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PETITIONER: STATE OF ORISSA & ANOTHER

       Vs.

RESPONDENT: KALINGA CONSTRUCTION CO. (P) LTD.

DATE OF JUDGMENT: 11/09/1970

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C. SHAH, J.C. HEGDE, K.S. SHAH, J.C. HEGDE, K.S.

CITATION:  1971 AIR 1650            1971 SCR  (2) 110

ACT: Arbitration--Award  by  arbitrator  after  considering   and believing  certain   evidence-If  open to court  to  sit  in appeal  over such award-Arbitration Act. 1940.  Ss.  30  and 33.

HEADNOTE: The  respondent  Company’s  tender  for  the  movement   and depositing of earth on the right dyke of the Hirakud Dam was provisionally  accepted by the Government in December  1951. The work started in Fehr any 1952 and a formal contract  was executed  in March 1953.  The earth work was done by  manual labour  for  a year in the beginning and thereafter  it  was done to a large extent by machinery.  The vertical  movement was styled as "lift" and the horizontal movement as  "lead". When the company started employing the heavy machinery  from the  beginning of 1953 onwards a number of ramps had  to  be constructed to enable the machinery to go up from the borrow pits  to  the  dyke.   After the  work  was  completed,  the respondent Company was paid a certain amount on the basis of a  scale  set out in the contract; but it claimed  an  addi- tional  substantial sum in respect of lifts and extra  leads and  certain other items together with the interest  on  the amounts  duo.  It was provided in the contract that  if  the average  lead mentioned bad to be exceed, the orders of  the Chief  Engineer  in  writing  had to,  be  obtained  by  the contractor.   The  respondent Company claimed  that  it  had ’sought the orders of the Chief Engineer in writing for  the extra  leads  resulting from the conversion  of  lifts  into leads  and that although the Chief Engineer did not  himself make  any such order, the Superintending Engineer with  whom the Company had been dealing did sign an order for the Chief Engineer.  The contract provided for arbitration of disputes and  differences.   After  the  matter  was  taken  up   for arbitration,  issues  were  framed  by  the  arbitrator  and considerable  oral and documentary evidence was led by  both the  parties before him.  On the basis of this evidence  the arbitrator found that the tender must be taken to have  been

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made and accepted on the basis that the whole work was to be done by manual labour; he believed the evidence of the Chief Engineer  that he passed no order allowing any  extra  leads and  eventually held that no further amount was  payable  by the  Government to the Company.  The  respondent  thereafter filed  a  plaint  under Sections 30 and  33  of  the  Indian Arbitration  Act,  1940, challenging the  award  on  various grounds and praying for it to be set aside.  The subordinate Judge who heard the ease set aside the award in March  1962. In  an  appeal  to  the  High  Court  the  two  Judges   who constituted  the Division Bench gave  dissenting  judgments, i.e.  one  of  them  holding that the  award  could  not  be substained  and  the other one being of the  view  that  the award  was not liable to be set aside.  The appeal was  then heard by a third judge who held that the award was liable to be  set aside on two of the issues; as he held these  issues to be severable, he proceeded to set aside the award in res- On appeal to this Court, 185 HELD : The appeal must be allowed and the order of the  High Court setting aside the award in part must be reversed.  The proceedings  instituted by the respondent under Sections  30 and 33 of the Arbitration.  Act must be dismissed. A bare perusal of the judgment of the third learned Judge of the  High.  Court clearly showed that he decided the  matter as  it he was entertaining an appeal against the award.   He re-examined  and  reappraised the evidence  which  had  been considered and believed by the arbitrator It was not open to the  High Court to sit in appeal on the arbitrator’s  award. [189 C] Once  it was found that under the terms of the contract  the Order  of the Chief Engineer in writing had to  be  obtained before the work involving additional leads was executed,- in the absence of any such written order it was not open to the court  to hold that the appellant was liable for payment  of extra leads by applying some principle or rule analogous  to estoppel.   Although it was true that the company  had  been writing to the Engineering Department in the matter and that the latter did not, for a considerable time, send any  reply but the Company was debarred from asking for any  additional payment  in  the absence of the Chief  Engineer’s  order  in writing.   If  the arbitrator came to  that  conclusion,  it could  not be said that there was any error apparent in  his award which would justify setting aside. 1190 C]

JUDGMENT: CIVIL  APPELLATE  JURISDICTION : Civil Appeal  No.  2023  of 1969. Appeal from the judgment and decree dated February 18,  1965 of the Orissa High Court in Misc.  Appeal No. 53 of 1962. S.   T.  Desai,  Gobind  Day and R.  N.  Sachthey,  for  the appellants. V.   T. Rangaswami; T. Raghavan, B. Datta, D. N. Mishra and J.   B. Dadachanji, for the respondent. The Judgment of the Court was delivered by Grover, J. This is an appeal by certificate from a judgment of the Orissa High Court relating to an award given by  Shri A. V. Viswanatha Sastri an Ex-Judge of the Madras High Court in  a  dispute which arose between the  respondent  and  the Union of India in respect of a claim made by the former  for a  sum  of Rs. 35,45,080.91 which was stated to be  due  for earth work done on the right dyke of the Hirakud Dam. The  Chief Engineer, Hirakud Dam, invited tenders on  behalf

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of  the  Union  of India for execution  of  work  specifying certain details as to how tender-, were to he submitted.  It appears  that  before  the  tenders  were  invited   certain estimates were prepared in the office of the Chief Engineer. The intending contractors were to submit tenders stating the rate  for depositing earth on the Right Dyke site  including all  lifts  and leads.  The respondent company  submitted  a tender  which, according to the Chief Engineer, was  not  in the form invited by him as certain extraneous L235Sup.CI-13 186 matters  were  stated to have been  introduced.   The  Chief Engineer  and the representatives of the respondent  company held  a conference at which certain agreements were  arrived at.  The tender of the contractor was provisionally accepted on December 28, 1951; the formal contract was executed  much later on March 21, 1953.  The work started in February  1952 and took four years for completion.  The earthwork was  done by the company by manual labour for a year in the  beginning and  thereafter it was done to a large extent by  machinery. The earth required to erect the dyke was dug up from certain areas demarcated by the Engineering Department near the site of  the  dyke.  The places from which the earth  had  to  be taken  were  called "borrow pits" or  "borrow  areas".   The company dug up earth from the "borrow pits" and dumped it on the site of the dyke upto the required specifications.  This involved  movement  of the loose earth both  vertically  and horizontally from the borrow pit to the dyke.  The  vertical movement was styled as "lift" and the horizontal movement as "lead".  When the company started employing the heavy machi- nery  from the beginning of 1953 onwards a number  of  ramps had to be constructed to enable the machinery to go up  from the borrow pits to the dyke. It has not been disputed that for the earthwork done by  the company it received payment from the Government of an amount aggregating  Rs.  1,08,19,543.00. This amount  was  paid  in accordance  with the rate in item I-A of the contract  (Ext. P-69).  According to that rate Rs. 45/- were to be paid  for 100 cubic feet of earthwork of all kinds of soil laid in  6" layers  with rough dressing including all lifts and  average lead  not  exceeding.  10".  According  to  the  company  an additional  sum of Rs. 26,20,798.75 was due in  addition  to the amount already paid in respect of extra leads  including lifts.   An amount of Rs. 2 lakhs was claimed on account  of the  construction of ramps.  The company further  claimed  a sum  of  Rs.  5,34,282-16  on account  of  interest  on  the aforesaid two amounts.  This claim was disputed by the Union of  India  and  it was maintained on  its  behalf  that  the company  had  been fully paid for the earthwork done  by  it according to the terms of the contract and that the  company was  not  entitled to payment for lifts nor  was  there  any occasion for leads in excess of an average of tO and further that the ramps in so far as they were outside the dyke  were not  to be paid for while those which had been  incorporated in the dyke had already been paid for as a part of the dyke. The agreement by which reference was made to the  arbitrator was as follows :-               "The  disputes  and  difference  between   the               parties relating to payment of lift equivalent               and leads for               187               machine route are referred to the  arbitration               of Shri A. V. Viswanatha Sastri, retired  High               Court  Judge,  Madras and his award  shall  be               final and binding on the parties."               On November 16, 1958 the following issues were

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             framed by he Arbitrator by the consent of both               the parties               (i)  Is the claimant entitled to  any  payment               for  lifts  under the terms ’of  the  contract               between the parties ?               NOTE  : Both sides agree that I foot of  lifts               is equal to 12-2-1/2 feet of lead.               (ii)  Whether  the  claimant  is  entitled  to               payment for machine leads where machines  have               been  used  for earthwork and if so,  on  what               basis and at what rates?               (iii)Whether  in the case of  machine  leads,               lifts are not taken into account as pleaded by               the Union of India ?               (iv)  Whether the claimant is entitled to  the               cost incurred in putting tip the ramps ?               (v)   Is  the  Union of  India  estopped  from               denying  liability  for payment of  lifts  and               machine  leads  for  the  reasons  stated   in               paragraphs 1 1 to 14 of the Statement Claim of               Ramlinga Construction Co. (P) Ltd. ?               (vi)  Is the claimant entitled to interest for               the period during which the-amounts payable to               the   claimant   remained   unpaid   by    the               Government, if so. at what rate .?               (vii)What  is the amount due to the  claimant               from the Union of India ?" A good deal of oral and documentary evidence was led by both the  parties  before the arbitrator.  After  discussing  the same he came to the following conclusions :-- 1.The tender must be taken to have been made and accepted on  the basis that the whole work was to be done  by  manual labour. 2.According to the terms of the contract if the averaee lead of IO had to be exceeded the orders of the Chief Engineer in writing  had to be obtained by the contractor and  then  the extra lead 188 was  to  be paid for at the rate of Rs. 1.12  As.  per  1000 cubic  feet.  The company did raise the question of  payment for  lifts  as  early as December 30, 1952  and  sought  the orders  of the Chief Engineer in writing for the extra  lead resulting  from the conversion of lifts into leads  but  the Chief  Engineer  never  made  any  order  in  writing.   The arbitrator believed the evidence of the Chief Engineer  Shri kanwar Sain that he passed no orders allowing the company an extension  of lead beyond the average 10.  As the  obtaining of the written order of the Chief Engineer was an  essential condition which had to be complied with before. a claim  for extra  lead  could be made the company was not  entitled  to payment for the extra leads beyond the average 10. (3)The  letter  Ext.  P-6 dated March 30, 1953  which  was signed by the Superintending Engineer for the Chief Engineer had  not been proved to have been written either  under  the instructions of the Chief Engineer  or approved by him.   In this  letter  it  was stated, inter  alia,  that  the  words "average 10 leads mentioned in the special conditions of the agreement  include the initial lead and lift and  all  other lifts  between  the borrow area and the  Dyke".   The  Chief Engineer’s evidence relating to Ext.  P-6 was believed. The  final conclusion of the arbitrator on issue No.  1  was that under the terms of the contract between the parties the rate  of Rs. 45/- per 1000 cubic feet covered all lifts  and that lifts had not to be separately paid for.  On issue  No. 2  the company’s claim for extra payment for  machine  leads

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was  held to be untenable.  The finding on issue No.  3  was that  in  case of machine leads lifts were not to  be  taken into  account.  On issue No. 4 the arbitrator held that  the company  was not entitled to recover the costs  incurred  in putting  up the ramps.  On issue No. 5 it was  decided  that the  Government was not estopped from denying liability  for payment for lifts and machine leads.  On issues 6 and 7  the arbitrator found that no amount was payable by the Union  of India  to  the company nor was the Union liable to  pay  any interest. The respondent company filed what was called a plaint  under ss.  30  and 33 of the Indian Arbitration Act  1940  in  the court  of the Subordinate Judge, Sambalpur, challenging  the award  on various grounds and prayed that it be  set  aside. It  was further prayed that another arbitrator be  appointed to  make  a fresh award regarding the disputes  between  the parties.   The Subordinate Judge set aside the award by  his order dated March 17, 1962.  The Union of India preferred an appeal to the High Court which was beard by Barman and  Das, JJ.   Learned judges gave dissenting judgments,  Burman  J., was  of  the  view that the award  could  not  be  sustained whereas  Das J., was of the opinion that the award  was  not liable  to  be set aside.  The appeal was then  heard  by  a third 189 Judge G. K. Misra J. On issues 1 and 2 Misra J. agreed  with the  judgment  of  Barman  J., but on  issues  3  and  4  he concurred  with  the, decision of Das J.  According  to  his judgment the award could not be set aside on issues 3 and  4 whereas it was liable to be set aside on issues 1 and 2.  As the  issues  were severable he set aside the award  only  on issues 1 and 2. A  bare perusal of the judgment of Misra J. would show  that lie  decided the matter as it he was entertaining an  appeal against  the award itself. He re-examined  and  re-appraised the evidence which had been considered by the arbitrator and held  that  the  arbitrator  was  wrong  in  coming  to  the conclusion that the work was contemplated by the contract to be done by manual labour alone.  According to him under  the agreement  payment for machine leads was  contemplated  from the  very  beginning or at any rate was  not  excluded.   He examined a large volume. of evidence including Ext.  P-6  as also  the  oral evidence of the Chief Engineer  Shri  Kanwar Sain and held that from the course of correspondence it  was clear  that in dealing with the contractor or the  Executive Engineer almost all the letters on behalf of the Chief Engi- neer  were being dealt with by the Superintending  Engineer. Once Ext.  P-6 was admitted to be genuine and was issued  by the  Superintending  Engineer  in  the  ordinary  course  of correspondence  it  was for the appellant  to  establish  by production of the relevant records that that letter had been issued  without authority of the Chief Engineer.  Misra  J., had  no  hesitation in holding that Ext.   P-6  was  written under  the authority of the Chief Engineer and  was  binding between  the parties.  Here again what Misra J., id  was  to appreciate  the  evidence which had been considered  by  the arbitrator,  in  particular,  the  testimony  of  the  Chief Engineer.  The arbitrator had believed the statement of  the Chief  Engineer that Ex. P-6 had neither been  issued  under his authority nor with his approval.  Once this part of  his statement was believed by the arbitrator it was not open  to Misra  J..  to  sit in appeal over  the  conclusion  of  the arbitrator in proceedings for setting aside the award. The  other  serious error into which Misra J., fell  was  to record a finding on the payment for extra leads beyond 10 in

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reversal of the conclusion of the arbitrator.  This is  what the learned judge proceeded to say :               "The  next point for consideration is  whether               the  payment for extra leads beyond 10 are  to               be rejected because the Chief Engineer’s order               in  writing had not been obtained  before  the               work involving additional leads was  executed.               Both under Ex.  P. 2 and Ext.  P. 69 this term               had   been  incorporated.   In  the   peculiar               circumstances  of this case, however, it  must               be taken that the               190               condition had been fulfilled even though there               was  no  order  in writing.  It  was  for  the               Executive  Engineer  and  the   Superintending               Engineer,  who were getting the work  done  by               the Company, to obtain the order in writing or               not  to allow the Company, to work  beyond  10               leads  including lifts without  obtaining  the               order of the Chief Engineer in writing." Once  it was found that under the terms of the contract  the order  of the Chief Engineer in writing had to  be  obtained before the work involving additional leads was executed  and in the absence of any such written order it was not open  to the  court  to hold that the  appellant-Union  of  India-was liable for payment of extra leads beyond 10 by applying some principle  or  rule analogous to estoppel.  It is  no  doubt true  that the company had been writing to  the  Engineering Department in the matter and that the latter did not, for  a considerable  time,  send  any reply  but  the  company  was debarred  from  asking  for any additional  payment  in  the absence  of the Chief Engineer’s order in writing.   If  the arbitrator  came to that conclusion it could not  said  that there  was  any  error apparent in  his  award  which  would justify setting it aside. For  the  reason given above the appeal is allowed  and  the order  of the High Court setting aside the award dated  July 19,  1959 in part as indicated in the judgment of Misra  J., is hereby reversed. The  proceedings instituted by  the respondent under ss. 30 and33  of the Indian  Arbitration Act, 1940, shall stand dismissed. In.  view of  the  entire circumstances  the parties are left to bear their own  costs in this Court. R.K.P.S. Appeal allowed. 191