Andhra HC (Pre-Telangana)
Government Of A.P. And Anr. vs Sri Venkateswara Construction Co., ... on 16 May, 2002
Equivalent citations: 2002(5)ALD142
JUDGMENT G. Bikshapathy, J.
1. The OP is filed under Sections 14(1), 30 and 33 of Arbitration Act, 1940 to direct the learned arbitrator to file the award in to Court and also to set aside the award of the arbitrator dated 30-11-1997 and dated 22-1-1998.
2. Important questions on the interpretation of clauses 73 and 59 of the Preliminary Specifications to A.P. Detailed Standard Specifications (for brief 'APDSS') and the jurisdiction of arbitrator arise for consideration.
3. The petitioner is the Government and it is referred to herein as department for the sake of convenience and the respondent No. 1 is referred to as the contractor and respondent No.2 is referred to as the learned arbitrator.
4. The events leading to the filing of the OP are that a sum of over Rs. 99 lakhs were sanctioned for construction of road over-bridge in K.M.1/6 of Gudivada-Kankipadu, Gudivada Mandal, Krishna District. Accordingly, tenders were called for. The claimant-contractor quoted the lowest rates and the same were approved by the authorities. The Superintending Engineer, R&B, Eluru executed an agreement No.7/83-84, dated 24-5-1983. According to them, the site was handed over to the contractor on 25-5-1983 and period of completion of work was fixed as 18 months i.e., the work should be completed on or before 24-11-1984. It is the case of the department that the contractor has not been progressing the work as per schedule inspite of granting extensions. Even though final extension date was fixed for completion by 31-3-1991, it was not completed and the contractor himself abandoned the work in March, 1991. Therefore, the department invoked Clause 60(c) of A.P.D.S.S. Since the balance work was to be completed the same was notified and it was got completed through another agency. However, the agreement executed on 25-5-1983 consisted of arbitration clause. The contractor sent a claim statement to the Committee of arbitrators under the terms of the agreement. The committee asked the department to submit the counter. Thereafter, further progress could not be made because arbitrators became functus officio. The contractor filed O.P. No.123 of 1994 before the I Additional Subordinate Judge, Kakinada for appointment of arbitrators in the vacancy or alternatively to appoint a sole arbitrator. The civil Court by an order dated 20-4-1995 appointed one Mr. V.V. Ramana as sole arbitrator. Against the said order, the department filed CRP No.2009 of 1995 and the same was dismissed on 8-11-1995. Against the said order, the department filed SLP No. 8355 of 1996. Before the Supreme Court, the department and the contractor have jointly agreed to refer the dispute to the sole arbitrator Justice Dr. K. Pitnnaiah, a retired Judge of this Court. Accordingly, the learned Judge was appointed as arbitrator after obtaining his consent.
5. The claim statement and the rebuttal statement and other documents already filed earlier before the arbitrator were transmitted to the sole arbitrator.
6. Before the learned arbitrator, the contractor submitted 31 claims which will be referred to in detail hereinafter. Exs.C1 to C-53 were marked for the contractor. The rebuttal statement was filed by the department denying the claims and Exs.Rl to R96 were marked for the department. The learned arbitrator passed the award on 30-11-1997 allowing some of the claims and rejecting some. However, there were certain typographical errors in the award dated 30-11-1997 and the learned arbitrator after issuing notice to the parties corrected the clerical errors by an Order dated 22-1-1998. The said award dated 30-11-1997 with modifications dated 22-1-1998 is assailed by the department in this petition.
7. It was resisted by the contractor and it was prayed that the award be made Rule of Court and decree be passed accordingly.
8. It is to be noted in this regard earlier the department made a prayer to file the award dated 30-11-1997 as rectified by an order dated 22-1-1998 into Court. But, however, this prayer was withdrawn as it was found by the department that the award was already filed by the learned arbitrator on 23-3-1998. In view of this, the validity of the award is only subject-matter in this petition.
9. For proper appreciation of the details of the claims and their final out come, it is necessary to extract the same with a view to have a birds eye view of the situation. As already stated, 31 claims were made under Part-A and Part-B. Part-B relates to compensation/interest while Part-A claim relates to principal compensation. The amounts finally awarded after the clerical omissions were rectified are reflected in the respective columns where the amounts were awarded. The following are the particulars of the claims:
Claim No. Description Amount claimed Amount awarded Remarks (1) (2) (3) (4) (5) 1 Towards earth work excavation and depositing on Bank with an Initial Lead of 10M and initial lift of 2M in clayey soils in wet and slushy condition under water as per S.S. 20B vide Tern No.2, of the agreement.
6,419 6,419 Allowed in full
2.
Towards providing sand cushion including cost seigniorage and cess charges and conveyance of sand to site, labour charges for filing, mattering ramming, and including all leads and lifts for conveyance of water etc., complete in foundations for finished item of work in ledge portions.
16,022 16,022 Allowed in full
3. Bailing out of water for earth work excavation for foundation of piers, abutment and walls.
1,67,433 1,67,400 Allowed in full
4. Providing shoring and strutting for earth work Excavation for foundations:
62,466 62,466 Allowed in full
5. For earth work in foundations:
3,989
-
Claim rejected
6. Extra leads.
6,525 6,525 Allowed in full
7. Bailing out water charge for VCC (1 :3.6) concrete in foundations for piers, abutments and retaining walls etc., in the Gudivada side approach upto sill level vide agreement. Items No.4 84,075 84,075 Allowed in full
8. V.C.C. (1 : 3:61 mix, using 40 mm size (S.S.5I H.B.C metal including cost seniorages and convenience of all materials to site, labour charges for centering, machine mixing and laying concrete, vibrating finishing and curing etc., vide Ag. Item No. 5 balance quantity executed and to be paid for.
7,718 7,721 Partly allowed
9. Refilling foundations with excavated soils with 1/2 k.m. lead in the viaduct portion as well as in the retaining wall portion in the Gudivada side approach.
20,883 20,883 Allowed in full
10. Conveyance of earth obtained from foundations on Gudivada side approach with a lead of 1 k.m to the formation of embankment on Kankipadu side approach.
60,994 46,038 Partly allowed 11 Payment for actual lead of 9 k.m.
10,998 10,998 Allowed in full
12. Earth work carting with a lead of 7 km and payment restricted to the extent leads provided for in the agreement as well as in the sanctioned estimate for the formation of the embankment in the Kankipadu side approach. Payment for the additional leads involved requested.
3,55,120 3,55,120 Allowed in full
13. V.R.C.C. controlled concrete with cube strength of 200 kgs. substantial question.
Claim using 20 mm size. IS.S.5) H.B.G. Crushed chips vide agreement item No.9 for laying deck slabs foot path slabs and korbs etc., payment for the additional work.
78,400 78,400 Allowed in full
14. V.R.C.C. (1:2:4) mix using 65% of 25 mm of HBG chips 25% of 12 mm and 10% of 6 mm size (S.S.5) HBG crushed chips vide agreement Item No. 10 for laying wearing coat. Payment for the additional quantity of work done.
45,000 45,000 Allowed in full
15. Earth work correcting with a lead of 7 k.m. for the formation of the embankment on Kankipadu side approach. Payment denied for the work actually got done payment requested regarding.
33,294 33,294 Allowed in full
16. Rectification of gravel base and gravel fill by the side of the retaining walls in the Gudivada side approach. Payment requested for the work executed, as per the instructions of the department.
7,800 7,800 Allowing in full
17. Payment of the supply of items like craft paper, A.C. Pipes and paints etc., required for the work and not covered by the agreement- payment-requested.
2,607
-
Rejected
18. Waival of penalties illegally imposed 6,700 6,700 Allowed in full
19. Cost of fabrication of Tor steel rods including conveyance to site cutting bending roads, tying grills and placing in position complete cost of bending wire etc., complete adoption of actual coeifficents of steel issued by the department and payment for extra quantity- requested.
83,400 55,662 Partly allowed
20. Coating with cement to the piers, abutments and retaining walls and sides of the deck slabs, and also bottoms of deck cables, hand rails and posts as per the instructions of the departmental officers.
30,000 30,000 Allowed in full
21. Refund of recovery made towards seigniorage and cess for the material used on the work.
24,506 24,506 Allowed in full
22. Refund of EMD, Security deposit and withheld amounts on this work.
2,31,937 2,31,937 Allowed in full
23. Non-recovery towards forged USRS for steel and for the cement obtained illegally -
requested.
-
-
Admitted
24. Non recovery towards earth work done for approaches recorded and paid but slipped subsequently, due to afflux of time, rains, cyclones and also due to defective design of embankment, non-protection by gravel backing and revetment as contemplated in the sanctioned estimations in the Kankipadu side approach.
-
-
Waival allowed
25. To set aside the illegal action of the EE (R & B) Machilipatnam supplementing the balance items of work under penal clause of 60 I c) of P.S. to APSS after long expiry of the currency of agreement.
-
-
Admitted.
26. Compensation for overhead charges due to prolonged execution of work much beyond the agreement period due to no fault of ours but due to delays, defaults, and breach of contract committed by the department.
7,59,700
-
Rejected as escalation allowed.
27. Compensation for damages suffered due to under utilisation of machinery and vehicles earmarked for this work due to prolonged execution of work for over several years for no fault of ours but due (o delays defaults, and breach of contract by the department.
9,00,000 8,64,000 Partly allowed
28. Compensation for damages suffered due to prolonged execution of work and due to continuous delays, defaults and breach of contract in not handing over the clear and uninterrupted possession of the site upto 25-9-1988 by the department, by way of increase in rates of materials, labour and transportation etc. 8,48,428 8,43,348 Allowed partly 28(2) Escalation 1-7-1985 to 30-6-1986 8,37,238 8,32,057 Partly allowed 28(3) Escalation : 1-7-1986to 30-6-1987 5,11,019 5,11,019 Allowed in full 28 (4) Escalation 1-7-1987 to 30-6-1988 3,64,300 3,64,300 Allowed in full 28(5) Escalation 1-7-1988to 30-6-1989 69,924 69,924 Allowed in full 28 (6) Escalation 1-7-1989 to 30-6-1990 5,31,640 4,86,316 Partly allowed.
29. Use of material.
-
-
Rejected.
30. Interest from the date of petition.
-
-
Against 24% p. a. claimed by the claimant only 19% interest p.a was awarded by sole arbitrator from 7-2-1995 to 30-11-1997
31. Cost.
40,000 30.000 Partly allowed.
10. The learned arbitrator in respect of the claims made in Part-B allowed the claim for compensation/interest at 18%.
11. The learned Additional Advocate-General appearing for the department submits that the learned arbitrator gravely erred in allowing the claims of the contractor. The learned arbitrator had exceeded the jurisdiction and awarded various amounts. He further submits that the learned Arbitrator allowed the escalation charges under various heads even though there was no escalation clause in the contract. Further, there was a prohibition for grant of escalation under the agreement under Clause 59 of the APDSS.
12. The learned Additional Advocate-General also submits that the learned arbitrator has awarded the amounts in respect of the claims which are beyond the terms of the agreement and thus all the claims are beyond the jurisdiction of the arbitrator.
13. On the other hand, the learned Counsel appearing for the contractor Mr. C. V. Nagrajuna Reddy submits that the learned arbitrator has passed the award after considering various contentions raised and upheld the claims in respect of certain items of work and rejected in respect of the certain other items by giving a detailed and cogent reasons. Therefore, such an award is immune from the attack.
14. The learned Additional Advocate-General and the learned Counsel for the contractor relied on various cases, which will be referred to hereinafter.
15. Both the Counsel advanced elaborate arguments with minutous details with reference to case law. Therefore, it became incumbent on the part of this Court to deal with the matter both extensively and intrinsically.
16. The learned Additional Advocate-General, before going into other claims firstly referred to the claims which were allowed in respect of the escalation-claim "No.27 and 28. He specifically contends that there was no escalation clause in the agreement. On the other hand, under Clause 59 claim for escalation under any circumstances is prohibited. Inasmuch as, the arbitrator is a creature under the agreement, he is only required to consider the claims which arise under the agreement and if a clause prohibiting escalation is contained in the agreement, the learned arbitrator cannot overlook that clause and grant relief. It would be nothing, but overstepping his jurisdiction. Since, it is a question of jurisdiction, it is always open for this Court to interfere with the claim awarded.
17. The learned Additional Advocate-General relies on the following decisions:
V.G. George v. Indian Rare Earths Limited, , State of Orissa v. S.C. Roy, 2002 (1) R.A.J. 86 (SC), State of Orissa v. Sudhakar Das, , Steal Authority of India Limited v. J.C. Budharaja, Government and Mining Contractor, , Rajasthan State Mines and Minerals Limited v. Eastern Engineering Enterprises, , New India Civil Erectors/P) Limited v. Oil and Natural Gas Corporation, , General Manager Northern Railways v. Sarvesh Chopra, 2002 (2) Supreme 170, R. Dwarakanath Reddy v. Government of Andhra Pradesh, (DB), V.C. Brahmanna v. State of A.P., 1996 (5) ALT 951 (D.B), Ch. Ramalinga Reddy v. Superintending Engineer, .
18. Mr. Nagarjuna Reddy, the learned Counsel for the contractor referred to the trend of judgments in arbitration cases right from Champa Bhara and Company v. Jeevaraj Balloo Spinning and Weaving Company, AIR 1923 PC 66.
19. The learned Counsel while relying on certain passages from the aforesaid judgments also relied on the following decisions:
P.V. Subba Naidu v. Government of Andhra Pradesh, , Sndarsan Trading company v. Government of Kerala, , and Continental Construction "company Limited v. State of 'Madhya Pradesh, , and host of other judgments of the Supreme Court and High Courts, which will be referred to herein during the course of discussion.
20. The following issues will arise for consideration:
1. Whether the arbitrator has jurisdiction to decide the claims or whether he exceeded the jurisdiction vested in him by virtue of the terms of the agreement?
2. Whether the award suffers from any error apparent on the face of the award?
3. Whether the arbitrator has committed misconducts under Section 30 of the Arbitration Act?
4. Whether the award is legal and valid?
21. All the issues can be decided jointly.
22. Before delving into the issues, it is necessary to note certain findings recorded by the learned arbitrator.
23. Claims were made by the contractor in respect of various items and justifications were also given for making the claims. They were rebutted equally by the department taking the clue from the terms of the agreement. The learned arbitrator has dealt with the issues in a very minutous manner referring to each and every contention raised, document produced by the parties.
24. The main obstructions which hampered the progress for completion of work according to the contractor are (1) P.H Municipal Water mains, (2) H.T. Electrical poles and high tension electrical I and over head electrical lines, (3) Telephone cables and Axel cables, (4) delay in removing the encroachments and hut dwellers, (5) belated retaining walls, (6) New proposals for construction of sub-way Nos.1 and 2 net covered by the agreement, (7) New proposals for construction of bridge across Chandraiah drain, not covered by the agreement, (8) Failure on the part of the department in taking over the site from the other agency and giving back to the contractor for execution of the balance items.
25. The learned arbitrator had categorically found basing on the documentary evidence produced before him that the obstacles were not removed immediately and that the electrical transformer and over head telephone and telephone lines were shifted only after September, 1988. The learned arbitrator also found that several encroachments in the alignments of approaches and the site was not handed over at a time free of encroachments and accordingly, found that there was delay in handing over the site. The learned arbitrator also found that there was also delay in submitting modifying designs in retaining walls.
26. Finally, after elaborate discussions, the learned arbitrator found that there was not default on the part of the contractor and it is the default and delays on the part of the department that prevented the contractor from resuming and completing the balance work. Accordingly, he found that defaults on the part of the department disabled the claimant-contractor for completing the work. The learned arbitrator also found that the delays and defaults were responsible for prolonging the work beyond the agreement period. Thus, he categorically found as follows:
"Having regard to all my findings on all the contentions raised before me with reference to their (respondents) documents I hold the respondents contentions and comments are not entitled to acceptance. In view of the explanations offered by the claimants on the basis of the unimpeachable cogent and convincing documentary evidence furnished by them on every allegation of the respondents, I hold the claimants care and their explanations are entitled to acceptance. I, therefore, hold that it is the delays, defaults and breaches committed by the respondents that are responsible for the prolongation work beyond the agreement period upto 2-3-1991. Hence, 1 hold that the defaults and breaches of the respondents are liable for the legal consequences viz., namely compensation or damages by way of the claims. The claims put forth by the claimants are sustainable.
Now I would like to examine each claim with reference to the respondents comments."
27. Thus, the learned arbitrator has recorded a clear findings that the delays and defaults are solely attributable to the department and that the extension of time was granted from time to time on account of the delays and defaults on the part of the department, which is prime cause for prolongation of the work beyond the period of agreement. Admittedly, the period of construction was 18 months and it ought to have been completed on or before 24-11-1984, but it was prolonged upto 1991 and it is also to be noted in this regard that the various claims made by the contractor in respect of the escalation and other items are only for the works done beyond the period of agreement.
28. It has now to be considered the jurisdiction of the arbitrator and the parameters of interference by the Courts over the awards passed by the arbitrator.
29. Since both the Counsels have argued on this issue elaborately right from inception of the arbitration cases, it is necessary to refer to the decisions to the extent they are relevant for the purpose of this case.
30. The limits of jurisdiction, the powers of arbitrator and -the area of interference over the award of the arbitrator have been the subject-matter of consideration by the Supreme Court as well as by various High Courts in catena of judgments spread over for several decades. Tracing the genesis of arbitration in India, the Supreme Court in Food Corporation of India v. Joginderpal Mohinderpal, , observed thus:
"In India, there is a long history of arbitration. Arbitration is a mode of settlement of disputes evolved by the society for adjudication and settlement of the disputes and the differences between the parties apart from the Courts of law. Arbitration has a tradition; it has a purpose. Arbitration, that is a reference of any particular dispute by consent of the parties to one or more persons chosen by the parties with or without an umpire and an award enforceable by the sovereign power was generally unknown to ancient India. Hindus recognised decisions of Panchayats or bodies consisting of wealthy, influential and elderly men of the community and entrusted them with the power of management of their religious and social functions. The sanction against disobedience to their decision was excommunication, or ostracism and exclusion from all religious and social functions of the community. An agreement to abide by the decision of a Panchayat and its decision with regard to the line of boundary was held to be conclusive, since a reference to arbitration and award properly so called did not exist. See the observations in Mokuddims of Kunkunwady v. Enamdar Brahmins of Soorpal (1841-41) 3 Moo Jnd App 383. See also Bachawats Law of arbitration at page 1.
(7) When power came to the East India Company, they framed regulations in exercise of the power vested in them by the British Government. Some of these regulations were touching arbitration. Bachawat gives description of the evolution of the Arbitration Act, 1940. Therefore, arbitration as a mode for settlement of disputes between the parties, has a tradition in India. It has a social purpose to fulfil today. It has a great urgency today when there has been an explosion of litigations in the Courts of law established by the sovereign power. New rights created, or awareness of these rights, the erosion of faith in the intrinsic sense of fairness of men, intolerant and uncompromising attitudes are all the factors which block our Courts. The Courts are full of litigations, which are pending for long time. Therefore, it should be the endeavour of those who are interested in the administration of justice to help settlement by arbitration, if possible. It has also a social efficacy being the decision by the consent of the parties. It has greater scope of acceptance today when there is a certain erosion of faith in view of the failure to appreciate the functions of the Courts of law. It has also the advantage of not only quickness of decision but of simplicity of procedure. But in proceedings of arbitration there must be adherence to justice, equity law and fair play in actions. However, the proceedings of arbitration must adhere to the principles of natural justice and must be in consonance with such practice and procedure which will lead to a proper resolution of the dispute and create confidence of the people for whose benefit these processes are resorted to. It is, therefore, the function of Courts of law to oversee that the arbitrators act within the norms of justice. Once they do so and the award is clear, just and fair, the Courts should, as far as possible, give effect to the award of the parties and make the parties compel to adhere to and obey the decision of their chosen adjudicator. It is in this perspective that one should view the scope and limit of correction by the Court of an award made by the arbitrator. We should make the law of arbitration simple, less technical and more responsible to the actual realities of the situation, but must be responsive to the canons of justice and fair play and make the arbitrator adhere to such process and norms which will create confidence, not only by doing justice between the parties, but by creating a sense that justice appears to have been done. Sections 30 and 33 of the Act provide for the grounds on which an award of the arbitrator can be set aside. These were mainly, until recent changes made by statutory laws in England, in consonance with the English Principles of Common Law as adopted in India. So far as file material of the present purpose is concerned, an award of the arbitrator can only be interfered with or set aside or modified within the four corners of the procedure provided by the Act. It is necessary to find whether the arbitrator has mis-conducted himself or the proceedings legally in the... sense whether the arbitrator has gone contrary to the terms of reference between the parties or whether the arbitrator has committed any error of law apparent on the_ face of the award. It is necessary to emphasise that these are grounds for setting aside the award but these are separate and distinct grounds. Halsburys Laws of England, Vol. 24th edn., para 623 reiterates that an arbitrators award may be set aside for error of law appearing on the face of it. Though this jurisdiction is not to be lightly exercised. The award can also be set aside if, inter alia, the arbitrator has misconducted himself or the proceedings. It is difficult to give an exhaustive definition what may amount to a misconduct on the part of the arbitrator. This is discussed in Halsbury's Laws of England (supra). It is not misconduct on the part of an arbitrator to come to an erroneous decision., whether his error is one of fact or law and whether or not his findings of fact are supported by evidence See the observations of Russell on Arbitration, 20th edn., page 422."
31. The judicial committee in Champsey Bhara's case (supra) has laid down the extent of the jurisdiction of the Court to set aside an award on the ground of an error in making the award, It has been reiterated that the award of the arbitrator may be set aside on the ground of error on the face thereof only when the award or in any document incorporated with it as for instance, a note appended by the arbitrator stating the reasons for his decision there is found some legal proposition which is the basis of the award and which is erroneous. However, if a specific question is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not make the award bad of its face so as to permit of it is set aside. (See : Bungo Steel Furniture v. Union of India .
32. In Allopi Prasad v. Union of India, , the Supreme Court held that the award of an arbitrator is liable to be set aside on the ground of error on the face thereof.
33. In Smt. Santha Sila Devi v. Dhirendra Nath Sen, , it was held that the Court should approach an award with a desire to support it, if that is reasonably possible rather than to destroy it by calling as illegal.
34. In Jeevarajbhai Ujamshi Sheth v. Chintamanrao Balaji, , Larger Bench of the Supreme Court observed thus:
"(22) The Court in dealing with an application to set aside an award has not to consider whether the view of the arbitrator on the evidence is justified. The arbitrator's adjudication is generally considered binding between the parties, for he is tribunal selected by the parties and the power of the Court set-aside award is restricted to case set out in Section 30. It is not open to the Court to speculated, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assumption that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the Court cannot proceed to determine whether the conclusion is right or wrong. It is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of his award."
35. In V.R. Subramanyam v. B. Thayappa, , it was held that if additional construction was not undertaken gratuitously and the work completed was not covered by the contract, in such a case, proof of such an agreement is not necessary. The Supreme Court observed as follows:
"If a party to a contract, has rendered service to the other not intending to do so gratuitously and the other person has obtained some benefit, the former is entitled to compensation for the value of the services rendered by him. Where, therefore, a building contractor made additional constructions to the building which were not done gratuitously and upon an oral agreement claimed compensation at prevailing market rate against owner of the plot, he was entitled to receive compensation for the work done which was not covered by the contract, even if he failed to prove an express agreement in that behalf. By awarding a decree for compensation under the statute and not under the oral contract pleaded, there was in the circumstances no substantial departure from the claim made by the building contractor."
36. In Kapoor Nilokhen Co-operative Dairy Farm Society Limited v. Union of India, , it was held that where an arbitrator is called upon to decide the effect of the agreement, he is really to decide a question of law i.e., of interpreting the agreement and hence his decision is not open to challenge. This was a case of reasoned award and the reference was to a specific question of law and since the reference was to a specific question of law, the decision of the arbitrator was held not open to challenge.
37. In Tarapore and Company v. Cochin Shipyard Limited, Cochin, , the Supreme Court observed that if the agreed fact situation, on the basis of which agreement was entered into ceases to exist, the agreement to that extent would become otiose. If rate initially quoted by the contractor became irrelevant due to subsequent price escalation, it was held in that case that contractor's claim for compensation for the excess expenditure incurred due to the price could not be turned down on ground of absence of price escalation clause in that regard in the contract. Agreement as a whole has to be read.
38. In Continental Construction Company's case (supra), the Supreme Court observed as follows:
"If no specific question of law is referred, the decision of the arbitrator on that question is not final however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. The arbitrator is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not he can be set right by the Court provided his error appears on the face of the awards. In this case, the contractor having contracted, he cannot go back to the agreement simply because it does not suit him to abide by it. The decision of this Court in Alopi Parshad v. Union of India may be examined. There it was observed that a contract is not frustrated merely because the circumstances is which the contract was made, altered. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the Courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous, The Supreme Court further observed thus:
"There was a clear finding of the arbitrator that the contract was not rendered ineffective in terms of Section 56 of the Contract Act due to abnormal rise in prices of material and labour. This being so and the contractor having completed the work, it was not open to him to claim extra cost towards rise in prices of material and labour. The arbitrator misconducted himself in not deciding this specific objection raised by the State regarding the legality of extra claim of the appellant."
39. In Sudarsan Trading Company (supra), the Supreme Court observed as follows:
"It is not open to the Court to 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. In the instant case the arbitrator has merely set out the claims and given the history of the claims and then awarded certain amount. He has not spoken his mind indicating why he has done what he has done; he has narrated only how he came to make the award. In absence of any reasons for making the award, it is not open to the Court to interfere with the award. Furthermore, in any event, reasonableness of the reasons given, by the arbitrator, cannot be challenged. Appraisement of evidence by the arbitrator is never a matter which the Court questions and considers. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of the evidence. The arbitrator is the sole Judge of the quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a Judge on the evidence before the arbitrator.
Once there is dispute as to the contract what is the interpretation of that contract, is a matter for the arbitrator and on which Court cannot substitute its own decision. If on a view taken of a contract, the, decision of the arbitrator on certain amounts awarded, is a possible view though perhans not the only correct view, the award cannot be examined by the Court. Therefore, the High Court had no jurisdiction to examine the different items awarded clause by clause by the arbitrator and to hold that under the contract these were not sustainable in the facts found by the arbitrator.
In the instant case, the Court had, examined the different claims not to find out whether these claims were within the disputes referable to the arbitrator, but to find out whether in arriving at the decision, the arbitrator had acted correctly or incorrectly. Thus, 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. 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 exercise. There may be a conflict as to the power of the arbitrator to grant a particular remedy."
40. In Gujarat Water Supply and Sewerage Board v. Unique Directors (Gujarat) (Private) Limited, , it was observed by the Supreme Court that "Reasonableness as such of an award unless the award is per se preposterous or absurd is not a matter for the Court to consider. Appeasement of evidence by the arbitrator is ordinarily not a matter for the Court.
41. In U.P. Hotels v. U.P. SEB, , the Supreme Court observed as follows:
"If a specific question of law is submitted to the arbitrator for his decision and he decides it, the fact that the decision is erroneous does not make the award bad on its face so as to permit it being set aside; and where the question referred for arbitration is a question of construction, which is, generally speaking, a question of law, the arbitrator's decisions cannot be set aside only because the Court would itself have come to a different conclusion; but if it appears on the fact of the award that the arbitrator has proceeded illegally, as, for instance by deciding on evidence which was not admissible or on principles of construction which the law does not countenance, there is error in law which may be ground for setting aside the award."
42. On merits of the case, the Supreme Court in Food Corporation of India's case (supra) observed thus:
(8) In the instant case, the arbitrator has chosen to make a speaking award, that is to say, he has given reasons for his conclusion. Whether he is obliged to give such reasons or not is another mailer but since the arbitrator had chosen to give the reasons, unless it is demonstrated to this Court that such reasons are erroneous as such as propositions of law or a view which the arbitrator has taken is a view which it could not possibly be sustained on any view of the matter, then the challenge to the award of the arbitrator cannot be sustained. As has been emphasised in Sudarsan Trading Co. v. Government of Kerala that an award could be set aside if the arbitrator has misconducted himself or the proceedings or has proceeded beyond jurisdiction. It could also be set aside where there are errors apparent on the face of the award, But these are separate and distinct grounds. In case of errors apparent on the face of the award, it can only he 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. See the observations of the Judicial Committee in Champsey Bhara and Company, v. Jivraj Balloo Spinning and Weaving Co. Ltd. (AIR 1923 PC 66) It further observed in para 10 as follows:
(10) Dr Singhvi drew our attention to the observations of this Court in M/s. Sudarsan Trading Co. at page 352 of the report where it was stated that if it was apparent from the award that a legal proposition which formed its basis was erroneous, the award was liable to be set aside. Dr. Singhvi sought to urge that when the arbitrator observed that "Corporation is not entitled to recover such a claim particularly when the 'Economic Rate has not been defined," this, according to the statement of Dr. Singhvi, the arbitrator was mistaking the law, such a mistake of law is apparent on the face of it. It has to be borne in mind, however, that wrong statement or conclusion of law, assuming even that it was a wrong statement of law, was not wrong statement of the proposition of law which was the basis for decision in this award. Error of law as such is not to be presumed; if there is legal proposition which is the basis of the award and which is erroneous as observed in Champsey Bhara and Company (AIR 1923 PC 66) then only the award can be set aside. There was no proposition of law; there was a legal deduction of law arrived at to say that the provisions of Clause g (i) of the contract would be penal rate and such penal rate cannot be sustainable without evidence of the damages suffered to that extent. We are of the opinion that the arbitrator had taken a view which is a plausible view. Beyond this the Court has nothing to examine. It is not necessary for a Court to examine the merits of the award with reference to the materials produced before the arbitrator. The Court cannot sit in appeal over the views of the arbitrator by re-examining and re-assessing the materials. See the observations of this Court in Puri Construction Private Limited v. Union of India, .
43. In Hindustan Construction Company Limited v. State of J&K, , after referring to the decision in Champsey Bhara's case (supra), the Supreme Court observed as follows:
"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 claim, 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, Court should look at those terms and interpret them, if this 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."
44. In State of Rajasthan v. Poori Construction Company Limited, , the Supreme Court held as follows:
"Since the arbitrator is a judge by choice of the parties, and more often than not, a person with little or no legal background, the adjudication of disputes by an arbitration by way of an award can be challenged only within the limited scope of several provisions of the Arbitration Act and the Legislature in its wisdom has limited the scope and ambit of challenged to an award in the Arbitration Act. By and large the Courts have disfavoured interference with arbitration award on account of error of law and fact on the score of mis-appreciation and misreading, of the materials on record and have shown definite inclination to preserve the awards as far as possible. As reference to arbitration of disputes in commercial and other transactions involving substantial amount has increased in recent times, the Courts were impelled to have fresh look on the ambit of challenge to an award by the arbitrator so that the award does not get undesirable immunity. In recent times, error in law and fact in basing an award has not been given the wide immunity as enjoyed earlier, by expanding the import and implication of "legal misconduct" of an arbitrator so that award by the arbitrator does not perpetrate gross miscarriage of justice and the same is not reduced to mockery of a fair decision of the lis between the parties to arbitration. However, in the anxiety to render justice to the party to arbitration, the Court should not reappraise the evidence intrinsically with a close scrutiny for finding out that the conclusion drawn from some facts, by the arbitrator is, according to the understanding of the Court, erroneous. Such exercise of power which can be exercised by an appellate Court with power to reverse the finding of fact, is alien to the scope and ambit of challenge of an award under the arbitration Act. If a question of law is referred to arbitrator and the arbitrator comes to a conclusion, it is not open to challenge the award on the ground that an alternative view of law is possible. 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. An error of law or fact committed by an arbitrator by itself does not constitute misconduct warranting interference with the award.
In the present case, the arbitrators have not taken into consideration any matter outside the scope of reference. On the basis of agreement between the parties in terms of the nomination of the respective arbitrator by the parties, the dispute and differences covered by the written agreement had been referred for arbitration by the said joint arbitrators. It was not the case of either of the parties that the arbitrators were incompetent to enter upon the reference; that any extraneous matter had been taken into consideration by the arbitrators or that reasonable opportunity of being heard had not been given to either of the parties by the arbitrators or the arbitrators had considered any document behind the back of any party. The Appellant failed to demonstrate that the findings made by the arbitrators were without any basis whatsoever and were not referable to documents relied upon and such findings were so patently unjust or perverse that no reasonable man could have arrived at such findings. Hence, on the score of alleged misreading, misconstructive, mis-appreciation 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.
There is no merit in the contention 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 the Supreme Court. It is not necessary to indicate in the award computation made for various heads and it is open to the arbitrator to give lump sum award."
45. Thus the Supreme Court in this case slightly indicated the powers of the Court to interfere with the award. A total immunity which the award was enjoying in the hands of the Courts, has now been subjected to interference on the ground of 'legal misconduct'.
46. In Hindustan Construction Company's case (supra), the Supreme Court held as follows:
(7) In our opinion, there is great force in the contentions urged by learned Counsel. The High court has set aside the award on the above items on the ground that there is an error apparent on the face of the award. This is clearly incorrect. The award is a non-speaking one and contains no reasoning which can be declared to be faulty. The scope of the Court's jurisdiction in interfering with a non-speaking award on the above ground is extremely limited. The rule of limitation in this respect was enunciated by the Judicial Committee almost seven decades ago in Champsey Bhara and Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd. (A.I.R. 1923 P.C. 66) in words which have been consistently and uniformly followed and applied in all subsequent decisions. Lord Dunedin said, after noting with disapproval certain attempts to extend the area of the Court's interference with such an award:
"An error in law on the face of the award means, in their Lordships' view, that you can find in the award or a document actually incorporated thereto, as for instance a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party, that opens the door to seeing first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound. Here it is impossible to say, from what is shown on the face of the award, what mistake the arbitrators made. The only way that the learned judges have arrived at finding what the mistake was is by saying: 'inasmuch as the arbitrators awarded so-and-so, and inasmuch as the letter shows that the buyer rejected the cotton, the arbitrators can only have arrived at that result by totally misinterpreting Rule 52'. But they were entitled to give their own interpretation to Rule 52 or any other article, and the award will stand unless, on the face of it, they have tied themselves down to some special legal proposition which then, when examined, appears to be unsound."
(8) 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.
(9) In going further and proceeding to consider the terms of the contract and their interpretation, the High Court was influenced by the decision in Absalom Ltd. v. Great Western (London) Garden Village Society Ltd. (1933 A.C. 592). The ratio of this decision has been discussed and explained by the Court of Appeal in Glacomo Costa Fu Andrea v. British Italian Trading Co. Ltd., (1962)2 All. E.R. 53 and more recently by this Court (in a decision to which one of us was a party) in Sudarsan Trading Co. v. Govt. of Kerala ". That decision, therefore, could not have been taken aid of to fault the award.
(10) There is, however, apart from the existence of an "error apparent on the face of the award", another angle from which a non-speaking award can be considered by the Court and, if necessary, interfered with. This ground for impeaching a non-speaking award and its limitations have been explained by this Court in the Sudarsan Trading Co. case" earlier referred to, Sabyasachi Mukharji, J., enunciated the rule and its limitation thus.
"An award may be remitted or set aside on the ground that the arbitrator in making it, had exceeded his jurisdiction and evidence of matters not appearing on the face of it, will be admitted in order to establish whether the jurisdiction had been exceeded or not, because the nature of the dispute is something which has to be determined outside the award whatever might be said about it in the award or by the arbitrator. See in this connection, the observations of Russell on The Law of Arbitration, 20th edn., p. 427. Also see the observations of Christopher Brown Ltd. v. Genossenschaft Oesterreichischer (1954) 1 Q.B. 8 and Dalmia Dairy Industries Ltd. v. National Bank of Pakistan (1978(2) Lloyd's Rep.223). It has to be reiterated that an arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award. In Halsbury's Laws of England II, 4th edn., Vol. 2, para 622, one of the misconducts enumerated, is the decision by the arbitrators on a matter which is not included in the agreement or reference. But in such a case one has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction. See the observations in Anisminic Ltd. v. Foreign Compensation Commission (1969)2 A.C. 147) and Regina v. Noseda, Field, Knight and Fitzpatrick (1958) I W.L.R. 793). But, in the instant case the Court had examined the different claims not to find out whether these claims were 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 .,.."
The learned Judge further proceeds to point out that Courts are sometimes persuaded to rely on this ground to set aside an award when, actually, what they were embarking upon was an interpretation of the contract and a criticism of the arbitrator's approach thereto. It is clear that this is what has happened in the present case also. We have already mentioned that the High Court has not rested its decision on any question of the arbitrator having exceeded his jurisdiction or travelled beyond the contract; it has clearly held it to be a case of "error apparent on the face of the award." In our view, the case cannot be brought within the scope of the "excess of jurisdiction" rule either."
47. In Jagodion Overseas Private Limited v. Industrial Development Corporation, , the Supreme Court observed that the Court should be very circumspect about setting aside an award reached by an arbitrator. For the purpose it agreed that disputes that may arise or had arisen between them should be resolved not by a Court of law and not by arbitration.
48. In Steel Authority of India Limited's case (supra), the Supreme Court observed thus:
"It is settled law that arbitrator derives the authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be arbitrary one. This deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action. In the present case, it is apparent that awarding of damages of Rs. 11 lakhs and more for the alleged lapses or delay in handing over work site is, on the face of it, against the terms of the contract."
49. The learned Additional Advocate-General relies on para 15, which reads thus:
"(15) Clause 32 of the agreement specifically stipulates that no claim whatsoever for not giving the entire site on award of work and for giving the site gradually will be tenable and the contractor is required to arrange his working programme accordingly. Clause 39 further stipulates that no failure or omission to carry out the provisions of the contract shall give rise to any claim by the Corporation and the contractor, one against the other, if such failure or omission arises from compliance with any statute or regulation of Government or other reasons beyond the control of either the Corporation or the contractor obtaining permission from Forest department to carry out the work in wild life sanctuary depends on statutory regulations. Clause (vi) of general condition of the contract also provides that failure or delay by the Corporation to handover to the contractor possession of the lands necessary for the execution of the work or any other delay by the Corporation which due to any other cause whatsoever would not entitle the contractor to damage or compensation thereof; in such cases, the only duty of the Corporation was to extend the time for completion of the work by such period as it may think necessary and proper. These conditions specifically prohibit granting claim for damages for the breaches mentioned therein. It was not open to the arbitrator to ignore the said conditions which are binding on the contracting parties. By ignoring the same, he has acted beyond the jurisdiction conferred upon him. It is settled law that arbitrator derives the authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be arbitrary one. This deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action. In the present case, it is apparent that awarding of damages of Rs. 11 lakhs and more for the alleged lapses or delay in handing over work site is, on the face of it, against the terms of the contract."
50. In B. V. Radha Krishna v. Sponge Iron India Limited, , the Supreme Court referred to the scope and ambit of Section 30 of Arbitration Act. The relevant paras 11, 12 and 13 are extracted below:
"(11) The disposal of the matter by the High Court in the manner shown above does not come within the ambit of Section 30 of the Arbitration Act. This Court, time and again, has pointed out the scope and ambit of Section 30 of the Act. In State of Rajasthan v. Pitri Construction Co. Ltd. after referring to decisions of this Court as well as English cases, the Court observed as follows:
"On the scope and ambit of the power of interference by the Court with an award made by an arbitrator in a valid reference to arbitration, various decisions have been made from time to time by Law courts of India including this Court and also by the Privy Council and the English Courts. Both the panics have referred to such decisions in support of their respective contentions. The factual contentions of the respective parties are proposed to be scrutinised and then the facts are proposed to be tested within the conspectus of judicial decisions governing the issues involved."
12. This Court again observed in paras 26-28 as follows:
"The arbitrator is the final arbiter for the dispute between the parties and it is not open to challenge the award on the ground that the arbitrator has drawn his own conclusion or has failed to appreciate the facts. In Sudarsan Trading Co. v. Govt. of Kerala it has been held by this Court 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. One has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction, Court cannot substitute 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 is a decision within the competency of the arbitrator. By purporting to construe the contract the Court cannot take upon itself the burden of saying that this was contrary to the contract and as such beyond jurisdiction. If on a view taken of a contract, the decision of the arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the Court. Where the reasons have been given by the arbitrator in making the award the Court cannot examine the reasonableness of the reasons. If the parties have selected their own forum, the deciding forum must be conceded the power of appraisement of evidence. The arbitrator is the sole Judge of the quality as well as the quantity of evidence and it will not be for the Court to take upon itself the task of being a Judge on the evidence before the arbitrator.
In Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar, it has been held by this Court that appraisement of evidence by the arbitrator is ordinarily never a matter which the Court questions and considers. It may be possible that on the same evidence the Court may arrive at a different conclusion than the one arrived at by the arbitrator but that by itself is no ground for setting aside the award. It has also been held in the said decision that it is difficult to give an exact definition of the word 'reasonable'. Reason varies in its conclusions according to the idiosyncrasies of the individual and the time and circumstances in which he thinks. In cases not covered by authority the verdict of a Jury or the decision of a Judge sitting as a Jury usually determines what is 'reasonable' in each particular case. The word reasonable has in law prima facie meaning of reasonable in regard to those circumstances of which the actor, called on to act reasonably knows or ought to know. An arbitrator acting as a Judge has to exercise a discretion informed by tradition, methodized by analogy, disciplined by system and subordinated to the primordial necessity of order in the social life. Therefore, where reasons germane and relevant for the arbitrator to hold in the manner he did, have been indicated, it cannot be said that the reasons are unreasonable.
In this case, claims before the arbitrators arise from the contract between the parties. It is well settled that if a question of law is referred to arbitrator and the arbitrator comes to a conclusion, it is not open to challenge the award on the ground that an alternative view of law is possible. In this connection, reference may be made to the decisions of this Court in Alopi Parshad and Sons Limited v. Union of India and Kapoor Nilokheri Co-operative Dairy Farm Society. In Indian Oil Corporation Limited v. Indian Carbon Ltd., this Court has held that the Court 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 conclusions or if the award is based upon any legal proposition which is erroneous."
"(13) In Hindustan Construction Co. Ltd. v. Governor of Orissa this Court observed on the scope of interference by the Court as follows:
".....It is well known that the Court while considering the question whether the award should be set aside, does not examine that question as an appellate Court. While exercising the said power, the Court cannot reappreciate all the materials on the record for the purpose of recording a finding whether in the facts and circumstances of a particular case the award in question could have been made. Such award can be set aside on any of the grounds specified in Section 30 of the Act.
14. Bearing in mind the principles laid down by this Court in the above said cases, if we look into disposal of the matter by the High Court, it would be evident that the High Court has substituted its own view in place of the arbitrator's view as if it was dealing with an appeal. That is exactly what is forbidden by the decisions of this Court. Therefore, we have no hesitation to set aside the judgment of the High Court on this issue."
51. In New India Civil Erectors (P) Limited v. Oil and Natural Gas Corporation, , it was a case relating to challenge to the non- speaking award. One of the disputes between the parties was with respect to the mode/method of measuring the constructed area. The term with regard to the mode of measurement clearly stated that the rate which was quoted excluded the balcony areas. It was not disputed that the plan of flats attached to the tender notice provided for balcony to be constructed. The claim of the appellant therein was what because balconies were in fact not constructed but were included in the constructed area, therefore, they were entitled to be paid in respect thereof. The High Court said aside the award of the arbitrators. While upholding the decisions of the Court, the Supreme Court observed that the arbitrators had over stepped their award by including the area of balcony in the measurement of the built up area. The term of the contract clearly stipulated that in the total built up area of the floor the balconies are to be excluded and not to be taken into account. The contractor, therefore, could not raise any claim in respect of this area. The contract prohibited payment in respect of the balconies as shown in the sanctioned plan. Merely because the balconies were enclosed did not permit any payment being made in respect thereof. It was in view of these facts that the Supreme Court held that the arbitrators had acted on the excess of their jurisdiction because the award was contrary to the term relating to the mode of measurement and in the interpretation of which term there was no dispute. In other words, construction of the contract was not in issue in the arbitration proceedings in that case. The interpretation of the term of contract did not arise in that case. The contract prohibited payment in respect of balconies but the award of the arbitrator had awarded an amount in respect thereof. Therefore, this- was in excess of jurisdiction.
52. Dealing with the non-speaking award and also for the claims on the ground of escalation of price, due to various reasons including payment of minimum rates of wages payable to various categories of workers, this Court in Associated Engineering Company v. Government of A.P., , referred to the contract clauses and set aside the award by holding :-
"This conclusion is reached not be construction of the contract but by merely looking at the contract. The umpire travelled totally outside the permissible territory and thus exceeded his jurisdiction in making the award those claims. This is an error going to the root of his jurisdiction. See Jivarajbhai Namshi Sheth v. Chintamanrao Balajit"
The Supreme Court further held as under :
"An arbitrator who acts in manifest disregard of the Contract Acts without jurisdiction. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialised branch of the law of agency (see Mustill and Body's Commercial Arbitration, 2nd edn., p. 641. He commits misconduct if by his award he decides matters excluded by the agreement (see Halsbury's Laws of England, Volume II, 4th edn., para 622. A deliberate departure from the contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award."
53. Similarly, in Managing Director, J&K Handicrafts, Jammu v. Good Luck Carpets, , the Supreme Court dealing with the non-speaking award, the Court negatived the contention that the agreement containing the arbitration clause cannot be looked into even to find out as to what was the nature of the dispute contemplated by it with regard which a reference to an arbitrator was contemplated, nor so, when the award was non-speaking one, by observation thus :
"Firstly, the award is not a totally non-speaking one inasmuch as it gives a resume of the incentive scheme and the agreement between the parties as also the items of the claim made by the respondent. Of course while fixing the amount found payable by the appellant, no reasons are recorded. Secondly, if there is any challenge to the award on the ground that the arbitrator had no jurisdiction to make the award with regard to a particular item inasmuch as it was beyond the scope of reference, the only way to test the correctness of such a challenge is to look into the agreement itself. In our opinion, looking into the agreement for this limited purpose is neither tantamount to going into the evidence produced by the parties nor into the reasons which weighed with the arbitrator in making the award."
54. In T.N. Electricity Board v. Bridge Tunnel Constructions, , the contractor had set up the claims raised at rates higher than the contracted rates and twice the rate for the work done after the expiry of the contract period. For those claims, dispute was raised and the matter was referred to the arbitrator. The civil Court made the award rule of the Court. The High Court confirmed the same. In appeal, this Court set aside the award and while discussing various contentions, observed as under:
"If the arbitrator decides a dispute which is beyond the scope of his reference or beyond the subject-matter of the reference or he makes the award disregarding the terms of reference or the arbitration agreement or terms of the contract, it would be a jurisdictional error beyond the scope of reference; he cannot cloth himself to decide conclusively that dispute as it is an error of jurisdiction which requires to be ultimately decided by the Court."
55. In H.P. State Electricity Board v. R.J. Shah and Company, , the Supreme Court held that if the award is in excess of jurisdiction of the arbitrator, then it is liable to be set aside, but if the award is within the jurisdiction on the basis of the construction of the contract, which the arbitrator was required to do, then the Court cannot set aside merely because another view was possible - test to determine whether arbitrator acted in excess of jurisdiction. The Supreme Court referred to the decisions of the Division Benches and also the Larger Benches of Supreme Court and observed thus:
"The case where there is want of jurisdiction has to be distinguished from the case where there is error in exercise of jurisdiction. The award is liable to be set aside if there is error of jurisdiction but not if the error is committed in exercise of jurisdiction. When the arbitrator is required to construe a contract then merely because another view may be possible the Court would not be justified in construing the contract in a different manner and then to set aside the award by observing that the arbitrator has exceeded the jurisdiction in making the award.
In order to determine whether the arbitrator has acted in excess of jurisdiction what has to be seen is whether the claimant could raise a particular dispute or claim before an arbitrator. If the answer is in the affirmative then it is clear that the arbitrator would have the jurisdiction to deal with such a claim. On the other hand, if the arbitration clause or a specific term in the contract or the law does not permit or give the arbitrator the power to decide or to adjudicate on a dispute raised by the claimant or there is a specific bar to the raising of a particular dispute or claim then jurisdiction. In order to find whether the arbitrator has acted in excess of jurisdiction the Court may have to look into some documents including the contract as well as the reference of the dispute made to the arbitrators limited for the purpose of seeing whether the arbitrator has the jurisdiction to decide the claim made in the arbitration proceedings.
In this case the arbitration clause is widely worded. The dispute which was referred to the arbitrators, inter alia, related to the construction of the contract. The contract did visualise the contractor raising a claim for revision of rates. The dispute was as to when such a claim could be raised. Correspondence exchanged between the parties prior to the making of the reference shows that the arbitrators were called upon to construe the contract in order to determine whether the contractor was entitled to claim revision of rates and if so what should be the revised rates. The dispute before the arbitrators, therefore, clearly related to the interpretation of the terms of the contract. The said contract was being read by the parties differently. The arbitrators were, therefore, clearly called upon to construe or interpret the terms of the contract. The construction placed on the contract by the contractor cannot be said to be an implausible one. Even if the arbitrators construed the terms of the contract incorrectly, it cannot be said that the award was in excess of their jurisdiction. Their jurisdiction clearly was to construe the terms of the contract and their decision thereon is final and binding on the parties. It is not possible to say that the arbitrators in the present case travelled outside the bounds of the contract. It cannot be said that the award showed that there was an error of jurisdiction even though there may have been an error in the exercise of jurisdiction by the arbitrators."
56. In Rajasthan State Mines' case (supra), the Supreme Court again traced the entire case law and observed thus:
"Despite the admission by the contractor, it is apparent that arbitrator has ignored the aforesaid stipulations in the contract. In the award, the arbitrator has specifically mentioned that he has given due weightage to all the documents placed before him and has also considered the admissibility of each claim. However, while passing the award basic and fundamental terms of the agreement between the parties are ignored". By doing so, it is apparent that he has exceeded his jurisdiction.
The rates agreed were firm, fixed and binding, irrespective of any fall or rise in the cost of the work covered by the contractor or of any other reason or any ground whatsoever. It is specifically agreed that contractor will not be entitled or justified in raising any claim or dispute because of increase in cost of expenses on any ground whatsoever. By ignoring the said terms, arbitrator has travelled beyond his jurisdiction as his existence depends upon the agreement and his function is to act within the limits of the said agreement. This deliberate departure from the contract amounts not only to manifests disregard of the authority or misconduct on his part but it may tantamount, to mala fide action.
It is settled law that the arbitrator is the creature of the contract between the parties and hence if he ignores the specific terms of the contract, it would be a question of jurisdiction error which could be corrected by the Court and for that limited purpose agreement is required to be considered For deciding whether the arbitrator has exceeded his jurisdiction reference to the terms of the contract is a must it is true that arbitration Clause 74 is very widely worded, therefore, the dispute was required to be referred to the arbitrator. Hence, the award passed by the arbitrator cannot be said to be without jurisdiction but, at the same time it is apparent that he has exceeded his jurisdiction by ignoring the specific stipulations in the agreement which prohibit entertaining of the claims made by the contractor. In the letter dated 5-2-1985 appointing the sole arbitrator, it has been specifically mentioned that agreement dated 14-5-1981 was executed by and between the parties and that contractor has raised the claims as mentioned in the letter dated 7-9-1983 which was denied by the company and at the request of the contractor, sole arbitrator was appointed to adjudicate the claims made by the contractor vide his letter dated 7-9-1983. This reference to the arbitrator also clearly provides that reference was with regard to the dispute arising between the parties on the basis of the agreement dated 14-5-1981, It nowhere indicates that the arbitrator was empowered to adjudicate any other claims beyond the agreement between the parties.
The issue whether the award is perverse and that the arbitrator failed to apply his mind to pleadings, documents and evidence as well as the clauses 17 and 18 of the agreement would cover the contention that the arbitrator acted beyond his jurisdiction in ignoring stipulations of the contract."
57. In para 44 after considering various decisions, the Supreme Court thus summarised the principles as follows:
"(44) From the resume of the aforesaid decisions, it can be stated that:
(a) It is not open to the Court to speculate, where on reasons are given by the arbitrator, as to what impelled arbitrator to arrive at his conclusion.
(b) It is not open to the Court to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award.
(c) If the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his jurisdiction then the Court cannot interfere.
(d) If no specific question of law is referred, the decision of the arbitrator on that question is not final, however much it may be within the jurisdiction and indeed essential for him to decide the question incidentally, hi a case where specific question of law touching upon the jurisdiction of the arbitrator was referred for the decision of the arbitrator by the parties, then the finding of the arbitrator on the said question between the parties may be binding.
(e) In a case of non-speaking award, the jurisdiction of the Court is limited. The award can be set aside if the arbitrator acts beyond his jurisdiction.
(f) To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties containing the arbitration clause. Arbitrator acting beyond his jurisdiction - is a different ground from the error apparent on the face of the award.
(g) In order to determine whether arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant could raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or give the arbitrator the power to decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim then the award passed by the arbitrator in respect thereof would be in excess of jurisdiction.
(h) The award made by the arbitrator disregarding the terms of the reference or the arbitration agreement or the terms of the contract would be a jurisdictional error which requires ultimately to be decided by the Court. He cannot award an amount which is ruled out or prohibited by the terms of the agreement. Because of specific bar stipulated by the parties in the agreement, that claim could not be raised. Even if it is raised and referred to arbitration because of wider arbitration clause such claim amount cannot be awarded as agreement is binding between the parties and the arbitrator has to adjudicate as per the agreement. This aspect is absolutely made clear in Continental Construction Co. Ltd. (supra) by relying upon the following passage from Alopi Parshad v. Union of India, 1960 (2) SCR 703 which is to the following effect:
"There it was observed that a contract is not frustrated merely because the circumstances in which the contract was made, altered. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executor contract are often faced, in the course of carrying it out, with a turn of event which they did not at all anticipate, a wholly abnormal rise of fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the Courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous."
(i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action.
(j) The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks just and reasonable; the arbitrator is a Tribunal selected by the parties to decide the disputes according to law."
58. In U.P. State Electricity Board v. Searsole Chemicals Limited, , the Supreme Court held thus:
"When the arbitrators have applied their mind to the pleadings, the evidence adduced before them and the terms of the contract, we do not think, it is within our scope to reappraise the matter as if this were an appeal, and it is clear that where two views are possible - in this case there is no such scope
- the view taken by the arbitrators would prevail."
59. In T.P. George v. State of Kerala, 2001 (2) SCC 758, the Supreme Court held as follows:
"The question, whether the Supplemental Agreement dated 20th October, 1983 debarred the appellant from pursuing his claims, was before the arbitrator. Such a question having been referred to the arbitrator the view of the arbitrator would be binding if it is one which is possible. The arbitrator has taken note of the appellant letters dated 6-10-1983 and 24-11-1983 and come to conclusion that the Supplemental Agreement had been got executed and that same was executed without prejudice to the claims which had already been made. This is a possible view.
The High Court has not at all considered the letter dated 6-10-1983 and 24-11-1983 nor dealt with the question as to whether or not the Supplemental Agreement was got executed. The High Court has not even considered the effect of the Supplemental Agreement having been executed without prejudice to the claims which had already been made. Even if the High Court had considered these aspects it could not have substituted its views for those of the arbitrator as it could not be said that the view taken by the arbitrator is unreasonable or one which cannot be arrived at by a reasonable person. In this view of the matter the impugned judgment cannot be sustained.
60. In General Manager, Northern Railways' case (supra), the Supreme Court held thus:
"To sum up, our conclusion are: (i) while deciding a petition under Section 20 of the Arbitration Act, 1940, the Court is obliged to examine whether a difference which is sought to be referred to arbitration is one to which the arbitration agreement applies. If it is a matter excepted from the arbitration agreement, the Court shall be justified in withholding the reference, (ii) to be an excepted matter it is not necessary that a departmental or 'in-house' remedy for settlement of claim must be provided by the contract. Merely for the absence of provision for in house settlement of the claim, the claims does not cease to be an excepted matter, (iii) an issue as to arbitrability of claim is available for determination at all the three stages - while making reference to arbitration, in the course of arbital proceedings and while making the award a rule of Court. In the case before us, the claim in question as preferred are clearly covered by "excepted matters." The statement of claims, as set out in the petition under Section 20 of the Arbitration Act, does not even prima facie suggest why such claims are to be taken out of the category of "excepted matters" and referred to arbitration. It would be an exercise in futility to refer for adjudication by the arbitrator a claim though not arbitrable, and thereafter, set aside the award if the arbitrator chooses to allow such claim. The High Court was, is our opinion, not right in directing the said four claims to be referred to arbitration. After the hearing was concluded the learned Counsel for the respondent cited a few decisions by making a mention, wherein the view taken is that 'interpretation of contract' is a matter for arbitrator to decide and the Court cannot substitute its own decision in place of the decision of the arbitrator. We do not think that the cited cases have any relevance for deciding the question arising for consideration in this appeal. "None of the cases is an authority for the proposition that the question whether a claim is an 'excepted matter' or not must be left to be decided by the arbitrator only and not adjudicated upon by the Court while disposing of a petition under Section 20 of the Arbitration Act, 1940. We cannot subscribe to the view that interpretation of arbitration clause itself can be or should be left to be determined by arbitrator and such determination cannot be done by Court at any stage. For the foregoing reasons we are of the opinion that the view of the "excepted matters' taken by the Division Bench of the High Court cannot be sustained.
The appeal is allowed, the impugned decision of the Division Bench of the High Court is set aside and that of the learned single Judge is restored. No order as to the costs."
61. In Ramachandra Reddy and Company v. State of A.P., , the Supreme Court was dealing with the powers of the civil Court under Section 16 of the Act on the aspect of revision of the award. In that regard, the Supreme Court has clearly delineated the parameters of the expressions 'error apparent on the face of the award' and held that in the absence of any specific agreement to claim escalation rate, the arbitration has no power to grant the amount. It held thus:
(5) Under the Arbitration Act, Section 16 is the provision under which the Court may remit the award for reconsideration of an arbitration and necessity for remitting the award arises when there are omissions and defects in the award, which cannot be modified or corrected. Remission of an award is in the discretion of the Court and the powers of the Court are circumscribed by the provisions of Section 16 itself. Ordinarily, therefore, a Court may be justified in remitting the matter if the arbitrator leaves any of the matters undetermined or a part of the matter which had not been referred to and answered and that part cannot be separated from the remaining part, without affecting the decision on the matter, which was referred to arbitration or the award is so indefinite as to incapable of execution or that the award is erroneous on the face of it. Discretion-having been conferred on the Court, to remit an award, the said discretion has to be judicially exercised and an appellate Court would not be justified in interfering with the exercise of discretion unless the discretion has been misused. What is an error apparent on the face of an award which requires to be corrected has always been a subject-matter of discussion. An error of law on the face of the award would mean that one can find in the award or a document actually incorporated thereto stating the reasons for a judgment some legal propositions which is the basis of the award and which can be said to be erroneous. Documents not incorporated directly or into the award cannot be looked into for the purpose of finding out any alleged error. The Courts are not to investigate beyond the award of the arbitrators and the documents actually incorporated therein and, therefore, when there would be no patent error on the face of the award, it would not be open for the Court to go into the proceedings of the award.
In the present matter, no reasons had been ascribed for interference with the award, rejecting claim Item No. 1 and for remittance of the same. The High Court being the Court of appeal, was therefore, frilly justified in exercise of its appellate power in correcting the error made by the Civil Judge In remitting claim Item No.1."
An arbitrator being a creature of the agreement, unless agreement either specifically or inferentially provides for a higher rate to be awarded for any additional or excess work done by the contractor, it would not be permissible for the arbitrator to award for the so-called additional work at a higher rate. The excavation of hard rock, cannot be held to be a supplemental item and, on the other hand, it is an item of work tendered and accepted, and, as such Clause 63 will have no application to claim Item 1, The question of granting a higher rate for any extra quantity of work executed by the Contractor would arise only when the contract provides for such escalated rate either expressly or by implication as in the case of S. Harcharan Singh v. Union of India, , where the competent authority had agreed for the same by correspondence. But in the case in hand, when there is no such acceptance by the competent authority, and there is no provision in the contract, permitting such escalated rate for the additional quantity of excavation made, the conclusion is irresistible that the contractor will not be entitled to a higher rate for the additional escalation work and as such the High Court was fully justified in setting aside the direction of the trial Judge, remitting claim Item No. 1 for reconsideration.
The grant of extension of time will not in any way make the contractor eligible for any extra claim due to escalation in rates of labour and materials or due to any other reasons under any circumstances.
62. The learned Additional Advocate-General attacked the claim allowed by the learned arbitrator under item No.27 and 28(1) 28(6) on the ground that such a claim is prohibited under Clause 59 of APDSS and therefore, the learned arbitrator has no jurisdiction to entertain such claim and muchless allowing claim. He further submits that apart from the other cases, the judgment of the Supreme Court in Ramalinga Reddy 's case (supra) is a complete answer and therefore, the claim under Clauses 27 and 28 have to be rejected. On the other hand, the learned Counsel for the contractor submits that the claims are quite justified and the Supreme Court never declared such a claim being prohibited. These claims relates to the compensation for damages suffered for under utilisation of machinery and vehicle under claim No.27, under claim No.28, the difference of S.S.R rate for the period from 25-11-1984 to 30-6-1985 was claimed while under claim No.28(2) to 28(6) the period is from 1-7-1986 to 30-6-1987 and 1-7-1987 to 30-6-1988, 1-7-1988, 1-7-1988 to 30-6-1989 and 1-7-1990 to 30-6-1991.
63. The main thrust of the argument of the learned Additional Advocate-General is that Clause 59 is a total bar. At the threshold it has to be noted in this regard that this prohibition under Clause 59 was never claimed at any time either during the period when the matter was under correspondence between the Contractor and the Department or when the claim was before the arbitrator. In the counter filed by the claimants under items 27 and 28, the department have never invoked Clause 59 at any point of time. It is only at the time of arguments, such an issue was sought to be pressed into service before the arbitrator. Even though the learned arbitrator was under no obligation to entertain such a stand at the time of arguments, yet the same was also dealt with by the arbitrator in an elaborate manner.
64. For proper appreciation of the case, it is necessary to refer to arbitration clauses 73 and also clause 59, they, read as follows:
"Clause 73 extracted in the preceding paragraph."
"Clause 59: Delays and extension of time:
"No claim for compensation on account of delays or hindrances to the work from any cause whatever shall lie, except as hereinafter defined.
Reasonable extension of time will be allowed by the Executive Engineer or by the officer, competent to sanction the extension for unavoidable delays; such as may result from causes which, in the opinion of the Executive Engineer shall assess the period of delay or hindrance caused by any written instructions issued by him, as twenty five per cent in excess of the actual working period so last."
65. It is settled law that the arbitrator is a creature under the agreement, unless the agreement either specifically or inferentially provides for higher rate to be awarded for any additional or excess work done by the contractor, it would not be permissible for arbitrator to award the additional amount. In other words, to claim additional/ higher rate for additional work, there should be a supplemental agreement or it should be an admitted supplemental item. It is also well settled that to claim any escalated rate, either express or by implication, the competent authority should agree. Further, the grant of extension of time will not in any way make the contractor eligible for any extra claim due to escalation of rates of labour and material (refer to Harcharan Singh v. Union of India, and Ramalinga Reddy 's case (supra).
66. What is an error apparent on the face of an award, which requires to be corrected, always been a subject-matter of discussion. It is now well settled that an error of law on the face of the award would been that one can find in the award or a document actually incorporated thereto stating that the reasons for judgment, some legal propositions which have the basis of the award and which can be said to be erroneous. The documents not incorporated directly or indirectly into the award cannot be looked into for the purpose of finding any alleged error. The Courts are not to investigate beyond the award of the arbitrators and the documents actually incorporated therein and therefore, when there would be no patent error on the face of the award, it would be open for the Court to go into the proceedings of the award. (See : C. Ramachandra Reddy's case (supra).
67. When the arbitrators have applied their mind to the pleadings, the evidence adduced before them and the terms of the contract, there is no scope for the Courts including the Supreme Court to reappraise the matter as if this were an appeal and it is a clear that whether two views are possible - in this case there is no such scope- the view taken by the arbitrator would prevail. (See : U.P. Electricity Board's case).
68. It is also well settled that it is not open for the Court to substitute the views for those of the arbitrators. Unless the view taken by the arbitrator is unreasonable or one which cannot be arrived at by a reasonable person. (See : T.P. George's case (supra).
69. In case of reasoned award or unreasoned award, Courts cannot interfere with such awards once the dispute is an arbitrable one and the arbitrator has jurisdiction to decide the same. A patent lack of jurisdiction initiates the award but a latent lack of jurisdiction (error within the jurisdiction) cannot be a ground for interference.
70. Construing the term of agreement and interpretation of clauses of agreement are within the exclusive province of the arbitrator. Even if there is error of fact or law in the award the same cannot be interfered. Further, the Court should make efforts to sustain the award rather than interfering.
71. Clause 59 of APDSS has been the subject-matter of consideration more than once before this Court.
72. A Division Bench of this Court in State of A.P. v. S. Shivraj Reddy, 1988 (2) APLJ 465, observed that on account of the lapses on the part of the department in not handing over the site to the contractor in full at a time, the contractor is entitled to be paid at the standard schedule of rates in force at the relevant time. The contract could not be completed within the time fixed under the agreement and therefore, the contractor laid a claim on the basis of the SSR rates in force during the period of extension. The Division Bench held that clause 59 has no application. As Clause 59 pertains to compensation and the present case was concerned with the work done, the contractor was not claiming any compensation for the loss of damage or loss of profit which he would have made, but for the delay committed by the department. What was asked for is that beyond the contractoral date he must be paid with the standard specification rate as the site was not handed over in time. Para 9 is relevant which is extracted below:
"In our view Section 59 has no application. It pertains to compensation. In the present case, we are concerned with the rates for the work done. The contractor is not claiming any compensation for loss or damage or loss of profit which he would have made but for the delay committed by the department. What is asked for here is that beyond the contractual date he must be paid as per the standard specification rates as the site was not handed over in time due to the fault of the department itself. We do not think Section 59 has any application at all. The decision of the Division Bench referred to by the learned Government Pleader has no relevance in the present context. In this Division Bench case, the contractor having agreed for reduction of rates and executing the final agreement, demanded escalation of rates complaining that the department committed delays and defaults. The Government relied upon Clause 59 and Foot Nos.7 of schedule "A" which prohibited payment of rates at the enhanced rates event during the extended period. The Division Bench negatived the claim of the contractor on the ground that the Foot Note 7 is clear to the effect that the agreed rate should prevail even during the extended period of the agreement. The judgment of the Division Bench was more based on the specific prohibition contained in Foot No 7 of Schedule 'A' of the agreement therein. There is no such clause in the present agreement. It is not a case of escalation of rates. Here the major portion of the site was handed over beyond the period of agreement during which period the cost of labour and other materials have gone up. Without the site it was impossible for the contractor to complete the work and what the arbitrators have done is only to permit the contractor to claim the rates prevalent as per the SSRs, in force, in our view, it is not prohibited either under the APDSS rules or by any clause in the agreement."
73. In M. Gangareddy v. State of A.P., 1996 (3) ALD 434 (DB), the Division Bench consisting of Justice of P. Venkatarama Reddi (as he than was) and myself, considered Clause 59. The department tried to take advance of judgment of another Division Bench in State of A.P. v. Associated Engineering Enterprises, Hyderabad, . Distinguishing the judgment and also referring to Ramalinga Reddy's case (supra), the Division Bench in para 8 observed thus:
"Applying the principle of the above decision to the facts of the case before us, it must be held that Clause 59 bars a claim for compensation on account of any delays or hindrances caused by the department. In such a case, the Contractor is entitled only to extension of the period of contract. Indeed, Such an extension was asked for, and granted on more than one occasion. (The penalty levied for completing the work beyond the extended period of contract has been waived in this case.) The contract was not avoided by the contractor, but the chose to complete the work within the extended time. In such a case, the claim for compensation is clearly barred by Clause 59 of the APDSS which is admittedly, a term of the agreement between the parties.
It may be noticed that in the above case, claim No. 1 which was turned down on the basis of Clause 59 was for compensation pertaining to the original period of contract as noted at paragraph 31 of the judgment. Referring to the earlier Division Bench judgment rendered by Jeevan Reddy, J (as he then was) and Bhaskar Rao, J, the learned Judges posed the question and answered as follows:
"The question is whether any claim for compensation is permissible for the original period of contract? It was held by a Bench of this Court of which one of us (Jeevan Reddy, J.) was a member - in AAO No.786 of 1986 dated 1-12-1988, that such a claim is not permissible by virtue of Clause 59 of the APDSS."
In Prasad and Company, Hyderabad v. Superintending Engineer, Irrigation Circle, Chittoor , the Division Bench of which of us (Venkatarama Reddy, J.) was a member held that escalation over and above the agreed rates during the currency of the agreement period was clearly barred by P.S. 59 of APDSS. In Ramalinga Reddy's case (supra), the Supreme Court had gone a step further and held that the claim for the payment of extra rate even for the work done beyond the agreement period was unsustainable in the light of the specific prohibition contained in Clause 59. However, it is not discernible from the judgment whether the prolongation of the contract was for reasons attributable to the Contractor or on account of breach of contractual obligations by the employer as in the instance case. Be that as it may even assuming that Clause 59 would have in the normal course come in the way of the petitioner claiming escalation in rates for the work done beyond the contractual period, the special facts and circumstances of this case stand apart and do not attract the bar of Clause 59. We agree with the learned Counsel for the contractor that the immunity conferred by the exclusionary Clause 59 must be deemed to have been waived and the department is estopped from taking shelter under it."
74. The Division Bench after referring to various correspondences and letters exchanged between the parties observed:
"The assurances/recommendations made by the departmental officers came in the wake of persist requests made-by the contractor to any escalated rates, vide Ex.A9 dated 21-12-1983, Ex.AlO dated 9-4-1984; Ex.A12 dated 1-7-1984 and Ex.A19 dated 15-4-1985 while asking for extension of time. Whenever he sought for extension of time he was consistently making a request for allowing payment at current SSRs plus or minus tender premium. This fact is not disputed. As seen from Ex.A17 etc., the department itself persuaded the contractor to seek extension of time all the while assuring him that his request for payment of balance work at the extra rates was under active consideration and will be recommended after due scrutiny. Follow up action was taken by calling for reports from the Executive Engineer who in turn submitted proposals for on the basis of SSRs prevailing in 1983-84 and 1984-85. In this state of affairs, the contractor proceeded to do the work whenever it was possible to do. At no point of time, the Superintending Engineer or any other departmental official tried to shut out the claim of the contractor on the basis of Clause 59. On the other hand, the correspondence makes it crystal clear that the concerned officials including the Superintending Engineer who signed the agreement being fully conscious of the inability of the department to keep up to the contractual obligations, lulled the contractor into the belief that his case for extra rates would be favourably considered and made him proceed with the work in larger public interest."
75. Referring to the principle of waiver, ultimately the Division Bench observed that there is waiver to enforce Clause 59 and held as follows:
"On the facts of the case, it can be reasonably said that there was waiver of the right to enforce Clause 59. Alternatively, we hold that the arbitrator's finding that there was an assurance to pay the extra rates cannot be said to be perverse or vitiated by an error of law apparent on the face of the award. The assurance may not a direct or express but it is possible to take the view that there was an implied promise to pay the extra rates for the work done beyond the agreement period notwithstanding Clause 59. The promise had emanated from a competent officer who signed the agreement itself. If the view taken by the arbitrator is reasonably possible or plausible, we cannot interfere with the award on the ground of error apparent on the face of the award. We, therefore, uphold the award in regard to Claim No.1(e) and the learned Additional Judge, City Civil Court was justified in confirming the award on this item."
76. In another Division Bench judgment in Government ofAndhra Pradesh v. G. Kondal Rao, (DB), Justice P. Venkatarama Reddi (as he then was), speaking for the Bench observed thus:
"14. It is common ground that there is no provision in the agreement for escalation of rates in case of delay or otherwise. On the other hand, there is a prohibition under Clause 59 of APDSS (forming part of the agreement) against the admissibility of claim for compensation on account of delay or other hindrances. On a conspectus of the case law on the subject, we have taken the view in CMA No. 1156 of 1989 that in the absence of an escalation clause in the contract, such escalation cannot be read into a written contract as an implied term and such a claim does not fall within the ambit of an arbitrable dispute, as held by a Division Bench of this Court in Chief Engineer, Panchayat Raj v. B. Balaiah, 1985 (1) APLJ 224. The latest judgment of the Supreme Court in Children, Ramalinga Reddy v. Superintending Engineer, (1994) 5 Scale 67, has also been relied upon by us in that case to negative the claim for payment of extra rates for the work done beyond the agreement period. The Supreme Court held that by virtue of Clause 59 coupled with the letter of the Superintending Engineer notifying, while granting extension, that no compensation will be allowed, the arbitrators exceeded their jurisdiction in granting the claim.
15. However, in the present case, there is one distinguishing feature. The finding of the arbitrators is that the appellants committed default in shifting the electrical poles and that the default occasioned loss to the contractor. It is to be compensate that loss caused on account of breach of contractual obligation on the part of the Government that the award was passed allowing extra rate for the work done beyond September, 1983, i.e., after the electrical poles were shifted. In such, circumstances, it could be contended with some force that, a claim to award compensation for the consequences of breach was incidental to the contract and fall within the domain of the arbitrators to decide. The question in P.M. Paul v. Union of India, , the Division Bench judgment of this Court in State of A.P. v. S. Shivaraj Reddy, 1988 (2) APLJ 465, and the observations made by another Division Bench of this Court in Government of A.P. v. P.V. Subbanaidu, 3990 (1) ALT 54, could have been pressed into service to sustain such claim. In the last case it was pointed out by Jeevan Reddy, J :
"In P.M. Paul the Government was held responsible because it was found by the arbitrators a fact (it was a reasoned award in that case) that the Government was responsible for the delay. In the absence of such an allegation and a finding, whether express or implied, it cannot be said that the claim for escalation charges is incidental to be contract, or that the arbitrator had jurisdiction to pronounce upon the same,"
Again at paragraph 29 it was observed :
"The true position, however, is unless the Government is held responsible for the delay in execution of the contract, there can be no basis for the contractor's claim and even here such a claim may be liable to be rejected in view of Clause 59 of the APDASS (See CMA No.684/85 dated 24-3-1989)."
In the same tenor cases involving prolongation of contract as a direct result of default or breach on the part of the Government were placed on a somewhat different footing in CMA No.998/94, dated 19-8-1989.
16. We need not dilate further on this aspect and express our final opinion focussing attention to the impact of Clause 59 in such situations. We proceed on the basis that there was a breach of the contractual obligation on the part of the department in their failure to shift the electrical poles within a reasonable time. We will further proceed on the premise that the contractor was within his rights to demand a reasonable extra payment for the work that had to be done far beyond the stipulated period. But, there is still a hurdle coming in the way of the arbitrators to accept such claim and this hurdle, in our view, cannot be successfully crossed."
77. It was categorically observed by the Division Bench that the contractor was within his right tablaim compensation, but for the undertaking. It was observed thus :
"Therefore, if the letter stand-as it ought to, what is the effect? The contractor who was perhaps within his rights to claim compensation in the form of escalated rates by reason of breach committed by the other party refrained from exercising that right. Instead, he sought for extension with a categorical assurance that he would not claim compensation or extra payment. The appellants acted upon it and granted extension as desired by the contractor. The contractor should therefore, be estopped from resiling from his undertaking and take a contrary stand in the arbitration proceedings."
78. Yet, in another judgment of the Division Bench in Superintending Engineer, Irrigation Department, Nizamabad v. Progressive Engineering Company, Hyderabad, 1997 (2) ALT 710 (D.B.), where Justice P. Venkatarama Reddi (as he then was) categorically held that the Contractor can make a claim for the escalation of the work done beyond the agreement period if he incurred loss on account of the breach of contractual obligation on the part of the Government even in the absence of escalation clause in contract and prohibition contained in Clause 59. The Division Bench critically analysed Clause 59 with reference to RamalingaReddy's case (supra) and recorded its conclusion on Clause 59 in paras 41 and 42 as follows:
"41. Our conclusions in regard to Clause 59 of the contract are summarised as follows:
(1) Clause 59 was never pleaded before the arbitrators to resist the contractor's claim.
(2) Assuming that Clause 59 creates a jurisdictional bar to the entertainment of a claim for escalation in rates, it cannot be said that the award is the product of inherent or patent lack of jurisdiction insofar as it allows a claim contrary to and disregarding one of the terms of contract. At best, it would be a case of latent lack of jurisdiction, as pointed out in Tarapore and Company v. State of M.P . It would therefore, be relevant to consider the conduct on the part of appellant in failing to put forward the objection based on a contractual term or the acquiescence of the appellant to suffer a decision on merits and the resultant prejudice that might be caused to the opposite party if it is allowed to be raised in post award proceedings.
(3) Viewed from the above angle, it is not just and proper to allow the appellant to raise that plea for the first time before that plea for the first time before the civil Court, especially because the contractor was denied the opportunity to prove that the claim falls within the exceptions contemplated by Clause 59 having regard to the factual situation obtaining in the present case. The contractor could have also contended that on a just and reasonable contraction of Clause 59, there is no room to apply the bar laid down in that clause to the facts of the instant case.
(4) In Ramlinga Reddy's case (supra) there was no finding that the execution of contract was prolonged on account of breach of a fundamental obligation on the part of employer. No argument was advanced on the various possible interpretations to be placed on Clause 59. On the other hand, it seems to be a common ground that the fact situation giving rise to the claim did not attract the defined exceptions.
(5) The decision in Ramalinga Reddy's case (supra) does not preclude an enquiry into the question of applicability of the bar contained in Clause 59 - if that is put in issue, on the basis of factual situation obtaining in a given case.
(6) The question whether Clause 59 bars the claim for escalation in rates where the execution of contract is prolonged beyond the originally agreed period on account of a fundamental breach on the part of the employer (department) is at least a debatable point.
42. Finally, before closing the case, we would like to refer in brief to two earlier decisions rendered by us recently. In Prasad and Company v. Superintending Engineer , we affirm the judgment of the civil Court setting aside the award allowing extra amount towards escalation in costs. In that case, the major part of the claim relates to the work carried out within the agreement period. Thus, the nature of the claim in the present case differs substantially. That part, there is nothing in that case to indicate the State did not plead before the arbitrators that Clause 59 was a bar to the contractor's claim. In Government of Andhra Pradesh v. G. Kondal Rao (AAO 241 of 1991, dated 14-7-1995) , after adverting to the earlier case in which Clause 59 was considered, we indicated that "the cases involving prolongation of contract as a direct result of default or breach on the part of the Government were placed on a somewhat different footing"
79. Admittedly in the instant case, the learned arbitrator considered Clause 73 and 59 and held that bar under Clause 59 was not attracted. This finding cannot be said to be beyond the jurisdiction of the arbitrator.
80. However, the learned Additional Advocate-General relied on two Bench judgments reported in Dwarkanath Reddy's case (supra), and V.C, Brahmanna's case (supra), wherein the Division Bench held that claim for compensation on account of delays and defaults fall outside the jurisdiction of the arbitrator by virtue of Clause 59. But, it is to be noted that the decision of earlier Division Bench were not brought to the notice of the Division Bench. Moreover, the Division Bench failed to take into consideration the effect of Clause 73 read with Clause 59. Apart from that the learned arbitrator rendered a categorical finding that the delays and defaults had occurred on account of breach of contract by the department and that claim fell in the defined exception under Clause 59. Thus, the judgments of the Division Bench are distinguishable on facts and hence the ratio laid down therein cannot be made applicable to the case on hand.
81. As can be seen from various judgments on Clause 59, various Division Benches held that Clause 59 cannot be said to be total Bar for claiming the escalation. It is a case where the term of agreement was construed by the arbitrator and held that referring to Subba Naidu's case (supra) and Ramlinga Reddy's case (supra) and that in view of the wide scope for arbitration Clause 59 has not been specifically excluded in Clause 73. In fact, what was awarded by the arbitrator was the SSR rates and fair wages which were prevailing in the relevant years when the contract was executed during the extended period. It is not the case of claiming enhanced rates, but it is a case of claiming the rates which were prevailing in the relevant years, since the contract was prolonged for a considerable number of years, for nearly a decade, the rates which existed during the period in which the work was completed were allowed and even in the question of fair wages to the labourers, it cannot be countenanced in view of the decision of the Supreme Court in Harcharan Singh's case .
82. In Subba Naidu's case (supra), arose from the judgment of this Court reported in Government of Andhra Pradesh v. P.V. Subbanaidu, 1990 (1) ALT 54 (DB). In that case, during the course of execution of contract, there was Skylab scare and that Skylab debris wound fall on the ground of 1-7-1979. On account of the scare, the labour left the work spot and the work had to be suspended. The contractor after completion of the work beyond the agreement period raised arbitration proceedings and laid the following claims;
Claim No.I 1 to 4 5,60,000/-
It was the contention of the Government that Skylab scare will not within the purview of the agreement.
Claim No.II.
Extra expenses for bailing out water for Three months: 20,000/-
(The contention of the department was that rate for excavation of canal also included the item dewatering and hence the claim was outside the scope of contract) Claim No.III Extra expenditure incurred: on account of abnormal increase in prices of commodities and labour and claimed: 5,51,940/-
(The claim was disputed on the ground that the contractor cannot claim higher rate than prescribed in the agreement. Extension was granted as the contractor expressed inability to do the work and not on account of any fault on the part of department.) Claim No.IV Differential explosive rates: 2,64,217/-
83. The arbitrators allowed lump sum amount of Rs.9.18 lakhs. The award was made rule of Court. The same was challenged by the department before the Court. The Division Bench in paras 16 and 17 observed thus:
"16. Before we take up each claim for consideration and before we refer to the several decisions cited before us, it would be appropriate to remind ourselves of certain basic principles: An arbitrator is a creature of the agreement. He cannot rewrite the contract between the parties. He cannot modify or amend the contract between the parties; he cannot create new heads of claims. He cannot revise the rates prescribed in the contract. So long as the contract is not held to be invalid or inoperative, the terms and conditions of the contract have to be respected by him. An arbitrator is on no higher footing than a Court. If a dispute goes before the Court, the Court would have to adjudicate the dispute in accordance with the term and conditions of the contract, unless, of course, it is found to be invalid for one or the other reasons. Merely because a dispute is referred to arbitrators in terms of the agreement, all other terms of the agreement "do not become extinct. They do not disappear. An arbitrator cannot award any amount he likes, either on grounds of mercy, kindness, or otherwise. If he is permitted to do so, the very sanctity of contract disappears. The contract between the parties becomes meaningless and irrelevant. Surely such a situation cannot be countenanced. Otherwise, the power of the arbitrator becomes totally arbitrary, uncanalized, and absolute. His award must abide by the general law of the land.
17. The award of the arbitrator can be set aside on any of the grounds mentioned in Section 30. The power of the Court to modify an award is provided by Section 15, while Section 16 provides the situations where the Court can remit an award to the arbitrator. Two grounds upon which an award can be set aside are relevant for the present purpose. They are: (a) that the award suffers from an error apparent on the face of the award. For this purpose, the Court has to look only to award and any other document or material incorporated therein; (b) that, the award is beyond the jurisdiction of the arbitrator. For this purpose, it is permissible for the Court to look to the terms of the agreement between the parties, as also to the terms of reference.
84. The Division Bench did not rule out the right of the contractor to claim escalation charges if the delays/defaults had occurred on account of the obstacles created by the Government. The Division Bench in para 25 observed thus:
"In Chief Engineer, Panchayat Raj Department v. B. Balaiah (1985 (I) A.P.L.J 224), a Bench of this Court held, after an elaborate review of the law that the claim for escalation charges interest that case is not a "matter for things arising" under Clause 73 of the Madras Detailed Standard Specifications, which constituted terms of the contract concerned therein, as they do in this case. It was held that the said claim for escalation charges is not within the ambit of the contract and, therefore, the arbitrator had no jurisdiction to adjudicate thereupon, or to make any award in that behalf. Mr. P. Ramachandra Reddy, the learned Counsel for the respondent-contractor, contended that this decision must be deemed to have been impliedly overruled by the decision of the Supreme Court in P.M. Paul v. Union of India . We do not think so. From the decision of this Court it does not appear that the contractor attributed the delay in execution of the contract to any default, or obstruction on the part of the Government. It appears that the work could not be completed within the prescribed period, and time had to be extended more than once and, on that account, he made a claim for excess amount, referred to as "escalation charges". In the absence of any default or obstruction on its part, which led to the delay in execution of the contract, the Government could not have been held responsible for escalation charges. In P.M. Paul (supra), the Government was held responsible because it was found by the arbitrator as a fact (it was a reasoned award in that case) that the Government was responsible for the delay. In the absence of such an allegation and a finding, whether express or implied, it cannot be said that the claim for escalation charges is incidental to the contract, or that the arbitrator had jurisdiction pronounce upon the same. Be that as it may, in the case before us it cannot be said by any stretch of imagination that the Skylab scare is in any manner incidental to the contract. As pointed out by the Supreme Court in Continental Construction Company v. State of M.P. a contract is not frustrated merely because the circumstances in which the contract was made, altered... The parties to an executory contract are often faced, in the course of carrying it out, with a turn of event which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the Courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous..." On the same reasoning it is not open to the contractor to claim extra amount on account of certain unexpected obstacles or difficulties, which he may encounter in execution of the contract. After all, it is a business that he is doing. In one case he may earn profit, and in another case he may incur loss, depending upon several factors. So long as the other side is not responsible for the loss, if any, suffered by him, he can claim no compensation from the other party. Nor is it the function of the arbitrators to ensure that the contractor does not suffer losses in any case."
85. The Division Bench held that the jurisdiction of the arbitrator under Clause 73 is only to entertain a dispute relating to interpretation of contract or in respect of any matter or thing arising thereunder. Since the claim did not fail in any of the items, the appeal was allowed by the Division Bench. The contractor carried the matter before the Supreme Court and the Supreme Court in P.V. Subba Naidu's case (supra) set aside the judgment of the Division Bench. Commenting on Clause 73, the Supreme Court observed thus:
"The entire thrust of the judgment is on examining the terms of the contract and interpreting them. The terms of the arbitration clause, however, are very wide. The arbitration clause is not confined merely to any question of interpretation of the contract. It also covers any matter or thing arising thereunder. Therefore, all disputes which arise as a result of the contract would be covered by the arbitration clause. The last two^ lines of the arbitration clause also make it clear that the arbitrator has power to open up, review and revise any certificate, opinion, decision, requisition or notice except in regard to those matters which are expressly excepted under the contract, and that the arbitrator has jurisdiction to determine all matters in dispute which shall be submitted to the arbitrator and of which notice shall have been given.
Clause 73 of the contract which provides for arbitration is widely worded. The High Court was not right in examining and interpreting the contract to see whether the claim was sustainable under the terms of the contract. The impugned judgments of the High Court are set aside. Appeals Nos.4617-18 and 3933-34 of 1990 are allowed. Appeals Nos. 4878-4879 of 1990 are dismissed. The judgments of the City Civil Court are upheld. Bank guarantee furnished by the contractor pursuant to interim orders of this Court will stand discharged."
86. Thus, it is clear that claim for escalation of charges was covered by Clause 73 and the award was upheld. Even in Ch. Ramalinga Reddy's case (supra), the Supreme Court was dealing with Clause 59 of APDSS, it was held that when the extension of time was granted to the contractor it was specifically stated that no claim for compensation would be entertained.
87. In the case on hand, it cannot be said that the claim is beyond the jurisdiction of the arbitrator by virtue of Subba Naidu 's case (supra) and the principle laid in V.R. Subrahmanyam's case (supra) it is also not the case of the department that while granting extensions specific mention was made to the effect that contractor will not be eligible to claim extra/additional rates for the work executed beyond the period of agreement. The learned arbitrator had categorically found on the basis of material available on record the department was solely and wholly responsible for the delays and defaults. In fact, it is found in various communications of the department that the contractor was being asked to apply for extension of time. The department did not take steps to terminate the contract. Further, the learned arbitrator had also gone into the contention of the department invoking the protective umbrella under Clause 59. The learned arbitrator recorded a specific finding that the prohibition contained in Clause 59 was not applicable and that the claim fell within the defined exceptions, He also held that Clause 59 was not specifically excluded under Clause 73 and that the claim fell within the exceptions under Clause 59. Thus, the learned arbitrator interpreted the terms of agreement and it is not for this Court to interfere with the view expressed by the learned arbitrator. The reliance placed by the learned Additional Advocate-General on General Manager, Northern Railways's case (supra) is also no avail. The Supreme Court while deliberating on jurisdiction of Court under Section 20 to refer the matter for arbitration, the "excepted matters" fall outside the jurisdiction of the arbitrator. The Supreme Court declined to subscribe the view that the interpretation of arbitration clause itself can be or should be left to be decided by arbitrator and such determination cannot be done by Court at any stage. In this case that situation is not present. By virtue of the Clause 73 of APDSS and the judgment of the Supreme Court in Subba Naidu's case (supra), the claims are held to fall under Clause 73. In the very same case of General Manager, Northern Railways's case (supra), the Supreme Court referred to Sections 55 and 56 of the Contract Act and held that even if the contractor undertook to complete the work without making a claim for the delay in performance of the contract occasioned by an act of employer, still a claim would be entertainable. Para 15 reads thus:
"In our country question of delay in performance of contract is governed by Sections 55 and 56 of the Indian Contract Act, 1872. If there is an abnormal rise in prices of material and labour, it may frustrate the contract and then the innocent party need not perform the contract. So long, if time is of the essence of the contract, failure of the employer to perform a mutual obligation would enable the contractor to avoid the contract as the contract becomes voidable at this option. Where time is "of the essence" of an obligation, Chitty on Contracts (Twenty-eighth Edition, 1999 at p. 1106, para 22-015) states "a failure to perform by the stipulated time will entitle the innocent party to (a) terminate performance of the contract and thereby put an to all the primary obligations of both parties remaining unperformed; and (b) claim damages from the contract-breaker on the basis that he has committed a fundamental breach of the contract ("a breach going to the root of the contract") depriving the innocent party of the benefit of the contract ("damages for loss of the whole transaction"). If, instead of avoiding the contract, the contractor accepts the belated performance of reciprocal obligation on the part of the employer, the innocent party, i.e., the contractor, cannot claim compensation for any loss occasioned by the non-performance of the reciprocal promise by the employer at the time agreed, "unless, at the time of such acceptance, he gives notice to the promiser of his intention to do so." Thus, it appears that under the Indian law, inspite of there being a contract between the parties, whereunder the contractor has undertaken not to make any claim for delay in performance of the contract occasioned by an act of the employer, still a claim would be entertainable in one of the following situations: (i) if the contractor repudiates the contract exercising his right to do so under Section 55 of the Contract Act, (ii) the employer gives an extension of time either by entering into supplemental agreement or by making it clear that escalation of rates or compensation for delay would be permissible, (iii) if the contractor makes it clear that escalation of rates or compensation for delay shall have to be made by the employer and the employer accepts performance by the contractor inspite of delay and such notice by the contractor putting the employer on terms."
The facts in this case also aptly apply under Clause (i) and (ii) above enabling the contractor to validly make the claim for compensation.
88. Thus, keeping in view the principles laid down in Champsay Bara's case (supra), Jeevaraj Bhai's case (supra), Kapor Nilokher's case (supra), Tarapore and Company's case (supra) Alopi Prasad 's case (supra), Sudarsan Trading's case (supra), U.P. Hotel's case (supra) State of Rajasthan's case (supra), Hindustan Construction Company's case (supra), Steel Authority of India Limited's case (supra), Radhakrishna's case (supra), H.P. State Electricity Board's case (supra), Rajasthan Mines's case (supra), Ramalinga Reddy's case (supra), Subba Naidu's case (supra) and the conclusion reached by Division Bench in Superintending Engineer, Irrigation Department, Nizamabad v. M/s. Progressive Engineering Company, Hyderabad, (D.B), more specifically 4, 5 and 6 cases.
89. I hold that the learned arbitrator has exercised the jurisdiction within the well defined limits of Clause 73. I do not find any patent lack of jurisdiction nor do I find any error apparent on the face of the award.
90. In respect of the other claims, it was sought to be contended by the learned Additional-Advocate General that what are the amounts claimed for extra laying etc., they are already covered by the terms of the agreement. Therefore, arbitrator cannot travel beyond the terms of the agreement as he is creature under the agreement. He refers to various items and submits that whatever the amounts were claimed were not permissible as the contractor was expected to undertake those works without making any extra claims. The learned Counsel for the respondent would however contend that the claims allowed by the learned arbitrator are well within his jurisdiction and it cannot be said that he transgressed his limits any point of time.
91. Claim No.1 (a) and 9 (a) relates to payment of additional work done by the contractor. It was sought to be rebutted by the respondent that the claim is contrary to special condition No.7 and Clause 308.5.2 of APDSS. The learned arbitrator found that the contractor was entitled for payment as it is an additional work done on the directions of the department. He also found that there was no contravention of the special condition 7 and Clause 308.5.2. So also the claim No. 2(a) and 10(a).
92. In respect of claim at 3(a) and 4(a), the learned arbitrator held that clause 308.5.2 of APDSS did not bar the claim made by the contractor. Similarly, in respect of the claim No.6(a), 7 (a) and other claims, the department tried to contend that the claims are not tenable by virtue of various provisions of APDSS and also the terms of the agreement. The learned arbitrator has considered each and every defence taken by the department with reference to the terms of the agreement. He had recorded his findings duly interpreting the terms of agreement.
93. It is held by the catena of the decisions of the Supreme Court that the arbitrator is entitled to interpret the terms of contract and such an interpretation cannot be interfered with by the Courts. Even if two views are possible, the view taken by the arbitrator has to be upheld, unless the view is not legally permissible. But in these cases, admittedly, the learned arbitrator found that the contention raised by the department were not sustainable and it cannot be said that there is any error apparent on the face of the record or that the arbitrator has exceeded his jurisdiction or that he committed misconduct, under Section 30 of the Act. The claims were found by the arbitrator falling under arbitration clause 73. He also considered the contention of the department barring the claims and held against the department. The learned arbitrator also found that various heads of works for which amounts were claimed in fact carried out beyond the agreement period. It is also to be noted in this regard that as many as 6 extensions were granted and yet the work could not be completed on account of the existence of various obstructions and that the department has not been able to handover the site fully so as to execute the work without any hurdles. The learned arbitrator has categorically found that the department is solely responsible for the delays and even the learned arbitrator found that the authorities themselves called upon the contractor to seek extension which implies that the department has agreed delays and defaults on their part. Thus, I do not find any flaw in the claims allowed by the learned arbitrator. 1 do not find any error on the face of the award or that the learned arbitrator had exceeded his jurisdiction. The award of the learned arbitrator is a well reasoned award though this Court is precluded from considering the reasonableness of the reasons. I also do not find any grounds enumerated in Section 30 of the Act for setting aside the claims. Hence, I hold that the claims allowed by the arbitrator are legal and do not suffer from any patent lack of jurisdiction.
94. With regard to Part-B claims, the learned arbitrator has granted the interest of 18% from the date it fell due till the date of the award and further interest of 18% from the date of the award till the date of decree under item No.30. It is now well settled by the judgment of the Supreme Court that the arbitrator is fully empowered to award interest for pre-reference period, pendente lite interest and the future interest from the date of the award till the date of payment (See: Secretary, Irrigation department, Government of Orissa v. G. C. Roy, , Jagdish Rai and Brothers v. Union of India, , Executive Engineer, Dhenkanal Minor Irrigation Division v. N.C. Budharaj, 2001 (2) SCC 721, and T.P. Geogre v. State of Kerala, 2001 (2) SCC 758 and from the date of the award till the date of decree is quite legal and sustainable. The contractor is also entitled for the interest @ 18% from the date of the award till the date of the decree and subsequent interest 18% from the date of the decree till the date of payment.
95. Accordingly, I hold that the award of the arbitrator is quite legal and valid and no grounds are made out to interfere under Section 30 of the Arbitration Act.
96. Accordingly, the OP No.3 of 1998 is dismissed. Consequently, the award is made rule of Court and the claim amounts allowed by the learned arbitrator are decreed in terms of the award. The contractor is also entitled for interest @ 18% from the date of award till the date of decree and future interest @ 18% from the date of the decree till the date of payment.
97. In the circumstances of the case, each party shall bear their own costs.
98. Before parting with the case, I must record that both the learned Additional Advocate-General Mr. D. Prakash Reddy appearing for the department and Mr. C. V, Nagarjuna Reddy appearing for the contractor argued and presented their respective contentions ably with precision and clarity. This Court places on record its great appreciations for the excellent performance of the Counsel.
99. In the result, the OP No.3 of 1998 is dismissed without costs.