Delhi High Court
Raghu Nath Singh vs Union Of India on 7 December, 2001
Equivalent citations: 2002IVAD(DELHI)539, 96(2002)DLT673, 2002(62)DRJ495
Author: J.D. Kapoor
Bench: J.D. Kapoor
JUDGMENT J.D. Kapoor, J.
1. The award of the Umpire has been challenged on the point of non-jurisdiction and having traversed beyond the terms of the agreement. The relevant term of the agreement is Clause 6 which reads as under:-
"6. The Railway does neither guarantee the quality nor take any responsibility for the increase or decrease in the approximate quantity of ashed dropped."
2. Put briefly relevant facts are as under:-
3. The tenders were floated by the respondents for purchase and removal of residual coal ashes at Delhi Railway Station (loco and traffic shed) for the period 1.1.74 to 31.12.74. On 25.3.75 the petitioner raised his claims before the respondents which were rejected by the respondents. The Arbitrators were appointed by this Court on the presentation of an application under Section 20 of the Arbitration Act. Vide letter dated 8.5.84 GM Northern Railway had appointed two Arbitrators namely Shri J.L. Jain and Shri K.L. Sikka. Since there were difference between the Arbitrators, vide letter dated 24.2.86 Shri K.N. Sharma entered into the reference as an Umpire to decide the disputes. The Umpire made the award to the effect that the respondent shall pay a sum of Rs. 1,47,600 in full and final settlement of the claims referred to by the Arbitrator.
4. Admittedly it is a non speaking award.
5. Mr. Jagjit Singh, learned counsel appearing for respondent has contended with vehemence that as per Clause 6 of the agreement neither did the Railway guarantee the quality nor did it take any responsibility of the increase or decrease in the approximate quantity of the ashes dropped and as such the finding of the Umpire that respondent was obliged to guarantee fixed quantity is against the terms of the contract itself and is liable to be set aside. The award has also been challenged with regard to the interest awarded by the Umpire @ 12% per annum which came up to Rs. 73,000/-. The main award is for Rs. 66,600/-. According to Mr. Singh the Arbitrator also traversed beyond the terms of the agreement in awarding the interest as it was clearly stipulated that no interest shall be allowed on the earnest money deposited or any amount due to the contractor under this contract. It is alleged that the Umpire also misconducted by awarding Rs. 8,000/- as costs against the claim of the Rs. 5,000/-.
6. In this regard Mr. Singh has placed reliance upon State of Orissa v. B.N. Agarwalla etc. wherein it was held that there can be no doubt that if the terms of the contract expressly stipulate that no interest would be payable, then notwithstanding the provisions of the Interest Act, 1978, an Arbitrator would not get the jurisdiction or right to award interest.
7. While countering the contentions of Mr. Singh, Mr. Arvind Chaudhary learned counsel for the petitioner has contended that in view of the admitted position of the parties that the tender was given on the basis of the yields as given in the preceding years by the PWI of the Railway, therefore, the contractor was entitled to around 8,80,000 cu. ft. of the ashes as in the previous four to five years the respondent has been supplying average 8,64,000 cu. ft. to the earlier contractors. In this regard Mr. Chaudhary has placed reliance upon the minutes of the meeting of the Tender Committee dated 17.12.74 which are as under:-
"Proceeding of Tender Committee on open tenders for purchase and daily removal of residual coal ashes at Delhi for one year during 1.1.75 to 31.12.75. Tenders opened on 17.12.74 and rates recorded on page 2 of the Tender Register.
Three tenders were received for the above work, out of which two are supported with Earnest Money. The third has stated that he has deposited Lumpsum Earnest Money of Rs. 25,000/- with C.E. (C) N. Rly., Kashmeri Gate, Delhi. He is however the lowest. The highest tender is that of Sh. Raghunath Singh at Rs. 2,00,211/- for one year from date of agreement, payable in four Installments. The last accepted rate of the period from 1.1.74 to 31.12.74 was Rs. 3,92,011/- compared to this the tender of Shri Reghunath Singh is much lower as the yield is expected to be almost the same as last year. It is also conditional and not conforming to our condition to deposit the cost in two Installments. The tender is therefore recommended to be rejected and fresh tenders be invited."
8. Thus according to Mr. Chaudhary the contractor gave the quotation on the understanding and reasonable expectation that at least 8,64,000 cu. ft. of ash would be supplied to him taking the average of the previous years. Counsel has also drawn attention to the note by the DEN (HQ) wherein the average yields of the previous years are given. The perusal of the award shows that the learned Umpire proceeded on the presumption that the contractual quantity itself was 8,64,000 cu.ft. taking the average of the previous years. However the record shows that in the year previous to the year when the claimant was given the tender the supply of the quantity was 6,33,075 cu.ft. whereas in the instant case the average supply was 7,24,928 cu. ft.
9. However the yield in the year 1.1.70 to 31.12.70 was 8,68,100 cu. ft.; 1.1.71 to 31.12.71 as 8,88,300 cu.ft.; 1.1.72 to 31.12.72 was 8,77,150 cu.ft. and 1.1.73 to 31.12.73 was 6,33,075 cu. ft. (lesser yield due to strike in three loco sheds).
10. It is needless to refer to catena of authorities on the status of a non-speaking award as there is a unanimous view that it is only in speaking award that the Court can look into the reasoning of the Arbitrator as it is not open to the Court to probe the mental process of the Arbitrator in a non-speaking award and speculate where no reasons have been given.
11. Aforesaid view received support and confirmation from State of U.P. v. Harish Chandra & Co. 1998(2) ALR
716. Relevant observations are as under:-
"10. A mere look at the clause shows that the claim for interest by way of damages was not to be entertained against the Government with respect to only a specified type of amount namely any moneys or balances which may be lying with the Government owing to any dispute, difference between the Engineer-in-Charge and the contractor; or misunderstanding between the Engineer-in-Charge and the contractor in making periodical or final payments of in any other respect whatsoever. The words "or in any other respect whatsoever" also referred to the dispute pertaining to the moneys of balances which may be lying with the Government pursuant to the agreement meaning thereby security deposit or retention money or any other amount which might have been with the Government and refund of which might have been withheld by the Government. The claim for damages or claim for payment for the work done and which was not paid for would not obviously cover any money which may be said to be lying with the Government. Consequently, on the express language of this clause, there is no prohibition which could be culled out against the respondent-contractor that he could not raise the claim for interest by way of damages before the arbitrator on the relevant items placed of adjudication. In fact, similar contention has been repelled by the aforesaid decision of the 3-Judge Bench of this Court in paragraphs 24 and 25 of the Report. It has been clearly observed in paragraph 25 of the Report that under Clause 4 which was pressed in service, no interest was payable on the amount withheld. The claim which was made in that case by Durga Parshad before the arbitrator was for the non-payment of the full amount as per final bill submitted by him and the interest so awarded on the said amount was clearly not covered by Clause 4 of the contract. Similar is the facts situation in the present case and the wording of the clause in question is also of an identical nature. Therefore, the contention of learned senior counsel for the appellant-State that Clause 1.9 barred the consideration of such a claim for interest cannot be sustained. The High Court, therefore, rightly came to the conclusion that the clause was not a bar to such a claim. Further contention of learned senior counsel for the appellant that the claims regarding cutting of hard rock was wrongly granted, cannot be made subject matter of an objection under Section 30 of the Arbitration Act which could have been agitated for getting any reduction of the amount as awarded by the arbitrator. It was a question purely on merits of the award which could be agitated in objections as they were not in the nature of an appeal against the award before the court below..."
12. However in the aforesaid case Clause 1.9 was almost similar to the Clause 16(2) of the contract in question. It was held that where there is no prohibition to claim for damages or claim for payment for the work done, the interest cannot be levied on the money which is lying as security, retention money or earnest money.
13. Now the crucial question that calls for determination is whether the quantity which was the average quantity and expected quantity of ash was a contractual quantity and a part of the term or not, as the Arbitrator has based the award on the premise and presumption that 8,64,000 cu. ft. was the contractual quantity. Even if it is assumed that the Arbitrator has taken the average of preceding 5-6 years of the ash which was being supplied by the Railways to various contractors still the fact remains that the contract nowhere cast the obligation upon the Railway to supply a fixed quantity of 8,64,000 cu.ft. May be the petitioner claimant while giving the tender might have expected that he would be supplied 8,64,000 cu.ft. in view of the past record of the Railway in this regard but once the terms of the contract were reduced into writing such an expectation ceased to be a contractual quantity nor could it supersede the term of the contract.
14. It cannot be imagined that the contractor or for that purpose the petitioner would have given the tender after getting the assurance from the Railways that he would be supplied a fixed quantity irrespective of any unforseen even like strike or any other eventuality. Had it been so the fixed quantity would have formed the part and parcel of the contract. In the absence of any such fixed quantity it is Clause 6 of the agreement that would govern the obligation on the part of the Railway with regard to the quantity of the ash to be supplied by it.
15. The Umpire or for that purpose the Arbitrator being bound by the contract cannot over-ride or travel beyond the arena of the terms of the contract. All oral assurances or even expectation of a party or oral terms of the agreement are rendered insignificant and non-binding once the terms and reduced into writing by way of concluded agreement or contract.
16. In the words of Supreme Court in New India Civil Erectors (P) Ltd. v. Oil & Natural Gas Corporation , it is axiomatic that the Arbitrator being a creature of the agreement must operate within the four corners of the agreement and cannot travel beyond it more particularly he cannot award any amount which is ruled out or prohibited by the terms of the agreement.
17. Clause 6 of the term of the agreement admits no two interpretations. It is clear and is bereft of any ambiguity. There was no contractual quantity agreed between the parties and as such award is beyond jurisdiction being not within the purview of the contract. The Umpire was not competent to render the award which is not within the precincts of the contract.
18. In view of the foregoing reasons I find that the award cannot be sustained and is liable to be set aside. The question of interest is of no relevance once the main claim is found to be baseless. As a consequence the objections are allowed and the award is set aside.