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The State of Andhra Pradesh and ors. Vs. the Pioneer Construction Co. - Court Judgment

LegalCrystal Citation
SubjectContract;Arbitration
CourtAndhra Pradesh High Court
Decided On
Case NumberA.A.O. Nos. 571 and 572 of 1975
Judge
Reported inAIR1978AP281
ActsIndia Contract Act, 1872 - Sections 2 and 73; Arbitration Act, 1940 - Sections 30
AppellantThe State of Andhra Pradesh and ors.
RespondentThe Pioneer Construction Co.
Appellant AdvocateGovt. Pleader for Excise
Respondent AdvocateG. Kulkarini, Adv.
Excerpt:
.....dated 18-7-1972 complained to the executive engineer about the impossibility of carrying out the work before 15-7-1972 i. should the amount so certified to be less than the amount which would have been due to the contractor on the completion of the works by him, the difference shall be paid to the contractor by the government, should the amount of the former exceed the latter, the difference shall be paid by the contractor to the government .the contractor should make good the difference between the actual cost incurred by the government in getting the work completed if it is more than what he had to receive for the work already done by him. 10. the learned government pleader has submitted that the arbitrator as well as the learned subordinate judge have misunderstood and..........ltd., v. union of indian, : air1973sc1338 ). stated in the award and which is the basis of the award, can the award be set aside or remitted on the ground of error of law apparent on the face of the record. (vide n. chellappan v. kerala s. e. board, : [1975]2scr811 ).14. the arbitrator is not bound to give a reasoned award and if, in passing the award, he makes a mistake of law or of fact, that is no ground for challenging the validity of the award. it is only when an erroneous proposition of law is stated in the award and which is the basis of the award, can the award be set aside or remitted on the ground of error of law apparent on the face of the record. (vide n. chellappan v. kerala s. e. board, : [1975]2scr811 ).15. applying these principles to the facts of this case, we do not.....
Judgment:

A. Gangadhara Rao, J.

1. The Pioneer Construction Company, the respondent, entered into an agreement on 5-6-1970 with the Superintending Engineer, Nagarjunasagar Canals Circle, Jaggayyapet, for excavation of the balance of the earth work of Munagala deep cut from mile 72/4 to 74/4 of Nagarjunasagar Left Main Canal. Since he did not complete the work in spite of repeated extensions of time, the contract was finally terminated with effect from 30-7-72 under clause 61 of P.S. to A.P.D.S.S. The respondent also requested the department to terminate the contract in his letter dated 18-7-1972. At the instance of the respondent, the matter was referred to the Arbitrator under clause 73 of P.S to A. P. D. S. S. The Arbitrator gave his award on 30-4-1974. It is partly in favour of the respondent. The respondent filed O. S. No. 122 of 1974 in the Court of the Subordinate Judge, Vijayawada under S. 14 (2) of the Arbitration Act for directing the Arbitrator , the 4th respondent , to file the award into Court. O.S. 117 of 1974 was filed by the Government, the Superintending Engineer and the Executive Engineer to set aside the award. Both the matters were heard by the Subordinate Judge, Vijayawada. The learned Subordinate Judge made the award a rule of the Court and passed the decree in terms of the award. He allowed O. S. No. 122 of 1974 filed by the respondent and dismissed O.S. 117 of 1974 filed by the Government. Questioning his judgement the Government have filed C. M. A. 571 of 1974 and 572 of 1975 in this Court.

2. The learned Government Pleader has confined is argument to the three items in dispute between the parties. The first relates to the supply of gelatine, the second to the payment of hire charges for the machinery supplied by the Government and the third is to the difference of amount payable by the contractor to the Government on termination of the contract.

3. We will deal with them seriatim. (1) Supply of gelatine:

In the agreement , Ex-A-1, in Cl.10, it is stated that explosives to the extent available will be supplied at the rates mentioned therein inclusive of sales tax at the site of the P. W. D. magazine at Nadigudem and the cost thereof will be recovered from the contractor's bill. As against gelatine 80% strength spl. the rate mentioned per kilogram is Rs. 4.95. It is further stated that the contractor can purchase explosives in the open market, if he so desires, but if he wants explosives to be supplied by the Government he should furnish his requirements one month in advance. On 29-6- 1971 the respondent wrote to the Superintending Engineer stating that he could not obtain gelatine from the various canal divisions, that he would be obliged if the department could supply special gelatine by making special arrangements at the highest level. The Government imported gelatine from Yugoslavia and Poland at a higher cost and supplied it to the respondent. The Government claimed that the contractor, should reimburse them the extra cost, on that account. On the other had, it was the case of the contractor that he should be charged only Rs. 4.95 per kilogram of gelatine according to the agreement and the extra amount recovered from him should be refunded to him The Arbitrator negatived the claim of the department and upheld the plea of the contractor that the gelatine supplied to him, whether indigenous or imported should be charged at the rate stipulated in the agreement.

4. The learned Government Pleader relying upon clause 10 of the agreement, the letter of the Contractor date 29-6-191 (Ex. A-2) and the three receipts (Exs. A-4 , A-5 and A-6) has submitted that the contractor is bound to pay for the gelatine at the rates mentioned in those receipts at least for the consignments covered by them. Exs. A-4, A-5 and A-6 are the receipts for the purchase of gelatine by the contractor from the department. They were sent to the Arbitrator only after the enquiry was completed but before the award was passed. No opportunity was given to the contractor to explain them. Apart from that, other receipts Exs. A-9, A-10, A-11, A-12 and A-13 which are of earlier dates show that the gelatine that was imported from Yugoslavia and Poland was supplied by the Department to the respondent at the rate of 4.95 per kilogram. The Arbitrator as well as the learned Subordinate Judge have held that there was no agreement that the respondent should pat at a higher rate for the gelatine that was imported and supplied to him. We agree with this finding . The agreement does not say that if the gelatine is imported and supplied to the respondent, he should pay at a higher rate. In his letter dated 29-6-1971 the respondent did not undertake that he would pay a higher rate for the imported gelatine. Exs. A-9 to A-13 clearly show that for the gelatine imported from Poland and Yugoslavia the respondent was charged only at the agreement rate of Rs. 4.95 per Kg. It is true that Exs. A-4, A-5 and A-6 show different rates for the imported gelatine. Merely because somebody on behalf of the contractor had signed them, we cannot infer an agreement that he had agreed to pay at the rate mentioned in those receipts. Those receipts at best are evidence of the receipts of the material. If really it was the intention of the Government that they wanted to supply the imported gelatine at a higher rate, then we do not see any reason why they had charged only Rs. 4.95 ps. in EXs. A-9 to A-13. The learned Government Pleader has submitted that the clerk who has written those receipts had, by mistake, mentioned the agreement rate. But no such evidence is placed before the Arbitrator or the Court. In these circumstances, we have no hesitation in holding that the respondent should be charged only Rs. 4.95 per Kg. for the imported gelatine that was supplied to him and we reject this contention.

5. (2) Hire charges for the machinery:

The Department supplied machinery to the respondent. At the time of the contract the rates were low. On 1-2-1972 the Chief Engineer enhanced the rates with effect from 1-9-1971. Accordingly the Govt. claimed enhanced charges. That was resisted by the contractor on the ground that he had to pay the hire charges stipulated at the time of the agreement. The plea of the contractor was upheld by the Arbitrator as well as by the learned Subordinate Judge. It is submitted by the learned Government Pleader that the Department has right to revise the charges and the contractor has to pay them though not retrospectively from the date of the revision, i.e. 1-2-1972.

6. Paragraph 4 of the agreement says that the contractor shall have to arrange his own machinery, tools and plants, etc. The departmental machinery such as, air compressors, if available and whenever convenient, will be hired to the contractor if required under the usual conditions stipulated in the Departmental Code of other Government orders. The contractor is prepared to pay the hire charges obtaining on the date when he had hired the machinery from the department. The learned Government Pleader has not placed before us any provision in the Departmental code or any other Government Order on the date when the defendant had hired the machinery that he would also undertake to pay the charges revised from time to time. It cannot be disputed that the department has a right to revise the hire charges. Equally, it cannot be disputed that the contractor has to pay the charges obtaining on the date of his hiring the machinery. But we are of the opinion that in the absence of a contract, the contractor is not liable to pay revised charges for the machinery already hired by him. We do not also agree that he has to pay the revised charges at least from 1-2-1972. That is because he had hired the machinery long before that date. The Arbitrator as well as the learned Subordinate Judge have held that the Department can recover the hire charges for the machinery hired to the respondent only at the rates prevailing at the time of entering into the agreement. We see no reason to take a different view of the matter and we reject this contention.

7. (3) The difference in cost payable for the quantum of work left over by the contractor and got done by others:

The work had to be completed by 15-7-1972. The contractor had to do some extra quantities of excavation in F and F- Rock over and above the quantities mentioned in the agreement. He wrote a letter Ex. C-22 on 20-2-1972 to the Executive Engineer claiming extra rate for that extra work and requesting for authorisation to carry on the extra quantities. But the authorisation for the extra quantities was issued by the Executive Engineer, Nadigudem only on 13-7-1972. The contractor in his letter dated 18-7-1972 complained to the Executive Engineer about the impossibility of carrying out the work before 15-7-1972 i.e. within two days. While terminating the contract, on 30-7-1972, the Executive Engineer did not refer to the contractor's letter date 18-7-1972.

8. In these circumstances, the Arbitrator held that the contractor is liable only for the quantum of work left over by him as compared with the quantities contemplated in the agreement.

9. It is submitted by the learned Government Pleader that according to P.S. 61, the respondent is bound to pay the difference in cost incurred in getting the actual work done by others after the termination of the agreement. It is true that the quantities mentioned in the tender are only approximate (see P. S. 11). P.S. 61 to the extent it is relevant, reads as follows:-

'Upon the completion of the works, the Executive Engineer shall certify the amount of the expenses properly incurred consequent on, and incidental to, the default of the contractor as aforesaid and in having the works completed by other persons, have credited the contractor with the value of the materials utilised as aforesaid. Should the amount so certified to be less than the amount which would have been due to the contractor on the completion of the works by him, the difference shall be paid to the contractor by the Government, should the amount of the former exceed the latter, the difference shall be paid by the contractor to the Government .....'

The contractor should make good the difference between the actual cost incurred by the Government in getting the work completed if it is more than what he had to receive for the work already done by him. It is also true that the quantities could only be mentioned approximately in the tender and what has to be taken into consideration is the actual work done on the ground. But, in this case, the Arbitrator has given reasons (which we have already referred to) for awarding only the difference between the approximate quantities mentioned in the agreement and the work done by the contractor. The Arbitrator held that it would meet the ends of justice if the determination of the contract under CI.61 of P. S. to A. P. D. S. S. is made applicable only for the quantum of work left over by the contractor as compared with the quantities contemplated in the agreement under the individual classification of soils in Schedule -A. This finding was confirmed by the Subordinate Judge.

10. The learned Government Pleader has submitted that the Arbitrator as well as the learned Subordinate Judge have misunderstood and misinterpreted CI. 61 of P.S. to A.P.D.S.S. and therefore, we should interfere with this finding we do not agree. There is no error of law apparent on the face of the award. It is not case where the Arbitrator has not properly understood or interpreted P. S. 61. He has taken certain facts into consideration to arrive at his conclusion. Those facts are based on evidence and it cannot be said that they are not relevant. The Court cannot reappraise the evidence and come to a different conclusion.

11. It is now well settled that the Courts cannot interfere with an award unless there is an error apparent on the face of the award or upon some paper accompanying and forming part of the award (Vide Champsey Co. Juvaraj Balloo Co. AIR 1923 P. C. 66). An error of law on the face of the award means that you can find in the award or the document actually incorporated thereto, as for instance, a note append by the arbitrator stating the reasons for his judgement, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to contention of one party that opens the door to seeing first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound. In determining the error of law appearing on the face of the award, a distinction must be drawn between cases in which a question of law is specially referred and those in which a decision on a question of law is incidentally material (however necessary) in order to decide the question actually referred. If the question of law is specially referred and it is evident that parties desire to have a decision from the Arbitrator about that rather than one from the Courts, then the Courts will not interfere. The Arbitrator cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. If he does not follow and apply the law he can be set right by the Courts provided his error appears on the face of the award. The single exception to this is when the parties choose specially to refer a question of law as a separate and distinct matter. In the absence of specific reference about the construction of a contract the jurisdiction of the Court was not taken away. (Thawardas Pherumal v. Union of India, : [1955]2SCR48 .

12. When an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such mistake does not appear on the face of the award or in the document appended to or incorporated in it so as to form part of it, the award will neither be remitted nor set aside notwithstanding the mistake. Mere reference to the contract in the award is not to be held as incorporating it. (Allen Berry & Co. v. Union of India : [1971]3SCR282 ).

13. If the arbitrator is called upon to decide the effect of the agreement, he has really to decide a question of law, that is of interpreting the agreement and hence, his decision is not open to challenge (K. N. Co-operative Dairy Farm Society Ltd., v. Union of Indian, : AIR1973SC1338 ). stated in the award and which is the basis of the award, can the award be set aside or remitted on the ground of error of law apparent on the face of the record. (Vide N. Chellappan v. Kerala S. E. Board, : [1975]2SCR811 ).

14. The arbitrator is not bound to give a reasoned award and if, in passing the award, he makes a mistake of law or of fact, that is no ground for challenging the validity of the award. It is only when an erroneous proposition of law is stated in the award and which is the basis of the award, can the award be set aside or remitted on the ground of error of law apparent on the face of the record. (Vide N. Chellappan v. Kerala S. E. Board, : [1975]2SCR811 ).

15. Applying these principles to the facts of this case, we do not find any error of law apparent on the face of the award or any document forming part of the award. Consequently, we dismiss these two appeal with costs in C. M. A. 571 of 1975 and no costs in C. M. A. 572 of 1975.

16. Appeals dismissed


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