1. The legality and the validity of the award dated December 14, 1976, by Brigadier Gur Dayal, arbitrator, against the Union of India, was challenged under Sections 30 and 33 of the Arbitration Act, 1940, (hereinafter called the Act) by the appellant on a number of grounds in the Court of the Subordinate Judge, First Class, Chandigarh, in their objection petition. The objection petition was dismissed by the Subordinate Judge by his judgment dated January 17, 1978. In the present appeal, the learned counsel for the appellant, has confined the challenge to the award in so far as the arbitrator allowed a sum of Rs. 1,91,170.28 as reimbursement of extra expenditure incurred by respondent No. 1 (hereinafter called the contractor), on the sole ground that the arbitrator had committed a blatant legal misconduct as the award in this regard was beyond jurisdiction in view of clause 9 of the contract between the parties. In order to appreciate the contention, the relevant facts, in brief, may be enumerated as under,
2. M/s. Manchanda Brothers, M. E. S. Contractors and government builders, respondent No. 1, entered into a contract with the Government of India for the construction of certain buildings. Their tender having been accepted on August. 21, 1972, the work regarding the construction of quarters was to be completed in two phases. Phase I, was to be completed within nine months and Phase II within 18 months. With the issuance of the work order, construction work was commenced. However, subsequently, the execution of work with regard to the construction of some building was suspended on June 21, 1973 by Major Raghu Nandan, Garrison Engineer, vide his letter, Exhibit A. Thereafter, by another letter, dated September 4, 1973, Exhibit B, the execution of some other work was also suspended for some time. This suspension order was withdrawn later on and thereafter, the contractor completed the work some dispute having been raised by the contractor, Lieutenant-General J. S. Bawa, Engineer-in-Chief by his letter dated January 21, 1976, appointed Brigadier Gur Dayal as the arbitrator under the terms of the contract. Claim was filed by the contractor before the arbitrator in which objections were raised on behalf of the appellant. Evidence was adduced by both the sides an thereafter, the arbitrator, respondent No. 2, gave his award on December 14, 1976. As the contentions of both the parties involve the interpretation of this award, the same is reproduced below:
''WHEREAS CERTAIN differences arose between the parties out of a contract in writing viz. CA No. CENWZ/CHD-20/72-73 for provision of married accommodation for JCOs, HAVs, ORs, and NCs, E at Chandigarh between them,
AND WHEREAS I was appointed the sole Arbitrator in the matter vide Engineer-in-Chief, Army Headquarters, Kashmir House, New Delhi. Letter No. 13600/WC/157/E8 dated 21 Jan., 76.
NOW, I BRIG. GUR DAYAL, having taken upon myself the burden of reference and having heard, examined and considered the statements of the parties and the documentary evidence produced before me by them.
I Do HEREBY make and publish this my final award in writing of and concerning the matter referred to me. Dealing with each claim separately, award and direct as under:--
A. Claims of The Claimant
1. Reimbursement of extra-expenditure in executing the work Rs. 4,06,355.58. The claim is allowed for Rs. 1,91,170.28 (Rupees one lac ninety one thousand one hundred seventy and paise twenty eight only).
2. Compensation for idle labour due to shortage of cement Rs. 14,688.00.
The claim is rejected.
3. Refund of recovery wrongfully ma e in respect of water proofing treatment Rs. 36,296.80.
The claim is allowed for Rs, 36,296.80 (Rupees thirty six thousand two hundred ninety six and paise eighty only).
4. Payment of C. I. pipe WC connectors--Rs. 4,558. 40.
The claim is allowed for Rs. 4,558.40 (Rupees four thousand five hundred fifty eight and paise forty only).
5. Compensation of loss due to forfeiture of advances for steel windows Rs. 3,000.00
The claim is rejected.
6. Compensation of loss on account of flush shutters--Rs. 9,595.00
The claim is rejected.
7. Cost of Arbitration--Rs. 8,000.00
The claim is allowed for Rs. 1,000/- (Rupees one thousand only).
B. CLAIMS OF THE RESPONDENT
1. Cost of arbitration--Rs. 2,000.00
The claim is rejected.
As a result of the above award, the Respondent shall pay to the Claimant a sum of Rs. 2,33,025.48 (Rupees two lacs thirty three thousand twenty five and paise forty eight only).
Cost of stamp paper viz. Rs. 113/- (Rupees one hundred and thirteen only) shall be borne by the Respondent.'
3. It is conceded by both the side that the dispute had been referred to the arbitrator under clause 70 of the Contract which is reproduced below:--
'All disputes, between the parties to the contract (other than those for which the decision of the C. W. E. or any other person is by the contract expressed to be final and binding), shall, after written notice by either party to the Contract to the other of them be referred to the sole arbitration of an Engineer Officer to be appointed by'' the authority mentioned in the tender documents.
Unless the parties otherwise agree such reference shall not take place until after the completion, alleged completion or abandonment of the works or the determination of the Contract.
If the Arbitrator so appointed resigns his appointment or vacates his office or is unable or unwilling to act due to any reason whatsoever, the authority appointing him may appoint a new Arbitrator to act in his place.
The Arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties, fixing the date of hearing.
The Arbitrator may, from time to time with the consent of the parties, enlarge the time, for making and publishing the award.
The Arbitrator shall give his award oh all matters referred to him and shall indicate his findings, along with the sums awarded, separately on each individual item of dispute.
The venue of Arbitration shall be such place or places as may be fixed by the Arbitrator in his sole discretion.
The Award of the Arbitrator shall be final and binding on both parties to the Contract.'
4. Subsequent to the pronouncement of the award, an application under Ss. 14 and 17 of the Act was filed on behalf of the contractor for the purpose of the award being made the rule of the Court, in the Court of the Subordinate Judge, First Class, Chandigarh. In this application, objection petition was filed on behalf of the appellant under Ss. 30 and 33 of the Act for setting aside the award on the following grounds:--
1. that the arbitrator has misconducted in allowing a sum of Rs. 1,91,170.28 paise to the applicant as reimbursement of extra expenditure allegedly incurred by the applicant due to the suspension of the contract, in contravention of condition No. 9 of I. A. F. W. 2249 (General Conditions of Contract Agreement);
2. that the arbitrator has admitted into evidence illegally, vouchers which did not bear any reference to the contract,, and
3. that the arbitrator has admitted into evidence a letter dated 15-11-1976 of the applicant although the arbitration proceedings were closed on 13-11-1976 and this action amounts to a legal misconduct on the part of the arbitrator.
On the pleadings of the parties, the following issues were framed:--
1. Whether the arbitrator has misconducted himself and proceedings, as alleged?
2. Whether the objection petition Is not maintainable?
3. Whether the objection petition does not require verification according to law, if the answer is in negative, then to what effect?
According to the findings of the trial Court, the appellant had not raised any contention in the objection petition that the mistake alleged in the award was apparent m the face of the record, nor was any such mistake discernible from a perusal of the award as there was no reference to any provision of the contract or condition No. 9 of the contract. Even if the arbitrator committed any mistake either in law or fact, the award cannot be remitted or set aside on any such ground. It was also concluded that the evidence led by the parties before the arbitrator cannot be appraised by the Court as the trial Court could not sit as a Court of appeal. It was also held that it was not disclosed from the award if any evidence had been allowed by the arbitrator improperly. Some other conclusions were also reached which are not relevant for the purpose of the present appeal.
5. The learned counsel for the appellant, at the outset, frankly conceded that he was challenging only the acceptance of the claim of the contractor by the arbitrator for the amount of Rs. 1,91,170.23 under the heading, 'Reimbursement of extra-expenditure in executing the work' out of the total claim of Rs. 4,06,355.58 as had been put forward by the contractor in his claim petition and that the findings or the acceptance of the other claims of the contractor in the award were not being disputed. It was stressed that in this regard, the award suffered from the basic defect inasmuch as the arbitrator had no jurisdiction to allow the said claim in view of condition 9 of the contract which is reproduced below:
''The Contractor shall suspend execution of the Works or any part thereof, whenever called upon in writing by the Garrison Engineer to do so, and shall not resume Work thereon until so directed in writing by the Garrison Engineer. The Contractor will be allowed by the G. E. an extension of time (not less than the period of suspension) for completion of the item or group of items of Work for which a separate period of completion is given in the contract and of which the suspended work forms part but no other claims in this respect for compensation or otherwise, howsoever, shall be admitted.'
It was argued that, during the course of the execution of the contract, the execution of some works had been suspended by the Garrison Engineer for some time. The order of suspension was later on withdrawn and the work was carried out by the contractor in accordance with the instructions. The disputed claim related to the compensation on account of the extra expenditure incurred by the contractor after the resumption of work due to rise in the prices of material, the enhanced wages and the labour employed. Such a claim was barred under condition 9 and, therefore, the arbitrator had no jurisdiction to consider the claim of the contractor in this regard and award any amount as compensation. As against this, the emphatic contention of the learned counsel for the contractor is that the impugned award was non-speaking one inasmuch as there is no reference to the respective contentions of the parties before the arbitrator or any provision of the contract or any reference to condition 9 on which the case of the appellant was based, nor was there any discussion even indirectly with regard to any legal proposition or any evidence which may have been led. As such, it was not possible to hold, according to the settled law, that the arbitrator was guilty of any legal misconduct or that the award suffered from any want of jurisdiction. It was also emphasised that the appellant had participated in the proceedings before the arbitrator and had taken a chance of a decision whether favourable or unfavourable to him, from the arbitrator and now, the appellant was estopped from raising any such objection and that it is not within the competence of the Court to look into the proceedings or the evidence which may have been adduced before the arbitrator. Thus, the impugned award cannot be held to suffer from any error apparent on the face of the award. In order to appreciate these contentions, it will be necessary to have a peep into the legal propositions as laid down from time to tune by the various decisions of the Privy Council, the Supreme Court and the High Courts, as to the scope and ambit of S. 30 of the Act under which only, an award can be set aside.
6. The ambit and scope of the jurisdiction of the Court vis-a-vis the award of the arbitrator was laid down in very lucid and clear terms by the Privy Council in Champsey Bhara & Company v. Jivraj Balloo Spinning and Weaving Co. Ltd., AIR 1923 PC 66 while reversing the judgment of the Bombay High Court as reported in Jivraj Baloo Spinnina and Weaving Co. Ltd. v. Champsey Bhara and Co., AIR 1920 Bom 256. The law as laid down by Williams, J., in Hodgkinson v. Fernie (1857) 3 CB NS 189, was approved as under:--
'The law has for many years been settled and remains so at this day, that, where a cause or matters in difference are referred to an arbitrator, a lawyer or a layman, he is constituted the sole find final judge of all questions both of law and of fact. ........... The only exception to that rule are cases where the award is the result of corruption of fraud, and one other, which though it is to be regretted, is now, I think firmly established viz., where the, question of law necessarily arises on the face of the award or upon some paper accompanying and. forming part of the award. Though the propriety of this latter may very well be doubted, I think it may be considered as established.'
Some contention had been raised with regard to an error in law on the face of the award. The controversy was set at rest in the following words:--
'An error in law on the face of the award means, in their Lordships, view, that you can find in the award or a document actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, 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 a 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.''
With regard to the scope of jurisdiction of arbitrator, it was held that it was the clause of reference on the basis of which the matter of dispute is to be referred to the arbitrator which is the sole determining factor. It was held as under:--
'The question of whether an arbitrator acts within his jurisdiction is, of course, for the Court to decide, but whether the arbitrator acts within his jurisdiction or not depends solely upon the clause of reference. It is, therefore, for the Court to decide in this case whether the dispute which has arisen is a dispute covered by Clause 13 of the articles. It clearly is so, because it is undoubtedly a dispute arising out of or in relation to a contract made subject to the rules and regulations of the Cotton Trade Association.'
7. In Firm Madanlal Roshanlal Mahajan v. Hukumchand Mills Ltd., Indore, AIR 1967 SC 1030, the ratio of the decision in Champsey Bhara and Co's case was approved and it was held that the arbitrator's award both on fact and law is final and there is no appeal from his verdict. The same principle of law was reiterated in the Union of India V. Bungo Steel Furniture Private Ltd., AIR 1967 SC 1032.
8. In Allen Berry and Co. Pvt. Ltd v. Union of India, AIR 1971 SC 696, it was emphasised that when the parties had chosen their arbitrator, they cannot, object to the award either upon the law or the facts when the award is good on the face of it and the mistake alleged is riot apparent from a perusal of the award or any document appended to or incorporated in it so as to form a part of it. It was also laid down as under:--
'Before we proceed to consider these propositions, it is necessary to ascertain the scope of S. 30 of the Arbitration Act, 1940, and the principles underlying that section. The general rule in matters of arbitration awards is that where parties have argreed upon an arbitrator, thereby displacing a court of law for a domestic forum, they must accept the award as final for good or ill. In such cases the discretion of the Court either for remission or for setting aside the award will not be readily exercised and will be strictly confined to the specific grounds set out in Ss. 6 and 30, of the Act.'
9. As to the question whether a contract or any of its clauses was incorporated in the award, it was held that answer to the same depends upon the construction of the award. In this regard, the following test was laid down:--
'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 whichever be the case. But a mere general reference to the contract in the award is not to be held as incorporating it. The principle or reading tracts or other documents into the award is not to be encouraged or extended.'
On behalf of the appellant, it was pointed out that in this case, the jurisdiction of the arbitrator had been conceded by the counsel. However, this fact does not detract from the merit of the principle of law laid down by their Lordships of the Supreme Court.
10. For some time, there was a controversy as to whether the arbitrator, was competent to award interest pendente lite, i. e. during the pendency of the arbitration proceedings. In the State of Madhya Pradesh v. Saith and Skelton (P) Ltd., AIR 1972 SC 1507, it was made clear that where all the disputes including the claim for payment of the amount with interest is referred to the arbitrator, the arbitrator has the jurisdiction to award interest during the pendency of the proceedings also.
11. The propositions of law, as enunciated in the decisions above referred to, were again approved in N. Chellappan V. Secretary, Kerala State Electricity Board, AIR 1975 SC 230 and it was even held that where even a question of limitation had been raised by the other party, but the award without expressly adverting to the same, awarded a certain sum on account of certain claims made by the contractor, the award was not vitiated on account of any mistake or error apparent on the face of the record. It was emphasised as under:--
'The umpire as sole arbitrator was 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.'
12. A close and analytical perusal of the award in the present case leaves no manner of doubt that the arbitrator did not make any reference even impliedly to any provision or clause of the contract or the contentions which may have been raised by the respective parties before him. In the award, the claim of the contractor with regard to various items has been partly allowed or rejected. Thus, when viewed in the light of the propositions of law as have been laid down in the various decisions of the Supreme Court as discussed above approving the law as laid down in Champsy Bhara & Company's case (supra), it is not possible to hold that the award is vitiated or invalid on account of any mistake or error of law or fact. Condition 9 of the contract which is the sole basis of attack by the learned counsel for the appellant is only to the effect that in case of suspension of execution of work by the Garrison Engineer for some time and resumption of the work subsequently, the con-tractor will not be entitled to any compensation on account of suspension of work. According to the award, an amount of Rs. 1,91,170.28 was allowed to the contractor as reimbursement of extra expenditure in executing the work. From this part of the award, it cannot be spelt out whether this amount was allowed as compensation in lieu of the suspension of work as contemplated under condition 9 or it related to the execution of other works regarding which no suspension had been ordered. Only a lump sum in part acceptance of the entire claim of the contractor on account of extra expenditure in executing the work was allowed. In the award, absolutely no reasons have been given, nor any propositions of law or fact have been adverted to so that this Court is not in a position to express any opinion whether the award suffered from any mistake of law which may be apparent on the face of the award.
13. The learned counsel for the appellant, placed reliance on some decisions in support of his proposition which, however, do not render any assistance to his case.
14. In Hanutmull Boid v. Fatehchand Murlidhar, AIR 1954 Cal 1, Jute Control Order expired on Sept. 30, 1946. However, the damages were awarded on Oct. 1, 1946, being far in excess of the price controlled under the said Order. The arbitrator thus awarded charges not at controlled rate, but at black-market rates. On a perusal of the award, the High Court came to the conclusion that paragraph 1 of the award should be read with paragraph 2 and the contents of paragraph 1, in fact, were the basis for the award of the damages as contained in paragraph 2 thereof. Thus, the award in this case was based on the reasoning and premises which were found to be erroneous. Besides, it was also held that if a party to a contract challenges the very existence of the contract and in spite of the challenge the arbitrator proceeds with the reference and makes an award, such an award would be a nullity.
15. The decision in G. P. Gunnis. & Co. Ltd. v. M/s. Amanmal Tulsidas, AIR 1924 Sind 75 (FB), was based on the decision in Jivraj Baloo Spinning and Weaving Co.'s case (supra), which was clearly reversed by the Privy Council in Champsey Bhara & Co.'s case (supra). It appears the decision of the Privy Council in the aforesaid case was not brought to the notice of the learned judges of the High Court.
16. A close perusal of ILR (1961) Cut 544, Union of India v. Joginder Singh & Co. makes it evident that this decision rather lends support to the contention of the opposite side, and it was held that the arbitrator had not purported to construe any clause of the contract and thus, there was no error of law apparent on the face of the award.
17. The learned counsel for the appellant also placed reliance on the following observations in the Indian Minerals Co. v. The Northern India Lime Marketing Association, AIR 1958 All 692:--
'Misconduct not amounting to moral turpitude is called legal misconduct and has a very wide meaning. It is difficult to give an exhaustive definition of what amounts to legal misconduct. It may how-ever be stated that legal misconduct means misconduct in the judicial sense arising from some honest, though erroneous, breach and neglect of duty and responsibility on the part of the arbitrator causing miscarriage of justice. There may be ample misconduct in a legal sense to make the Court set aside the award even when there is no ground to impute the slightest improper motive to the arbitrator. It includes failure to perform the essential duties which are cast on an arbitrator as such. It also includes any irregularity of action which is not consonant with general principles of equity and good conscience which ought to govern the conduct of an arbitrator.''
No exception can be taken to the scope and ambit of legal misconduct as laid down above, but the learned counsel has not been able to point out as to which principle of legal misconduct, as above referred to, vitiated the impugned award. It is not the case of the appellant that proper opportunity was not given to him by the arbitrator nor did the appellant impute any improper motive to the arbitrator.
18. In Union of India v. United Timber Works of Jamna Nagar, AIR 1960 Punj 478, it was held that an award suffered from a patent error of law where compensation was allowed on the ground of equity for loss of profit in the absence of proof that any damages had been sustained. A close perusal of' the judgment makes it evident that in this case the award was not a non-speaking one and the facts and the evidence had been adverted to. The learned Judge after analytical scrutiny of the award came to the conclusion that the compensation had been awarded in the absence of proof of any damages.
19. In Union of India v. Sharma & Sons, AIR 1968 Raj 99, principles were broadly enunciated as to under what circumstances the award could be set aside. It was clearly stated,--
'The award if baldly stated, without giving any reasons for it, cannot be assailed even if it be against facts or repugnant to law. In other words, the award is not open to judicial review, but if a reference to arbitration be made generally and not specifically and the arbitrator enunciates a proposition of law and states his own view of law as a ground of his award, such an award is open to attack in a Court of law and is liable to be set aside if there be an error of law apparent on the face of it.'
I am afraid, the principle of law thus enunciated lends no strength to the case of the appellant. In the present case, as referred to above, the award, in dispute, is without any reasons and no legal propositions have been stated or commented upon.
20. It was also stressed by the learned counsel for the contractor that the appellant fully participated in the proceedings before the arbitrator and did not challenge the jurisdiction of the arbitrator with reference to condition 9 and, therefore, in view of the law laid down in N. Chellappan's case (supra), the appellant was estopped from raising the question of jurisdiction. This contention is also not without substance. A close perusal of the objection petition filed before the arbitrator shows that though it was contended that the contractor was not entitled to any compensation in view of condition 9 of the contract, yet the jurisdiction of the arbitrator was not specifically challenged or disputed. According to the learned counsel for the appellant the lacuna may be due to the ignorance or wrong drafting of the objections, but the objection did amount to a challenge to the jurisdiction of the arbitrator. I am afraid, I cannot subscribe to this view. If the appellant had really and seriously challenged the jurisdiction of the arbitrator to look into certain claim of the contractor, they have taken appropriate proceedings under the provisions of the Act to divest the arbitrator of proceeding with the arbitration proceedings culminating in the award.
21. In view of the above discussion, 1 am clearly of the opinion that the impugned award does not suffer from any error of law or fact apparent an the face of the award and that the award is a bald one, so to say, it is a non-speaking award. As the parties chose to abide by the decision of the arbitrator instead of going to the civil Court and the arbitrator had full powers to give his award in respect of all disputes arising under the contract except those which were specifically exempted under clause 70, under which the reference was made to the arbitrator, the award cannot be held to be without jurisdiction.
22. Consequently, the decision of the trial Court is affirmed and the appeal is dismissed with no order as to costs.
23. Appeal dismissed.