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PETITIONER: STATE OF U.P.

       Vs.

RESPONDENT: M/S. RAM NATH INTERNATIONALCONST. PVT. LTD.

DATE OF JUDGMENT10/11/1995

BENCH: G.B. PATTANAIK (J) BENCH: G.B. PATTANAIK (J) AGRAWAL, S.C. (J)

CITATION:  1996 AIR  782            1996 SCC  (1)  18  JT 1995 (8)   396        1995 SCALE  (6)321

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T PATTANAIK, J.      This appeal  is directed  against the  Judgment of  the Allahabad High  Court dated  16th December,  1993  in  First Appeal From Order No. 930 of 1991, arising out of an arbitration proceeding.      The  Respondent   -  contractor  had  entered  into  an agreement  with   the  appellant  for  construction  of  non overflow and  overflow sections  with  bridge  spillway  and other appurtenant  works of Maudaha Dam in Hamirpur district in the  State of  Uttar Pradesh.  The agreement  was entered into on  26th August,  1985  and  work  commenced  from  1st September, 1985. The period stipulated for completion of the work was 42 months. In the year 1987 in respect of two items of work  namely Items  13 and  15, it  is alleged  that  the appellant changed  the designs  and drawings  as a result of which the  quantity of  work became abnormally high compared to the  estimated quantity  of work  in  the  agreement.  On account of  such abnormal  increase of  the quantity of work the contractor  claimed higher  rate than what was agreed to in the  agreement. The State having refused to acceed to the contractor’s demand  and disputes  having arisen between the parties, the arbitration clause of the agreement was invoked and dispute  was referred  to the  sole arbitration  of  the Joint  Secretary   and  Joint   Legal  Remembrancer  to  the Government of  Uttar  Pradesh.  Before  the  arbitrator  the respondent -  contractor made a claim of Rs. 91,56,750/- for the increased  quantity of  work in  respect of  Item No. 13 executed till  30.4.90 and Rs. 9,92,402.50 for the increased quantity of  work in  respect of  Item No.  15 executed till 30.4.90 together  with interest  @ 10%  thereon. The  entire basis of  the claim of the contractor was that in respect of the quantity  of work in excess of the estimated quantity in the agreement  he is  entitled to  be paid  @ Rs. 453.50 per cubic meter  in place  of the  agreed rate of Rs. 243.00 for

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Item No.  13 and  the rate  of Rs. 739.55 per cubic meter in place of  agreed rate  of Rs. 460.00 for Item No. 15. It was alleged in  the claim  petition  that  the  State  of  Uttar Pradesh has paid and is paying the agreed rate of Rs. 243.00 per cubic  meter in  respect of  the additional  quantity of work in  Item No.  13 and similarly has paid and is paying @ 460.00 per  cubic meter  even in  respect of  the additional quantity of  work in respect of Item No.15. According to the respondent contractor,  on account  of substantial change in designs and drawings there has been abnormal increase in the quantities of  work compared  to the  estimated quantity  of work in  the original  agreement  and  in  respect  of  such additional quantity  of work  he is  not bound to be paid at the agreed  rate but at an enhanced rate on the basis of the analysis of  rate submitted  by him.  It was further averred that  when  the  drawings  and  designs  were  changed,  the contractor had resisted and prayed for the alteration in the rate but  the concerned  authorities had  assured him orally for such change though ultimately did not agree to the same. It was  also averred  in the  claim petition  that under the agreement he  was bound  to carry  out the  work as  per the directions of  the concerned  authorities and accordingly he has carried out the same.      The appellant  - State  filed written  statement before the arbitrator  denying its  liability to pay at the revised rate as  claimed by  the contractor.  It was  admitted  that there has been a change in the drawings and designs relating to Item  Nos. 13  and 15  and on account of such change, the quantity of  work in  respect of the aforesaid two items has increased. But  the claimant is not entitled to any enhanced rate, in  view of  the different  clauses of  the  agreement itself. It  was also  averred in  the written statement that the so  called variation  in the quantity of work is covered by clauses  11.25 and  13.1.1 of  the agreement and therfore the contractor is not entitled to any higher rate.      The learned  arbitrator after  analysing the  different clauses of  the agreement,  came to  the conclusion that the contractor could  not have  refused the  work in  accordance with the  alterations and  modifications in the drawings and designs. He  further held  that there has been a fundamental change  in   the  drawings   and  designs  which  abnormally increased the  quantum of  work than  the estimated  quantum indicated in  the agreement  and under  the agreement though the contractor  cannot claim  any excess  rate for work upto the excess  of 10%, but beyond the same the contractor would be entitled  to claim a higher rate. The arbitrator accepted the analysis  of rate.  The arbitrator accepted the analysis of rate  given by  the contractor and accordingly in respect of the  quantity of  work executed  after the  date  of  the completion of  the work  indicated in  the agreement  namely 28.2.1989, he  granted  as  per  the  rate  claimed  by  the contractor.  In   all  he   awarded  a   total  sum  of  Rs. 90,21,765.65 together  with interest  @ 9%  per  annum  from 21.5.90 till the date of the award and further interest @ 6% per annum  from the  date of  the award  till the payment or till the  decree, if  any, passed on the basis of the order. The arbitrator  also held  that in respect of works executed after 30th  April, 1990  the claimant  would be  paid at the same rate i.e. Rs. 453.50 per cubic meter in respect of Item No. 13 and Rs. 739.55 per cubic meter in respect of Item No. 15 after  adjusting the  payments already  made as  per  the rates given in the contract.      The contractor  filed an  application before  the Civil Judge, Hamirpur  for making  the award a rule of court which was registered as Suit No. 53 of 1991. The appellant - State

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filed his  objections challenging the legality of the award. The learned Judge being of the opinion that the court has no jurisdiction to  interfere with  an award  of the arbitrator since the  arbitrator had  decided all  the issues  properly with detailed  analysis as  well as  after perusing  all the necessary documents, made the award a rule of the Court. The learned Trial  Judge also  came to  the conclusion  that the arbitrator  was  fully  within  his  powers  to  accept  the analysis of  rate submitted  by  the  contractor  which  was infact not  disputed by  the State and therefore there is no error in  the award  which could  be interfered  with by the court. On  the question  whether the objections filed by the State could at all be entertained the same having been filed beyond 30  days the  Civil Judge came to the conclusion that the objections cannot be entertained and perused as the same was  filed   beyond  the  period  of  30  days.  With  these conclusions the  award having  been made a rule of court and the objection  of the  State having been rejected, the State preferred an  appeal in  the High  Court of  Allahabad under Section 39  of the Arbitration Act. The High Court set aside the conclusion  of  the  Trial  Judge  with  regard  to  the entertainability of  the objection  filed by  the State  and held that  taking into account the magnitude of the claim of Rs. 1 crore and taking into account that the objection could not be filed on 23rd March, 1991 was a Sunday, the objection filed on  25th of  March,  1991  has  to  be  considered  on condoning the  delay, in the interest of Justice. But so far as the  conclusion of  the Trial Judge on merits of the case is concerned  the High  Court refused  to interfere with the decision  of   the  Trial  Judge  on  the  ground  that  the arbotrator has not committed any error in allowing the claim of the  contractor as  per the analysis of rates given by it in respect  of the  extra quantity  of work  and it  is  not permissible for  the court within the parameter for exercise of its jurisdiction to interfere with the award. Thus appeal having been  dismissed, the  State has preferred the present appeal.      Mr.  Sehgal,   the  learned   senior  counsel  for  the appellant contended that in view of the escalation clause in the contract  itself, the  arbitrator had no jurisdiction to allow the  contractor’s claim  at a new rate on the basis of the analysis  of rates and the award, therefore, is vitiated on that  score. He  further contended  that even  if it  was permissible for  the arbitrator  to accept  the analysis  of rates submitted by the contractor for the excess quantity of work executed  by him  beyond the  stipulated period  of the contract,  yet  the  arbitrator  committed  gross  error  in allowing the  total claim  without taking  into account  the payments already  made to  the contractor in accordance with the escalation  clause of  the contract  and the  award  is, therefore, vitiated  on that  score. Mr. Sanghi, the learned senior counsel  appearing for  the respondent  on the  other hand contended  that the  quantity of  work executed  by the contractor being  far more  in  excess  of  the  anticipated quantity of  work in  the contract  and such excess being on account  of   alteration  of   drawings  and   designs,  the arbitrator was  fully within  his jurisdiction to accept the analysis of  rates submitted by the contractor and award the contractor’s claim.  It was further contended that the State not having  objected to  the analysis  of rates given by the contractor, the  arbitrator was  fully justified in awarding the claim  of the contractor. Mr. Sanghi also contended that the payments already made to the contractor at the escalated rate in  respect of the extra quantity of work in accordance with the  terms of  the contract  is of no consequence since

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the contractor  claimed the  change of  the basic rate which the arbitrator  has allowed  and  on  such  basic  rate  the contractor would  otherwise be entitled to the escalation in accordance with  the clauses  of the  contract. According to Mr. Sanghi,  the High  Court rightly  did not interfere with the award  as no  error appears  to have been pointed out in the award itself.      The jurisdiction  of the  court to  interfere  with  an award of  an arbitrator  is undoubtedly  a limited  one. The adjudication of  the arbitrator is generally binding between the parties  and it  is not  open to the court to attempt to probe the mental process by which the arbitrator has reached his conclusion. Award of an arbitrator can be set aside by a court only  on the  grounds indicated  in Section  30 of the Arbitration Act.  It is  not open  to the court to re-assess the evidence  to find  whether arbitrator  has committed  ay error or  to decide the question of adequacy of evidence and the court  cannot sit on the conclusion of the arbitrator by re-examining and  reappreciating the  evidence considered by the arbitrator.  At  the  same  time  the  arbitrator  is  a creature of the agreement itself and therefore is duty bound to enforce  the terms of the agreement and cannot adjudicate a matter  beyond the  agreement itself.  If  the  arbitrator adjudicates a  claim of  a contractor  with reference to the clauses of  the agreement  itself whereby the agreement gets engrafted into  the award,  it will  be open to the court to examine those  clauses of  the agreement  and find  out  the correctness  of   the  conclusion  of  the  arbitrator  with reference to  those clauses.  Bearing in  mind the aforesaid parameters  for   exercise  of   jurisdiction  by  Court  in examining the  legality of  an award  of an  arbitrator, the award in  hand as well as the order of the subordinate Judge and that of the High Court requires scrutiny.      Admittedly under the agreement the completion period of work was  28.2.1989. The  stipulated  quantity  of  work  in respect of Item No. 13 was 57000 cubic meters and in respect of Item  No. 15  it was  3500 cubic meters. In the course of execution of the contract, drawings and designs were changed as a  result of  which there  was abnormal  increase of  the quantity of  work and  for such increase of quantity of work when the  contractor claimed  a higher  rate  and  gave  the analysis before  the arbitrator,  which was  not disputed by the State  and the  arbitrator accepted  the rate, the court will not  be justified  in interfering  with the same. It is not possible  for us  to accept the contention of Mr. Sehgal that under the terms of the agreement the contractor was not entitled to  claim any  higher rate.  The arbitrator  having considered all  the relevant  materials and  there being  no legal proposition  which has formed the basis for acceptance of a  higher rate  and no  the other  hand  the  same  being arrived at  on account  of  the  abnormal  increase  in  the quantity of  work which was on account of change of drawings and designs,  the court will not be justified in interfering with  the   same.  The   first  contention  of  Mr.  Sehgal, therefore, cannot be accepted.      But  the   second   submission   of   Mr.   Sehgal   is unassailable. After  expiry of  the period stipulated in the agreement in respect of further quantity of work executed by the contractor,  the State has been praying at a higher rate by calculating  in terms  of the  escalation clause  in  the contract itself.  When the claimant filed his claim petition before the  arbitrator an assertion was made in paragraph 27 of the  Claim Petition that the opposite party in respect of the extra  quantity of work executed in Item No. 13 has paid and is  paying at  the rate  of Rs.  243.00 per  cubic meter

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though the  claimant is entitled to a rate of Rs. 453.50 per cubic meter  and  hence  the  claimant  is  entitled  to  an additional amount  at the rate of Rs. 210.50 per cubic meter (Rs. 453.50  - 243.00)  and the  amount thus  comes  to  Rs. 91,56,750. Similarly,  in respect  of extra quantity of work in Item  No. 15  it was averred in paragraph 30 of the Claim Petition that  the Opposite  party in  respect of this extra quantity has paid and is paying at the rate of Rs. 460/- per cubic meter though the claimant is entitled to a rate of Rs. 739.55 per cubic meter and hence the claimant is entitled to an additional  amount at  the rate  of Rs.279.55  per  cubic meter (Rs.  739.55-460.00) and  the amount thus comes to Rs. 9,92,402.50. The  Claim Petition  was filed on May 19, 1990. But it was brought to our notice in the course of hearing of this appeal  by Mr. Seghal, learned senior counsel appearing for the appellant that subsequent to 28.2.1989 which was the period contemplated  under the  agreement for  completion of work,  the  contractor  -  claimant  has  been  paid  at  an escalated rate  in accordance  with the escalation clause in the agreement  itself. Neither the arbitrator nor any of the forums below  have taken  note of  the aforesaid  fact.  Mr. Sanghi, learned  senior counsel appearing for the respondent - contractor,  however, vehemently  urged that  the claim of Rs. 453.50 per cubic meter in respect of Item No. 13 and Rs. 739.55 per  cubic meter  in respect  of Item  No. 15 was the basic rate  claimed by  the  contractor  and  therefore  any payment already  made for  excess quantity of work after the stipulated period  in the  agreement in  accordance with the escalation clause  in the  agreement cannot  be  taken  into account in  adjudicating the claim of the contractor. We are unable to accept this contention of Mr. Sanghi in as much as the claimant himself, as has stated earlier unequivocally in the Claim  Petition averred  that the claimant has been paid and is  being  paid  at  the  old  rate  stipulated  in  the agreement and he is entitled to the higher claim. In respect of the  excess quantity  of work  executed by  the  claimant subsequent  to   the  completion  period  indicated  in  the agreement when  the claimant  has made the claim at a higher rate and  that claim  is allowed  by the  arbitrator on  the basis of  analysis of  rates given  by him,  then the amount already paid  to him  by the  State in  accordance with  the escalation clause  in the  agreement has  to be adjusted and the claimant would not be entitled to double benefit on that score. Unfortunately,  this position has been lost sight off by the  arbitrator as  well as  by the subordinate Judge and the High Court possibly because this has not been brought to the  notice   by  the  State.  Mr.  Sanghi  learned  counsel appearing for  the respondent on instruction from his client does not  dispute the position that subsequent to 28.2.1989, in  respect   of  the  quantity  of  work  executed  by  the contractor, he  has been  paid at  an escalated  rate on the basis of  calculation made in accordance with the escalation clause in  the agreement.  This being the position, we would have ordinarily  set aside  the award  of the arbitrator and remitted the  matter for recalculation. But in the course of hearing  Mr.  Sanghi,  learned  counsel  appearing  for  the respondent submitted  that the matter may be decided by this Court since a considerable period has lapsed in the meantime and did  not dispute the calculation sheet that was filed by Mr. Seghal, learned counsel appearing for the State, as well as the  affidavit of Shri Ambika Prasad, Executive Engineer, Maudha Dam,  Construction Division.  In the  same  affidavit after making  necessary adjustments  of payment, made at the escalated rate, it has been stated that the contractor would be entitled  to the amount of Rs. 37,26,917.22 in respect of

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Item No.  13 for the extra work executed between 1.3.1989 to 30.4.1990 and  a sum  of Rs. 1,71,542,41 in respect of extra quantity of  work for  Item No.  15 for  the period  between 1.3.1989 to  30.4.1990  and  thus  in  all  the  claimant  - contractor would  be entitled to Rs. 38,98,459.63 in respect of the extra quantity of work executed by him for the period 1.3.1989 to  30.4.1990. Since  the calculation  made in this affidavit is not disputed and in view of the submission made by Mr.  Sanghi appearing  for the  claimant  contractor,  we modify the  award of  the arbitrator  and  direct  that  the claimant would  be entitled  to an  additional  sum  of  Rs. 38,98,549.63 in  respect of  the work  executed by  him upto 30.4.1990 and  the same  amount would also carry interest at the rate  of 9%  per annum  from 21.5.1990  till payment  is made, as awarded by the Arbitrator himself.      The arbitrator  has also  held in  the award  that  the claimant would  be entitled  to be  paid at the same rate as indicated in  the award  in respect  of  the  work  executed subsequent to  30th April,  1990. Mr.  Sanghi,  the  learned senior counsel  appearing for  the contractor submitted that no reference  has been  made to the arbitrator as to at what rate the  contractor would  be paid  in respect  of the work executed subsequent  to 30th  April,  1990  and  infact  the claimant contractor  had not  made any  claim on that score. And as  such the  said direction  of the  arbitrator must be held to  be without  jurisdiction. Mr.  Sehgal  the  learned senior counsel  appearing for the State also could not point out any material to indicate that the reference included the dispute with  regard to  the rate  at which  the  contractor would be  paid even  subsequent to  30th  April,  1990.  The arbitrator  obviously   cannot  entertaion  and  decide  any dispute which  has not  been referred to it. In this view of the matter  the direction  of the arbitrator must be held to be without  jurisdiction and  we accordingly quash that part of the  direction. In  the net result, therefore, the appeal is allowed  in part  to the  extent already indicated. There will be no order as to costs.