Bombay High Court
Shri Prabhubhai Jadhavji Rathod vs Union Of India (Uoi) Through Its Acting ... on 28 February, 2008
Equivalent citations: 2008(110)BOM.L.R.852
Author: B.P. Dharmadhikari
Bench: B.P. Dharmadhikari
JUDGMENT B.P. Dharmadhikari, J.
Page 0856
1. This First Appeal filed under Section 37 of Arbitration and Conciliation Act, 1996 (hereinafter referred to as Act) challenges the judgment and order dated 16/6/2007 delivered by learned District Judge, Nagpur in Misc. Civil Application No. 531 of 2003 whereby the learned District Judge has allowed application under Section 34 thereof filed by present Respondent. Appellant had stated that controversy herein is covered by the judgment dated 23/12/2005 in First Appeal No. 601/2005 and hence both parties had agreed to address the court finally at the stage of admission itself. On one date, Respondent stated that another matter vide F.A. No. 284/2007 between parties involving similar point was already closed for judgment and therefore it was thought fit to await such judgment. The said Appeal was decided on 20/12/2007. In the meanwhile record & proceedings from Court of District Judge were called for and thereafter, parties were heard on 11th, 12th and 13th February, 2008 in this Appeal.
2. Admitted for immediate final hearing. Heard Advocate R.R. Shrivastava for Appellant, Advocate R.G. Agrawal for Respondent Union of India. Perused R & P of lower court.
3. Advocate Shrivastava points out that in present matter 3 claims raised before Arbitrators by the Appellant are only relevant. Claim number 4 was for recovery of loss of Rs. 1,86,570/-on account of underutilisation of labour force. Arbitrators allowed sum of Rs. 93,285/-only under this head. Claim number 5 was for recovery of loss of Rs. 63,000/-sustained on account of underutilisation of overheads. Amount awarded by Arbitrators under this head is Rs. 31,500/- only. Claim number 11 was to recover loss of anticipated profit of Rs. 22,183/-on account of work which Appellant could not complete. Unexecuted work was worth Rs. 71,293/-and 25% thereof was claimed as loss of profit. The Arbitrators granted only Rs. 17,723/ on this account. He invites attention to consideration of these claims by the Arbitrators and thereafter by learned District Judge. According to him stand not taken in defence by present Respondent before Arbitrators and not even raised before District Court has been treated as valid defence by learned Lower Court to deny any amount to present Appellant. He states that clauses in contract i.e. General Conditions of Contract (GCC) have been invoked by lower court without even any notice to or opportunity to present Appellant. He therefore states that a totally new case has been made out for Respondent by learned District Court and its application under Section 34 of Act has been allowed. He invites attention to Clause 17(3), 19(1), 61 & 62 of GCC Page 0857 for this purpose. According to him Learned District Judge has treated the appeal as one under Section 96 of Civil Procedure Code and ignored limits of Section 34 of Act. The appreciation of evidence undertaken by District Court is prohibited and recourse to GCC or Indian Contract Act was not permissible. He further argues that absolutely no reason has been assigned to reduce the costs of Rs. 40,000/-awarded by Arbitrators to Rs. 25,000/-only by District Court.
4. Advocate R.G. Agrawal for Respondent Union of India states that the learned District Judge has rightly appreciated the controversy in the light of contract between parties and its terms and conditions. He points out that Arbitrators were duty bound to find out whether claim as lodged is within four corners of GCC and learned District Court has found that Arbitrators did not undertake any such scrutiny and thereby mis-conducted the proceedings. He fully supports the impugned judgment and order and prays for dismissal of appeal. He points out that learned District Judge has only interpreted various clauses in GCC and as such the other two judgments are not at all relevant for consideration in present matter.
5. Judgment dated 23/12/2005 in First Appeal No. 601/2005 is being relied upon by Appellant to show that contractor there was found entitled to damages on account of underutilisation of labour, overhead, machinery, tools, plants as completion of work was found prolonged on account of lapse on the part of employer. In paragraph 19 there, this High Court has observed that extension of time was allowed for reasons which were beyond control of contractor and hence contractor was entitled to compensation for additional expenses therefor as per terms of supplementary agreement between parties to that First Appeal. Clause in 63 of GCC was found irrelevant in view of this supplementary agreement. It has been noticed that it was not the case of employer giving an extension of time as a matter of grace because employer admitted that contract could not be completed within time for reasons beyond the control of contractor. The judgment of Hon'ble Apex Court in case of G. M. Northern Railways v. Sarvesh Chopra, was therefore found to be irrelevant. Objection to payment made to labours which was not witnessed by employer was overruled in paragraph 22 by observing that requisite Form No. 5 was not given to contractor by employer for the purposes of registration as required by Rule 21 of Maharashtra Contract Labours (Regulation and Abolition) Rules, 1971. Similarly other claims are also considered in factual background and I therefore find that this judgment does not in any way assist the Appellant in present matter. Judgment dated 20/12/2007 in First Appeal No. 284 of 2007 relies heavily upon judgment in First Appeal No. 601/2005 (supra) and consideration of propriety of order of learned District Judge in rejecting certain claims allowed by arbitrators starts from its paragraph 10. The evidence on record has been looked into for that purpose. Grievance about delay and underutilisation of overheads etc. is again considered in the factual background. Thus question put before me viz. whether terms and conditions of GCC supported such claims did not Page 0858 arise for consideration in both these First Appeals. The factual findings there, therefore, have no bearing on present adjudication undertaken by me.
6. Mention of impugned judgment of learned District Judge at some length is necessary to find out application of mind therein. In paragraph 18 learned District Judge has concluded that delay in execution of work was caused due to nonperformance of reciprocal part of contract by the employer. In paragraph 19 and onwards, the learned Judge has proceeded to consider the entitlement for damages flowing from Section 55 and Section 73 of Contract Act in the light of various clauses embedded in GCC also Clause 26A of tender documents. In the light of those clauses it has been concluded that temporary problems like non-availability of site were to be anticipated by the contractor and he was expected to quote rates accordingly. It has been found that there was no provision in contract to enable contractor to claim compensation under such circumstances and he was expected to use heavy machinery whenever site was available. It was also found that vide his letter dated 22/11/1989 at C-12, contractor only claimed final bill amount and security deposit and there was no claim under these heads. Contractor was not new to the work of Respondent and was aware of various obstacles and delays; and rates quoted by him therefore were after taking into consideration such problems. Records showing payment to labour were therefore not given much importance. It was noticed that under GCC, contractor was not supposed to suspend the work at any time for any reason and was only entitled to claim extension on account of non-availability of material or site. Hence closure of work by present Appellant was found to be at his risk and therefore he was found not entitled to claim any amount on the ground of loss of profit. It also found that claim on aforesaid counts was "excepted matter" and hence Arbitral Tribunal could not have given any compensation on that account. In paragraph 27, learned District Judge has found that most of the claims made by Appellant to Arbitral Tribunal could not have been allowed and they constituted major claims. Appellant contractor refused to work though Railways i.e. Union of India extended time. Therefore, cost of Rs. 40,000/-awarded by Arbitral Tribunal was reduced to Rs. 25,000/-. This also shows that judgments in First Appeal Nos.601/2005 and 284 of 2007 do not have any bearing on this controversy. This exercise of learned District Judge needs to be evaluated in the light of contention of Appellant that there was no such defence before Arbitral Tribunal and even during Section 34 proceedings.
7. Learned District Judge in paragraph 23 of his judgment has found that claim raised was in relation to "excepted matters" in view of Clauses 61, 62 and 63 of GCC after placing reliance on G. M., Northern Railways v. Sarvesh Chopra (supra) wherein, Hon'ble Apex Court observes:
15. In our country question of delay in performance of contract is governed by Sections 55 and 56 of the Indian Contract Act, 1872. If there is an abnormal rise in prices of material and labour, it may frustrate the contract and then the innocent party need not perform Page 0859 the contract. So also, if time is of the essence of the contract, failure of the employer to perform a mutual obligation would enable the contractor to avoid the contract becomes voidable at his option. Where time is "of the essence" of an obligation, Chitty on Contracts (Twenty Eighth Edition, 1999, at p. 1106, para 22-015) states "a failure to perform by the stipulated time will entitled the innocent party to (a) terminate performance of the contract and thereby put an end to all the primary obligations of both parties remaining unperformed; and (b) claim damages form the contract breaker on the basis that he has committed a fundamental breach of the contract ("a breach going to the root of the contract") depriving the innocent party of the benefit of the contract ("damages for loss of the whole transaction"). If, instead of avoiding the contract, the contractor accepts the belated performance of receipts the belated performance of reciprocal obligation on the part of the employer, the innocent party, i.e. the contractor, cannot claim compensation for any loss occasioned by the non performance of the reciprocal promise by the employer at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so." Thus, it appears that under the Indian law, in spite of there being a contract between the parties, whereunder the contractor has undertaken not to make any claim for delay in performance of the contract occasioned by an act of the employer, still a claim would be entertainable in one of the following situations; (i) if the contractor repudiates the contract exercising his right to do so under Section 55 of the Contract Act, (ii) the employer gives an extension of time either by entering into supplemental agreement or by making it clear that escalation of rates or compensation for delay would be permissible, (iii) if the contractor makes it clear that escalation of rates or compensation for delay shall have to be made by the employer and the employer accepts performance by the contractor in spite of delay and such notice by the contractor putting the employer on terms.
Before me, no arguments are advanced by learned Counsel for Appellant about the findings recorded by learned lower Court in paragraph 23. In memo of Appeal, ground No. "v" only speaks of this finding of learned District Judge as "clearly erroneous" , but then reasons therefor are not mentioned and substantiated. This point is not even touched during oral arguments by Appellant. In next ground, Section 73 of Contract Act has been pointed out to state entitlement of Appellant to claim damages/compensation but then said reference is in relation to other terms and conditions of GCC mentioned above and not to its Clause 63. Learned District Judge has not held that Appellant terminated the contract by exercising his powers under Section 55 of Indian Contract Act. When this application of mind by the learned District Court is not shown to be erroneous, the impugned judgment and order needs to be maintained even if other contentions as advanced before me are presumed worthy of acceptance.
8. Before proceeding further, I find it proper to reproduce various clauses of GCC on which learned District Judge has relied. Clause 17 appears in chapter with heading "General Obligations". Clause 17 (3). Extension of time Page 0860 on Railway Account. In the event of any failure or delay by the Railway to handover to the Contractor possession of lands necessary for the execution of the works or to give the necessary notice to commence the works or to provide the necessary drawings or instructions or any other delay caused by the Railway due to any other cause whatsoever, then such failure or delay shall in no way affect or vitiate the contract or alter the character thereof or entitle the Contractor to damages or compensation therefor but in any such case, the Railway may grant such extension or extensions of the completion date as may be considered reasonable.
Clause 19 appears under chapter with heading "Execution of Works."
Clause 19 (1). Contractor's Understanding. It is understood and agreed that the Contractor has, by careful examination, satisfied himself as to the nature and location of the work, the conformation of the ground, the character, quality and quantity of the materials to be encountered, the character of equipment and facilities needed preliminary to and during the prosecution of the works, the general and local conditions, the labour conditions prevailing therein and all other matters which can in any way affect the works under the contract.
Clauses 61 and 62 appear in chapter with heading "Determination of Contract". Next clause that is Clause 63 appears in chapter dealing with "Settlement of Disputes."
Clause 61 (1). Right of Railway to determine contract. The Railway shall be entitled to determine and terminate the contract at any time should, in the Railway's opinion, the cessation of work become necessary owing to paucity of funds or from any other cause whatsoever in which case the value of approved materials at site and of other work done to date by the Contractor will be paid for in full at the rates specified in the contract. Notice in writing from the Railway of such determination and the reason therefor shall be conclusive evidence thereof.
(2). Payment on determination of contract. Should the contract be determined under Sub-clause (1) of this clause and the Contractor claims payment for expenditure incurred by him in the expectation of completing the whole of the works, the Railway shall admit and consider such claims as are deemed reasonable and are supported by vouchers to the satisfaction of the Engineer. The Railways decision on the necessity and propriety of such expenditure shall be final and conclusive.
Clause 62, Sub-clause (1) deals with procedure for determination of contract owing to default of Contractor. Its subclause (2) deals with right of Railway after rescission of contract owing to such default. Admittedly here contract was rescinded not by Railway but by Appellant contractor.
Appellant has not pointed out any other Clause in GCC as relevant here.
9. Relevant parts of Section 73 of Contract Act are as under:
73. Compensation for loss or damage caused by breach of contract:-When a contract has been broken, the party who suffers by such breach is entitled to receive, from the party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from Page 0861 such breach, or which the parties knew, when they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
In facts of present case, it is apparent that the notice of termination of contract was given by present Appellant. And hence, provisions of Section 73 of Contract Act will not come to his rescue. The learned District Judge has held that delay in execution of work was caused due to non-performance of reciprocal part of contract by employer but there is no finding of any breach of contract on the part of employer. Even before me it is not the case of Appellant that breach of contract was committed by employer rendering contract voidable at his option. Such option is not even exercised by him either during or after contract period. In First Appeal No. 284 of 2007 & First Appeal No. 601/2005 (supra) this Court had no occasion to go into this aspect or to consider the tenability of claims as raised by the contractor therein in the light of various clauses of GCC mentioned above. In fact in First Appeal No. 601/2005, this Court has found that there was a subsequent agreement styled a supplementary agreement between parties and therefore it was not necessary for it to consider judgment of Hon'ble Apex Court in G. M., Northern Railways v. Sarvesh Chopra (supra). Provisions of Clause 17 (3) above are very wide and protect Respondent i.e. Railways even if delay is caused because of its failure to provide necessary drawings or instructions or for any other cause whatsoever. Appellant has accepted this clause. Clause 19 above again shows that contractor has to gather all necessary information or facts at his own risk by carefully examining the nature of work required of him, the location or site and all other relevant factors having bearing on execution of his contract. Power given to Respondent by Clause 61 (1) is again very drastic and it can determine contract for any cause whatsoever and its notice in writing in that respect is conclusive evidence even about reasons for such determination. Its. subclause (2) permits contractor to claim payment for expenditure incurred by him only when contract is determined by Railway by invoking Sub-clause (1) above. This limited entitlement of contractor is also restricted only to reimbursement of expenditure incurred by him in expectation of completing the whole of the works and the claim of loss of profit on that account is therefore not supported by GCC. Even Clause 62 above contemplates determination of contract by Railways owing to default of contractor. No other provision either in GCC or of Law is being invoked by the Appellant to suggest even remote possibility of reaching any other view. In view of these provisions, it is apparent that no cause & claim like claim numbers 4, 5 and 11 under the heads made by present Appellant can accrue from GCC and as such could not have been taken into account by Arbitral Tribunal. Consideration of these claims by learned District Judge in impugned judgment and order is neither perverse nor erroneous. Appellant has entered into contract with open eyes and it is he who has Page 0862 backed out of it. Hon'ble Apex Court in G. M., Northern Railways v. Sarvesh Chopra (supra) has considered clause like Clause 17 (3) above and observed:
14. In Hudson's Building and Engineering Contracts (11th Edition, pp 1098-9) there is reference to 'no damage' clauses, an American expression, used for describing a type of clause which classically grants extensions of time for completion, for variously defined 'delays' including some for which, as breaches of contract on his part, the owner would prima facie be contractually, responsible, but then proceeds to provide that the extension of time so granted is to be the only right or remedy of the contractor and, whether expressly or by implication, that damages or compensation are not to be recoverable therefor. These 'no damage' clauses appear to have been primarily designed to protect the owner from late start or co-ordination claims due to other contractor delays which would otherwise arise. Such clauses originated in Federal Government contracts but are now adopted by private owners and expanded to over wider categories of breaches of contract by the owners in situations which it would be difficult to regard as other than oppressive and unreasonable. American jurisprudence developed so as to avoid the effect of such clauses and permitted the contractor to claim in four situations, namely, (i) where the delay is of a different kind from that contemplated by the clause, including extreme delay, (ii) where the delay amounts to abandonment, (iii) where the delay is a result of positive acts of interference by the owner, and (iv) bad faith. The first of the said four exceptions, has received considerable support from judicial pronouncements in England and Commonwealth. Not dissimilar principles have enabled some commonwealth courts to avoid the effect of 'no damage' clauses. (See Hudson, ibid) The finding of learned District Judge that delay in execution of work was caused due to non-performance of reciprocal part of contract by employer needs to be evaluated in this background. GCC only enables Appellant to ask for an extension on that account. Observations made by Hon'ble Apex Court in paragraph 15 (reproduced above) of its judgment therefore show that in certain circumstances Appellant may be entitled to claim compensation in spite of above-mentioned clauses in the GCC. Question whether Arbitral Tribunal therefore could have considered such claims is a pure question of law here when such circumstances are not put forth by Appellant. Arbitral Tribunal could not have taken cognizance of any claim which is against the terms and conditions of contract between parties and in present case, at least at this stage it can be said that 3 claims made by the Appellant could not have been looked into by Arbitral Tribunal & awarding damages or compensation therefor is void. When the claim is contrary to GCC, it is obvious that defence of exercise of option under Section 55 of Contract Act ought to have been raised by present Appellant before Arbitral Tribunal and in any case, there should have been the finding that termination or closer was in view of said Section & option. There is no such express mention by Appellant though he had such opportunity as there was threat by Respondent to invoke Clause 62 of GCC. His communication dated 22/11/1989 at Exhibit C-12 does not contain Page 0863 any such statement and his claim before Arbitral Tribunal also does not mention that he exercised option under Section 55 of Contract Act. He has stated that on 30/6/1989 he received letter for providing boulder drains when period of contract was already over and he therefore requested on 19/10/1989 that if said work was to be completed then extension should be granted up to 30/6/1990 on Railways account or else the Respondent should close the agreement by paying his dues. On 22/11/1989 he informed Respondent that he was no longer interested in carrying out the work & contract be treated as closed. Thereafter he received communication dated 30/11/1989 on 2/12/1989 mentioning that extension of time had been granted as requested by him vide letter dated 19/10/1989. According to Appellant said option of granting extension was not open after 22/11/1989 and in spite of this clarification, Respondent threatened of action under Clause 62 of GCC. He informed on 7/12/1989 that extension of contract period was amendment and could not have been done unilaterally and extension therefore did not bind him. He also requested for referring the matter to arbitration but no reference was made and his other contractors were used to pressurize him. According to him, contract was finally closed by him on 22/11/1989. It is obvious that he was entrusted with some work after contract period was over and he sought extension of time for it and then backed out. Thus in the face of express clauses in the GCC, it was essential for Appellant to expressly point out that contract had become voidable at his option and he exercised it. In any case it was essential for Arbitral Tribunal to record such finding before undertaking any further scrutiny of his entitlement. Arbitral Tribunal ought to have been more cautious in such matters where the public revenue & interest was at stake as Railways was not being effectively represented & defended.
10. It is settled position that the award of an Arbitrator Tribunal cannot be contrary to law and that which is not permissible in law cannot be granted in such proceedings or can not be approved by Courts because it was granted by ArbitratoRs. In "Oil and Natural Gas Corpn. Ltd. v. SAW Pipes Ltd.", Hon'ble Apex Court holds that if the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal and it could be interfered under Seciton 34. However, such failure of procedure should be patent affecting the rights of the parties. Hon'ble Court notices that while the English Act has, the Legislature in India has not incorporated exhaustive grounds for challenging the award passed by the Arbitral Tribunal or the ground on which appeal against the order of the Court would be maintainable. But in such cases, that cannot be reason to give narrower meaning to the term 'public policy of India.' Wider meaning is required to be given so as to prevent frustration of legislation and justice. It is further Page 0864 observed that it is wrong to contend that limited jurisdiction was given to the Court with the purpose to see that the disputes are resolved at the earliest by giving finality to the award passed by the forum chosen by the parties. For achieving the object of speedier disposal of dispute, justice in accordance with law cannot be sacrificed. Giving limited jurisdiction to the Court for having finality to the award and resolving the dispute by speedier method would be much more frustrated by permitting patently illegal award to operate. Hon'ble Apex Court declares that patently illegal award is required to be set at naught, otherwise it would promote injustice.
It is fortunately not necessary to explore more on this issue because of recent judgment of Division Bench of this Court. In 2007(8) LJS. 57 : 2007(6) Mah.L.J. 255 Pawan Hans Helicopters v. Associated Constructions, Division Bench of this Court observes:
12. In Steel Authority of India's case (supra), the contractor was required to complete the work within a period of two yeaRs. After the expiry of the period of two years, the contractor raised a claim of about Rs. 18 lakhs as damages for delay in handing over the work sites and allied reasons. Such a claim was put forth on 29-8-1979. Thereafter on 20-12-1980, a supplementary agreement was executed between the parties for the same work at the increased rate. Despite the fact that supplementary agreement was executed for the same work at the increased rate, the Steel Authority of India wrote a letter dated 3-9-1983 repudiating the claim of Rs. 18 lakhs on account of damages for any loss sustained by the contractor, which was claimed by him by his letter dated 29-8-1979. Thereafter disputes arose and the matter was referred to arbitration. The arbitrator gave award granting damages to the tune of Rs. 11,26,296/-and further sum of Rs. 12,06,000/ towards interest with further interest at the rate of 17%. The award was made the rule of the Court on 2-4-1990 with the modification for payment of interest at the rate of 8%. The appeal before the High Court failed and the matter was taken up before the Apex Court. Referring to Clauses 25, 32 and 39 of the agreement, the Apex Court held that the agreement specifically stipulated that no claim whatsoever for not giving the entire site for the work and for giving the site gradually would be tenable and the contractor was required to arrange his working programme accordingly and further that no failure or omission to carry out the provisions of the contract would give rise to any claim by the Corporation and the contractor, one against the other, if such failure or omission arises from compliance with any statute or regulation of the Government or other reasons beyond the control of either the Corporation or the contractor. Considering the facts which revealed necessary permission from the various departments as well as various other reasons which were beyond the control of the Corporation and as there was extension of time for completion of the work with the specific provision prohibiting grant of claim for damages, in those circumstances, it was held that:
Page 0865 It was not open to the arbitrator to ignore the said conditions which are binding on the contracting parties. By ignoring the same, he has acted beyond the jurisdiction conferred upon him. It is settled law that arbitrator derives the authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be arbitrary one.
It was further held that:
in cases where there is no question of interpretation of any term of the contract, but of solely reading the same as it is and still the arbitrator ignores it and awards the amount despite the prohibition in the agreement, the award would be arbitrary, capricious and without jurisdiction. Whether the arbitrator has acted beyond the terms of the contract or has travelled beyond his jurisdiction would depend upon facts, which however would be jurisdictional facts, and are required to be gone into by the Court. Arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error.
Practically entire case law on the point is considered by the Division Bench which further observes:
13. While delivering the said decision in Steel Authority of India's case, (Steel Authority of India Ltd. v. J.C. Budharaja, Government and Mining Contractor ) the Apex Court had referred to two of its earlier decisions -one in Continental Construction Co. Ltd. v. State of Madhya Pradesh and Anr. in H.P. State Electricity Board v. R.J. Shah and Company .
14. In Continental Construction Company's case (supra) (Continental Construction Co. Ltd. v. State of Madhya Pradesh ) the Apex Court has held that the clauses of the contract which stipulated that the contractor had to complete the work in spite of rise in prices of materials and also rise in labour charges at the rate stipulated in the contract, in those cases, the arbitrator could not allow the contractor's claim in contravention of those clauses. It was specifically held therein that it was not open to the contractor to claim extra costs towards the rise in prices of the material and labour and the arbitrator had misconducted himself in not deciding the specific objection regarding the legality of the extra claim. While holding so, it was specifically ruled that:
If no specific question of law is referred, the decision of the arbitrator on that question is not final however much it may be within his jurisdiction and indeed essential for him to decide the Page 0866 question incidentally. The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. The arbitrator is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not he can be set right by the Court provided his error appears on the fact of the award." (Emphasis supplied)
15. In R.J. Shah's case (supra) (H.P. State Electricity Board v. R.J. Shah and Company ) the Apex Court held that in order to find out whether the arbitrator has acted in excess of the jurisdiction, the Court may have to look into some documents including the contract. It was specifically held that: "In order to determine whether the arbitrator has acted in excess of jurisdiction what has to be seen is whether the claimant could raise a particular dispute or claim before the arbitrator. If the answer is in affirmative, then it is clear that arbitrator would have the jurisdiction to deal with such a claim. On the other hand if the arbitration clause or a specific term in the contract or the law does not permit or give the arbitrator the power to decide or to adjudicate on a dispute raised by the claimant or there is a specific bar to the raising of a particular dispute or claim, then any decision given by the Arbitrator in respect thereof would clearly be in excess of jurisdiction."
16. In Sri S.C. Roy's case (supra) (State of Orissa v. Sri S.C. Roy (dead) by LRs. JT 2001 (5) SC 267) the Apex Court, after taking note of the settled law on the point that in the absence of escalation clause in the arbitration agreement, the arbitrator would not be entitled to grant escalation charges in view of the decision in the matter of Secretary, Irrigation Department, Government of Orissa and ORs. v. G.C. Roy , held that once the agreement discloses no escalation clause and a specific objection is raised in that regard, the arbitrator cannot grant escalation charges.
17. As already seen above, Clause 34 of the agreement specifically prohibits the respondents from claiming any extra amount on account of fluctuation of prices. It specifically provides that the contractor shall be entitled for the contract price irrespective of any rise or fall in the prices. There being a clear contract against entitlement for escalation in the rates to the contractor, irrespective of fluctuation in the prices of the materials to be used for completion of the work contract as also labour charges, and a specific objection in relation to that claim having been raised before the arbitrator, it was not open to the arbitrator to grant escalation charges to the respondents.
Thereafter in paragraph 18, Division Bench notices Clauses 43.(1)(E) & 43.(1): of the agreement and concluded that:
Page 0867 Neither the award nor the impugned order refers to compliance of pre-requisites of Clause 43.(1)(E). Mere reference to Clause 43.(1)(E) cannot itself empower the arbitrator to award escalation charges.
In paragraph 25 Division Bench notices that "There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameter of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the records."
Applying this law laid down by the Apex Court to the facts of the case in hand, it is apparent that the arbitrator clearly travelled beyond the terms of the contract in relation to the claim made by the respondents for the escalation charges for the period after the expiry of the original period under the contract.
11. Controversy before me therefore stands fully covered by the above judgments. Neither Arbitral Tribunal has attempted to find out its jurisdiction in the face of above mentioned Clauses in GCC nor the Appellant made any such effort. In "Food Corporation of India v. Surendra, Devendra and Mahendra Transport Co." in para 7 Hon. Apex Court observes:
7. High Court issued a direction by order dated 16th June, 1988 referring the disputes for arbitration in terms of Clause XX. The matters which were excluded from the reference to the arbitrator therefore could not be referred to or decided by the arbitrator. Entrance of reference by the arbitrator on disputes which were excluded from reference and the adjudication thereupon would amount to exceeding in the exercise of the jurisdiction as held by this Court in Rajasthan State Mines and Minerals Ltd. case (Supra). Since there was a specific bar to the raising of a claim regarding transit, demurrage and wharfage charges, the award made by the arbitrator in respect thereof would be in excess of the jurisdiction.
Consequently the findings of Learned District Judge about Arbitral Tribunal exceeding jurisdiction in present matter calls for no interference. As major claims allowed in the Arbitral award are found to be unsustainable and beyond reach of arbitrators, the reduction in costs amount by Learned District Judge can not be faulted with. There is thus no merit in this Appeal and it stands dismissed without any order as to costs.