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Secretary, Works Department, Govt. of Orissa and anr. Vs. Govinda Choudhury - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtOrissa High Court
Decided On
Case NumberMisc. Appeal No. 165 of 1982
Judge
Reported inAIR1983Ori83
ActsArbitration Act, 1940 - Sections 30 and 33
AppellantSecretary, Works Department, Govt. of Orissa and anr.
RespondentGovinda Choudhury
Appellant AdvocateAddl. Govt. Adv.
Respondent AdvocateG. Rath, Adv. for ;N.C. Panigrahi, Adv.
DispositionAppeal dismissed
Cases ReferredUnion of India v. M. L. Dalmiya
Excerpt:
.....any material in this case from where any conclusion of that type can be reached. 1942 ac 356. in para 9 of the judgment of the supreme court it was clearly indicated that once the dispute was 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. , 1942 ac 356 at page 366 the law on the point is very clearly stated in the following passage: --an arbitration clause is a written submission agreed to by the parties to the contract, and, like other written submissions to arbitration, must be construed according to its language and, in the light of the circumstances in which it is made. ' it also contained a recital that the assured had made a proposal and declaration as the basis of the contract, and a..........having based his claim on hypothetical enhancement of rate without any material basis, the learned arbitrator as well as the learned subordinate judge ought to have held that the award is bad in law;5. for that the award of interest made by the arbitrator is high and excessive inasmuch as it is illegal, arbitrary and without jurisdiction.6. for that the decision of the learned court below is otherwise bad in law and liable to be set aside.'6. on the objections taken in the trial court, the issue was inappropriate. the framing of an issue is not the monopoly of the court. parties have their responsibility and are entitled, to suggest to the court the real question in dispute to be highlighted by framing of issues. it is not known as to why when such an issue was raised, the.....
Judgment:

R.N. Misra, C.J.

1. The Secretary of the Works Department and the concerned Executive Engineer have carried this appeal under Section 39 of the Arbitration Act (hereafter referred to as the 'Act') challenging the decision of the learned Subordinate Judge of Berhampur by which, in exercise of powers under Section 17 of the Act, he has made the award a rule of the Court,

2. The respondent entered into an agreement with the Executive Engineer, appellant No. 2, for widening and strengthening the single lane section to two lanes of N. H. No. 5 from Mile 642/5 to Mile 649/7 + 80--Job No. 164--R. S. 5-- Reach No. II from Mile 645/0 to Mile 649/7 + 80. Tender for this work had been invited on 18-7-72. The respondent had given his tender for Rs. 6,76,679/-against the estimated value of the work of Rs. 3,25,100/-. The tender was negotiated and, finally the respondent agreed to undertake the work for a sum of Rs. 5,68,392/-. On 13-1-73, the Executive Engineer intimated acceptance and that also was treated as the written order to commence the work. Formal contract in the F-2 form was executed on 31-1-73. The work was stipulated to be completed by 13-10-73. On 16-1-73, the contractor requested the Department for supply of detailed work order which was supplied on 19-1-73. The contractor pointed out to the Executive Engineer that stacking place had not been provided, and as the owners of the roadside lands were not permitting stacking, collection of material was hampered. The contractor requested for water tanks and road rollers and other materials like tar boilers and mixers. By August, 1973, the contractor informed the Executive Engineer that he was not in a position to continue the work beyond 13-10-73 and requested that the work already done may be measured, final bill prepared and he may be paid the dues and the contract may be taken as closed. Alternately, he claimed that if the work was to be done and extension was to be granted for two more years beyond 13-10-73, he should be given 30 per cent enhancement of the contracted rate, Since the Executive Engineer insisted that the work should be done but was not prepared to pay any additional remuneration, the contractor continued the work but maintained that dispute had arisen.

By 13-10-73 the contractor had been paid a sum of Rs. 1,20,510.12 Paise under five running bills. Beyond that date, further amounts were paid under ten more running bills and the 16th running bill had been prepared but the amount found thereunder said to be Rs. 41,935.55 Paise was not paid. The contractor raised disputes and, invoked the arbitration clause and asked for appointment of an Arbitrator. Shri P.L. Dandapat was appointed as Arbitrator by the Chief Engineer. His authority was, however, revoked by the learned Subordinate Judge in M. J. C. No. 235 of 1979 and Sri Justice B.K. Patra who retired as Acting Chief Justice of this Court was appointed Arbitrator.

The claimant laid claim under four different parts marked as A, B, C and D. His claims under parts A, B and, C amounted to Rs. 13,20,452.70 Paise and the claim under part D relating to interest amounted to Rs. 2,50,886.71 Paise. The total claim under the four parts, therefore, came to Rs. 15,71,338.71 Paise.

In the counter, the claim was denied. It was submitted that the contract amount had been negotiated at 74 per cent higher than the estimated amount. It was maintained relying upon the terms of the contract that the claimant was not entitled to the amounts asked for under the various heads. It was pleaded that though some money was due under the 16th running bill, since there was a counter claim of the Department, the money was withheld for the purpose of adjustment. It was conceded that the contractor had a security deposit of Rs. 28,180/- and earnest money of Rs. 11,357/- with the Department but these had also been withheld for adjustment towards the counter claim of the Department. Liability to pay interest was disputed. The Department raised a counter claim of Rs. 1,19,525.72 Paise. The claimant filed a rejoinder before the Arbitrator.

3. No oral evidence was led in the arbitration proceeding, but parties relied upon certain documents. The Arbitrator delivered an eighteen-page Award and found that the claimant was entitled to a total sum of Rs. 2,41,017.65 Paise. He found that the counter claim was not maintainable. He directed that interest at 12 per cent would run on the amount indicated above from the date of the award.

4. An objection was filed before the learned Subordinate Judge on behalf of the appellants raising four aspects, namely '(i) that the Arbitrator cannot entertain enhanced rate of claim not stipulated in the agreement; (ii) that the parties are bound by the Schedule of rate which was prevalent at the time of entering into the agreement and subsequent revised schedule of rates cannot be made the basis for grant of higher rates; (iii) that the claim for idle labour was beyond the terms of the agreement; and (iv) that the claim for additional work is outside the agreement. Thus, the Arbitrator ignored the above-mentioned facts of the agreement ................... while giving the award.'

The learned, Subordinate Judge framed a single issue, namely, whether the Arbitrator misconducted the proceeding and the award is liable to be set aside, and disposed of this issue by saying:

'I have heard Advocates of both parties and perused the objections raised by the defendants There is nothing in the objection to show that the Arbitrator misconducted the proceeding. The objections do not clearly indicate how the Arbitrator has allowed the claim much beyond the agreement. There is nothing in the objection to hold that the award is otherwise invalid, and illegal. The objection, therefore, cannot be sustained. The Award should, therefore, be made a rule of the Court.'

5. Six grounds have been raised in this appeal, namely:--

'1. For that the judgment of the learned Subordinate Judge is contrary to law and against the weight of evidence on record.

2. For that the learned Subordinate Judge in his cryptic 10-line judgment having not discussed the contentions raised in the objection under Sections 30 and 33 of the Arbitration Act, the decision is illegal and liable to be set aside.

3. For that the learned court below ought to have held that the award is vitiated since it was based on claims for idle labour and additional work which were beyond the agreement.

4. For that the contractor having based his claim on hypothetical enhancement of rate without any material basis, the learned Arbitrator as well as the learned Subordinate Judge ought to have held that the award is bad in law;

5. For that the award of interest made by the Arbitrator is high and excessive inasmuch as it is illegal, arbitrary and without jurisdiction.

6. For that the decision of the learned court below is otherwise bad in law and liable to be set aside.'

6. On the objections taken in the trial court, the issue was inappropriate. The framing of an issue is not the monopoly of the Court. Parties have their responsibility and are entitled, to suggest to the court the real question in dispute to be highlighted by framing of issues. It is not known as to why when such an issue was raised, the Government Pleader appearing for the present appellants did not object. Counsel for both sides agreed that the objections may be looked into and instead of remitting the matter to the learned Subordinate Judge, I might consider the objections and dispose of the dispute at the appellate level. That is why I have examined the objections raised before the learned Subordinate Judge.

7. The first question to be decided is whether the award of the learned Subordinate Judge is a reasoned one, I have already indicated that it is a long award spread over 18 pages. Pages 1 to 10 of the award contain general narration. The claim under part A is in pages 10 and 11; the claim under part B is in pages 11 and 12 and the claim under parts C and D is in page 13. The counter claim has been indicated in page 14, Pages 15 to 17 refer to the rejoinder. At page 18 there is Indication of what has been stated by the present appellants in their reply to the rejoinder. After these have been stated, the Arbitrator has proceeded to say :--

'Both parties made elaborate submissions in support of their respective contentions and placed before me the various documents on record. In the course of arguments the claimant filed before me 2 affidavits sworn by 2 outsiders which are placed in record. The decisions cited by both parties have also been taken into consideration by me. Having given my careful consideration to the claims made by the claimant, objections raised thereto by the respondent, the counter claim made by the respondent and the objection raised thereto by the claimant and taking into consideration various documents on record and oral submissions made by the parties, I hereby make my award as mentioned below:

The claimant do recover towards his claim a sum of Rs. 2,41,017.65 Paise (Rupees two lakhs, fortyone thousand, seventeen and Paise sixtyfive) from the respondents. This amount shall carry interest @ 12% per annum from the date of this award, till payment or the date of decree to be passed by the court, whichever is earlier. The counter claim preferred by the respondent against the claimant is rejected.'

The learned Additional Government Advocate placed before us the entire award from beginning to end. On a scrutiny of the contents of the award from pages 1 to middle of page 18, it is evident that essentially the Arbitrator has given a running narrative of the various pleadings of the parties. Casually, here and there he has indicated if some aspect in the pleadings has not been denied, by the adversary. The determination of the Arbitrator is contained in the portion I have extract-ed above. In view of this analysis of the contents of the award, I am led to hold that no reasons have been given for the conclusion and, therefore, not-withstanding the award being a long one, it continues to be an unreasoned award. The Arbitrator having not given any reason for his conclusion and as a bald decision has been given, I hold that the award is virtually an unreason-ed one.

As the award is an unreasoned one, the scope for challenge is very limited. The learned Additional Government Advocate, however, strenuously contended that the Arbitrator has acted in excess of his jurisdiction and, has taken into account claims which were beyond the contract and, therefore, they are not disputes which were arbitrable. I have already indicated that the claimant had laid claim to a sum of a little more than Rs. 13,00,000/- towards principal and about Rs. 2,50,000/- towards interest Under part A, the contractor claimed Rs. 6,01,127/-; under part B, a sum of Rs. 6,71,048/-; under part C a sum of Rs. 48,277/- and under part D a sum of Rs. 2,50,886.71 Paise. As already pointed out, the claim under part C was for refund of security deposit etc. while the claim under part D related exclusively to interest. The amount under Part A is on the basis of higher rates in respect of the work done after 13-10-1973 and, the balance left under the 16th running bill. As indicated, from out of the running bill, an admitted due of Rupees 41,935.55 remained to be paid. The contractor asked for higher rates for the work done after 13-10-1973. To reiterate, the quantum of the work done after 13-10-1973 is not in dispute. The claim laid was on the basis of higher rate only for the admitted work. The claim under Part B was for additional work extra lead, loss of labour and the like, as detailed therein. The learned Arbitrator rejected the counter claim. No objection had been raised against rejection of the counter claim before the learned Subordinate Judge, nor has any challenge been laid in the appeal before me. Once the counter claim is rejected, the claimant became entitled to 3 admitted sums, i.e. security deposit of Rupees 28,180/-, earnest money of Rs. 11,357/-and admitted dues of Rs. 41,935.55 paise payable under the 16th running bill, These sums come to Rs. 81,472,55 paise. Deducting these amounts from the awarded sum, the Arbitrator has given the claimant a sum of Rs. 1,58,545.10 paise under the other heads of claim. As already pointed out, the total claim was in excess of Rs. 15,00,000/-. The Arbitrator has allowed about 10 per cent out of it. There is no indication in the award as to which items of claim he has allowed.

The learned Additional Government Advocate took the stand that since the Arbitrator has taken into consideration the entire claim raised under four parts and the claim under some of the heads according to him could not be entertained by the Arbitrator, the award must be taken as vitiated. He relied upon the observations of the Supreme Court in the case of Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji, AIR 1965 SC 214 to support his proposition. I have not been able to find any observation of the court in the reported decision which supports the contention. In para 23 of the leading judgment by Shah, J, as the learned Judge then was, it has been stated:--

'It is clear that the Arbitrator has included in his valuation some amount which he was incompetent, by virtue of the limits placed upon his authority by the deed of reference, to include.'

In para 22, there is a discussion which indicates the basis for that conclusion. The learned Additional Government Advocate has failed to indicate any material in this case from where any conclusion of that type can be reached.

Ordinarily, the award must be taken as valid until the person who seeks to challenge it is able to show that in making the award the Arbitrator exceeded his jurisdiction and, therefore, the award has been vitiated. Scope of challenge to an award is limited, compared to challenge available to a judgment of a court. It is essentially on the principle that the parties have decided to abide by the verdict of a forum chosen by them. I am inclined, to take the view that unless the party challenging the award is able to show that the Arbitrator has exceeded his jurisdiction in taking into consideration a matter beyond his jurisdiction and allowing a sum by way of damages which he was precluded from accepting, the award would not be held as vitiated.

8. There is no force in the submission of the learned Additional Government Advocate that the claims advanced by the claimant were beyond the jurisdiction of the Arbitrator, In the case of A.M. Mair & Co. v. Gordhandas Sagarmull, AIR 1951 SC 9, a three Judge Bench held that where a party has to have recourse to the contract to establish his case, it would be a dispute under the contract and reliance was placed on the oft-quoted English decision in the case of Heyman v. Darwins, Ltd. 1942 AC 356. In para 9 of the judgment of the Supreme Court it was clearly indicated that once the dispute was 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. The same aspect was reiterated by a Bench of two learned, Judges in the case of Ruby General Insurance Co. Ltd. v. Pearey Lal Kumar AIR 1952 SC 119, Again, in the case of Union of India v. Salween Timber and Construction Co. (India) AIR 1969 SC 488, a Bench of three Judges considered the same aspect. In para 5 of the reported judgment, Ramaswami, J. spoke for the Court thus:--

'The test for determining the question is whether recourse to the contract by which both the parties are bound is necessary for the purpose of determining whether the claim of the respondent firm is justified or otherwise. If it is necessary to take recourse to the terms of the contract for the purpose of deciding the matter in dispute, it must be held that the matter is within the scope of the arbitration clause and the arbitrators have jurisdiction to decide this case. In Heyman v. Darwins Ltd., 1942 AC 356 at page 366 the law on the point is very clearly stated in the following passage:--'An arbitration clause is a written submission agreed to by the parties to the contract, and, like other written submissions to arbitration, must be construed according to its language and, in the light of the circumstances in which it is made. If the dispute is whether the contract which contains the clause has ever been entered into at all, that issue cannot go to arbitration under the clause, for the party who denies that he has ever entered into the contract is thereby denying that he has ever joined in the submission. Similarly, if one party to the alleged contract is contending that it is void ab initio (because for example, the making of such a contract is illegal), the arbitration clause cannot operate, for on this view the clause itself also is void. But in a situation whether the parties are at one in asserting that they have entered into a binding contract, but a difference has arisen between them whether there has been a breach by one side or the other or whether circumstances have arisen which have discharged one or both parties from further performance, such differences should be regarded as differences which have arisen 'in respect of' or 'with regard to', or 'under' the contract, and an arbitration clause which uses these, or similar expressions should be construed accordingly.'

In Stebbing v. Liverpool and London and Globe Insurance Company Ltd., (1917) 2 KB 433, the policy of insurance contained a clause referring to the decision of an arbitrator 'all differences arising out of this policy.' It also contained a recital that the assured had made a proposal and declaration as the basis of the contract, and a clause to the effect that compliance with the conditions endorsed upon the policy should be a condition precedent to any liability on the part of the insurers. One of the conditions provided that if any false declaration should be made or used in support of a claim all benefit under the policy should be forfeited. In answer to a claim by the assured, the insurers alleged that statements in the proposal and declaration were false. When the matter came before the arbitrator, the assured objected that this was not a difference in the arbitration and that the arbitrator had no power to determine whether the answers were true or not, or to determine any matters which called in question the validity of the policy. In holding that the arbitrator had jurisdiction to decide the matter, Viscount Reading, C. J. observed:

'If the company were seeking to avoid the contract in the true sense they would have to rely upon some matter outside the contract, such as a misrepresentation of some material fact, including the contract, of which force and effect are not declared by the contract itself. In that case the materiality of the fact and its effect in inducing the contract would have to be tried. In the present case the company are claiming the benefit of a clause in the contract when they say that the parties have agreed that the statements in question are material and that they induced the contract. If they succeed in escaping liability that is by reason of one of the clauses in the policy. In resisting the claim they are not avoiding the policy but relying on its terms. In my opinion, therefore, the question whether or not the statement is true is a question arising out of the policy.'

These three decisions of the Supreme Court are clearly indicative of the position that if for determining a question the contract has to be referred to, it would be squarely a matter within the jurisdiction of the arbitrator. The stand taken before the Subordinate Judge and the argument of the learned Additional Government Advocate before me in appeal is that the contract does not permit the claim admitted by the arbitrator. The stand, therefore, is woven out of the terms in the contract and reference to the contract is the foundation for the submission. On the principle indicated by their Lordships of the Supreme Court in the cases referred to, it must follow that the appellants are not able to abandon the contract for raising their disputes against the award and their objections are founded on the contract. In fact, same was the position before the arbitrator. The arbitrator had to look into the contract and come to his conclusion. There is, therefore, no substance in the contention of the learned Additional Government Advocate that the disputes which have been entertained by the Arbitrator are beyond his jurisdiction qua arbitrator. Once these are within his jurisdiction, the learned Arbitrator was free to come to his conclusion,

9. The learned Additional Government Advocate relied upon a decision of the Supreme Court in the case of Orissa Mining Corporation Ltd. v. Prannath Vishwanath Rawlley, AIR 1977 SC 2014 where it was held that if the Arbitrator entertained a fresh claim put before him, he exceeded his jurisdiction. There is no clear material in the award that any fresh claim had been laid. Therefore, no reference to the Supreme Court decision is really necessary, I am told by the learned Additional Government Advocate that the claimant had asked, for a little over rupees ten lakhs when he filed his claim before the first Arbitrator and, asked for rupees fifteen lakhs before the new Arbitrator. In this case, as already pointed out, the Arbitrator has allowed much less than the original claim. He also relied upon a decision of the Calcutta High Court in the case of Union of India v. M. L. Dalmiya & Co. Ltd., AIR 1977 Cal 266, the ratio of which I find is not material for the present case. There was reference to two to three decisions of the other High Courts to which I find reference need not be made in view of what I have stated above.

10. As I have already found, out, it is a non-reasoned award and since there is no challenge on the ground of the proceeding having been misconducted or alleging any misconduct against the Arbitrator, the challenge raised is also beyond the limit available in law,

11. There is no merit in the appeal and the same has, therefore, to be dismissed. The appeal accordingly is dismissed. Parties are directed to bear their own costs.


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