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Commander, Bangalore Area and anr. Vs. Armugam Nagarthnam and Co. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKarnataka High Court
Decided On
Case NumberR.A. Nos. 4 to 6 of 1949-50
Judge
Reported inAIR1954Kant46; AIR1954Mys46; ILR1953KAR480
ActsArbitration Act, 1940 - Sections 2, 14(2), 30, 33 and 35
AppellantCommander, Bangalore Area and anr.
RespondentArmugam Nagarthnam and Co.
Appellant AdvocateA.R. Somanatha Iyer, Adv.
Respondent AdvocateB. Shankara Rao, Adv.
Excerpt:
.....gordhan das sagarmull' [1950]1scr792 (a): once the dispute is found to be within the scope of the arbitration clause, it is no part of the province of the court to enter into the merits of the dispute'.5. even otherwise there is a good deal of substance in the contention on behalf of the government that in para 2 (b) and the letter ext a it was made clear that the amount mentioned in col. all other disputes and differences the settlement of which is not provided for under any other clause of this contract and which shall arise either during the progress of the work or after completion thereof concerning the work or the execution or maintenance thereof or the construction or meaning of these conditions of contract or as to any other matter arising out of or relating to the contract or..........the contractors however felt that those differences were not matters that came under the arbitration clause, but both parties submitted the points of difference to an arbitrator, the contractors, raising before him the question of jurisdiction also. the award was:'that schedule b prices and the total amount shall not be altered and that the contractor shall not be compensated; and that the rate fixed by c. r. e for hire of military transport is binding and that the government have no claim against the contractor in this respect'.petitions were therefore filed against the respondents under section 14(2), arbitration act. on the other hand the contractors filed petitions for setting aside the award, stating the facts of their case and contending that clause 35 of the contract.....
Judgment:

Mallappa, J.

1. In these three appeals the respondents are Contractors who entered into contracts with the Military Department for the construction of what are known as 'Hutted Ancillaries' on a lump sum basis. Letters dated 27-4-43 were addressed to them enclosing the tender documents and they were instructed to submit their tenders within 11 A. M. on 1-8-43. In para. 2(b) of the letter marked Ext. A the attention of the contractors was drawn to the fact that 'the Plinth areas inserted in Col. 15 or Schedule B, are rounded off to the nearest foot' and that it should be understood that the amounts mentioned in Col. 19 against each item (except in the case of provincial items) are fixed amounts and shall not be varied and that the percentage tendered will be deemed to be above or below these amounts. While there is hardly any doubt that the contracts were therefore on a lump sum basis it will be noticed that in Schedule D in which the rates for pricing variations and additions are mentioned, it was stated that it was a list of items rates of the same standard of values as the Plinth area rates, entered in 'Schedule B' and shall be used for pricing variations and additions.

2. The contention of the contractors is that the above statement in Schedule D led them to think that the lump sums mentioned in Ext. B had been worked out on that basis and that they are therefore entitled to claim money for the work done on that basis and not on the basis ,of their lump sum tender. It was also contended that there was an arithmetical error of Rs. 10,000/- in Schedule B and that they were entitled to get this corrected. The contention of the Government was that if there were any mistakes in Schedule B they were immaterial as the contract was clearly on lump sum basis. Moreover, the contractors had signed the final bills as well as no-claim certificates and they cannot reopen the question over again.

3. When differences arose, the Government proposed to refer the matter to an Arbitrator as had been agreed to under Clause 35 of the contract. Apart from the two points referred to above, the Government contended that lorries had been supplied to the contractors at a low rate of Rs. 7-8-0 per lorry per day as per the instinct ions of the Commander Royal Engineers, but that the rate of hire per lorry per day should have been Rs. 45/- and the rate of Rs. 7-8-0 was wrong, unauthorised, and not binding on the Government. The contractors however felt that those differences were not matters that came under the arbitration clause, but both parties submitted the points of difference to an arbitrator, the contractors, raising before him the question of jurisdiction also. The award was:

'That schedule B prices and the total amount shall not be altered and that the contractor shall not be compensated; and that the rate fixed by C. R. E for hire of Military Transport is binding and that the Government have no claim against the contractor in this respect'.

Petitions were therefore filed against the respondents under Section 14(2), Arbitration Act. On the other hand the contractors filed petitions for setting aside the award, stating the facts of their case and contending that Clause 35 of the contract under which the matter was referred to arbitration did not apply to the case; that the arbitrator should have taken evidence before giving the award, that the award is liable to be set aside for judicial misconduct since the Arbitrator has deliberately and intentionally misinterpreted the law and that the award is not based on any evidence.

On the other hand it was contended by the Government that if the contractors wanted to adduce evidence they should have tendered the evidence and that no request was made for examining any witness. The allegations made by the contractors in para 13 of their affidavits about the arbitrator having ascertained what exact relief they wanted are denied and even otherwise one can see nothing wrong in the arbitrator having ascertained this.

4. After stating the cases of the parties at some length, the learned Judge of the lower court has held:

'The defence of the Government before the arbitrator to the effect that the rates given in Schedule D are intended mainly for the pricing of work done by the contractors under Clause 25 of the conditions of the contract and that the purpose of Schedule B is to give the contractors an idea of the approximate price the Government proposed to pay for the work for which tenders were invited, cannot be sustained in the light of para 2 (b) of Ext. A, Clause 3 of Ext. D and the statement in Schedule D to the effect that it is the list of the item rates of the same standard of values as the plinth area rates entered in Schedule B and shall be used for pricing variations and additions as per clause 3 of the special conditions of the contract'.

The learned Judge has examined the correctness of the findings of the arbitrator, as if he was sitting in appeal over his findings. This is rightly objected to by the appellants. As observed in -- 'Mair A. M. & Co. v. Gordhan Das Sagarmull' : [1950]1SCR792 (A):

'Once the dispute is found to be within the scope of the arbitration clause, it is no part of the province of the Court to enter into the merits of the dispute'.

5. Even otherwise there is a good deal of substance in the contention on behalf of the Government that in para 2 (b) and the letter Ext A it was made clear that the amount mentioned in Col. 19 in Schedule B against each item -- except in the case of provincial items are fixed amounts and shall not be varied and that the percentage tendered will be deemed to be above or below these amounts, and that it must be taken that so far as these items are concerned the contract must be taken as being on a lump sum basis. Similarly it will be noticed that Schedule D makes it clear that the rates mentioned in it shall be used for pricing variations and additions.

The contention that, if at all, there was any assurance that the rates mentioned in schedule D are of the same standard of values as those mentioned in Schedule B, the assurance can be taken advantage of in pricing variations and additions in respect of which the contract was not on a lump sum basis, but not the contract on the basis of Schedule B on a lump sum basis, is not also without substance (sic). There is therefore much that could be said in favour of the view taken by the Arbitrator in preference to that of the learned Judge of the lower court. What, however, the learned Judge of the lower court in cases of this kind should have more profitably examined was whether any case is made out under Section 30, Arbitration Act to set aside the awards.

6. Under Section 30, Arbitration Act:

'An award shall not be set aside except on one or more of the following grounds namely: --

(a) that an arbitrator or umpire has misconducted himself or the proceedings;

(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;

(c) that an award has been improperly procured or is otherwise invalid'.

The award for instance can be set aside on the ground of corruption of the arbitrator or where the Arbitrator has secret interest with the subject matter of the submission. It is no doubt true that the arbitrator in this case is a military officer and in that sense interested in the contract. But when it was agreed that the differences have to be settled by an arbitrator who is a military officer, it cannot be said that the arbitrator had any secret interest in the subject matter of the submission or in any of the parties. In cases of this kind, as observed by Lord Justice Phillimore in -- 'Smith Coney & Barett v. Becker Gray & Co.' 1916-2 Ch. 86 (B):

'In all probability the members of the Tribunal would be if not directly, indirectly, interested in the sense that it might affect other contracts in so far reaching a decision as there may be in this case, but it cannot be helped. The parties have agreed that it should be a condition precedent that there shall be such a tribunal and they must go before the arbitral tribunal, and it is not open to the plaintiffs to take advantage of the fact that third parties whose fiat is necessary are interested'.

We may add here that in this case no objection was taken for submitting the differences to the particular arbitrator who has given the award, and in fact during the course of arguments it was made clear that no objection is being taken to this person having acted as arbitrator. What has, however, been seriously contended is that the disputes between the parties are not such as coming within the scope of any of the clauses of the contract between the parties under which the reference was made. There can hardly be any doubt that the arbitrator would be acting without jurisdiction in cases in which parties had not agreed that the matters in dispute should be decided by an arbitrator. In this case, however, Clause 35 of the contract states:

'All other disputes and differences the settlement of which is not provided for under any other clause of this contract and which shall arise either during the progress of the work or after completion thereof concerning the work or the execution or maintenance thereof or the construction or meaning of these conditions of contract or as to any other matter arising out of or relating to the contract or the work to be executed or payments to be made in pursuance thereof shall be referred to the arbitration'.

The disputes between the parties are clearly with reference to the payments to be made in pursuance of the contract, and it is equally clear that the matter has been agreed to be settled by arbitration. What is however contended is that Clause 18 of the Contract provides for rectification of errors, omissions or wrong estimates discovered in the Bills of Quantities, and as such the dispute between the parties is covered under this Clause of the contract. Therefore, the dispute between the parties is whether Clause 18 excludes Clause 35 of the Contract, and Clause 35 which refers to cases other than those provided in other, clauses is not applicable. This is a case in which the parties are at variance in respect of ''the matter arising out of, or relating to, the contract'' referred to in Clause 35. We may here refer to the decision reported in -- 'Ruby General Insurance Co. .Ltd. v. Pearey Lal Kumar' : [1952]1SCR501 (C) that:

'Where one party relying on the arbitration clause in a policy of insurance says that there has been a breach of its terms and the other party, also relying on that clause, says that there has been no breach but on the other hand the requirements of that clause have been fulfilled, the point in dispute between the parties is one for the decision of which the former is compelled to invoke to his aid one of the terms of the insurance agreement and so the difference between the parties is a difference 'arising out of the policy' within the meaning of the arbitration clause and the arbitrator has jurisdiction to decide it'.

Moreover, even if it is assumed that Clause 18 of the contract' is applicable to this case, all that could be said is that the party affected is entitled to certain rectification. It is not stated there how the party affected should obtain relief if differences arose between them. Clause 18 is not the clause which provides for the settlement of disputes and differences. Clause 35 is therefore clearly applicable and the parties were bound to refer to arbitration the claim of one of them for rectification under Clause 18. Since the parties have referred their disputes to arbitration without any objection, other than the untenable objection that the dispute is not one that comes under Clause 35, it cannot be said that the award is liable to be set aside on this ground either.

7. However, the award could also be set aside on the ground that the arbitrator improperly rejected to receive evidence, and it is contended in this case that evidence has not been allowed to be let in. It must however be stated that it is not made out, as has been contended by the Government, that the contractors offered to let in evidence and still less they tendered any evidence. As observed by Jai Lal J, in the case reported in -- 'Ganga Sahi v. Karim Bakhsh' A. I. R. 1926 Lah 584 (D) that:

'It is not the duty of the Court 'suo motu' to fix a date for evidence in support of the objections to an award filed in Court. It is for the parties to move the Court if they want to produce evidence'.

This observation is no doubt with reference to the duty of the Court. But it is equally applicable to the case of an arbitrator. As observed in -- 'Manindra Nath v. Mohanunda Roy', 13 Ind Gas 161 (Cal) (E), in order to make out a case entitling a party to impeach an award on the ground that the arbitrators improperly refused to take the evidence of an important witness, the witness must be distinctly tendered to the arbitrator.

8. One other contention that appears to havebeen raised before the lower court is that theaward could also be set aside on the ground thatit is based on materials not placed before him.But the findings of the arbitrator are supported,as already observed, by what is stated in Ext. Aand Schedules B and D. There is no substancein this contention also. It has not been shownthat there has been any judicial misconduct ofthe arbitrator and that he deliberately and intentionally misinterpreted the law. The learnedDistrict Judge was not therefore right in setting aside the award. The appeals are allowed withcosts, the swards are ordered to be filed in courtand there shall be decrees in accordance with theterms of the awards. Advocate's fee Rs. 25/-in each case.

9. Appeals allowed.


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