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Executive Engineer, R.E. Division, Dhenkanal and anr. Vs. J.C. Budharaj - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtOrissa High Court
Decided On
Case NumberMisc. Appeal Nos. 29, 30 and 62 of 1981
Judge
Reported inAIR1981Ori172
ActsArbitration Act, 1940 - Sections 3, 13, 30 and 37; Limitation Act, 1963 - Sections 12
AppellantExecutive Engineer, R.E. Division, Dhenkanal and anr.
RespondentJ.C. Budharaj
Appellant AdvocateAddl. Govt. Adv.
Respondent AdvocateG. Rath, Adv.
DispositionAppeals dismissed
Cases ReferredBokaro and Ramgur Ltd. v. Dr. Prasun Kumar Banerjee
Excerpt:
.....interest can be awarded under the interest act, and observed that none of them was present in the case: subramaniam chettiar, (1960) 2 scr 209 :(air 1960 sc 307), and it was pointed out that they were obviously not intended to lay down any broad and unqualified proposition like the one which is urged before us by mr. the arbitration clause clearly indicates that when there be a dispute relating to any of the matters indicated therein, the same shall be referred for arbitration of a superintending engineer unconnected with the work to be appointed bythe chief engineer. 8. all the contentions raised by learned additional government advocate in support of these appeals fail......the main work. therefore, the contention of learned additional government advocate that for extra work the arbitration clause does not apply and the extra work is not arbitrable has no force.in regard to the payment for extra cost of labour, there is really no material at all with reference to which the award can be doubted. that argument must, therefore, fail.6. contention no. (iv):-- next comes the question of payment of interest. learned additional government advocate relied upon the observations of bose. j, in thawardas's case (air 1955 sc 468) to the following effect (at pages 477-78) -'......the interest act. 1839 applies asinterest is not otherwise payable bv law in this kind of case (see b. n. rly. co. v. ruttanji ramji. air 1938 pc 67), but even if it be assumed that an.....
Judgment:

R.N. Misra, C.J.

1. Each of these appeals is filed by the State under Section 39 of the Arbitration Act challenging the order of the learned Subordinate Judge, Bhubaneswar, making an award rule of the court under Section 17 of the Act after overruling the objections thereto. The respondent-contractor is common to all the appeals. Common questions of law and fact arise in all these appeals, vet for convenience, the facts of each case are summarized in brief before the contentions raised by counsel would be noticed :

M. A. 62 of 1981:-- The work was for improvement of the National Highway No. 5 , running between Cuttackand Bihar border within the Baitarani Range. Contract No. 182 F-2 of 1965-66 was entered into between the parties. Under it the last running bill was paid on 1-3-1967. Final payment has not been made as the contractor did not accept the measurement and the figures reached by the departmental officers. Dispute arose over that question which at the instance of the contractor the Chief Engineer referred to the arbitration of Sri J. Behera, Superintending Engineer under the arbitration Clause. The Arbitrator heard parties, examined the claims with reference to the documents produced and ultimately came to hold that the contractor was entitled to payment of Rs. 1,17,877/-. The objections filed against the award have been overruled and the award has been made a decree of the court.

M. As. 29 and 30 of 1981:-- The contractor undertook construction of Jodabadia Minor Irrigation Project on behalf of the State, but two separate contracts were entered into between the parties -- one being 19 F-2 of 1971-72 and the other being 97 F-2 of 1974-75. The subject matter of Miscellaneous Appeal No. 29 of 1981 is the award in the dispute arising out of contract No. 19 while the subject matter of Miscellaneous Appeal No. 30 of 1981 relates to contract No. 97. In regard to contract No. 19, the work was over bv 1-8-1974. The dispute arose as to final measurement and when the contractor did not accept the calculations of the department the matter was referred at his instance in terms of the arbitration Clause for arbitration of Sri S. N. Sinha, Superintending Engineer. The Arbitrator after hearing parties and looking into the documents produced before him determined the dues of the contractor at Rs. 12.59,069.21.

In the dispute relating to contract No. 97, the work was completed on 15-8-1975 but final payment had also not been made as dispute arose as to the Quantum of work done and upon notice by the contractor in January. 1979, Sri S. N. Sinha, Superintending Engineer, was appointed as arbitrator to adjudicate the dispute. The Arbitrator after hearing parties ultimately gave an award for Rs. 7,85,200.85 with interest.

2. Learned Additional Government Advocate has raised five contentionsagainst the order of the learned Subordinate Judge. They are -

(i) The claim was barred by limitation and the arbitrator had no jurisdiction to entertain he claim. Limitation had been pleaded but the arbitrator omitted to deal with the question specifically and the Subordinate Judge went wrong in noticing the contention but not accepting it;

(ii) In regard to the extra work done which really forms the main foundation for the claim laid before the arbitrator, there was no agreement nor was there an arbitration Clause. Therefore those disputes were not referable to arbitration;

(iii) Grant of extra claim on the ground of labour charges was beyond the arbitrator's powers and in respect of such items, there was another Clause independent of Clause 23, namely. Clause 11 where the decision of the named authority was final and there was no scope for arbitration of such disputes;

(iv) The arbitrator had no power to direct payment of interest either prior to the period of reference or during the pendency of the reference, as the claim for interest in the instant cases was not covered by the four propositions indicated in the case of Thawardas Pherumal v. Union of India, AIR 1955 SC 468: and

(v) There was no valid reference at all, inasmuch as though an arbitrator had been appointed, the points of dispute had not been agreed upon by both sides and joint reference has not been made for such or any dispute.

3. Admittedly, none of these awards is a reasoned one. The arbitrator has quantified under specific heads the claim admissible to the contractor and no reason has been indicated either for the grant or for withholding of the claim under any particular head. In the body of the award of the first two appeals (M. As. 29 and 30 of 1981), the Arbitrator has said:--

'On perusal of all documents and keeping in view the arguments by both parties, I hereby give my Award on each item of claim and append it as Annexure-I......'

What exactly are the documents which the arbitrator took into account have not been specified. Even the agreement is not a part of the award. It is settledposition of law that unless there be an error apparent on the face of the record in an award, the court has no jurisdiction to interfere with it. In this background, I proceed to consider the specific objections raised.

4. Contention (i):-- Section 37 of theArbitration Act provides that the provisions of the Limitation Act would apply to arbitration as they apply to proceedings in court. In the instant cawes, final bills have not been drawn up and dispute arose when the contractor's claims were not accepted in toto and he was not offered payment according to his satisfaction. Though the work in respect of Miscellaneous Appeals Nos. 29 and 30 of the 1981 had been completed either in 1974 or 1975 and the work in Miscellaneous Appeal No. 62 of 1981 was completed as early as 1967, for so, final measurements had not been effected for many years and when the public officers took measurement which was not to the satisfaction of the contractor, dispute arose. There can be no doubt that dispute would arise in these cases when final measurement was done and plaintiff's claims were not being admitted in toto. In fact, in each of these cases, as rightly stated by Mr. Rath for the contractor, the dispute arose in relation to the work done which was not being reflected in the final measurement. That being the position, in none of these cases the claim could be barred by limitation. There could be some force in the stand taken by learned Additional Government Advocate that these were cases where possibly the claim was then premature. Such a contention had not been raised at any stage before. Within the plea of limitation, the contention that the claims were premature cannot be contained. The arbitration Clause is wide enough to cover any dispute relating to the work done and a dispute relating to the quantum of work done or the measurement of the work completed could come within the ambit of the arbitration Clause. That being the position. I do not think, there is any force at all in the contention of learned Additional Government Advocate that the claim in each of these case was barred by limitation. The first contention must, therefore, fail.

5. Contentions (II) and (III):-- I shall now deal with the next two contentions together, namely the payment for the extra work as also extra cost of labour. So far as these items are concerned, there is nothing in the award from which it can be shown that the arbitrator committed an illegality in allowing these claims. Admittedly, the entire dispute had been referred to the arbitrator and the scope of dispute which can be raised was in the arbitration Clause itself. When the ambit of disputes cognisable by the arbitrator has been specified in the arbitration Clause and an arbitrator is appointed for deciding the dispute relating to the work, the dispute before the arbitrator is in its comprehensive form.

Extra work is indeed supplemental work. As already indicated, the job undertaken in each of these cases was a specified one. Certain things were stipulated, certain other things were undertaken by the contractor as desired or required by the departmental authorities. There is no dispute that these extra works were by way of supplementing the main work. When such is the position, the supplementary work must be taken as a part of the main work and the arbitration Clause would ordinarily apply to disputes relating to such extra work being supplementary to the main work. Therefore, the contention of learned Additional Government Advocate that for extra work the arbitration Clause does not apply and the extra work is not arbitrable has no force.

In regard to the payment for extra cost of labour, there is really no material at all with reference to which the award can be doubted. That argument must, therefore, fail.

6. Contention No. (iv):-- Next comes the question of payment of interest. Learned Additional Government Advocate relied upon the observations of Bose. J, in Thawardas's case (AIR 1955 SC 468) to the following effect (at pages 477-78) -

'......The Interest Act. 1839 applies asinterest is not otherwise payable bv law in this kind of case (see B. N. Rly. Co. v. Ruttanji Ramji. AIR 1938 PC 67), but even if it be assumed that an arbitrator is a Court within the meaning of that Act. (a fact that by no means appears to be the case), the following among other conditions must be fulfill-ed before interest can be awarded under the Act:

(1) there must be a debt or a sum certain;

(2) it must be payable at a certain time or otherwise;

(3) these debts or sums must be payable by virtue of some written contract at a certain time:

(4) there must have been a demand in writing stating that interest will be demanded from the date of the demand.

Not one of these elements is present, so the arbitrator erred in law in thinking that he had the power to allow interest simply because he thought the demand was reasonable.

It was suggested that at least interest from the date of suit could be awarded on the analogy of Section 34 of the Civil Procedure Code, 1908. But Section 34 does not apply because an arbitrator is not a court within the meaning of the Code nor does the Code apply to arbitrators, and, but for Section 34, even a Court would not have the power to give interest after the suit. This was, therefore, also rightly struck out from the award.' The correctness of these observations of Bose, J. was first doubted by the Supreme Court in the case of Ct. A. Ct. Nachiappa Chettiar v. Ct. A. Ct. Subramaniam Chettiar. AIR 1960 SC 307. In paragraph 44 of the Judgment, the Court pointed out: -

'......Dealing with the contentionthat the arbitrators could not have awarded interest in such a case Bose J, set out four conditions which must be satisfied before interest can be awarded under the Interest Act, and observed that none of them was present in the case: and so he concluded that the arbitrator had no power to allow interest simply because he thought that the payment was reasonable. The alternative argument urged before this Court that interest could be awarded under Section 34 of the Code of Civil Procedure, 1908, was also repelled on the ground that the arbitrator is not a court within the meaning of the Code nor does the Code apply to arbitrators. Mr. Viswanatha Sastri relies upon these observations and contended that in no case can the arbitrator award interest. It is open to doubt whether the observations on which Mr. Viswanatha Sastri relies support or were intended to laydown such a broad and unqualified proposition.......'

Doubt was again expressed by the Court in the case of Satinder Singh v. Umrao Singh, AIR 1961 SC 908, when the Court observed (at p. 916):--

'......Bose. J., who spoke for theCourt has set four conditions which must be fulfilled before interest can be awarded under Interest Act of 1839, and observed that not one of those was present in the case with which the Court was concerned. That is why it was held that the arbitrator had erred in law in thinking that he had the power to allow interest simply because he thought the demand was reasonable. Having come to this conclusion the learned Judge proceeded to make certain observations in respect of the applicability of Section 34 of the Code of Civil Procedure. He added that Section 34 does not apply because the arbitrator is not a Court within the meaning of the Code, nor does the Code apply to arbitrators, and but for Section 34 even a Court would not have the power to give interest after the suit. These observations were considered by this Court in Nachiappa Chettiar v. Subramaniam Chettiar, (1960) 2 SCR 209 : (AIR 1960 SC 307), and it was pointed out that they were obviously not intended to lay down any broad and unqualified proposition like the one which is urged before us by Mr. Gopal Singh in the present appeal.'

In the case of Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore. AIR 1967 SC 1030, the observations of Bose. J. again came for consideration. After quoting the relevant paragraph from the Judgment of Bose, J. the Court pointed out : (at p. 1032)

'These observations divorced from their context, lend colour to the argument that the arbitrator has no power to award pendente lite interest. But, in later cases, this Court has pointed out that the observations in Thawardas's case, (1955) 2 SCR 48 : (AIR 1955 SC 468), were not intended to lay down such a broad and unqualified proposition see Nachiappa Chettiar v. Subramaniam Chettiar. (1960) 2 SCR 209 at 238 : (AIR 1960 SC 307 at p. 320), Satinder Singh v. Umrao Singh, (1961) 3 SCR 676 at p. 6 : (AIR 1961 SC 908 at p. 916). The relevant facts regarding the claim for interest in Thawardas's case (1955)2 SCR 48 : (AIR 1955 SC 468), will be found at DP. 64 to 66 of the Report (SCR) : (at pp. 477 to 478 of AIR) and in Paras 2. 17 and 24 of the Judgment of the Patna High Court reported in Union of India v. Premchand Satram Das. AIR 1951 Pat 201 at pp. 204-205. The arbitrator awarded interest on un-liquidated damages for a period before the reference to arbitration and also for a period subsequent to the reference. The High Court set aside the award regarding interest on the ground that the claim for interest was not referred to arbitration and the arbitrator had no jurisdiction to entertain the claim. In this Court, counsel for the claimant contended that the arbitrator had statutory power under the Interest Act of 1839 to award the interest and, in any event, he had power to award interest during the pendency of the arbitration proceedings under Section 34 of the Code of Civil Procedure. 1908. Bose. J., rejected this contention. It will be noticed that the judgment of this Court in Thawardas's case (1955) 2 SCR 48 : (AIR 1955 SC 468), is silent on the question whether the arbitrator can award interest during the pendency of arbitration proceedings if the claim regarding interest is referred to arbitration. In the present case, all the disputes in the suit were referred to the arbitrator for his decision. One of the disputes in the suit was whether the respondent was entitled to pendente lite interest. The arbitrator could decide the dispute and he could award pendente lite interest just as a Court could do so under Section 34 of the Code of Civil Procedure. Though, in terms. Section 34 of the Code of Civil Procedure does not apply to arbitrations, it was an implied term of the reference in the suit that the arbitrator would decide the dispute according to law and would give such relief with regard to pendente lite interest as the Court could give if it decided the dispute. This power of the arbitrator was not fettered either by the arbitration agreement or by the Arbitration Act. 1940...

The same question was again examined in a decision of the same year in the case of Union of. India v. Bungo Steel Furniture Private Ltd.. AIR 1967 SC 1032. After quoting the relevant paragraph from Thawardas's case Rama-swami. J. pointed out : (at p. 1035)

'This passage supports the argument of the appellant that interest cannot be awarded by the arbitrator after the date of the award but in later cases it has been pointed out by this Court that the observations of Bose, J. in (19551 2 SCR 84 : (AIR 1955 SC 468). supra, were not intended to lay down such a broad and unqualified proposition....In our opinion, the arbitrator had jurisdiction, in the present case, to grant interest on the amount of the award from the date of the award till the date of the decree granted by Mallick, J. The reason is that it is an implied term of the reference that the arbitrator will decide the dispute according to existing law and give such relief with regard to interest as a Court could give if it decided the dispute..................'

In the case of the State of Madhya Pradesh v. Saith and Skelton (P) Ltd.. AIR 1972 SC 1507, analysing the decision in AIR 1967 SC 1030, it was pointed out that from that case, it is clear that if all the disputes are referred to arbitration, the arbitrator has power to award interest pendente lite i.e. during the pendency of the arbitration proceedings.

In the case of Ashok Construction Co., v. Union of India, (1971) 3 SCC 66. it has been categorically found that a claim for interest from the due date of the claim till the claim was laid was admissible. This principle has been accepted by a Division Bench of this Court in the case of State of Orissa v. Govinda Choudhury. (1971) 2 Cut WR. 524. In view of these authorities, I do not find any support for the contention of learned Additional Government Advocate that in the facts of the present case, interest from the due date up to the laying of the claim and for the period during which the claim was pending before the arbitrator could not be awarded. No objection can be raised to such interest being granted.

7. Contention No. (v) :-- We shall now examine the last contention that there was no valid reference. The arbitration Clause clearly indicates that when there be a dispute relating to any of the matters indicated therein, the same shall be referred for arbitration of a Superintending Engineer unconnected with the work to be appointed bythe Chief Engineer. In each of these cases, the Chief Engineer made the appointment when notice of dispute was given. Both the parties appeared before the arbitrator, filed their claim and counter thereto, produced materials and were heard. In such circumstances, it becomes difficult to accept the contention that there was no valid reference to arbitration. I have decided this aspect of the matter in the case of State of Orissa v. Consolidated Construction Co. (Misc. Appeal No. 18 of 1981) disposed of on 28-4-1981 (reported in AIR 1981 Orissa 166), negativing such a contention of learned Additional Govt. Advocate. I have also referred to some of the decisions of this Court as also a Full Bench decision of the Patna High Court in the case of Bokaro and Ramgur Ltd. v. Dr. Prasun Kumar Banerjee,AIR 1968 Pat 150 (FBI in support of the plea of estoppel. I do not think, the observation of the Supreme Court which learned Additional Government Advocate relied that this went to the very root of the matter and could not be covered by estoppel, applies to a case of the present type. There is no force in that contention.

8. All the contentions raised by learned Additional Government Advocate in support of these appeals fail. Accordingly, these appeals are dismissed with costs. Consolidated hearing fee is fixed at rupees one thousand.


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