Andhra Pradesh High Court - Amravati
The State Of Ap Another vs Teen Murthy Enterprises Another on 12 March, 2020
Author: C.Praveen Kumar
Bench: C.Praveen Kumar, Battu Devanand
HON'BLE SRI JUSTICE C.PRAVEEN KUMAR
AND
HON'BLE SRI JUSTICE BATTU DEVANAND
C.M.A. No.794 of 2015
JUDGMENT:(per the Hon'ble Sri Justice C.Praveen Kumar)
1. With the consent of both the counsel, the main C.M.A. is disposed.
2. Assailing the order in A.O.P.No.21 of 2001 on the file of the II Additional Senior Civil Judge, Visakhapatnam, dated 29.9.2012, the present C.M.A. is filed by the State of Andhra Pradesh under Section 39 of Arbitration Act, 1940.
3. The facts, which lead to filing of the appeal, are as under :
The 1st respondent, who is a class-1 civil contractor, being successful tenderer, entered into a contract with the Government of Andhra Pradesh under Agreement No.C.R.(L.S.) 83/87-88, dated 29.6.1987 for construction of the bridge across river Nagavali, with formation of approach road near Thotapalli regulator at K.M.104/10 of Kalingapatnam-Srikakulam-Parvathipuram road for a value of Rs.91,18,280/-. It is alleged that the land was handed over to the contractor on 15.7.1987 with a condition that the contractor has to complete the work within a period of eighteen months. But, however, on 29.8.1991 the 1st respondent abandoned the work and consequently the contract was terminated with effect from 2.11.1991. It is said that the contractor could do only work to an extent of Rs.25.19 lakhs as against the work of 77.89 lakhs. The events lead to filing of 2 O.S.No.540 of 1991 by the respondent-contractor before the III Additional Subordinate Judge, Visakhapatnam under Section 20 of Arbitration Act, seeking a direction to the appellant herein to file the contract agreement before the Court to adjudicate upon the dispute by itself or by appointing an Arbitrator and to restrain the appellant herein from invoking bank guarantees pending adjudication. After contest, the court by its order dated 12.12.1997, allowed the suit and accordingly dispute was referred to an Arbitrator by name Sri P.V.Janardhan Rao, a retired Judicial Officer. This order appointing the Arbitrator was never challenged by the appellant herein, as such, the same has become final.
4. Pursuant thereto, the Arbitrator conducted the proceedings and passed an Award dated 30.1.2001 allowing claims to an extent of Rs.35,53,956/- as against the total value of Rs.87,87,000/-. It is to be noted here that even before the Arbitrator the main issue which was raised was with regard to his jurisdiction to adjudicate the dispute. Rightly so, the Arbitrator held that it is beyond his scope to adjudicate upon his own jurisdiction, more so, when the order of the civil Court has become final. Aggrieved by the Award of the Arbitrator the State preferred A.O.P. No.21 of 2001 before the II Additional Senior Civil Judge, Visakhapatnam, under Sections 30 and 33 of the Arbitration Act, 1940. Though various grounds came to be raised touching the merits of the matter, but, a reading of the order indicates that the appellant-Government confined the contest only to the jurisdiction of the Arbitrator on the ground that there is a bar, in view of G.O.Ms.No.430, dated 24.10.1983 and G.O.Ms.No.160, dated 1.6.1987. Considering the evidence available on record and having regard to the judgment of 3 the Supreme Court in Kodandaram Redy Vs. State of A.P.1, the appeal was dismissed. Challenging the same, the present appeal came to be filed.
5. Learned Advocate General appearing for the State of Andhra Pradesh would submit that the Arbitrator while taking a decision on claim No.1, relating to escalation of charges due to variation of prices of materials, oils, labour etc., went beyond the original agreement period i.e., from 14.1.1989 to 31.10.1991 and awarded a sum of Rs.9,10,000/-, which is illegal, improper and incorrect. It is pleaded that foot note to schedule A1 Item No.7 at page No.91 of the agreement, by express term bars, any escalation of rates and as such any escalation made by the Arbitrator is beyond his jurisdiction. It is further pleaded that Arbitrator has awarded escalation in rates based upon Consumer Price Index for industrial workers issued by the Reserve Bank of India, Bulletin No.27 and that the same cannot be taken as the basis for granting escalation as work executed and material required for the purpose of work does not depend upon the Consumer Price Index. It is urged that the Arbitrator passed his Award only on presumptions and assumptions and on a hypothetical figures furnished by the contractor. It is further submitted that the Contractor did not furnish any material before the Arbitrator to come to a conclusion that the value of work executed between 14.1.1989 and 31.10.1991 was Rs.18.20 lakhs. It is also urged that, when all the material is supplied by the Department, question of escalation in rates does not arise and even if there is escalation in rates, the same cannot be awarded in favour of the contractor, as he did not 1 2011(1) SCC 197 4 incur any expenditure for purchase of the said material. Therefore, it is pleaded that grant of escalation for the work executed from 14.1.1989 to 31.10.1991 is an error apparent on the face of the record.
6. On the other hand, Sri V.Ravinder Rao, learned Senior Counsel appearing for Sri M.Jayaram Reddy, would contend that though the Department handed over the site on paper on 15.7.1987, the certificate to this effect was also appended to the copy of the agreement, but as per the actual ground condition, the Department has not even initiated land acquisition proposals for the land to which the approach road on both sides of the proposed new bridge was to be laid. Hence, it is urged that as on the date of handing over of the site for the entire work, the Department is only in possession of river portion and not the land. Believing the representations made by the Department, men and machinery were mobilized to start the work. In fact, pursuant to the letters given by the Department, strength of the workers and machinery was also increased. As the process of acquisition could not take place, the 1st respondent was not in a position to do any work and on the other hand, it has to face protests from the land owners.
7. Learned counsel for the respondent mainly submits that the only ground urged by the appellant before the court was with regard to appointment of an Arbitrator which was answered against them. Without confining to the argument advanced before the civil Court, the appellant is now raising various issues to cling the merits of the case, besides maintainability of the arbitration, which is impermissible under law. He pleads that the order 5 impugned clearly indicates the grounds raised and the reasons given. When all other grounds were given up, the question of again going into the merits of the case may not be proper.
8. The same is opposed by the learned Advocate General stating though grounds of appeal indicate that the main ground raised before the civil court was with regard to appointment of an Arbitrator and his jurisdiction, but a reading of the whole shows that grounds are raised touching the merits of the case. Hence, pleads that it does not debar them from raising issues on merits as well.
9. It cannot be said that the order passed by the civil Court appointing the arbitrator is a nullity in these proceedings. Even assuming that it was an erroneous decision taken by the civil Court, the remedy lies elsewhere as long as order is in existence.
Raising a dispute with regard to the appointment of an Arbitrator cannot be gone into in the ancillary proceedings. Apart from that, having participated in the arbitration proceedings fully and contested the claim on merits, without challenging the jurisdiction of the Arbitrator, it would be unfair on the part of the appellant to challenge the very same issue in an ancillary proceedings. In fact, the Apex Court in Renusagar Power Co. Ltd. Vs. General Electric Co.2 categorically held that the Arbitrator will not have any power to decide his own jurisdiction in which the question of either existence or validity of the arbitral agreement was involved.
The relevant paras of the judgment are as follows :
2(1984) 4 SCC 679 6 "25. Four propositions emerge very clearly from the authorities discussed above :
1. Whether a given dispute inclusive of the arbitrator's jurisdiction comes within the scope or purview of an arbitration clause or not primarily depends upon the terms of the clause itself; it is a question of what the parties intend to provide and what language they employ,
2. Expressions such as "arising out of" or "in respect of" or "in connection with" or "in relation to" or "in consequence of" or "concerning" or "relating to" the contract are of the widest amplitude and content and include even questions as to the existence, validity and effect (scope) of the arbitration agreement.
3. Ordinarily as a rule an arbitrator cannot clothe himself with power to decide the questions of his own jurisdiction (and it will be for the Court to decide those questions) but there is nothing to prevent the parties from investing him with power to decide those questions, as for instance, by a collateral or separate agreement which will be effective and operative.
4. If, however, the arbitration clause, so widely worded as to include within its scope questions of its existence validity and effect (scope), is contained in the underlying commercial contract then decided cases have made a distinction between question as to the existence and or validity of the agreement on the one hand and its effect (scope) on the other and have held that in the case of former those questions cannot be decided by the arbitrator, as by sheer logic the arbitration clause must fall along with underlying commercial contract which is either non-existent or illegal while in the case of the latter it will ordinarily be for the arbitrator to decide the effect or scope of the arbitration agreement i.e. to decide the issue of arbitrability of the claims preferred before him.
57. In view of the position which arises from the aforesaid discussion it is really unnecessary for us to go into and decide the question whether, in cases where the arbitration clause contained in the underlying Commercial Contract is so widely worded as to include within its scope the questions of its existence, validity or effect (scope), the decided cases have made a distinction between questions as to the existence or validity of the agreement on the one hand and its effect (scope) on the other and have held that in the case of the former those questions cannot be decided by the arbitrators, as by sheer logic the arbitration clause must fall along with the underlying Commercial Contract which is either non- existent or illegal, while in the case of the latter it will ordinarily be for the arbitrators to decide the effect (scope) of the arbitration agreement as is contended for by Counsel for G.E.C., because both under the scheme of the Foreign Awards Act as well as under the 7 general law of arbitration obtaining in England and in India, the decision of the arbitrator on the question of his own jurisdiction will have to be regarded as provisional or tentative, subject to final determination of that question by the Court. However, on a consideration of the rival authorities that have been cited at the Bar bay Counsel on either side we are inclined to accept the contention of Counsel for G.E.C. for the following reasons : (a) that conceptually a challenge to the existence or validity of the arbitration agreement contained in an underlying Commercial Contract is fundamentally different from an inquiry into the scope and effect of such agreement in as much as the former goes to the root of the arbitration agreement whereas the latter pre-supposes that the arbitration agreement exists in fact and in law and the inquiry is then undertaken as to its true scope and effect; (b) that indisputably, decided cases have made this distinction between the two concepts, e.g. in Jawahar Lal Barman's case (supra) this Court has noted this distinction for the purposes of procedural aspects arising Under Sections 31(2), 32 and 33 of the Arbitration Act, 1940, but the English cases particularly Heyman v. Darwins Ltd, (supra) and Willesford v. Watson (supra) have made that distinction substantively; (c) that certain observations made by this Court in para 6 of its judgment in Water Supply Service India (P) Ltd. v. The Union of India and Ors. (AIR 1971 SC 2083) on which Counsel for Renusagar have relied in support of their contention that existence of an arbitration agreement is the same as the effect (scope) thereof, do not, in our view, have the effect of equating the question of the scope of the arbitration agreement with the question of its existence; in that case the application made Under Section 5 of the Arbitration Act to revoke the arbitration was obviously mis-conceived inasmuch as the ground on which the revocation was sought was that the disputes sought to be referred to arbitration were not within the purview of the arbitration clause and it was in that context that the observations were made in para 6 of the judgment to say that such a dispute was as regards the existence of the arbitration agreement; in fact, the ratio of the decision was that the controversy raised in the case fell within the scope of Section 33 of the Arbitration Act and not Section 5; in any case, in our view, the incidental observation in para 6 of the judgment in that case on which Counsel for Renusagar have relied cannot outweigh the distinction which has been noticed by this Court in its well-considered judgment in Jawahar Lal Barman's case (supra); (d) that an analysis of several decisions cited at the Bar, we venture to suggest, shows that almost all the decision which articulate the principle broadly by saying that an arbitrator has no power to decide questions of his own jurisdiction are cases in which the question of either the existence 8 or the validity of the arbitration agreement was involved, whereas whenever the question of arbitrator's jurisdiction depended upon the scope or effect of the arbitration agreement Courts appear to have readily directed the parties to go before the arbitrators; and (e) in any event the decision of the Court of Appeal in Chancery in Williesford v. Watson (supra)-which decision has been annotated and digested in Russell on Arbitration (20th Edn.)-is a clear authority for the proposition that where the arbitration clause was very widely worded so as to include within its scope any dispute "touching the construction of" the contract which contained the arbitration clause, the Court would not decide but would leave it to the arbitrator to decide the question whether the matter in dispute between the parties fell within the arbitration agreement. In fact, the Court of Appeal in that case repelled every endeavour on the part of the appellants to require the Court to do the very thing which lay within the competence of the arbitrators-that is to say, to look into the whole matter, to construe the instrument and to decide whether the thing complained of was inside or outside the agreement, and directed the parties to go to arbitration by staying the suit. It would be debatable whether in such a case where the Court has expressly declined to decide the dispute involved between the parties and has directed the parties to go to arbitration, the arbitrator's decision on the question of his jurisdiction would again be subject to Court's decision. Would it not be a case similar to the case falling within the principle of a specific question of law being expressly referred to an arbitrator whose decision thereon finally binds the parties : But as stated at the out set, the aforesaid question on which we have expressed our view, does not arise for decision in this case."
10. Coming to the judgment of the Apex court in Kodanada Rami Reddy's case (1 supra) it would be appropriate to refer the relevant paragraphs which are as under :
"18. In the application under Section 8(2) of the Act, the appellant had specifically contended that there was an arbitration agreement between the parties and therefore, the disputes were arbitrable. The first respondent resisted the said petition by specifically contending that there was no arbitration agreement between the parties. The issue was adjudicated, and by order dated 25.3.1991, the Sub-ordinate Court, Nellore, held that there was an arbitration agreement and consequently appointed the arbitrator. The said court in allowing the application under Section 8(2) of the Act filed by the appellant, by order dated 25.3.1991, followed the 9 decision of this Court in State of Andhra Pradesh v. I. Devender Reddy [C.A. No. 3578/1989 decided on 2.3.1990] and several decisions of the Andhra Pradesh High Court and held that the GOM dated 1.6.1987 was prospective in operation, that in regard to contracts concluded prior to 1.6.1987, GOM No. 403 dated 24.10.1983 alone applied and consequently disputes involving claims of more than Rs. 50,000/- had to be referred to Arbitration by the court of competent jurisdiction under Section 8(2) of the Act. The said order dated 25.3.1991 was not challenged and attained finality.
19. The Arbitrator entered upon the reference on
11.4.1991. The first respondent participated in the arbitration proceedings fully and contested the claims of the appellant, on merits without challenging the jurisdiction of the arbitrator. More importantly, the first respondent did not even plead or contend before the Arbitrator that there was no arbitration agreement or that the entire proceedings were invalid. The failure of the first respondent to raise any such contention was obviously because the said contention had already been expressly raised in the proceedings under Section 8 of the Act and negatived by the Sub- ordinate Court in its order dated 25.3.1991 appointing the Arbitrator and that order had been accepted and had attained finality.
24. The next question is whether the first respondent could have challenged the order dated 25.3.1991 passed under Section 8(2) of the Act appointing an arbitrator by filing a belated petition in 1993 two years later. The issue is not one relating to merely delay. The issue is whether the first Respondent having allowed the order dated 25.3.1991 to remain unchallenged and implemented, and having participated in the arbitration proceedings before the arbitrator without protest and without raising the contention that there was no arbitration agreement, and without challenging the award on the ground that there was no arbitration agreement, could raise the issue in an appeal against the rejection of the application under Sections 30 and 33 of the Act. The answer is clearly in the negative. The first respondent could not challenge the order dated 25.3.1991, appointing the Arbitrator, which had attained finality, belatedly on 17.4.1993 by contending that there was no arbitration agreement between the parties.
29. The crucial difference is that all the four appeals considered by this Court in Obulu Reddy, related to cases where the order of the Sub-ordinate Judge under Section 8 of the Act, appointing the arbitrator had been challenged by the State without 10 any delay and the High Court in two of the matters had accepted the challenge and in other two matters rejected the challenge and that is how all four appeals came up before this Court. But in this case, as noticed above, the order under Section 8(2) of the Act, by the Sub-ordinate Judge was not challenged and was allowed to attain finality. It was challenged only after the award was made and that award was made a rule of the court. In such circumstance, the rule of finality would come into play in regard to the order under Section 8(2) of the Act appointing the Arbitrator.
30. The observation in Obulu Reddy that when there was no arbitration agreement the award is a nullity, was made as the state government had not accepted the existence of the arbitration agreement at any stage and had all along challenged the order under Section 8 of the Act appointing the Arbitrator. In this case, though the first respondent had initially contended that there was no arbitration agreement, when the civil court held that there was an arbitration agreement and appointed the arbitrator, the first respondent did not challenge the decision, but accepted the said position and participated in the arbitration proceeding without protest. More importantly, when the award was made by the Arbitrator, the first respondent filed an application for setting aside the award wherein it admitted specifically that the appointment of the arbitrator was in terms of the agreement between the parties, but challenged the award on other grounds. In the circumstances, when there was an adjudication by a court of competent jurisdiction that there was an arbitration agreement and when that was not challenged and the arbitrator was allowed to proceed on the basis that there was an arbitration agreement, and when it was specifically conceded that the appointment of arbitrator is in terms of the agreement between the parties, the award will not be a nullity.
31. The order dated 25.3.1991 appointing an Arbitrator was also not a nullity, even though it may be erroneous. It is well settled that a decree will be a nullity only if it is passed by a court usurping a jurisdiction it did not have. But a mere wrong exercise of jurisdiction or an erroneous decision by a court having jurisdiction, will not result in a nullity. An order by a competent court, even if erroneous, is binding, unless it is challenged and set aside by a higher forum. Be that as it may."
11. As seen from the record, the Arbitrator was endorsed with the jurisdiction to enter reference by virtue of an order passed by 11 the III Additional Subordinate Judge, Visakhapatnam. He by himself did not assume any jurisdiction as an Arbitrator. When once the order of civil court has attained finality, there is no point in challenging the proceedings before the Arbitrator on the ground that the Arbitrator has no jurisdiction. Even the civil Court before whom the Award of the Arbitrator came to be challenged will not get any authority or jurisdiction to deal with the same, unless the order passed by the civil court in O.S.No.540 of 2001 appointing the Arbitrator, is challenged.
12. The judgment of the Apex Court in Kodanda Rami Reddy's case (1 supra) squarely applies to the facts of the case and as such the argument that the Arbitrator should not have proceeded with the matter cannot be accepted.
13. The only other ground raised by the learned Advocate General is with regard to awarding a sum of Rs.9,10,000/-
towards escalation charges under Claim No.1(a). As stated earlier, the plea of the learned Advocate General is that when once the material has been supplied by the Department, namely, cement, steel etc., question of granting escalation towards increase in cost of material is patently illegal. In other words, this appears to be the main ground which is sought to be urged in this appeal.
Hence, it will be useful to extract the relevant claim, which is as under :
12Claim No. Nature of the claim Amount Amount
claimed awarded
1. 2. 3. 4.
1.(a) Escalation charges due 9,10,000.00 9,10,000.00
to variation of prices of
materials, oils, labour
for the work executed
beyond the original
agreement period i.e.,
from 14.1.89 till end of
31.10.1991
14. As stated earlier, it is alleged by the counsel for the appellant that the Arbitrator did not give a set off to the value of the cement and steel supplied by the Government. A reading of the claim 1(a) shows that it relates to "escalation charges due to variation of prices of materials, oils, labour for the work executed by the contractor beyond the original agreement period i.e., from 14.1.1989 till end of 31.10.1991." This claim only relates to escalation charges for the work executed beyond the contract period. No material has been placed before the Court to establish that the appellant has supplied steel and cement for the work executed beyond the contract period. The plea appears to be that the Arbitrator could not have allowed the claim when there is no escalation clause in the contract.
15. The finding of fact arrived at by the Arbitrator as well as by the civil court show that there were many circumstances and factors existing which obliged the respondent to extend the period for completion of work. Some were said to have been stated by the contractor in his pleadings himself and some relate to non-handing over of the entire site, non-furnishing designs, plans etc., which 13 also include non-supply of cement and steel in time. Therefore, the clause that the contractor cannot claim expenditure incurred during the extended period or that the Arbitrator has no authority to order escalation of charges cannot be made applicable to the instant case; more so, for the reason that there was delay in handing over of the site for executing the work, which fact is not seriously disputed by the appellant.
16. The dispute with regard to payment of escalation charges relates to Item-1 only. The learned Advocate General would contend that when the Department has supplied steel and cement, claiming escalation charges over and above for the very same subject, namely, steel and cement, would be improper. But, reading of a Clause-1(a) does not anywhere clearly show that it was only for steel and cement; it speaks about oil, labour for the work executed and the material. The material could be development of the infrastructure at the site, hiring equipment for execution of work etc., When the clause does not specifically say that it relates only to steel and cement, the argument that escalation charges were only towards steel and cement cannot be accepted.
17. Therefore, it cannot be said that the Arbitrator has acted beyond his jurisdiction in awarding the amount for the additional cost incurred.
18. At this stage, it is also to be noted here that this plea was never raised specifically before the civil court nor any material was placed to establish that steel and cement was supplied for the work executed beyond the contract period. Further, it is to be noted that the court hearing applications under Section 30 does not 14 exercize appellate jurisdiction and re-appraisal of the evidence is not permissible. Even in case Award contains reasons the interference would still be not available to the Court unless it is found to be perverse or that the Award was passed under wrong proposition of law. Such a ground is not raised in the instant case.
19. At this stage, we intend to refer to the judgment in M.P. Housing Board v. Progressive Writers & Publishers 3, wherein the Apex Court held as under :
"28. The finding arrived at by the arbitrator in this regard is not even challenged by the Board in the proceedings initiated by it under Section 30 of the Act. It is fairly well settled and needs no restatement that the award of the arbitrator is ordinarily final and the courts hearing applications under Section 30 the Act do not exercise any appellate jurisdiction. Reappraisal of evidence by the court is impermissible.
29. In Ispat Engineering & Foundry Works, B.S. City, Bokaro v. Steel Authority of India, B.S. City, Bokaro {[2001] 3 SCR 1190}, it is held:
"4. Needless to record that there exists a long catena of cases through which the law seems to be rather well settled that the reappraisal of evidence by the court is not permissible. This Court in one of its latest decisions [Arosan Enterprises Ltd. v. Union of India (AIR 1999 SC 3804) upon consideration of decisions in Champsey Bhara & Co. v. Jivraj Balloo Spg. & Wvg. Co. Ltd. (AIR 1923 PC 66), Union of India v. Bungo Steel Furniture (P) Ltd. {[1967] 1 SCR 324}, N. Chellappan v. Secy., Kerala SEB {[1975] 2 SCR 811}, Sudarsan Trading Co. v. Govt.
of Kerala {[1989] 1 SCR 665}, State of Rajasthan v. Puri Construction Co. Ltd. {(1994) 6 SCC 485} as also in Olympus Superstructures (P) Ltd. v. Meena Vijay Khetan {[1999] 3 SCR 490} has stated that reappraisal of evidence by the court is not permissible and as a matter of fact, exercise of power to reappraise the evidence is unknown to a proceeding under Section 30 of the Arbitration Act. This Court in Arosan Enterprises 3 (2009) 5 SCC 678 15 categorically stated that in the event of there being no reason in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, interference would still be not available unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. This Court went on to record that in the event, however, two views are possible on a question of law, the court would not be justified in interfering with the award of the arbitrator if the view taken recourse to is a possible view. The observations of Lord Dunedin in Champsey Bhara stand accepted and adopted by this Court in Bungo Steel Furniture to the effect that the court had no jurisdiction to investigate into the merits of the case or to examine the documentary and oral evidence in the record for the purposes of finding out whether or not the arbitrator has committed an error of law. The court as a matter of fact, cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties."
30. Interpretation of a contract, it is trite, is a matter for the arbitrator to determine. Even in a case where the award contained reasons, the interference therewith would still be not available within the jurisdiction of the court unless, of course, the reasons are totally perverse or award is based on wrong proposition of law. An error apparent on the face of the records would not imply closed scrutiny of the merits of documents and materials on record. "Once it is found that the view of the arbitrator is a plausible one, the court will refrain itself from interfering...."
[see Sudarsan Trading Co. v. Govt. of Kerala {[1989] 1 SCR 665} and State of U.P. v. Allied Constructions {(2003) 7 SCC 396}.
45. In Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd. and Anr. {[1989] 1 SCR 318}, this Court held that "an award of an arbitrator should be read reasonably as a whole to find out the implication and the meaning thereof. Even in a case where the arbitrator has to state reasons, the sufficiency of the reasons depends upon the facts and circumstances of the case. The Court, however, does not sit in appeal over the award and review the reasons. The court can set aside the award only if it is apparent from the award that there is no evidence to support the conclusion or if the award is based upon any legal proposition which is erroneous." The award under challenge is not the one which is based on no evidence.
1646. In Food Corporation v. Joginder Pal {[1989] 1 SCR 880} this Court reiterated the principle that an award of an arbitrator can only be interfered with or set aside or modified within four corners of the procedure provided by the Act. It is not misconduct on the part of an arbitrator to come to an erroneous decision, whether error is one of the fact or law, and whether or not his findings of fact are supported by evidence. In case of errors apparent on the face of the award it can only be set aside if in the award there is any proposition of law which is apparent on the face of the award, namely, in the award itself or any document incorporated in the award. Errors of law as such are not to be presumed."
20. Further, in Food Corporation of India Ltd. Vs. A.M. Ahmed & Co.4 the Apex Court held as under :
"29. Two judgments of this Court on escalation and legal misconduct of the arbitrator can be beneficially referred to, followed and applied to the case on hand.
30. The first judgment is in Hyderabad Municipal Corporation v. M. Krishnaswami Mudaliar & Mudaliar and Anr. (AIR 1985 SC 607). The only question argued by the counsel for the Hyderabad Municipal Corporation was that the respondent contractor was not entitled to claim 20% extra over and above the rates originally agreed upon between the parties under the contract. Under the contract, drainage work in question was entrusted to the respondent and under the terms of the contract the work was to be completed by the contractor within a period of one year. Admittedly, at the instance of the Executive Engineer, PWD due to financial difficulties - less budget having been provided for in the year in question, therefore the respondent-contractor was requested to spread over the work for two years more that is to say to complete the same in three years but the contractor was agreeable to spread over the work for two years as suggested on condition that extra payment will have to be made to him in view of increased rates of either material or wages. The Government did not intimate to the contractor that no extra payment on account of increased rates would be paid to him or that he will have to complete the work on the basis of original rates. In fact, no reply was sent by the Government and a studied silence was maintained by the Government in regard to the contractor's demand for extra payment, in spite of several reminders in that behalf, till the contractor 4 (2006) 13 SCC 779 17 actually completed the work during the spread over period. After completion of work, the contractor submitted his final bill claiming 20% extra over and above the rates originally agreed upon between the parties. The Government stated that he was not entitled to increased rates. The High Court, after considering the correspondence exchanged between the parties has taken the view that the government was liable to make extra payment for the work done as there was no dispute that the rates of material, etc. had increased during the extended period of two years and the contractor was entitled to such extra payment. This Court, after considering the relevant material on record, was also of the view that both in equity and in law the contractor is entitled to receive extra payment and the High Court was right in deciding the question in contractor's favour. This Court held that the liability to make this extra payment has been properly saddled on the Municipal Corporation.
31. The second judgment is in P.M. Paul v. Union of India {[1989] 1 SCR 115}. In this case, the dispute that was referred to the arbitrator was as to who is responsible for the delay, what are the repercussions of the delay in completion of the building and how to apportion the consequences of the responsibility. The arbitrator found that there was escalation and, therefore, he came to the conclusion that it was reasonable to allow 20% of the compensation under the claim. He accordingly allowed the same. Counsel appearing for the Union of India submitted before this Court that the arbitrator had granted a sum of Rs. 2 lakhs as escalation charges and cost in the absence of escalation clause was not a matter referred to the arbitrator. In other words, it was urged that the arbitrator had traveled beyond his jurisdiction in awarding the escalation cost and charges. This Court in paragraphs 11 & 12 of the judgment held thus:
11. It is well-settled that an award can only be set aside under Section 30 of the Act, which enjoins that an award of an arbitrator/umpire can be set aside, inter alia, if he has misconducted himself or the proceeding.
Adjudicating upon a matter which is not the subject- matter of adjudication, is a legal misconduct for the arbitrator. The dispute that was referred to the arbitrator was, as to who is responsible for the delay, what are the repercussions of the delay in completion of the building and now to apportion the consequences of the responsibility. In the objections filled on behalf of the respondent, it has been stated that if the work was 18 not completed within the stipulated time the party has got a right for extension of time. On failure to grant extension of time, it has been asserted, the contractor can claim difference in prices.
12. In the instant case, it is asserted that the extension of time was granted and the arbitrator has granted 20% of the escalation cost. Escalation is a normal incident arising out of gap of time in this inflationary age in performing any contract. The arbitrator has held that there was delay, and he has further referred to this aspect in his award. The arbitrator has noted that Claim I related to the losses caused due to increase in prices of materials and cost of labour and transport during the extended, period of contract from 9.5.1980 for the work under phase I, and from 9.1 1.80 for the work under phase II. The total amount shown was Rs. 5,47,618.50. After discussing the evidence and the submissions the arbitrator found that it was evident that there was escalation and, therefore, he came to the conclusion that it was reasonable to allow 20% of the compensation under Claim I, he was accordingly allowed the same. This was a matter which was within the jurisdiction of the arbitrator and hence, the arbitrator had not misconducted himself in awarding the amount as he has done.
The above two cases, in our opinion, squarely apply to the facts and circumstances of the case on hand.
32. Escalation, in our view, is normal and routine incident arising out of gap of time in this inflationary age in performing any contract of any type. In this case, the arbitrator has found that there was escalation by way of statutory wage revision and, therefore, he came to the conclusion that it was reasonable to allow escalation under the claim. Once it was found that the arbitrator had jurisdiction to find that there was delay in execution of the contract due to the conduct of the FCI, the Corporation was liable for the consequences of the delay, namely, increase in statutory wages. Therefore, the arbitrator, in our opinion, had jurisdiction to go into this question. He has gone into that question and has awarded as he did. The Arbitrator by awarding wage revision has not mis-conducted himself. The award was, therefore, made rule of the High Court, rightly so in our opinion.
1921. In view of the judgments of the Apex Court referred to above and viewed from any angle, we do not find any illegality or irregularity in the order of the civil court and the arbitrator.
22. Ergo, the C.M.A. is dismissed. No order as to costs.
Consequently, interlocutory applications pending, if any, shall stand closed.
______________________________ JUSTICE C.PRAVEEN KUMAR _____________________________ JUSTICE BATTU DEVANAND Date : 12.03.2020 skmr