Full Judgment Text
1
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
APPEAL FROM ORDER NO.108 OF 2005
M/s S.D. Shinde, Contractor,
Shree ZParvati, Behind Zopadi
Canteen, Savedi Road,
Ahmednagar,through its partner
Annasaheb Shripati Shinde,
age 45 years, occup.business,
r/of Shriparwati, Savedi Road,
Ahmednagar, Taluka and Dist. .. Appellant/
Ahmednagar. ori.pltff./
claimant
versus
01. Government of Maharashtra,
Irrigation Department,
represented by the Executive
Engineer, Kukadi Irrigation
Project, Division No.VII,
Shrigonda, Dist. Ahmednagar
(M.S.)
02. Ramdas s/o Shripati Shinde,
age major, occup. business,
03. Arun s/o Shripati Shinde,
age major, occup.business,
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04. Mala alias w/o Anita Hiralal
Paear, age major, occupation
household.
05. Bapusasheb s/o Shripati Shinde
age major, occup. business,
06. Ravi s/o Shripati Shinde,
age major, occup. business,
(Respondent Nos. 1 to 6 r/of
Yeshwant Coloney, Ahmednagar,
Taluka and District Ahmednagar)
07. Prasad s/o Raosaheb Shinde,
age major,
08. Sunny s/o Raosaheb Shinde,
age minor,
09. Rohit s/o Raosaheb Shinde,
age minor,
through legal guardian Laxman
Raosaheb Shinde, age 40 years
occupation business r/o Takli
Dhokeshwar, Taluka Parner,
District Ahmedngar. ..Respondents
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Shri V.J. Dixit, Senior Counsel, instructed by
Shri P.R.Katneshwarkar, Advocate, for appellant.
Shri G.B.Rajale, Advocate, for Respondent No.1.
Shri G.K. Thigle, Advocate for Respondent Nos. 2
and 3. Shri S.M. Godsay, Advocate for Respondent
Nos.4,5,7,8 and 9.
Coram: P.R.Borkar J.
Judgment reserved on:05/08/2009
Judgment pronounced on:13/08/2009
JUDGMENT.
01. By this appeal from order the present
appellantoriginal plaintiffcontractor challenges
the judgment and order passed by learned Joint
Civil Judge, Senior Division, Ahmednagar, in
Regular Civil Suit No.595 of 1997 on 3.04.2003,
thereby refusing to pass decree in terms of the
award passed by sole Arbitrator Shri A.K.
Shenolikar on 14.12.1997.
02. Briefly stated, the facts giving rise to
the this appeal are that the appellant was earlier
sole proprietary firm in the name and style `M/s
S.D.Shinde Contractor' owned by one Shri
S.D.Shinde. He expired during pendency of suit, on
14.1.1990 and after his death the suit was
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continued by his legal heirs. Present appeal is
filed by one of those legal heirs i.e. Annasaheb
Shripati Shinde claiming to be partner of the said
firm M/s.S.D.Shinde Contractor. Respondent Nos. 2
to 8 are the remaining heirs of deceased
S.D.Shinde. The original dispute decided by the
sole arbitrator was between late Shri S.D.Shinde
contractor and Respondent No.1Government of
Maharashtra through Irrigation Department.
03. Along with suit, learned trial judge has
also decided two miscellaneous applications, viz.
Miscellaneous Application No.1 of 1998 filed by
Respondent No.1State under Sections 30 and 33 of
the Indian Arbitration Act, 1940 ("The Arbitration
Act" for short) for setting aside the award passed
by the sole Arbitrator Shri A.K. Shenolikar; ARBI
Miscellaneous Application No. 1 of 1999 was filed
by one Bapusaheb Shripat Shinde on behalf of M/s
S.D.Shinde Contractor for making the award of the
sole arbitrator as rule of the court and for
passing decree in terms of the award in the name
of legal heirs of late S.D.Shinde who died on
14.1.1990. Basically, this appeal from order is
challenging the refusal by the learned trial
judge to pass decree in terms of the award passed
by sole arbitrator and also the order setting
aside the said award.
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04. Late Shri S.D.Shinde who was a civil
contractor, had submitted a tender in respect of
construction of earthwork structure and lining of
Kukadi Left Bank Canal. The tender was accepted
in respect of the work in kilometer No.91 to
kilometer No. 110 of the said Project. The work
order was issued in favour of the claimant
appellant by the Executive Engineer vide letter
No.AB/LCB/91 to 110/2257 dated 23/7/1983 and the
parties entered into contract which was for Rs.
4,01,77,153/=. According to contract, the work
was to be completed within eighteen calender
months. Thus date of completion was stipulated to
be 22.1.1985. However, it is now admitted
position that the work could not be completed
within stipulated time and both the parties agreed
to the extension of time which was given on five
occasions. Ultimately, Respondent No. 1 foreclosed
the contract on 25.1.1990 on the application made
by the appellant. Thus, 25.1.1990 is the date on
which the work was taken away or foreclosed by
Respondent No.1. It is further admitted position
that the the appellantoriginal contractor had
given application for foreclosure of the contract
and its date is mentioned as 13.3.1990, but it
appears that the the month was wrongly mentioned
as there is no dispute regarding date of
foreclosure being 25.1.1990. Final bill was
submitted on 14.12.1990. On 18.1.1995 the
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application was filed by appellantoriginal
contractor to Respondent No.1 for appointment of
arbitrator.
05. As per application M.A. No.1/1995 para 2,
Superintending Engineer rejected claim on
11.1.1991 and on 21.1.1991, S.D.Shinde Contractor
first requested for nomination of Arbitrator.
However, in spite of repeated letters from
21.1.1991 onwards, arbitrator/s were not appointed
either by Respondent No.1 or by Central Water
Power Commission as per terms of the contract and,
therefore, the original contractor Shri S.D.Shinde
filed Miscellaneous Application No. 1 of 1995 in
the court of Civil Judge, Senior Division,
Ahmednagar under Section 8 of the Arbitration Act.
That application came to be decided by learned
Civil Judge on 25.2.1997. Admittedly, none of the
respondents, including Respondent No.1 and its
officers and the Chairman, Central Water Power
Commission, New Delhi participated in the
proceedings. Although initially Respondents had
appeared in the matter and engaged Shri V.D.
Athare, District Government Pleader they did not
file their say. Later on Shri A.R. Phadnis,
District Govt. Pleader also appeared for sometime.
Consequently, application proceeded without any
written statement and as suggested by the original
contractor, Shri A.K.Shenolikar, retired Chief
Engineer, Nagpur, was appointed as the sole
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arbitrator. The order passed by learned Civil
Judge, Senior Division on 25.2.1997 in Arbitration
M.A. o.1 of 1995 needs to be quoted at this stage
as it is argued that the court while appointing
the arbitrator has exceeded its powers under
Section 8 of the Arbitration Act and also made a
reference of certain disputes to the arbitrator
which were beyond agreement and thus vitiated the
appointment of the arbitrator and the reference.
The order reads:
".1 The Petition filed under section 8
of the Indian Arbitration Act, 1940, is
allowed.
2. Shri Shitolikar (Shenolikar),
Retired Chief Engineer, Nagpur, is
appointed as Arbitrator for settling the
dispute in respect of payment of
additional and extra work carried by the
petitioner outside of Contract
LCB9/8384.
3. The Arbitrator now appointed shall
give his Award within 3 months from the
date of this decision."
(Note: emphasis is supplied to highlight
term of reference.)
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It is the direction in paragraph No. 2 of the
order, which is criticised
06. Shri Shenolikar, pursuant to his
appointment as arbitrator, passed award on
14.12.1997. The arbitrator accepted almost all
major claims of the contractor Shri S.D.Shinde and
awarded compensation as follows;
(a) Idle Machinery charges at Rs.5,62,628.00
Rs2692 for 209 days.
(b) Idle overheads at Rs.7440/ Rs.8,55,600.00
for 115 days.
Total Rs.14,18,228.00
As per paragraph 6.5 of the award, the
compensation amounts awarded are as below.
a) Unabsorbed overheads Rs.28,89,000.00
b) period of contract Rs.15,72,000.00
c) Compensation for extended Rs.91,28,000.00
period of contract.
d) Compensation for stoppages Rs.14,18,000.00
Total Rs.150,07,000.00
The learned Arbitrator awarded interest of Rs.
133.22 lacs for the period 10.12.12.1988 to
5.3.199. He did not award interest pendentelite
but awarded future interest from 1.3.1998 till
actual payment.
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07. For passing decree in terms of the said
award, Regular Civil Suit No.595 of 1997 was filed
by the present appellantcontractor in the Court
of Civil Judge, Senior Division, Ahmednagar.
Learned Civil Judge by his judgment and order
dated 3.4.2003 set aside the award holding that
the appointment of the learned Arbitrator and
reference of disputes to him were not as per the
law and, therefore, he refused to pass decree in
terms of the award and set aside the award. It is
this judgment and order which is challenged in
this appeal.
08. Heard learned counsel for respective
parties. Together, they have taken me through the
entire record.
09. The award was quashed and set aside by
the learned Civil Judge on the grounds of
limitation, misconduct on the part of the
arbitrator, invalid reference amongst other
grounds. However, before going to the actual
discussion of various facets with reference to the
facts of the case, I may refer to the case law
cited before me and in the light of the same,
factual matrix of the case can be considered.
10. Shri V.J.Dixit, learned Senior Counsel,
instructed by Shri P.R. Katneshwarkar for the
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appellant referred to the judgment of learned
Single Judge of our High Court in the case of M/s
R.P.Souza & Co. vs. Chief Engineer, PWD 1993 (3)
In paragraph 15 of the judgment,
Bom.C.R.738.
after referring to the facts of the said case, it
was observed that the work was to be commenced on
18.1.1992 and was to be completed in October 1994.
The final bill was prepared by the respondents
only on 16th January 1996. In other words, it took
nearly two years for the respondents to prepare
the final bill in respect of the work carried out
by the applicants. Under such circumstances, it
was held that the Respondent was not entitled to
raise the question of limitation. Shri Dixit,
learned Senior Counsel, argued that in the
present case, final bill was submitted on
14.12.1992 and, therefore, application to the
court for appointment of arbitrator filed on
18.1.1995 cannot be said to be beyond the period
of limitation.
11. Second case relied upon by learned Senior
Counsel Shri Dixit is M/s Tarapore and Company
vs. Cochin Shipyard Ltd. Cochin AIR 1984 SC 1072.
In para 32, it is observed;
" On a conspectus of these decisions,
it clearly transpires that if a question of
law is specifically referred and it becomes
evident that the parties desired to have a
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decision on the specific question from the
arbitrator about that rather than one from
court, then the court will not interfere with
the award of the arbitrator on the ground
that there is an error of law apparent on the
face of the award even if the view of law
taken by the arbitrator does not accord with
the view of the court. "
In the present case, it is not that any question
of law was referred to the sole arbitrator.
Further, in paragraph 33 of the same judgment, it
has been observed to following effect;
". Not only the respondent did not have
recourse to an application under Section 33 of the
Arbitration Act, but of its own it referred a
specific question of law to the arbitrator for his
decision, participated in the arbitration
proceeding invited the arbitrator to decide the
specific question and took a chance of a decision.
It cannot therefore, now be permitted to turn
round and contend to the contrary on the nebulous
plea that it had referred the claim/dispute to the
sole arbitrator without prejudice to its right to
contend to the contrary. "
It is argued before this court that
though Respondent No.1 and its officers had not
taken part in the arbitration proceedings in
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Arbitration M.A. No.1 of 1995, Respondent No.1
had appeared before the sole arbitrator Shri
Shenolikar and participated in the proceedings
and, therefore, it cannot challenge the
appointment of the arbitrator.
12. Another case cited by Senior Counsel Shri
Dixit is International Airports Authority of India
vs. M/s Mohinder Singh AIR 1996 Bombay 167. It is
observed in paragraph 12 as follows;
12. ....................................
Moreover, the appointment of the
arbitrator was made by the petitioners
themselves and the petitioners by long
participation of the arbitration
proceedings before the arbitrator
accepted such appointment and it is
neither valid nor legal nor proper on the
part of the petitioners now to allege
that the appointment of the arbitrator by
the Chief Engineer of the petitioners in
charge of the work at the material time
was not proper."
13. In the case of H.P. State Electricity
Board vs. R.J. Shah and company, (1999) 4 SCC
which is relied upon by the appellant, the
214,
Apex Court was considering Sections 30 and 33 of
the Arbitration Act. In paragraphs 26 and 28
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following observations are made;
"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.
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28. The decision in Associated Engg.
Co.case relied upon by Shri Maninder
Singh does not in any way persuade us to
take a view different than the view
arrived at by the High Court. At p.103
Thommen J speaking for the Court observed
as follows; (see para 24.)
"24. The arbitrator cannot act
arbitrarily, irrationally, capriciously
or independently of the contract. His
sole function is to arbitrate in terms of
the contract. He has no power apart from
what the parties have given him under
the contract. If he has travelled outside
the bounds of the contract, he has acted
without jurisdiction. But if he has
remained inside the parameters of the
contract and has construed the provisions
of the contract, his award cannot be
interfered with unless he has given
reasons for the award disclosing an error
apparent on the fact of it."
14. The next case cited by Senior Counsel
Shri Dixit is T.R.George vs. State of Kerala, 2001
AIR (SC) 816. In paragraph 10, it has been laid
down;
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"Arbitrator is competent to award
interest at four stages, namely, from the
stage of cause of action till filing of
proceedings, during pendency of
proceedings before the Arbitrator,
further interest i.e. from the date of
award and date of decree and interest
arising from the date of decree till
payment."
15. In the present case, it is argued that
the arbitrator has awarded interest of Rs.133.22
lacks from 10.12.1988 to 5.3.1995 which was during
period of the contract.It is worth noting that the
period of original contract was extended from time
to time with consent of both the parties and this
had happened on five occasions and the last
extension was upto 25.1.1990 when the contract was
foreclosed.Under the circumstances, the arbitrator
could not have awarded interest for eight years.
It is also submitted that entire approach of the
arbitrator was partisan and he only wanted to
oblige the contractor Shri S.D.Shinde. He did not
consider the fact that because of fault of
contractor, extensions of time had to be given. He
overlooked that extensions were with consent of
both the parties. In such circumstances,
particularly when extension of time is with
consent of both sides, there should not have been
award of interest from back date i.e.10.12.1988.
16. Shri S.M.Godsay,learned Advocate for
Respondent Nos.4,5,7,8 and 9 cited some
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authorities. In Mohinder Kumar Jain vs. Beas
Construction Board and another 1991 Arb.W.L.J.589,
wherein observations in Nandyal Coop.Spinning
Mils Ltd. vs. K.V.Mohan Rao, 1993(2) SCC 654=1993
(1) Arb.LR 469 are referred which read thus:
" Where a contract authorises a party to
appoint an Arbitrator, but no arbitrator is
appointed by that party within the time
stipulated in the notice served by the other
party, Court would get jurisdiction in terms
of Section 8 of the Act to appoint an
arbitrator."
It is argued that since Respondent No.1 and
Central Water Power Board have not exercised their
right to appoint arbitrator in spite of notice,
Respondent No.1 is not entitled to complain about
appointment of sole arbitrator by the court.
17. Learned Counsel Shri S.M.Godsay also
relied upon the case of Nandyal Coop. Spinning
Mills Ltd. vs. K.V. Mohan Rao, 1993 SCC 654 , which
is referred to above. In para 9, Sections 8 and 20
of the Arbitration Act are discussed. In paragraph
10, observations in para 3 in the case of Union of
India vs. Prafulla Kumar Sanyal are referred to
which are to following effect:
". If no such arbitrator had been
appointed and when the parties cannot
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agree upon an arbitrator, the court may
proceed to appoint an arbitrator by
itself. Thus if an arbitrator had been
appointed whether in the agreement or
otherwise, the court shall make an order
of reference to him. In this case,
clause 29 of the agreement provides that
every dispute shall be referred to the
sole arbitration of the person appointed
by the President of India or if he is
unwilling to act to the person appointed
by the arbitrator. An arbitrator, in
fact, has not been appointed by the
President though provision has been made
for such appointment..... If an
arbitrator had not been appointed, as
required in the subsection, the court is
to find whether the parties could agree
upon an arbitrator. If there is no such
agreement, the court will have to appoint
arbitrator of its choice."
18. In Dharma Pratishthan v M/s Mudhok
Construction Pvt. Ltd. AIR 2005 SC 214, it has
been held that unilateral appointment of an
arbitrator and unilateral reference by one party
without consent of other is illegal and therefore
the award given such Arbitrator is nullity and
void ab initio and such award can be set aside
under Section 30.
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In paragraph 14to 19 of judgment in the
said case, various earlier rulings have been
referred and in paragraph 20 it has been observed:
"20. Thus, there is ample judicial
opinion available for the proposition
that the reference to a sole Arbitrator
as contemplated by para 1 of the First
Schedule has to be a consensual reference
and not an unilateral reference by one
party alone to which the other party does
not consent."
19. It is argued by Advocate Shri Godsay that
though Shri A.K.Shenolikar was an arbitrator
suggested by the contractor Shri S.D.Shinde,
Respondent No.1 and its officers did not suggest
any other name as an arbitrator and now they
cannot complain about appointment of Shri
Shenolikar as sole arbitrator by the court.
20. It may be noted that some of the
authorities are referred to by more than one
Advocate. I am not again referring to the same
case, but I refer to ratio laid down in cases
cited.
21. On the other hand, Advocate Shri Rajale
for Respondent No. 1 also cited some authorities.
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In the case of P.Manohar Reddy vs. Maharashtra
Krishna Valley Development Corporation (2009) 2
SCC 494 (paras 19 and 20) following observations
are made;
"19. A plain reading of the
aforementioned provisions clearly show
that Clause 54 does not envisage raising
of a claim in respect of extra or
additional work after the completion of
contract. The jurisdiction of the Civil
court under Section 8 of the Act or under
Section 20 thereof can be invoked if the
disputes and differences arising between
the parties was the one to which the
arbitration agreement applied.
20. The contractual clause provides
for a limitation for the purpose of
raising a claim having regard to the
provisions of Section 28 of the Contract
Act. It is no doubt true that the period
of limitation as prescribed under Article
137 of the Limitation Act would be
applicable, but it is well settled that a
clause providing for limitation so as to
enable a party to lodge his claim with
the other side is not invalid. "
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22. It is argued before this court that the
application for appointment of arbitrator ought to
have been made within a period of thirty days
after Defect Liability Period is over. Since
admittedly foreclosure of the work by both the
sides was on 25.1.1990, the period of six months
thereafter would end on 25.7.1990 and as per the
terms of agreement between the parties,
application to the court ought to have been made
within thirty days i.e. 25.7.1990. The period of
three years if counted from that date, it comes to
25.7.1993 and therefore the application made to
the court on 18.1.1995 for appointment of an
arbitrator is barred by limitation and, therefore,
the view taken by the learned Civil Judge, Senior
Division cannot be faulted with.
23. Here, I may refer to clauses 54A and 55A
of the contract. I reproduce them from statement
of claim filed by the appellant.
"54A. If the contractor considers any
work demanded of him to be outside the
requirements of the contract or considers
any drawings record or ruling of the
Executive Engineer, K.I.P.DN No.III 51
ROR on any matters in connection with or
arising out of the contract or carrying
out of work to be unacceptable, he shall
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promptly ask the Executive Engineer, in
writing for written instructions or
decision. Thereupon, the Executive
Engineer shall give his written
instructions or decision within a period
of 30 days of such request.
Upon receipt of the written
instructions or decision the contract
shall promptly proceed without delay to
comply with such instructions or
decision.
If the Executive Engineer K.I.P.DN
No.III 51 ROR fails to give his decision
in writing within a period of 30 days
after being requested or if the
contractor is dissatisfied with the
instructions or decision of the Executive
Engineer, the contractor may within 30
days after receiving the instructions or
decision appeal to upward authority who
shall afford an opportunity to the
contractor to be heard and to offer
evidence in support of his appeal. This
official shall give a decision within a
period of 60 days after the contractor
has given the said evidence in support of
his appeal.
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If the contractor is
dissatisfied with this decision the
contractor within a period thirty days
from receip0t of the decision shall
indicate his intention to refer the
dispute to Arbitrator failing which the
said decision shall be final and
conclusive.
To be deleted where condition 54 is
included.
* To be adopted in the tender
documents for works whose estimated cost
put to tenders is Rs.50 lakhs or more, in
which case condition 54 is deleted.
sd/ sd/
Signature of No.of corrections Executive
Contractor Engineer.
All the disputes or differences in
respect of which the decision has not
been final and conclusive shall be
referred for arbitration to a sole
arbitrator appointed as follows.
Within 30 days of receipt of notice
from the contractor or his his intention
to refer the dispute top arbitration the
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Chief Engineer (S.P.) IRRIGATION DEPT.
PUNE C shall send to the contractor a
list of three officers of the rank of
Superintending Engineers or higher, who
have not been connected with the work
under this contract. The contractor
shall within 15 of receipt of this list
select and communicate to the Chief
Engineer, the name of one officer from
the list who shall then be appointed as
the sole Arbitrator. In case contractor
fails to communicate this selection of
name within the stipulated period, the
Chief Engineer shall without delay select
one officer from the list and appoint him
as the sole arbitrator. If the Chief
Engineer fails to send such a list within
30 days as stipulated the contractor
shall send a similar list to the Chief
Engineer within 15 days. The Chief
Engineer shall then select one officer
from the list and appoint him as the sole
Arbitrator within 15 days. If the Chief
Engineer fails to do so, the contractor
shall communicate to the Chief Engineer
name of one officer from the list who
shall then be the sole Arbitrator.
The arbitration shall be conducted
in accordance with the provisions of the
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Indian Arbitration Act, 1940 or any
statutory modification thereof. The
Arbitrator shall determine the amount of
costs to be awarded to either parties.
Performance under the contract shall
continue during the arbitration
proceeding s and payments due to the
contractor shall not be withheld unless
they subject matter of the arbitration
proceedings.
All awards shall be in writing and
in case of award amounting to Rs. One
lakh and above, such awards shall state
the reasons for the amount awarded.
Neither party is entitled to bring a
claim to arbitrator if the arbitrator has
not been appointed before the expiration
of 30 days after defects liability
period.
*55A Arbitration (FOR ENTIRE WORK)
All disputes or differences in
respect of which the decision is not
final and conclusive, shall be referred
to the adjudication of three arbitrators.
One to be nominated by the owner, the
other by the contractor and the third by
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the Chairamn, Central Water Commission,
New Delhi. If either of the parties fail
to appoint its Arbitrator within 60
(sixty) days after receipt of notice for
the appointment of an Arbitrator then the
Chairman Central Water Commission, New
Delhi shall appoint an Arbitrator. A
certified copy of the appointment made by
the "Chairman" shall be furnished to both
parties.
To be deleted where condition 55
is included.
* To be adopted in the tender
documents for works whose estimated cost
put to tenders is Rs.50 lakhs or more, in
which case condition deleted.
The arbitration shall be conducted
in accordance with the rules and
procedures of Indian Arbitration Act,
1940, or any statutory modifications
thereof. The decision of the majority of
arbitrators shall be final and binding
upon the parties and the expenses of the
arbitrators shall be paid as may be
determined by the arbitrators.
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Performance under the contract,
shall if reasonably possible, continue
during the arbitration proceedings and
payments due to the contractor by the
owner shall not be withheld, unless they
are the subject matter of the arbitration
proceedings.
All awards shall be in writing and
in case of claims equivalent to Rupees
one lakh or more, such awards shall state
reasons for the amounts awarded.
Neither party is entitled to bring a
claim to Arbitration if arbitrator has
not been appointed before the expiration
of 30 days after defects liability
period. "
24. It is submitted that in this case clause
55A is more attracted and the arbitration
agreement clearly lays down that neither party is
entitled to bring a claim to the arbitrator, if
arbitrator has not been appointed before
expiration of thirty days after defect liability
period and under the circumstances the learned
Civil Judge ought not to have entertained
Arbitration M.A. No.1 of 1995. it is argued that
the case of R.P. Souza and Co. (supra) was a
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27
decision in the facts of its own case and it is
not a proposition of law that limitation should
start only from the date of submitting final bill
nor it is a law that merely because there was
delay in preparation of final bill, limitation
would extend. It may be noted that the contractor
is also entitled to submit his claim of final bill
and in this case, it is not shown when did he
submit his claim. But, in M.A. No.1/1995 in para 2
in items 5 & 6, it is stated that the
Superintending Engineer informed rejection of
claims to S.D.Shinde on 1111991 and so,
S.D.Shinde made request for nomination of
arbitrator on 21.1.1991. So, cause of action arose
on 1111991. Moreover, as held in the case of
, there could be special
P.Manohar Reddi (supra)
contractual clause providing limitation for the
purpose of raising claim. So, in the
circumstances, in my opinion, learned Civil Judge
did not commit any error in holding that
Arbitration M.A. No.1 of 1995 was time barred and
the Civil Court could not have appointed
arbitrator when application was filed before it
after limitation was over.
25. Advocate Shri Rajale for Respondent No.1
cited a rulings in the cases of Union of India vs.
Shri Om Prakash AIR 1976 SC 1745 and M/s
H.S.Tuli & Sons Builders Pvt. Ltd. v. Union of
In paragraphs 11 and 12 of
India AIR 1992 SC 1124.
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28
its judgment in M/s H.S.Tuli & Sons Builders Pvt.
Ltd. the Apex Court discussed ingredients of
Sections 8 and 20 of the Arbitration Act. It
would be useful to quote paragraphs 11 and 12
which show distinction in the context or situation
in which Sections 8 and 20 of the Arbitration
Act apply.
"11. The learned Additional Solicitor
General, Mr. Reddy, after taking us
elaborately through the various
provisions of Arbitration Act would
submit that Section 8(1)(a) is attracted
unless the agreement provides for
arbitrator by consent of parties or where
there is no concurrence in the
appointment. In other words, three
ingredients are necessary to apply
Section 8 which are as follows.
(i) There must be an agreement to
appoint an arbitrator.
(ii) The parties do not concur in the
appointment.
Therefore, the said subsection has no
application to a case in which the
agreement provides for appointment of an
arbitrator by one of the parties or by
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29
nominated persons.
12. In contrast, Section 20 confers
power
(i) to order the agreement to be
filed; and
(ii) to make an order of reference
to the arbitrator appointed by the
parties or where the parties cannot
agree to the appointment of an
arbitrator appointed by court.
Where, therefore, the clause in the
agreement provided arbitrator to be
appointed by EngineerinChief, if he
refuses, recourse to Section 8(1)(a) or
1(b) cannot be had. It must be under
Section 20(4)."
It is further observed in paragraphs 16 to 18 as
follows;
"16. Section 8 of the Arbitration Act
occurs under Chapter II which deals with
arbitration without intervention of
court, while Section 20 falls under
Chapter III which deals with arbitration
with intervention of court.
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30
17. In our view, Section 8 provides a
simple machinery for appointment of an
arbitrator, initially, as seen from sub
section 1(a) or for supplying the vacancy
as seen from subsection 1(b) if the said
vacancy occurs during the period of
arbitration.
18. Subsection 1(a) would apply to a
case of initial appointment of an
arbitrator or arbitrators. The
implication is in the arbitration
agreement, the arbitrator or arbitrators
must not have been named. Where,
therefore, they are named, this section
will have no application. Similarly, the
arbitrator or arbitrators are required to
be appointed by all parties to the
reference with consent. On the contrary,
if there is some other mode of
appointment, for example, Section 4,
where the parties to the agreement agree
that the arbitrator has to be appointed
by a person designated in the agreement
either by name or hold, for the time
being in office, certainly, this section
will not apply."
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31
26. In the present case, I have already
quoted the order passed by the learned Civil
Judge, Ahmednagar passed on 25.2.1997 while
deciding Arbitration M.A. No.1/1995. Clause 2 of
the order needs to be reproduced once again for
ready reference.
"2. Shri Shitolikar (Shenolikar) Retired
Chief Engineer, Nagpur, is appointed as
Arbitrator for setting the dispute in
respect of payment of additional and
extra work carried by the petitioner
outside of Contract LCB9/8384."
27. It is argued before this court that the
learned Civil Judge while appointing Shri
Shenolikar, Retired Chief Engineer, as arbitrator,
also referred the disputes to the arbitrator
outside the contract LCB9/8384. Thus, the
subjectmatter which was not covered by the
contract was also referred by the learned Judge to
the arbitrator and this is clearly invalid
reference which is nullity in the eye of law as
observed in the case of Union of India vs. Om
in which, after referring to
Prakash (supra)
Sections 8 and 20 of the Arbitration Act and their
ingredients, it is observed that Section 20
confers power on the court to order the agreement
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32
to be filed and further to make an order of
reference to the arbitrator appointed by the
parties or where the parties cannot agree upon an
appointment, to an arbitrator appointed by court.
Subsection (1) of Section 20 makes it clear that
the provisions of the Section can be availed of
only if no proceedings under Chapter II has been
initiated. Section 8 does not contain any
provision empowering the court to make an order
of reference to the arbitrator as one finds in
subsection (4) of Section 20. The Court further
observed at the end of paragraph 4;
"4.......................................
Thus, it seems clear that the court in
the instant cases had no jurisdiction,
after appointing an arbitrator under
Section 8(2), to proceed further to make
an order referring the disputes to the
arbitrator."
In paragraph 5, it has been observed that such
award is invalid and, therefore, could be set
aside. Further observations in the same paragraph
are as follows;
"5. ....................................
The words "or is otherwise invalid" in
clause (c) of Section 30 are wide enough
to cover all forms of invalidity
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33
including invalidity of the reference.
We do not find any reason why the general
and unqualified language of clause (c)
should not include an award on an invalid
reference which is a nullity."
Thus, while disposing of arbitration Miscellaneous
Application No.1 of 1995,reference made by learned
Civil Judge to the arbitrator of disputes which
were outside the contract between the parties is
invalid and, therefore, can be set aside under
Section 30 of the Arbitration Act. Here,I may also
refer to ratio laid down in the case of H.P.State
Electricity Board v. R.J.Shah & Co.(supra)
28. It is argued before this court that the
arbitrator was quite aware of error committed by
the court in making reference of disputes outside
the contract. But, he attempted to give goby to
the same, by observing in paragraph 4.3.4 of his
award to following effect;
"........................................
As Sole Arbitrator was appointed by the
Court order the legality of which cannot
be tested before me as I do not enjoy
powers of appeal to correct the flaws, if
any, in the court order. I have been
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34
appointed by a court order which has not
so far been questioned by any of the
parties in any judicial courts having
power of appeal over it. I must hold that
as an arbitrator appointed by a proper
court order, I have jurisdiction to
decide the matter before me whatever may
be the implications of the Clause 55A of
the contract."
29. So, it is submitted that even before the
arbitrator, it was argued that the reference by
court of the disputes outside the contract between
the parties was not proper and it is also
submitted that the reference was time barred.
However, the arbitrator accepted the line of
argument as advanced by Advocate of the present
appellant and other than Respondent No.1 that
limitation would start from submission of the
final bill. In my considered opinion, reference
made by learned Civil Judge to the arbitrator in
Arbitration M.A. No.1 of 1995 is invalid and the
award passed consequent thereto is nullity.
30. It is also argued before me that that the
arbitrator has awarded rates which were higher
than the rates prescribed and allowed under the
contract. Reference was made by Advocate Shri
Rajale for Respondent No.1 to the case of Food
Corporation of India v. Chandu Construction (2007)
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35
4 SCC 697 and more particularly to paragraphs 9 to
11 wherein scope of Section 30 of the Arbitration
Act for setting aside the award of the arbitrator
by the court is discussed and the word
"misconduct" within the meaning of Section 30(a)
of the Arbitration Act was considered. Paragraphs
9 to 11 read:
"9. On the other hand, learned counsel
for the claimants submitted that it was
within the domain of the arbitrator to
construe the terms of contract in the
light of evidence placed on record by the
claimants, particularly the terms of
similar contract entered into by FCI with
the other contractors. it is asserted
that the view taken by the arbitrator
being plausible, the High Court was
justified in declining to interfere with
the award.
"10. While considering objections under
Section 30 of the Arbitration Act, 1940
(for short "the Act"), the jurisdiction
of the court to set aside an award is
limited. One of the grounds stipulated
in the section on which the court can
interfere with the award is when the
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36
arbitrator has "misconducted" himself or
the proceedings. The word "misconduct"
has neither been defined in the Act nor
is it possible for the court to
exhaustively define it or to enumerate
the line of cases in which alone
interference either could or could not be
made. Nevertheless, the word "misconduct"
in Section 30(a) of the Act does not
necessarily comprehended or include
misconduct or fraudulent or improper
conduct or moral lapse but does
comprehend and include actions on the
part of the arbitrator, which on the face
of the award are opposed to all rational
and reasonable principles resulting in
excessive award or unjust result.
11. It is trite to say that the
arbitrator being a creature of the
agreement between the parties, he has to
operate within the four corners of the
agreement and if he ignores the specific
terms of the contract, it would be a
question of jurisdictional error on the
face of the award, falling within the
ambit of legal misconduct which could be
corrected by the court. We may, however,
hasten to add that if the arbitrator
commits an error in the construction of
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37
contract, that is an error within his
jurisdiction. But, if he wanders outside
the contract and deals with matters not
allotted to him, he commits a
jurisdictional error."
In paragraphs 13 and 15 following observations are
made;
"13. In Continental Construction Co.Ltd.
v. State of M.P. it was emphasised that
not being a councilator, an arbitrator
cannot ignore the law or misapply it in
order to do what he thinks is just and
reasonable. He 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 award.
"15. Therefore, it needs little emphasis
that an arbitrator derives his authority
from the contract and if he acts in
disregard of the contract, he acts
without jurisdiction. A deliberate
departure from contract amounts to not
only manifest disregard of his authority
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38
or a misconduct on his part, but it may
tantamount to a mala fide action."
In paragraphs 19 and 20 it has further been
observed by the Apex Court as follows;
"19. ....................................
......... The claimants had submitted
their tender with eyes wide open and if
according to them the cost of sand was
not included in the quoted rates, they
would have protested at some stage of
execution of the contract, which is not
the case here. Having accepted the terms
of the agreement dated 1991984, they
were bound by its terms and so was the
arbitrator. It is, thus, clear that the
claim awarded by the arbitrator is
contrary to the unambiguous terms of the
contract. We are of the view that the
arbitrator was not justified in ignoring
the express terms of the contract merely
on the ground that in another contract
for a similar work, extra payment for
material was provided for. It was not
open to the arbitrator to travel beyond
the terms of the contract even if he was
convinced that the rate quoted by the
claimants was low and another contractor,
namely, M/s Gupta and Company had been
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39
separately paid for the material. The
claimants' claim had to be adjudicated by
the specific terms of their agreement
with FCI and no other.
20. Therefore, in our view, by awarding
extra payment for supply of sand the
arbitrator has outstepped confines of the
contract. This error on his part cannot
be said to be on account of misconstruing
of the terms of the contract but it was
by way of disregarding the contract,
manifestly ignoring the clear stipulation
in the contract. In our opinion, by doing
so, the arbitrator misdirected and
misconducted himself."
In the present case, if we have a glance at the
award passed by the arbitrator, it is clear that
he has ignored the major term in the contract
incorporated in clause/para 2 in the statement of
claim filed by contractor Shri S.D.Shinde which
reads;
"2.00. SPECIAL WORK AND SITE CONDITIONS
NO. 10WATER FOR IRRIGATION. Water may
have to be released in the canal during
rabi season and no compensation for such
stoppage of work is payable. The rate
quoted will be inclusive of dewatering
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40
and defilling necessary."
It is clause 2.10, but wrongly typed as 2.00 in
the paperbook.
31. In spite of full knowledge of condition
that water may have to be released in canal
during rabbi season and no compensation for such
stoppage of work is payable, still the arbitrator
has awarded amount as loss suffered by contractor
due to washing away of material because of
dewatering and desiting as a result of release of
water. The amount claimed under this head is Rs.
91,73,640/=. The term quoted is condition No.10 in
the original contract and at para 2.10 in the
statement of claim, it is clearly indicated that
the rate quoted will be inclusive of dewatering
and defilling necessary. The Arbitrator awarded
Rs.14,18,000/= as compensdation for stoppage of
work due to canal releases. It is also clear that
the revised rates were awarded by the learned
arbitrator, thereby going beyond the terms of the
contract and as observed in FCI v. Chandu
Construction (supra) , the arbitrator could not
have allowed revised rates beyond the terms of
original contract when extension of contract was
by consent of both sides and there was no fresh
contract for revision of rates and escalation of
rates. The amount claimed was Rs. 1,25,15,527/=
and actual amount awarded under this
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41
head is Rs.91,28,000/=.Even for the period during
the contract the compensation of Rs.15,72,000/=
was awarded. When extensions of contract and
foreclosure of the same were with consent of
both the sides, idle machinery charges and idle
overhead compensation should not have been allowed
by arbitrator unless those were provided in the
original contract.
32. After carefully scrutinising the award
made and reasons given for the same by the learned
arbitrator, in my opinion, he has clearly exceeded
his jurisdiction and authority. He was bound by
the terms of the contract and, therefore, should
have decided the claims/disputes within the
framework of the contract. He was not working as
a conciliator. It is also pointed out that though
the original contract was for Rs.4,01,00,000/= and
total bill sanctioned was for Rs.5,49,00,000/=.
In paragraph Nos. 6.3.1. and 6.3.2 of the award,
learned Arbitrator has given reasons for awarding
revised rates, but he did not say that he was
awarding rates as per the contract between the
parties.
33. Having given anxious consideration to the
arguments advanced before me, the reasons given in
the award, the terms of the contract and the
reasons given by learned Civil Judge while
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42
deciding R.C.S. No. 595 of 1997, in my opinion,
this appeal has no merits and the same, therefore,
deserves to be dismissed. Appeal from Order is
therefore dismissed.
pnd/ ao108.09 (P.R.BORKAR, J.)
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
BENCH AT AURANGABAD
APPEAL FROM ORDER NO.108 OF 2005
M/s S.D. Shinde, Contractor,
Shree ZParvati, Behind Zopadi
Canteen, Savedi Road,
Ahmednagar,through its partner
Annasaheb Shripati Shinde,
age 45 years, occup.business,
r/of Shriparwati, Savedi Road,
Ahmednagar, Taluka and Dist. .. Appellant/
Ahmednagar. ori.pltff./
claimant
versus
01. Government of Maharashtra,
Irrigation Department,
represented by the Executive
Engineer, Kukadi Irrigation
Project, Division No.VII,
Shrigonda, Dist. Ahmednagar
(M.S.)
02. Ramdas s/o Shripati Shinde,
age major, occup. business,
03. Arun s/o Shripati Shinde,
age major, occup.business,
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2
04. Mala alias w/o Anita Hiralal
Paear, age major, occupation
household.
05. Bapusasheb s/o Shripati Shinde
age major, occup. business,
06. Ravi s/o Shripati Shinde,
age major, occup. business,
(Respondent Nos. 1 to 6 r/of
Yeshwant Coloney, Ahmednagar,
Taluka and District Ahmednagar)
07. Prasad s/o Raosaheb Shinde,
age major,
08. Sunny s/o Raosaheb Shinde,
age minor,
09. Rohit s/o Raosaheb Shinde,
age minor,
through legal guardian Laxman
Raosaheb Shinde, age 40 years
occupation business r/o Takli
Dhokeshwar, Taluka Parner,
District Ahmedngar. ..Respondents
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3
Shri V.J. Dixit, Senior Counsel, instructed by
Shri P.R.Katneshwarkar, Advocate, for appellant.
Shri G.B.Rajale, Advocate, for Respondent No.1.
Shri G.K. Thigle, Advocate for Respondent Nos. 2
and 3. Shri S.M. Godsay, Advocate for Respondent
Nos.4,5,7,8 and 9.
Coram: P.R.Borkar J.
Judgment reserved on:05/08/2009
Judgment pronounced on:13/08/2009
JUDGMENT.
01. By this appeal from order the present
appellantoriginal plaintiffcontractor challenges
the judgment and order passed by learned Joint
Civil Judge, Senior Division, Ahmednagar, in
Regular Civil Suit No.595 of 1997 on 3.04.2003,
thereby refusing to pass decree in terms of the
award passed by sole Arbitrator Shri A.K.
Shenolikar on 14.12.1997.
02. Briefly stated, the facts giving rise to
the this appeal are that the appellant was earlier
sole proprietary firm in the name and style `M/s
S.D.Shinde Contractor' owned by one Shri
S.D.Shinde. He expired during pendency of suit, on
14.1.1990 and after his death the suit was
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4
continued by his legal heirs. Present appeal is
filed by one of those legal heirs i.e. Annasaheb
Shripati Shinde claiming to be partner of the said
firm M/s.S.D.Shinde Contractor. Respondent Nos. 2
to 8 are the remaining heirs of deceased
S.D.Shinde. The original dispute decided by the
sole arbitrator was between late Shri S.D.Shinde
contractor and Respondent No.1Government of
Maharashtra through Irrigation Department.
03. Along with suit, learned trial judge has
also decided two miscellaneous applications, viz.
Miscellaneous Application No.1 of 1998 filed by
Respondent No.1State under Sections 30 and 33 of
the Indian Arbitration Act, 1940 ("The Arbitration
Act" for short) for setting aside the award passed
by the sole Arbitrator Shri A.K. Shenolikar; ARBI
Miscellaneous Application No. 1 of 1999 was filed
by one Bapusaheb Shripat Shinde on behalf of M/s
S.D.Shinde Contractor for making the award of the
sole arbitrator as rule of the court and for
passing decree in terms of the award in the name
of legal heirs of late S.D.Shinde who died on
14.1.1990. Basically, this appeal from order is
challenging the refusal by the learned trial
judge to pass decree in terms of the award passed
by sole arbitrator and also the order setting
aside the said award.
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5
04. Late Shri S.D.Shinde who was a civil
contractor, had submitted a tender in respect of
construction of earthwork structure and lining of
Kukadi Left Bank Canal. The tender was accepted
in respect of the work in kilometer No.91 to
kilometer No. 110 of the said Project. The work
order was issued in favour of the claimant
appellant by the Executive Engineer vide letter
No.AB/LCB/91 to 110/2257 dated 23/7/1983 and the
parties entered into contract which was for Rs.
4,01,77,153/=. According to contract, the work
was to be completed within eighteen calender
months. Thus date of completion was stipulated to
be 22.1.1985. However, it is now admitted
position that the work could not be completed
within stipulated time and both the parties agreed
to the extension of time which was given on five
occasions. Ultimately, Respondent No. 1 foreclosed
the contract on 25.1.1990 on the application made
by the appellant. Thus, 25.1.1990 is the date on
which the work was taken away or foreclosed by
Respondent No.1. It is further admitted position
that the the appellantoriginal contractor had
given application for foreclosure of the contract
and its date is mentioned as 13.3.1990, but it
appears that the the month was wrongly mentioned
as there is no dispute regarding date of
foreclosure being 25.1.1990. Final bill was
submitted on 14.12.1990. On 18.1.1995 the
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6
application was filed by appellantoriginal
contractor to Respondent No.1 for appointment of
arbitrator.
05. As per application M.A. No.1/1995 para 2,
Superintending Engineer rejected claim on
11.1.1991 and on 21.1.1991, S.D.Shinde Contractor
first requested for nomination of Arbitrator.
However, in spite of repeated letters from
21.1.1991 onwards, arbitrator/s were not appointed
either by Respondent No.1 or by Central Water
Power Commission as per terms of the contract and,
therefore, the original contractor Shri S.D.Shinde
filed Miscellaneous Application No. 1 of 1995 in
the court of Civil Judge, Senior Division,
Ahmednagar under Section 8 of the Arbitration Act.
That application came to be decided by learned
Civil Judge on 25.2.1997. Admittedly, none of the
respondents, including Respondent No.1 and its
officers and the Chairman, Central Water Power
Commission, New Delhi participated in the
proceedings. Although initially Respondents had
appeared in the matter and engaged Shri V.D.
Athare, District Government Pleader they did not
file their say. Later on Shri A.R. Phadnis,
District Govt. Pleader also appeared for sometime.
Consequently, application proceeded without any
written statement and as suggested by the original
contractor, Shri A.K.Shenolikar, retired Chief
Engineer, Nagpur, was appointed as the sole
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7
arbitrator. The order passed by learned Civil
Judge, Senior Division on 25.2.1997 in Arbitration
M.A. o.1 of 1995 needs to be quoted at this stage
as it is argued that the court while appointing
the arbitrator has exceeded its powers under
Section 8 of the Arbitration Act and also made a
reference of certain disputes to the arbitrator
which were beyond agreement and thus vitiated the
appointment of the arbitrator and the reference.
The order reads:
".1 The Petition filed under section 8
of the Indian Arbitration Act, 1940, is
allowed.
2. Shri Shitolikar (Shenolikar),
Retired Chief Engineer, Nagpur, is
appointed as Arbitrator for settling the
dispute in respect of payment of
additional and extra work carried by the
petitioner outside of Contract
LCB9/8384.
3. The Arbitrator now appointed shall
give his Award within 3 months from the
date of this decision."
(Note: emphasis is supplied to highlight
term of reference.)
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8
It is the direction in paragraph No. 2 of the
order, which is criticised
06. Shri Shenolikar, pursuant to his
appointment as arbitrator, passed award on
14.12.1997. The arbitrator accepted almost all
major claims of the contractor Shri S.D.Shinde and
awarded compensation as follows;
(a) Idle Machinery charges at Rs.5,62,628.00
Rs2692 for 209 days.
(b) Idle overheads at Rs.7440/ Rs.8,55,600.00
for 115 days.
Total Rs.14,18,228.00
As per paragraph 6.5 of the award, the
compensation amounts awarded are as below.
a) Unabsorbed overheads Rs.28,89,000.00
b) period of contract Rs.15,72,000.00
c) Compensation for extended Rs.91,28,000.00
period of contract.
d) Compensation for stoppages Rs.14,18,000.00
Total Rs.150,07,000.00
The learned Arbitrator awarded interest of Rs.
133.22 lacs for the period 10.12.12.1988 to
5.3.199. He did not award interest pendentelite
but awarded future interest from 1.3.1998 till
actual payment.
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9
07. For passing decree in terms of the said
award, Regular Civil Suit No.595 of 1997 was filed
by the present appellantcontractor in the Court
of Civil Judge, Senior Division, Ahmednagar.
Learned Civil Judge by his judgment and order
dated 3.4.2003 set aside the award holding that
the appointment of the learned Arbitrator and
reference of disputes to him were not as per the
law and, therefore, he refused to pass decree in
terms of the award and set aside the award. It is
this judgment and order which is challenged in
this appeal.
08. Heard learned counsel for respective
parties. Together, they have taken me through the
entire record.
09. The award was quashed and set aside by
the learned Civil Judge on the grounds of
limitation, misconduct on the part of the
arbitrator, invalid reference amongst other
grounds. However, before going to the actual
discussion of various facets with reference to the
facts of the case, I may refer to the case law
cited before me and in the light of the same,
factual matrix of the case can be considered.
10. Shri V.J.Dixit, learned Senior Counsel,
instructed by Shri P.R. Katneshwarkar for the
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10
appellant referred to the judgment of learned
Single Judge of our High Court in the case of M/s
R.P.Souza & Co. vs. Chief Engineer, PWD 1993 (3)
In paragraph 15 of the judgment,
Bom.C.R.738.
after referring to the facts of the said case, it
was observed that the work was to be commenced on
18.1.1992 and was to be completed in October 1994.
The final bill was prepared by the respondents
only on 16th January 1996. In other words, it took
nearly two years for the respondents to prepare
the final bill in respect of the work carried out
by the applicants. Under such circumstances, it
was held that the Respondent was not entitled to
raise the question of limitation. Shri Dixit,
learned Senior Counsel, argued that in the
present case, final bill was submitted on
14.12.1992 and, therefore, application to the
court for appointment of arbitrator filed on
18.1.1995 cannot be said to be beyond the period
of limitation.
11. Second case relied upon by learned Senior
Counsel Shri Dixit is M/s Tarapore and Company
vs. Cochin Shipyard Ltd. Cochin AIR 1984 SC 1072.
In para 32, it is observed;
" On a conspectus of these decisions,
it clearly transpires that if a question of
law is specifically referred and it becomes
evident that the parties desired to have a
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11
decision on the specific question from the
arbitrator about that rather than one from
court, then the court will not interfere with
the award of the arbitrator on the ground
that there is an error of law apparent on the
face of the award even if the view of law
taken by the arbitrator does not accord with
the view of the court. "
In the present case, it is not that any question
of law was referred to the sole arbitrator.
Further, in paragraph 33 of the same judgment, it
has been observed to following effect;
". Not only the respondent did not have
recourse to an application under Section 33 of the
Arbitration Act, but of its own it referred a
specific question of law to the arbitrator for his
decision, participated in the arbitration
proceeding invited the arbitrator to decide the
specific question and took a chance of a decision.
It cannot therefore, now be permitted to turn
round and contend to the contrary on the nebulous
plea that it had referred the claim/dispute to the
sole arbitrator without prejudice to its right to
contend to the contrary. "
It is argued before this court that
though Respondent No.1 and its officers had not
taken part in the arbitration proceedings in
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12
Arbitration M.A. No.1 of 1995, Respondent No.1
had appeared before the sole arbitrator Shri
Shenolikar and participated in the proceedings
and, therefore, it cannot challenge the
appointment of the arbitrator.
12. Another case cited by Senior Counsel Shri
Dixit is International Airports Authority of India
vs. M/s Mohinder Singh AIR 1996 Bombay 167. It is
observed in paragraph 12 as follows;
12. ....................................
Moreover, the appointment of the
arbitrator was made by the petitioners
themselves and the petitioners by long
participation of the arbitration
proceedings before the arbitrator
accepted such appointment and it is
neither valid nor legal nor proper on the
part of the petitioners now to allege
that the appointment of the arbitrator by
the Chief Engineer of the petitioners in
charge of the work at the material time
was not proper."
13. In the case of H.P. State Electricity
Board vs. R.J. Shah and company, (1999) 4 SCC
which is relied upon by the appellant, the
214,
Apex Court was considering Sections 30 and 33 of
the Arbitration Act. In paragraphs 26 and 28
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13
following observations are made;
"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.
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14
28. The decision in Associated Engg.
Co.case relied upon by Shri Maninder
Singh does not in any way persuade us to
take a view different than the view
arrived at by the High Court. At p.103
Thommen J speaking for the Court observed
as follows; (see para 24.)
"24. The arbitrator cannot act
arbitrarily, irrationally, capriciously
or independently of the contract. His
sole function is to arbitrate in terms of
the contract. He has no power apart from
what the parties have given him under
the contract. If he has travelled outside
the bounds of the contract, he has acted
without jurisdiction. But if he has
remained inside the parameters of the
contract and has construed the provisions
of the contract, his award cannot be
interfered with unless he has given
reasons for the award disclosing an error
apparent on the fact of it."
14. The next case cited by Senior Counsel
Shri Dixit is T.R.George vs. State of Kerala, 2001
AIR (SC) 816. In paragraph 10, it has been laid
down;
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15
"Arbitrator is competent to award
interest at four stages, namely, from the
stage of cause of action till filing of
proceedings, during pendency of
proceedings before the Arbitrator,
further interest i.e. from the date of
award and date of decree and interest
arising from the date of decree till
payment."
15. In the present case, it is argued that
the arbitrator has awarded interest of Rs.133.22
lacks from 10.12.1988 to 5.3.1995 which was during
period of the contract.It is worth noting that the
period of original contract was extended from time
to time with consent of both the parties and this
had happened on five occasions and the last
extension was upto 25.1.1990 when the contract was
foreclosed.Under the circumstances, the arbitrator
could not have awarded interest for eight years.
It is also submitted that entire approach of the
arbitrator was partisan and he only wanted to
oblige the contractor Shri S.D.Shinde. He did not
consider the fact that because of fault of
contractor, extensions of time had to be given. He
overlooked that extensions were with consent of
both the parties. In such circumstances,
particularly when extension of time is with
consent of both sides, there should not have been
award of interest from back date i.e.10.12.1988.
16. Shri S.M.Godsay,learned Advocate for
Respondent Nos.4,5,7,8 and 9 cited some
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16
authorities. In Mohinder Kumar Jain vs. Beas
Construction Board and another 1991 Arb.W.L.J.589,
wherein observations in Nandyal Coop.Spinning
Mils Ltd. vs. K.V.Mohan Rao, 1993(2) SCC 654=1993
(1) Arb.LR 469 are referred which read thus:
" Where a contract authorises a party to
appoint an Arbitrator, but no arbitrator is
appointed by that party within the time
stipulated in the notice served by the other
party, Court would get jurisdiction in terms
of Section 8 of the Act to appoint an
arbitrator."
It is argued that since Respondent No.1 and
Central Water Power Board have not exercised their
right to appoint arbitrator in spite of notice,
Respondent No.1 is not entitled to complain about
appointment of sole arbitrator by the court.
17. Learned Counsel Shri S.M.Godsay also
relied upon the case of Nandyal Coop. Spinning
Mills Ltd. vs. K.V. Mohan Rao, 1993 SCC 654 , which
is referred to above. In para 9, Sections 8 and 20
of the Arbitration Act are discussed. In paragraph
10, observations in para 3 in the case of Union of
India vs. Prafulla Kumar Sanyal are referred to
which are to following effect:
". If no such arbitrator had been
appointed and when the parties cannot
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17
agree upon an arbitrator, the court may
proceed to appoint an arbitrator by
itself. Thus if an arbitrator had been
appointed whether in the agreement or
otherwise, the court shall make an order
of reference to him. In this case,
clause 29 of the agreement provides that
every dispute shall be referred to the
sole arbitration of the person appointed
by the President of India or if he is
unwilling to act to the person appointed
by the arbitrator. An arbitrator, in
fact, has not been appointed by the
President though provision has been made
for such appointment..... If an
arbitrator had not been appointed, as
required in the subsection, the court is
to find whether the parties could agree
upon an arbitrator. If there is no such
agreement, the court will have to appoint
arbitrator of its choice."
18. In Dharma Pratishthan v M/s Mudhok
Construction Pvt. Ltd. AIR 2005 SC 214, it has
been held that unilateral appointment of an
arbitrator and unilateral reference by one party
without consent of other is illegal and therefore
the award given such Arbitrator is nullity and
void ab initio and such award can be set aside
under Section 30.
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18
In paragraph 14to 19 of judgment in the
said case, various earlier rulings have been
referred and in paragraph 20 it has been observed:
"20. Thus, there is ample judicial
opinion available for the proposition
that the reference to a sole Arbitrator
as contemplated by para 1 of the First
Schedule has to be a consensual reference
and not an unilateral reference by one
party alone to which the other party does
not consent."
19. It is argued by Advocate Shri Godsay that
though Shri A.K.Shenolikar was an arbitrator
suggested by the contractor Shri S.D.Shinde,
Respondent No.1 and its officers did not suggest
any other name as an arbitrator and now they
cannot complain about appointment of Shri
Shenolikar as sole arbitrator by the court.
20. It may be noted that some of the
authorities are referred to by more than one
Advocate. I am not again referring to the same
case, but I refer to ratio laid down in cases
cited.
21. On the other hand, Advocate Shri Rajale
for Respondent No. 1 also cited some authorities.
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19
In the case of P.Manohar Reddy vs. Maharashtra
Krishna Valley Development Corporation (2009) 2
SCC 494 (paras 19 and 20) following observations
are made;
"19. A plain reading of the
aforementioned provisions clearly show
that Clause 54 does not envisage raising
of a claim in respect of extra or
additional work after the completion of
contract. The jurisdiction of the Civil
court under Section 8 of the Act or under
Section 20 thereof can be invoked if the
disputes and differences arising between
the parties was the one to which the
arbitration agreement applied.
20. The contractual clause provides
for a limitation for the purpose of
raising a claim having regard to the
provisions of Section 28 of the Contract
Act. It is no doubt true that the period
of limitation as prescribed under Article
137 of the Limitation Act would be
applicable, but it is well settled that a
clause providing for limitation so as to
enable a party to lodge his claim with
the other side is not invalid. "
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20
22. It is argued before this court that the
application for appointment of arbitrator ought to
have been made within a period of thirty days
after Defect Liability Period is over. Since
admittedly foreclosure of the work by both the
sides was on 25.1.1990, the period of six months
thereafter would end on 25.7.1990 and as per the
terms of agreement between the parties,
application to the court ought to have been made
within thirty days i.e. 25.7.1990. The period of
three years if counted from that date, it comes to
25.7.1993 and therefore the application made to
the court on 18.1.1995 for appointment of an
arbitrator is barred by limitation and, therefore,
the view taken by the learned Civil Judge, Senior
Division cannot be faulted with.
23. Here, I may refer to clauses 54A and 55A
of the contract. I reproduce them from statement
of claim filed by the appellant.
"54A. If the contractor considers any
work demanded of him to be outside the
requirements of the contract or considers
any drawings record or ruling of the
Executive Engineer, K.I.P.DN No.III 51
ROR on any matters in connection with or
arising out of the contract or carrying
out of work to be unacceptable, he shall
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21
promptly ask the Executive Engineer, in
writing for written instructions or
decision. Thereupon, the Executive
Engineer shall give his written
instructions or decision within a period
of 30 days of such request.
Upon receipt of the written
instructions or decision the contract
shall promptly proceed without delay to
comply with such instructions or
decision.
If the Executive Engineer K.I.P.DN
No.III 51 ROR fails to give his decision
in writing within a period of 30 days
after being requested or if the
contractor is dissatisfied with the
instructions or decision of the Executive
Engineer, the contractor may within 30
days after receiving the instructions or
decision appeal to upward authority who
shall afford an opportunity to the
contractor to be heard and to offer
evidence in support of his appeal. This
official shall give a decision within a
period of 60 days after the contractor
has given the said evidence in support of
his appeal.
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22
If the contractor is
dissatisfied with this decision the
contractor within a period thirty days
from receip0t of the decision shall
indicate his intention to refer the
dispute to Arbitrator failing which the
said decision shall be final and
conclusive.
To be deleted where condition 54 is
included.
* To be adopted in the tender
documents for works whose estimated cost
put to tenders is Rs.50 lakhs or more, in
which case condition 54 is deleted.
sd/ sd/
Signature of No.of corrections Executive
Contractor Engineer.
All the disputes or differences in
respect of which the decision has not
been final and conclusive shall be
referred for arbitration to a sole
arbitrator appointed as follows.
Within 30 days of receipt of notice
from the contractor or his his intention
to refer the dispute top arbitration the
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23
Chief Engineer (S.P.) IRRIGATION DEPT.
PUNE C shall send to the contractor a
list of three officers of the rank of
Superintending Engineers or higher, who
have not been connected with the work
under this contract. The contractor
shall within 15 of receipt of this list
select and communicate to the Chief
Engineer, the name of one officer from
the list who shall then be appointed as
the sole Arbitrator. In case contractor
fails to communicate this selection of
name within the stipulated period, the
Chief Engineer shall without delay select
one officer from the list and appoint him
as the sole arbitrator. If the Chief
Engineer fails to send such a list within
30 days as stipulated the contractor
shall send a similar list to the Chief
Engineer within 15 days. The Chief
Engineer shall then select one officer
from the list and appoint him as the sole
Arbitrator within 15 days. If the Chief
Engineer fails to do so, the contractor
shall communicate to the Chief Engineer
name of one officer from the list who
shall then be the sole Arbitrator.
The arbitration shall be conducted
in accordance with the provisions of the
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24
Indian Arbitration Act, 1940 or any
statutory modification thereof. The
Arbitrator shall determine the amount of
costs to be awarded to either parties.
Performance under the contract shall
continue during the arbitration
proceeding s and payments due to the
contractor shall not be withheld unless
they subject matter of the arbitration
proceedings.
All awards shall be in writing and
in case of award amounting to Rs. One
lakh and above, such awards shall state
the reasons for the amount awarded.
Neither party is entitled to bring a
claim to arbitrator if the arbitrator has
not been appointed before the expiration
of 30 days after defects liability
period.
*55A Arbitration (FOR ENTIRE WORK)
All disputes or differences in
respect of which the decision is not
final and conclusive, shall be referred
to the adjudication of three arbitrators.
One to be nominated by the owner, the
other by the contractor and the third by
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25
the Chairamn, Central Water Commission,
New Delhi. If either of the parties fail
to appoint its Arbitrator within 60
(sixty) days after receipt of notice for
the appointment of an Arbitrator then the
Chairman Central Water Commission, New
Delhi shall appoint an Arbitrator. A
certified copy of the appointment made by
the "Chairman" shall be furnished to both
parties.
To be deleted where condition 55
is included.
* To be adopted in the tender
documents for works whose estimated cost
put to tenders is Rs.50 lakhs or more, in
which case condition deleted.
The arbitration shall be conducted
in accordance with the rules and
procedures of Indian Arbitration Act,
1940, or any statutory modifications
thereof. The decision of the majority of
arbitrators shall be final and binding
upon the parties and the expenses of the
arbitrators shall be paid as may be
determined by the arbitrators.
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26
Performance under the contract,
shall if reasonably possible, continue
during the arbitration proceedings and
payments due to the contractor by the
owner shall not be withheld, unless they
are the subject matter of the arbitration
proceedings.
All awards shall be in writing and
in case of claims equivalent to Rupees
one lakh or more, such awards shall state
reasons for the amounts awarded.
Neither party is entitled to bring a
claim to Arbitration if arbitrator has
not been appointed before the expiration
of 30 days after defects liability
period. "
24. It is submitted that in this case clause
55A is more attracted and the arbitration
agreement clearly lays down that neither party is
entitled to bring a claim to the arbitrator, if
arbitrator has not been appointed before
expiration of thirty days after defect liability
period and under the circumstances the learned
Civil Judge ought not to have entertained
Arbitration M.A. No.1 of 1995. it is argued that
the case of R.P. Souza and Co. (supra) was a
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27
decision in the facts of its own case and it is
not a proposition of law that limitation should
start only from the date of submitting final bill
nor it is a law that merely because there was
delay in preparation of final bill, limitation
would extend. It may be noted that the contractor
is also entitled to submit his claim of final bill
and in this case, it is not shown when did he
submit his claim. But, in M.A. No.1/1995 in para 2
in items 5 & 6, it is stated that the
Superintending Engineer informed rejection of
claims to S.D.Shinde on 1111991 and so,
S.D.Shinde made request for nomination of
arbitrator on 21.1.1991. So, cause of action arose
on 1111991. Moreover, as held in the case of
, there could be special
P.Manohar Reddi (supra)
contractual clause providing limitation for the
purpose of raising claim. So, in the
circumstances, in my opinion, learned Civil Judge
did not commit any error in holding that
Arbitration M.A. No.1 of 1995 was time barred and
the Civil Court could not have appointed
arbitrator when application was filed before it
after limitation was over.
25. Advocate Shri Rajale for Respondent No.1
cited a rulings in the cases of Union of India vs.
Shri Om Prakash AIR 1976 SC 1745 and M/s
H.S.Tuli & Sons Builders Pvt. Ltd. v. Union of
In paragraphs 11 and 12 of
India AIR 1992 SC 1124.
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28
its judgment in M/s H.S.Tuli & Sons Builders Pvt.
Ltd. the Apex Court discussed ingredients of
Sections 8 and 20 of the Arbitration Act. It
would be useful to quote paragraphs 11 and 12
which show distinction in the context or situation
in which Sections 8 and 20 of the Arbitration
Act apply.
"11. The learned Additional Solicitor
General, Mr. Reddy, after taking us
elaborately through the various
provisions of Arbitration Act would
submit that Section 8(1)(a) is attracted
unless the agreement provides for
arbitrator by consent of parties or where
there is no concurrence in the
appointment. In other words, three
ingredients are necessary to apply
Section 8 which are as follows.
(i) There must be an agreement to
appoint an arbitrator.
(ii) The parties do not concur in the
appointment.
Therefore, the said subsection has no
application to a case in which the
agreement provides for appointment of an
arbitrator by one of the parties or by
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29
nominated persons.
12. In contrast, Section 20 confers
power
(i) to order the agreement to be
filed; and
(ii) to make an order of reference
to the arbitrator appointed by the
parties or where the parties cannot
agree to the appointment of an
arbitrator appointed by court.
Where, therefore, the clause in the
agreement provided arbitrator to be
appointed by EngineerinChief, if he
refuses, recourse to Section 8(1)(a) or
1(b) cannot be had. It must be under
Section 20(4)."
It is further observed in paragraphs 16 to 18 as
follows;
"16. Section 8 of the Arbitration Act
occurs under Chapter II which deals with
arbitration without intervention of
court, while Section 20 falls under
Chapter III which deals with arbitration
with intervention of court.
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30
17. In our view, Section 8 provides a
simple machinery for appointment of an
arbitrator, initially, as seen from sub
section 1(a) or for supplying the vacancy
as seen from subsection 1(b) if the said
vacancy occurs during the period of
arbitration.
18. Subsection 1(a) would apply to a
case of initial appointment of an
arbitrator or arbitrators. The
implication is in the arbitration
agreement, the arbitrator or arbitrators
must not have been named. Where,
therefore, they are named, this section
will have no application. Similarly, the
arbitrator or arbitrators are required to
be appointed by all parties to the
reference with consent. On the contrary,
if there is some other mode of
appointment, for example, Section 4,
where the parties to the agreement agree
that the arbitrator has to be appointed
by a person designated in the agreement
either by name or hold, for the time
being in office, certainly, this section
will not apply."
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31
26. In the present case, I have already
quoted the order passed by the learned Civil
Judge, Ahmednagar passed on 25.2.1997 while
deciding Arbitration M.A. No.1/1995. Clause 2 of
the order needs to be reproduced once again for
ready reference.
"2. Shri Shitolikar (Shenolikar) Retired
Chief Engineer, Nagpur, is appointed as
Arbitrator for setting the dispute in
respect of payment of additional and
extra work carried by the petitioner
outside of Contract LCB9/8384."
27. It is argued before this court that the
learned Civil Judge while appointing Shri
Shenolikar, Retired Chief Engineer, as arbitrator,
also referred the disputes to the arbitrator
outside the contract LCB9/8384. Thus, the
subjectmatter which was not covered by the
contract was also referred by the learned Judge to
the arbitrator and this is clearly invalid
reference which is nullity in the eye of law as
observed in the case of Union of India vs. Om
in which, after referring to
Prakash (supra)
Sections 8 and 20 of the Arbitration Act and their
ingredients, it is observed that Section 20
confers power on the court to order the agreement
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32
to be filed and further to make an order of
reference to the arbitrator appointed by the
parties or where the parties cannot agree upon an
appointment, to an arbitrator appointed by court.
Subsection (1) of Section 20 makes it clear that
the provisions of the Section can be availed of
only if no proceedings under Chapter II has been
initiated. Section 8 does not contain any
provision empowering the court to make an order
of reference to the arbitrator as one finds in
subsection (4) of Section 20. The Court further
observed at the end of paragraph 4;
"4.......................................
Thus, it seems clear that the court in
the instant cases had no jurisdiction,
after appointing an arbitrator under
Section 8(2), to proceed further to make
an order referring the disputes to the
arbitrator."
In paragraph 5, it has been observed that such
award is invalid and, therefore, could be set
aside. Further observations in the same paragraph
are as follows;
"5. ....................................
The words "or is otherwise invalid" in
clause (c) of Section 30 are wide enough
to cover all forms of invalidity
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33
including invalidity of the reference.
We do not find any reason why the general
and unqualified language of clause (c)
should not include an award on an invalid
reference which is a nullity."
Thus, while disposing of arbitration Miscellaneous
Application No.1 of 1995,reference made by learned
Civil Judge to the arbitrator of disputes which
were outside the contract between the parties is
invalid and, therefore, can be set aside under
Section 30 of the Arbitration Act. Here,I may also
refer to ratio laid down in the case of H.P.State
Electricity Board v. R.J.Shah & Co.(supra)
28. It is argued before this court that the
arbitrator was quite aware of error committed by
the court in making reference of disputes outside
the contract. But, he attempted to give goby to
the same, by observing in paragraph 4.3.4 of his
award to following effect;
"........................................
As Sole Arbitrator was appointed by the
Court order the legality of which cannot
be tested before me as I do not enjoy
powers of appeal to correct the flaws, if
any, in the court order. I have been
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34
appointed by a court order which has not
so far been questioned by any of the
parties in any judicial courts having
power of appeal over it. I must hold that
as an arbitrator appointed by a proper
court order, I have jurisdiction to
decide the matter before me whatever may
be the implications of the Clause 55A of
the contract."
29. So, it is submitted that even before the
arbitrator, it was argued that the reference by
court of the disputes outside the contract between
the parties was not proper and it is also
submitted that the reference was time barred.
However, the arbitrator accepted the line of
argument as advanced by Advocate of the present
appellant and other than Respondent No.1 that
limitation would start from submission of the
final bill. In my considered opinion, reference
made by learned Civil Judge to the arbitrator in
Arbitration M.A. No.1 of 1995 is invalid and the
award passed consequent thereto is nullity.
30. It is also argued before me that that the
arbitrator has awarded rates which were higher
than the rates prescribed and allowed under the
contract. Reference was made by Advocate Shri
Rajale for Respondent No.1 to the case of Food
Corporation of India v. Chandu Construction (2007)
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35
4 SCC 697 and more particularly to paragraphs 9 to
11 wherein scope of Section 30 of the Arbitration
Act for setting aside the award of the arbitrator
by the court is discussed and the word
"misconduct" within the meaning of Section 30(a)
of the Arbitration Act was considered. Paragraphs
9 to 11 read:
"9. On the other hand, learned counsel
for the claimants submitted that it was
within the domain of the arbitrator to
construe the terms of contract in the
light of evidence placed on record by the
claimants, particularly the terms of
similar contract entered into by FCI with
the other contractors. it is asserted
that the view taken by the arbitrator
being plausible, the High Court was
justified in declining to interfere with
the award.
"10. While considering objections under
Section 30 of the Arbitration Act, 1940
(for short "the Act"), the jurisdiction
of the court to set aside an award is
limited. One of the grounds stipulated
in the section on which the court can
interfere with the award is when the
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36
arbitrator has "misconducted" himself or
the proceedings. The word "misconduct"
has neither been defined in the Act nor
is it possible for the court to
exhaustively define it or to enumerate
the line of cases in which alone
interference either could or could not be
made. Nevertheless, the word "misconduct"
in Section 30(a) of the Act does not
necessarily comprehended or include
misconduct or fraudulent or improper
conduct or moral lapse but does
comprehend and include actions on the
part of the arbitrator, which on the face
of the award are opposed to all rational
and reasonable principles resulting in
excessive award or unjust result.
11. It is trite to say that the
arbitrator being a creature of the
agreement between the parties, he has to
operate within the four corners of the
agreement and if he ignores the specific
terms of the contract, it would be a
question of jurisdictional error on the
face of the award, falling within the
ambit of legal misconduct which could be
corrected by the court. We may, however,
hasten to add that if the arbitrator
commits an error in the construction of
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37
contract, that is an error within his
jurisdiction. But, if he wanders outside
the contract and deals with matters not
allotted to him, he commits a
jurisdictional error."
In paragraphs 13 and 15 following observations are
made;
"13. In Continental Construction Co.Ltd.
v. State of M.P. it was emphasised that
not being a councilator, an arbitrator
cannot ignore the law or misapply it in
order to do what he thinks is just and
reasonable. He 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 award.
"15. Therefore, it needs little emphasis
that an arbitrator derives his authority
from the contract and if he acts in
disregard of the contract, he acts
without jurisdiction. A deliberate
departure from contract amounts to not
only manifest disregard of his authority
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38
or a misconduct on his part, but it may
tantamount to a mala fide action."
In paragraphs 19 and 20 it has further been
observed by the Apex Court as follows;
"19. ....................................
......... The claimants had submitted
their tender with eyes wide open and if
according to them the cost of sand was
not included in the quoted rates, they
would have protested at some stage of
execution of the contract, which is not
the case here. Having accepted the terms
of the agreement dated 1991984, they
were bound by its terms and so was the
arbitrator. It is, thus, clear that the
claim awarded by the arbitrator is
contrary to the unambiguous terms of the
contract. We are of the view that the
arbitrator was not justified in ignoring
the express terms of the contract merely
on the ground that in another contract
for a similar work, extra payment for
material was provided for. It was not
open to the arbitrator to travel beyond
the terms of the contract even if he was
convinced that the rate quoted by the
claimants was low and another contractor,
namely, M/s Gupta and Company had been
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39
separately paid for the material. The
claimants' claim had to be adjudicated by
the specific terms of their agreement
with FCI and no other.
20. Therefore, in our view, by awarding
extra payment for supply of sand the
arbitrator has outstepped confines of the
contract. This error on his part cannot
be said to be on account of misconstruing
of the terms of the contract but it was
by way of disregarding the contract,
manifestly ignoring the clear stipulation
in the contract. In our opinion, by doing
so, the arbitrator misdirected and
misconducted himself."
In the present case, if we have a glance at the
award passed by the arbitrator, it is clear that
he has ignored the major term in the contract
incorporated in clause/para 2 in the statement of
claim filed by contractor Shri S.D.Shinde which
reads;
"2.00. SPECIAL WORK AND SITE CONDITIONS
NO. 10WATER FOR IRRIGATION. Water may
have to be released in the canal during
rabi season and no compensation for such
stoppage of work is payable. The rate
quoted will be inclusive of dewatering
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40
and defilling necessary."
It is clause 2.10, but wrongly typed as 2.00 in
the paperbook.
31. In spite of full knowledge of condition
that water may have to be released in canal
during rabbi season and no compensation for such
stoppage of work is payable, still the arbitrator
has awarded amount as loss suffered by contractor
due to washing away of material because of
dewatering and desiting as a result of release of
water. The amount claimed under this head is Rs.
91,73,640/=. The term quoted is condition No.10 in
the original contract and at para 2.10 in the
statement of claim, it is clearly indicated that
the rate quoted will be inclusive of dewatering
and defilling necessary. The Arbitrator awarded
Rs.14,18,000/= as compensdation for stoppage of
work due to canal releases. It is also clear that
the revised rates were awarded by the learned
arbitrator, thereby going beyond the terms of the
contract and as observed in FCI v. Chandu
Construction (supra) , the arbitrator could not
have allowed revised rates beyond the terms of
original contract when extension of contract was
by consent of both sides and there was no fresh
contract for revision of rates and escalation of
rates. The amount claimed was Rs. 1,25,15,527/=
and actual amount awarded under this
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41
head is Rs.91,28,000/=.Even for the period during
the contract the compensation of Rs.15,72,000/=
was awarded. When extensions of contract and
foreclosure of the same were with consent of
both the sides, idle machinery charges and idle
overhead compensation should not have been allowed
by arbitrator unless those were provided in the
original contract.
32. After carefully scrutinising the award
made and reasons given for the same by the learned
arbitrator, in my opinion, he has clearly exceeded
his jurisdiction and authority. He was bound by
the terms of the contract and, therefore, should
have decided the claims/disputes within the
framework of the contract. He was not working as
a conciliator. It is also pointed out that though
the original contract was for Rs.4,01,00,000/= and
total bill sanctioned was for Rs.5,49,00,000/=.
In paragraph Nos. 6.3.1. and 6.3.2 of the award,
learned Arbitrator has given reasons for awarding
revised rates, but he did not say that he was
awarding rates as per the contract between the
parties.
33. Having given anxious consideration to the
arguments advanced before me, the reasons given in
the award, the terms of the contract and the
reasons given by learned Civil Judge while
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42
deciding R.C.S. No. 595 of 1997, in my opinion,
this appeal has no merits and the same, therefore,
deserves to be dismissed. Appeal from Order is
therefore dismissed.
pnd/ ao108.09 (P.R.BORKAR, J.)
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