the  themselves  before  the arbitrator and  even the  objections under Section 30 of the Act of  the Act  filed by  the defendants to the said awards before the  Trial court  it is  revealed that  not only  the arbitrator was  alive to  the question  of applicability  of entire Clause  11 of  the  Agreement  including  the  second proviso but the defendants wanted to object to the awards on the ground  that the  decision  of  the  arbitrator  on  the question of limitation was erroneous. We will presently show how this is clearly revealed from the record of the case.      When the  plaintiff put forward his money claims before the arbitrator  for adjudication  the defendants  themselves joined issued  on the  applicability of  Clause  11  of  the Agreement. In  their written  objections  filed  before  the arbitrator in both these cases, at paragraph 9 the following pertinent averments were made:      "9. That  the  statements  made  in      para 6  of the  statement of claims      are not  correct. It  is  submitted      that clause  11  of  the  agreement      executed between the parties relate      to additional  or  extra  items  of      work  and   it   lays   down   that      certificate of  Engineer in  Charge      of the work shall be conclusive and      further says that in the event of a      dispute   the   decision   of   the      Superintending Engineer  of  Circle      will be  final. In the instant suit      the Superintending  Engineer R.E.O.      Work Circles,  Ranchi did not agree      with  the  recommendations  of  the      Executive Engineer, Shri B.N. Puran      in view  of the fact that the extra      items of  work  were  not  executed      during his  incumbency  and  wanted      the orders  and acceptance  of Shri      P.C. Das  in whose  incumbency  the      work was  executed and  only on his      recommendations any  claim  can  be      considered.  Under  the  facts  and      circumstances  of   the  case   the      claimant is  not entitled to any of      the claims  or  reliefs  prayed  by      him."      A mere  look at the aforesaid written objections of the defendants before  the arbitrator  on the  applicability  of Clause  11  shows  that  their  only  grievance  before  the arbitrator was  that the  procedure of  Clause  11  was  not followed and  there  was  not  a  whisper  about  the  claim becoming barred by limitation in the light of second proviso to Clause  11. Even  that apart  when we  turn to the awards which  are   non-speaking  awards   we  find  the  following pertinent recitals:      "Now,  therefore,  I  said  Taradas      Ghosh  (T.   Ghosh)   after   going      through   all    the    statements,      evidences,   arguments   etc.   and      having  duly   considered  all  the      matters submitted to me by both the      parties do  hereby make my award as      follows:

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    1.  That   the  Executive  Engineer      Rural   Engineering    Organisation      Works Division  Chaibasa should pay      Sri  Hanuman  Mal  Jain  Contractor      Chakradharpur   a    sum   of   Rs.      3,99,400/-  (Rupees   three   lakhs      ninety nine  thousand four  hundred      only) after  going through  all the      documents and arguments by both the      parties.      2.  That   the   aforesaid   amount      carries  simple   interest  @   18%      (eighteen)  per   annum   which   I      consider  reasonable   with  effect      from 1.1.86  till the date of award      and also  from the  date  of  award      till the  date of  payment  or  the      date   of   decree   whichever   is      earlier."      It becomes,  therefore, clear that the arbitrator while passing  non-speaking   awards  in   both  these  cases  had considered all  statements, evidences  and arguments offered by the  contesting parties before him and then he had passed the awards.  It is  also pertinent  to note that amongst the documents considered by the arbitrator the Agreement between the parties  including Clause 11 with both its provisos duly signed by  the parties  was  obviously  on  the  record  and whatever  contentions   were  canvassed  by  the  defendants regarding the applicability of Clause 11 were stared to have been considered  by the arbitrator and then the non-speaking awards  were   passed.  Consequently  it  is  impossible  to appreciate the contention that there was any patent error on the part  of the  arbitrator in not considering the question of limitation  as mentioned  in the second proviso to Clause 11. It  is also  necessary to  note  that  the  said  second proviso does  not totally  prohibit granting  of a claim for the work  on extra items carried but by the contractor by it only lays  down the procedure how the claim could be lodged. Consequently the  second proviso  cannot  be  said  to  have ousted  jurisdiction  of  the  arbitrator  in  deciding  the dispute on  merits as well as on the question of limitation. Implicit in  the observations in the award is the finding of the arbitrator  that the  claims were not contrary to Clause 11 but  were in  compliance thereof.  Not only  that, in the objections  under  Section  30  of  the  Act  filed  by  the defendants in  both these  cases before  the Trial Court the following contentions  were  raised  by  the  defendants  in Objection No. (x):      "(x)   For    that   the    learned      Arbitrator ought to have disallowed      the claim  as time  barred and  not      maintainable in  terms of clause 11      of the Agreement."      This objection  on the  face of it shows that according to the  defendants the  arbitrator had  wrongly allowed  the claims which  were time  barred as  per Clause  11. Thus the objection was  not on  the ground of absence of jurisdiction of the  arbitrator wrongly held the claim to be within time. This obviously  was in  the domain  of the  jurisdiction  of arbitrator and  even if  he had decided wrongly the question of limitation  it could  not be  made  a  subject-matter  of objection under  Section 30  of the  Act  against  a    non- speaking award.  Nor would  it show  any misconduct  on  his part. The court obviously could not sit as a Court of Appeal against the  decision rendered  by the  arbitrator  on  this

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ground. Much  more so  when  the  awards  were  non-speaking awards. In  this connection  we may  refer to  a decision of this court  in the  case of  Dandasi Sahu v. State of Orissa (1990) 1  SCC 214 to which our attention was invited by Shri Sanyal,  learned  senior  counsel  for  the  appellants.  He submitted that  even in  case of  a non-speaking  award  the arbitrator is  bound to  refer to  all the documents and his awards  nowhere  showed  that  he  had  considered  all  the documents in  this connection  while passing the awards. The observations found  in paragraph 3 at page 218 of the Report on which reliance was placed by Shri Sanyal read as under:      "... Though  the arbitrator  is not      bound  to   disclose  as   to  what      interpretation he has made and what      inference he  was derived  from the      documentary evidence,  he is  bound      to refer  in the  award that he had      considered all the documents placed      before him  no  matter  whether  he      relies on  them  or  discards  them      from consideration.  The arbitrator      in his  award  ex  facie  does  not      mention that  he has referred to or      considered  the   documents  placed      before  him   in  respect   of  the      original claim."      These observations  made  in  connection  with  a  non- speaking award instead of helping the learned senior counsel for the  appellants on  the facts  of the  present  case  go against the appellants. The reason is obvious. In the awards in question,  as seen  earlier, the  arbitrator has  clearly mentioned that  he had  considered all  matters submitted to him by  both the  parties and  he had  gone through  all the statements, evidences,  arguments etc.  It is  true that the word ‘evidences,  arguments etc.  It is  true that  the word ‘evidences’  is   mentioned  and  not  ‘documents’  in  that paragraph. However  it could  not be urged with any emphasis that evidence  would include  only  oral  evidence  and  not documentary evidence.  But even  that apart  the  subsequent identical paragraph  found in  the awards  which is  already extracted by  us earlier  leaves no  room for doubt that the claims have  been adjudicated  after going  through all  the documents and arguments by both the parties. Consequently it must be  held that  even though  the learned  Trial Judge as well as the High Court had not noticed the second proviso to Clause 11 of the Agreement both the parties had joined issue on the point before the arbitrator and the arbitrator having considered all  the relevant  contentions of  the parties on this aspect  had  passed  the  impugned  awards  which  even according to  the defendants were passed on consideration of Clause 11  as a  whole but only fault sought to the found by the defendants  against the  awards was  that the arbitrator had wrongly  treated the  claims not to be time barred. That question  would  squarely  get  connected  with  the  second proviso to  Clause 11  to which  we have  made  a  reference earlier and  not dehors it. The first contention, therefore, is found to be devoid of any substance. That takes us to the second submission  raised by  Shri  Sanyal,  learned  senior counsel for the appellants. Contention No.2      Shri Sanyal  submitted that  Clause 2.32  of the Tender Terms which  was binding  on the  plaintiff  prohibited  the arbitrator  from  awarding  any  interest  on  the  disputed amounts. The  said clause  in the  Tender  Notice  reads  as under:

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    "2.32- CLAIMS FOR INTEREST :-      No claim  for  interest  or  damage      shall   be    made   against    the      department  with   respect  to  any      money or balance which may be lying      with the  department owing  to  any      dispute,      unsettled      claim,      difference of understanding between      the Engineer-in-charge  on the  one      hand  and  the  Contractor  on  the      other  hand  with  respect  to  any      unavoidable delay  on the  part  of      the Executive  Engineer  in  making      final  payment   in   any   respect      whatsoever."      This  contention  was  raised  by  the  defendants  for consideration before  the High  Court in the Memo of Appeal. Not only  that but  this contention  was also  canvassed for consideration of  the learned  Trial Judge.  It is also true that the Trial Court while dealing with these objections has made identical  observations  in  both  the  proceedings  in identical paragraph  14 of  its  judgments.  That  identical paragraph reads as under :      "14.  The   learned  G.P.   however      argues that  clause 2.32  of  Bihar      Public   Works    Department    F-2      specifically  debars  interest  and      hence on the basis of ruling relied      upon by  the plaintiff  reported in      AIR  1992  SC  732  the  arbitrator      should not  allow interest.  I have      carefully gone  through clause 2.32      of Form  F-2 and it is debatable on      the point whether arbitrator should      allow interest  or not? Hence it is      the  duty   of  the  arbitrator  to      decide whether  clause 2.32 fetters      his hand  in allowing  interest  or      not."      It is true that the learned Trial Court thought that it was a  debatable question  and that  it was  the duty of the arbitrator to decide such questions. The learned Trial Judge had not  addressed  himself  to  the  question  whether  the arbitrator had  considered the  said clause  or not. When we turn to  the High  Court’s judgment  in appeal  we find  the situation no  better. In  the impugned judgment at paragraph no.6 the  High Court  has noted the contention that award of interest @  18% p.a.  in absence  of any  agreement to  this effect was  unwarranted. But  when we turn to the discussion in the  said  judgment  the  only  discussion  found  is  in paragraph 10  of the judgment dealing with the main argument regarding Clause  11. This  would have required us to either remand the  proceedings to  the High Court for consideration of this  second contention  or decide the same ourselves. As these are  old claims  arising out  of suits of 1988, in our view, interest  of justice  requires that  we may  ourselves decide this  question on its own merits. We have, therefore, heard the learned advocates on this question.      When we  turn to  the said  clause 2.32 we find that it may prima  facie he found to be applicable to the claims for interest or  damage in  connection with any money or balance which may  be  lying  with  the  department  and  which  the plaintiff may  rightfully claim to be refundable to him. The phrase ‘money  or  balance  which  may  be  lying  with  the department’ may  cover not only any amount of money but even

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any balance  of money meaning thereby the claim may refer to the whole amount which the plaintiff claims to be refundable to him  or any  balance of  it after  having been refunded a part of  it and  thus the  claim is  confined  to  only  the balance being  left with  the department.  In either case it would be  a claim  for refund  of an amount of money already lying with  the department.  However learned  senior counsel Shri  Sanyal   submitted  that   the  term  ‘any  money’  is independent of  the balance  which may  be  lying  with  the department  and,   therefore,  any   money  claimed  by  the plaintiff against  the defendants  would be  covered by  the said clause  and it  is not necessary that the money must be lying with  the department and only claim of refund would be contemplated by  the said clause. However even assuming that such a  construction of  the clause  is possible,  the  real hurdle in  the way of the defendants lies in the penultimate part of the said clause. It clearly shows that the claim for money or damage should have been made against the department and the  dispute regarding  the same  should  have  remained unsettled between the Engineer-in-Charge on the one hand and the Contractor  on the  other and  in connection with such a dispute  it  should  be  demonstrated  that  there  was  any unavoidable delay  on the  part of the Executive Engineer in making the  final payment. It is, therefore, obvious that if the delay  was  avoidable  on  the  part  of  the  Executive Engineer in  making the  final payment  then  the  claim  of interest in  connection with  the said amount of money would not get  barred under the said clause. So far as this aspect is concerned  it is  interesting to note that nowhere in the objections filed  before the  arbitrator or  even before the Court under  Section 30  of the  Act such  a connection  was canvassed for  consideration by the appellants. In the third volume of  additional  documents  filed  by  the  appellants themselves is  found a copy of the Minutes maintained by the arbitrator in  connection with the proceedings before him in the present two cases. At paragraph 6 of the said Minutes in connection with the plaintiff’s claims the contention of his counsel is noted. The summary of the submissions as noted in the said paragraph reads as under:      "6. Sri  Kar Roy,  Counsel for  the      Claimant,    while    summing    up      submitted  that   the  claims  were      submitted to  the Department before      completion of the work on 01.04.85.      Reminder notices  were submitted by      the  Claimant   on   08.04.85   and      12.04.85.  The   E.E.  might   have      thought   it    fit    to    obtain      recommendations on  11.09.85  after      obtaining recommendations  of  J.E.      Thereafter    unreasonable    delay      occurred on  the part  of  E.E.  to      take   next    logical   step   and      ultimately recommended and/or dealt      with the  claim  on  21.08.87.  The      concerned    officers     of    the      Respondent generally  accepted  the      claims, but did not give any reason      for rejection  of any  item,  which      was absolutely arbitrary."           [Emphasis supplied]      The aforesaid  contentions before  the arbitrator leave no room  for doubt  that it  was the  case of  the plaintiff before the  arbitrator that  his  claims  were  unreasonably delayed by  the Executive  Engineer before  considering  the

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same. It  is  this  contention  which  is  accepted  by  the arbitrator by  passing the  impugned awards though in a non- speaking manner. Therefore, it is not possible to agree with the contention  of learned senior counsel for the appellants that the claim for interest was barred by clause 2.32 of the Tender Terms.  If the contention of the plaintiff before the arbitrator was  that his  claims were  unduly  delayed  they would obviously  rule out  the  applicability  of  the  said clause as  that would not amount to unavoidable delay on the part of  Executive Engineer  in making the final payment. On the contrary  it would  be avoidable  delay which would take out the  claims  from  the  fetters  of  Clause  2.32,  even assuming that  Shri Sanyal,  learned senior  counsel for the appellants is  right in  his submission that the said clause would cover all money claims pertaining to the amounts which may not  be lying  with the  department and  still would  be within the  sweep of  the first  part of the said clause. In this connection  it is also profitable to refer to paragraph 13  of  the  written  objections  filed  on  behalf  of  the defendants before he arbitrator:      "13.   That   there   is   specific      provision in  the agreement between      the parties  that claim  for damage      or interest  against the department      is not  maintainable. Moreover  the      facts and circumstances of the case      as well  as under the provisions of      law the  claimant is  not  entitled      for  any   damage  or  interest  as      claimed by him."      This statement  of objections  clearly shows  that  the defendants joined issue on the question whether any interest could have  been  awarded  against  the  defendants  by  the arbitrator. Implicit  in this  contention would  be the moot question whether there was any unavoidable delay on the part of the  Executive Engineer in making the final payment which according to the plaintiff fell short of his claim and it is this connection  which, as  noted by  the arbitrator  in the Minutes was  pressed for consideration of the arbitrator. He ultimately came  to his own conclusion regarding the same by rejecting this  contention on merits by non-speaking awards. It is,  therefore, not  possible to  agree with  the learned senior counsel  for the  appellants  that  applicability  of Clause 2.32  of the  terms of tender was not kept in view by the arbitrator and consequently his awards suffered from any patent error  of law.  We have to undertake this exercise on the facts  of the present cases as neither the learned Trial Judge nor  the High Court had come to the grip of this issue and in  order to avoid unnecessary protraction of litigation we thought  it fit,  as noted  earlier,  after  hearing  the parties to decide this controversy. We accordingly find that on  merits  there  is  no  substance  even  in  this  second contention.      In  the  result,  both  these  appeals  fails  and  are dismissed. However  in the  facts and  circumstances of  the cases there shall be no order as to costs in each of them.