Andhra HC (Pre-Telangana)
Chairman Of The Board Of Trustees Of The ... vs Sri Gurucharan Singh And Anr. on 4 September, 2003
Equivalent citations: 2003(6)ALD562, 2004(1)ALT195, 2004(1)ARBLR319(AP)
Author: B. Sudershan Reddy
Bench: B. Sudershan Reddy
JUDGMENT P.S. Narayana, J.
1. The petitioner, Chairman of the Board of Trustees of the Port of Visakhapatnam Port Trust, Visakhapatnam, had filed the present O.P. under Section 30 of the Arbitration Act, 1940, hereinafter referred to as "Act" in short, praying for the relief to set aside the award dated 28-2-1991 made by Sri Gurucharan Singh, Umpire, 12, Palam Marg, Vasant Vihar, New Delhi 110057, shown as 1st respondent in the O.P., relating to the work of construction of land based works at Lova Gardens which is C-2 works and marine works and break water construction, which is C-3 works. The Contractor M/s. Continental Constructions Limited, Continental House, 28, Place, New Delhi 110018, is shown as 2nd respondent in the O.P.
2. The O.P. was filed in the matter of C.M.A. No.162/80 and C.M.A. No. 1189/82, The petitioner, no doubt, had raised several grounds in the main O.P. and also in the supplemental statement to the said O.P. on objections filed by M/s. Continental Construction Limited, the Contractor, hereinafter referred to as "2nd respondent" for the purpose of convenience. Reply also was filed to such objections raised by the 2nd respondent. Initially, the Counsel representing the respective parties - Sri K. Srinivasa Murthy, representing the petitioner, and Sri V. Rajagopal Reddy, representing the 2nd respondent-contesting party, had advanced arguments relating to the question of limitation and also the question relating to non-filing of an application by the 2nd respondent to make the award the rule of the Court. Subsequent thereto, the Counsel had advanced arguments relating to the merits and demerits of the matter. This Court had reserved the matter for judgment and subsequent thereto on verification of records found that certain grounds, though raised, were left untouched by both the Counsel while advancing arguments and hence the matter was again posted For Being Spoken and the respective Counsel again had reiterated that they confine to the submissions already made and they are not going to advance any further arguments in relation to the other grounds left untouched any further.
3. The petitioner had pleaded that the petitioner wanted to construct land based works at Lova Gardens, which is termed as C-2 works and also for marine work and break water construction, termed as C-3 works, in the Port of Visakhapatnam. It was further pleaded that the petitioner invited tenders for award of C-2 and C-3 contracts at Lova Gardens on 5-8-1970 and as against the tender notice the petitioner received five tenders for C-2 contract and two tenders for C-3 contract and the 2nd respondent is one of them. After accepting the tender of the 2nd respondent, the contract was awarded to the 2nd respondent and the letter of intent was issued on 7-5-1971 and subsequently the agreement was executed on 15-5-1971. The schedule period for completion of C-2 work was 148 weeks and C-2 works was 156 weeks. M/s. Howe India Private Limited, Consulting Engineers, New Delhi, were constituted as Engineers under the said contracts. Clause 44 of the contract provides for extension of time and stipulates that should the amount of extra work or other special circumstances of any kind whatsoever which may occur, shall fairly entitle the contractor for extension of time for completion of the work and the Engineer shall determine the amount of such extension. On application of the 2nd for grant of extension of the completion period, the Engineer, under Clause 44 of the General Conditions of the Contract, granted two extensions for completion of C-2 and C-3 works upto 30-9-1975 by letters dated 16-12-1974 and 30-12-1975. On the grant of such extensions of time, the 2nd respondent by his letter dated 29-7-1976 preferred a claim with the Engineer for payment of extra over-head and additional expenses to a tune of Rs. 2,43,10,961-60 incurred by them in execution of C-2 and C-3 works beyond the original completion dates. The 2nd respondent requested the Engineer to certify the said amount payable under the General Conditions of the Contract to enable the petitioner to make payments thereto to the 2nd respondent. In reply to the said claim, the Engineer vide his letter dated 2-11-1976 addressed to the Chief Engineer of the petitioner, stated that they are of the opinion that for an experienced contractor it was not possible to foresee in advance the circumstances of delay and therefore there seems some ground for paying compensation to the 2nd respondent. It was further stated by the Engineer that he was not in a position to verify the details of the additional overhead expenses incurred by the 2nd respondent and suggested that the matter be discussed between the petitioner and the 2nd respondent and the quantum of compensation be decided to the mutual satisfaction. In further reply dated 27-1-1977, the Engineer stated that he was not in a position to verify the additional overhead expenses incurred by the 2nd respondent beyond the original completion date and suggested that the matter regarding quantum of compensation may be discussed between the parties and decided to mutual satisfaction. It was pleaded that the letters dated 241-1976 and 27-1-1977 do not constitute a decision of the Engineer within the meaning of Clause 67 of the contract. It was further stated that by a letter dated 25-1-1978, the petitioner intimated the 2nd respondent that nothing was payable under the terms of the contract. Being dissatisfied by the said rejection of the claim made by the 2nd respondent, the arbitration clause was invoked and for the determination of the amount payable to the 2nd respondent, one Sri J.S. Grewal, S-288, Panchishila Park, New Delhi, was appointed as their arbitrator and the petitioner was called upon to nominate and appoint its Arbitrator within 15 days, failing which the Arbitrator appointed by the 2nd respondent should act as the sole Arbitrator. It was further pleaded that there is no dispute referable to arbitration as specified under Clause 67 of the conditions of the contract inasmuch as there was no decision by the Engineer. It was further stated that at no point of time, the matter was referred to the decision of the Engineer and hence the very nomination of the Arbitrator is not valid.
4. It was further pleaded that though there is no dispute referable to arbitration, the 2nd respondent nominated the Arbitrator and the petitioner had not taken steps to appoint an Arbitrator and consequent thereupon he was declared as the sole Arbitrator. The 2nd respondent filed suit O.S. No. 253/78 on the file of Additional Subordinate Judge, Visakhapatnam praying for confirmation of Sri J.S. Grewal as the sole Arbitrator or to nominate and appoint a second Arbitrator or for appointment of an Arbitrator by the Court and the learned Subordinate Judge had confirmed the appointment of Sri J.S. Grewal as the sole Arbitrator and aggrieved by the same, the petitioner moved C.M.A. Nos. 162/80 and 1189/82 and the Division Bench of this Court by an order dated 19-3-1987 had disposed of the C.M.As. stating that it was brought to their notice that Sri J.S. Grewal who was appointed as the sole Arbitrator died in 1980 and hence it was not necessary for them to go into the merits of the Appeals and in view of the changed circumstances as provided under the Act, each party is directed to name its Arbitrator within 15 days from the date of the order and the Arbitrator so appointed shall pass an award after hearing both the sides within six months. It was also pleaded that in pursuance of the said order, the parties appointed their own Arbitrators and the Arbitrators in turn, the Umpire. The case was heard by the Arbitrators and in view of the difference of opinion, the matter was referred to the Umpire and the Umpire by an award dated 28-2-1991 granted Rs. 2,09,81,211/- in favour of the 2nd respondent. The petitioner had made a written request to the Umpire to file the award in the Court of Subordinate Judge, Visakhapatnam to enable them to challenge the same, but however, the Umpire had chosen to file the award before this Court as can be seen from the letter dated 21-4-1991. In pursuance of the filing of the award by the Umpire, this Court issued notice in the aforesaid C.M.As. to show-cause why the award dated 28-2-1991 passed by the Umpire should not be made the rule of the Court.
5. It was also further pleaded that the award made by the Umpire and filed into the Court is without jurisdiction and several contentions raised by the petitioner had not been considered and several documents also had not been taking into consideration and the decisions cited also had not been dealt with and all these will definitely constitute error apparent on the face of the record. It was also pleaded that reasons based on surmises and conjectures and thus the award is unsustainable. It was also pleaded that seven claims already had been made by the 2nd respondent and the arbitration awards were made in relation to the disputes and hence again this dispute cannot be re-agitated in view of the bar under Order 2, Rule 2 of the Code of Civil Procedure. It was also pleaded that the present award is barred by res judicata and at any rate the 2nd respondent is estopped from contending otherwise not having included these claims while making the prior claims.
6. It was also pleaded that the present claim of the 2nd respondent cannot be sustained in view of Section 120 of Madras Port Trusts Act. It was also further pleaded that in view of the letter dated 3-3-1978 it is clear that the claim is not arbitrable at all since there is no decision by the Engineer within the meaning of Clause 67 of the contract. It was also further pleaded that awarding the same under Clause 12(2) of the contract itself cannot be sustained in the light of Sections 73 and 74 of the Indian Contract Act. Several details had been furnished to point out that the very approach of the Umpire is not correct approach and the award is perverse and unsustainable. It was pleaded that the Umpire had granted relief under Clause 12(2) of the contract as additional expenses, which was beyond the claim. Thus it was stated that the Umpire had not assigned any reasons while allowing the claim and making the award and the same will constitute misconduct on the part of the Umpire and thus the award is vitiated in view of the errors pointed out apparent on the face of the record.
7. In the supplemental statement, several additional technical grounds had been raised explaining how the method adopted by the Arbitrator cannot be sustained at all.
8. The 2nd respondent had raised objections denying all the allegations and explaining in detail all the events which had happened and the circumstances which had paved the way for the appointment of Arbitrators, the Umpire and the making of the award. The 2nd respondent also had raised all the grounds by way of objections and had taken a stand that none of the grounds specified under Section 30 of the Act are attracted and hence the 2nd respondent is entitled to the relief of making the award the rule of the Court.
9. Again, to the objections raised by the 2nd respondent, the petitioner filed a reply almost reiterating the stand taken by the petitioner in the main O.P. and also taking a specific stand that the dispute does not fall within the meaning of Clause 67 of the contract and hence the dispute itself is not arbitrable and in view of the same there is no question of the Arbitrators or the Umpire making the award at all under the provisions of the Act.
10. Before touching the merits and demerits of the case, two important questions were raised by way of preliminary objections and initially both the Counsel had addressed elaborate arguments on the following questions:
1. Whether the O.P. is filed within the period of limitation ?
2. Whether a separate application needs to be filed by making the award the rule of the Court?
After advancing elaborate arguments on the aforesaid questions, the learned Counsel had advanced arguments in relation to the merits and demerits of the matter. As already referred to supra, certain of the grounds though raised were left untouched by both the parties and hence this Court is deciding the matter on the strength of the respective contentions advanced by both the Counsel only.
11. Sri K. Srinivasa Murthy, the learned Counsel representing the petitioner, in a systematic way had made the following submissions. The learned Counsel with all emphasis had contended that the Umpire had made the award on 28-2-1991 and had sent the award to the parties on 7-3-1991 and the petitioner received the award of the Umpire, a copy of which was filed before this Court on 9-3-1991, and on 25-3-1991 the Umpire had sent the award reports. The learned Counsel also while pointing out the other dates had submitted that on 2-4-1991 the Umpire filed the award before this Court and had informed the petitioner and the 2nd respondent about the filing of the award and on 5-7-1991 this Court had issued notice to the party which was served on the party on 5-8-1991 and the petitioner filed objection under Section 30 of the Act to set aside the award on 13-8-1991 and hence the same is within limitation since the limitation will begin to run from 5-8-1991 only. The learned Counsel also had submitted that under Article 119(b) of the Limitation Act, 1963, for setting aside the award, 30 days time has to be reckoned from the date of service of notice of the filing of the award. The learned Counsel also had pointed out that no application had been submitted by the 2nd respondent for making the award the rule of the Court. The learned Counsel also had drawn our attention to Sections 14(2), 15, 16, 17, 30 and 33 of the Act and had explained in detail the scope, ambit and object of the different provisions of the Act. The learned Counsel had placed reliance on several decisions in this regard. Elaborating his submissions touching the merits of the matter, the learned Counsel initially commented that the reasons recorded by the Arbitrator arc totally unsustainable and hence they cannot be styled as reasons at all in the eye of law. The learned Counsel also would maintain that when the Umpire had proceeded to record the reasons, the reasons must be reasons in the eye of law. Otherwise, they are no reasons at all and in this view of the matter, the award is vitiated. The learned Counsel also had pointed out the claim statement and the disputes raised and had specified that though C-7 is not the subject-matter of the dispute, the same was referred to along with C-2 and C-3 also in the notes. The learned Counsel also had pointed out the reasons adopted and the submissions made by the parties. The learned Counsel commented that certain observations, like, the contractor had not earned much profit etc., are irrelevant and hence such observations by the Arbitrator definitely will vitiate the award. The learned Counsel had thoroughly taken us through the reasons recorded and had pointed out that the Umpire definitely had travelled beyond the claim. No doubt, the learned Counsel also had commented that it is clear from the findings and the observations made by the Umpire that the Umpire had definitely exceeded the jurisdiction though there was no justification at all made by the Engineer so as to attract Clause 67 of the contract. The learned Counsel had made a serious attempt to explain that at any rate the award cannot be said to be a reasoned award at all since the reasons, if any, are totally unsustainable and the learned Counsel also had made an attempt to contend that there is no arbitrable dispute at all between the parties and hence the 2nd respondent is not entitled to any relief. Certain decisions also were relied upon explaining the scope and ambit of Section 30 of the Act.
12. Per contra, Sri V. Rajagopal Reddy, the learned Counsel representing the 2nd respondent/contractor who had raised the question of limitation as the foremost preliminary objection, had made elaborate submissions on the first question and had contended that the present O.P. is clearly barred by limitation. The learned Counsel also had pointed out to the respective dates and had made an attempt to explain how the O.P. cannot be said to be within the period of limitation. The learned Counsel had pointed out that the office had taken an objection when the O.P. was presented under Section 30 of the Act on 13-8-1991. The learned Counsel pointed out that though the office had raised an objection and though at the earliest point of time the objection was raised on the question of limitation, even in the supplemental grounds the petitioner was unable to explain how the O.P. is within limitation. The learned Counsel also contended that the notice of filing of the award was given on 5-7-1991 and the Counsel for the petitioner is having ample knowledge about the same and hence the period of 30 days should be reckoned from 5-74991 and the O.P. was filed on 13-8-1991 which is beyond the period of 30 days from the date of notice of the filing of the award. The learned Counsel had placed reliance on several decisions in this regard. While making further submissions, the learned Counsel pointed out that whether an application is made to make the award the rule of the Court or not, when once there are no grounds to set aside the award, the only resultant consequence would be to make the award the rule of the Court. No separate independent application need be filed in this regard. The learned Counsel also had placed reliance on certain decisions to convince the Court that a separate application praying for such relief need not be filed.
13. After addressing the arguments on preliminary questions (1) and (2) referred to supra, the learned Counsel had taken us through the relevant portions of the award where reasons had been recorded. The learned Counsel also would contend that the jurisdiction of this Court and the scope of interference under Section 30 of the Act is very limited and even if two views are possible on the reasons recorded by an Arbitrator or an Umpire, this Court should be reluctant to interfere in view of the limitations imposed in exercise of jurisdiction by this Court in interfering with the awards made by the Umpire or the Arbitrator under the provisions of the Act. The learned Counsel also had drawn our attention to the dispute between the parties and had explained that it is a referable dispute and in fact convincing reasons had been recorded in this regard and in pursuance of the direction of the Division Bench when the appointment had been made and when an award was made by the Umpire, now the petitioner cannot be permitted to go far beyond the order already made by the Division Bench and again raise the same contentions. While concluding his submissions, the learned Counsel had contended that the Umpire had not gone beyond the reference and the Umpire was the Member of Central Water Commission and Ex-Officio Additional Secretary to Government of India and was former Chief Engineer, Visakhapatnam Outer Harbour Project (A.P.). The learned Counsel also commented that as can be seen from the record, sufficient opportunity was given - about 16 hearings were held and elaborate submissions were made by both the parties, and an award in detail was made. The learned Counsel concluded that in view of the limitations in exercise of jurisdiction under Section 30 of the Act, this Court need not interfere with the award questioned in the present O.P. The learned Counsel had drawn our attention to several decisions explaining the scope and ambit of interference by the Court under Section 30 of the Act.
14. Heard both the Counsel and perused the material available on record.
15. The dispute, designated as Arbitration Case No. 54, is as shown hereunder:
(i) Civil Works Contract No. C-2 Entitled 'Land Based Works at Lova Garden:
(a) Amount of contract : Rs. 11.11 Crores
(b) Scheduled date of completion: 7.3.1974
(ii) Civil Works Contract No. C-3. Entitled 'Marine Works and Break Water Construction:
(a) Amount of contract : Rs. 7.36 Crores
(b) Scheduled date of completion : 3.5.1974 The basis of the claim by the 2nd respondent in short is to avoid paying heavy liquidated damages to the petitioner as stipulated in the contracts C-2 and C-3 arising out of any default on the part of the 2nd respondent. The 2nd respondent made more than adequate arrangements to meet the scheduled dates of completion of the contracts. The equipment purchased and deployed was more than double indicated in the contracts. In view of the failure on the part of the petitioner to meet the legal and contractual obligations, the 2nd respondent was unable to complete the contracts by the stipulated dates. The said failure on the part of the petitioner and the other factors which were unforeseen were placed before the Engineer who was the competent authority under the contracts who had extended the date of completion of the contracts to 30-9-1975. The said extension was given without levy of liquidated damages which were obligatory on the part of the petitioner to levy under the contract if extension to complete the contracts had been necessitated on account of any default on the part of the 2nd respondent. It is stated though the petitioner made repeated demands to the Engineer to levy liquidated damages under the contracts C-2 and C-3, the same was not accepted and the Engineer had accepted the claim of the 2nd respondent under the terms of the contract and in response to the decision of the Engineer, the petitioner carried out verification of the amounting to Rs. 2.43 crores by sending a specialist team to the 2nd respondent's office at Delhi. In view of the same, the 2nd respondent claimed an amount of Rs. 2.43 crores + interest, and also the costs.
16. The petitioner herein with all vehemence had opposed the claim of the 2nd respondent. It was stated by the petitioner that the 2nd respondent never suffered any loss whatsoever and the same is evident from the very fact that the 2nd respondent's claim for Rs. 2.43 crores is in relation to the period from October, 1971 to May, 1974 and for the first time they gave notice of their intention to make their claim on 10-1-1976 and the claim was made on 29-7-1976. The petitioner also had taken a stand that the Engineer never gave any decision and hence there is no arbitrable dispute at all within the meaning of Clause 67. Several other reasons also had been explained by the petitioner and ultimately the petitioner had taken a stand that the claim is liable to be rejected being frivolous one.
17. Clause 67 of the General Conditions of the Contracts C-2 and C-3 relating to settlement of disputes by Arbitration reads as hereunder:
"If any dispute or differences of any kind whatsoever shall arise between the Board or the Engineer and the Contractor in connection with or arising out of the contract or carrying out of works (whether during the progress of the works, after the termination, abandonment or breach of contract) it shall in the first place be referred to and settled by the Engineer who within a period of 90 days after being requested by either party to do so shall give written notice of his decision to the Board and the contractor."
On the strength of the claim, as already referred to supra, after correspondence, the 2nd respondent filed O.S. No. 253/78 for confirming Sri J.S. Grewal, as the sole Arbitrator and since the relief was granted, the matter was carried by way of C.M.A. Nos. 162/80 and 1189/82 and the Division Bench by the order dated 19-3-1987 taking into consideration the death of the sole Arbitrator in 1980 directed the parties to name its Arbitrator within 15 days and the Arbitrator shall pass an award after hearing both the sides within six months. In pursuance of the said direction, Arbitrators were appointed and in view of the difference, the matter was referred to the Umpire who made the award on 28-2-1991. The Umpire had sent the award to the parties on 7-3-1991. The petitioner received the award of the Umpire, copy of which was filed before this Court on 9-3-1991 and no doubt the petitioner requested the Umpire to file the award before the learned Subordinate Judge, Visakhapamam, but the Umpire had sent the award reports on 25-3-1991 and on 2-4-1991 the Umpire filed the award before this Court and informed the petitioner and the 2nd respondent about the filing of the award and on 5-7-1991 the notice was ordered to the party which was served on 5-8-1991 and the present O.P. was filed under Section 30 of the Act to set aside the award on 13-8-1991.
18. Question No. 1: The first preliminary question raised is the question of limitation i.e., Whether the O.P. is filed within the period of limitation? The facts which had ultimately led to the filing of the O.P. in detail had been narrated supra. The specific stand taken by the 2nd respondent is that the notice was dated 5-7-1991 and the O.P. was filed on 13-8-1991 which is beyond the period of limitation in view of Article 119(b) of the Limitation Act, 1963. The limitation to present the O.P. under Section 30 of the Act, according to the learned Counsel for the 2nd respondent, commences from 5-7-1991 itself. The stand taken by the petitioner is that mere presence of the "Counsel is of no consequence and when the Court thought of issuing notice, the date of service of notice on the party should be the date of reckoning for the purpose of limitation and the date of service of notice being 5-8-1991, the O.P. filed on 13-8-1991, is within 30 days and hence perfectly it is within limitation. This is the initial principal question between the parties on which elaborate submissions were made and several decisions were cited in this regard. In Managing Director, Central Ware Housing Corporation, New Delhi and Ors. v. K. Venkateswara Rao and another, 1989 (1) ALT 528, it was held by this Court at para 6, as follows:
"Sri Suryanarayana the learned Counsel for the 1st respondent, cited the decision of the Supreme Court in Nilakantha v. Kashinath in support of his contention that oral intimation of filing of award to the advocate of a party is "service of notice" within the meaning of Section 14(2) of the Act and Section 19 of the Limitation Act. In that case, after the award was filed by the arbitrator in the Court on February 18, 1948, the Court adjourned the case "for parties' say to the arbitrator's report" to March 22, 1948. Before that date, an application was filed on March 16, 1948 seeking permission to inspect the documents and to grant time for filing the objections which were filed on April 2, 1948. The award was made rule of the Court on August 24, 1949. It was urged that no notice or intimation was issued by the Court to the appellant or his guardian intimating that the award has been filed in the Court, therefore, the limitation for filing an application to set aside the award never began to run against him. It was not disputed that no formal notice was issued to the appellant therein. But it was contended that the limitation started running from February 21, 1948 when the case was adjourned by the Court for "parties" say to the arbitrator's report" in the presence of the advocates of the parties. The Supreme Court holding that notice to the Counsel of the filing of the award amounts to notice to the party, observed -
"We are of opinion that the expression 'give notice' in Sub-section (2) of Section 14 simply means giving intimation of the filing of the award which certainly was given to the parties through their pleaders on February 21, 1948. Notice to the pleader is notice to the party. In view of Rule 5 of Order III Civil Procedure Code, which provides that, any process served on the pleader of any party shall be presumed to be duly communicated and made known to the party whom the pleader represents and, unless the Court otherwise directs shall be as effectual for all purposes as if the same had been given to or served on the party in person".
The Supreme Court further observed that to consider the expression 'date of service' of notice as meaning only a written notice served formally on the party to be affected, will leave the door open to that party, even though with full knowledge of the filing of the award, he has taken part in the subsequent proceedings, to challenge the decree based upon the award at any time upon the ground that for want of a proper notice his right to object to the filing of the award had not accrued. Such a result would stultify the whole object which underlies the process of arbitration the speedy decision of a dispute by a Tribunal chosen by the parties."
The next decision relied upon by the learned Counsel is R.D. Gupta v. Union of India, AIR 1970 Assam and Nagaland 35. In this case, a Division Bench of the Assam and Nagaland High Court held that though under Section 14(2) of the Act a formal notice is not necessary and a verbal notice may be enough, yet knowledge of lawyer cannot be deemed to be notice within the meaning of the said section, unless the lawyer has been authorized by party to receive such a notice. From a perusal of the said decision, it appears that the judgment of the Supreme Court in Nilakanthas v. Kashinath case (supra) was not cited before the Court. In that case on the award being on 26-5-1966, the Court passed the following order:
"Arbitrator filed the award along with the record of proceedings and his bill amounting to Rs. 7,163/- Issue notice on the parties fixing 14-7-1966".
This was shown to the Government Pleader who wrote "seen" and signed. Subsequently the notice of filing of the award was served on the Government on 30-5-1966. The Government filed application to set aside the award on 30-5-1966. Here it would be relevant to note that then the matter was taken to the Supreme Court in subsequent stage of the proceedings R.D. Guptha v. Union of India it was contended that endorsement of the advocate "seen" and his signing on the proceedings of the Court dated May 26, 1966 amounted to service of notice under Section 14(2) of the Act and therefore the application filed to set aside the award on June 27, 1966 must be held to be barred by limitation. The Supreme Court while holding that the notice need not be in writing declined to accept the said contention and observed:
"All that Mr. Changakakoti was told was that a written notice of the filing of the award will be given to the Government though he had come to know that the award had been filed into Court. Under the circumstances we are unable to hold that the information given to Mr. Changakakoti amounted to a notice under Section 14(2) of the Arbitration Act".
.........
From the above narration of the facts, it is clear that the appellant had knowledge of the filing of the award by the arbitrator in the Court. Therefore, it cannot be said that the appellant did not have notice of the award within the meaning of Section 14(2) of the Act. In my view, therefore, the non-filing of the application by the appellant to set aside the award is not the consequence of non-service of the notice, so it cannot be contended that the appellant was denied the opportunity of filing the application for setting aside the award. In the absence of an application to set aside the award it is futile to contend that the Trial Court refused to set aside the award".
Article 119(b) of the Limitation Act, 1963, reads as hereunder:
Description of Appeal Period of Limitation Time from which period begins to run For setting aside anaward or getting an award remitted far reconsideration.
Thirty days The date of service of notice of the filing of the award.
The question which falls for consideration is how to compute the period of limitation of 30 days of filing the application for setting aside the award from the "date of service of notice of filing of the award". In Nilkantha Sidramappa Ningashetti v. Kashinath Somanna Ningashetti, , the Apex Court held:
"Sub-section (1) of Section 14 of the Arbitration Act, 1940 (X of 1940) requires the arbitrators or Umpire to give notice in writing to the parties of the making and signing of the award. Sub-section (2) of that section requires the Court, after the filing of the award, to give notice to the parties of the filing of the award. The difference in the provisions of the two sub-sections with respect to the giving of notice is significant and indicates clearly that the notice which the Court is to give to the parties of the filing of the award need not be a notice in writing. The notice can be given orally. No question of the service of the notice in the formal way of delivering the notice or tendering it to the party can arise in the case of a notice given orally. The communication of the information that an award has been filed is sufficient compliance with the requirements of Sub-section (2) of Section 14 with respect to the giving of the notice to the parties concerned about the filing of the award. 'Notice' does not necessarily mean 'communication in writing'. 'Notice', according to the Oxford Concise Dictionary, means 'intimation, intelligence, warning' and has this meaning in expressions like 'give notice, have notice' and it also means 'formal intimation of something, or instructions to do something' and has such a meaning in expressions like 'notice to quit, till further notice'. We are of opinion that the expression 'give notice' in Sub-section (2) of Section 14, simply means giving intimation of the filing of the award, which certainly was given to the parties through their pleaders on 21-2-1948. Notice to the pleader is notice to the party, in view of Rule 5 of Order III, Civil Procedure Code, which provides that any process served on the pleader of any party shall be presumed to be duly communicated and made known to the party whom the pleader represents and, unless the Court otherwise directs, shall be as effectual for all purposes as if the same had been given to or served on the party in person."
In Union of India and Ors. v. Aradhana Trading Company and Ors., 2002 (3) LRI 113, the Apex Court held at paras 12 and 15 as follows:
"Learned Counsel for the respondents has placed reliance upon a decision - Neelakantha Shidramappa Ningashetti v. Kashinath Somanna Ningashetti and Ors. It is a decision by a Bench of four Judges. The parties know about the filing of the award in the Court and on the date fixed the case was adjourned for 'the parties' say to the arbitrator's report'. No notice in writing was issued by the Court of the filing of the award or objections thereto. The objections were filed late beyond the time prescribed by limitation. The Court made the award rule of the Court. The plea which was taken was that the period of limitation would start from the date of service in writing of filing of the award. Such a contention was not accepted by the Court and it was held that notice in writing was not necessary as the information to the parties of the award having been filed and date adjourned for their say to the arbitrator's report was sufficient notice. It was held that award was not liable to be set aside and no appeal was maintainable under Section 39(1)(vi) of the Arbitration Act. In State of West Bengal v. Gourangalal Chatterjee the appeal under Section 39 was held to be not maintainable against an order passed by the Single Judge appointing a new arbitrator since the order was not covered under any of the clauses of Section 39 nor even letters patent appeal was held to be maintainable. In Union of India v. Mohindra Supply Co. , a decision by a Bench of four Judges held that Section 39 applies to the appeals to superior Courts as well as to intra-Court against the decree passed in terms of the award but against the order passed in appeal, a letters patent appeal was held to be barred under Sub-section (2) of Section 39 of the Arbitration Act according to which no second appeal lies against an order passed under Section 39(1) of the Act. It was further held that in view of the said provision, appeal under Section 100 CPC was also prohibited. We, however, find that so far as this case is concerned, it stands on a different footing since in the present case it is not a further appeal or a second appeal but an appeal against an order passed by the learned Single Judge under Order IX, Rule 13 CPC. It would however be relevant for the purpose that restriction on appeal under Section 39 of the Arbitration Act shall be applicable to appeals under any provision of law, may be CPC or letters patent".
"So far the question as to whether the order passed by the learned Single Judge rejecting the application for recalling setting aside ex parte order dated 27 January, 1998 is concerned, it cannot be treated as an order refusing to set aside the award. This position would stand covered by the decision in the case of Neelakantha Shidramappa Ningashetti as it has been held if there was no objection before the Court for setting aside the award, no question of refusal to set it aside could arise. Hence no appeal under Section 39(1)(vi) of the Arbitration Act would be maintainable. The ground of challenge of the award was that the limitation to file the objection was to run with effect from the date of service of a written notice for filing of the objection which contention was repelled by the Bench consisting of four Judges holding that the knowledge of the appellant of the award having been filed and time allowed to file objections was sufficient notice. In the present case also it is to be found that no objections to the award had been filed despite due notice and nor even subsequently while Counsel is said to have been attending the Court on two dates fixed in the case. In this view of the matter it would not be necessary to go into other aspect of the matter or the view taken in some other cases as referred to in the earlier part of the judgment. Some cases, a reference of which has been made earlier relate to the question of maintainability of a second appeal in letters patent against the appellate order passed under Section 39(1) of the Arbitration Act as in the case of Mohindra Supply Company where the Bench of four Judges held that in view of Clause (2) of Section 39 of the Arbitration Act, an appeal against an appellate order under the letters patent was not maintainable. The restriction to appeal contained under Sub-section (2) of Section 39 was applicable to letters patent. So restriction contained under Sub-section (1) of Section 39 of Arbitration Act shall also be applicable."
In East India Hotels Limited v. Agra Development Authority, , the Apex Court at paras 9, 10, 11 and 12 observed:
"From a perusal of the above provision, shorn of unnecessary details, it is clear that notice under Sub-section (2) of Section 14 of the Act need not be in writing and that it can also be oral. What is essential is that there must be service of notice or intimation or communication of the filing of the Award to the parties, mode of service of such a notice being immaterial. But such information, communication and knowledge must be by or pursuant to order of the Court. However, after filing of an Award by the Arbitrator or the Umpire in the Court, if it merely records the presence of the parties or their Counsel but does not indicate mat notice of filing of the Award be given to the parties, no service of notice can be attributed from that fact, as notice must be referable to an act of the Court.
Now we shall refer to the cases cited by the learned Counsel. In Nilkantha Shidramappa Ningashetti v. Kashinath Somanna Ningashetti and Ors., 1962 (5) SCC 400, a four Judges Bench while considering Sub-section (2) of Section 14 of the Act held as follows:
"Sub-section (1) of Section 14 of the Arbitration Act, 1940 (X of 1940) requires the Arbitrators or Umpire to give notice in writing to the parties of the making and signing of the Award. Sub-section (2) of that section requires the Court, after the filing of the Award, to give notice to the parties of the filing of the Award. The difference in the provisions of the two sub-sections with respect to the giving of notice is significant and indicates clearly that the notice which the Court is to give to the parties of the filing of the Award need not be a notice in writing. The notice can be given orally. No question of the service of the notice in the formal way of delivering the notice or tendering it to the party can arise in the case of a notice given orally. The communication of the information that an Award has been filed, is sufficient compliance with the requirements of Sub-section (2) of Section 14 with respect to the giving of the notice to the parties concerned about the filing of the Award. 'Notice' does not necessarily mean 'communication in writing'. 'Notice', according to the Oxford Concise Dictionary, means 'intimation, intelligence, warning' and has this meaning in expressions like 'give notice, have notice' and it also means 'formal intimation of something, or instructions to do something' and has such a meaning in expressions like 'notice to quit, till further notice'. We are of opinion that the expression 'give notice' in Sub-section (2) of Section 14, simply means giving intimation of the filing of the Award, which certainly was given to the parties through their pleaders on 21-2-1948. Notice to the pleader is notice to the party, in view of Rule 5 of Order 3, Civil Procedure Code, which provides that any process served on the pleader of any party shall be presumed to be duly communicated and made known to the party whom the pleader represents and, unless the Court otherwise directs, shall be as effectual for all purposes as if the same had been given to or served on the party in person."
"In Secretary to Government of Karnataka and Anr. v. V. Harishbabu, , this Court had occasion to consider again Sub-section (2) of Section 14 of the Act, the Bench noticed the judgment passed in Nilkantha Shidramappa Ningashetti v. Kashinath Somanna Ningashetti and Ors. (supra) and held that notice under Sub-section (2) of Section 14 of the Act need not be in writing and it might be oral and there should be no formal mode of service; what is essential is that notice or intimation or communication of the filing of the Award must be issued by the Court to the parties and served upon the parties. The dictum in these cases support the view, we have expressed.
On 13-11-1998 the Trial Court recorded the fact of filing of the Award by the Umpire and directed that learned Counsel for the parties be informed. This order was duly noted by the Counsel for both the parties. In our opinion the essential requirement of Sub-section (2) of Section 14 was duly complied with inasmuch as intimation of filing the Award to the parties was communicated. As notice to the Counsel is notice to the party, the above order dated 13-11-1998 together with the endorsement of the Advocate on the proceeding sheet would amount to a proper and valid service of notice under Sub-section (2) of Section 14 of the Act. We have already mentioned that as per the direction of the Court, Umpire also filed the record. We, accordingly hold that order dated 13-11-1998 which was noted by the learned Counsel, would amount to a valid notice under Sub-section (2) of Section 14. We, therefore, need not consider the alternative arguments of Dr. Singhvi."
In Secretary to Government of Karnataka v. V. Harishbabu, , the Apex Court at paras 13 and 14 observed:
"A four-Judges bench of this Court in Nilkantha Shidramappa Ningashetti v. Kashinath Somanna Ningashetti, while considering the requirements of service of notice under Section 14 of the Act opined:
"Sub-section (1) of Section 14 of the Arbitration Act, 1940 (Act X of 1940 requires the arbitrators or umpire to give notice in writing to the parties of the making and signing of the award. Sub-section (2) of that section requires the Court, after the filing of the award, to give notice to the parties of the filing of the award. The difference in the provisions of the two Sub-sections with respect to the giving of notice is significant and indicates clearly that the notice which the Court is to give to the parties of the filing of the award need not be a notice in writing. The notice can be given orally. No question of the service of the notice in the formal way of delivering the notice or tendering it to the party can arise in the case of a notice given orally. The communication of the information that an award has been filed is sufficient compliance with the requirements of Sub-section (2) of Section 14 with respect to the giving of the notice to the parties concerned about the filing of the award. 'Notice' does not necessarily mean 'communication in writing'.
In view of the settled law and our discussion above, our answer to the question posed in the opening part of the judgment is that the period of limitation for filing objections seeking the setting aside of an arbitration award commences from the date of service of the notice issued by the Court upon the parties regarding the filing of the award under Section 14(2) of the Act. Such a notice need not be in writing but what is essential is that the notice or intimation or communication of the filing of the award must be issued by the Court to the parties and served upon the parties concerned. Date of service of a notice issued by the arbitrator under Section 14(1) of the Act or the date of obtaining an endorsement on the award by the arbitrator from the party concerned is irrelevant for determining the question of limitation for filing objections under Article 119(b) of the Limitation Act, 1963."
In Bharat Coking Coal Limited v. C.K. Ahuja and Anr., (1995) Supp. (1) SCC 774; the Apex Court at paras 4 and 6 observed :
"The said applications under Sections 14(2), 17 and 29 of the Indian Arbitration Act have been numbered as IAs Nos. 9-12 of 1994 in Civil Nos. 3882-85 of 1990. At the hearing of the said applications, learned Counsel appearing for M/s Bharat Coking Coal Ltd. has contended that as the award was not filed and signed in proper manner, the same should not be taken into consideration. It was also contended that the copy of the award was required to be supplied to the parties and since copy of the award was not given to M/s Bharat Coking Coal Ltd., the question of filing objections did not arise. It was als6 contended that the said award was not filed in proper Court. Accordingly, there was no question of limitation running from the date of filing the award. In support of the contention that there will be no question of limitation if the award is not filed in proper Court reliance is made to a decision of this Court in State of M.P. v. Saith and Skelton (P) Ltd. . It may be stated here that the learned Counsel for M/s. Bharat Coking Coal Ltd. took inspection of the award on 3-10-1994 but the objection to the award was not filed within thirty days from such inspection. Disputing the said contentions, Mr. Bhandare, the learned Counsel appearing for M/s. C.K. Ahuja and another, has contended that the reference to arbitration has been made by this Court on the prayer of the parties. Accordingly, the arbitration proceedings have originated in this Court. Therefore the award is required to be filed before this Court. Consequently, the objection if any to the award is also required to be filed before this Court. He has also submitted that at no point of time, any objection was raised by M/s. Bharat Coking Coal Ltd. about the alleged impropriety in filing the award before this Court even though the notice of the Counsel was drawn about filing of the award in April, 1994. Even in the petition of objection filed before this Court, no objection has been taken by M/s. Bharat Coking Coal Ltd. that the award should not have been filed before this Court. Accordingly, such contention should not be allowed to be raised at the hearing of these applications. Mr. Bhandare has also contended that when the award has been filed in the Court and the attention of the learned Counsel for the parties drawn by the Registry of this Court about the filing of the award, the period of limitation for filing objection to such award will run from the date of the notice. Although on the prayer of the learned Counsel for the objector, a fresh notice was issued later on, the limitation for filing objection to the award cannot be counted from the date of such notice issued subsequently by this Court at the instance of the learned Counsel for M/s. Bharat Coking Coal Ltd. In support of this contention Mr. Bhandare has referred to a decision of this Court in Food Corporation of India v. E. Kuttappan, . In the said decision reference was made to an earlier decision of this Court in Nilkantha Shidramappa Ningashetti v. Kashinath Somanna Ningashetti, and Indian Rayon Corporation Ltd. v. Raunaq and Co. (P) Ltd., . It has been held in the decision in Food Corporation of India case, , that the obligation of filing the award in Court is a legal imperative on the arbitrator and when the award was filed in Court and the parties were aware of such filing of the award in Court, the limitation to file objection would run from the date of filing the award being made known to the parties, arid not from any subsequent date when a notice of filing of such award was subsequently issued to the parties concerned."
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In our view, the contention raised by Mr. Bhandare is wholly justified. The Registry of this Court gave notice to the learned Counsel for the parties about the filing of the award in April 1994. It is nobody's case that Counsel had an authority to take such notice on behalf of either of the party. It was also open to the Counsel to take inspection of the award. As a matter of fact, such inspection was also taken on 3-10-1994 but no objection was filed within thirty days either from the notice given by the Registry in April, 1994 or from the date of inspection of the award on 3-10-1994. It has been held by this Court in State of M.P. v. Saith and Skelton (P) Ltd. that where the Arbitrator was appointed by the Supreme Court by consent of parties and no further directions were given in the said order which would indicate that the Supreme Court had not divested itself of its jurisdiction to deal with the award or matters arising out of award, the forum for taking further action is the Supreme Court. It has also been held in the said decision that in the absence of any other Court having been invested with such jurisdiction, the only conclusion that is possible is that further orders must be passed only by the Court that passed the order, namely, the Supreme Court, Mr. Bhandare has relied on a later decision of this Court in Punjab SEB v. Ludhiana Steels (P) Ltd in support of his contention that when reference to arbitration was made by this Court, the award is to be filed in this Court only. We may only indicate that the said decision has a distinguishing feature inasmuch as in that case after making reference to arbitration, this Court specifically directed that the award would be sent to Registry of this Court. In any event, even if it is assumed that the award should be filed in other Court when the notice of filing of the award was given by the Registry of this Court, objection as to the award including objection as to forum ought to have been raised before this Court and it will not be open to the parties to altogether ignore the notice of filing the award given by the Registry of this Court. We may also indicate here that in the petition of objection it has not been urged that there has been any impropriety in filing the award in this Court. Accordingly, such objection should not be permitted to be raised at this stage as the objection to the award has been filed long after the period of limitation, the same should be dismissed. We may also indicate here that even on merit, we do not think that any interference is called for against the award. We, therefore, allow the Interlocutory Applications Nos. 9 to 12 of 1994 and direct the award to be made rule of Court. It also appears to us that in the facts of the case, the applicants M/s C.K. Ahuja and Anr., are entitled to get an award of interest @ 12% from the date of the award till realisation. The interlocutory applications are accordingly disposed of. There will be no order as to costs."
The view expressed by the Apex Court in. the decision referred in Nilkantha Sidramappa Ningashetti v. Kashinath Somanna Ningashetti (supra) had been consistently followed and the same principle is reiterated in State of M.P. v. Saith and Skelton (P) Ltd., and also in Food Corporation of India v. E. Kuttappan, .
19. It is no doubt true that in the decision referred in Managing Director, Central Ware Housing Corporation, New Delhi and Ors. v. K. Venkateswara Rao and Anr. (supra), the expression "unless the Court otherwise directs" had been well explained. It is also no doubt true that in the present case the Counsel for the petitioner was present in Court on 5-7-1991 and he was informed of the filing of the award. It is pertinent to note that though the Court was conscious of the fact of the presence of the Counsel, the Court had directed notice to the party and the notice was served on 5-8-1991 and the petitioner filed the O.P. under Section 30 of the Act on 13-8-1991, within the period of 30 days. When notice was specifically ordered by the Court, the date of service of notice on the party should be reckoned as the date for the purpose of computation of the period of limitation of 30 days within the meaning of Article 119(b) of the Limitation Act, 1963. There cannot be any quarrel or controversy in relation to the principles which had been laid down in the decision referred in Managing Director, Central Ware Housing Corporation, New Delhi and Ors. case (supra). But however, in view of the expression "unless the Court otherwise directs" inasmuch as the Court had directed issuance of notice, the service of notice on the party alone should be taken as the date of commencement of the period of limitation. In Madan Lal v. Sunder Lal, , the Apex Court held at paras 7 to 9 of the judgment as follows:
"The analysis of the relevant provisions of the Act contained in Chapter II which apply mutatis mutandis to arbitrations of the other two types shows that the Court has to pronounce judgment in accordance with the award if it sees no cause to remit the award or any of the matters referred to arbitration for reconsideration, if it sees no cause to set aside the award. The Court has to wait for the time given to a party to make an application for setting aside the award and where such an application has been made the Court has to decide it first and if it rejects it the Court proceeds to pronounce judgment according to the award. It is clear, therefore, from Section 17 that an application to set aside the award is contemplated therein and it is only when no such application has been made within the time allowed or if such an application has been filed and has been rejected that the Court proceeds to pronounce judgment in terms of the award. The Act, therefore, contemplates the making of an application to set aside an award and the grounds on which such an application can be made are to be found in Section 30. The grounds on which an application can be made for setting aside the award are - (a) that an arbitrator or umpire has misconducted himself or the proceedings, (b) that an 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) that an award has been improperly procured or is otherwise invalid. These are the only grounds on which an award can be set aside under Section 30 and it will be seen that if a party wants an award to be set aside on any of these grounds it has to make an application. Thus any party wishing to have an award set aside on the ground that it was improperly procured or otherwise invalid has to make an application. We may also refer to Section 32 which lays down that:
"notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected otherwise than as provided in this Act".
It is clear, therefore, from the scheme of the Act that if a party wants an award to be set aside on any of the grounds mentioned in Section 30 it must apply within 30 days of the date of service of notice of filing of the award as provided in Article 158 of the Limitation Act. If no such application is made the award cannot be set aside on any of the grounds specified in Section 30 of the Act. It may be conceded that there is no special form prescribed for making such an application and in an appropriate case an objection of the type made in this case may be treated as such an application, if it is filed within the period of limitation. But if an objection like this has been filed after the period of limitation it cannot be treated as an application to set aside the award, for it is so treated it will be barred by limitation.
It is not in dispute in the present case that the objections raised by the appellant were covered by Section 30 of the Act, and though the appellant did not pray for setting aside the award in his objection that was what he really wanted the Court to do after hearing his objection. As in the present case the objection was filed more than 30 days after the notice it could not be treated as an application for setting aside the award, for it would then be barred by limitation. The position thus is that in the present case there was no application to set aside the award on grounds mentioned in Section 30 within the period of limitation and, therefore, the Court could not set aside the award on those grounds. There can be no doubt on the scheme of the Act that any objection even in the nature of a written statement which falls under Section 30 cannot be considered by the Court unless such an objection is made within the period of limitation (namely, 30 days), though if such an objection is made within limitation that objection may in appropriate cases be treated as an application for setting aside the award".
In Deo Narain Choudhury v. Shree Narain Choudhury, , the Apex Court observed :
"Section 14 of the Arbitration Act, 1940 reads as follows :
14. Award to be signed and filed :--(1) When the arbitrators or umpire have made their award, they shall sign it and shall give notice in writing to the parties of the making and signing thereof and of the amount of fees and charges payable in respect of the arbitration and award.
(2) The arbitrators or umpire shall, at the request of any party to the arbitration agreement or any person claiming under such parry or if so directed by the Court and upon payment of the fees and charges due in respect of the arbitration and award and of the costs and charges of filing the award, cause the award or a signed copy of it, together with any depositions and documents which may have been taken and proved before them, to be filed in Court, and the Court shall thereupon give notice to the parties of the filing of the award.
(3) Where the arbitrators or umpire state a special case under Clause (b) of Section 13, the Court, after giving notice to the parties and hearing them, shall pronounce its opinion thereon and such opinion shall be added to, and shall form part of, the award."
Thus, under Section 14(1) the Arbitrator has to give a notice to the parties. Then the Arbitrator or the Umpire has to file the Award in Court. Under Section 14(2) the Court "shall thereupon give notice to the parties of the filing of the Award". It is now settled law that the period of Limitation under Article 119 of the Limitation Act, 1963 will start running from the date the notice has been given by the Court under Section 14(2) of the Arbitration Act, 1940."
In R.D. Gupta v. the Union of India, the Apex Court held:
"The last contention taken by the appellant was that the application made on behalf of the Union of India to set aside the award is barred by limitation. As seen earlier, the award had been filed in Court on 26-5-1966, and a notice of the filing of the award was served on the Union of India on 30-5-1966. The petition to set aside the award was made on 27-6-1966. Therefore, prima facie the petition was in time having been filed within thirty days from the date of service of the notice of filing of the award. But what is said on behalf of the appellant is that on the very day the award was filed into Court the Assistant to the Deputy Commissioner passed the following order:
"Arbitrator has filed the award along with the record of proceedings and his bill is amounting to Rs. 7,163.00. Issue notice on the parties fixing 14-7-1966."
This order was shown to Mr. L.P. Changakakoti, Government Advocate and his signatures obtained. This amounted to a service of a notice under Section 14(2) of the Act. Hence the petition filed on 27-6-1966 must be held to be barred. It is true that notice under Section 14(2) of the Act need not be in writing but we are unable to accept the contention that the information given to Mr. Changakakoti amounts to a notice to the Government under Section 14(2) of the Arbitration Act. All that Mr. Changakakoti was told was that a written notice of the filing of the award will be given to the Government though he had come to know that the award had been filed into Court. Under the circumstances we are unable to hold that the information given to Mr. Changakakoti amounted to a notice under Section 14(2) of the Arbitration Act."
In Secretary to Government of Karnataka and Anr. v. V. Harishbabu, , the Apex Court at paras 10 and 15 held:
"An analysis of Sub-section (2) of Section 14 shows that it mandates the Court, after the filing of the award duly signed by the arbitrator or the umpire as the case may be, to give notice to the parties of the filing of the award. Sub-section (1) of Section 14 requires the arbitrator or umpire to give a notice in writing to the parties of the making and signing of the award. The two provisions operate under different set of circumstances. The issuance of a notice under Section 14(2) of the Act by the Court is a mandatory requirement though the section does not prescribe any formal mode for the service of the notice. What is essential under the said provision is that there must be service of notice or intimation or communication of the filing of the award by the Court to the parties, the mode of service of such a notice being immaterial. It is the substance and not the form of the notice which is relevant and once it is established that a notice or communication or information of the filing of the award has been issued by the Court and served on the party concerned, the statutory requirements of Section 14(2) of the Act would stand satisfied. Keeping in view the difference in the phraseology of Section 14(1) and 14(2) of the Act, it follows that the notice from the Court under Section 14(2) of the Act need not be in writing. It can be oral also but what is necessary is that a notice, communication or information to the effect that an award has been filed in the Court must be given by the Court to the parties concerned. Notice to the pleaders of the parties, who are representing the parties before the Court, would of course be sufficient compliance with the requirements of Sub-section (2) of Section 14 of the Act. A notice by the arbitrator under Sub-section (1) of the Act is not a substitute for the notice which the Court is enjoined upon to issue under Sub-section (2) of Section 14 of the Act. Where the arbitrator himself files an award in the Court, the Court is bound to give notice to the parties that the award has been filed and the Court cannot pass a decree in terms of the award, unless such notice has been served on the party concerned and till after the expiry of a period of 30 days from the date of service of such a notice as contemplated by Article 119(b) of the Limitation Act, 1963, In a case where a party has knowledge aliunde of the filing of the award and seeks time to file objections to the award, absence of a formal notice from the Court would be rendered immaterial and in such a case the date when the party enters its appearance and either through an application in writing or orally seeks time to file objections to the award, shall be deemed to be the date of service of the notice within the meaning of Sub-section (b) of Section 119 of the Limitation Act read with Section 14(2) of the Act. However, where the order of the Court merely records the presence of the parties or their Counsel, after an award is filed by the arbitrator in the Court, but does not indicate that the notice of the filing of the award has been given to the parties, no service of notice can be presumed from that order. No formality in the act of filing of the award in the Court is required but what is required is that the filing of the award must be by or on behalf of the arbitrator and after the same has been filed the notice of the filing of the award must follow from the Court under Sub-section (2) of Section 14 of the Act. If an award is filed by one of the parties the authority of the arbitrator to the party concerned to file the award must be established and the onus is on that party to establish that he had been so authorised by the arbitrator to file the award in the Court. A plea to that effect must be found in the application which accompanies the award. Such an authority has to be specifically alleged and positively proved otherwise the filing of the award in the Court cannot be said to be by or under the authority of the arbitrator or the umpire as the case may be."
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In view of the settled law and our discussion above, our answer to the question posed in the opening part of the judgment is that the period of limitation for filing objections seeking the setting aside of an arbitration award commences from the date of service of the notice issued by the Court upon the parties regarding the filing of the award under Section 14(2) of the Act. Such a notice need not be in writing but what is essential is that the notice or intimation or communication of the filing of the award must be issued by the Court to the parties and served upon the parties concerned. Date of service of a notice issued by the arbitrator under Section 14(1) of the Act or the date of obtaining an endorsement on the award by the arbitrator from the party concerned is irrelevant for determining the question of limitation for filing objections under Article 119(b) of the Limitation Act, 1963."
The same view was expressed in Ch. Ramalinga Reddy v. Superintending Engineer, , and also Indian Rayon Corporation Limited v. Raunaq and Company (P) Limited, . Reliance also was placed on the General Marketing Manufacturing Company v. Union of India, 1996 (1) ALR 585, Rajasthan State Mines and Minerals Engineering Enterprises, , Union of India v. Rupera Transport Company, 1997 (2) ALR 668, Munakala Rajanna v. Food Corporation of India, 1997 (2) ALR 645, State of Bihar, through Executive Engineer v. Rameshwar Prasad, 1994 (1) Supp. SCC 574, Ramprasad Construction Company v. State of A.P., , The Superintending Engineer v. Asia Foundation and Construction (P) Ltd. 1994 (2) An. WR 448.
20. In the light of the said legal position, inasmuch as the Court had directed notice and the notice was served on 5-8-1991, we have no hesitation in holding that the O.P. presented on 13-8-1991 within a period of 30 days is within the period of limitation under Article 119(b) of the Limitation Act, 1963. Accordingly, we hold that the O.P. filed by the petitioner under Section 30 of the Act is within limitation.
21. Question No. 2: The next question that was raised is that since the 2nd respondent had not made any independent application to make the award the rule of the Court, the 2nd respondent is not entitled to any relief even if the petitioner is unsuccessful in making out a case for setting aside the award. The learned Counsel representing the 2nd respondent no doubt made an attempt to contend that along with objections an application also was filed praying for such a relief. At any rate, ultimately a stand was taken that there is no necessity of filing any independent application to make the award the rule of the Court. In Sheoramprasad v. Gopalprasad, , it was held:
"However, it appears to us that once the first defendant had moved the Court under Section 14 of the Arbitration Act, it was not necessary for the plaintiff to file another application for the same purpose. Nor indeed was it necessary for him to make any application praying that a decree should be passed in terms of the award.
After an award is filed under Section 14, a party may apply to the Court under Section 15 for its modification or under Section 16 for remitting it to the arbitrators. He may also apply under Section 33 for setting aside the award on any of the grounds mentioned in Section 30. Where a Court sees no cause to remit the award or to set it aside, it is bound to pass a decree in terms thereof made under Section 17.
The jurisdiction of the Court to embody the award in a decree is not, therefore, dependent upon any application by a party that it should be accepted. Its power under Sections 15 to 17 or 30 and 33, is derived from the filing of the award before it under Section 14. Therefore, after the award was filed in the lower Court on the application of the first defendant, it had the jurisdiction to accept the award and pass a decree in terms thereof, even if the plaintiff had made no application for that purpose."
In District Co-operative Development Federation v. Ram Samujh, AIR 1976 All 476 (FB), a Full Bench of the Allahabad High Court observed at paras 5, 6 and 31 as follows:
"It was held in the case of Amod Kumar Verma v. Hari Prasad Burman, that the provisions of Section 17 can be applied only in a proceeding stated with an application under Section 14 and in a proceeding started under Section 33, when no proceeding started under Section 14 is pending, no decree can be passed and the only order that can be passed is one refusing to set aside the award. It was also observed in that case that an application to set aside the award before filing of the award under Section 14 is incompetent. A party aggrieved by the award can challenge it only through an application under Section 33 and must proceed under Section 14. Much stress is laid for the opposite party by these observations made in the case of Amod Kumar Verma, v. Hari Prasad Burman, , but these observations should not be read in isolation or divorced from the context in which they were made and should not be taken to lay down that a decree cannot be passed by the Court under Section 17 of the Act under any circumstances when an application for filing of the award was never made under Section 14.
I am of the view that the exercise of jurisdiction by Court under Section 17 for making a decree in terms of an award is not necessarily dependent on the filing of an application by a party to the arbitration agreement under Section 14(2) with a prayer for Court's direction to summon the award. No doubt it is open to any party to the arbitration agreement or any such person claiming under such party to move the Court by an application under Section 14(3) to cause the award to be filed and when the award is summoned on such an application and produced in Court the Court may proceed under Sub-section (3) of Section 14, Sections 15 and 16 and make a decree in terms of the award under Section 17. But that is not the only procedure which will lead to the making of an award by the Court under Section 17, The Court on its own motion and suo motu under Section 14(2) direct the arbitrator to file the award if under any circumstances the Court receives information of the making of the award. There is no limitation provided for such suo motu summoning of the award by the Court from the arbitrator. It is noteworthy that Sub-section (2) of Section 14 of the Act does not contain any provision which may imply that the power to summon the award from the arbitrator is to ! be exercised by the Court only on an application with that prayer being made by a party. This is in contrast with Sub-section (3) of Section 20 of the Act containing such words as "on such application being made, the Court shall direct notice thereof to be given to all the parties to the agreement". I am of the opinion, therefore, that the award can be summoned by the Court from the arbitrator suo motu under Section 15(2) if by any means the fact of making of an award comes to the Court's notice and the making of an application under Section 14(2) containing a prayer for summoning the award is not a condition precedent or a necessary condition to the exercise of such a power by the Court.
The award may be produced before the Court by the arbitrator also suo motu without either any party to the agreement making a request or without the award being summoned by the Court. In either case, whether the award is filed before the Court on being summoned on an application by a party under Section 14(2) or on the award being filed by the arbitrator suo motu or on the award being summoned by the Court suo motu, the Court must proceed to give notice of filing of the award to the parties and act under Section 17. The Court must pass a decree in terms of the award when it sees no cause to remit or set aside the award. In Rahmatulla v. Vidya Bhusan, it was observed:
"Section 14 of the Arbitration Act provides for the methods by which an award can come on the record of the Court as a preliminary step to giving the Court jurisdiction to make a decree on the basis of that award. The award can, as the provisions of Section 14 indicate, come on the record or an application by a party to have the arbitrator file the award along with the necessary enclosures to the award on the direction of the Court. The award can also come to the Court on the arbitrator taking action in respect of the filing of the award suo motu", In the case of R.L. Sondhi v. Accountant General of Punjab, also the Court recognized the possibility of the award being filed before the Court by the arbitrator suo motu or upon a direction given by the Court. There is no limitation provided for filing of the award in Court by the arbitrator either suo motu or upon direction of the Court. It follows, therefore, that once the award has been filed in Court the Court acquires jurisdiction to pass a decree in terms of the award under Section 17 and it does not matter under what circumstances the award comes before the Court, that is to say, whether the award has been filed by the arbitrator personally or through an authorized agent suo motu or upon the Court's direction. In the present case, the Court had received information about making of the award from the petitioner's application of 5-7-1961 and actually summoned the award from the arbitrator by order dated 3-1-1962. In doing so, the Court appears to have treated the original application of 5-7-1961 as one under Section 14, as it expressly purported to be, or a source of information to the Court of making of the award.
In either case it is clear that the Court summoned the award from the arbitrator in exercise of its power under Section 14(2) of the Act. Let us at present postpone considerations of the question whether the application of 5-7-1961 could be treated as one filed under Section 14(2) of the Act and whether the application was maintainable in the absence of a prayer for summoning the award and in the absence of the award being before the Court already. The question arises whether the Court could refuse to act under Section 17 and pass a decree in terms of the award when the award had been filed before it by the arbitrator in the above circumstances. Apart from every other aspect of the matter it is clear that the award having come before the Court; the parties having been given intimation of its filing, the Court became vested with jurisdiction to proceed to pass a decree in terms of the award under Section 17 of the Act and from that aspect of the matter alone it is clear that the Civil Judge was in error in taking the view that a decree in terms of the award could not be passed when an application as required by Section 14(2) for summoning the award is not a condition precedent to the exercise of jurisdiction under Section 17 nor is it a fact which confers jurisdiction on Court to act under Section 17.
No doubt the Court has occasion to, nor can it possibly exercise jurisdiction under Section 17 for so long as the award is not filed before it. A party to the arbitration agreement or a person claiming under such party may adopt the process of moving the Court by an application under Section 14(2) with a prayer for summoning the award. A motion by such an application is only one of the processes by which the filing of an award can be secured. The alternative processes, as indicated above consist of summoning of the award by the Court suo motu or its production by the arbitrators suo motu. Therefore, the exercise of power by the Court under Section 17 is not dependent on filing of an application under Section 14(2) and the Court can exercise power under Section 17 and proceed to pass a decree in terms of the award if the award has been produced before it notwithstanding the fact that an application under Section 14(2) had never been moved by a party to the arbitration agreement or a person claiming under such party. Of course, if the award has not been produced before the Court and no application has been filed under Section 14 praying for summoning of the award the Court cannot exercise power under Section 17 and cannot be passed in terms of the award for the simple reason that the Court is not in a position to know in what terms the award has been made.
It is in this sense that observations made in the case of Amod Kumar Varma v. Hari Prasad Burman to the effect that "the provisions of Section 17 can be applied only in a proceeding started on an application under Section 14 and where no proceeding started under Section 14 is pending, no decree can be passed and the only order that can be passed is one refusing to set aside the award" should be understood. In that case the award was not filed before the Court by the arbitrator. It was produced in another suit by a Commissioner who had been directed to seize it from the arbitrator. In the peculiar circumstances their Lordships held that the award had not been produced and because no application praying for summoning of the award had been moved under Section 14(2) they made the above general observations. It is clear that when these observations were made they were not considering the situation where an award may have been filed in Court. The above observations in the case of Amod Kumar Varma v. Hari Prasad Barman, therefore, do not apply to the present case. On the other hand, it is noteworthy that in the concluding portion of para 7 of the leading judgment of Desai, J. the following observations were made which support the view which I have expressed:
"Once the award has been filed in Court the law will take its course and a decree will be passed if the award is found to be in order."
In para 8 of the report again Desai, J. observed:
"It follows that a decree can be passed under Section 17 only in a case starting with the filing of the award or with an application for the filing of the award under Section 14."
In the case of Rahmatulla v. Vidya Bhusan, an award had come before the Court, having been filed by the plaintiff with a prayer that it may be made rule of the Court. The award had neither been filed by the arbitrator nor by one of the parties to the arbitration agreement nor was an application made in accordance with Section 14(2) of the Act. The question arose whether it was open to the Court before which the award was filed to act on the award under Section 17 and pass a decree on its basis where the award had not been filed as a result of proceeding started under Section 14 of the Act. The question was answered in the affirmative holding that the Court could pass a decree in terms of the award under Section 17 when the award had come before it and it was not necessary that the award should have come before it as a result of specific proceedings, as provided by Section 14, being taken. The situation in the present case is similar. There is nothing in terms of Section 14 of the Act which can preclude the Court from taking into consideration the award for the purpose of exercising jurisdiction conferred on it by Section 17. From this point of view the Civil Judge was in error in refusing to exercise jurisdiction under Section 17 of the Act.
The award having been produced before it and the parties having been given notice he possessed jurisdiction to pass a decree in terms of the award if he saw no cause for setting aside or remittance of the award. The order of the lower Court was erroneous also from another angle. This application of 5-7-1961 was expressly described as one under Section 14 of the Act. The application contained a prayer for passing a decree in terms of the award but no prayer for summoning of the award in accordance with Sub-section (2) of Section 14, but this was only a formal defect. The application purported to be and indeed was expressed to be under Section 14, should have been treated as such and jurisdiction exercised under Section 17. Indeed the lower Court appears to have actually treated the application of 5-7-1961 as one under Section 14 when it actually summoned the award by order of 3-1-1962. If the lower Court was of the view that the application dated 5-7-1961 was not strictly an application under Section 14(2) of the Act in the absence of a prayer for summoning the award it could have permitted amendment of that application so as to add such a prayer and should have proceeded under Section 17 on such amendment.
Against such a course the submission of learned Counsel for the opposite party was that an amendment, which took away a right vested in his clients by lapse of time, should not be permitted. No doubt, amendment should not be allowed when limitation for making an application under Section 14 has expired as such an amendment may cause manifest prejudice to the other side. But no such consideration could have arisen in the present case for it is not shown that the application of 5-7-1961 was filed beyond the period of limitation. Such an application, therefore, could be permitted to be amended to remove a formal defect. Similar view was taken in . It is not necessary in the present case, however, to pass an order of remand for necessary amendment of the application under Section 14 dated 5-7-1961 because the award had already been filed before the lower Court and for reasons above stated the Court is competent to Act under Section 17.
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Now, a person who relies on the award and wants it to be made a rule of the Court has to follow the same procedure with a slight difference. All that he is required to do is to make an application under Section 14 of the Act for the filing of the award within the time prescribed by Article 178 and bearing the Court-fees as provided in Article 18 of Schedule II to the Court-fees Act. After the award has been filed and the objections, if any, filed by the other side against the award have been rejected, the Court shall proceed to pronounce judgment according to the award and pass a decree making the award a rule of the Court as required by Section 17 of the Act even without that party making any application to that effect. It was held by the Madhya Pradesh H.C. in Sheoramprasad Ram Narayan Lal v. Gopalprasad Parmeshwardayal Shukla, , that the Court may suo motu pass a decree under Section 17 of the Act even though no application has been filed by either party for the purpose. There is, however, no legal bar to that party making a specific prayer for passing a decree in terms of the award either in his original application made under Section 14 of the Act for the filing of the award or at a subsequent stage, though such a prayer on his part is not mandatory as it is with regard to a party who wants to avoid the award."
In A.R. Savkur v. Amritlal Kalidas and Ors., , the Bombay High Court held :
"Now, if the contention of the appellant were sound, it would come to this that there would be two periods of limitation for two different applications, one under Section 30 and the other under Section 33. According to Mr. Mistree for the appellant, if an application to set aside an award were made under Section 30, the Article in the Limitation Act which would apply is Article 158 and the period of limitation would be 30 days. If, on the other hand, the application for a declaration that the award is invalid without asking to set aside the award was made, then that application would be an application under Section 33 and the period of limitation would be three years under Article 181. But strangely enough, if that was the scheme of the Act and if the Legislature contemplated two different applications with two different periods of limitation under Sections 30 and 33, Section 17 does not refer to any application under Section 33 at all.
Therefore the curious result will be that the obligation upon the Court is only to wait till the period of limitation under Article 158 has expired and then it becomes incumbent upon the Court to proceed to pass a judgment upon the award, with the consequence that although a judgment upon the award has been passed under Section 17, the period of limitation to make an application to set aside the award having passed, it would still be open to the party adversely affected by the award to make an application under Section 33 and that application he could make right up to three years. In our opinion such a contention would not only be contrary to the scheme of the Act but it would result in anomalies which the Legislature could never possibly have contemplated.
Therefore, the only proper interpretation to give to Section 17 is that it contemplates all applications to set aside an award and all applications to set aside an award filed under Section 33 and not under Section 30. Section 30 does not deal with applications to set aside an award at all. It deals with what the powers of the Court are when an application is made to set aside an award. But when we want to decide what is the right of a party to apply to set aside an award and what procedure he should follow, then we have got to turn to Section 33.
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But even assuming that the true interpretation of the expression "otherwise invalid" is as contended for by the appellant and as was held by the Privy Council, we fail to see how that view helps the appellant on the question of limitation. Assuming that under Section 30 the power of the Court to set aside an award is limited to the grounds mentioned in that section and the expression' "otherwise invalid" is 'ejusdem generis', then the power of the Court to declare an award invalid on the ground that the arbitration agreement was invalid would arise under Section 33. But even so the question would still have to be decided whether under Section 30 or Section 33 the application that has to be made is an application to set aside an award or not. We are not now concerned with the grounds on which the Court can set aside an award and whether the grounds fall under Section 30 or Section 33.
What we are concerned with is whether the Arbitration Act contemplates only an application to set aside an award to which Article 158 applies, or whether the Arbitration Act contemplates two different types of applications, one to set aside an award and the other to have a declaration that the award is invalid. In our opinion, for the reasons already stated, the only application contemplated by the Arbitration Act is an application under Section 33, and whether the award is challenged on the grounds mentioned in Section 30 or on the grounds mentioned in Section 33, the application has got to be made under Section 33, it has to be decided under Section 33 and the award has got to be set aside never mind how the challenge is made to the award, and once the application has been made to set aside an award under Section 33, Section 17 comes into operation and the Court is bound to pass a judgment in terms of the award if that application to set aside the award is refused or if the application to set aside the award is not made within the time mentioned in Article 158, Limitation Act."
The same view was expressed by the Madras High Court in Ramaswami Servai and Ors. v. Muthiralayee and Ors., , wherein it was held:
"The word "application" has not been defined either in Section 17 or anywhere in the Arbitration Act or in the Limitation Act. "Application" as defined in Rule 2 Sub-rule (2) of the Civil Rules of Practice and Circular Orders Vol. 1, contemplates an oral application and also therefore there is no need for an application, under Section 17, Arbitration Act to set aside an award to be in any particular form with Court fee affixed thereon. The counter-affidavit filed by the respondents in application for passing a decree in terms of an award, filed within 30 days of the service of notice of the petition counter attacking the genuineness and validity of the award and praying that the Court might be pleased to pass an order dismissing the petition is an application within the meaning of Section 17 of the Arbitration Act with a sufficient compliance with the terms thereof. It is not necessary to make it in any particular form and to affix Court fee stamp of any value."
In the light of the views expressed by the different High Courts specified supra, we have no hesitation in holding that a separate application by the 2nd respondent for making the award the rule of the Court is not necessary.
22. The next aspect in relation to which elaborate arguments had been advanced by both the Counsel are in relation to the merits and demerits of the matter. It is no doubt true that the jurisdiction of an Umpire or an Arbitrator is limited to the claim statement and it is not open to the Arbitrator or the Umpire to go beyond the claim. The stand taken by the petitioner is that the 1st respondent-Umpire had not acted in accordance with law in deciding the questions and in fact the 1st respondent-Umpire had travelled beyond the reference exceeding the jurisdiction which may fall within the meaning of misconduct or at any rate an error apparent on the face of record, vitiating the award. The further stand taken by the Counsel for the petitioner is that the method adopted and the reasons recorded are totally erroneous, at any rate irrelevant, and hence on that ground also the award is liable to be set aside. The 1st respondent-Umpire was a member of Central Water Commission and Ex-Officio Additional Secretary to the Government of India and he was also the former Chief Engineer, Visakhapatnam Outer Harbour Project, Port Trust, Visakhapatnam and apart from this it is evident that he held several important positions as reflected from the award report and thus the 1st respondent-Umpire is not only well qualified, but also a well experienced person. It is needless to say that from the very nature of contracts it is clear that these are special type of contracts and the evaluation of the work and the other details under different heads can be done only by an Arbitrator or an Umpire having intimate touch with the field and the same cannot be evaluated by an ordinary person. It is pertinent to note that in the judgment in O.S. No. 253/78 on the file of Additional Subordinate Judge, Visakhapatnam, reference was made in the following terms:
"The said arbitrator shall arbitrate the disputes and differences between the parties as to the claim of compensation payable to the plaintiff by the defendants and give his award according to law at an early date."
In fact, the same was affirmed by the Division Bench of this Court in C.M.A. No. 162/80 and C.M.A. No. 1189/82, but however in view of death of the Arbitrator, the matters were disposed of with a direction to the parties to appoint their Arbitrators specifying the time to make an award within six months and no doubt the time was extended in C.M.P.No. 14061/87 dated 17-12-1987. The claim of the 2nd respondent was in relation to and for reimbursement of additional expenses incurred and overhead charges including depreciation on the plant and equipment during the extended period. The 2nd respondent submitted the claim at Rs. 2,43,10,963/- to the Engineer on 29-7-1976. The claim dated 29-7-1976 reads as hereunder:
"Claim Bill No. Arb.54 29-7-1976 Dr. The Chairman, Visakhapatnam Port Trust, Visakhapatnam.
To Amount due on account of additional expenses incurred in the construction of C-2, C-3 works beyond the original completion date and upto 30th September, 1975 as per details given in the enclosure in terms of Clauses 12 (2), 20(2) and 42 of general conditions of C-2 and C-3 contracts.
Rs. 2,43,10,963.00 For Continental Construction (P) Limited Sd/-
(C.L. Verma, Director)"
The details of additional expenses incurred beyond the original completion date upto the extended completion date 30-9-1975 of C-2 and C-3 contracts which was enclosed to the bill dated 29-7-1976 reads as hereunder:
Expenses Sr. No. Account 1-6-1974 to 31-12-1974 1-1-1975 to 30-9-1975 Total 1 Advertisement 4,171-52 11,680-42 15,851-94 2 Bank charges 5,931-13 6,136-03 12,067-16 3 Catrage freight 1,30,415-98 66,159-66 1,96,575-64
4.
Commission and brokerage 75-00 75-00 5 Conveyance 4,957-21 8,939-62 13,896-83 6 Depreciation 58,45,339-00 59,69,424-00 1,18,14,763-00 7 Electricity & water charges 3,27,239-25 4,53,238-46 7,80,477-71 8 General expenses 9,219-68 6,639-05 15,858-73 9 Insurance 13,31,571-58 8,93,068-89 22,24,640-47 10 Interest paid 2,20,875-81 1,23,771-63 3,44,647-44 11 Machinery and equipment repairs 68,08,952-75 41,83,339-15 1,09,92,291-90 12 Medical expenses 61,585-22 40,758-15 1,02,343-37 13 Mess expenses 18,367-65 10,267-26 28,634-91 14 Office maintenance 2,369-39
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2,369-39 15 Packing and forwarding 5,718-68 3,926-26 9,644-94 16 Postage & telegrams 3,022-08 1,575-52 4,597-60 17 Printing & Stationery 47,374-12 39,459-14 86,833-26 18 Provident & Family Pension Funds 81,871-50 89,074-00 1,70,945-50 19 Rent 27,898-50 23,788-68 51,687-18
20. Repairs and Renewals 87,572-77 18,512-53 1,06,085-30 21 Rates & Taxes 5,226-15 2,680-40 7,906-55 22 Salary & Wages I. Monthly paid staff 15,27,223-34 16,51,827-96 31,79,051-30 II Daily rated workers 27,73,212-63 27,18,288-21 54,91,500-84 23 Staff amenities 38,564-84 28,726-80 67,291-64 24 Technical consultation fees 48,376-40 38,821-84 87,198-24 25 Telephone expenses 19,127-95 18,152-77 37,280-72 26 T.A. Bills 98,371-24 1,08,820-91 2,07,192-15 27 Vehicle maintenance 95,886-96 67,823-18 1,63,710-14 28 Vehicle taxes 2,35,267-55 1,14,064-05 3,49,331-60 29 Tyres and tubes consumed 81,411-79
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81,411-79 30 Bonus 95,170-00 1,02,410-00 1,97,580-00 Total 2,00,42,367-67 1,68,01,374-57 3,68,43,742-24 Notes:--(i) The above additional expenses relates to the work done against (C-2,C-3, C-7 and Wet Basin) contracts.
(ii) Total work done against C-2, C-3 C-7 wet basic contracts during the period from 1-6-1974 to 30-9-1975 amounts to Rs. 5,45,02,316-00,
(iii) Total work done against C-2 and C-3 contracts during the period from 1-6-1974 to 30-9-1975 amounts to Rs. 3,59,62,791-00 Therefore, the amount of additional expenses incurred by us during the extended period of completion in C-2 and C-3 works is as under:
3,68,43,742.24 x 3,59,62,791-00/5,45,02,316 - Rs. 2,43,10,963-00 It is no doubt true in Column (i) of the "Notes" mentioned below the statement of additional expenses incurred beyond the original completion date upto the extended completion date 30-9-1975 of C-2 and C-3 contracts, in brackets, C-7 contract also had been referred to along with C-2 and C-3 contracts. The Counsel for the petitioner made elaborate submissions on this aspect and had made an attempt to convince the Court that in this view of the matter, the Umpire had travelled beyond the scheme. Though C-7 also is referred to in Column (i), while arriving at the total claim, this was not taken into consideration as is evident from column (iii) of the said Notes itself. Hence, we have no hesitation in holding that the mere mentioning of C-7 in the "Notes" appended to the details of additional expenses, cannot in any way vitiate the award.
23. The correspondence between the parties had been dealt within detail by the Umpire. In fact, the Umpire while dealing with the verification of the claim had stated "As the issue was extremely important on 5-10-1988, I inspected the claim records of the claimants in the presence of representatives of parties who had been informed earlier to depute representatives during my examination. Respondent's representatives did not bring to my notice if their verification team differed from claim amount". The relevant Clauses of the contract which may be relevant for the present purpose are Clauses 11, 12(1), 12(2), 44, 47 and 52 and the said Clauses read as hereunder:
Clause 11: The tender shall be deemed to have been based on such data regarding hydrological climatic and physical conditions as shall have been supplied by the Board in the documents furnished to the Contractor by the Board for the purpose of tendering. The Contractor shall nevertheless inspect and examine the site and its surroundings and shall satisfy himself so far as practicable before submitting his tender as to the form and nature of the site, the quantities and nature of the work and materials necessary for the completion of the works and the means of access to the site, the accommodation he may require and in general shall himself obtain all necessary information subject as abovementioned as to risks, contingencies and other circumstances which may influence or affect his tender.
Clause 12(1): The Contractor shall be deemed to have satisfied himself before tendering as to the correctness and sufficiency of his tender for the works and of the rates and prices stated in the priced Bill of Quantities and the Schedule of Rates and Prices (if any) which rates and prices shall except insofar as it is otherwise provided in the contract cover all his obligations under the contract and all matters and things necessary for the proper completion and maintenance of the works.
Clause 12(2): If however during the execution of the works the Contractor shall encounter physical conditions or artificial obstructions which conditions or obstructions could not have been reasonably foreseen by an experienced Contractor the Contractor shall forthwith given written notice thereof to the Engineer Representative and if in the opinion of the Engineer such conditions or artificial obstructions could not have been reasonably foreseen by an experienced Contractor then the Engineer shall clarify and the Board shall pay the additional expenses to which the Contractor shall have been put by reason of such conditions including the proper and reasonable expense
(a) of complying with any instruction which the Engineer may issue to the Contractor in connection therewith and,
(b) of any proper reasonable measures approved by the Engineer which the Contractor may take in the absence of specific instructions from the Engineer as a result of such conditions or obstructions being encountered.
Clause 44: Should the amount of extra or additional work of any kind or other special circumstances of any kind whatsoever which may occur be such as fairly to entitle the contractor to an extension of time for the completion of the work, the Engineer shall determine the amount of such extension. Provided that the Engineer is not bound to take into account any extra or additional work or other special circumstances unless the contractor has within 28 days after such work has been commenced or such circumstances have arisen or as soon thereafter as is practicable delivered to the Engineer's Representative full and detailed particulars of any claim to extension of time to which he may consider himself entitled in order that such claim may be investigated at the time".
Clause 47(1): If the Contractor shall fail to complete the works within the time prescribed by Clause 43 hereof or extended time then the Contractor shall pay to the Board the sum stated in the tender as liquidated damages for such default and not as a penalty for every day including Sundays, Holidays or part of a day which shall elapse between the time prescribed by Clause 43 hereof or extended time as the case may be and the days of completion of the works. The Board may without prejudice to any other method of recovery deduct the amount of such damages from any monies in their hand due or which may become due to the Contractor. The payment or deduction of such damages shall not relieve the Contractor from his obligation to complete the works or from any other of his obligations and liabilities under the contract.
Clause 47(2): If before the completion of the whole of the works, any part of the works, any part of the works has been certified by the Engineer as completed pursuant to Clause 48 hereof and occupied or used by the Board, the liquidated damages for delay shall for any period of delay after such certification be reduced in the proportion which the value of the part so certified bears to the value of the whole of the works.
Clause 52(1): The Engineer shall determine the amount (if any) which in his opinion should be added to or deducted from the sum named in the Tender in respect to any extra or additional work done or work omitted by his order. All such work shall be valued at the rates set out in the contract if in the opinion of the Engineer the same shall be applicable. If the contract shall not contain any rates applicable to the extra or additional work then suitable prices shall be agreed upon between the Engineer and the Contractor. In the event of disagreement the Engineer shall fix such prices as shall in his opinion be reasonable and proper.
Clause 52(2): Provided that if the nature of amount of any omission or addition relative to the nature or amount of the whole of the contract work or to any part thereof shall be such that in the opinion of the Engineer the rate of price contained in the contract for any item of the works is by reason of such omission or addition rendered unreasonable or inapplicable then a suitable rate or price shall be agreed upon between the Engineer and the Contractor. In the event of disagreement the Engineer shall fix such other rate or price as shall in its opinion be, reasonable and proper having regard to the circumstances:
Provided also that no increase of the contract price under Sub-clause (1) of this clause or variation of rate or price under Sub-clause (2) of this clause shall be made unless as soon after the date of the order as is practicable and in the case of extra or additional work before the commencement of the work or as soon thereafter as is practicable notice shall have been given in writing
(a) by the Contractor to the Engineer of his intention to claim extra payment or a varied rate, or
(b) by the Engineer to the Contractor of his intention to vary a rate or price as the case may be.
Clause 52(3): If the next effect of all variation (other than those arising by reason of any clause relating to variations in price of materials and or labour) shall be found on completion of the whole of the works to result in a reduction or an addition greater than 15 percent of the sum named in the Tender the amount of the Contract Price shall be amended by such sum as shall be agreed upon between the Engineer and the Contractor. In the event of disagreement the Engineer shall fix such sum as shall in his opinion be reasonable and proper regard being had to all material and relevant factors including the Contractor's on-costs and overheads.
Clause 52(4): The Engineer may if in his opinion it is necessary or desirable order in writing that any additional or substituted work shall be executed on a day-work basis. The Contractor shall then be paid for such work under the conditions set out in the Day-work Schedule included in the Bill of Quantities and at the rates and prices affixed thereto by him in his Tender.
The Contractor shall furnish the Engineer such receipts or other vouchers as may be necessary to prove the amounts paid and before ordering materials shall submit to the Engineer quotations for the same for his approval.
In respect of all work executed on a day work basis the Contractor shall during the continuance of such work deliver each day to the Engineer's Representatives an exact list in duplicate of the names, occupation and time of all workmen employed on such work and a statement also in duplicate showing the description and quantity of all materials and plant used thereon or therefore (other than plant which is included in the percentage addition in accordance with the Schedule hereinbefore referred to). One copy of each list and statement will if correct or when agreed be signed by the Engineer's Representative and returned to the Contractor. At the end of each month the Contractor shall deliver to the Engineer's Representative a priced statement of the labour material and plant (except as aforesaid) used and the Contractor shall not be entitled to any payment unless such lists and statements have been fully and punctually rendered. Provided always that if the Engineer shall consider that for any reason the sending of such list or statement by the contractor in accordance with the foregoing provision was impracticable he shall nevertheless be entitled to authorize payment of such work either as day work (on being satisfied as to the time employed and plant and materials used on such work) or at such value therefore as shall in his opinion be fair and reasonable.
Clause 52(5): The Contractor shall send to the Engineer's Representative once in every month an account giving particulars as full and detailed as possible of all claims for any additional expense to which the Contractor may consider himself entitled and of all extra or additional work ordered by the Engineer which he has executed during the preceding month and no claim for payment for any such work will be considered which has not been included in such particulars. Provided always that the Engineer shall be entitled to authorize payment to be made for any such work notwithstanding to the Contractor's failure to comply with this condition if the Contractor has at the earliest practicable opportunity notified the Engineer that he intends to make a claim for such work.
Clause 67 of the General Conditions of Contracts C-2 and C-3 entitling Settlement of disputes by arbitration, the crucial clause, already had been referred to supra. The correspondence dated 2-11-1976 and 27-1-1977, read as hereunder:
HOWE (INDIA) PVT. LTD, NEW DELHI I-108/C2-C-3 November 2, 1976 The Chief Engineer (P) Outer Harbour Project, Harbour Approach Road, Visakhapatnam-I. Sub: C2-C3 contract - VOHP - Claim for payment of extra overhead expenses.
Ref: CCPL's Letter No. ARB.54, dated 29th July 1976.
Dear Sir, Please refer to the above letter of Messrs Continental Construction Private Ltd. which has been copied to you as well as the Chairman, VPT. In this letter the Contractor claims that the extension of completion time of C-2/C-3 contract was granted on account of following reasons:
(a) Late delivery of Hopper Barges
(b) General disturbance and civil commotion
(c) Non-supply of cement by VPT during construction period
(d) Delay in supply of gantry cranes.
(e) Poor yield of larger size rocks
(f) Adverse prevailing situation in the country during the currence of C-2/C-3 contracts and
(g) Labour strikes.
They claim that on account of this extension of time they have had to incur an additional overhead expenses of Rs. 2,43,10,963.00 which the contractor could not foresee at the time of signing the contract.
From an examination of our record we find that the extension of construction time was granted to the Contractor due to many reasons; amongst them a certain period was allowed for interruption in the work due to (a) civil commotion (b) break in supply of cement by VPT and (c) strike in port area.
We are of the opinion that for an experienced contractor it was not possible to foresee in advance these circumstances and, therefore there seems some ground for paying compensation to the contractor on these points.
The contractor has given a detailed list of additional overhead expenses incurred by them beyond the original completion date which we are not in a position to verify. We, therefore, suggest that this matter be discussed between the Port Trust and the Contractor and the quantum of compensation, if any is decided to mutual satisfaction.
Assuring you of our best attention.
Yours faithfully HOWE (INDIA) PVT. LTD.
Sd/-
(F.S.R. ROSSLER) CC CCPL:: NEW DELHI HIPL VIZAG.
HOWE (INDIA) PVT. LIMITED NEW DELHI I-108/C-2/C-3/A-4 January, 27 1977 The Chairman, Visakhapatnam Port Trust, Visakhapatnam-I. Sub: VOHP contracts C2-C3 - claim for payment of extra overhead expenses.
Ref: Your letter No. OH/CE/C-2.C-3/Claims/ 4801, dated 28-12-1976.
Dear Sir, The extension of time granted to the contractor vide our letter No. I-108/C-2-C-3/A-4/102, dated 17-12-1974 and No. I-108/C-2-C-3/A-4, dated 30-12-1975 were on the following grounds as listed below:-
(a) Delay in barges and jetties 2 1/2 months (b) Civil commotion in A.P. 2 months (c) Break in supply of cement, late delivery of gantry crane etc. 1 1/2 months (d) Pour yield of larger size rocks 4 1/2 months (e) Adverse prevailing situation in the country during the currency of the C-2/C-3 contract 1 month (f) Labour strike 1/2 month
Regarding para second of your above referred letter we have already mentioned in our earlier letter No. I-108/C-2-C-3 dated November 2., 1976 that we are not in a position to verify the additional overhead expenses incurred by the Contractor beyond the original completion date. We would suggest that the matter regarding compensation may be discussed between the Port Trust and the contractor and decided to mutual satisfaction.
We trust you would find the above satisfactory.
Yours faithfully HOWE (INDIA) PVT. LTD.
Sd/-
F.S.R. ROESSLER cc CCPL NEW DELHI CCPL VIZAG HIPL VIZAG."
24. The 2nd respondent, as already referred to supra, had made a claim for Rs. 2,43,10,963/- and the Umpire granted Rs. 2.09 crores. The Umpire after recording reasons in detail had arrived at the conclusion that the 2nd respondent/contractor is entitled to additional expenditure incurred during the extended period in relation to C-2 and C-3 contracts. As can be seen from the reasons recorded by the Umpire, the amounts were awarded under Over-head and additional expenses incurred which were verified and found to be correct by the team of the petitioner and even for the claim, it was specifically stated by the Umpire that nothing had been pointed out by the petitioner. As can be seen from the record available, as many as 16 hearings were held and elaborate submissions were made by both the Counsel and elaborate reasons also had been recorded in this regard. It is no doubt true that certain reasons recorded by the 1st respondent-Umpire relating to not earning much profit etc., may not be relevant reasons, but however the Court has to look into the award as a whole while appreciating whether it is vitiated by any one of the grounds specified under Section 30 of the Act. Section 30 of the Act reads as hereunder:
"An award shall not be set aside except on one or more of the following grounds, namely:-
(a) that an arbitrator or Umpire has misconducted himself or the proceedings;
(b) that an 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;
(c) that an award has been improperly procured or is otherwise invalid."
It is not in controversy that the award made by the Umpire is a reasoned one. No doubt much comment was made by the learned Counsel for the petitioner pointing out the reasons and further stating that the very approach of the Umpire is erroneous and cannot be sustained. It is pertinent to note that the 2nd respondent filed a suit O.S. No. 253/78 on the file of Additional Subordinate Judge, Visakhapatnam and the same was carried in appeal in C.M.A. Nos. 162/80 and 1189/82 and the same was disposed of as referred to supra. In view of the said decision, the question touching the reference made in this regard again cannot be reagitated in view of the finality of the decision made by the Division Bench in C.M.A. Nos. 162/80 and 1189/82. An attempt also was made to convince the Court that the Umpire had granted relief under Clause 12(2) of the contract by way of additional expenses which is unrelated to the overheads and hence it is beyond the claim itself and thus it falls under grave misconduct. In the light of the reference already referred to supra, we are of the considered opinion that this contention cannot be sustained. The same is well reflected even from the claim and hence the jurisdiction of the Umpire or the Arbitrator to decide this question and to make a reasoned award cannot be doubted in any way.
25. The award made by the 1st respondent contains three parts. Part-I deals with background details pertaining to the dispute and its adjudication. Part-n dealing with decisions of the Umpire and their basis of entitlement of claims in accordance with law, facts of the case as per the documents placed before the Umpire and provisions of the contracts C-2 and C-3 binding upon the parties. Part-III contains the decisions on contentions of the parties on quantum of claim and basis of decisions, calculations based on which the Umpire arrived at the quantum of award under C-2 and C-3 contracts. After recording the reasons in detail, the Umpire made the following award:
"Based on my decisions on issues framed by me on the encompassed contentions of the parties, I make following awards on the claims of claimants Case 54, adjudicated by me in accordance with law, merit of contracts C-2 and C-3 and facts of case, as follows:
1. CLAIM No. 1: Overhead expenses incurred by the claimants in executing C-2 and C-3 contracts of Visakhapatnam outer Harbour Project, beyond the original completion date of the contract:
(i) Amount claimed Rs. 2,43,10,963-00
(ii) Amount passed Rs. 2,43,10,963-00 Less incidence of escalation -Rs. 33,29,752-00 during extended period (details enclosed) =Rs. 2,09,81,211 -00
2. CLAIM No. 2:
A. Claimants also claim interest at the commercial rate of interest @ 17.5% per annum on Rs. 2,43,10,963-00 from the date we submitted our claim i.e., 29-7-1976 upto the date of award (28-2-1991)
(i) Amount claimed (calculated) Rs. 6,20,64,876-00
(ii) Amount passed NIL B. Interest @ 17.5% per annum from the date of award till date of payment or the decree of the Court, whichever is earlier.
(i) Amount claimed : As above
(ii) Amount passed : No interest payable by respondents on award amount if payment made within two months of the date of award. If not, claimants shall be paid interest on award amount with effect from 1-5-1991, till date of payment or decree of the Court whichever is earlier. Rate of interest shall be the prevailing interest charged by scheduled Banks on over-drafts/loans/credits to non-priority sector, limited to 17.5%.
Calculation of escalation amount on labour and materials inherently included in claim amount Rs. 2,43,10,963-00 by claimants, required to be disallowed vide letter dated 29-4-1976 of claimants:
Basis of calculation of escalation inherently included in claim amount:
Report of Committee of Government of India which awarded Rs. 75 lakhs ex-gratia on escalation to claimants, enclosed by respondents on pages R-202 to R-210:-
V=P/100 x Rx I-Io/Io Where V = Escalation on labour and materials (in extended period 1-6-1974 to 30-9-1975) P = 45 (labour & material excluding respondents supplied) R = Claim Amount Rs. 2,43,10,963-00 I=312.1 (wholesale price index taken from claimants graph page C-261 in the period 1-6-1974 to 30-9-1975 IO = 239.3 (pages R-208/209, para 14) V = 45/100 x 24310963 x 312.1 - 239.3/239.3 = Rs. 33,29,752-00 To be deducted from claim amount of Rs. 2,43,10,963-00.
Sd/-
(GURUCHARAN SINGH) UMPIRE (Retd.) Member of Central Water Commission, & Ex-officio Addl. Secretary to Govt. of India Also Formerly:
1. Member, Dam Safety Panel, World Bank Projects, Orissa.
2. Chief Engineer, Baira-Siul H.E. Project (H.P.)
3. Chief Engineer, Visakhapatnam Outer Harbour Project (A.P.)
4. Chief Engineer, Farakka Barrage Project (NPCC)
5. Chief Engineer, Designs/Monitoring, Central Water Commission."
In substance, the stand taken by the petitioner in the O.P. is that Clause 67 or Clause 12(2) are not attracted at all and the reasons recorded have no nexus to the claim made and thus the Umpire had travelled beyond the jurisdiction while recording the findings and no doubt the method adopted by the Umpire, the 1st respondent, also had been seriously assailed. No doubt, elaborate submissions were made by both the Counsel pointing out the relevant portions of the award and making submissions -the petitioner seriously assailing the award and the 2nd respondent justifying the same.
26. As can be seen from the award report, it is clear that the Umpire had recorded the respective submissions and had taken note of the decisions on which reliance was placed by both the parties and had divided the questions involved into separate chapters or paragraphs and had recorded his reasons thereon. Adequacy of reasons may be a ground of attack in an application filed under Section 30 of the Act, provided the resultant effect attracts any one of the grounds under the said provision, and not otherwise. It is pertinent to note that the recording of reasons is something different from recording of adequate reasons. The approach to be adopted by the Arbitrators or the Umpires cannot be expected to be uniform always and while scrutinizing an award made under the Act by an Umpire or an Arbitrator, it has to be seen whether any one of the grounds specified under Section 30 of the Act are attracted. In State Bank of India v. Ram Das, Secunderabad, (DB), one of us (B. Sudershan Reddy, J) speaking on behalf of the Division Bench while dealing with the aspect as to what are reasons at Paras 13 and 14 had observed:
What are reasons: Reasons are nothing but intellectual faculty by which conclusions are drawn from premises; reaching conclusion by connected thought.
(i) A faculty of the mind by which it distinguishes truth from falsehood, good from evil, and which enables the possessor to deduce inference from facts or from propositions (Black's Law Dictionary-Fifth Edition).
(ii) Recording of reasons require coherent and logical thinking and drawing inference from conclusions by systematic analysis from facts known.
Reasons are the link between material on which certain conclusion are based and the actual conclusions. They disclose how the mind is applied and the subject-matter for decision. They should reveal the rational nexus between the facts considered and the conclusions reached. (See Union of India v. Mohan Lal Kapoor, AIR 1973 SC 2758. The reasons should demonstrate that there is logical and legal basis for their ultimate conclusions. The reasons provide means whereby a party is appraised of why a decision has been made".
In Union of India v. Mohan Lal Kapoor, AIR 1973 SC 2758, it was held :
"The giving of reasons in support of their conclusions by judicial and quasi-judicial authorities when exercising initial jurisdiction is essential for various reasons. First, it is calculated to prevent unconscious, unfairness or arbitrariness in reaching the conclusions. The very search for reasons will put the authorities on the alert and minimize the chances of unconscious infiltration of personal bias or unfairness in the conclusion."
The same view was expressed in S.N. Mukherjee v. Union of India, , and Raipur Development Authority v. Chokhamal Contractors, (1989) 2 SCC 721, and also Siemens Engineering and Manufacturing Company of India Limited v. Union of India, . In T.N. Electricity Board v. Bridge Tunnel Constructions, , the Apex Court at para 20 observed:
"Parliament has expressed that Legislative Judgment that the award shall state reasons upon which it is based unless the parties have agreed otherwise or the award is covered on agreed terms under Section 30 of the new Act. Thus, the law on the award, as governed by the new Act, is the other way about the pre-existing laws; it mandates that the award should state the reasons upon which it is based. In other words, unless (a) the parties have agreed that no reasons are to be given or (b) the award is an arbitral award on agreed terms under Section 30 of the new Act, the award should state the reasons in support of determination of the liability/nonliability. Thereby, the Legislature has not accepted the ratio of the Constitution Bench in Chokhamal Contractors case (1989(2) SCC 721) that the award, being in the private law field, need not be a speaking award even where the award relates to the contract of private parties or between person and the Government or public sector undertakings. The principle is the same, namely, the award is governed by Section 31(3)."
In the decision referred State Bank of India v. Ram Das, Secunderabad (supra), one of us (B. Sudershan Reddy, J.) had observed:
"But can it be said that giving of reasons is a mere formality? Does it mean that the Court should accept any and every observation of the Arbitrator as the reason given by the Arbitrator or Umpire, as the case may be? The requirement of giving reasons for any award is a legislative mandate as provided in the proviso to Section 14 of the Act. In our considered opinion any and every observation in the Award by the arbitrator cannot be construed as the reason for Award. The arbitrator's ipsi dixit assertion cannot be equated to that of a reason. The requirement of giving reasons means anything compelling the arbitrator to articulate the basis of findings showing a rational connection between the facts found and the conclusions reached. Vague and general observations cannot be concluded to be reasons in the Award."
..............
"Analysis of judicial precedents would lead to an irresistible conclusion that the Arbitrator/Umpire is duty bound and under statutory obligation to give reasons for the award and failure to give adequate and sufficient reasons would constitute an error of law on the face of the award requiring the Court's intervention."
A perusal of the award made by the 1st respondent/Umpire definitely reveals that reasons in detail had been recorded.
27. It is no doubt true that though the 2nd respondent had claimed under various heads, the Engineer by the letter dated 2-11-1976 had stated that extension was granted to the 2nd respondent due to various reasons i.e., civil commotion, break in supply of cement by VPT and strike in port area. It is also true that the claim made by the 2nd respondent is in relation to overheads for the extended period of time. It is also true that the Umpire was appointed in view of the difference between the arbitrators who were appointed by the respective parties. We have given our anxious consideration to the respective contentions raised by both the Counsel in relation to the recording of reasons by the 1st respondent/Umpire. The respective stands taken by the parties are well known - the petitioner totally disputing the award and the 2nd respondent making a serious attempt to sustain the said award. The whole correspondence had been taking into consideration and the terms of the contract also had been referred to and ultimately the 1st respondent/Umpire after making calculations in relation to the works done, having arrived at a particular conclusion, had made the award. For the purpose of better appreciation, though it is not necessary to deal with all the reasons recorded by the 1st respondent/Umpire in detail, one may have the cursory glance at certain of the reasons. At pages 45 and 46 of the award, the 1st respondent had specifically stated that he had examined the reasons and minutes of weekly progress meetings held by the Engineer's representative. Again, at pages 50 and 51 of the award, it was stated:
"In response to the claimant's letter dated 29-7-1976 (para 19 above) the respondents addressed letter dated 28-9-1976, to the Engineer, demanding rejection of claim of the claimants for which they gave following reasons:
(1) Claim being not in accordance with the provisions of contract and was totally inadmissible on following grounds:
(1) Claim has been made under Clause 12(2) without satisfying pre-conditions of the clause.
(2) Schedule J of Contracts C-2 and C-3 prohibits contractor to claim compensation on account of any delay in supply equipments beyond dates given in contract.
(3) As per contract Clause 2.6 page 6-1-11 and Clause 2.3 page 6-3-3, the contractor is responsible to choose quarries and supply rocks of required grading and quality and as such respondents are not liable for any claim.
(4) Clauses 20(2) and 42(1) cited by claimants were quoted out of context.
Clause 44 under which Engineer had given extension did not ipso facto confer any right on the claimants to claim reimbursement of expenses during extended period.
Concluding, the respondents demanded that the Engineer
(i) Reject the claim, being outside scope of contract, unjustified, untenable and as such liable to be rejected.
(ii) Send recommendations to impose levying of liquidated damages on account of respondents having suffered due to claimants not keeping scheduled progress seasonwise and not completing work as per stipulated dates (Pages R-57 to R-59).
Likewise, at Pages 86 and 87 of the award it was stated:
"I now examine the merits of contentions of the parties, keeping in view the documentary evidence placed before and letter and spirit of Clause 67 relevant to issue as detailed above.
1. Vide letter dated 10-1-1976 [a(iii), para 2 above], addressed to Engineer, the claimants indicate their intention to claim reimbursement of their overhead charges and depreciation during extended period.
2. Vide letter dated 2-2-1976 addressed by respondents to Engineer with copy to claimants, the respondents inform Engineer that there was no case whatsoever for claimants to claim reimbursement of overhead charges and depreciation.
From perusal of letter dated 2.2.1976, it is evident that a dispute has arisen between the parties on reimbursement of overhead and depreciation charges and respondents by addressing letter to Engineer has referred the dispute yet in principle to the Engineer.
3. Vide letter dated 29.7.1976, addressed to Engineer and copy to Respondents, claimants submit claim of Rs. 2,43,10,963/-with request to certify the claim to enable Respondents to make payment.
4. Vide letter dated 28.9.1976, addressed to Engineer, the Respondents challenge the claim on grounds of being outside scope of contract, untenable and unjustified. The Respondents demand that claim be rejected and demand possibility of levying liquidated damages on claimants.
From perusal of Respondents letter dated 28.9.1976, it is evident that vide this letter, the Respondents have convicted the claim dated 29.7.1976 of Claimants into a dispute and by addressing letter dated 28.9.1976 to the Engineer the dispute became referred to the Engineer for his decision (namely claimants demanding that Engineer to certify claim for payment and Respondents demanding its rejection and to recommend imposing liquidated damages) within the meaning of Clause 67. Thus the mandatory requirement of Clause 67 that before invoking arbitration, the dispute, in first instance, be placed before the Engineer for his decision stands fully implemented vide Respondents letter dated 28.9.1976 addressed to Engineer challenging the claim of claimants dated 29.7.1976 and demanding its rejection."
At Pages 109 and 110 of the award, it was stated by the 1st respondent/Umpire as hereunder:
"During hearings, I enquired of the Respondents what was the evaluated cost of special conditions of Tender bids C-2 and C-3 of the claimants. The Respondents stated that despite search they were unable to locate the old file (Reference summary record of 12th hearing, dated 28.1.1990). As such they were unable to furnish evaluated cost of Respondents to special conditions of the claimants bid. The Respondents have not furnished any comments whatsoever on the detailed calculations furnished by claimants on page C-169 for evaluated cost of reduction amounting to Rs. 7.38 crores.
I nevertheless have examined the reasonability of the claimants evaluated cost as follows:
1. Base value of bid of = Rs. 23.16 crores (second eligible tenderer HCC-Rs. 51.36 crores) (Page R-202)
2. Value of special condition = Rs. 7.38 crores (Not evaluated) withdrawn etc. (Page C-169) Total Bid value of claimants bid = Rs. 30.54 crores Base value + value of condition % reduction = 7.38/30.54 x 100 = 24.2% which is almost same as 25% profit kept by the claimants in their bid as submitted by them before Committee of Government of India in connection with escalation (Page R-208).
Before this Committee the claimants had also put up profit and loss accounts certified by Chartered Accountants that the claimants had lost Rs. 114.65 lakhs on the Visakhapatnam unit as a whole up to June 1975. As such withdrawal of condition wiped out the margin of profit kept by claimants entirely.
From perusal of above facts recorded in the documents placed before me, I consider that value of Rs. 7.38 crores as indicated by claimants as per calculations given on page C-169 is substantially borne out by the above details."
Specific findings had been recorded at Pages 116 and 117 and also at 121. At page 122, it was stated as hereunder:
"Therefore, the compensation for overheads which did not necessitate any team to be sent to Delhi for months to verify the accounts would work out to Rs. 5.62 lakhs as per calculation given below:
1. Value of work done during extended period of 1.6.1974 to 30.9.1975 Rs. 3,59,62,791.00 (No dispute between parties) (Page C-27)
2. Therefore compensation payable = 10% of 35962791 x 2.5/16 if claim is consider purely under overheads
- Rs. 5.62 lakhs Likewise, findings also had been recorded at pages 123, 127, 129 and 131 of the award and it was specifically stated at page 133 as hereunder:
"I also examined the note of Committee constituted by Government of India (Page R-202) which establishes that although the Committee could have justifiably awarded a sum of Rs. 300.3 lakhs as ex-gratia on escalation, they actually passed Rs. 75 lakhs. Evidently the Committee was ensuring minimum financial viability of Claimants to complete the work which was particularly necessary in the interest of public when the contractor's bid was not only the lowest but also by far low being 28 crores in base value alone lesser than second eligible tenderer.
(ii) Add value of special condition rates reduced by claimants Rs. 7.4 crores (iii) Contract value of Awards of works C-2 and C-3 Rs. 30.6 crores Proportionate cost of reductions given by claimants as per = 18.47/ 30.6 x .7.4 statement made by consulting = Rs. 4.47 crores Engineer that hold-ups not due to fault would be compensated Amount of instant claim on account of hold-ups due to no fault = Rs. 2.43 cores of claimants
Thus the instant claim of claimants is Rs. 2 crores lesser than the reductions given by the claimants to the Respondents that the Claimants would be compensated under Clause 12(2) for hold-ups to their work on any account not due to their fault."
Further findings had been recorded at pages 134 and 135 and ultimately the award was made.
28. It is no doubt true that contentions in detail had been advanced by the Counsel for the petitioner that the approach adopted by the 1st respondent/Umpire is not correct approach and hence the amount awarded cannot be sustained. In substance, the stand taken by the Counsel for the petitioner is that the reasons are unsustainable reasons.
29. The award in question is a reasoned award and a team of representatives had examined the basic records of the 2nd respondent pertaining to the items expenditure during the extended period and the 1st respondent/Umpire inspected the works in the presence of both the parties and examined the records with regard to the claim on 5-10-1988. It is also pertinent to note that the 1st respondent rejected the claim of the 2nd respondent in Arbitration Case No. 36A which pertains to the extra amount incurred by the 2nd respondent. An Umpire or an Arbitrator is a creature of an agreement and no doubt he is duty bound to enforce the terms of the agreement and cannot adjudicate the matter beyond the agreement. As can be seen from the award report, after 16 hearings in between August, 1988 and October 1990, after hearing the parties in detail represented by the Advocates, the award was made. Individual heads of claim had been specified, like claims by way of depreciation, machinery and equipment, salaries etc., covering individually, and reasons in detail had been recorded under different heads. It is also pertinent to note that the account books and records of expenses maintained by the 2nd respondent for the relevant period in relation to the heads of claims were made available both to the 1st respondent/Umpire and also to the petitioner for verification and check-up. Every aspect had been made clear and categorical and there was no hide and seek game at all. In fact, it was stated that at page 76 of the award that records pertaining to items of expenditure comprising claim amounts were verified by the Specialist deputed by the Port Trust/petitioner, particularly in relation to the claim of depreciation made by the 2nd respondent/claimant. The parties in fact deputed their specialist officers to jointly verify the cost of equipment, new and old, and verification was done on 27-6-1990 and 28-6-1990 and joint verification costs were also included in the submissions made by the 2nd respondent before the 1st respondent/Umpire. It is also pertinent to note that the petitioner had never pointed out any error in the claim at the time of examination of records by the 1st respondent/Umpire and these findings in fact had been recorded by the 1st respondent/Umpire. The verification also was done by the 1st respondent/Umpire himself in the presence of the parties and also in the presence of the specialists. In fact, pursuance to the letter by the petitioner dated 24-7-1977, the records were made available at Delhi by the 2nd respondent for verification by the team of specialists commencing from 2-5-1977 and at request of the petitioner's letter dated 25-7-1977, the 2nd respondent also furnished additional information sought for and the same had been examined and verified by the petitioner in the light of the letter dated 11-8-1977. It is also pertinent to note that the petitioner did not point out any defects in the claim though there was lapse of considerable time. Thus, reasons had been recorded in detail.
30. The observation of the 1st respondent/Umpire in relation to Rs. 5.62 lakhs is only in the context of a contention and cannot be equated to a finding. No doubt, the learned Counsel for the petitioner made an attempt to convince the Court that at the best the 2nd respondent may be entitled to the said amount. A mere contention cannot be equated with a finding. A stray sentence cannot defeat the detailed reasons recorded by the 1st respondent/Umpire while making the award. The award may have to be construed as a whole taking all the facts and circumstances of the case into consideration. It may be that in a suitable case, the award may be partly modified, but only for just and proper reasons since the Courts should be definitely slow in substituting their own findings to that of the reasons or the findings made by either the Arbitrators or the Umpires, as the case may be. In Ram Nath International Construction Pvt. Ltd. v. State of U.P., AIR 1998 SC 367, the Apex Court held:
"The first item of dispute relates to the work of excavating the canal section from Kms. 189.50 to Kms. 190.70 in addition to the earth work involved in lip cutting for this section and lining it. According to the respondent, in the Technical Specifications annexed to the contract, paragraph 2.09.01 stated that from Kms. 190.70 to Kms. 197 earth work involved is in lip cutting; and from Kms.189.5 to Kms. 190.7 whole of the canal section is to be excavated. In the pre-bid conference which was held, the minutes of the meeting record that departmental machines will be working from Kms. 190.7 to Kms. 197. The canal cross section available will be irregular and the contractor will have to excavate the remaining quantity to the dimensions shown. Between Kms. 189.5 and Kms. 190.7 whole of the canal cross section is to be excavated below ground level by the contractor. The respondent contends that excavating the canal is not extra work. But the rate for this work is not specified anywhere. Bill of Quantity, which is also annexed to the contract specifies the rates for different kinds of work which the contractor has to carry out. Item No. S. No. 1 provides for payment at the rate of Rs. 19/-per cubit metre of earth for "the earth work in lip cutting, transportation in embankment or spoil bank including all lead lefts mechanical compaction, dressing, dewatering as per specification." The rate for the work of excavation of the canal does not appear to be specified. The respondent contended before the arbitrator that payment at the rate of Rs. 19/- per cubic metre covered every kind of earth work and not just the earth work involved in lip cutting. While according to the appellant, this was extra work for which payment had not been specified and had to be agreed upon. There was clearly a dispute on the issue and the reference to arbitration clearly covers this dispute. The first item of Office Memorandum referring the dispute to arbitration relates to rate for extra work of earth work beyond lip cutting in the reach Kms. 189.50 to Kms.190.70. In view of the fact that this dispute was expressly referred to arbitration, we fail to see how it can be said that the decision on this dispute by the arbitrator is beyond the scope of the reference. Both parties argued this question before the arbitrator. The arbitrator has given a speaking award giving detailed reasons why he considers this work as extra work for which payment is required to be made to the contractor. We are not examining the correctness or otherwise of the conclusion reached by the arbitrator. It is a matter of interpretation of the contract and was referred by the parties to arbitration. The High Court was not right in coming to the conclusion that this dispute was beyond the scope of the reference to arbitration."
In P.K. Chinnasamy v. Superintending Engineer, Execution Circle, Madurai, , it was held at paras 2, 3 and 4 as follows:
"Mr. T. Raghavan, learned Counsel appearing for the contractor, would first submit that when the Court below found that there is no ground to set aside the awards, then by the very force of Section 17 of the Arbitration Act 10 of 1940, hereinafter referred to as the Act, the Court below is left with no other alternative but to proceed to pronounce the judgments according to the awards and upon the judgments being pronounced, decrees shall follow and the Court below committed an error in touching the awards on merits and passing decrees in terms of its own assessment of the claims. The implications of Section 17 are plain from the very language of it and the said provision reads as follows:
"17. Judgment in terms of award:- Where the Court sees no case to remit the arbitration for reconsideration or to set aside the award, the Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow, and no appeal shall lie from such decree except on the ground that it is in excess of, or not otherwise in accordance with the award."
If any decision has got to be adverted to, we can refer to the pronouncement of a Bench of this Court, to which one of us (Nainar Sundaram, J.) had been a party in Ranga v. Asha Films Exchange (1981) 2 Mad L.J. 68 where it has been observed as follows:
"Even a bare reading of Section 17 leaves no room for doubt that if the Court sees no cause to remit the award on any of the matters referred to arbitration for reconsideration under Section 16 or to set aside the award, the Court, after the time for making an application to set aside the award has expired or such application having been made, after refusing it, has no other alternative but to proceed to pronounce judgment according to the award and upon the judgment so pronounced a decree shall follow. It further lays down that no appeal shall lie from such decree except on the ground that it is in excess of or not otherwise in accordance with the award."
Hence, we find substance in the submission of Mr. T. Raghavan, learned Counsel appearing for the contractor, when a grievance is being expressed by him with regard to the Court below, having found no ground to set aside awards, yet touching the awards on merits and passing decrees in terms of its own assessment of the claims. Unless the Court sees cause to remit the award or any of the matters referred to arbitration for reconsideration, or to set aside the award, a definite and a positive result must follow and that is set out by the statute in Section 17. The Court has no option except to pronounce judgment according to the award. In the present case, the Court below found no cause for remittal or for setting aside as contemplated in Section 17. It is also not a case of modification on the contingencies set out in Section 15. The Court below touched the merits of the awards and passed decrees in terms of its own assessment of the claims. The legal propriety of this action on the part of the Court below is also being put in issue, which we shall presently deal with. By the implication of Section 17, judgments ought to have been pronounced according to the awards and the decrees ought to have followed. But, our answer to the above question does not bring a complete resolution to the controversy in the present Civil Miscellaneous Appeals and Revisions, because the Board has preferred independent Civil Miscellaneous Appeals, namely, C.M.A. Nos. 440 of 1983 and 415 of 1984 against the dismissal of its original petitions to set aside the awards. Mr. P.D. Dinakaran, learned Counsel appearing for the Board, would endeavour to submit that there are certain errors which, according to him, are legal, apparent on the face of records in the awards passed by the arbitrator and there is every justification for bringing the matters within the scope of Section 30 and in particular Clause (a) thereof of the Act, and setting aside the awards. Learned Counsel appearing for the Board would submit that this is a case where it must be held that the arbitrator has misconducted himself with reference to the controversy sought to be arbitrated by him. Learned Counsel for the Board is not in a position to expatiate his submission and demonstrate before us as to what are the errors of law apparent on the face of records in the awards and how the arbitrator could be held to have misconducted himself. His submission merely remained a theory without any substantiation. In fact, the Court below did not fine any error of law apparent on the face of records. At this juncture, we must take note of certain principles which have been countenanced as settled ones, by Courts including the highest in the land. The arbitrator is not bound to give a reasoned award. While passing an award, if he makes a mistake of law or of fact, not apparent on the face of records, it is not open for challenge. The award is bad only on the ground of error of law on the face of records. An error of law apparent on the face of records means that some erroneous legal proposition, which is the basis of the award, is found expressed in the award, itself or in a document actually incorporated or appended thereto, as part and parcel of the award. The Court has no jurisdiction to deal judicially with the merits of a case determined by the arbitrator. It is not the function of the Court to scrutinize the award on merits as if it is sitting in appeal on the verdict of the arbitrator. In the instant cases, as already noted, no error of law, apparent on the face of records, has been noticed by the Court below. On the other hand, the Court below has chosen to investigate into the merits of the claims and deal with them as if it is an appellate forum. This is totally untenable and not permissible. There is a plethora of decisions, even of the highest Court in the land, on the subject and it is sufficient if we refer to some of them as follows:
(i) N. Chellappan v. Kerala State Electricity Board, ;
(ii) Coimbatore District P.T. Samgam v. Bala Subramania Foundry, ; and
(iii) Raipur Development Authority v. Chokhamal Contractors, (1989) 2 SCC 721 : AIR 1990 SC 1426.
The principles have also been taken note of by a Bench of this Court, to which one of us (Bellie, J) had been a party in The Superintending Engineer, Tward Board, Madurai v. A.C.L. Irudayaraj and Anr. -C.R.P. Nos. 1926 to 1940 of 1981 etc. Batch - (Judgment dated 4-3-1987).
When we take note of the above principles and apply them to the facts of the present cases, we find no scope for the Court to invoke the aid of Section 30 of the Act for the purpose of setting aside the awards. If that is so, we find that the dismissals of O.P. 172 and 173 of 1980 by the Court below are perfectly in order and they do not require interference at our hands. Once there is a refusal to set aside the award, then the implications of Section 17 of the Act come into play and as we have already noted, there is no other alternative for the Court, except to pronounce a judgment, as per the terms of the award, which shall be followed by a decree. The Court below committed an error when it touched the awards on merits and passed decrees in terms of its own assessment of the claims. It is true that the Board has filed revisions i.e., C.R.P. 2144 and 677 of 1982, impeaching the action of the Court below in passing the decrees as it did. But, they have no significance at all, in the view of the matters, which we have taken. The resultant position, as per our discussion, is as follows:
(i) C.M.As. Nos. 493 and 494 of 1982 are allowed and we pronounce judgments according to the terms of the awards and decrees upon our present judgments shall follow.
(ii) C.M.A. Nos. 440 of 1983 and 415 of 1984 are dismissed.
(iii) C.R.P. Nos. 2144 and 677 of 1982 are dismissed.
The contactor would be entitled to costs in all the matters."
In State of Rajasthan v. Puri Construction Company Ltd., , it was held at paras 29 and 32 as follows:
"It may also be mentioned here that it is not necessary to indicate in the award compensation made for various heads and it is open to the arbitrator to give a lump sum award. In this connection, reference may be made to the decisions made in State of Rajasthan v. R.S. Sharma and Co., , State of Orissa v. Lall Bros., and in Roshanlal Mahajan v. Hukumchand Mills Ltd., .
.........
The contentions about factual errors and omissions apparent on the face of record as raised in the written argument are essentially errors and omissions in not properly considering the materials on record, in misreading and misconstruing such materials and consideration of some documents and statements out of their contexts. The arbitrators have given the award by referring to various documents and statements available on record and indicating the reasons for basing the findings. Even if it is assumed that on the materials on record, a different view could have been taken and the arbitrators have failed to consider the documents and materials on record in their proper perspective, the award is not liable to be struck down in view of judicial decisions referred to hereinbefore. Error apparent on the face of the record does not mean that on closer scrutiny of the import of documents and materials on record, the finding made by the arbitrator may be held to be erroneous. Judicial decisions over the decades have indicated that an error of law or fact committed by an arbitrator by itself does not constitute misconduct warranting interference with the award. It does not appear to us that the findings made by the arbitrators are without any basis whatsoever and are not referable to documents relied upon and such findings are so patently unjust or perverse that no reasonable man could have arrived at such findings. Hence, on the score of alleged misreading, misconstruction, misappreciation of the materials on record or failure to consider some of the materials in their proper perspective, the impugned award is not liable to be set aside. It has been urged that computation of lump sum damage in the absence of any material showing actual loss suffered by the contractor is patently unjust and improper warranting interference by this Court. Lump sum award by itself is not illegal as held in a number of decisions of this Court. The contractor's case was that because of delay in handing over the site and for non-supply or delayed supply of materials essential for the construction work thereby putting obstacles and hindrances to execute the work within the stipulated time and ultimately repudiating the contract and seizing machines etc. of the contractors, he not only suffered huge loss but was practically reduced to bankruptcy. It is the case of the contractor that on account of illegal seizure of costly machines by the appellant, he was prevented from undertaking other works of contract. A part of machines seized by the appellant have been sold for Rs. 20 lakhs. In the award, the arbitrators have recorded that the appellant admitted that the remaining machines would cost about Rs. 5 lakhs. That apart, constructions of labour quarters, laying of roads etc., at substantial cost incurred by the contractor have been utilised by the appellant after repudiation of contract. It may be stated here that the first part of construction work of Mahi Bajaj Sagar Dam was given to M/s R.S. Sharma. A lump sum award of Rs. 75,41,755.00 was awarded in favour of M/s R.S. Sharma. The machines of M/s R.S. Sharma were not seized by the appellant. Such lump sum award of more than Rs. 75 lakhs without indicating how such quantum was determined has been upheld by this Court and the decision is reported in State of Rajasthan v. R.S. Sharma and Co., . The respondent contractor has urged that the machines including those seized and sold at depreciated value will now cost about Rs. 2.5 crores of rupees. Considering the magnitude of work involving costly machines and materials, if the two arbitrators in their wide experience have quantified the total damage and have given the award for Rs. 1 crore in favour of the respondent, it cannot be held that such award is so patently unjust and irrational and shocking to the conscience of the Court, that the same should be interfered with. As already indicated, in the case of other contractor concerning first part of the work in Mahi Bajaj Sagar Dam, namely, R.S. Sharma & Co. the arbitrators quantified damages to the extent of over Rs. 75 lakhs without indicating how such damages had been quantified. But challenge to such award by the State of Rajasthan failed and the award has been upheld by this Court. We, therefore, dismiss the petition of objection and additional objection challenging the validity of the award."
31. The jurisdiction and power of the Court to interfere with a reasoned award and the parameters thereof had been well settled by the different judicial pronouncements. In the decision referred State Bank of India v. Ram Das, Secunderabad (supra), one of us (B. Sudershan Reddy, J.) speaking on behalf of the Bench while dealing with this aspect at paras 23 to 25, had observed:
"It is well settled that the Arbitrator's award is generally considered to be binding on the parties since the Arbitrator is a Tribunal selected by the parties. It is also equally well settled that the Court while considering the validity of the Award does not sit as an appellate Court. It cannot reappreciate or reassess the evidence and material on record for substituting its own views for that of the Arbitrator. The power of the Court to set aside the award is circumscribed and an award can be set aside by the Court only on the grounds set out under Section 30 of the Act of 1940 viz., (a) where the arbitrator has misconducted himself or the proceedings; (b) where the award has been made after issue of an order by the Court superseding the arbitration or after the arbitration proceedings have become invalid under Section 35; and (c) where the award has been improperly procured or otherwise invalid.
The law is well settled that the Court can set aside the award under Clause (c) of Section 30, if it suffers from an error on the face of the award. Even before the Amendment Act the award could be set aside on the ground of error on the face of it when the reasons given by the decision, either in the award or in any document incorporating with it or based upon a legal proposition which is erroneous.
It is true that the Court cannot probe the mental process of the Arbitrator and speculate, where no reasons are giver by the Arbitrator, as to what impelled the Arbitrator to arrive at his conclusion. But where the Arbitrator is required to give reasons in support of his decision, it would be 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 basis of recording of such reasons. The reasonableness of the reasons given by the Arbitrator cannot, however, be challenged. The Arbitrator is the sole Judge of the quality, as well as quantity of the evidence. It is true that there is no obligation on the part of the Arbitrator/Umpire to give any detailed judgment, But intelligible indication of the grounds should be available to find out the mind of the Arbitrator for his action. Reasons should not only be intelligible but also deal with the substantial points. (See Indian Oil Corporation Ltd. v. Indian Carbon Ltd., ; Bijendra Nath Srivastava v. Mayank Srivastava, ; and B. V. Radhakrishna v. Sponge Iron India Ltd., ."
In State of U.P. v. Ram Nath International Construction Pvt., Ltd., , it was held at para 7 by the Apex Court as follows:
"The jurisdiction of the Court to interfere with an award of an arbitrator is undoubtedly a limited one. The adjudication of the arbitrator is generally binding between the parties and it is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion. Award of an arbitrator can be set aside by a Court only on the grounds indicated in Section 30 of the Arbitration Act. It is not open to the Court to reassess the evidence to find whether arbitrator has committed any error or to decide the questions of adequacy of evidence and the Court cannot sit on the conclusion of the arbitrator by re-examining and re-appreciating the evidence considered by the arbitrator. At the same time the arbitrator is a creature of the agreement itself and therefore is duty bound to enforce the terms of the agreement and cannot adjudicate a matter beyond the agreement itself. If the arbitrator adjudicates a claim of a contractor with reference to the clauses of the agreement itself whereby the agreement gets engrafted into the award, it will be open to the Court to examine those clauses of the agreement and find out the correctness of the conclusions of the arbitrator with reference to those clauses. Bearing in mind the aforesaid parameters for exercise of jurisdiction by Court in examining the legality of an award of an arbitrator, the award in hand as well as the order of the Subordinate Judge and that of the High Court requires scrutiny."
In Buendra Nath Srivastava (Dead) Through LRs v. Mayank Srivastava, , it was Held by the Apex Court at para 20 as follows:
"We would now proceed to deal with the question as to whether the High Court was right in setting aside the award made by the arbitrator. As regards an award made by an arbitrator under the Act the law is well settled that the arbitrator's award is generally considered binding between the parties since he is the Tribunal selected by the parties. The power of the Court to set aside an award is restricted to the grounds set out in Section 30 of the Act, namely, (a) where the arbitrator in misconducted himself or the proceedings; (b) where 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; and (c) where the award has been improperly procured or is otherwise invalid. The Court can set aside the award under Clause (c) of Section 30 if it suffers from an error on the face of the award. An award might be set aside on the ground of an error on the face of it when the reasons given by the decision, either in the award or in any document incorporated with it, are based upon a legal proposition which is erroneous. In the absence of any reasons for making the award, it is not open to the Court to interfere with the award. The Court cannot probe the mental process of the arbitrator and speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. An award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed grave mistake in arriving at his conclusion. The arbitrator is under no obligation to give reasons in support of the decision reached by him unless under the arbitration agreement or deed of settlement he is required to give such reasons. If the arbitrator or Umpire chooses to give reasons in support of his decision it would be 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 basis of the recording of such reasons. The reasonableness of the reasons given by the arbitrator cannot, however, be challenged. The arbitrator is the sole Judge of the quality as well as the quantity of the evidence and it will not be for the Court to take upon itself the task of being a judge of the evidence before the arbitrator. The Court should approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal. (See : Champsey Bhara and Co. v. Jivraj Balloo Spg. and Wvg. Co. Ltd., AIR 1923 PC 66; Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji, , Sudarsan Trading Co. v. Government of Kerala, , Raipur Development Authority v. Chokhamal Contractors and Santa Sila Devi v. Dhirendra Nath Sen, AIR 1990 SC 1426)."
In Hindustan Construction Company Limited v. State of Jammu and Kashmir, , the Apex Court held:
"The present case is precisely one of the same type as the one before the Judicial Committee. The arbitrators have just awarded amounts to the contractor, against its claims, on Item Nos. 2 and 5. They make no reference to the contract or any of its clauses. Yet, the State contends that since these are items covered by certain terms of the contract, the Court should look at those terms and interpret them; if this is done, it is said, the State's interpretation is bound to be accepted and that apparently accepted by the arbitrators will be found to be wrong. It is this contention that has been accepted. This cannot be done. Even if, in fact, the arbitrators had interpreted the relevant clauses of the contract in making their award on the impugned items and even if the interpretation is erroneous, the Court cannot touch the award as it is within the jurisdiction of the arbitrators to interpret the contract. Whether the interpretation is right or wrong, the parties will be bound; only if they set out their line of interpretation in the award and that is found erroneous can the Court interfere."
In Puri Construction Pvt. Ltd. v. Union of India, , while dealing with objections to an award and the scope and ambit and the jurisdiction of the Court it was held that when a Court is called upon to decide the objections raised by a party against an arbitration award, the jurisdiction of the Court is limited, as expressly indicated in the Act and it has no jurisdiction to sit in appeal and examine the correctness of the award on merits. In Sudarsan Trading Company v. Government of Kerala, , the Apex Court held at para 31 :
"....But, in the instant case the Court had examined the different claims not to find out whether these claims are within the disputes referable to the arbitrator, but to find out whether in arriving at the decision, the arbitrator had acted correctly or incorrectly. This, in our opinion, the Court had no jurisdiction to do, namely, substitution of its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid or damages liable to be sustained was a decision within the competency of the Arbitrator in this case. By purporting to construe the contract the Court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction. It has to be determined that there is a distinction between disputes as to the jurisdiction of the Arbitrator and the disputes as to in what way that jurisdiction should be exercised. There may be a conflict as to the power of the arbitrator to grant a particular remedy (See Commercial Arbitration by Sir M.J. Mustill and Steward C. Body page 84)."
In Alien Berrt and Co. v. Union of India, , the Apex Court observed at para 12 as follows:
"The question raised by Counsel is that the umpire failed to consider all these documents while considering the scope and content of the contract of sale and relied on only sale-note No. 160, dated 11-7-1946, that the contract was not contained in the said Note 160 alone, and that therefore, he misconstrued the contract, and that that misconstruction, which is a point of law, is apparent on the face of the award, as it was made the very basis of the award.
The first three issues raised by the umpire were:
(1) whether the appellant was entitled to prove that any vehicles, stores, etc., other than those mentioned in the sale-notes were sold to it:
(2) whether the Government was bound by the clarifications, representations, explanations or assurances made or given by any officer or officers of the Department regarding the subject-matter of the contracts of sale except those necessarily implicit in the sale-notes; and (3) whether the Government sold any vehicles except those lying in Moran Depot on 11-7-1946, or those intended to be moved thereto."
In Tarapore and Company v. Cochin Shipyard Ltd., Cochin, , it was held by the Apex Court at para 13 as follows:
"Mr. F.S. Nariman, learned Counsel for the appellant urged that Section 16(1)(c) may permit the Court to remit or set aside the award on the ground that there is an error of law apparent on the face of it, yet where a specific question of law has been referred to the arbitrator for decision, the fact that the decision is erroneous does not make the award bad on its face so as to permit its being set aside. Expanding the submission, it was urged that a decision on a question of law by an arbitrator may be given in two different and distinct situations: firstly where while deciding a dispute referred to him incidentally a question of law may arise which an arbitrator may decide in order to dispose of the reference and if in such a situation any error of law appears on the face of the award, the Court can interfere with the award. But there is altogether an independent and a distinct situation in which a question of law might arise such as where the parties to the dispute may frame the specific question of law and refer it to the arbitrator for his decision. In the later situation, it was urged that the decision of the arbitrator even if erroneous would not permit the Court to interfere with the award. Proceeding along it was urged that in this case a specific question of law touching upon the jurisdiction of the arbitrator was specifically referred to the arbitrator for his decision and therefore, the decision of the arbitrator is binding on the parties and the Court cannot proceed to inquire whether upon a true construction of the arbitration clause, the dispute referred to the arbitrator for arbitration would be covered by the arbitration clause so as to clothe the arbitrator with the jurisdiction to arbitrate upon the dispute."
In Hindustan Tea Company v. K. Sashikant Co. and Anr., , it was held at para 2 that:
".....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."
In Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar and Anr, , it had been observed by the Apex Court in para 4 of the Judgment that:
"......The Arbitrator in our opinion is the sole Judge of the quality as well as the quantity of evidence and it will not be for this Court to take upon itself the task of being a Judge of the evidence before the Arbitrator. It may be possible that on the same evidence the Court might have arrived at a different conclusion than the one arrived at by the Arbitrator but that by itself is no ground in our view for setting aside the award of an arbitrator."
In U.P. Hotels v. U.P. State Electricity Board, , the Apex Court observed:
".....Even assuming, however, that there was an error of construction of the agreement or even that there was an error of law in arriving at a conclusion, such an error is not an error which is amenable to correction even in a reasoned award under the law. Reference may be made to the observations of this Court in Coimbatore Distt. P.T. Samagam v. Bala Submmania Boundary, , where it was reiterated that an award can only be set aside if there is an error on its face. Further, it is an error of law and not mistake of fact committed by the Arbitrator which is justiciable in the application before the Court. Where the alleged mistakes or errors, if any, of which grievances were made were mistakes of facts if at all, and did not amount to error of law apparent on the face of the record, the objections were not sustainable and the award could not be set aside."
In Hydel Construction Ltd. v. H.P. State Electricity Board, 1999 (3) Arb.LR 288 (H.P.), while dealing with the scope of interference and the powers of the Court under Section 30 of the Act it was held at para 26 as follows:
"The legal propositions stated by the various judgments are as under:
(1) The Arbitrator is the final Judge all questions both of law and fact;
(2) The Arbitrator is the sole Judge of the quality and quantity of evidence;
(3) It is not open to the Court to re-examine and re-appreciate the evidence considered by the arbitrator to hold that the conclusion reached by the Arbitrator is wrong;
(4) The Court cannot sit in appeal over the view of the Arbitrator by re-examining and re-appraising the materials;
(5) Where two views are possible, the Court is not justified in interfering with the award by adopting its own interpretation;
(6) An Arbitrator is not required to give a detailed judgment while rendering even a reasoned award;
(7) The Arbitrator is a creature of the agreement itself and, therefore, is duty bound to enforce the terms of the agreement and cannot adjudicate a matter beyond the agreement. Court can find out the correctness of the conclusions of the Arbitrator with reference to those clauses.
(8) Award, on the face of it, based on erroneous proposition of law and no evidence, can be interfered with."
In Oil and Natural Gas Corporation Limited v. Saw Pipes Limited, , the Apex Court while dealing with the ambit and scope of Court's jurisdiction in case where award passed by the arbitral Tribunal is challenged under Section 34 of the Arbitration and Conciliation Act, 1996, had observed at para 55:
"It is true that if the arbitral Tribunal has committed mere error of fact or law in reaching its conclusion on the disputed question submitted to it for adjudication then the Court would have no jurisdiction to interfere with the award. But, this would depend upon reference made to the arbitrator; (a) If there is a general reference for deciding the contractual dispute between the parties and if the award is based on erroneous legal proposition, the Court could interfere; (b) It is also settled law that in a case of reasoned award, the Court can set aside the same if it is, on the face of it, erroneous on the proposition of law or its application; (c) If a specific question of law is submitted to the arbitrator, erroneous decision in point of law does not make the award bad, so as to permit of its being set aside, unless the Court is satisfied that the arbitrator had proceeded illegally."
In the same decision, the Apex Court after discussing the relevant case law on the subject, at para 69, had further observed :
"From the aforesaid discussions, it can be held that:-
(1) Terms of the contract are required to be taking into consideration before arriving at the conclusion whether the party claiming damages is entitled to the same;
(2) If the terms are clear and unambiguous stipulating the liquidated damages in case of the breach of the contract unless it is held that such estimate of damages/compensation is unreasonable or is by way of penalty, party who has committed the breach is required to pay such compensation and that it what is provided in Section 73 of the Contract Act;
(3) Section 74 is to be read along with Section 73 and, therefore, in every case of breach of contract, the person aggrieved by the breach is not required to prove actual loss or damage suffered by him before he can claim a decree. The Court is competent to award reasonable compensation in case of breach even if no actual damage is proved to have been suffered in consequence of the breach of a contract;
(4) In some contracts, it would be impossible for the Court to assess the compensation arising from breach and if the compensation contemplated is not by way of penalty or unreasonable, Court can award the same if it is genuine pre-estimate by the parties as the measure of reasonable compensation."
32. In view of the limitations imposed by law in disturbing a reasoned award made by the an Arbitrator or an Umpire, it is to be seen whether the present impugned award made by the 1st respondent/Umpire is liable to be set aside for any one of the grounds specified under Section 30 of the Act. The grounds urged are misconduct on the part of the Umpire, that the terms of the contract had not been interpreted properly, and further raising a ground that the award had been improperly procured or is otherwise invalid in any other terms. We have given our anxious consideration to several contentions raised by the respective parties, but unfortunately we are unable to see any serious legal infirmity pointed out attracting any one of the grounds under Section 30 of the Act so as to interfere with the impugned award. Further, reasons in detail had been recorded in relation to the arbitral dispute within the meaning of Clause 67 of the contract referred to supra. The main core of the submission of the learned Counsel for the petitioner is that the method or approach adopted by the 1st respondent/Umpire is erroneous. It may be that on the construction of the terms of the contract and also the respective contentions of the parties, two views are possible and the Umpire had chosen to adopt a particular method, and such reasoned award where clear findings for arriving at the conclusions had been specifically furnished by the 1st respondent/Umpire, in view of the limitations imposed by law, we are of the opinion that such award cannot be disturbed on the ground that yet another view canvassed by the petitioner acceptable and hence the views expressed by the umpire in this regard are unsustainable. When the parties had chosen a reference to an Arbitrator or an Umpire, the Arbitrator or the Umpire having entered upon the reference had recorded reasons and made the award. Unless an error apparent on the face of the record or serious legal infirmities falling within any one of the grounds under Section 30 of the Act are pointed out, the same should be left untouched. On a meticulous perusal of the award made and the findings recorded on each of the submissions, we are of the considered opinion that the impugned award does not suffer from any legal infirmity and none of the grounds specified under Section 30 of the Act are attracted and hence the O.P. filed by the petitioner is bound to fail.
33. We have answered the questions raised and argued by the respective Counsel. No other grounds had been urged by the Counsel representing the parties.
34. Before parting with the case, we are constrained to observe that it is really unfortunate that arbitration proceedings are being delayed so much defeating the very object of invoking an arbitration clause. The delay of disposal of arbitration matters may have to be deprecated, for whatever reasons it may be, since the arbitration proceedings are meant as a devise of alternative dispute resolution system with the object of having settlement of dispute at the earlier point of time.
35. For the foregoing reasons recorded above, there is no merit in the O.P. filed by the petitioner and accordingly the O.P. shall stand dismissed. However, in the peculiar facts and circumstances of the case, this Court makes no order as to costs.