Calcutta High Court
Union Of India (Uoi) vs Bridge And Roof Company (I) Limited on 20 March, 2006
Equivalent citations: 2006(3)ARBLR428(CAL), 2006(2)CHN263
Author: Asok Kumar Ganguly
Bench: Asok Kumar Ganguly, Aniruddha Bose
JUDGMENT Asok Kumar Ganguly, J.
1. This appeal has been filed by Union of India which is represented by Executive Engineer, Postal Civil Division - II, challenging a judgment and order dated 6th May, 2005 passed by a learned Single Judge of this Court. By the said judgment the learned Single Judge dismissed the application, filed by the appellant, for setting aside an award.
2. The relevant facts of the case are that the respondent is a Class-I Contractor, engaged in various constructional work and pursuant to a tender process floated by the appellant the respondents submitted its offer for execution of a construction work comprising of office building for Postmaster General, West Bengal Circle, Chittaranjan Avenue, Kolkata. Ultimately the respondent was entrusted with the work. A formal agreement was executed between the parties. In the course of execution of work some disputes and differences arose between the parties calling and they were referred to arbitration. The said contract contained an Arbitration Clause which is Clause 25. The said Clause is as follows :
Clause 25. Settlement of disputes by Arbitration.--Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right matter or thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions orders or these conditions or otherwise concerning the works, or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, P & T Civil Wing, in charge of the work at the time of dispute or if there be no Chief Engineer, the administrative head of the said P & T Civil Wing at the time of such appointment. It will be no objection to any such appointment that the arbitrator so appointed is a Government servant, that he had to deal with the matters to which the contract relates and that in the course of his duties as Government servant he had expressed views on all or any of the matters in dispute or difference. The arbitration to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Chief Engineer or administrative head as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the state at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Chief Engineer or administrative head of the P & & T Civil Wing as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases where the amount of the claim dispute is Rs. 50,000/- (Rupees fifty thousand) or above, the arbitrator shall give reasons of the award.
Subject as aforesaid the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitration proceeding under the clause.
It is also a term of the contract that the party invoking arbitration shall specify the dispute or disputes to be referred to arbitration under this clause together with the amount or amount claimed in respect of each such dispute.
It is also a term of the contract that if the contractor(s) do/does not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the initiation from the Government that the bill is ready for payment, the claim of the contractor(s) will be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims.
The arbitrator(s) may from time to time with consent of the parties enlarge the time, for making and publishing the award.
3. In view of various disputes between the parties the matter was referred to the arbitration of the named arbitrator, Mr. Surendranath. Before the named arbitrator claims and counter-claims were filed. After a hearing before the arbitrator an award was passed by the named arbitrator on 29th January, 1990. From the said award it appears that the arbitrator gave an award to the extent that the appellant is to pay the respondents a sum of Rs. 14,37,859/- and there was no direction in the award about payment of interest.
4. Being aggrieved by the said award the appellant filed an application for setting aside the same under Section 30 of Arbitration Act, 1940. The matter was taken up by the learned Single Judge. The learned Judge by a reasoned judgment dismissed the application. The learned Judge of the First Court in his judgment and order which is under appeal, indicated the points on which the matter was argued before His Lordship. These points are as follows :
(1) The arbitrator relied on the report of a local commissioner while deciding the issue. The arbitrator had no power to delegate his authority on the local commissioner and as such the award was vitiated by illegality.
(2) The decision of the arbitrator on the claim made under Clause 10C was outside the scope of the contract.
(3) Force majeure clause relied on by the respondent and accepted by the arbitrator was applicable only for the purpose of extension of time and not for escalation. The arbitrator erred in relying on the said clause while awarding compensation on the ground of escalation.
(4) The arbitrator could not have decided the counter-claim which was erroneously brought before him by the petitioner as such claim was not within the purview of the arbitration agreement.
5. Of those points, before the Appeal Court, the first point was not pressed. As a matter of fact, two points were urged before the Appeal Court. They are (i) the arbitrator has travelled beyond the scope of the arbitration agreement by deciding on excepted matters and (ii) the second point, which was argued, was that the arbitrator had no jurisdiction to decide the counter-claim and by deciding the counter-claim the arbitrator has also travelled beyond jurisdiction. The learned Judge of the First Court, on the point of the counter-claim, came to a finding that the counter-claim could not have been the subject-matter of arbitration. But the learned Judge found that the said counter-claim was raised by the petitioner and the petitioner, the appellant before us, invited the arbitrator to adjudicate upon the same. Accordingly the arbitrator decided the same and ultimately rejected the same. On this ground the learned Judge could not accept the contention of the appellant on the question of counter-claim. Apart from that the learned Judge also found that there was no averment in the application for setting aside the award and nor was there any prayer in that application for setting aside the award on that ground.
6. Now dealing with the first point namely whether the arbitrator has gone into the question of excepted matters, this Court finds that in the Arbitration Clause, which has been set out above, it is made clear except where it is otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings, instructions etc. as to the quality of workmanship or materials used on the work or any other question, claim, right, matter or thing should be referred to arbitration.
7. Now the learned Counsel for the appellant has drawn the attention of this Court to Clause 2 and Clause 10C of the agreement in order to find out the import of the Excepted Clause.
8. From a perusal of Clause 2 and Clause 10C it appears that Clause 2 authorises that Engineer-in-Chief may decide the amount of compensation, which is determined by the Superintending Engineer, which the contractor is liable to pay. It was said that the decision of the Superintending Engineer shall be final. But that does not bring it within the Excepted Clause. It may be that the decision of the Superintending Engineer is final between the parties but an arbitrator is not bound by the said finality. This is a well-settled legal position. Similarly Clause 10C merely authorises the Superintending Engineer to come to a finding whether the delay in the matter of completion of the work is due to any act of the contractor. Here also similar finality clause has been attached to the decision of the Superintending Engineer. Here also similar principles apply. Such finality Clause is not binding on the arbitrator. Therefore it cannot be said that the arbitrator has stepped outside the arena conferred on him by the arbitration clause and decided on any excepted matter in passing the award.
9. Now coming to the question of counter-claim it appears that the question of counter-claim was raised by the Chief Engineer, Civil. This has been recorded by the arbitrator in the award under the heading "counter-claim". It has been clearly mentioned that Chief Engineer, Civil has referred 6 counter-claims by its letter dated 02.04.1986 and during the pendency of the proceeding 2 more counter-claims were referred to for adjudication again by the letters of the Chief Engineer dated 26.05.1987 and 21.11.1988 and it was therefore recorded in the award itself that in all 8 counter-claims were referred to by Union of India for adjudication. Here the claimant resisted the counter-claim by raising a preliminary objection regarding admissibility of the counter-claim. This has been recorded in paragraph 3 of the award.
10. At no point of time it was ever argued by the appellant that the recording of facts in the award by the arbitrator was factually incorrect.
11. Therefore going by the recitals in the Arbitration Agreement it cannot be disputed that counter-claims were referred for adjudication by the appellant. The claimant resisted the adjudication by the arbitrator on those counter-claims by raising preliminary objection but the arbitrator overruled those objections and in the ultimate decision the arbitrator held that the counter-claims are not admissible.
12. This being the admitted factual position, the question is whether there is any merit in the contentions raised by Union of India that the arbitrator had no jurisdiction to entertain the counter-claims.
13. The answer has to be in the negative, since the party who is now disputing the jurisdiction of the arbitrator to decide the counter-claims had in fact invited the arbitrator to decide those counter-claims. It is well-settled that once a party invites an arbitrator to decide certain claims and the arbitrator decides those points against that party, that party cannot turn round and say that the arbitrator has no jurisdiction to decide those questions. That a party cannot approbate and reprobate is a principle which is embedded in almost all forms of civil adjudication and is also attached in arbitration. Therefore, there is no merit in this point.
14. The learned Counsel for the appellant relied on a number of judgments. Reliance was placed was placed on a judgment of the Supreme Court in the case of Mohammed Yunus v. Food Corporation of India and Anr. reported in 2000(7) Supreme 722, in support of the contention that an award has to be set aside in a case where the arbitrator has passed beyond the terms of the contract and decided matters which are beyond his jurisdiction. In the case of Mohammed Yunus the reason why the Supreme Court held that the award cannot be sustained is that the arbitrator was appointed in a manner which was not provided in terms of the contract. In the instant case the facts are quite different. Here the arbitrator was appointed by the Chief Engineer in terms of the power given to him under Clause 25 of the Arbitration Agreement. In the said order of appointment it was made clear that in case the amount of claim in dispute exceeds Rs. 50,000/- the arbitrator shall give reasons for the award. In the instant case reasons have been given. In the said order of appointment it was made clear that the arbitrator will make and publish his award in respect of the claims, disputes of the contractor and the counter-claims of the Union of India subject to their admissibility in Clause 25 of the agreement. Therefore, the ratio in the case of Mohammad Yunus has no application here.
15. The learned Counsel for the appellant relied on the decision in the case of Executive Engineer, R.E.O. v. Suresh Chandra Panda . In that case the learned Judges of the Hon'ble Supreme Court held that disputes which are specifically excluded from the purview of the Arbitration Clause are not referable to arbitration. In the said judgment of Suresh Chandra the Hon'ble Supreme Court has quoted Clause 11 which, according to the learned Judges of the Supreme Court contained an exclusion or finality Clause. In the instant case the finality Clauses which are referred to by the appellant are contained in Clause 2 and Clause 10C. From a perusal of Clause 2 and Clause 10C in the agreement and on its comparison with Clause 11 which has been set out in the judgment of Suresh Chandra it will be clear that there is substantial difference between the Clauses. Therefore, the ratio of the judgment in the case of Suresh Chandra was based in the context of Clause 11 and the same cannot be attracted in the facts of this case. Apart from that in the case of Suresh Chandra the arbitrator was told at the very initial stage that it does not have jurisdiction to decide certain claims. Here no such contention was raised before the arbitrator. Therefore, the factual background in the case of Suresh Chandra is substantially different from the facts of the present case.
16. The other decision which was cited on this point was delivered by the Supreme Court in the case of Rajasthan State Mines & Minerals v. Eastern Engineering Enterprises . The learned Counsel relied on the said judgment in support of the contention that where an award is passed by the arbitrator beyond the terms of the reference or the arbitration agreement the award will be vitiated by jurisdictional error. In other words it was contended that if an award is given in respect of a claim which is prohibited by the terms of contract such an award cannot be sustained. There can be no dispute with this proposition. But factually speaking those principles are not applicable here. In the case of Rajasthan State Mines & Minerals (supra) it was made clear to the arbitrator at the time of his appointment that reference was made with regard to the disputes arising between the parties on the basis of the agreement dated 14th May, 1981 and it was also made clear that the contractors had raised its claim as mentioned in the letter dated 7th September, 1981 which was denied by the Company. Therefore, what was referred to the arbitration was the claims made by the contractors by his letter dated 7th September, 1981 on the basis of the agreement dated 14th May, 1981. That being the factual position, the learned Judges held that the award which was de hors the claim and cannot be sustained. Here from the order of reference it appears that the order of reference was made in terms of Clause 25 of the contract between the parties. It was an open reference and was not circumscribed by any stipulation about the terms of reference. From the reference which is dated 02.04.1986 it is clear that the disputes and claims as per the statement attached were forwarded to the arbitrator. It is nobody's case that the arbitrator has travelled beyond the statement of claims made by the contractor. The statement of claims has been annexed. A perusal of the same shows that contractors claim was to the extent of Rs. 55,03,201/-. The counter-claim of the Union of India was also referred. Therefore, it was an open reference to the arbitrator. So the ratio in the case of Rajasthan State Mines is not attracted in the facts of this case.
17. The learned Counsel for the appellant relied on the decision of the Supreme Court in the case of Kiran Singh v. Chaman Paswan AIR 1954 SC 340, in order to contend that where there is lack of jurisdiction, that objection can be raised even collaterally at any stage. In that case an objection was raised under Section 11 of the Suits Valuation Act about the pecuniary jurisdiction of the Trial Court where the suit was tried.
18. The territorial and pecuniary jurisdiction of a Civil Court depends on legal provisions like the provisions of Civil Procedure Code and the Suits Valuation Act. But the jurisdiction of an arbitrator normally depends on the arbitration agreement between the parties. Therefore the concept of jurisdiction of Civil Courts is quite different from the concept of arbitrator's jurisdiction. In the case of arbitrator's jurisdiction, the conduct of the parties plays a significant part. In such cases long participation in arbitration proceeding normally gives rise to a finding that the parties have acquiesced in the jurisdiction of the arbitrator. So the ratio in the case of Kiran Singh (supra) delivered in a different factual and legal context does not assist the appellant.
19. The learned Counsel for the claimant, on the other hand, has referred to the decision of the Supreme Court in the case of Prasun Roy v. Calcutta Metropolitan Development Authority and Ors. . The arbitration clause in the case of Prasun Roy is almost similar to the one in this case.
20. The learned Judges of the Supreme Court in the case of Prasun Roy held that where there has been long participation by the parties before the arbitrator in connection with the decision of a dispute, the parties are deemed to have acquiesced in the jurisdiction of the arbitrator and subsequently the parties participating in the proceeding are precluded from contending that the proceeding are without jurisdiction. The said principle in Prasun Roy's case has been affirmed by the Supreme Court in the case of State of Rajasthan v. Nav Bharat Construction Co. reported in 2005(11) SCC 197. The principles in Prasun Roy are attracted to the facts of this case.
21. For the reasons aforesaid, this Court finds that there is no merit in this appeal. The appeal is accordingly dismissed.
22. There will be no order as to costs.
Aniruddha Bose, J.
23. I agree.