1. The present appeal from order is directed against the impugned order passed by the learned Civil Judge, S.D. Bhuj on August 13, 1976, as the Board of Trustees for the Port of Kandla were aggrieved by the impugned order passed by the learned Civil Judge, whereby he rejected the application filed by the appellant trustees for setting aside the interim award on Claim No. 2 given on February 6, 1975 under Sections 14, 16, 30 and 33 etc. of the Arbitration Act, 1940.
2. A few relevant facts giving rise to the present appeal may be shortly stated.
3. On October 20, 1971, the appellants-trustees entered into a contract for the construction of the modification work of Oil Jetty at Old Kandla with M/s. Radio Foundation Engineering Ltd., and Hazarat and Co., one of the terms and conditions of the said contract was in the following terms.
The completion period will be 12 months which does not include the preparation period of four months. Within 2 weeks of the letter of acceptance, the requirements of structural steel for temporary works will be intimated by the contractors to the Department. The preparation period will commence when all steel required for working platform for pier head, gangway piles, piles in front of Caisson No. 2 an piles for triangular portion are made available at Kandla port Trust store yard All balance steel will be handed over within 3 months thereafter.
4. The aforesaid contract also contained a condition for exclusion rates in consonance with enhancement in Consumer Price Index. 1 relevant clause is as under:
Our rates are based on Consumer Price Index Number (General) for Industrial Labour in Kandla on 28-5-1971. If the Index number is enhanced we will be paid extra by the Department on the basis of the following formulas:
35 I-1 cV= X R1000 I cWhere V-amount in Rupees to be paid to us
R-value of work done during the period under consideration.
Ic-Consumer's Price Index Number (General) for Industrial Labour on
14-5-71 in Kandla.
1-Consumer Price Index No. (General) for industrial Labour in Kandla in the Period under consideration. For application of this formula the consumer price index No. (General) as printed in the Indian Labour Journal Published by the Labour Bureau, Ministry of Labour Employment and Rehabilitation Govt, of India will be adopted.
The above condition was subsequently slightly modified and the following clause was added:(ii) (page-7): Additional payment under this clause will be made only incase of Increase by more than 5 points in the consumer Price Index. Likewise if there is any decrease in the Consumer Price Index by more than 5 points, rebate will be given. It is understood that for any increase In the Index by more than 5 points, the full amount what is due under this clause will be paid to us.
5. Under the above clause the contract rates were to be enhanced according to the formula proved in the above clause with the increase in Consumer Price Index Number (general) for Industrial Labour in Kandla. The above contract also contained a condition for payment of liquidated damages in case the completion of work is delayed beyond the period of completion specified in the contract. In that behalf, the relevant clause is as under:
The contractors agree to pay towards liquidated damages an amount equal to 1/4% of total value of the work per week beyond the completion date or extended completion date, subject to total liquidated damages being 5 per cent of the total value of the work.
6. The aforesaid contract also contained an arbitration clause for reference of disputes between the parties concerning the works or the construction, or meaning of (he contract or the specifications or the payment to be made in pursuance thereof or the rights, duties and obligations of the parties. The relevant clause in that behalf is in the following terms:
All disputes or questions including those on which Chief Engineer's decision is final which shall, either during the progress of the work or after their completion, arise between the parties hereto concerning the works or the execution or maintenance thereof or the construction or meaning of these of the specifications, drawings plans, instructions or directed referred to above or as to any other matter arising out of connected with or incidental to these, or works to be executed or payments to be made in pursuance thereof, or the rights, duties or obligations of any persons relating to the premises shall be referred to two arbitrators, one to be appointed by each party to the dispute in accordance with and subject to the provisions of the Indian Arbitration Act, 1940. In case of disagreement between the arbitrators, the disputes will be referred to an Umpire nominated by Arbitrators. Further both the Arbitrators and umpire shall be civil engineers and no claim will be dismissed on grounds of limitation.
7. It was the case of the appellants that the contract work was to be completed on or before February 28, 1974 but respondent No. 3 did not complete the work on that day, and, the work was delayed and was continued thereafter. On August 7, 1974 the respondent contractor sent telegram for their claim for exclusion of rates having regard to the Consumer Price Index. The appellant-trustees as well as the respondent contractor did appoint their respective arbitrators.
8. The appellants-trustees did request the respondents-contractors to intimate to them their list of claims indicating the amounts involved with the respondent contractors but they did not furnish to the appellants trustees the list of claims indicating the amount claimed. Ultimately, the respondent-contractors submitted their claims before the arbitrators.
9. The controversy in the present proceedings between the appellants trustees and the respondents-contractors is only in respect of claim No. 2 as lodged by the respondents-contractors before the arbitrators.
10. Claim No. 2 of respondents-contractors is in regard to the payment to the contractors against consumer price index. It was the case of the respondents-contractors, that having regard to the terms of the contract, they are entitled for payment against the consumer price index, and in this behalf the accepted condition of contract is in the following terms:
ii. M/s. Rodio-Hazarat's rates are based on consumer Price Index Number (General) for Industrial Labour in Kandla on 28-5-1971. If the index number is enhanced, M/s. Rodio-Hazarat will be paid extra by the Department on the basis of the following formulas:
35 I-1 cV= X R =100 IcWhere V-amount in Rupees to be paid to M/s. Radio-Hazarat.
R-Value of work done during the period under consideration.
Ic-Consumer's Price Index Number (General) for Industrial Labour on
14-5-1971 in Kandla.
I-Consumer Price Index Number (General) for Industrial Labour in Kandla for the period under consideration. For application of this formula the Consumer Price Index Number (General) as printed in the Indian Labour Journal published by the Labour Bureau Ministry of Labour Employment and Rehabilitation Government of India will be adopted.
The additional payment under this clause will be made only in case of increase by more than 5 points in the consumer price index. Likewise if there is any decrease in the Price Index by more than 5 points rebate will be given. It is understood that for any increase in the Index by more than 5 points the full amount that is due this clause will be made.
11. It was the case of the respondents-contractors before the arbitrators, that they have been submitting bills for increase in the consumer price index from time to time. However, the appellants-trustees did not pay to the respondent-contractors any amount on the ground, that the Consumer Price Index for Industrial Labour in Kandla is not published in the Indian Labour Journal by the Labour, Bureau, Ministry of Labour Employment and Rehabilitation. Government of India. The respondents contractors also stated that the Consumer Price Index is published only for two centres of Gujarat State namely (1) Bhavnagar and (2) Ahmedabad. The respondents-contractors also stated that as per normal practice, where the Consumer Price Index is not published for a particular town, the index of the nearest centre is to be considered, and Bhavnagar being the nearest town for which Index is published, would be applicable to their claim. On that basis, the respondents-contractors had submitted excalation bills which where not paid by the appellants-trustees and the said bills are of Rs. 4,00,000/- approximately. The respondents-contractors also stated before the arbitrators, that in all fairness equity and justice, the aforesaid amount might be awarded in their favour on the basis of the Index Number for the nearest town i.e. Bhavnagar, which furnished to the port.
12. To the aforesaid claim of respondent No. 3 the contractors, the appellants-trustees case in substance was that they had to pay to the respondents-contractors in respect of claim No. 2 on the basis of the consumers price index (general) for industrial labour in Kandla. They also stated, that the respondents-contractors should have specified their said claim on the basis of the consumer price index number for industrial labour in Kandla. They also stated that the respondents-contractors were only entitled to claim any amount from the appellants-trustees till the date of the completion of the work, and if the arbitrators wanted to grant any claim of the contractors for a period beyond the agreed date for the completion of the contract-work, they should have taken into consideration the appellants-trustees claim for damages as the contract work was not completed on February 28, 1974 but, was completed thereafter. The appellants-trustees also submitted that the arbitrators have no jurisdiction to decide disputes which had taken place after the reference in respect of the existing disputes was made to the aforesaid arbitrators.
13. The arbitrators declared that a sum of Rs. 3,62,421/- is due and payable by the appellants to the respondents-contractors in respect of the claim contained in the statement of claim for work executed upto 31st May, 1974. The arbitrators also directed the appellants to pay to the respondents-contractors the aforesaid amount in respect of Claim No. 2 contained in the statement of claim for the work executed upto 31st May, 1974 filed by the respondents-contractors. The arbitrators also directed that for the work executed for the period commencing from 1st June, 1974 till completion of the above contract, the appellants should pay to the respondents-contractors on the basis of All India Average Consumer Price Index Nos. for Industrial Workers (General) and for the purpose of computing the further amount payable to the Claimants pursuant to the above directive, the same basis would apply. The arbitrators also declared that the aforesaid award would be taken into consideration while making the final award.
14. The appellants-trustees of the port of Kandla were aggrieved at the aforesaid interim award given by the Arbitrators and filed Civil Miscellaneous Application No. 14 of 1975 in the Court of the Civil Judge, (S.D.), Kutch at Bhuj, and in substance, prayed that the aforesaid award should be set aside and that the learned Arbitrators should be directed to hear all the disputed claims together and that the arbitrator should be directed to give only one award.
15. The learned Civil Judge rejected the aforesaid application by the appellants-trustees on the grounds set out by the learned Judge in the impugned order. The learned Civil Judge took the view that the appellants-trustees had consented before the arbitrators for giving their award for the period upto 28th February, 1974, and hence, the arbitrators had the jurisdiction to pass the interim impugned award. He also look the view, that the appellants trustees cannot deny their liability to make payment to respondents-contractors upon the increase of the pi ice index. He also took the view, that the question of paying damages to the appellant-trustees on account of delay caused in the completion of the contract work was kept open, and the same would be considered when the final award will be passed. Shortly stated on the aforesaid grounds, the learned Civil Judge rejected the application filed by the appellants-trustees for setting aside the impugned award.
16. It is under these circumstances that Appeal From Order No. 188 of 1976 is filed by the appellants-trustees.
17. Civil Application No. 2429 of 1976 in Appeal From Order No. 188 of 1976 is filed for an interim injunction restraining the Civil Judge from making the award of the arbitrators in the matter of arbitration between the appellant and respondent No. 3 on claim No. 2 dated February 6, 1975 as the rule of the court, and from passing the decide in terms of the award.
18. Civil Revision Application No. 1125 of 1976 is filed by the contractors M/s. Radio Foundation and Engineering Limited and Hazarat and Company, as they were aggrieved by the judgment and order of the learned Civil Judge (S.D.), Shuj-Kutch, as the learned Civil Judge, suo motu did not pass a decree in terms of the interim award.
19. It is under these circumstances, that the present three proceedings are placed for disposal and as they are arising out of one impugned order passed by the Civil Judge. Hence I propose to dispose of them by delivering this common judgment.
20. Mr. C.T. Daru, the learned advocate appearing for the appellant trustees only raised the following contentions.
(1) That for paying the amount to the respondents-contractors as the amount due and payable to them under the contract, it is the term and condition of the contract between the parties, that the consumer price index number (general) for industrial labour in Kandla should be the basis for determining the amount payable to the respondents-contractors. He stated that the arbitrators while passing the impugned award, did not see that the respondents-contractors did not put up their claim No. 2 on the basis of consumers price index number (general) for industrial labour in Kandla, though the appellants-trustees had specifically taken that contention before the arbitrators. He stated, that the arbitrators in passing the impugned award in favour of the respondents-contractors took into consideration All India average consumer price index numbers for industrial workers (general) for the purpose of computing the amount due and payable to the respondents contractors. Mr. Daru, in substance, submitted that a different yardstick which was alien to the terms of the contract was adopted by the arbitrators in computing the amount payable to the respondents contractors. He stated, that the arbitrators by adopting an entirely alien yardstick for computing the amount payable to the respondents contractors, committed an error of law apparent on the fact of the record. He stated, that in this view of the matter, the impugned award should be set aside and a direction should be given to the arbitrators to act in accordance with the terms of the contract viz. in order to compute the amount payable to the respondents-contractors, the general price index as prevalent in Kandla should be the only basis for computing the amount due and payable to the respondents-contractors.
(2) The arbitrators should have computed the amount payable to the respondents-contractors only upto 28th February, 1974, according to the appellants-trustees, or upto the agreed date on which the contract was to be completed. That the arbitrators, in the instant case, had given the compensation to the respondents-contractors for a period upto 1st June, 1976. If the arbitrators had done so, the arbitrators should have taken into their consideration the claim of the appellants trustees for damages, as the respondents-contractors did not complete the contract work on 28th February, 1974, the date, which according to the appellants-trustees, was the agreed date by which the contract work to be completed. In substance, Mr. Daru urged, that the respondents-contractors were guilty of completing the work late, and hence, the respondents-contractors were also answerable to the appellants-trustees for the delay in completing the contract work but, that claim was not considered by the arbitrators.
(3) That in any event, the present arbitrators had no jurisdiction to decide any dispute which had arisen between the parties after the submission of the disputes which were already referred to the present arbitrators.
21. These were the only submissions made by Mr. Daru in course of the hearing of the aforesaid proceedings.
22. Reading the terms of the contract between the parties, I am convinced, that in the instant case, it is one of the agreed terms and conditions of the contract, that the respondents-contractors were to be paid escalation amount having regard to the consumers price index (general) for industrial labour in kandla for the period under consideration. If this was the term or the condition of the contract, I fail to understand as to how the arbitrators could have ever taken into consideration all India average consumer price index numbers for industrial workers (general) for the purpose of computing the amount payable to the respondents-contractors. Surely such a yardstick should not have been adopted by the arbitrators for determining the amount payable to the respondents contractors, and if, the arbitrators had adopted such a yardstick for the purpose of computing the amount due and payable to the respondents-contractors, in my view, the arbitrators did commit an obvious error of law apparent on the face of the record. The consideration which weighed with the arbitrators in computing the amount of compensation is patently and manifestly unjust and alien to the terms of the contract, and that being so, the arbitrators committed an error of law apparent on the fact of the record.
23. In order to justify the submission Mr. Daru invited my attention to the decision of the Supreme Court in Rohtas Industries v. Its Union : (1976)ILLJ274SC , and paragraphs 14, 15, 16 and part of para 17 of the said judgment are in the following terms:
14. In one of the lending English cases Champsey Bhara and Co. 50 Ind. Appi 324-AIR 1923 PC 66, followed in India, Lord Dunedin defined 'error of law on the face of the award' as 'where the question of law necessarily arises on the face of the award upon some paper accompanying and forming part of the award' and said that then only the error of law therein would warrant judicial correction. The law Lord expressed himself lucently when he stated:
An error in law on the face of the award means, in Their Lordships' view, that you can find in the award some legal proposition which is the basis of the award and which you can then say is erroneous.Williams J. in the case of Hodgkinsons v. Feraie (1807) 3 CB(NS)189 hit the nail on the head by using the telling test as firmly established, viz., 'where the question of law necessarily arises on the face of the award.' In this view the enquiry by the Court before venturing to interfere is to ascertain whether an erroneous legal proposition is the basis of the award. Nay, still less. Does a question of law (not even a proposition of law) necessarily arise on the award followed by a flawsome finding explicit or visibly implicit? Then the Court can correct.
15. Tucker J. in James Clark (1944) I KB 566 formulates the law to mean that if the award were founded on a finding which admits of only one proposition of law as its foundation and that law is erroneous on its face, the Court has the power and, therefore, the duty to set right. While the Judge cannot explore, by chasing subterranean routes or ferret out by delving deep what lies buried in the unspoken cerebration of the arbitrator and interfere with the award on the discovery of an error of law by such adventure, it is within his purview to look closely at the face of the award to discern the law on which the arbitrator has acted if it is transparent, even translucent but lingering between the lines or merely wearing a verbal veil. If by such an intelligent inspection of the mien of the award which is an index of the mind of the author-and error of law forming the basis of the verdict is directly disclosed, the decision is liable to judicial demolition. In James dark the issue was posed with considerable clarity and nicety. If, at its face value, the award appears to be based on an erroneous finding of law alone, it must fail. The clincher is that the factual conclusion involving a legal question must necessarily be wrong in point of law. Even though the award contains no statement of the legal proposition, if the facts found raise a clear point of law which is erroneous on the face of it; the Court may rightly hold that an error of law on the face of the award exist and invalidates.
16. Let us put the proposition more expressively and explicitly. What is important is a question of law arising on the face of the facts found and its resolution ex fade or sub-silentio. The arbitrator may not state the law as such. Even then such cute silence confers no greater of subtler immunity on the award than plain speech. The need for a speaking order, where considerable numbers are affected in their substantial rights, may well be a facet of natural justice or fair procedure, although, in this case, we do not have to go so far. If, as here, you find an erroneous law as the necessary buckle between the facts found and the conclusions recorded, the award bears its condemnation on its bosom. Not a reference in a narrative but a clear legal nexus between the facts and the finding. The law sets no premium on juggling with drafting the award or binding the legal error by blanking out. The inscrutable face of the sphinx has no better title to invulnerability than a speaking face which is a candid index of the mind. We may, by way of aside, express hopefully the view that a minimal judicialisation by statement, laconic or lengthy, of the essential law that guides the decision is not only reasonable and desirable but has, over the ages been observed by arbitrators and quasi-judicial tribunals as a norm of processual justice. We do not dilate on this part of the argument as we are satisfied that be the test the deeply embedded rules to issue certiorari or the traditional grounds to set aside an arbitration award 'thin partition do their bounds divide' on the facts and circumstances of the present case.
17. The decisive question now comes to the fore. Did the arbitrators commit an error of law on the face of the award in the expanded sense we have explained? The basic facts found by the arbitrators are beyond dispute and admit of a brief statement. We summarise the fact situation succinctly and fairly when we state that according to the arbitrators, the strike in question was in violation of Section 24 of the Act and therefore illegal.
24. In view of what has been stated above, in the aforesaid judgment of the Supreme Court. Mr. Daru submitted that in the instant case, the impugned award clearly indicates a flawsome finding which is not only visibly implicit but also explicit. He also stated, that the very basis of passing the impugned award clearly reveals an error of law apparent on the face of the record.
25. Mr. Daru also invited my attention to the reported decision in Hastimal v. Hiralal : AIR1954Bom243 . In paragraph 6 of the said judgment it is stated as follows:
If the award directs a party to do an act which is prohibited by law or if it ii otherwise patently illegal and void, we think it would be open to the Court to consider this patent defect in the award suo motu' and when the court acts 'suo motu' no question of limitation prescribed by Article 158 can arise. In our opinion, the words used both in Section 17 and Section 30 are wide enough to include the jurisdiction of the court to deal with matters covered by those sections 'suo motu.
26. In view of what has been stated above, and on the facts of the case, it is clear to my mind that the arbitrators by adopting a different and entirely alien yardstick for computing the amount payable to the respondents, the arbitrators did commit an error of law apparent on the face of the record, and hence, the same requires correction at the hands of this Court. Mr. Daru is also right in his submission, that when the arbitrators computed the amount due and payable to the contractors, they should have considered the claims of the respondents-contractors only upto 28th February, 1974 or the agreed date between the parties for the completion of the contract work, but, if the arbitrators wanted to give an interim relief to the respondents-contractors for a period even beyond February 28, 1974, the arbitrators should have taken into consideration the claim of the appellants-trustees for damages, as the respondents-contractors caused delay in completing the contract work. Mr. Daru is also right in bringing to my notice, that the present arbitrators have no jurisdiction to decide the disputes which had subsequently arisen after the reference of the present disputes to them.
27. But Mr. K.S. Nanavati, the learned advocate appearing for the respondents-contractors very vehemently urged, that in the instant case, the impugned award is silent in respect of the yardstick adopted by the arbitra tors in awarding a sum of Rs. 3,62,421/- as can be seen from the impugned award itself at points 'A' and 'B' in the award. Mr. Nanavati urged, that if the impugned award is silent as to what weighed with the arbitrators in computing the amount of Rs. 3,62,421/-, it is not open to me to interfere with the impugned order passed by the learned Civil Judge. He stated, that in any event, this is a case, where there is no error of law apparent on the face of the record, and hence, I should be reluctant to interfere with the order passed by the learned Civil Judge. Mr. Nanavati also urged, that it is not open to the appellants-trustees to make out the aforesaid main points for the first time in this Court, particularly when the appellants-trustees did not take up that point specifically in terms before the learned Civil Judge.
28. In order to justify the submission, Mr. Nanavati invited my attention to the decision of the Supreme Court in N. Chelloppan v. Kerala State Electricity Board : 2SCR811 , and submitted, that unless an erroneous proposition of law is stated in the award and which is the basis of the award, then only the award can be set aside or remitted on the ground of error of law apparent on the face of the record He also urged on the basis of the reported decision 'of the Calcutta High Court in Prernchand v. Fort Choster Jute Mfg. Company Ltd : AIR1959Cal620 that as the appellants-trustees did not take up the aforesaid main points before the learned Civil Judge, it would not be open to the appellants-trustees to take up that point for the first time in this Court, though he conceded that such a point was taken before the arbitrators.
29. With respect, it is not possible for me to agree or accept any of the submissions made by Mr. Nanavati. In the instant case, the arbitrators as stated above, have adopted an entirely different and an alien yardstick for computing the amount payable to the respondents-contractors, and in my view that error is not only visibly implicit but also explicit. In order to come to such a conclusion, did take into consideration the entire impugned award given by the arbitrators. In the impugned award which is Annexture 'A' to the appeal memo filed by the appellants-trustees, it is clearly stated that the respondents-contractors should be paid on the basis of All India Average Consumers Index price (General). Taking into consideration the entire award-being Annexure 'A' to the appeal memo, I am-convinced that the arbitrators completely ignored the terms of the contract between the parties, and that being so, in my view the arbitrators committed an error of law apparent on the face of the record. In this view of the matter, I do not see any substance or merit in the aforesaid submission of Mr. Nanavati.
30. I am also satisfied, that in the instant case there is a dispute between the parties as to whether the contract which was to be completed on February 28, 1974 or on the date later than February 28, 1974. If the contract work was not completed on an agreed date, the appellants-trustees had obviously a right in law to claim damages from the respondents contractors for the delay for completing the contract work, and that being so, the arbitrators ought not to have passed any impugned award for a period subsequent to the completion of the contract work as the arbitrators were bound in law to consider the claim of the trustees for damages against the respondents-contractors on that count. I am also convinced that the present arbitrators has only the jurisdiction to decide the disputes which existed at the time of the reference, and hence, obviously they have no jurisdiction to decide any disputes which took place after the reference and referred to in the supplementary claim statement before the arbitrators.
31. As a result of the aforesaid discussion, I set aside the impugned order passed by the learned Civil Judge on Ex. 14 & Ex. 22, and also set aside the interim award passed by the arbitrators being Annexure 'A' to the memo of appeal, and direct the arbitrators to rehear the parties in the light of my aforesaid observations. I also direct the arbitrators to hear the matter fully in respect of all the claims lodged by the respondents-contractors. I also direct the arbitrators to give one award on all the claims filed by the respondents-contractors within a period of two months after the receipt of the writ from this Court to the trial Court, and should submit the entire award to the Civil Court within the aforesaid period.
32. In the result. Appeal From Order No. 188 of 1976 is allowed with no order as to costs. In view of my order in the main matter, there will be no order on the civil application. In view of the aforesaid directions in the appeal. Civil Revision Application No. 1125 of 1976 does not survive, and hence, stands disposed of with no order as to costs.