Full Judgment Text
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PETITIONER:
STATE OF ORISSA & ANOTHER
Vs.
RESPONDENT:
KALINGA CONSTRUCTION CO. (P) LTD.
DATE OF JUDGMENT:
11/09/1970
BENCH:
GROVER, A.N.
BENCH:
GROVER, A.N.
SHAH, J.C.
SHAH, J.C.
HEGDE, K.S.
SHAH, J.C.
HEGDE, K.S.
CITATION:
1971 AIR 1650 1971 SCR (2) 110
ACT:
Arbitration--Award by arbitrator after considering and
believing certain evidence-If open to court to sit in
appeal over such award-Arbitration Act. 1940. Ss. 30 and
33.
HEADNOTE:
The respondent Company’s tender for the movement and
depositing of earth on the right dyke of the Hirakud Dam was
provisionally accepted by the Government in December 1951.
The work started in Fehr any 1952 and a formal contract was
executed in March 1953. The earth work was done by manual
labour for a year in the beginning and thereafter it was
done to a large extent by machinery. The vertical movement
was styled as "lift" and the horizontal movement as "lead".
When the company started employing the heavy machinery from
the beginning of 1953 onwards a number of ramps had to be
constructed to enable the machinery to go up from the borrow
pits to the dyke. After the work was completed, the
respondent Company was paid a certain amount on the basis of
a scale set out in the contract; but it claimed an addi-
tional substantial sum in respect of lifts and extra leads
and certain other items together with the interest on the
amounts duo. It was provided in the contract that if the
average lead mentioned bad to be exceed, the orders of the
Chief Engineer in writing had to, be obtained by the
contractor. The respondent Company claimed that it had
’sought the orders of the Chief Engineer in writing for the
extra leads resulting from the conversion of lifts into
leads and that although the Chief Engineer did not himself
make any such order, the Superintending Engineer with whom
the Company had been dealing did sign an order for the Chief
Engineer. The contract provided for arbitration of disputes
and differences. After the matter was taken up for
arbitration, issues were framed by the arbitrator and
considerable oral and documentary evidence was led by both
the parties before him. On the basis of this evidence the
arbitrator found that the tender must be taken to have been
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made and accepted on the basis that the whole work was to be
done by manual labour; he believed the evidence of the Chief
Engineer that he passed no order allowing any extra leads
and eventually held that no further amount was payable by
the Government to the Company. The respondent thereafter
filed a plaint under Sections 30 and 33 of the Indian
Arbitration Act, 1940, challenging the award on various
grounds and praying for it to be set aside. The subordinate
Judge who heard the ease set aside the award in March 1962.
In an appeal to the High Court the two Judges who
constituted the Division Bench gave dissenting judgments,
i.e. one of them holding that the award could not be
substained and the other one being of the view that the
award was not liable to be set aside. The appeal was then
heard by a third judge who held that the award was liable to
be set aside on two of the issues; as he held these issues
to be severable, he proceeded to set aside the award in res-
On appeal to this Court,
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HELD : The appeal must be allowed and the order of the High
Court setting aside the award in part must be reversed. The
proceedings instituted by the respondent under Sections 30
and 33 of the Arbitration. Act must be dismissed.
A bare perusal of the judgment of the third learned Judge of
the High. Court clearly showed that he decided the matter
as it he was entertaining an appeal against the award. He
re-examined and reappraised the evidence which had been
considered and believed by the arbitrator It was not open to
the High Court to sit in appeal on the arbitrator’s award.
[189 C]
Once it was found that under the terms of the contract the
Order of the Chief Engineer in writing had to be obtained
before the work involving additional leads was executed,- in
the absence of any such written order it was not open to the
court to hold that the appellant was liable for payment of
extra leads by applying some principle or rule analogous to
estoppel. Although it was true that the company had been
writing to the Engineering Department in the matter and that
the latter did not, for a considerable time, send any reply
but the Company was debarred from asking for any additional
payment in the absence of the Chief Engineer’s order in
writing. If the arbitrator came to that conclusion, it
could not be said that there was any error apparent in his
award which would justify setting aside. 1190 C]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 2023 of
1969.
Appeal from the judgment and decree dated February 18, 1965
of the Orissa High Court in Misc. Appeal No. 53 of 1962.
S. T. Desai, Gobind Day and R. N. Sachthey, for the
appellants.
V. T. Rangaswami; T. Raghavan, B. Datta, D. N. Mishra and
J. B. Dadachanji, for the respondent.
The Judgment of the Court was delivered by
Grover, J. This is an appeal by certificate from a judgment
of the Orissa High Court relating to an award given by Shri
A. V. Viswanatha Sastri an Ex-Judge of the Madras High Court
in a dispute which arose between the respondent and the
Union of India in respect of a claim made by the former for
a sum of Rs. 35,45,080.91 which was stated to be due for
earth work done on the right dyke of the Hirakud Dam.
The Chief Engineer, Hirakud Dam, invited tenders on behalf
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of the Union of India for execution of work specifying
certain details as to how tender-, were to he submitted. It
appears that before the tenders were invited certain
estimates were prepared in the office of the Chief Engineer.
The intending contractors were to submit tenders stating the
rate for depositing earth on the Right Dyke site including
all lifts and leads. The respondent company submitted a
tender which, according to the Chief Engineer, was not in
the form invited by him as certain extraneous L235Sup.CI-13
186
matters were stated to have been introduced. The Chief
Engineer and the representatives of the respondent company
held a conference at which certain agreements were arrived
at. The tender of the contractor was provisionally accepted
on December 28, 1951; the formal contract was executed much
later on March 21, 1953. The work started in February 1952
and took four years for completion. The earthwork was done
by the company by manual labour for a year in the beginning
and thereafter it was done to a large extent by machinery.
The earth required to erect the dyke was dug up from certain
areas demarcated by the Engineering Department near the site
of the dyke. The places from which the earth had to be
taken were called "borrow pits" or "borrow areas". The
company dug up earth from the "borrow pits" and dumped it on
the site of the dyke upto the required specifications. This
involved movement of the loose earth both vertically and
horizontally from the borrow pit to the dyke. The vertical
movement was styled as "lift" and the horizontal movement as
"lead". When the company started employing the heavy machi-
nery from the beginning of 1953 onwards a number of ramps
had to be constructed to enable the machinery to go up from
the borrow pits to the dyke.
It has not been disputed that for the earthwork done by the
company it received payment from the Government of an amount
aggregating Rs. 1,08,19,543.00. This amount was paid in
accordance with the rate in item I-A of the contract (Ext.
P-69). According to that rate Rs. 45/- were to be paid for
100 cubic feet of earthwork of all kinds of soil laid in 6"
layers with rough dressing including all lifts and average
lead not exceeding. 10". According to the company an
additional sum of Rs. 26,20,798.75 was due in addition to
the amount already paid in respect of extra leads including
lifts. An amount of Rs. 2 lakhs was claimed on account of
the construction of ramps. The company further claimed a
sum of Rs. 5,34,282-16 on account of interest on the
aforesaid two amounts. This claim was disputed by the Union
of India and it was maintained on its behalf that the
company had been fully paid for the earthwork done by it
according to the terms of the contract and that the company
was not entitled to payment for lifts nor was there any
occasion for leads in excess of an average of tO and further
that the ramps in so far as they were outside the dyke were
not to be paid for while those which had been incorporated
in the dyke had already been paid for as a part of the dyke.
The agreement by which reference was made to the arbitrator
was as follows :-
"The disputes and difference between the
parties relating to payment of lift equivalent
and leads for
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machine route are referred to the arbitration
of Shri A. V. Viswanatha Sastri, retired High
Court Judge, Madras and his award shall be
final and binding on the parties."
On November 16, 1958 the following issues were
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framed by he Arbitrator by the consent of both
the parties
(i) Is the claimant entitled to any payment
for lifts under the terms ’of the contract
between the parties ?
NOTE : Both sides agree that I foot of lifts
is equal to 12-2-1/2 feet of lead.
(ii) Whether the claimant is entitled to
payment for machine leads where machines have
been used for earthwork and if so, on what
basis and at what rates?
(iii)Whether in the case of machine leads,
lifts are not taken into account as pleaded by
the Union of India ?
(iv) Whether the claimant is entitled to the
cost incurred in putting tip the ramps ?
(v) Is the Union of India estopped from
denying liability for payment of lifts and
machine leads for the reasons stated in
paragraphs 1 1 to 14 of the Statement Claim of
Ramlinga Construction Co. (P) Ltd. ?
(vi) Is the claimant entitled to interest for
the period during which the-amounts payable to
the claimant remained unpaid by the
Government, if so. at what rate .?
(vii)What is the amount due to the claimant
from the Union of India ?"
A good deal of oral and documentary evidence was led by both
the parties before the arbitrator. After discussing the
same he came to the following conclusions :--
1.The tender must be taken to have been made and accepted
on the basis that the whole work was to be done by manual
labour.
2.According to the terms of the contract if the averaee lead
of IO had to be exceeded the orders of the Chief Engineer in
writing had to be obtained by the contractor and then the
extra lead
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was to be paid for at the rate of Rs. 1.12 As. per 1000
cubic feet. The company did raise the question of payment
for lifts as early as December 30, 1952 and sought the
orders of the Chief Engineer in writing for the extra lead
resulting from the conversion of lifts into leads but the
Chief Engineer never made any order in writing. The
arbitrator believed the evidence of the Chief Engineer Shri
kanwar Sain that he passed no orders allowing the company an
extension of lead beyond the average 10. As the obtaining
of the written order of the Chief Engineer was an essential
condition which had to be complied with before. a claim for
extra lead could be made the company was not entitled to
payment for the extra leads beyond the average 10.
(3)The letter Ext. P-6 dated March 30, 1953 which was
signed by the Superintending Engineer for the Chief Engineer
had not been proved to have been written either under the
instructions of the Chief Engineer or approved by him. In
this letter it was stated, inter alia, that the words
"average 10 leads mentioned in the special conditions of the
agreement include the initial lead and lift and all other
lifts between the borrow area and the Dyke". The Chief
Engineer’s evidence relating to Ext. P-6 was believed.
The final conclusion of the arbitrator on issue No. 1 was
that under the terms of the contract between the parties the
rate of Rs. 45/- per 1000 cubic feet covered all lifts and
that lifts had not to be separately paid for. On issue No.
2 the company’s claim for extra payment for machine leads
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was held to be untenable. The finding on issue No. 3 was
that in case of machine leads lifts were not to be taken
into account. On issue No. 4 the arbitrator held that the
company was not entitled to recover the costs incurred in
putting up the ramps. On issue No. 5 it was decided that
the Government was not estopped from denying liability for
payment for lifts and machine leads. On issues 6 and 7 the
arbitrator found that no amount was payable by the Union of
India to the company nor was the Union liable to pay any
interest.
The respondent company filed what was called a plaint under
ss. 30 and 33 of the Indian Arbitration Act 1940 in the
court of the Subordinate Judge, Sambalpur, challenging the
award on various grounds and prayed that it be set aside.
It was further prayed that another arbitrator be appointed
to make a fresh award regarding the disputes between the
parties. The Subordinate Judge set aside the award by his
order dated March 17, 1962. The Union of India preferred an
appeal to the High Court which was beard by Barman and Das,
JJ. Learned judges gave dissenting judgments, Burman J.,
was of the view that the award could not be sustained
whereas Das J., was of the opinion that the award was not
liable to be set aside. The appeal was then heard by a
third
189
Judge G. K. Misra J. On issues 1 and 2 Misra J. agreed with
the judgment of Barman J., but on issues 3 and 4 he
concurred with the, decision of Das J. According to his
judgment the award could not be set aside on issues 3 and 4
whereas it was liable to be set aside on issues 1 and 2. As
the issues were severable he set aside the award only on
issues 1 and 2.
A bare perusal of the judgment of Misra J. would show that
lie decided the matter as it he was entertaining an appeal
against the award itself. He re-examined and re-appraised
the evidence which had been considered by the arbitrator and
held that the arbitrator was wrong in coming to the
conclusion that the work was contemplated by the contract to
be done by manual labour alone. According to him under the
agreement payment for machine leads was contemplated from
the very beginning or at any rate was not excluded. He
examined a large volume. of evidence including Ext. P-6 as
also the oral evidence of the Chief Engineer Shri Kanwar
Sain and held that from the course of correspondence it was
clear that in dealing with the contractor or the Executive
Engineer almost all the letters on behalf of the Chief Engi-
neer were being dealt with by the Superintending Engineer.
Once Ext. P-6 was admitted to be genuine and was issued by
the Superintending Engineer in the ordinary course of
correspondence it was for the appellant to establish by
production of the relevant records that that letter had been
issued without authority of the Chief Engineer. Misra J.,
had no hesitation in holding that Ext. P-6 was written
under the authority of the Chief Engineer and was binding
between the parties. Here again what Misra J., id was to
appreciate the evidence which had been considered by the
arbitrator, in particular, the testimony of the Chief
Engineer. The arbitrator had believed the statement of the
Chief Engineer that Ex. P-6 had neither been issued under
his authority nor with his approval. Once this part of his
statement was believed by the arbitrator it was not open to
Misra J.. to sit in appeal over the conclusion of the
arbitrator in proceedings for setting aside the award.
The other serious error into which Misra J., fell was to
record a finding on the payment for extra leads beyond 10 in
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reversal of the conclusion of the arbitrator. This is what
the learned judge proceeded to say :
"The next point for consideration is whether
the payment for extra leads beyond 10 are to
be rejected because the Chief Engineer’s order
in writing had not been obtained before the
work involving additional leads was executed.
Both under Ex. P. 2 and Ext. P. 69 this term
had been incorporated. In the peculiar
circumstances of this case, however, it must
be taken that the
190
condition had been fulfilled even though there
was no order in writing. It was for the
Executive Engineer and the Superintending
Engineer, who were getting the work done by
the Company, to obtain the order in writing or
not to allow the Company, to work beyond 10
leads including lifts without obtaining the
order of the Chief Engineer in writing."
Once it was found that under the terms of the contract the
order of the Chief Engineer in writing had to be obtained
before the work involving additional leads was executed and
in the absence of any such written order it was not open to
the court to hold that the appellant-Union of India-was
liable for payment of extra leads beyond 10 by applying some
principle or rule analogous to estoppel. It is no doubt
true that the company had been writing to the Engineering
Department in the matter and that the latter did not, for a
considerable time, send any reply but the company was
debarred from asking for any additional payment in the
absence of the Chief Engineer’s order in writing. If the
arbitrator came to that conclusion it could not said that
there was any error apparent in his award which would
justify setting it aside.
For the reason given above the appeal is allowed and the
order of the High Court setting aside the award dated July
19, 1959 in part as indicated in the judgment of Misra J.,
is hereby reversed. The proceedings instituted by the
respondent under ss. 30 and33 of the Indian Arbitration
Act, 1940, shall stand dismissed. In. view of the entire
circumstances the parties are left to bear their own costs
in this Court.
R.K.P.S.
Appeal allowed.
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