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State of Madhya Pradesh Vs. Satyapal Wasson - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtMadhya Pradesh High Court
Decided On
Case NumberMisc. Appeal No. 188 of 1972
Judge
Reported inAIR1979MP119; 1979MPLJ208
ActsArbitration Act, 1940 - Sections 30
AppellantState of Madhya Pradesh
RespondentSatyapal Wasson
Appellant AdvocateM.V. Tamaskar, Govt. Adv.
Respondent AdvocateRavish Agrawal, Adv.
DispositionAppeal dismissed
Cases ReferredUnion of India v. Sharma
Excerpt:
.....district judge that the arbitrator failed to decide the main dispute which was referred to him i. thus the arbitrator had failed to decide the main point of difference referred to..........items nos. 9 and 10, while the department insisted that item no. 11 was an independent and a separate item and only rs. 4/- has to be added to the rata provided for items nos. 4, 5 and 6 in case the lead was from 0.5 kilometer to 2 kilometers. the respondent put up his claim but the same was not accepted by the superintending engineer. a reference was, therefore, made to the sole arbitrator i.e. the superintending engineer, for deciding the dispute.the respondent then submitted his claim for rs. 3,23,734.92p. in respect of the following 3 items; claim no. 1 for rs. 2,81,120/- towards additional payment due towards item no. 11, claim no. 2 for rs. 16,259.92p. towards interest at 12 per cent per annum and claim no. 3 for rs. 26,355/- for additional expenses incurred for re-excavating.....
Judgment:

C.P. Sen, J.

1. The State has preferred this appeal under Section 39 of the Arbitration Act, 1940, against the judgment and decree of the District Judge setting aside the award given by the Arbitrator under Section 30 of the Act.

2. The respondent is a contractor and his tender for construction of Hasdeo project Main Canal, excavation and forming embankment from R.D. 12301 M. to R.D. 12720 M. and R.D. 13921 M. to R.D. 14160 M. Group No. IV for an amount of Rs. 1,38697.60p./- was accepted by the superintending Engineer, Hasdeo Project, Circle Korba, and the acceptance was conveyed to the respondent on 17-3-1969. It appears that before execution of the contract some dispute arose between the parties regarding interpretation of the rate for item No. 11 of the tender and the superintending Engineer wanted to put his own interpretation by way of clarification but the same was not accepted by the respondent. So on 21-5-69 a written contract was executed by the parties on the basis of the tender accepted without adding any clarification, Clause 29 of the contract provided that the decision of the Superintending Engineer would be final, conclusive and binding on the parties in respect of all disputes arising out of the contract.

Items Nos. 4, 5 and 6 were for excavation work in different soils and for disposal within 60 meters. Item No. 9 provided for a lead for disposal beyond 60 meters upto 210 meters on extra payment of Rs. 80/- per 10 cubic meters. Item No. 10 provided for a lead for disposal beyond 210 meters upto 0.5 Kilo- ' meter on extra payment of Rs. 80/- per 10 cubic meters and item No. 11 provided for a lead for disposal beyond 0.5 kilometer upto 2 kilometer on extra payment of Rs. 4/- per 10 cubic meters, According to the respondent, for payment of Item No. 11 the amount has to be calculated by adding the rate provided for items Nos. 4, 5 and 6 and added to items Nos. 9 and 10, while the Department insisted that item No. 11 was an independent and a separate item and only Rs. 4/- has to be added to the rata provided for items Nos. 4, 5 and 6 in case the lead was from 0.5 kilometer to 2 kilometers. The respondent put up his claim but the same was not accepted by the Superintending Engineer. A reference was, therefore, made to the sole Arbitrator i.e. the Superintending Engineer, for deciding the dispute.

The respondent then submitted his claim for Rs. 3,23,734.92p. in respect of the following 3 items; Claim No. 1 for Rs. 2,81,120/- towards additional payment due towards item No. 11, claim No. 2 for Rs. 16,259.92p. towards interest at 12 per cent per annum and claim No. 3 for Rs. 26,355/- for additional expenses incurred for re-excavating dump material from the site as the dumping area was not made available. The claim was opposed by the State stating that for item No. 11 the respondent was responsible for quoting a very low rate ie. Rs. 4/- per 10 cubic meter, in addition to the rate provided for items Nos. 4, 5 and 6, towards the lead. The respondent, therefore, cannot be paid anything extra. The respondent is also not entitled to any isterest or extra payment for re-excavating the dump material. The rate for items Nos. 9 and 10 cannot be added together for calculating the rate for item No. 11. The Arbitrator after framing issues recorded evidence of the parties. The respondent was permitted to cross-examine the witnesses of the opposite party. On 3-12-1970 the Arbitrator gave his award of Rupees 30,000/- for claim No. 1 and Rs. 1500/-for claim No. 3 while disallowing the claim No. 2 for interest.

3. The respondent then moved an application on 2-1-71 under Section 14(2) of the Act for filing of the award by the Arbitrator. The award was then filed by the Arbitrator and notice was given to the respondent about filing on 15-3-71. He then filed his objection under Section 30/33 of the Act on 12-4-71 contending that the award is vitiated on the following grounds (i) The Superintending Engineer having already formed his opinion about the rate payable in respect of item No. 11, he should not have proceeded to arbitrate in the matter; (ii) the Arbitrator misconducted himself in not permitting the respondent to examine 3 of his witnesses and confining other witnesses to some items only; (iii) the Arbitrator has further misconducted himself in failing to decide the main dispute as to what is the rate payable in respect of item No. 11; (iv) the award is vague and cryptic and it is very difficult to know what the findings of the Arbitrator are in respect of the claims made by the respondent and (v) the award is invalid as being given on 3-12-1970 in place of 4-12-1970 which was the date declared by the Arbitrator for pronouncement of the award.

The application was opposed by the State who contended that the respondent having accepted the Superintending Engineer as the Arbitrator and having participated in the arbitration proceedings, he cannot now be permitted to challenge the jurisdiction of the Arbitrator to arbitrate in the matter. The respondent had made a lump sum claim of Rs. 3,23,734.92p. and it was not necessary for the Arbitrator to decide each claim separately. The Arbitrator was not required to mention the rate for item No. 11 separately. The Arbitrator was also not required to give any reasons and so the award cannot be set aside on the ground of vagueness. The learned District Judge overruled objections Nos.1, 4 and 5 of the respondent that the Superintending Engineer should not have arbitrated in the matter and that the award is vague and cryptic and it was not delivered on 4-12-70. However, he allowed the other objections holding that the Arbitrator has misconducted himself in shutting out the respondent from leading evidence and he had no jurisdiction to confine the respondent's witnesses to particular items. The Arbitrator has also not decided the main dispute i.e. what is the rate payable in respect of item No. 11, and on that count the award is vitiated. He has, therefore, set aside the award. Aggrieved by his judgment, the State has preferred this appeal.

4. Under Section 30 of the 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, and (c) that award has been improperly procured or is otherwise invalid. The Supreme Court in Alopi Prashad v. Union of India, AIR 1960 SC 588 has held as under (at p. 592):--

'The award of an arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it, as for instance, a note appended by the arbitrator, stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous.

If, however, a specific question is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not make the award bad on its face so as to permit of its being set aside.

In such a case, the decision being of arbitrators selected by the parties to adjudicate upon those questions, the award will bind the parties.'

In Jivarajbhai v. Chintamanrao Balaji AIR 1965 SC 214 the Supreme Court has further held as under (at p. 220):--

'The Court in dealing with an application to set aside an award has not to consider whether the view of the arbitrator on the evidence is justified. The arbitrator's adjudication is generally considered binding between the parties, for he is a tribunal selected by the parties and the power of the Court to set aside the award is restricted to cases set out in Section 30 of Arbitration Act, 1940. It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his conclusion. On the assumption that the arbitrator must have arrived at his conclusion by a certain process of reasoning, the Court cannot proceed to determine whether the conclusion is right or wrong. It is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of his award.'

In Bungo Steel Furniture v. Union of India, AIR 1967 SC 378 the Supreme Court has laid down as under (at p. 382):

'If an arbitrator, in deciding a dispute does not record his reasons and does not indicate the principles of law on which he has proceeded, the award is not on that count vitiated. It is only when the arbitrator proceeds to give his reasons or to lay down principles on which he has arrived at his decisions that the Court is competent to examine whether he has proceeded contrary to law and is entitled to interfere if such error in law is apparent on the face of the award itself.'

The Supreme Court in Union of India v. J. N. Misra, AIR 1970 SC 753 has held that (at pp. 754, 755) 'the arbitrator is not bound to give an award on each point. He can make his award on the whole case. An Arbitrator may award one sum generally in respect of all money claims submitted to him, unless the submission requires him to award separately on some one or more of them.' Therefore, it is settled law that an arbitrator need not give a reasoned award and the award cannot be set aside be-because it is vague or cryptic. In dealing with an application under Section 30 the Court is not sitting in appeal over the decision of the arbitrator. It is not open to the Court to speculate when no reasons are given by the arbitrator as to what impelled the arbitrator to arrive at his conclusion. But if the arbitrator does record reasons for his conclusion then it is open to the Court to examine whether the arbitrator has proceeded contrary to law and the Court is entitled to interfere if there is error apparent on the face of the award itself. However, the Supreme Court in Alien Berry and Co. v. Union of India, AIR 1971 SC 696 has held as under (at p. 699):--

'As the parties choose their own arbitrator, they cannot, when the award is good on the face of it, object to the decision either upon the law or the facts. Therefore, even when an arbitrator commits a mistake either in law or in fact in determining the matters referred to him, but such a mistake does not appear on the face of the award or in a 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.'

Therefore, though the Court is not entitled to go beyond the award and find out what could have been the reasons for giving such an award, but if some docu-ment is appended to the award or is in-corporated in it so as to form part of it, then it will be open to the Court to look into those documents. The test is does the arbitrator come to a finding on the wording of the contract? If he does, he can be said to have impliedly incorporated the contract or a clause in it which-ever be the case.

5. An arbitrator is not bound by the technical rules of procedure, which the Courts are required to follow specially when substantial justice has been done. The arbitrator is not, however, entitled to adopt the procedure of a special nature, unless all parties affected by it agree to the adoption of such procedure. An arbitrator, though ordinarily free from the fetters of adjective law, must nevertheless observe the fundamental principle of justice, that is, the principle of natural justice has to be followed. An arbitrator is not bound by the technical and strict rules of evidence, but he must not disregard the rules of evidence which are founded on fundamental principles of justice and public policy. An arbitrator is also not bound to reduce the evidence to writing, unless the terms of the agreement so require. In the present case, the arbitrator was not required to strictly follow the rules of Civil Court or the Evidence Act.

The Arbitrator permitted the respondent to submit his claim statement and a reply was also filed by the State, then issues were framed and the parties were permitted to lead evidence and cross-examine his opponent's witnesses. In the claim statement the respondent himself submitted that the dispute is mainly centering round the interpretation of item No. 11 of the tender i.e. what rate is payable for dumping the excavated material of items Nos. 4, 5 and 6 to a lead of 0.5 to 2 kilometers, and no oral evidence could be given on this question as the same would be hit by Sections 91 and 92 of the Evidence Act. Therefore, the respondent cannot now make a grievance that he was not permitted to examine 3 witnesses. The 3 witnesses cited who were not permitted to be examined, were not parties to the contract but they were sought to be examined to give their own interpretation about the rate payable for item No. 11. It was open to the arbitrator to disallow examination of certain witnesses if found irrelevant. Rightly the respondent has not been permitted to examine those witnesses.

There is nothing on record to show that the witnesses who have been examined by the respondent were in any way shut out from giving evidence or restricted to a particular item. There is no such grievance made hi the application under Section 14(2) of the Act. In the objection under Section 30 which was subsequently filed, there is also no definite allegation made as to which particular witness has not been permitted to depose on which particular point which was relevant for deciding the dispute. The main dispute being interpretation of item No. 11, the examination of the witnesses could not have been of much help because it was ultimately for the arbitrator to give his own interpretation about the rate payable for item No. 11. Under the circumstances, the learned District Judge was not right in holding that the arbitrator has misconducted himself in shutting out the respondent from leading evidence.

6. However, we are of the opinion that the findings of the learned District Judge have to be affirmed as the arbitrator has failed to arbitrate on the main dispute which was referred to him i.e. what is the rate payable for the item No. 11. Recently, the Supreme Court in Orissa Mining Corpn. Ltd. v. P. V. Rawlley, AIR 1977 SC 2014 has held as under (at p. 2017):--

'When an agreement is filed in court and order of reference is made under Section 20(4) then the claim as a result of the order of reference is limited to a particular relief and the arbitrator cannot enlarge the scope of the reference and entertain fresh claims without a further order of reference from the Court.'

In the present case, the arbitrator was required to give his finding by accepting either the interpretation of the respondent or the interpretation of the Department regarding rate of payment for item No. 11. It was perfectly permissible to the arbitrator to give lump sum award for all the claims without separately mentioning the amount awarded in respect of each claim. The award mentions that on examination and consideration of the statement of the parties and the evidence produced, the claimant should be paid lump sum amount of Rs. 31,500/- against his claims (1) and (3). With the award was appended the record of proceedings of the Arbitrator from 6-11-70 to 3-12-70. In the proceeding dated 3-12-70 the arbitrator has calculated as to how figure of Rs. 31,500/-was arrived at. Out of this, Rs. 1500/-have been paid towards claim No. 3 and for claim No. 1 Rs. 30,000/- have been awarded. This figure he has arrived at by multiplying the quantity of the work done in respect of item No. 11 by 30, which means the arbitrator has given rate of Rs. 30/- for item No. 11.

Since these proceedings are incorporated with the award, it is open to this court to look into these proceedings and find out as to how the amount of Rupees 31,500/- has been awarded by the arbitrator. The arbitrator seems to have made a via media between the claim of the respondent and the stand taken by the State. The arbitrator should have strictly confined himself to the question referred, that is either to accept the interpretation about rate for item No. 11 put by the respondent or put by the Department. He could not have substituted an entirely new rate which was not stipulated by the parties in the contract. Therefore, we are inclined to agree with the findings of the District Judge that the arbitrator failed to decide the main dispute which was referred to him i.e. at what rate the work for item No. 11 has to be done, whether the rate has to be calculated by adding rates for items Nos. 9 and 10 or whether the item No. 11 is an independent of items Nos. 9 and 10. We are fortified in our view by the decision of the Rajasthan High Court in Union of India v. Sharma & Sons, AIR 1968 Raj 99 in which it has been held as under*:--

'The real dispute between the parties that was referred to the arbitrator was about the applicability of correct rate for the job done by the contractor. It was not that the parties only wanted the arbitrator to determine what sum was payable by one to the other. Indeed there was no serious dispute between them regarding the actual amount that may be payable once the question of rate was adjudicated upon. The award did not show what decision the arbitrator had given regarding the rate that was to be applied to the various items of work. It could not be concluded that by necessary intendment he decided the question of rate. Had he accepted the claim of one party or the other in toto, it would have been possible to infer that by implication he accepted the rate claimed by that party. But, the figure awarded by the arbitrator could not be worked out on either of the two rates claimed by the respective parties. Thus the arbitrator had failed to decide the main point of difference referred to him. The award produced by him was, therefore, incomplete and defective on that ground, and hence could not be sustained.'

7. Accordingly, the appeal fails and it is dismissed with costs. Counsel's fee as per schedule, if certified.


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