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Om Prakash Baldev Kishan Vs. Union of India and anr. - Court Judgment

LegalCrystal Citation
SubjectLabour and Industrial
CourtDelhi High Court
Decided On
Case NumberFirst Appeal Nos. 14 and 32 of 1980
Judge
Reported in1984(7)DRJ164
ActsArbitration Act, 1940 - Sections 30
AppellantOm Prakash Baldev Kishan
RespondentUnion of India and anr.
Advocates: S.C. Malik,; D.P. Sharma and; D.K. Kapur, Advs
Cases ReferredDes Raj & Sons v. Union of India and
Excerpt:
.....not vitiate the award unless the error appears on the fact of the award.; 'the question whether a contract or a clause of it is incorporated in the award is a question of construction of the award. 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 of regarding contracts or other documents into the award is not to be encourages or extended. [see babu ram v. nanhemal, c.a, no. 107 of 1966, d/ 5-12-1968 (s.c.) ]. the rule thus is that as the parties choose their own arbitrator to be judge in the dispute between them, they cannot, when the..........that the contractor would not be entitled to any compensation on account of the suspension of work. clause 3.1 of the special conditions laid down that the contractor shall have no claim if on account of local regulations or otherwise he was required to pay- wages in excess of the fair wages shown in the schedule of fair wages. in view of these specific terms of the contract, argued the learned counsel, the arbitrator was not competent to award any compensation against claims nos. i and 2, he had misconducted the proceedings by awarding rs. 3,26,174.56 and rs. 67,414.83 against those claims and, thereforee, the award regarding claims nos. 1 and 2 was liable to be set aside. we find no merit in this contention. (11) breach of contract occurs where a party repudiates or fails to.....
Judgment:

G.C. Jain, J.

(1) These two cross-appeals (F.A.O. (O.S.) No. 14 of 1980 and F.A.O. (O.S) No. 32 of 1980) arise out of the judgment of a learned Single Judge dated November 20, 1979.

(2) Messrs 0m Parkash Baldev Krishan (hereinafter to be referred as 'the Contractor') submitted a tender for 'Provision of Married Accommodation for CPL's/AC's Flt. Sgt./MWO's/WO's/Near Delhi'. The tender was accepted and the work was awarded to the contractor by the Union of India vide agreement No. CEDZ-8 of 1972-73, dated August 21, 1973. Clauses 9, 26, 62(0) and 70 of the General Conditions of contract and clause 3.1 of the Special Conditions of Contract, which are relevant for the decision of these appeals, read as under :

'9.Suspension of Work. The Contractor shall suspend execution of the Works or any part of parts 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 Garrision 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 claim in this respect for compensation or otherwise, howsoever shall be adm itted,'

'26.Labour-The Contractor shall employ labour in sufficient number to maintain the required rate of progress and of quality to ensure workmanship of the degree required by the Specifications and to the satisfaction of the Engineer-in-Charge. The Contractor shall remain liable for the payment of all wages or other moneys to his work-people or employees under the Payment of Wages Act, 1936, Minimum Wages Act, 1948 Employers' Liability Act, 1938, Workman's Compensation Act, 1923, or any other Act or enactments relating thereto and rules framed there under from time to time. The Contractor shall work only on and during the hours of a working day unless he obtains the prior written approval of the Engineer-in-charge to do otherwise. If such approval is given no liability in respect of any excess cost arising there from shall be incurred by Government.

'62(G).If any work, the rate for which cannot be obtained by any of the methods referred to in paras (A) to (E) above, has been ordered on the Contractor, the rate shall be decided by the G.E. on the basis of the cost to the Contractor at site of Works plus l0/o to cover all overheads and profit. Provided that if the Contractor is not satisfied with the decision of the G.E., he shall be entitled to represent the matter to the C.W.E. within seven days of receipt of the G.E.'s decision and the decision of the C.W.E. thereon shall be final and binding.'

'70.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'.

'3.1.The contractor shall have no claim whatsoever, if on account of any local regulations or otherwise he is required to pay wages in excess of the fair wages shown in the Schedule of Fair Wages.'

Certain disputes and differences arose between the parties. Contractor raised several claims. These included the following four claims :

'1.Reimbursement/compensation for infructuous expenditure incurred on account of enforced idleness of staff, shuttering and machinery during suspension of work and also for higher cost incurred in the purchase of material and the employment of labour subsequent, to resumption of work after the period of suspension Rs. 6,37,557.00 .

'2.Reimbursement of additional expenditure incurred due to rise in labour wages enforced by the Govt. w.e-f. 25 Apr. 73 Rs. 1,19,556.00 .

13.Reimbursement of deductions as in Do No. 29 for Pcc floor instead of terrazzo under cooking shelves Rs. 4,850.25.

14.Sum under paid in the final shape of Do No. 31...Rs. 62, 000.00 '.

(3) In pursuance of the arbitration clause the disputes were referred to the decision of Brigadier S. R. Bagga, as sole arbitrator. The learned arbitrator made his award on January 28, 1978 and awarded a sum of Rs. 4,56,535.41 with interest on the said amount at 6 per cent per annum from January 28, 1978 up to.the date of payment or decree whichever was earlier Rs. 3,26,174.56, Rs. 67,41483, Rs. 4,850.25 and Rs. 33,612.60 were awarded against the above-mentioned claims Nos. 1, 2, 13 and 14.

(4) On an application made by the Contractor under Sections 14 and 17 of the Arbitration Act (Suit No. 185-A of 1978) the award and the proceedings were filed in the court by the learned Arbitrator.

(5) 0N receipt of the notice of the filing of the award the Union of India filed objections under Section 30 and 33 (I.A. No. 3396 of 1978.)

(6) It was averred that the learned arbitrator had misconducted the proceedings by making the award contrary to clause 9 of the General conditions and clause 3.1 of the Special Conditions. He had misconducted the proceedings by failing the take into consideration that there was no provision in the contract for escalation of the contract price on account of any increase in wages of labour employed in the work by the contractor or on account of rise in material costs except on account of Act of the Legislature. It was further averred that the arbitrator had misconducted the proceedings by adjudicating the claims subject-matter of claim 13 and 14 as the said disputes were not covered by the arbitration clause.

(7) The learned single Judge held that the award was a non-speaking award; it was for the arbitrator to interpret the scope and meanings of the various clauses of the contract ; the award did not show as to how those clauses were interpreted and understood and consequently there was no misconduct so far as claims I and 2 were concerned. Regarding claims 13 and 14 it was held that the disputes under those claims were not covered by the arbitration clause and, thereforee, the arbitrator had no jurisdiction to decide the said claims. The award regarding claims Nos. 13 and 14 being severable, he set aside the award regarding claims Nos. 13 and 14 only and made the rest of it a rule of the court and granted a decree for Rs. 4,18,072.56 with interest at 6 per cent per annum from January 28, 1978 till the date of decree as per the award and from the date of decree till payment.

(8) Under Section 30 of the Arbitration Act an award can be set aside if the arbitrator has misconducted himself or the proceedings. The expression 'misconduct' is of wide import. It does not necessarily imply moral turpitude, dishonesty, partiality and bias. It is often used in a technical sense denoting irregularity. In that sense it means and includes some honest though erroneous breach of duty causing, miscarriage of justice. If there has been some mishandling of the arbitration proceedings or serious neglect of duties on the part of the arbitrator,which is likely to lead to substantial miscarriage of justice the court would be justified in setting aside the award.

(9) In K. P. Poulose v. State of Kerala and another, : AIR1975SC1259 the Supreme Court held :

'UNDER Section 30(a) of the Arbitration. Act an award can be set aside when an Arbitrator has misconducted himself or the proceedings. Misconduct under Section 30(a) has not a connotation of moral lapse It comprises legal misconduct which is complete if the Arbitrator on the face of the award arrives, at an inconsistent conclusion even. on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision. It is in this sense that the Arbitrator has .misconducted the proceedings in this case.'

In the present case it cannot be said that the arbitrator had ignored the terms of the contract between the parties. It has been recited in the award that he had heard, examined and considered that pleadings, documentary and oral evidence produced before him and also the oral submissions and arguments made by the parties. As a matter of fact, this is not the grievance of the Union of India,

(10) The contention raised by Mr. D.K. Kapur, learned counsel for the Union of India, is that the award against claims Nos. 1 and 2 was in violation of and contrary to the terms of the agreement. Clause 9 ' of the General Conditions provided that the contractor would not be entitled to any compensation on account of the suspension of work. Clause 3.1 of the Special conditions laid down that the contractor shall have no claim if on account of local regulations or otherwise he was required to pay- wages in excess of the fair wages shown in the Schedule of Fair Wages. In view of these specific terms of the contract, argued the learned counsel, the arbitrator was not competent to award any compensation against claims Nos. I and 2, he had misconducted the proceedings by awarding Rs. 3,26,174.56 and Rs. 67,414.83 against those claims and, thereforee, the award regarding claims Nos. 1 and 2 was liable to be set aside. We find no merit in this contention.

(11) Breach of contract occurs where a party repudiates or fails to perform one or more of the obligations imposed upon him under the contract. Repudiation occurs when one of the parties indicates by words or conduct that he is unable or unwilling to perform his side of the contract A breach of contract always entitles the innocent party to maintain an action for damages.

(12) The Garrison Engineer admittedly suspended the contract from September 11, 1973 to February 20, 1973. Suspension means temporal repudication. The contractor was, thereforee, entitled to damages for this breach.

(13) Clause 9 of the General Conditions excluded the liability of the Union of India for compensation/damages on account of suspension of work. Clause 3.1 of the special Conditions exempted the 'Union of India from compensating the. contractor in case he was required to pay higher wages in pursuance of local regulations or otherwise. The question whether the exclusion clause would apply was one of the true construction of the contract. The v arbitrator was to ascertain the contractual intention after examining the contract as a whole. It was for him to decide whether the suspension of work was for valid reasons and whether the exclusion clause would apply even when the suspension of the work was ordered without any reason or rhyme Application of exclusion clauses often also depends on the question when the' breach committed, was a fundamental breach.

(14) In U.G.S. Finance Ltd (1964) 1 LR 446, pearson L.J. said:

'AS to the question of 'fundamental breach' I think there is rule of construction that normally an exception or exclusion clause or similar provision in a contract should be construed as not applying to a situation created by a fundamental breach of contract. This is not an independent rule of law imposed by the court on the parties willy-nilly in disregard of their contractual intention on the contrary it is a rule of construction based on the presumed intention of the contracting parties. It involves the implication of a term to give to the contract that business efficacy which the parties as reasonable mean must have intended it to have. This rule of construction is not new in principle but it has become prominent in recent years in consequence of the tendency to have standard forms of contract containing exceptions clauses drawn in extravagantly wide terms, which would produce absurd results if applied literally.'

This legal proposition was approved in Suisse All antique Societe D' Armoment Maritime S.A. v. N. V. Rotterdamsche Kolen Centrals 1967 A.C. 361.

(15) The question of construction, generally speaking, is a question of law. An arbitrator is a domestic tribunal appointed by the parties. His decisions right or wrong are binding on the parties. An erroneous decision by him on a question of law does not vitiate the award unless the error appears on the fact of the award. The Supreme Court in M/s. Alien Berry and Co. Private Ltd. v. The Union of India, : [1971]3SCR282 held:

'THE question whether a contract or a clause of it is incorporated in the award is a question of construction (if the award. 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 of reading contracts or other documents into the award is not to be encouraged or ex- tended. [see Babu Ram v. Nanhemal, C.A. No. 107 of 1966, D.00 5-12-1968 (S.C.)]. The rule thus is that as the parties choose their own arbitrator to be Judge in the dispute between them, they cannot, when the award is good on the face of it, object to the decision either upon the law or the facts. thereforee, even when an arbitrator commits a mistake either in law or in fact in determing the matters referred to him but such 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 mi stake.'

(16) An error of law on the face of the award means as laid down in Champasey Bhara and Company v.Jivraj Baloo Spinning and Weaving Company Limited 1923 A.C. 480: 'that you can find jn 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'. This principle was approved by the Supreme Court in various judgments, (see Union of India v. A. L. Rallia Ram, : [1964]3SCR164 and N. Chellappan v. Secretary, Kerala State Electricity Board and another, : [1975]2SCR811 ).

(17) The award is the present case is a non-speaking award. The contract between the parties or the clauses in question have not been incorporated in the award. The away does not contain any legal proposition which could be said to be erroneous.

(18) 1.MR. K.D. Kapur learned counsel for the Union of India, relied on the decision of the Supreme Court in Jivarajbhai Ujamshi Sheth and others v. ChintamanraoBalaji and others, : [1964]5SCR480 . This judgment in our view, does not help him much. In para 18 of the judgment it was observed that 'an award made by an arbitrator is conclusive as a judgment, between the parties and the Court is entitled to set aside an award if the arbitrator has misconducted himself in the proceedings or when - the 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 of the Arbitration Act or where an award has been improperly procured or is otherwise invalid (Section 30 of the Arbitration Act). An award may be set aside by the Court on the ground of error on the face of the award, but an award is not invalid merely because by a process of inference and argument it may be demonstrated that the arbitrator has committed some mistake in ariving at his conclusion'. However, on the facts of that case it was held that the arbitrator had included in his valuation some amount which he was incompetent by virtue of the limits placed on his authority, by the deed of reference, to include. That was not a case in which the arbitrator had committed a mere error of law, or fact in reaching his conclusion on the questions subject-matter for his adjudication. It was a case of assumption of jurisdiction not possessed by him and that rendered the award, to the extent which it was beyond the arbitrator's jurisdiction, invalid. The deed of reference in the present case had not placed any limits on the, jurisdiction of the arbitrator regarding decision of claims Nos. I and 2 The arbitrator had jurisdiction to construe the various clauses of the contract. It cannot be said that he exceeded jurisdiction so far as the decisions regarding claims Nos. 1 and 2 was concerned.

(19) Mr. Kapur also referred to a decision of a Single Judge of this Court in M/s. Des Raj & Sons v. Union of India and another (Suit No. 524-A of 1977, decided on January 22, 1980). This decision is subject matter of appeal No. F.A.O. (0.S.) 35 of 1980. In that case also, like the present case, the Union of India assailed the award for Rs. 44,078-22 and Rs. 8,073.25 against claim for damages on account of suspension of work and hike in labour charges on the plea that the award was in violation of Clause 9 of general conditions and Clause 3.1 of the special conditions. The learned single Judge, (D.K. Kapur, J.) allowed the objections. He held :--

'THE arbitrator can make an error of law or of fact, but he cannot go outside the contract. When the parties have agreed that no claim will be admissible for compensation due to suspension of the work, then it is immaterial why the suspension has occurred. It is clear from the term just reproduced that the parties had agreed between themselves that if the work is suspended, then no compensation can be claimed. Yet, the arbitrator has allowed that claimed. In my view, the arbitrator has acted beyond his jurisdiction. No dispute could arise under the contract because of this, so the award is without jurisdiction as far as it allows the claim of Rs. 44,078.72, against claim No. 12 mentioned in the award. Similarly, there is a special condition regarding wages which is Clause 3,1 which reads as follows :

'THE contractor shall have no claim whatsoever, if on account of any local regulations or otherwise he is required to pay wages in excess of the fair wages shown in the schedule of fair wages.'

The award has allowed a sum of Rs. 8,073.25 against the claim for rise in labour wages with effect from 25th April, 1973. This claim is also outside the scope of dispute because the contract states that no extra wages can be claimed for'.

(20) With respect, we cannot agree with the view taken by the learned Single Judge. Admittedly these disputes were covered by the arbitration clause. The phrase 'all disputes' used in Clause 70 of the arbitration clause means all disputes in respect of the contract and its construction. The arbitrator was, thereforee, competent to decide the disputes regarding the construction of various terms of the agreement. Learned Single Judge has him- self observed that an arbitrator could make an error of law or of fact. He, however, did not take into consideration the fact that the construction of a contract or its clauses was generally speaking a question of law. The arbitrator being a judge of questions of law as well as of facts his erroneous decision on a question of law would not vitiate the award unless the error was apparent on the face of the award. We have seen the award in that case. There was a recital that the arbitrator had examined and considered the pleadings submitted on behalf of the parties and documentary and oral evidence produced before him by them and also their oral submissions and arguments. There was no error apparent on the face of the award. The contract or its clauses had not been incorporated in the award. In the absence of the incorporation of the contract the learned Single Judge could not read the terms to find fault with the award. The view taken by the learned single Judge is contrary to the decision of the Supreme Court in the case of M/s. Allen Berry and Co. Private Ltd. (supra). The award regarding the said two claims in that case was not liable to be set aside.

(21) The appeal filed by the Union of India, thereforee, has no merit.

(22) The contractor has also filed a cross-appeal against the decision of the learned single Judge whereby the award regarding claims Nos. 13 and 14 was set aside. The short question for determination in this appeal is whether the disputes subject-matter of claims Nos. 13 and 14 were excepted matters and were not covered by the arbitration clause. An examination of Clause 70 of the General Conditions reveals that it did not cover disputes for which the division of the C.W.E. or any other person was by the contract expressed to be final and binding. Claims Nos. 13 and 14 admittedly were covered by Clause 62(G) of the agreement. Clause (26G) provides that the decision of C.W.E. regarding these disputes shall be final and binding. These disputes were, thereforee, excepted matters and were not covered by the arbitration clause.

(23) Learned counsel for the contractor contended that under Clause 62(G), Garrison Engineer was to determine the rates. The contractor then had a right to make representation to C.W.E. and his decision was to be final and binding. But in the present case the Garrison Engineer had determined the rates in consultation with C.W.E. The contractor was deprived of his right to make effective representation and, thereforee, the disputes would be covered by the arbitration clause. We do not agree. The questions as to how the Garrison Engineer fixed the rates and whether the contractor was deprived of his light to make effective representation to C.W.E. under Clause (G) are not relevant. The fact remains that the decision of the C.W.E. regarding these disputes, under the agreement, was final and binding. thereforee, these disputes were covered by the exception to arbitration clause and were excepted matters. The appeal also filed by the contractor also had no merit.

(24) In conclusion) we dismiss both the appeals. The parties, in the circumstances, are left to bear their own costs.


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