Full Judgment Text
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CASE NO.:
Appeal (civil) 6678 of 1999
PETITIONER:
D.D. Sharma
RESPONDENT:
Union of India
DATE OF JUDGMENT: 27/04/2004
BENCH:
CJI, S.B. Sinha & S.H. Kapadia.
JUDGMENT:
J U D G M E N T
W I T H
CIVIL APPEAL NO.1984 OF 2000
S.B. SINHA, J :
These appeals arise out of a common judgment and order
dated 15.09.1998 .passed by a Division Bench of the Gauhati
High Court in FA No. 8 of 1993 whereby and whereunder an
objection filed by the Union of India purported to be in
terms of Section 30 of the Arbitration Act, 1940 was
allowed in part.
The parties hereto admittedly entered into a contract
for construction of six permanent major bridges on Lekhabali
Basar-Along Road in State of Arunachal Pradesh wherefor a
notice inviting tender was issued by the Chief Engineer,
Project Vartak, Director General (Border Roads). Shri D.D.
Sharma, appellant in Civil Appeal No. 6678 of 1999,
(hereinafter referred to as ’the contractor’) pursuant
thereto and in furtherance thereof made an offer.
Negotiations admittedly took place between the parties in
relation thereto.
The notice inviting tender, inter alia, stipulated that
the entire work was to be completed within 36 months from
the date of handing over the site which would be within one
month from the date of issue of acceptance letter. It was
further stipulated that the notice of tender shall form part
of the contract.
It appears that the Union of India proposed an
alternative design and in response thereto the contractor by
his letter dated 25.8.1983 made an offer on the terms and
conditions stipulated therein, clause 6 whereof reads as
under :
"All other terms and conditions will be
as per NIT except that the tender is
valid for all the 6 bridges and cannot be
divided. To avail the coming working
season if the work is allotted within 60
days of opening of the tender, we are
ready to offer suitable rebate."
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The Union of India in response thereto showed its
inclination but requested the contractor to withdraw various
stipulations/conditions specified in his tender in terms of
a letter dated 30.09.1983 stating:
"You are requested to withdraw various
stipulations/conditions specified by you
in your tender as brought out above. In
case you consider that the withdrawal of
the stipulation/conditions involve
financial effect you are requested to
indicate the same for each
withdrawal/modification of condition
separate itemwise."
The contractor replied thereto stating :
"We are pleased to withdraw all our
terms and conditions besides our
condition no.4 for design assumption and
the interim payment schedule as the same
has been prepared keeping conformity
with the estimate. As such the same
will form a part of contract. We are
also pleased to inform you that if the
work is allotted to us, we will offer a
rebate of Rs.90,000.00 only per bridge.
For withdrawal of the above stated
conditions and for offering rebate, the
Department will have to give us 10%
advance over our L.S. tendered amount
against H.G. Bond of Industrial
Cooperative Bank Ltd. Gauhati. This 10%
advance will have to be adjusted
proportionately along with the interim
payment and the B.G. Bond for the
adjusted amount will have to be released
from time to time."
From a perusal of the said counter offer made by the
contractor it will appear that one of the conditions laid
down therein was to the effect that all withdrawal of
conditions and rebate would be made subject to the
conditions stated therein. It was, therefore, a conditional
offer.
By another letter dated 22.11.1983, the contractor
offered further rebate on 10% mobilization advance,
stating :
"In partial modification to our rebate
offered by us vide our letter under
reference at serial (2) we are pleased
to offer the following final rebate if
the department gives interest free 10%
over our L.S. tendered amount against
B.G. bond of Industrial Cooperative Bank
Ltd., Gauhati. This 10% advance will
have to be adjusted proportionately
along with the interim payment and the
B.G. bond for the adjusted amount will
have to be released from time to time.
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The Rebates of the Bridges are as
follows : These rebates are over and
above the rebates mentioned in our
letter at Serial (2) under reference.
1. Nallah at 15.5 m Rs.9,18,000.00
2. Laiko at 20.442 km Rs.6,21,000.00
3. Cane at 25.841 km Rs.6,48,000.00
4. Saiki at 63.88 km Rs.9,18,000.00
5. Kiddi at 96.542 km Rs.9,18,000.00
6. Sipu at 148.3 km Rs.6,66,000.00
---------------
Rs.46,89,000.00
Rupees forty six lakhs eighty nine
thousand only.,
This rebate has been offered subject to
our condition that the work is allotted
to us by 31st December 1983 and if the
work is allotted to us as a whole,
without breaking up the same partwise as
referred to in para 5 of your letter
no.27537/DGBRE/VTK/72/E8 dt. 30th Sep.
1983.
Hope this clarified all the points
raised by you."
The said offer was, thus, again a conditional one.
The Central Government by a letter dated 1.3.1984
addressed to the Director General Border Roads, conveyed the
sanction of the President to the variation from the standard
and special conditions of the contract, inter alia,
stating :
"Mobilisation Advance
After acceptance of the tender and at
the time of placing the work order on
the contractor he shall be paid on
demand 10% interest free mobilization
advance of the contract value against
the bank guarantee bond from a Scheduled
Bank.
The loan advance shall be recovered
proportionately from his ’on account’
payment made to him under the contract
and in such a way that by the time 50%
of the work is completed the entire
advance would be recovered. The first
installment commencing from the first on
account payment and Bank Guarantee Bond
will be released for the adjusted
amount. If the advance thus made is
utilized by the firm for purpose other
than for which it was provided the
entire advance together with interest at
12% p.m would be recovered from the firm
in one installment."
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It is not in dispute that the Union of India could not
hand over the site to the contractor within the stipulated
period. The period of contract, however, was extended from
time to time.
Admittedly, the notice inviting tender contained an
arbitration agreement. Disputes and differences having
arisen between the parties, the matter was referred to the
arbitration of Brig. S.B. Joshi, Chief Engineer.
Before the learned Arbitrator, inter alia, four claims
were raised by the contractor which are:
"Claim No. 1(a)
Refund of payment of sum offered as
rebate on account of placing Work Order
for all the six bridges as a whole
Rs.5,40,000.00.
Claim No.1(b)
Refund of rebate offered subject to the
condition that 10% interest free
mobilization advance is paid in one lump
sum and the work is allotted as a whole
Rs.46,89,000.00
Claim No.1 (c)
Escalation as per terms of contract on
claim 1(a) and (b) considering these as
part of quoted lump sum as calculation
Rs.60,591.00 & Rs.5,21,131.00
Claim No.2
Extra infructuous/Uncompleted expenses,
expenses and loss of profit due to
enlargement of period of performance
Rs.10,00,000.00
The learned Arbitrator rejected the claim of the
contractor in respect of Claim No. 1(c) but partially
allowed Claim Nos.1(a), 1(b) and 2 to the extent of
Rs.90,000/-, Rs.6,48,000/- and Rs.5,00,000/- respectively.
The contractor filed an application before the Court of
the Assistant District Judge, Tezpur which was marked as
Money Suit (Arbitration) Case No. 12 of 1990, purported to
be under Sections 14(2) and 17 of the Arbitration Act, 1940
praying therein for a direction upon the Arbitrator to file
a copy of the award and to make the same rule of the court.
The Union of India filed an objection thereto purported
to be under Section 30 thereof. By reason of a judgment
and order dated 26.8.1992, the learned Assistant District
Judge at Tezpur : Sonitpur, rejected the application filed
by the Union of India for setting aside the award and made
the same rule of the Court.
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Aggrieved by and dissatisfied therewith, an appeal was
filed by the Union of India before the Gauhati High Court
which was marked as F.A. No. 8 of 1993.
The High Court allowed the appeal in part holding,
inter alia,, that having regard to the delay in handing over
the site for Cane Nallah Bridge, the award of Rs.5,00,000/-
for the damages caused to the contractor although justified
but as the contractor made two offers of rebate in terms of
its letters dated 25.8.1983 and 22.11.1983 which had not
been considered by the learned Arbitrator, the award in
respect thereof was not sustainable, and a part of the award
could be served, it set aside the award for a sum of
Rs.7,38,000/-.
The parties are in appeals before us against the said
judgment.
Mr. K.K. Rohtagi, learned counsel appearing on behalf
of the appellant, would, inter alia, submit that the award
being a non-speaking one and having regard to the fact that
the learned Arbitrator in his award categorically stated
that he had taken into consideration all the documents, the
High Court must be held to have committed a manifest error
in interfering therewith. The learned counsel would contend
that the two offers of rebate referred to by the High Court
in the impugned judgment being conditional ones and the
conditions precedent therefor having not been fulfilled, the
contractor was entitled to make his claim on rebate.
According to the learned counsel, one of the rebates was
offered if the amount of 10% mobilization advance is given
at a time which admittedly was not done, as has been noticed
by the High Court itself in the impugned judgment. It was
further contended that the second rebate was offered by the
contractor on the condition that the mobilization advance of
10% should be proportionately deducted from the bills for
the entire period of 36 months whereas the Union of India
directed recover of the said amount within a period of 18
months.
Handing over of possession of site within the
stipulated period, Mr. Rohtagi would contend, had a direct
relationship with the requirement of deployment of heavy
machinery and staff and as a result of non-compliance of the
said condition of contract on the part of the Union of
India, the contractor had suffered a huge loss as it had to
keep machinery idle for a long time and bear other cost of
establishment unnecessarily.
Mrs. Anil Katiyar, learned counsel appearing on behalf
of the respondent, on the other hand, would submit that as
the contractor had claimed a sum of more than Rs.6,00,000/-
as escalation cost and the same having been duly granted, no
further claim by the contractor was admissible.
The jurisdiction of the court to set aside an
arbitration is well-settled. The court, inter alia, can set
aside an award if the arbitrator has misconducted himself
or the proceedings. The jurisdiction of the court in
interfering with a non-speaking award is very limited.
It is also trite that correspondences exchanged by the
parties are required to be taken into consideration for the
purpose of construction of a contract. Interpretation of a
contract is a matter for the Arbitrator to determine, even
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if it gives rise to determination of a question of law.
The Arbitrator in his award dated 5.10.1990
categorically stated that "he had examined and considered
the pleadings submitted by and on behalf of the parties and
documentary and oral evidences were produced before him by
the parties".
It has not been disputed that the documents in question
referred to in para 17 of the judgment of the High Court
were filed before the learned Arbitrator.
The arbitrator was, thus, required to consider as to
whether the contractor can substantiate his claim relying on
or on the basis of non-compliance of the conditions
precedent in relation to the offer of rebate made by it in
his letters dated 25.8.1983 and 22.11.1983. The said
contention evidently was, thus, a subject matter of
determination by the Arbitrator. An Arbitrator being a
judge chosen by the parties, his decision would ordinarily
be final unless one or the other condition contained in
Section 30 of the Arbitration Act is satisfied for the
purpose of setting aside his award. Once it is held that
the construction of an agreement fell for consideration of
the Arbitrator, the determination thereupon shall not
ordinarily be interfered with.
The court’s jurisdiction in this behalf is merely to
see whether the Arbitrator has exceeded his jurisdiction or
not. The High Court did not point out any material on the
basis whereof it could be said to have been established that
the two documents in question had not been considered by the
learned Arbitrator. Such a conclusion could be arrived at
if the award was a speaking one. The award being not a
speaking one, the averments made therein should be accepted
at their face value unless contrary is proved by the party
questioning the validity of the award.
The learned counsel appearing on behalf of the Union of
India has failed to point out that any material was brought
on records on the basis whereof the findings of the High
Court could be justified.
In Continental Construction Ltd. vs. State of U.P.
[(2003) 8 SCC 4], it was, inter alia, held :
"16.The award is a non-speaking one.
It is trite that the court while
exercising its jurisdiction under
Section 30 of the Arbitration Act, 1940
can interfere with the award only in the
event the arbitrator has misconducted
himself or the proceeding or there
exists an error apparent on the face of
the award.
17.The learned Civil Judge and the High
Court have not found that the umpire
acted arbitrarily, irrationally,
capriciously or independent of the
contract. No finding has been arrived
at that the umpire has made conscious
disregard of the contract which was
manifest on the fact of the award."
This Court in State of U.P. vs. Allied Constructions
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[(2003) 7 SCC 396], observed :
"...Interpretation of a contract, it is
trite, is a matter for arbitrator to
determine (see M/s Sudarsan Trading Co.
vs. The Government of Kerala, AIR 1989
SC 890). Section 30 of the Arbitration
Act, 1940 providing for setting aside an
award is restrictive in its operation.
Unless one or the other condition
contained in Section 30 is satisfied, an
award cannot be set aside. The
arbitrator is a Judge chosen by the
parties and his decision is final. The
Court is precluded from reappraising the
evidence. Even in a case where the
award contains reasons, the interference
therewith would still be not available
within the jurisdiction of the Court
unless, of course, the reasons are
totally perverse or the judgment is
based on a wrong proposition of law. As
error apparent on the face of the
records would not imply closer scrutiny
of the merits of documents and materials
on record. One it is found that the
view of the arbitrator is a plausible
one, the Court will refrain itself from
interfering..."
Yet again in H.P. State Electricity Board vs. R.J. Shah
and Company [(1999) 4 SCC 214], it was held :
"26. 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
any decision given by the arbitrator in
respect thereof would clearly be in
excess of 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 Rajasthan State Mines & Minerals Ltd. vs. Eastern
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Engineering Enterprises and Another [(1999) 9 SCC 283],
this Court, opined :
"44. (a) It is not open to the Court to
speculate, where on reasons are given by
the arbitrator, as to what impelled the
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 adjudication then the
Court cannot interfere.
(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."
It has not been shown before us on behalf of the Union
of India that there exists any provision in the contract
which precluded the arbitrator from deciding the dispute or
there existed any specific bar in the contract precluding
the contractor to raise such a claim. Once it is held that
the Arbitrator had the jurisdiction, no further question
shall be raised and the court will not exercise its
jurisdiction unless it is found that there exists any bar on
the face of the award. [See Pure Helium India (P) Ltd. vs.
Oil & Natural Gas Commission \026 (2003) 8 SCC 593].
While considering a speaking award this court has,
however, albeit in a different context in Union of India v.
M/s Banwari Lal & Sons (P) Ltd. [2004 (4) Scale 443]
noticed :
"17. It is now well settled that when a question
of law is referred to the arbitrator the award
cannot be set aside only if a different view is
possible. However, it is also trite that if no
specific question of law is referred, the decision
of the Arbitrator on that question would not be
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final, however, much it may be within his
jurisdiction and indeed essential for him to
decide the question incidentally. Only in a case
where specific question of law touching upon the
jurisdiction of the arbitrator was referred for
determining his jurisdiction by the parties, then
the finding of the arbitrator on the said question
between the parties may be binding.
18. It is also trite that where the award contains
reasons, the same may be interfered, inter alia,
when it is based on a wrong proposition of law.
However, when the view of the arbitrator is a
plausible one, the Court would not normally
interfere."
Furthermore, as we do not find that there existed any
material on records to show that the Arbitrator while making
an award ignored any material documents, the impugned
judgment cannot be sustained, which is set aside
accordingly.
In the result Civil Appeal No.6678 of 1999 filed by the
contractor is, therefore, allowed and Civil Appeal No.1984
of 2000 filed by the Union of India is dismissed. No costs.