Andhra HC (Pre-Telangana)
Tirumala Tirupathi Devasthanam, ... vs K. Subbarayudu And Another on 27 August, 1999
Equivalent citations: 1999(6)ALD463
JUDGMENT
1. All the CRPs and CMAs raise common questions of law and hence they are decided by a common judgment.
2. The factual matrix leading to the filing of CRPs and CMAs can be traced out to the extent necessary.
3. The Tirumala Tirupathi Devasthanams (for brevity 'TTD') had issued tender notifications for "Improvements to 1st ghat road by providing hot-mix process". The entire stretch of the ghat road is over 17 KMs. The stretch was divided into six strips and they were notified. First stretch is from KM '0' to '3', second stretch is from '3' KM to '6' KM, third stretch is from 6 KM to 9 KM, fourth stretch is from 9 KM to 12 KM, fifth stretch is from 12 KM to 15 KM and sixth stretch is from 15 KM to 17/4 KM. Therefore, six tender notifications were issued calling for the tenders from the prospective tenders and one Mr. Balaiah (hereinafter referred as Contractor), the 1st respondent in the first set of CRPs and also the CMAs was found to be the lowest tenderer for three works. In respect of balance three tenders, one Mr. K. Subbarayudu, the 1st respondent in the second set of CRPs and also the CMAs, was the lowest tenderer. The facts and events in the two sets of tenders are identical and therefore the facts were referred to only in one set of tenders. The contractor furnished necessary bank guarantee and Earnest Money Deposit (hereinafter referred as 'EMD'). As there was delay in acceptance of the tenders, the contractor requested the TTD to refund the EMD deposits which were refunded. But, thereafter negotiations took place and the tender was revalidated upto 31-7-1982. In the meanwhile. Contractor requested the TTD to give 10 per cent interest free mobilisation advance against the bank guarantee and in such an event, he expressed his readiness to reduce his rates by 2 per cent. The said offer was accepted by the TTD and the contractor was directed to pay the EMD and sign the agreement within seven days. It is stated that the contractor was trying to oblain the bank guarantee and if he was unsuccessful, he would not claim 10 per cent interest free advance in which case, 2 per cent rebate would not arise. The TTD informed the contractor that his request was accepted to give interest free advance against the bank guarantee. But, however, since the contractor failed to produce the bank guarantee, the TTD decided to go in for an ordinary renewal cast of thin forming of cheap carpet. Thereupon, the Contractor issued a notice to the TTD on 27-8-1983 to refer the matter to the arbitration, and on 7-10-1983 the matter was referred to the sole arbitrator namely the Superintending Engineer, Roads and Buildings Circle, Cuddapah. The said Arbitrator refused to proceed with stating that there was no concluded contract between the parties. Against this action, the contractor filed a suit which was decreed in his favour holding that there was a concluded contract and appointed the sole Arbitrator one A.P. Ranghanatha Swamy, Retired Chief Engineer of Hyderabad. Against the judgment and decree in the suit, the TTD filed CRPs. before the High Court in CRP Nos.1783 of 1987 and 1784 of 1987. This Court confirmed the findings of the civil Court that there was a concluded contract. But, reversed the appointment of the sole Arbitrator Sri A.P. Ranganatha Swamy and directed the arbitration to be referred to the designated Arbitrator namely the Superintending Engineer, Roads and Buildings, Cuddapah. Thereupon, the proceedings were initiated before the Arbitrator and the Arbitrator or, 4-5-1988 passed the Award. Before the Arbitrator, the Contractor made a claim in respect of 9 items in three contracts in respect of KMs. 0-3, 3-6 and 6-9, and in respect of balance three contracts, the claim was made in 12 parts. The learned Arbitrator passed an Award for consolidated amount. The learned Arbitrator rejected the claim under the head loss of advances in all the claim applications and passed an consolidated award jointly in respect of claim Nos.1 to 3, 5 and 6 relating to three contracts upto 9 KMs and in respect of other balance contracts, consolidated amount was passed 1 to 6, 8 and 9. Apart from this, individual claim for EMD, costs and interest was also allowed. Thus, he allowed the following claims:
"Piece of work (in KMS) Amount allowed:
0-3 Rs. 2,04,500/ with interest @15% per annum from the date of award till the date of payment.36
Rs. 1,75,250/-
-do-
6-9 Rs. 1.88,150/-
-do-
9-12 Rs. 3.35,500/-
-do-
12-15 Rs. 2,99,750/-
-do-
15-17/4 Rs. 3,23,250/-
-do-
4. The Contractor filed six civil suits for making the Award Rule of Court. Similarly, TTD filed suit which was subsequently renumbered as OPs. for setting aside the award. Both the suits and OPs. were jointly tried by the civil Court and the suits were decreed with future interest @ 12% per annum from the date of the decree till the date of realisation and the OPs. were dismissed. Aggrieved by the judgment and decree in the suits filed by the contractor, TTD filed CMA and it also filed CRPs against the order dismissing the petition filed by the TTD for setting aside the award. Thus, two sets of litigation are brought before the High Court by the TTD. The following details will cover the complete litigation:
Sl. No Stretch Suit by Contracto OP by TTD CRP by TTD against decree in suit.
CMA by TTD against orders in OP.
KM
1.
0-3 211/88 4/89 1944/89 1005/89
2. 3-6 215/88 3/89 1849/89 1010/89
3. 6-9 217/88 6/89 1948/89 1008/89
4. 9-12 213/88 2/89 1950/89 1011/89
5. 12-15 214/88 1/89 1952/89 1012/89
6. 15-1714 216/88 5/89 1945/89 1007/89 Thus, aggrieved by the judgment and decree of the lower Court making the Award Rule of the Court and aggrieved by the judgment and decree of the lower Court refusing to set aside the award, the matter is carried by the TTD in CRP and CMA respectively in respect of six contracts. Thus, six sets of CRPs and six sets of CMAs are before this Court.
5. To be specific with regard to the claims in first three contracts, nine claims were made by the Contractor which is extracted below:
"(1) Transport charges of roads, (2) Idle charges of machinery, (3) Overhead charges, (4) Loss of advance, (5) Transport charges of machinery back to Hyderabad.
(6) Damages due to the loss of profit.
(7) Refund of deposit, (8) Costs of arbitration, (9) Interest from the date of the petition."
6. In balance three contracts, following are the claim particulars:
"(1) Transport charges of machinery, (2) Site clearing and errection charges of machinery, (3) Eleclrical connection charges, (4) Idle charges of machinery,
5) Idle labour charges, (6) Overheads, (7) Loss of advance, (8) Dismantling and transporting the plant and machinery back to Visakhapatnam, (9) Damages due to loss of profits claimed Rs. 1,0-9,865/- revised to Rs.1,46,000/-during the proceedings.
(10) Refund of Earnest Money Deposit, (11) Costs, (12) Interest."
7. Heard the learned Standing Counsel for TTD Mr. M. Adinarayana Raju and Mr. Subrahmanya Reddy, the learned senior Counsel for the Contractors.
8. The learned Standing Counsel for TTD (the revision petitioner and also the appellant in all the aforesaid proceedings) submits that there was no concluded contract between the parties and the entire arbitration proceedings are without jurisdiction.
9. He also contends that no reasons were assigned by the Arbitrator for awarding lump sum payment. Even otherwise, there is no evidence before the Arbitrator to award the sums. Thus, there is total lack of evidence. The Arbitrator has used his personal knowledge which is contrary to law. Thus, it is a case of non-application of mind. Lastly, he submits that the Arbitrator lacked jurisdiction to arbitrate the issues as the items claimed by the contractor did not form part of the subject-matter of arbitration agreement. In effect, he submits that the items fell outside the terms of the arbitration agreement and therefore the Arbitrator had no jurisdiction.
10. On the other hand, the learned senior Counsel appearing for the Contractor Mr. Subrahmanya Reddy submits that the Award of the Arbitrator was quite legal and valid and the same cannot be interfered with by this Court. He disputed the contentions raised by the learned Standing Counsel for the ITD.
11. Let us consider the first contention that there was no concluded contract between the parties and therefore the question of reference to arbitrator does not arise.
12. The learned Standing Counsel for TTD submits that the agreement was never signed by both the parties and therefore there was no consensus ad idem between the parties and hence it cannot be treated as a concluded contract between the parties so as to make il binding on the parties. I cannot appreciate this argument. As already noticed, when the designated Arbitrator namely the Superintending Engineer, Roads and Buildings, Cuddapah refused to enter into reference, on the ground that there was no concluded contract between the parties, the Contractor filed a suit stating that there was a concluded contract and for appointment of sole Arbitrator. The civil Court has rendered a finding that there was a concluded contract and appointed one sole Arbitrator A.P. Ranganatha Swamy. Against the decree and judgment of the civil Court, the matter was carried in revisions by TTD and this Court while confirming the finding that there was a concluded contract, set aside the appointment of the sole Arbitrator A.P. Ranganatha Swamy and directed that the designated arbitrator in the agreement should enter the reference. Thus, the finding relating to the concluded contract was finally settled by this Court in revisions.
and it would not be appropriate for the TTD again to contend that there was no concluded contract. The lower Court also, when the same contention was raised, considered this issue at length and found the contention that there was no concluded contract had no legs to stand in view of the orders of this Court in the CRP. Under these circumstances, I have to necessarily hold that by virtue of the judgment of the High Court in CRPs referred to above, the TTD cannot again rcagitate the matter, by taking the very same ground which was pressed into service in earlier suits filed by the contractor.
13. Let us now consider various other issues with reference to the decided cases.
Whether the Arbitrator is required to give reasons_?
14. The Supreme Court in Jivarajbhai v. Chintamanrao Balaji, , observed thus:
"..... An award may be set aside by the Court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that arbitrator has committed some mistake in arriving at his conclusion. As observed in Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd., 50 Ind. App. 324 = AIR 1923 PC 66 at page 331 (of Ind. App) (at Page 69 of AIR):
"An error in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party, that opens the door to seeing first what the contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound."
The Court in dealing with an application to set aside an award has not to consider whether the view of the arbitrator on the evidence is justified. The arbitrator's adjudication is generally considered binding between the parties, for he is a Tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30. It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assumption that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the Court cannot proceed to determine whether the conclusion is right or wrong. It is not open to the Court to attempt to proble - the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of his award."
15. The Supreme Court in Bungo Steel Furniture Pvt., Ltd. v. Union of India, , observed as follows:
"It is now a well-settled principle that if an arbitrator, in deciding a dispute before him, does not record his reasons and does not indicate the principles of law on which he has proceeded, the award is not on that account vitiated. It is only when the arbitrator proceeds to give his reasons or to lay down principles on which he has arrived at his decisions that the Court is competent to examine whether he has proceeded contrary to law and is entitled to interfere if such error in law is apparent on the face of the award itself."
16. In M/s. Hindustan Tea Co. v. Ms. K. Sashikant and Co., , the Supreme Court held that under the Arbitration Act, the Arbitrator is made final arbitrator of ihe disputes between the parties. Award was not open for the challenge on the ground that the arbitrator has reached a wrong conclusion or failed to appreciate the facts. Where the award which was a reasoned one was challenged on the ground that the arbitrator acted contrary to the provisions of Section 70 of the Contract Act. It was held that the same could not be set aside. It was a case where Justice G.K. Mitter, Retired Judge of the Supreme Court was appointed as Umpire. Parties appeared before the Umpire and after protracted hearing of the matter, spread over for several years the Umpire made the award on 30-6-1982. Aggrieved company filed an application under Sections 30 and 33 of the Arbitration Act praying the Court that the award may be set aside either as a whole or to the part keeping in view the several objections raised in the petition. The Supreme Court observed in Para 2 as follows:
"The Award is reasoned one. The objections which have been raised against the Award are such that they cannot indeed be taken into consideration within the limited ambit of challenge admissible under the scheme of the Arbitration Act. Under the law, the Arbitrator is made the final arbiter of the dispute between the parties. The Award is not open to challenge on the ground that the Arbitrator has reached a wrong conclusion or has failed to appreciate facts. Strong reliance was placed by the appellant's learned Counsel on an old Madras decision in Yogambal Boyee Ammani Animal v. Naina Pillai Markayar, (1909) ILR 33 Mad. 15. In our view, on the facts of this case challenge to the Award is not permissible by taking the stand that the Arbitrator acted contrary to the provisions of Section 70 of the Contract Act. In these premises the objections filed to the Award has to be rejected. We direct the Award to be made a rule of the Court."
17. In State of Orissa v. Ms. Lall Brothers, , the Supreme Court held that the fact that there is an unreasoned award, is no ground to set aside an award. Lump sum award is not bad perse, as such. An award is conclusive as a judgment between the parties and the Court is entitled to set aside an award only if the arbitrator has misconducted himself in the proceedings or when the award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35 of the Arbitration Act or where an award has been improperly procured or is otherwise invalid under Section 30 of the Act. An award may be set aside by the Court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion. It is not open to the Court to speculate where no reasons are given by the arbitrator, as to what impelled him to arrive at his conclusions. The fact that a lump sum award has been given is no ground to declare the award bad.
18. The Supreme Court in Raipur Development Authority v. M/s. Chokhamal Contractors, AIR 1990 SC 1426, observed that an award passed under the Arbitration Act is not liable to be remitted or set aside merely on the ground that no reasons have been given in its support except where the arbitration agreement or the deed of submission or an order made by the Court such as the one under Section 20 or Section 21 or Section 34 of the Act or the statute governing the arbitration requires that the arbitrator or the umpire should give reasons for the award.
19. But, in the instant case, it is not the case that under the agreement, arbitrator is required to give reasons. Therefore, in the absence of such a stipulation, it is not obligatory on the part of the Arbitrator to give reasons. The Supreme Court found that giving reasons in support of a decision could not be considered as a rule of natural justice either under the Law of Arbitration or Administrative Law. The Supreme Court, traced history of English Law and American Law on the subject. Para 19 of the judgment is relevant which is extracted below:
"It is not well-settled that an award can neither be remitted nor set aside merely on the ground that it docs not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons. The arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or in the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the Court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons. The arbitrator or umpire shall have to give reasons also where the Court has directed in any order such as the one made under Section 20 or Section 21 or Section 34 of the Act that reasons should be given or where the statute which governs an arbitration requires him to do so."
20. The Supreme Court after referring various cases was of the view that giving reasons is desirable, but in the absence of any statutory limitation, it would not be appropriate to interfere with such non-reasoned awards. The scheme of the Act was referred to by the Supreme Court with reference to the recommendations of the Law Commission in its Seventy-Sixth Report on Arbitration Act, 1940 which was submitted in 1978 and the Law Commission did not recommend a provision requiring the Arbitrator to give reasons for the award. In Paras 33, 34 and 35, the Supreme Court was dealing with the non-reasoned awards, which are extracted below:
"33. The question which arises for consideration in these cases is whether it is appropriate for this Court to take the view that any award passed under the Act, that is, the Arbitration Act, 1940 is liable to be remitted or set aside solely on the ground that the arbitrator has not given reasons thus virtually introducing by a judicial verdict an amendment to the Act when it has not been the law of nearly 7/8 decades. The people in India as in other parts of the world such as England, USA and Australia have become accustomed to the system of settlement of dispute by private arbitration and have accepted awards made against them as binding even though no reasons have been given in support of the awards for a long time. They have attached more importance to the element of finality of the awards than their legality. Of course, when reasons are given in support of the awards and those reasons disclose any error apparent on the face of the record people have not refrained from questioning such awards before the Courts. It is not as if that people are without any remedy at all in cases where they find that it is in their interest to require the arbitrator to give reasons for the award. In cases where reasons are required, it is open to the parties to the dispute to introduce a term either in the arbitration agreement or in the deed of submission requiring the arbitrators to give reasons in support of the awards. When the parties to the dispute insist upon reasons being given, the arbitrator is, as already observed earlier, under an obligation to give reasons. But, there may be many arbitrations in which parties to the dispute may not relish the disclosure of the reasons for the awards. In the circumstances and particularly having regard to the various reasons given by the Indian Law Commission for not recommending to the Government to introduce an amendment in the Act requiring the arbitrators to give reasons for their awards we feel that it may not be appropriate to take the view that all awards which do not contain reasons should either be remitted or set aside. A decision on the question argued before us involves a question of legislative policy which should be left to the decision of Parliament. It is a well-known rule of construction that if a certain interpretation has been uniformly put upon the meaning of a statute and transactions such as dealings in property and making of contracts have taken place on the basis of that interpretation, the Court will not put a different interpretation upon it which will materially affect those transactions. We may refer here to the decision of the Court of Appeal rendered by Lord Evershed M.R. in Brownsea Haven Properties v. Pools Corporation, (1958) Chy. 574, in which it is observed thus:
"There is well established authority for the view that a decision of long standing, on the basis of which many persons will in the course of time have arranged their affairs should not lightly be disturbed by a superior Court not strictly bound itself by the decision."
34. Courts should be slow in taking decisions which will have the effect of shaking rights and titles which have been founded through a long lime upon the conviction that a particular interpretation of law is the legal and proper one and is one which will not be departed from.
35. It is no doubt true that in the decision pertaining to Administrative Law, this Court in some cases has observed that the giving of reasons in an administrative decision is a rule of natural justice by an extension of the prevailing rule. It would be in the interest of the world of commerce that the said rule is confined to the area of Administrative Law. We do appreciate the contention urged on behalf of the parties who contend that it should be made obligatory on the part of the arbitrator to give reasons for the award, that there is no justification to leave the small area covered by the law of arbitration out of the general rule that the decision of every judicial and quasi-judicial body should be supported by reasons. But, at the same time it has to be borne in mind that what applies generally to settlement of disputes by authorities governed by public law need not be extended to all cases arising under private law such as those arising under the law of arbitration which is intended for settlement of private disputes. As stated else where in the course of this judgment if the parties to the dispute feel that reasons should be given by the arbitrators for Ihe awards it is within their power to insist upon such reasons being given at the time when they enter into arbitration agreement or sign the deed of submission. It is significant that although nearly a decade ago the Indian Law Commission submitted its report on the law of arbitration specifically mentioning therein that there was no necessity to amend the law of arbitration requiring the arbitrators to give reasons. Parliament has not chosen to take any step in the direction of the amendment of the law of arbitration. Even after the passing of Ihe English Arbitration Act, 1979 unless a Court requires the arbitrator to give reasons for the award (vide sub-sections (5) and (6) of Section I of the English Arbitration Act, 1979). an award is not liable to be set aside merely on the ground that no reasons have been given in support of it."
The Supreme Court expressing the need for amendment to the Act requiring the arbitrators to give reasons observed:
"36. It is true that in two cases one decided by Ihe High Court of Delhi and another decided by the High Court of Orissa there are some observations to the effect that it would be in the interests of justice if the arbitrators are required to give reasons for their awards because in recent years the moral standards of arbitrators are going down. But, generally this Court and all the High Courts have taken the view that merely because the reasons are not given an award is not liable to be remitted or set aside except where the arbitration agreement or the deed of submission, or an order made by the Court such as the one under Section 20 or Section 21 or Section 34 of the Act or the statute governing the arbitration requires that the arbitrator or umpire should give reasons for the award. The arbitrators or umpire have passed the awards which are involved in the cases before us relying on the law declared by this Court that the awards could not be questioned merely on the ground that they have not given reasons. At the same time it cannot also be said that all the awards are contrary to law and justice. In this situation, it would be wholly unjust to pass an order either remitting or setting aside the awards, merely on the ground that no reasons are given in them, except where the arbitration agreement or the deed of submission or an order made by the Court such as the one under Section 20 or Section 21 or Section 34 of the Act or the statute governing the arbitration required that the arbitrator or the umpire should give reasons for the award."
21. While emphasising the need for recording reasons, in non-statutory arbitration, the Supreme Court observed thus:
"37. There is, however, one aspect of non-speaking awards in non-statutory arbitrations to which Government and Governmental authorities are parties that compel attention. The trappings of a body which discharges judicial functions and requires to act in accordance with law with their concomitant obligations for reasoned decisions are not attracted to a private adjudication of the nature of arbitration as the latter, as we have noticed earlier, is not supposed to exert the State's sovereign judicial power. But arbitral awards in disputes to which the State and its instrumentalities are parties affect public interest and the matter or the manner in which Government and its instrumentalities allow their interest to be affected by such arbitral adjudications involve larger questions of policy and public interest. Government and its instrumentalities cannot simply allow large financial interests of the State to be prejudicially affected by non-reviewable - except in the limited way allowed by the Statute - non-speaking arbitral awards. Indeed, this branch of the system of dispute-resolution has, of late, acquired a certain degree of notoriety by the manner in which in many cases the financial interests of Government have come to suffer by awards which have raised eye-brows by doubts as to their rectitude and propriety. It will not be justifiable for Governments or their instrumentalities to enter into arbitration agreements which do not expressly stipulate the rendering of reasoned and speaking awards. Governments and their instrumentalities should as a matter of policy and public interest - if not as a compulsion of law -ensure that wherever they enter into agreements for resolution of disputes by resort to private arbitrations, the requirement of speaking awards is expressly stipulated and ensured. It is for Governments and their instrumentalities to ensure in future this requirement as a matter of policy in the larger public interest. Any lapse in that behalf might lend itself to and perhaps justify, the legitimate criticism that Government failed to provide against possible prejudice to public-interest."
But, however, in view of the prevailing law, the Supreme Court at Para 38 stated thus:
"Having given our careful and anxious consideration to the contentions urged by the parties we feel that law should be allowed to remain as it is until the competent Legislature amends the law. In the result we hold that an award passed under the Arbitration Act is not liable to be remitted or set aside merely on the ground that no reasons have been given in its support except where the arbitration agreement or the deed of submission or an order made by the Court such as the one under Section 20 or Section 21 or Section 34 of the Act or the statute governing the arbitration requires that the arbitrator or the umpire should give reasons for the award. These cases will now go back to the Division Bench for disposal in accordance with law and the view expressed by us in this decision."
22. In S. Harcharan Singh v. Union of India, , the Supreme Court observed as follows:
"6. As regards the award of an arbitrator under the Act, the law is well settled that the arbitrator's adjudication is generally considered binding between the parties for he is a Tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30 of the Act, viz. (a) if the arbitrator has misconducted himself or the proceedings; or (b) when the award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35; or (c) when the award has been improperly procured or is otherwise invalid. Under clause (c) of Section 30 the Court can set aside an award which suffers from an error on the face of the award. It is, however, not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator, to arrive at his conclusion. But, the jurisdiction of the arbitrator is limited by the reference and if the arbitrator has assumed jurisdiction not possessed by him, the award to the extent to which it is beyond the arbitrator's jurisdiction would be invalid and liable to be set aside (See: Jivarajbhai Ujmshi Sheth v. Chintamanrao Balaji, . This position at law has been reiterated by the Constitution Bench of this Court in its recent decision in Raipur Development Authority v. M/s. Chokliamal Contractors, 1989 (2) SCC 721. It has been held that an arbitrator or umpire is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or the deed of submission he is required to give such reasons and if the arbitrator or umpire chooses to give reasons in support of his decision it is open to the Court to set aside the award if it finds that an error of law has been committed by the arbitrator or umpire on the face of the record on going through such reasons and that an award can neither be remitted nor set aside merely on the ground that it does not contain reasons in support of the conclusion or decisions reached in it except where the arbitration agreement or the deed of submission requires him to give reasons.
7. In the instant case the arbitration agreement or the deed of submission did not require the arbitrator to give reasons and, therefore, the award cannot be questioned on the ground of an error on the face of the award. The learned Judges of the Division Bench of the High Court have set aside the award in relation to claim No.1, relating payment for additional work of hard rock cutting on the ground that in making the award the arbitrator exceeded his jurisdiction by allowing a rate to the contractor in excess of the agreed rate for the job for hard rock cutting against the terms and conditions contained in clause 12 of the agreement."
23. Therefore, from the reading of the aforesaid decisions, it is clear that though it is desirable to give reasons, it is not incumbent on the part of the arbitrator to pass speaking award duly giving reasons, in the absence of any such conditions in the arbitration agreement or the statute governing the arbitration. What impelled the arbitrator to allow a particular claim in the award is not a matter for enquiry by the Court. Admittedly, the cases on hand are non-speaking awards and this Court is precluded from interfering with such award. The law is now changed under the Arbitration Act, 1996. Mandatory duty being cast on the arbitrator to record reasons in the award, unless the parties agreed that no reasons need be given.
Whether the Arbitrator can award lump sum amount ?
24. The instances of this type are only in non-speaking awards. In M/s. Lall Brothers' case (supra), the Supreme Court held that lump sum award is not bad per se, illegal in law. In catena of decisions, the Supreme Court affirmed the said view (See: further Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore, , Union of India v. Bungo Steel Furniture Pvt. Ltd. , as well as the decision of this Court in Allen Berry and Co. (P) Ltd. v. Union of India, .
25. Therefore, it has to be safely concluded that the arbitrator is empowered to award lump sum amount. The learned Standing Counsel for TTD, however submits that in first three contracts when the claims are under identical heads, the arbitrator did not award the same lump sum amount. So also, in other three contracts. Thus, he submits that the arbitrator has committed misconduct. I am unable to agree with this submission, when the lump sum amounts are awarded under the arbitration, such awards cannot be enquired into by this Court. Therefore, it would not be open for the TTD to raise this issue. Hence, I have to necessarily reject the contention of the learned Standing Counsel for TTD.
Whether Arbitrator can use his personal skill and expertise in the absence of any evidence ?
26. The learned Standing Counsel for TTD relies on the decision of Madras High Court reported in (Krotapalli) Gopalam v. Myneni Suryanarayana, AIR 1976 Mad. 752, wherein the Division Bench of Madras High Court observed:
"Though personal knowledge does not of itself disqualify an arbitrator from acting as such and may even be a good reason for his being selected but, unless the parties consent to such a course, no arbitrator has a right to decide the matter on his personal knowledge and the award based on such knowledge is vitiated."
27. In Dewan Singh v. Champai Singh, , the Supreme Court observed:
"Parties to an agreement of reference may include in it such clauses as they think fit, except those prohibited by law, but the phrase 'in whatever manner' they think does not mean that the arbitrators can decide the disputes on the basis of their personal knowledge. Further, arbitrators must act in accordance with the principles of natural justice, and inform the parties to the submission about the nature of their personal knowledge but in the present case, it was not done so."
The phrase "whatever manner" mentioned in the arbitration agreement cannot embrase in it that the arbitrators can decide the dispute on the basis of their personal knowledge. The Supreme Court held that the proceedings before the arbitrator are quasi-judicial and they must be conducted in accordance with the principles of natural justice. In the aforesaid case, it is nobody's case that the parties were informed about the nature of the personal knowledge possessed by the arbitrator and they were given opportunity to correct any misconception or wrong assumptions. More over, there were five arbitrators and it was not known whether the award was passed on the basis of the personal knowledge of them or only some of them. It cannot be disputed that the parties to the agreement of reference may include such clause as they may think fit unless prohibited by law. It is normally implied term of arbitrator that he must decide the dispute in accordance with the ordinary law (See: Chandris v. Isbrandtsen Moller C Inc.(1951) KB 240 and such a rule can be departed only specifically provided for in the agreement.
28. In M/s. Bajranglal Laduram v. Ganesh Commercial Co. Ltd., , the Calcutta High Court held that "where the arbitrators are appointed under a contract for the supply of jute bags, on failure to deliver goods on due date, they as perts in trade can decide matters within their expert knowledge without evidence. But, they cannot decide whether two parties have extended the time of delivery except on evidence, as such would not be a matter within their expert knowledge." But, in the instant case, it is not the case of extension of time, but it is a case that the arbitrator being an Engineer and having sufficient experience, is capable of deciding the issue with his expert knowledge, without there being any evidence. Therefore, this decision does not help the TTD.
29. In Bijoy Singh v. Bilasroy and Co., , to the same effect, the Division Bench of Calcutta High Court observed that "Arbitrators who are experts in the trade can decide matters which are within the expert knowledge without evidence. But, they cannot decide whether two parties have extended the time of delivery except on evidence, as such would not be a matter within their expert knowledge. Where the arbitrators came to a finding without evidence it must be held that they have misconducted the proceedings." But, in the instant case, the issue was with regard to possessing expert knowledge, but not with regard to extension of time which is required to be considered on evidence.
30. The learned senior Counsel for the Contractor Mr. Subrahmanya Reddy, taking assistance from the very same cases cited by the learned standing Counsel for TTD submits that it is always open for the arbitrator to invoke his personal skill and experience. He states that the fact that the parties agreed to refer the dispute or difference for arbitration of the Superintending Engineer would itself indicate that the arbitrator has possessed necessary knowledge and experience in the matter which was referred to him. He also refers to the following English decisions:
In an action relating to sale of goods, the arbitrator awarded damages for wrongful rejection. The claim having been framed (incorrectly) as a claim for the price, neither side, tendered any evidence as to damages, but the arbitrator had been chosen as having an expert knowledge of the subject-matter. The award was upheld (See: Mediterranean etc. Co. v. Fortress Fabrics, (1948) 2 All. ER 186).
31. An arbitrator experienced in cloth was held justified in deciding a dispute as to quality upon inspection of samples only (See: Wright v. Hawson, (1888) 4 TLR 386). Similarly, an umpire expert in the timber trade properly decided a dispute as to quality on his own inspection (See: Jordeson and Co. v. Stora Kopparbergs Berhags Aknebolag, (1931) 41 L.I.L. Rep.201 at Page 204).
32. In this regard, it is pertinent to refer to an authoritative book on the subject in Law of Arbitration by Russell, 20th Edition, at Page 277, it was commented with regard to the use of expert skill which reads thus:
"Where however the parties employ an arbitrator who has expert knowledge, and authorise him to make use of that knowledge, it is of course proper for him to do so; and it would seem that the Court will tend to presume such authority from the mere fact of employment of a specially qualified person as arbitrator.
such a case, it will be no objection to an award that the evidence actually tendered by the parties is insufficient to support it, if there are materials upon which the arbitrator himself could have supplied the deficiency.
It may be proper, atleast in a quality arbitration, and more particularly in a quality arbitration on perishable goods, for an umpire to make use of the expert knowledge of the arbitrators."
Thus, the Indian and English decisions clearly lay down that it is permissible to use expert knowledge without any evidence in the issue under arbitration. Admittedly, in the instant case, the arbitrator is highly experienced Engineer having skill and expertise knowledge and he having dealt with number of such arbitration matters, it is always open for him to exercise the skill which is required for adjudicating the matter. Thus, there need not be any particular evidence on this aspect. Further, the award itself reads thus:
"After carefully assessing the admissible and inadmissible portions of these claims, basing on the details available and on my judgment of the said losses from my experience on similar works and also after verifying the rates of idle charges of such machinery, labour rates prevailed in 1998 in Government Departments and after taking into consideration the points presented by the respondents and replies of the petitioner, I hereby order a sum of Rs.2,80,000/-(Rupees Two lakhs and eighty thousand only)."
34. It is no doubt true that if there is no evidence at all on record, the arbitrator has no jurisdiction to make the award and such an award made of no evidence is liable to be set aside. But, when the arbitrator makes the award basing on the material available on record and using his experience and skill, the availability of evidence becomes irrelevant. It is not the case where no documents are available. Before the Arbitrator, the contractor filed a claim petition and rebuttal statement was submitted by the TTD and the written arguments were filed by the petitioner and also the TTD was submitted. Admittedly, this case falls under the award with no reasons and in such a case it is very much doubtful whether there should be any evidence at all. The Division Bench of Karnataka High Court in Commander Works Engineers, Bangalore v. Sarvashri Sreenivasan Foundaries and Engineering Works, Srinivasanagar, , held that non-production of records by either party, however, important those documents may be for the decision of dispute by the Arbitrator is not a sufficient ground to interfere with the award. It was a case of non-speaking award. If it is a case of speaking award, the Court is certainly entitled to go into the aspect whether the findings of the arbitrator were based on evidence available on record and if the vital documents are before the arbitrator and if they are not considered, it is a case for interference by the Court. But, in case of non-speaking awards, it is wholly immaterial that there should be an evidence. Therefore, I have to necessarily reject the contention of the learned standing Counsel for TTD that awards suffered with legal infirmity on the ground that there was no evidence available on record and that arbitrator used his personal knowledge.
Whether the Arbitrator has jurisdiction to pass an Award in respect of the claims which were not covered in the arbitration agreement ?
35. The learned standing Counsel for TTD submitted that the arbitrator lacked inherent jurisdiction to entertain the claims as they did not form part of the arbitration agreement and that arbitrator gets only jurisdiction if he is entitled to arbitrate the matters on issues specified in the arbitration agreement. He submits that in the instant case, the claims made by the contractor are outside the purview of the arbitration agreement and therefore being a jurisdictional issue, the arbitrator has committed error apparent on the face of the record.
36. It is now well settled that in the arbitration proceedings, an error of law can only be interfered with and in case of errors of facts, this Court would be loath to interfere.
37. The learned Counsel for the Contractor submits that this issue was not at all raised before the arbitrator and also in the suit filed by the contractor on earlier occasion when the arbitrator refused to entertain the reference on the ground that there was no concluded agreement and that the objections with regard to the jurisdiction should be taken at the earliest point of time. In the instant case, no such objection was ever taken and that even if any objection is taken, no evidence was adduced by the TTD in support of that plea as this issue falls outside the arbitration agreement and therefore he submits that such a contention cannot be raised by the TTD. He also alternatively submits that the TTD is estopped from contending that the arbitrator lacked jurisdiction as the TTD had acquiesced its right having actively participated and defended the case in all its meticulous fashion.
38. The learned Counsel for the Contractor relied on the following decisions:
N. Chellappan v. Secretary, Kerala State Electricity Board, .
Prasun Roy v. The Calcutta Metropolitan Development Authority, .
The Hindustan Construction Co. Ltd. v. Governor of Orissa, .
M/s. Construction India v. Secretary, Works Department, Government of Orissa, .
39. In Chellappan's case (supra), the Supreme Court observed thus:
"Where the arbitrator fail to make the award within the specified time, Schedule 1, Rule 4 authorises the Umpire forthwith to enter upon the reference in lieu of the arbitrators. Neither the fact that the umpire expressed his unwillingness to enter upon the reference without an order of the Court nor the fact that an application was made to extend the period for making the award by the arbitrators long after the expiry of the period for making the award, had the effect of depriving him of his jurisdiction under Rule 4 of the First Schedule. The fact that the Court on application of a party under Sections 5 and 11 of the Act has passed consent order revoking the authority of the arbitrators and directing the umpire to make the award as the sole arbitrator will not affect the jurisdiction of the umpire under Schedule 1, Rule 4 and a party who submitted to the jurisdiction of the umpire and took part in the proceedings before him without any demur will be precluded by his acquiescence from challenging the award for lack of jurisdiction. Judgment of Kerala High Court, Reversed."
The Supreme Court while explaining error of law observed:
"Where the Umpire as the sole arbitrator has awarded a sum to the contractor on account of certain claims made by the contractor after considering the argument of the Board for disallowing it, but without expressly adverting to the question of limitation the award is not vitiated on account of any mistake or error apparent on the face of the award. The umpire as sole arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that is no ground for challenging the validity of the award. It is only when an erroneous proposition of law is stated in the award and which is the basis of the award, can the award be set aside or remitted on the ground of error of law apparent on the face of the record. Champsen Bhara and Co. v. Jivraj Balloo Co. Ltd., AIR 1923 PC 66 and Union of India v. Bungo Steel Furniture (P) Ltd., ."
It further held in para 13 thus:
"The Court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out, whether or not the arbitrator has committed an error of law."
The Supreme Court observed as follows:
"On the other hand, we find that the Board participated in the proceedings before the umpire, without any demur to his jurisdiction. The only inference from this conduct on the part of the Board is that it had no objection to the order revoking the authority of the arbitrators. Therefore, by acquiescence, the Board was precluded from challenging the jurisdiction of the umpire.
"If the parties to the reference either agree before hand to the method of appointment, or afterwards acquiesce in the appointment made, will full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence"
(See: "Russell on Arbitration", 17th Edition Page 215)."
In Chowdhri Murtaza Hossein v. ML Bibi Bechunnissa, (1876) 3 Ind. App. 209 (PC) at Page 220, the Privy Council said:
"On the whole, therefore, their Lordships think that the appellant, having a clear knowledge of the circumstances on which he might have founded an objection to the arbitrators proceeding to make their award, did submit to the arbitration going on; that he allowed the arbitrators to deal with the case as it stood before them, taking his chance of the decision being more or less favourable to himself; and that it is too late for him, after the award has been made, and on the application to file the award, to insist on this objection to the filing of the award."
40. Disagreeing with the finding of the High Court that acquiescence of the Board by participating in the proceeding before the umpire as sole arbitrator would not confer jurisdiction as there was inherent lack of jurisdiction held that the arbitrator had jurisdiction to enter upon the reference and pass an award under Rule 4 of the First Schedule. The Supreme Court held thus:
"Therefore, when the Board without demur participated in the proceedings before the umpire and took the chance of an award in its favour, it cannot turn round and say that the umpire had no inherent jurisdiction and therefore its participation in the proceedings before the umpire is of no avail. The fact that the umpire did not purport to act in the exercise of his jurisdiction under Rule 4 of the First Schedule but under the order of the Court, would not make any difference when we are dealing with the question whether he had inherent jurisdiction. As the umpire became clothed with jurisdiction when the extended period for making the award by arbitrators expired, it cannot be said that he had no inherent jurisdiction."
The Supreme Court observed in Para 12 as follows:
"The umpire as sole arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that is no ground for challenging the validity of the award. It is only when a proposition of law is stated in the award and which is the basis of the award, and that is erroneous, can the award be set aside or remitted on the ground of error of law apparent on the face of the record.
"Where an arbitrator makes a mistake either in law or in fact in determining the matters referred, but such mistake does not appear on the face of the award, the award is good notwithstanding the mistake, and will not be remitted or set aside.
The general rule is that, as the parties choose their own arbitrator to be the Judge in the disputes between them, they cannot, when the award is good on its face, object to his decision, either upon the law or the facts." (See: "Russell on Arbitration", 17th Edition Page 322)."
41. In Prasun Roy's case (supra), the Supreme Court approved the judgment of the Calcutta High Court in Arbitration Jupiter General Insurance Co. Ltd. v. Corporation of Calcutta, , wherein the learned Chief Justice, Calcutta High Court, observed as follows:
"It is necessary to state at the outset that Courts do not favour this kind of contention and conduct of an applicant who participates in arbitration proceedings without protest and fully avails of the entire arbitration proceedings and then when he sees that the award has gone against him he comes forward to challenge the whole of the arbitration proceedings as without jurisdiction on the ground of a known disability of a party. That view of the Court is ably stated by the Editor of the 15th Edition of Russell on the Law of Arbitration at Page 295 in the following terms:
"Although a party may by reason of some disability be legally incapable of submitting matters to arbitration that fact is not one that can be raised as a ground for disputing the award by other parties to a reference who were aware of the disability. If one of the parties is incapable the objection should be taken to the submission. A party will not be permitted to lie by and join in the submission and then if it suits its purpose attack the award on that ground. The presumption in the absence of proof to the contrary will be that the party complaining was aware of the disability when the submission was made."
The Supreme Court observed in Paras 6 and 7 as follows:
"6. Mr. Kacker submitted that this principle could be invoked only in a situation where the challenge is made only after the making of an award and not before. We are unable to accept this differentiation. The principle is that a party shall not be allowed to blow hot and cold simultaneously. Long participation and acquiescence in the proceeding preclude such a party from contending that the proceedings were without jurisdiction.
7. Russel on Arbitration 18th Edition Page 105 explains the position as follows:
"If the parties to the reference either agree before hand to the method of appointment, or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence."
42. Relying on the observation of the Judicial Committee in decision in Chowdhury Murtaza Hossein v. Mussumat Bibi Bechunnissa, (1876) 33 Ind. App. 20, (extracted at Page 41), the Supreme Court in N. Chellappan v. Secretary, Kerala Stale Electricity Board, (supra), acted upon the principle that acquiescence defeated the right of the applicant at a later stage. In that case the facts were similar. It was held by conduct there was acquiescence. Even in a case where initial order was not passed by consent of the parties a party by participation and acquiescence can preclude future challenges.
43. Thus, the learned Counsel for the contractor submits that the conduct of the TTD having participated fully in the proceedings, without any demur, precluded the TTD from challenging the award on the ground that arbitrator had decided the issues which did not form part of the agreement.
44. In Hindustan Construction's case (supra), the Supreme Court held that the State Government having not questioned the jurisdiction before the special Tribunal to adjudicate the dispute and having participated in the arbitration proceedings, held that it precluded from raising such an issue before the High Court. Para 7 is extracted below:
"According to us, the Notification dated 6-5-1988 constituting the Special Tribunal and referring the dispute to such Special Tribunal cannot be held to be one in exercise of power under proviso to subsection (7) of Section 41-A. The said notification of reference to Special Tribunal is within the scope of proviso to sub-section (1) of Section 41-A. The State Government exercised the said power taking into consideration all the facts and circumstances of the case including the direction of the Arbitration Tribunal because it involved a claim of Rs. one crore and above. It is an admitted position that the State Government had not at any stage questioned before the Special Tribunal the jurisdiction thereof to adjudicate the said dispute. The State Government itself by a statutory notification having constituted the Special Tribunal and referred the dispute to said Special Tribunal, we fail to appreciate as to how for the first time this stand was taken before the High Court by the State Government that the Special Tribunal had no jurisdiction to adjudicate the dispute or to make the award. According to us, in the facts and circumstances of the case, the High Court ought not to have permitted the State Government to raise such a contention after it had submitted to the jurisdiction of the Special Tribunal merely because the award went against it. It hardly behoves the State Government to question the jurisdiction of the Special Tribunal at such a belated stage merely because the award was not to its liking. The State Government cannot be permitted to behave like an ordinary dishonest litigant who takes an off chance hoping to succeed and if the outcome is not to his liking to turn back and question the Special Tribunal's jurisdiction. The High Court should not have permitted such a somersault. We, therefore, set aside the High Court's finding on this issue for the above reasons."
45. In Ms, Construction India's case (supra), it was held that a mere reference to an office held by an Arbitrator will not disqualify him from being an Arbitrator after he ceases to hold that office. Objection as to the jurisdiction were withdrawn and thus it indicates conscious acquiescence on the part of the respondents in continued jurisdiction of the Arbitrator to decide the dispute. The Supreme Court observed that the jurisdiction which was conferred on an arbitrator was on account of the consent of the parties to the arbitration agreement. Before the arbitrator, the objection as to jurisdiction of the arbitrator was withdrawn by the respondents. It shows acquiescence on the part of the respondents in the continued jurisdiction of the arbitrator to decide the dispute. The minutes recorded show that after raising objection, the respondents have withdrawn the same. This would indicate a conscious acquiescence on the part of the respondents in the continued jurisdiction of the arbitrator. The Supreme Court also held on similar issue that the State Electricity Board was precluded from challenging the jurisdiction of the umpire. A passage from Russell on Arbitration, 17th Edition at Page 215 was relied upon. It is to the following effect:
"If the parties to the reference either agree before hand to the method of appointment, or afterwards acquiesce in the appointment made, with full knowledge of all the circumstances, they will be precluded from objecting to such appointment as invalidating subsequent proceedings. Attending and taking part in the proceedings with full knowledge of the relevant fact will amount to such acquiescence."
46. In the same passage the decision of the Supreme Court in Prasum Roy's case (supra), was approved where the Court held that the long participation acquiescence in the arbitration proceedings precluded a party from contending that the proceedings were without jurisdiction.
47. Referring to the dicta laid down by the Supreme Court, the learned senior Counsel submits that the TTD having actively participated in the arbitration proceedings was precluded from contending that the arbitrator had no jurisdiction, when it suffered the award.
48. The learned standing Counsel for the TTD, however, submits that the arbitrator cannot confer jurisdiction on himself when the same was not conferred by the agreement between the parties. He tried to take the assistance of the decision reported in West Bengal Industrial Infra-Structure Development Corporation v. M/s. Star Engineering Company, , wherein, it was held that the challenge on the ground that the dispute decided was outside the scope of reference, being expressly excluded by agreement of parties. The learned single Judge of Calcutta High Court held that the question being of inherent jurisdiction of Arbitrator, Court has jurisdiction to look into the contract and if the dispute is outside scope of reference, award must be set aside. In the instant case there was no exclusion clause expressly prohibiting to arbitrate on the claims under award. He further relied on the decision of the Supreme Court reported in Associated Engineering Company v. Government of Andhra Pradesh, , wherein the Supreme Court observed as follows:
"26. The arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. But, if he has remained inside the parameters of the contract and has construed the provisions of the contract, his award cannot be interfered with unless he has given reasons for the award disclosing an error apparent on the face of it.
28. A dispute as to the jurisdiction of the arbitrator is not a dispute within the award, but one which has to be decided outside the award. An umpire or arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. He cannot say that he does not care what the contract says. He is bound by it. It must bear his decision. He cannot travel outside its bounds. If he exceeded his jurisdiction by so doing his award would be liable to be set aside. As stated by Lord Parmoor:
"...... It would be impossible to allow an umpire to arrogate to himself jurisdiction over a question which on the true construction of the submission was not referred to him. An umpire cannot widen the area of his jurisdiction by holding, contrary to the fact, that the matter which he affects to decide is within the submission of the parties......", Attorney-General far Manitoba v. Kelly, (1922) 1 AC 268, 276.
Evidence of matters not appearing on the face of the award would be admissible to decide whether the arbitrator travelled outside the bounds of the contract and thus exceeded his jurisdiction. In order to see what the jurisdiction of the arbitrator is, it is open to the Court to see what dispute was submitted to him. If that is not clear from the award, it is open to the Court to have recourse to outside sources. The Court can look at the affidavits and pleadings of parties; the Court can look at the agreement itself. Bunge and Co. v. Dewar and Webb, (1921) 8 Lloyd's Rep.436 (KB).
29. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But, if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Such error going to his jurisdiction can be established by looking into material outside the award. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The dispute as to jurisdiction is a matter which is outside the award or outside whatever may be said about it in the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such jurisdictional error needs to be proved by evidence extrinsic to the award. (See: Ms. Alopi Parshad and Sons Ltd. v. Union of India, ; Bunge and Co. v. Dewar and Webb, (1921) 8 Lloyd's Rep 436 (KB); Christopher Brow Ltd v. Genossenschaft Oesterreichischer, (1954) 1 QB 8; Res v. Futham, (1951) 2 KB 1; Falkingham v. Victorian Railways Commission, (1900) AC 452; Rex v. All Saints, Southampton, (1828) 7 B&C 785; Laing, Sons and Co. Ltd. v. Eastcheap Dried Fruit Co., (1961) I Lloyd's Rep.142, 145 (QB); Dalmia Dairy Industries Ltd v. National Bank of Pakiostan, (1978) 2 Lloyd's Rep.223(CA); Heyman v. Darwins Ltd., (1942) AC 356, Union of India v. Kishorilal, ; Renusagar Power Co. Ltd. v. General Electric Company, ; Jivarajbhai v. Chintamanrao, ; Gobardhan Das v. Lachhmi Ram, ; Thawardas v.
Union of India, ; Omanhene v. Chief Obeng, AIR 1934 PC 185, 188; F.R. Absalom Ltd. v. Great Western (London) Garden Village Society Limited, (1933) AC 592 (HL) and M. Golodeiz v. Schrier, (1947) 80 Lloyd's Rep.647)."
49. A reading of the above provisions would clearly indicate that an arbitrator is not empowered to allow the claims which are not specifically referred to him. That will be an action over-stepping the jurisdiction. But, in the instant case, it is not as if the arbitrator lacked the inherent jurisdiction. It is to be noted that there was a concluded contract and in pursuance of the terms of the contract, the reference was made to the arbitrator and even before the arbitrator both the parties participated and also submitted their respective written arguments and the arbitrator passed an unreasoned award.
50. The question is whether the jurisdiction of the arbitrator can be challenged before the High Court ?
51. The learned standing Counsel for TTD however, submits that this objection was taken in the written statement filed by the TTD to the claims made by the Contractor. As can be seen from the pleading in the written statement no specific challenge was made to the jurisdiction of the arbitrator. Nothing could have prevented the TTD from adducing evidence or by filing specific affidavit on this issue by exclusively mentioning the relevant provisions of the contract which preclude the arbitrator from giving a decision on the claims made by the contractor. No such material was placed before the arbitrator except making a bold statement. In the written statement filed in the suit filed by the contractor for making the award rule of Court to the following effect:
"The findings of the arbitrator on various claims are wrong, unsustainable in the absence of specific provision in the agreement."
Moreover, the Supreme Court already held that the jurisdiction of the arbitrator is ati issue which falls outside the award and it has to be proved by evidence exlrinsic to the award. Admittedly, TTD has not adduced any evidence on this aspect. Thus, the conduct of the TTD shows that it acquiesced its right to challenge the jurisdiction on this aspect and in fact in the rebuttal statement filed by the arbitrator no such specific objection was taken with regard to the jurisdiction, except stating that the TTD did not admit the claims putforth by the Contractor that the claims are untrue and the contractor was put to strict proof of various claims made by him. Thus, it is seen that no such objection was taken even before the arbitrator and a feeble attempt was made in the written statement in the suit and that too not supported by any evidence. The TTD did not adduce any evidence in the civil Court in support of its plea. It is obvious as the main thrust of the defence of TTD was that there was no concluded contract. Thus, the events would show that the TTD had fully participated in the arbitration proceedings without any demur and that they have not taken any objection about the jurisdiction before the arbitrator and even in the suit such an objection was not supported by any evidence. In such circumstances, it would not be appropriate for the TTD to contend that the arbitrator lacked inherent jurisdiction. It is no doubt true that the arbitrator gets jurisdiction in pursuance of the arbitration agreement. He has to confine his arbitration to the claims referred to it by the parties and admittedly the claims were made by the contractor and they were sought to be objected by the TTD on merits without there being any protest with regard to the jurisdiction. Even if any such jurisdictional error had crept in, that objection should be taken at the earliest point of time. It will be too late in the day to contend before this Court that the arbitrator has no jurisdiction to decide the claims which are not covered by the specific provision in the agreement. I have also perused the agreement and find that there is no such express prohibition at all in respect of the claims made by the petitioner.
52. The matter can also be viewed yet from another angle. On an earlier occasion, when the arbitrator refused to entertain the reference on the ground that there was no concluded contract, the contractor filed a suit and one of the issue which was framed was whether there was a concluded contract or agreement between the parties to refer the matter to an arbitrator. The civil Court after considering the evidence on record held that there was a concluded contract between the parties to refer the matter to an arbitrator. Therefore, that finding became final, and now it would not be open for the TTD to say that the arbitrator had no authority to adjudicate the claim of the contractor. What are all the claims made by the contractor were available before the TTD much prior to the filing of the suit by the contractor. It was never the case of the TTD that the claims did not form part of the arbitration agreement. It was only being contended that there was no concluded contract between the parties to refer the matter to an arbitrator. When once it is held that there was a concluded contract to refer the matter to the arbitrator, it would not be open for the TTD to say that the items of claims are beyond the purview of the arbitration agreement. The defence which was available must be pleaded at the earliest opportunity. If it was not taken, the law presumes that the party is deemed to have waived the right to plead at subsequent stages. Though the provisions of CPC are not applicable to the arbitration proceedings yet the basic and fundamental principles of waiver and acquiescence cannot be given a go bye. The conduct of TTD established conscious acquiescence on its part. Therefore, I hold that the TTD had acquiesced the right of raising plea of jurisdiction of the arbitrator in respect of the claims under the award.
53. For the foregoing discussions, I find no merits in the CRPs and CMAs. Accordingly, they are dismissed. In the circumstances, the parties shall bear their own costs.