Full Judgment Text
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PETITIONER:
THE HINDUSTAN CORPORATION CO. LTD.
Vs.
RESPONDENT:
GOVERNOR OF ORISSA & ORS.
DATE OF JUDGMENT02/03/1995
BENCH:
SINGH N.P. (J)
BENCH:
SINGH N.P. (J)
AHMADI A.M. (CJ)
MANOHAR SUJATA V. (J)
CITATION:
1995 AIR 2189 1995 SCC (3) 8
JT 1995 (2) 561 1995 SCALE (2)105
ACT:
HEADNOTE:
JUDGMENT:
1. Leave granted.
2.The award given by the Special Arbitration Tribunal
(hereinafter referred to as ’the Special Tribunal’) has been
set aside by the High Court and the proceeding has been
remitted to the Arbitration Tribunal for fresh adjudication.
That order is under challenge in the present appeal.
3.On 16.7.1979, tenders were invited by the respondents for
construction work of concrete cum-masonary dam of Upper
Kolab, Multi Purpose River Project, in the State of Orissa.
The tender of the appellant having been accepted, an agree-
ment was executed between the appellant and the respondent-
State for the execution of the said project. The work order
issued to the appellant on 2.1.1981. The work was to be
completed by 30.9.1982. In terms of the agreement,
escalation charges were to be paid to the contractor. The
respondents granted extension for the completion of the
project by end of the December, 1985. There is no dispute
that work was completed before that date. However,
escalation charges were paid by the Executive Engineer in
the running bills only till 31.3.1985 after which no payment
in this respect was made. Some other amounts also remained
to be paid including the refund of security deposits, which
led to the reference of the dispute to the Arbitration
Tribunal, constituted under Section 4 1 A of the Arbitration
Act, as introduced by Arbitration (Orissa Amendment) Act,
1982. A counter claim was also filed before the Arbitration
Tribunal, on behalf of the State. The Arbitration Tribunal
having found that the dispute involved a claim for more than
Rs.one crore directed the State Government to exercise power
under proviso to Section 41A (1) of the Arbitration Act
(hereinafter referred to as ’the Act’) as amended by the
Arbitration (Orissa Amendment) Act, 1982 and to refer the
dispute to the Special Tribunal. We do not express any view
on the question whether the initial jurisdiction exercisable
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by the Arbitration Tribunal got lost on the opposite party
laying a counterclaim exceeding Rs. one crore. That may
have to be answered in an appropriate case. -Me State
Government referred the dispute
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aforesaid by a Notification dated 6.5.1988 to the Special
Tribunal, which had been constituted with a refired Judge of
the High Court. The Special Tribunal issued notices to the
parties on 14.5.1988 and had its first sitting on 28.5.1988.
No party raised any dispute on the question whether or not
the Special Tribunal had any jurisdiction. On 28.8.1988,
the Special Tribunal extended the time for making the award
by four months from the date of expiry of time i.e. from
27.9.1988, pursuant to a memorandum put in by both sides for
such extension. On 27.9.1988, the four months statutory
time calculated from 28.5.1988 expired. But in view of the
aforesaid extension on 28.8.1988 on basis of the memorandum
put in by both sides for such extension, the Special
Tribunal proceeded with the dispute. However, the award
could not be given. On 18.1.1988, another joint memorandum
was filed on behalf of both the parties before the Special
Tribunal for extension of time for submission of the award
by four months from 27.1.1989. With the consent of both the
parties, the period for making the award was extended. On
10.2.1989, the Special Tribunal made and signed its award.
Objection was filed on behalf of the respondents to the
award. On 26.9.1989 the Subordinate Judge rejected the said
objection and made the award Rule of the Court granting 6%
pendente lite interest and 4% future interest An appeal was
filed on behalf of the respondent-State before the High
Court. That appeal has been allowed by the High Court -and
the award of the Special Tribunal has been set aside. A
direction has been given to the Arbitration Tribunal to
proceed with the adjudication of the disputes afresh.
4. From the Order of the High Court, it appears that the
award aforesaid has been set-aside primarily on the grounds
(1) The constitution of the Special Tribunal under Section
41A of the Act and the reference of the dispute by the
State, Government which was already pending before the Ar-
bitration Tribunal for adjudication was without jurisdiction
(2) The Special Tribunal had no jurisdiction to enlarge the
time for making of the award and (3) The award was otherwise
invalid due to nonconsideration of relevant materials avail-
able on the record in respect of a question which was at
issue.
5. The relevant part of Section 41 A, which was
introduced by the Arbitration (Orissa Amendment) Act 1982
aforesaid is as follows:-
"41-A. Constitution of and reference to the
Arbitration Tribunal -
(1) Notwithstanding anything contained in
the Act or in any contract or any other
instrument, but without prejudice to the
provisions contained in Section 47, in all
cases where the State Government, a local or
other authority controlled by the State
Government, a statutory corporation or a
Government company is a party to the dispute,
all references to arbitration shall be made to
the Arbitration Tribunal.
Provided that reference to arbitration of the
disputes specified in sub-section (1)
involving claims of rupees one crore or above
may be made by the State Government to a
Special Arbitration Tribunal comprising of one
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or more retired High Court Judges, as may be
constituted by the State Government from time
to time.
(2) to (6) xxx xxx xxx
(7) All arbitration proceedings relating to
a dispute of the nature specified in
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sub- section (1) which are pending before any
arbitrator on the date of commencement of the
Arbitration (Orissa Amendment) Act, 1982, and
in which no award has been made by the said
date. shall transferred to and disposed of by
the Arbitration Tribunal.
Provided that the State Government my by order
in writing direct that the arbitration
proceedings relating to disputes and claims
involving rupees one crore or above, pending
before any Arbitrator or Board of Arbitrators
on the date of the commencement of the
Arbitration (Orissa Amendment) Act. 1982,
(Orissa Act 3 of 1983) shall be transferred to
any special arbitration tribunal constituted
under the proviso to sub-section (1) for
disposal in accordance with law".
In view of sub-section (1) of Section 41 A, in all cases
where the State Government a local or other authority
controlled by the State Government, a statutory corporation
or a government company is a party to the dispute,
references shall be made for arbitration to the Arbitration
Tribunal. Proviso to the said sub-section says that where
the dispute involves a claim of Rs.one crore or above, the
reference for arbitration shall be made by the State Gov-
ernment to the Special Tribunal comprising of one or more
retired judges of the High Court as may be constituted by
the State Government from time to time. Because of sub-
section (7) of Section 41A, any arbitration proceeding
pending before any Arbitrator on the date of the com-
mencement of the Arbitration (Orissa Amendment) Act, 1982,
in which no award has been made by the said date, shall
stand transferred, to be disposed of by the Arbitration
Tribunal. Proviso to the said subsection (7) says that if
in the dispute so pending, the claim is in respect of Rs.one
crore or above, it shall be transferred to any Special
Tribunal constituted under the proviso to sub-section (1)
for disposal in accordance with law. It appears that the
aforesaid Arbitration Act, 1982 (Orissa Act 3 of 1983)
received the assent of the President on 21.3.1983 and was
published in the extra-ordinary issue of the Orissa Gazette
on 26.3.1983. According to the High Court, as the dispute in
question arose in the year 198586, there was no question of
exercise of power by the State Government under subsection
(7) of Section 4 1 A aforesaid, which was applicable only to
such disputes which were pending on 26.3.1983, when the Ar-
bitration (Orissa Amendment) Act, 1982 came in force. The
High Court was of the view that even proviso to subsection
(7), of Section 41 A shall be applicable to only such
disputes which were pending when the Arbitration (Orissa
Amendment) Act 1982 came in force and the State Government
could have transferred only such disputes to the Special
Tribunal.
6. The learned counsel appearing for the appellant,
pointed out that from a bare reference to the Notification
dated 6.5.1988 issued by the State Government, it shall
appear that the State Government had not transferred the
dispute pending before Arbitration Tribunal to Special
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Tribunal in exercise of power under proviso to subsection
(7) of Section 41A but the dispute was referred to the
Special Tribunal in exercise of power under proviso to sub-
section (1) of Section 41A of the Act. The High Court was
in error in proceeding on the assumption that the State
Government had exercised the power of transfer from the
Arbitration Tribunal to the Special Tribunal in exercise of
the power under proviso to sub-section (7) of Section 41A of
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the Act. In the Notification dated 6.5.1988, it has been
clearly stated that a dispute had arisen between the
appellant and the State Government involving rupees more
than one crore and the Arbitration Tribunal has also given a
direction to appoint Special Tribunal; because of which "in
exercise of the powers conferred by the proviso to sub-
section (1) of Section 41A of the Arbitration Act, 1948 (X
of 1948) as amended by the Arbitration (Orissa Amendment)
Act, 1984, (Orissa Act 17 of 1984), the State Government do
hereby constituted Special Arbitration Tribunal comprising
Mr.Justice B.Behra, retired Justice Orissa High Court to
settle the said disputes.............. It may be mentioned
that the Arbitration Act was further amended by Arbitration
(Orissa Amendment) Act, 1984 (Orissa Act 17 of 1984) which
has been referred to in the aforesaid Notification of the
State Government. But we are not concerned in the present
appeal in respect of the said amendment and as such details
thereof need not be mentioned.
7. According to us, the Notification dated 6.5.1988
constituting the Special Tribunal and referring the dispute
to such Special Tribunal cannot be held to be one in
exercise of power under proviso to subsection (7) of Section
41A. The said notification of reference to Special Tribunal
is within the scope of proviso to subsection (1) of Section
41 A. The State Government exercised the said power taking
into consideration all the facts and circumstances of the
case including the direction of the Arbitration Tribunal
because it involved a claim of Rs.one crore and above. It
is an admitted position that the State Government had not at
any stage questioned before the Special Tribunal the ju-
risdiction thereof to adjudicate the said dispute. The
State Government itself by a’ statutory notification having
constituted the Special Tribunal and referred the dispute to
said Special Tribunal, we fail to appreciate as to how for
the first time this stand was taken before the High Court by
the State Government &a the Special Tribunal had no
jurisdiction to adjudicate the dispute or to make the award.
According to us, in the facts and circumstances of the case,
the High Court ought not to have permitted the State
Government to raise such a contention after it had submitted
to the jurisdiction of the Special Tribunal merely because
the award went against it. It hardly behaves the State
Government to question the jurisdiction of the Special Tri-
bunal at such a belated stage merely because the award was
not to its liking. The State Government cannot be permitted
to behave like an ordinary dishonest litigant who takes an
off chance hoping to succeed and if the outcome is not to
his liking to turn back and question the Special Tribunal’s
jurisdiction. The High Court should not have permitted such
a somersault. We, therefore, set-aside the High Court’s
finding on this issue for the above reasons.
8. So far the question of extension of time for making the
award is concerned, it is an admitted position that a
memorandum was filed on behalf of both the parties including
the State Government on 28.8.1988 for extension of the
period for making the award by four months from the date of
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the expiry of the time on 27,9.1988. In the order dated
28.8.1988 the Special Tribunal said:
"While receiving the notification the
Irrigation and Power Department, Orissa, has
given a direction for submission of
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the Award within 120 days from the date of
first sitting. The first sitting of the
Special Arbitration Tribunal had taken place
on 28th May, 1988. The learned Counsel for
both the sides have put in a memorandum
stating that time for submission of the Award
may be enlarged by a period of four months
from the date of expiry of time. Time is
enlarged as submitted by learned counsel for
both the sides."
Again on 18. 1. 1989, a joint memorandum signed by the
Advocates for the appellant and the respondent-State was
filed, saying that both parties agree for extension of time
for submission of the Award by a period of four months with
effect from the due date i.e. 27.1.1989. On the said joint
memorandum,the Special Tribunal passed an order the same day
saying that the learned counsel for both the sides on behalf
of the parties had filed a joint memorandum for extension of
time for submission of the award by a period of four months
’with the consent of both the parties time is extended for
submission of the Award by a period of four months with
effect from 27.1.1989 keeping in mind the legal principle
laid down by the Supreme Court in 1987 (4) SCC 93.’ Within
the extended period as already mentioned above the award was
made on 10.2.1989.
9. The first schedule to the Arbitration Act specifies the
implied conditions of the arbitration agreements. Because
of condition No.3, the arbitrator has to make award within
four months of his entering on the reference or after having
been called upon to act by notice in writing from any party
to the arbitration agreement or within such extended time
as the Court may allow: In other words, the power to extend
the time of four months has been vested in the Court,
otherwise the award after expiry may become invalid. But
that condition has to be read along with Section 28 of the
Act.
"28.Power to Court only to enlarge time for
making award.-(1) Court may if it thinks fit,
whether the time for making the award has
expired or not and whether the award has been
made or not, enlarge from time to time the
time for making the award.
(2)any provisions in an arbitration
agreement whereby the arbitrators or umpire
may, except with the consent of all the partie
s
to the agreement, the time for the award,
shall be void and of no effect.
Sub-section (1) of Section 28 vests power in the Court to
enlarge the time for making the award from time to time.
Subsection (2) of Section 28 says in clear and unambiguous
terms that any provision in an arbitration agreement whereby
the arbitrators or umpire can enlarge the time for making
the award shall be void and of no effect ’except with the
consent of all the parties to the agreement’. Sub-section
(2) of Section 28 has been the subject matter of
controversy, as to whether even if the time is extended with
the consent of both the parties, the restrictions prescribed
in sub-section (1) of Section 28 and under condition No.3 of
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the first schedule arc contravened. In the case of Hari
Krishan Wattal v. Vatkunth Nath Pandya,(1974) 1 SCR 259, it
was pointed out that under clause 3 of the Schedule to the
Arbitration Act, the Arbitrator is expected to make his
award within four months from his entering on the reference
or on his being called upon to act or within such extended
time as the court may allow. But then it was said:-
567
"Sub-section 2 of section 28, however,
indicates one exception to the above rule that
the Arbitrator cannot enlarge the time, and
that is when the parties agree to such an
enlargment. The occasion for the Arbitrator
to enlarge the time occurs only after he is
called upon to proceed with the arbitration or
he enters upon the reference. Hence, it is
clear that if the parties agree to the
enlargement of time after the Arbitrator has
entered on the reference, the Arbitrator has
the power to enlarge it in accordance with the
mutual agreement or consent of the parties.
That such a consent must be a post-reference
consent, is also clear from section 28(2)
which renders null and void a provision in the
original agreement to that effect. In a sense
where a provision is made in the original
agreement that the Arbitrator may enlarge the
time,. such a provision always implies mutual
consent for enlargement but such mutual
consent intially expressed in the original
agreement does not save the provision from
being void It is, therefore clear that the
Arbitrator gets the jurisdiction to enlarge
the time for making the award only in a case
where after entering on the arbitration the
parties to the arbitration agreement consent
to such enlargement of time."
Again in the case of State of Punjab v. Sri Hardayal, (1985)
3 SCR 649, it was said:
"Sub-section (1) of s.28 is very wide and
confers full discretion on the court to
enlarge time for making the award at any time.
The direction under sub-s.(1) of s.28 should,
however, be exercised judiciously. Sub-
section (2) of s.28 also makes it evident tha
t
the court alone has the power to extend time.
It further provides that a clause in the
arbitration agreement giving the arbitrator
power to enlarge time shall be void and of no
effect except when all the parties consent to
567
such enlargement. It is not open to arbi-
trators at their own pleasure without consent
of the parties to the agreement to enlarge
time for making the award."
In the case of Hindustan Steel Works Construction Ltd. v.
C.Rajasekhar Rao, (1987) 4 SCC 93, this Court said:
"In this connection reference may be made to
H.K Wattal v. VN.Pandya, where this Court
reiterated that sub-section (2) of Section 28
indicated one exception to the above rule that
the arbitrator could not enlarge the time, and
that was when the parties agreed to such an
enlargement. It is clear this Court reiter-
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ated that the arbitrator gets the jurisdic
tion to enlarge the time for making the award
only in a case where after entering on the
arbitration the parties to the arbitration
agreement consent to such enlargement of time.
In this case precisely it so happened".
According to us, the High Court overlooked the provision of
sub-section (2) of Section 28. After the Special Tribunal
had entered into reference, by consent of the parties, the
time for making the award could have been extended. In the
present case it is not in dispute that the appellant and the
respondent-State both had for extension of the period for
making the award,after the Special Tribunal had entered into
reference. As such the award cannot be held to be invalid
on that ground
10.The third ground for declaring the award invalid by the
High Court is that the Special Tribunal had not considered
important documents which were on the record of the
arbitration proceeding. In this connection our attention
was drawn to a letter dated 28.8.1982 ad by the appellant
company to the Executive
568
Engineer saying that they were applying for extension of
time for completion of works upto 30.6.1984 because of valid
reasons given in the prescribed proforma. In that letter,
it was also mentioned that during the discussion between the
Dy.General Manager of the company with the Government
Officials at Bhubaneshwar on 20.2.1982, it had been agreed
to consider the extension of time upto 30.6.1984. In the
proforma attached to the said letter, again the same thing
was reiterated. It was said in the said proforma on behalf
of the appellant company that they had undertaken that they
shall not claim any compensation or extra rate for executing
the work beyond the stipulated date except whatever was
permissible as per the contract. It was urged that the
letter and the proforma aforesaid was not considered by the
Special Tribunal while making order in respect of
escalations. According to the respondent-State as the
extension was given at the request of the appellant, they
were not entitled for any escalation charges. Reference was
also made on behalf of the respondents to the supplementary
agreement, especially clauses VI and VII thereof In Clause
VI, it has been stated that any extra arrangement if re-
quired to be made by the company to complete the work as per
the above agreed schedule "shall, be done by them,without
liability to the Government of Orissa".In Clause VII of the
said supplementary agreement, it has been said that Govern-
ment of Orissa shall consider to extend the date of
completion of the work upto 30.6.1984 "without liability to
the both contracting parties". On basis of the aforesaid
clause it was urged on behalf of the respondents which has
been accepted by the High Court, that the State Government
was not bound to pay any charges under the head
‘escalation’. On behalf of the appellant, it was
demonstrated that the aforesaid no liability clause in the
supplementary agreement related to clause- 13 of the
original agreement under the heading ’Compensation for delay
in works’. It says that the contractor’s rates are based on
the assumption that the contract will be completed by 30th
September, 1982 and the contractor shall not claim "any
compensation or revision of rates if the work gets delayed
upto 6 months beyond the contract completion time i.e.
30.9.1982". It further says that if the contract completion
date gets delayed beyond 31.3.1983 for the reasons not
attributable to the contractor, the rates shall be revised
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for the unfinished work as on 31.3.1983 by Engineer in-
charge in consultation with the contractor, subject to the
approval of the Government. When in the supplementary
agreement in clauses VI and VII it was said that extra
arrangement for completion of the work as per the agreed
schedule shall be done by the Contractor without liability
to the Government of Orissa or without liability to both
contracting,, parties, it was with reference to the
aforesaid clause 13 which stipulated compensation for delay
in works. According to the appellant, the Special Tribunal
has awarded extra amount in respect of escalations of labour
charges which had been stipulated in para 12.1 of the
agreement saying that for the increase in the cost of labour
the Contractor shall be paid extra as per the formula given
in the said clause. In other words, the escalation charges
allowed to the appellant by the Special Tribunal is in
respect of escalation of the labour charges and that, was
not regulated by clauses VI and VII of the supplementary
agreement. The Learned counsel for the appellant pointed
out from the award that the Special Tribunal was
569
conscious of Clause 13 relating to ’compensation for delay
in works’ and ’labour escalations’ under clause 12.1 of the
agreement. It has been said in the award that the
competent authority by a letter dated 16.10.1984, addressed
to the appellant, had categorically assured that the
appellant shall be paid the escalation charges under clauses
12.1, 12.2 and 12.3 of the special conditions. The Tribunal
has also held that the said authority was competent to give
such assurance on behalf of the State apart from the fact
that under clauses 12.1 ,12.2 and 12.3 of the special
conditions, the appellant was entitled to the escalation
charges. In this background, it cannot be said that there
is any error apparent on the face of the award which
required an inter ference by the High Court. 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.
According to us, no ground has been made out on behalf of
respondents to set aside the award holding it to be invalid.
11. In the result, the appeal is allowed and the order of
the High Court is set aside. The order making the award the
Rule of the Court,by the learned Subordinate Judge is
upheld. However, in the facts and circumstances of the case,
there shall be no order as to costs.
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