1. Heard Sri B.K. Saxena, learned Counsel for the appellant and Sri R.N. Trivedi, Senior Advocate, assisted by Sri Akhilesh Kalra, on behalf of the respondent.
2. Before coming to the merits and demerits of the appeal, it would be useful to mention certain relevant background of the case. The parties entered into a contract in March, 1981. On account of dispute, the matter was referred to Arbitrators appointed by the parties. As there was disagreement between the Arbitrators on certain points, the matter was referred to the Umpire, who delivered the Award on 20.3.1998. Thereafter the matter went to the Civil Court. The orders passed by the Civil Court were assailed before this Court in the instant appeal.
3. On 18.12.2008, a Division Bench of this Court while hearing the matter came to the conclusion that as the factual dispute is involved it can be adjudicated by the mediator. On the agreement of the parties, the matter was relegated to mediator for amicable settlement. Later on Justice O.P. Srivastava [Former Judge of this Court] was appointed as mediator. The Division Bench further provided that U.P. Power Corporation shall deposit an amount of Rs. 40 lacs in interest bearing account within a month. As the parties could not arrive to amicable settlement inspite of lapse of considerable time, an application for recalling the FAFO from the Mediator was moved by the respondent. On 24.3.2009, this appeal was listed before a Division Bench in which one of us, namely, Rajiv Sharma was a member. The Division Bench considering the peculiar circumstances of the case appointed Sri Navneet Shegal, Secretary, Energy Department, State of U.P. as Conciliator on 25th March, 2009. The Conciliator was required to submit his report on 27.3.2009. The Conciliator in his report indicated that the gap between the two offers is so large that it is very difficult to narrow it down and it is not possible to settle the dispute through conciliation. By the order dated 22.5.2009, the Hon'ble the Chief Justice nominated a Bench comprising of one of us, namely, Rajiv Sharma and Justice U.K. Dhaon [as he then was] to hear the recall application of the orders dated 24.3.2009,25.3.2009 and 27.3.2009. In between, Justice U.K. Dhaon retired and the matter was again placed before Hon'ble the Chief Justice. Hon'ble the Chief Jutice vide order dated 24.7.2009 nominated that the matter shall be placed before a Bench of which one of us, namely, Rajiv Sharma is a member. When the matter came up before us, the parties counsel stated that as the parties are litigating since more than a decade, it would be appropriate that the matter is heard finally on merits and did not press the pending misc. applications. Consequently, we proceeded to hear the matter finally.
4. Through the present First Appeal From Order under Section 39 of the Arbitration Act (X of 1940), the appellant has assailed the judgment and decree dated 12.9.2000 passed by the Civil Judge (Senior Division), Lucknow in Misc. Case No. 68-C of 98 [M/s Western India Enterprises Ltd. v. UPSEB), whereby the Civil Judge while rejecting the objections purporting to be under Section 30 and 33 of the Arbitration Act, 1940, refused to set-aside the award dated 20.3.1998.
5. Brief facts, giving rise to the instant First Appeal From Order, are that U.P. State Electricity Board [hereinafter referred to as 'Board' for the sake of brevity] entered into a contract with the erstwhile M/s Western Indian Enterprises Ltd. [known as 'WIEL], which is now known as U.B. Engineering Ltd. [hereinafter referred to as 'UBEL']. A letter of Intent as well as an order, bearing No. 3070.TDE/M-III/Anpara/WIEL was also issued on 12.3.1981. The said contract was entered for the purpose of erection, testing and commissioning of three 210 MW Boilers and Auxiliaries at Anpara Thermal Power Station. The total Contract price for the said job was Rs. 5,13,03,180/-. The completion period of the said work was as under:
1st Unit - Within 24 months
2nd Unit - Within 30 months &
3rd Unit - Within 36 months
6. Apart from the above period, 12 months' grace period was also provided and as such entire work was to be completed within a period of 48 months from the date of commencement of the work.
7. According to the appellant, the work started on 26.3.1981 and it came to an end in the month of March, 1989. Upon completion of the contractual work, the erstwhile UPSEB paid the amount under the contract to the respondent-contractor, including the amount equivalent at the rate of Rs. 1 lakh per month for almost five years, towards the period of delay in completion of the work beyond the scheduled date plus amount towards escalation in prices, by applying the Price Variation Formula incorporated in Clause No. 2 of the Letter of Intent dated 12.3.1981. On 12.3.1989, the respondent-contractor M/s WIEL wrote a letter to UPSEB proposing a new Price Variation Formula and also with respect to amendment of certain clauses in the original Letter of Intent. Pursuant to the negotiations and meetings of the High Power Committee of UPSEB, only clause Nos. 2, 3, 4 and 5 of the Letter of Intent dated 12.3.1981 were amended. While issuing the amendments, UPSEB also inserted ceiling limits of each item by indicating the maximum amounts payable or to be paid by UPSEB to M/s WIEL. Consequent to amendments, M/s WIEL lodged revised bills, so as to avail the enhanced rates. These bills were duly considered by UPSEB and all the amounts therein upto ceiling limits were paid to M/s WIEL. The contractor i.e. M/s WEIL was dissatisfied by the action of the appellant-UPSEB, in imposing ceiling limits in the amendments, therefore, a dispute had arisen, which was referred for arbitration. The Arbitration Clause No. 37 of the Contract was invoked and Hon'ble Mr. Justice B. L. Loomba, [Former Judge of this Court] was appointed on behalf of UPSEB as one of the Arbitrators whereas M/s WIEL appointed Hon'ble Mr. Justice D. B. Deshpande [Former Judge of High Court] as the other Arbitrator. Both the said Arbitrators constituted the Arbitral Tribunal pursuant to the Arbitration Clause contained in the Letter of Intent dated 12.3.1981, exercising jurisdiction under the Arbitration Act, 1940.
8. M/s WIEL submitted the statement of claims. In Paragraphs 22, 23, 25 and 26 M/s WIEL accepted the amendments of certain terms of the amendments in the Letter of Intent but questioned the ceiling limits imposed by the UPSEB, which contested the claims by filing written statement. Both the Arbitrators made the Awards in the following manner:
In the Award made by Mr. Justice B.L. Loomba (Retd.), a sum of Rs. 23,04,519.51 was awarded to M/s WIEL - the claimants. The counter-claims of UPSEB to the tune of Rs. 58,33,487.90 was allowed. With respect to the Insurance claims of WIEL to the tune of Rs. 89,18,340.40, it was held that UPSEB shall follow-up the action and communicate with the Insurance company forthwith for payment of the amounts to be provided by the Insurance Company on the claims made by the Contractor. The claim for HP Point was rejected.
In the Award made by Hon'ble Mr. Justice D. B. Deshpande (Retd.), the counter-claims of UPSEB to the tune of Rs. 7,31,500/-was allowed. The claims of M/s WIEL to the tune of Rs. 2,52,95,252.45 was allowed which included the award for Insurance Claims amounting to Rs. 89,18,430.40 and the HP point to the tune of Rs. 1,54,66,244.67. If these amounts are deducted from the total amounts so awarded, then a sum of Rs. 58,29,007.68 is payable by UPSEB to M/s WIEL.
9. On reference of the matter to the Umpire, Hon'ble Mr. Justice Jaswant Singh [Former Judge of the Supreme Court of India] directed the UPSEB to pay the contractor/claimant (M/s WIEL) 64% of the amounts claimed by M/s WIEL initially, before the Arbitrators, alongwith interest @ 12% per annum. It was further held that the claimant shall be entitled to the enhanced rate of interest payable by the UPSEB to M/s WIEL at the rate changed by the Scheduled Banks.
10. In the proceedings before the Civil Judge (Senior Division) Lucknow, the UPSEB filed objections under Sections 30 and 33 of the Arbitration Act. The objections, so preferred by the appellant were rejected vide order dated 12.9.2000,
11. It is in this background, the appellant-company being the successor in interest of UPSEB has filed the instant appeal under Section 39 of the Arbitration Act (X) of 1940, assailing the aforesaid order dated 12.9.2000.
12. Learned Counsel for the appellant submits that the UPSEB, i.e. the Predecessor in interest of the appellant entered into a contract with erstwhile M/s WIEL now known as M/s U.B. Engineering Ltd. pursuant to which the respondents completed the work under the contract. The total contract price for the job was Rs. 5,13,03,180/-. The entire amount in terms of the Letter of Intent, including the amounts equivalent at the rate of Rs. 1 lakh per annum for almost four years towards the delay in completion of the work beyond the scheduled date and also the amounts representing escalation in prices by applying the Price Variation Formula, already incorporated, was paid to the Contractor-M/s WIEL. Thus, no dispute remained between the parties with respect to the payment of any amount under the original Letter of Intent. The contractor approached UPSEB for further financial reliefs. Several meetings took place between the parties and before the High Power Committee of UPSEB. The proposed amendments in some of the terms of the Letter of Intent in the shape of the letter dated 29.3.1989 were sent to the UPSEB by M/s WIEL. UPSEB finally issued amendments vide letter dated 29.3.1989. Only some of the clauses of the Letter of Intent contained in clause Nos. 2, 3, 4 and 5 of the original Letter of Intent were amended in following heads:
(I)Clause 3 - Transportation charges
(II)Unit rates for extra work - Clause Nos. 4 and 5.
(III)Clause No. 2 - Price Variation Formula for main erection work.
13. M/s WIEL-respondent company submitted the revised bills pursuant to the aforesaid amendments, contained in letter dated 29.3.1989 to UPSEB. Thereafter, UPSEB paid the amounts in accordance with the letter dated 29.3.1989, i.e. to the tune of Rs. 68.94 lakhs as a 'package deal' by applying the ceiling limits, as mentioned in the said amendments.
14. Learned Counsel for the appellant argued that M/s WIEL submitted their statement of claims before the two Arbitrators,stating in para 23 thereof as under:
23. The claimant humbly submits that the crux of this entire Arbitration is the ceiling imposed by the Respondent and the entire claim of the claimant stands/falls by this issue.
15. Similarly, in paragraphs 20, 21, 22, 24, 25 and 26 of the statement of claims, the claimant-WIEL, specifically stated that the amendments contained in the letter dated 29.3.1989 are admitted and acceptable, but the ceilings imposed by UPSEB were not acceptable. It was further stated that the very action of UPSEB in amending certain terms of the Work Order clearly goes to show that the claimant should be suitably compensated. While pointing out the controversy only with respect to the ceilings, the Claimant (WIEL) also claimed exorbitant amounts for HP joint and insurance claims. It was stated in para 30 that the claimant submitted final claim on 9th August, 1991 for insurance. In para 33, the claimant stated that the insurance claims of the claimant remained pending with the Insurance Company as per information given by UPSEB. It was stated that in terms of the contract, it is a condition precedent that the claimant will receive the amounts under this head only after the claims are settled by the Insurance Company. The claim relates to the repair costs on damage occurred during the transit, storage and repair costs on damage occurred during the erection. Finally, a sum of Rs. 3,51,44,813.18/-was claimed alongwith interest as per chart.
16. During the pendency of the Arbitral proceedings, the parties appeared and their clarification in respect of the pleadings and supplementary pleadings were recorded from time to time. It was brought on record with respect to the bills submitted by M/s WIEL, as per amended formula. The bills were to the tune of Rs. 68,94,000/- and all of them were paid. These clarifications were made on 28.2.1994. Another statement on behalf of UPSEB, in the shape of clarifications, pursuant to the proceedings held on 14th and 15th January, 1994 were submitted on 31st January, 1994. It was stated as under:
As per records, no material was transported between the period December, 1998 upto March, 1989.
17. The learned Arbitrators required the claimants - M/s WIEL to establish as to whether any material was transported during the aforesaid period. On behalf of M/s WIEL it was stated that they had nothing to say further in the matter and they had no evidence to support.
18. Both the learned Arbitrators, namely, Hon'ble Mr. Justice B. L. Loomba [Former Judge of High Court] and Hon'ble Mr. Justice D. B. Deshpande [Former Judge of High Court] delivered concurrent decisions by rejecting the following claims of the claimants - M/s WIEL (now U.B. Engineering Ltd.) as mentioned below:
(a) Claim/bill at Sl. No. 01: Regular bills - WIEL claimed a sum of Rs. 18,61,222.06/- In this head, Hon'ble Mr. Justice B. L. Loomba (Retd.) made the Award only to the extent of Rs. 16,45,122.39/- by reducing the claim as indicated at internal page Nos. 8 and 10 of his Award. Hon'ble Mr. Justice D. B. Deshpande (Retd.) also awarded the same amount to the tune of Rs. 16,45,112.39/- appearing in internal page No. 10 (running page No. 150) of his Award.
(b) Claim/bill at Sl. No. 05 for Rs. 12,83,116.28/- relating to Transportation.
(c)Claim/bill at Sl. No. 07 for Rs. 9,33,914.36/- relating to Price Variation on Transportation:
18. Both the Arbitrators held that the claimant -M/s WIEL lead no evidence to establish transportation of materials as mentioned in claim No. 5. Hence, both the claims, i.e. for transportation and price variation on transportation were rejected. It was held that the claimant-WIEL (now U. B. Engineering Ltd.) was not entitled to any amount under the said claims.
19. Claim/bill at Sl. No. 06 - Regular Bills amounting to Rs. 55,000/- for unloading and stacking work: Both the Arbitrators rejected the claim of the claimant - (M/s WIEL now known as M/s U.B. Engineering Ltd.) as the claimant failed to establish its claim.
20. Learned Counsel for the appellant also pointed out that both the learned Arbitrators allowed the counter-claim of UPSEB relying upon the Minutes of Meeting dated 30.3.1992, duly signed by the parties' representatives, wherein the parties admitted that the contractor-M/s WIEL shall pay a sum of Rs. 7,31,500/- to UPSEB.
21. The Umpire after considering the material on record while observing that in order to re-establish harmonious relations between the parties, as also for goodwill between them and considering the peculiar nature of the work/contract, directed to pay to the claimant-respondent 64% of the amount claimed by it initially before the Arbitrators appointed by them. According to Counsel for the appellant, the learned Umpire did not adjudge the admissible and inadmissible claims of the claimant and instead awarded a lump- sum payment to the tune of 64% of it. It is evident that while doing so, the learned Umpire completely ignored to consider that the several claims made by the claimants in the statement of claims, as mentioned above, were already rejected by both the learned Arbitrators.
22. In other words, the learned Umpire duly recorded that the concurrent decisions on several claims by the two learned Arbitrators were not the subject matter of the proceedings before the Umpire, since the claimant has not contested the same. Even after recording such a finding, the learned Umpire still considered the rejected claims as valid and awarded 64% of the entire claims raised by WIEL - the claimant.
23. Elaborating further, learned Counsel for the appellant argued that the learned Umpire completely ignored to consider clause No. 26.5 of Letter of Intent dated 12.3.1981, while considering the claim No. 13 and counter-claim No. l1 regarding Insurance. The learned Arbitrator also completely ignored to consider the pleadings made by the claimant in the statement of claims in this regard. The claimant specifically admitted in paragraph 33 of the statement of claim that the claim is relating to repair costs of damage occurred during transit and storage and repair costs of damage occurred during erection.
24. Clause 26.5 of the Letter of intent specifically provides that the contractor shall be responsible for any damage to the equipment and material to his faulty handling and storage at erection site and also for any incorrect erection on spot. The contractor shall rectify the incorrect erection and rectify the damaged equipment before the plant is taken over by the Engineer-in-Charge free of any extra charges. Thus, the term of the contract specifically provided that the contractor shall repair the damaged equipment without any extra charges. It implies that UPSEB (now the appellant) was under no liability to pay extra charges or otherwise to the Contractor with respect to the repair costs of damage occurred during transit or during erection.
25. The second part of Clause -26.5 of Letter of Intent provides that where the equipment is required to be replaced due to such incorrect erection/mishandling, whatever amount is recovered from the Insurance Company by lodging claims will be reimbursed to the contractor. It is not the case of the claimant that any equipment was replaced as pleaded in paragraph 33 of the statement of claim. The entire pleadings.are related to the damage only.
26. In paragraph 33 of the statement of claims, the claimant pleaded that the claimant lodged claims and the Insurance Company did not pay, therefore, the claimant was liable to pay the said amount. The aforesaid submission of the claimant is beyond the terms of the contract more particularly contained in clause 26.5 of the Letter of Intent. Evidence, in the shape of letters was adduced before the arbitrator, established that the claimant lodged several claims with the Insurance Company for the inflated amounts. However, the Insurance Company rejected the inflated claims and allowed only a part of it. The claimant accepted the said amount without any protest and did not raise any further claims. Under the contract, UPSEB was never liable to make payment of the amount to the claimant as per its Insurance claims if the Insurance Company did not pay. The claims lodged by the claimants were to be assessed-verified by the Insurance Company and not by the UPSEB. The Board had no role for the assessment or verification of such claims lodged by the claimant before the Insurance company nor UPSEB was liable to pay any amount, if Insurance Company refuses to pay or did not pay.
27. Clause No. 26.5 of Letter of Intent did not require the UPSEB to make such payment to the contractor regarding Insurance claim. Considering the good relationship between the parties UPSEB paid a sum of Rs. 20 lakhs to the contractor in anticipation of the likely payment to be made by the Insurance Company so as to enable UPSEB to adjust the said sum of Rs. 20 lakhs in the payment likely to be received from the Insurance Company. Merely because UPSEB paid a sum of Rs. 20 lakhs, it cannot be presumed that clause No. 26.5 of the Letter of Intent would stand altered or changed. The language contained in clause 26.5 is very simple and conveys only the above meaning.
28. Even the amendments to Letter of Intent made through the letter dated 29.3.1989 do not pertain to clause 26.5 or with respect to the amounts payable to the contractor with respect to the Insurance claim already lodged. It is relevant to mention here that Clause 26.5 is a term of original Letter of Intent in short referred to as 'LOI'. It is clarified that with respect to the contractual work carried out under the original LOI, all the bills raised by the contractor were paid by UPSEB and no disputes ever remained.
29. According to appellant's counsel, the disputes between the parties arose only subsequent to the amendments carried out through the letter dated 29.3.1989. The contractor raised the disputes in the statement of claim that the amendments as mentioned are acceptable to the contractor but not the imposition of ceilings. Thus the only controversy between the parties giving rise to arbitration was due to the imposition of ceilings. There was no dispute with respect to the insurance claims between the parties and the same was not the subject matter of the amendments and thus the claim in respect to the insurance raised by the contractor was beyond the reference of the disputes arisen under the amendments mentioned through the letter dated 29.3.1989.
30. It has been vehemently argued on behalf of the appellant that the learned Umpire completely ignored the above terms of the contract and evidence in respect thereto and acting beyond the scope of the contract, held on his whims and fancy so as to require UPSEB to make payment. The letters available on the record established the premiums paid but it was ignored. There was no evidence available on the record in arbitration that the insurance claims were rejected by the Insurance Company because UPSEB did not pay the premium. In its absence the learned Umpire could not be swayed away by irrelevant considerations to make the award. Thus, the conclusions arrived at by the Umpire with respect to Insurance claims constitute errors apparent on the face of the record.
31. Learned Counsel has pointed out that the claimants have sent a letter dated 12.1.1989, contained in Annexure No. 1, with the written reply of the respondent. By this letter, a request was made by the respondent for providing financial relief to the claimants and an amended formula was also incorporated therein. A bare perusal of the said Annexure No. 1 would reveal that the claimants did not make any claim in respect of H.P. joints towards price escalation. On the other hand, the extra claim for material management was withdrawn. As such, it would reveal that the amended formula did not apply at all for price escalation with respect to H.P. Joints.
32. It is relevant to mention here that the clause No. 13 of Letter of Intent dated 12.3.1981 relates to the H. P. Joints. It is provided specifically therein that the total number of H. P. Joints were estimated to 44,232, for all the units, and no adjustment in contract price was admissible for variations in the estimates number of H. P. Joints upto 5%. The said limit, adjustment in respect of variations in HP Joints is to be computed either at Rs. 210/- per equivalent joint and the details for computing equivalent joint was also enclosed as Annexure No. II to the said contract or as per clause Nos. 4.8, 4.9 and 4.10 of the Letter of Intent for Unit load for welding, stress relieving and radiography.
33. It is further provided in clause No. IV of the Letter of Intent that the other Unit rates, as shall be admissible for works mentioned therein, are not subject to price variation formula. Clause Nos. 4.8, 4.9 and 4.10 falling therein were not the subject to price variation formula. Thus, it would be established from the documents on record that the amended formula for price escalation, as conveyed through the letter dated 29.3.1989 was not applicable at all to the H.P. Joints. Thus, it is established conclusively that the claimants are not entitled to any amount in the shape of price escalation as per amended formula in respect of H. P. Equivalent Joints (extra High Pressure Joints); and, therefore, the claim put forth by the claimants to the tune of RS.1,54,66,244.37 deserves to be rejected.
34. In the background of the aforesaid facts, it has been argued that the learned Umpire in a most cursory manner dealt with certain claims of the contractor and UPSEB but while making the Award completely ignored his own conclusions on such claims. Instead, the learned Umpire made the Award by holding that the Contractor (WIEL) shall be entitled to 64% of the claims lodged by the contractor through the statement of claimants before the Arbitrator. Thus, the learned Umpire selected by the parties failed to act as Umpire or sole arbitrator and instead made an imaginary Award without relying upon or without considering the findings recorded on various claims and findings concurrently recorded by the two Arbitrators.
35. The role of Central Electrical Authority was also explained. It was stated that Central Electrical Authority was not empowered to settle the claims or make statement on behalf of UPSEB for payment of any amount. Therefore, the letter issued by the Central Electrical Authority was wholly irrelevant and did not bind the UPSEB.
36. Attacking the award, learned Counsel for the appellant strenuously argued that the acting of learned Umpire amounts to misconduct. The learned Umpire has ignored the terms of the contract and acted contrary to the same. In making the Award the leaned Umpire directed for lump sum payment on speculative basis not permissible by law having ignored his own conclusions, though recorded perversely and the conclusions concurrently recorded by the two Arbitrators and which conclusions were binding on the claimant as held by the learned Umpire in his Award.
37. In order to substantiate his arguments, learned Counsel for the appellant has relied upon few cases,namely, State of Rajasthan v. M/s Nav Bharat Const. Co. 2005 AIR SW 5265, Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises and Anr. : (1999) 9 SCC 283 and Grid Corporation of Orissa Ltd. v. Balasore Technical School (1999) 9 SCC 317.
38. Paras 26 and 27 of the report of State of Rajasthan v. M/s Nav Bharat Const. Co (supra) are as under:
26. It prima -facie appears that the majority of the claims are against the terms of the Contract. However, there are also other claims which are not against the terms of the Contract. To merely set aside the Award on ground of misconduct would work hardship on the Respondent as they would then be deprived of claims which may be maintainable. In our view the correct course would be to set aside the award and refer the matter back to an independent Umpire appointed by this Court. The Umpire will fix his own terms and conditions. We however clarify that only those claims covered by the two applications will be considered. Of course the Umpire will decide how many of the 39 claims formed part of the claims made in the two applications. Needless to state that the terms of the contract will be kept in mind and claims contrary to terms of the contract will undoubtedly not be allowed. The Umpire will also decide whether the Respondent had agreed to do the contracted work done during the extended period at the same rates and/or whether the Respondent is entitled to increased rates and if so at what rate. The Umpire shall decide only on the basis of the materials already placed before the earlier Arbitrators and the earlier Umpire.
27. Under the circumstances and for reasons set out hereinabove, we set aside the Award and appoint Justice N. Santosh Hegde, a retired Judge of this Court, as the Umpire. The Umpire, Mr. V.K. Gupta, shall forthwith forward all papers and documents to Justice N. Santosh Hegde at his residence, i.e. 9, Krishna Menon Marg, New Delhi. The parties shall appear before Justice N. Santosh Hegde on 6.10.2005 fix his fees which shall be borne by both the parties equally. Justice N. Santosh Hegde is requested to fix the schedule and give his award within a period of 5 months from the date of receipt of all the papers and documents from the outgoing Umpire Mr. V.K. Gupta. The award to be filed in this Court. We leave the question of grant of interest open to be decided by the Umpire in accordance with law.
39. In Para 3 of the report of Grid Corporation of Orissa Ltd. v. Balasore Technical School (supra), on which reliance has been placed by the appellant's counsel, the Apex Court observed that the arbitrator being a creature of the contract must operate within the four corners of the contract and cannot travel beyond it and he cannot award any amount which is ruled or prohibited by the terms of the agreement.
40. Refuting the allegations of the appellant, On behalf of the respondent-company, it has been submitted that due to abnormal increase in minimum wages, the respondent requested to the appellant, to modify the price variation formula. The appellant accepted the request of the respondent, and directed them to prepare a fresh formula. Consequently, the answering respondent prepared the fresh formula and submitted it to the appellant, which was later on, accepted by the appellant.
41. It has been pointed out that the Board's order dated 29.3.1989 was not the conditional one; the said order is consisted of two parts i.e. one was formula and the other was ceiling. Both parts are separate and separable. One part can be accepted and the other can be rejected. The Company accepted the formula but did not accept the ceiling. The respondent never consented to the ceiling imposed by the Board. As such it is quite clear that the ceiling is neither consented to nor acted upon. In any view of the matter, the ceiling was unilateral, arbitrary and not binding on the respondent. And there is absolutely no evidence about the alleged consent.
42. It has also submitted that a comprehensive Insurance policy was taken by the Board and not by the Company. The Insurance premium was to be paid by the Board and not by the Company. The claims, if any, were to be lodged with the Insurance Company by the Board and not by the Company. The only duty of the Company was to put up the material before the Board for lodging the claim and to support the Board against Insurance Company in case the Insurance Company raises a dispute with respect to the claim. Further, there was no need to file the awards given by the Arbitrators, it is the Award of the Umpire, which has been made Rule of the Court by the Court of Civil Judge (Senior Division), Lucknow and that is only under challenge.
43. It has next been contended that the respondent in pursuance of the judgment & decree dated 12.9.2000 filed an Execution Application which is pending in the Court of Civil Judge, Lucknow (Senior Division). The respondent is entitled to the amount awarded by the Umpire in his award dated 20.3.1998 as the counter claims of the appellant stands rejected.
44. It has also submitted that the respondent filed claims for extra work to the tune of Rs. 3,51,44,813/- caused due to delays (relating to escalation in cost of material and wages etc.) and the interest thereon till the filing of the claim to make it claimed amount i.e. Rs. 88449465/-. In para 23 of the claim petition, it was indicated in explicit words that the crux of the issue was the ceiling on price escalation, which was a unilateral decision and was not accepted by the respondents.
45. As regards the HP Joints, it has been submitted by the respondents that the number of HP joints in the agreement was 44,232. However, the respondent-company made 67,673 HP joints and thus there was an excess of 21,234 HP joints i.e. 75,312 equivalent HP joints. The standard for equivalent joints provides that the joints had to be made of pipes having outside diameter of 63.5 mm with thickness of 6.3 mm. If the diameter and thickness of the steel increases, the number of equivalent joints would proportionately increase. In the present case, the outside diameter was 300 mm with thickness of 30 mm. Thus, the formula 300x30/63.5 x 6.3.= No of equivalent joints would be applicable.
46. It has been clarified in arbitration proceedings and both the arbitrators agreed that the number of extra joints was 21234 i.e. 75312 equivalent joints. Justice L.B. Loomba has held that the payment should be @ Rs. 210/- per equivalent joint as per clause -13 of the Agreement. Justice D.B. Deshpande has held that the only defence of appellant was letter dated 29.3.1989 and that payment till 1985 were made according to Clause 2 of the Agreement and that there could be no ceiling on escalation.
47. In the agreement, it was provided that the approximate weight of the pipes and auxiliaries etc. was 31,617 MT for which payment amounting to Rs. 4,98,03,180 was to be made. If the quantity increased up to 5% of the HPJs, no payment was to be made. Admittedly, there was increase in tonnage to the extent of 2930 MT. Increase in tonnage upto + 2.5.% did not entail any payment. Payment was made in respect of additional equivalent HPJs @210 as also for excess tonnage erected @ Rs. 1534. Both the Arbitrators agreed on this aspect.
48. Para 13 of the LOI stipulated basic price of Rs. 210/- per equivalent HP Joints over the estimated number of such joints. This stipulation is to be read in the context that the erection had to be completed of in three units in between March, 1983 and December, 1983. Consequently, the aforesaid basic price could not be determinative of the ultimate price payable due to 4 years delay solely attributable to the defaults of the UPSEB which has pleaded that according to the escalation formula in para 2 read with the admission of the SEB dated 12.1.1989 regarding the increase in wages.
49. The Sub-Committee appointed by the UPSEB held a meeting on 12.1.1989. In the said meeting, three members of the UPSEB were present. In the minutes of the said meeting, it was agreed that because of the delay and overall increase in the cost of material and labour charges, escalation was admissible to the respondent. The respondent vide its letter dated 12.1.1989 had requested for escalation on excess of HP joints due to the delay caused and increase of wages. No escalation was placed in respect of the excess HPJs. The matter was referred to CSPC. The petitioner was never informed of the said meeting nor any representative of the company was invited. It was recognized by the sub-committee in the minutes of meeting dated 12.1.1989 in para 2 that in June, 1985, there has been abnormal increase in minimum wages for unskilled labour from Rs. 156/- to Rs. 208/- during March, 1983 and to Rs. 450/- in June, 1985 as per the Notification of the U.P. Government dated 29.6.1985. In the original contract, clause-13 provided for the basis price of Rs. 210/- in respect of the excess equivalent HP Joints and read with Clause No. 2 thereof escalation was admissible in accordance with the formula mentioned therein, and in view of the recognition of phenomenal increase in the wages, the respondent was not only entitled to the basic price but also increase in the minimum wages by way of escalation. It is significant that no ceiling on escalation was placed in the minutes of the meeting dated 12.1.1989.
50. The contention of the appellant that the decision of the CSPC amounted to amendment of clause 2 is not accepted as it was a unilateral decision. It may be pointed out that under Section 62 of the Contract Act there has to be an Agreement between the parties even for alterations of the contract. It has also been pointed out that the letter dated 29.3.1989 (whereby certain amendments were made) insofar as it had placed a ceiling on the escalation with respect to HPJs is illegal for the following reasons:
(a) It was a unilateral decision and was not binding on the respondent.
(b) It is not fair or reasonable to deny the claim of HPJs although escalation has been paid on the tonnage without ceiling.
(c)Escalation has been paid on original number of HPJ as per clause No. 2 of LOI dated 12.3.1981.
(d) The letter dated 29.3.1989 recognizes that escalation due to delays, which was solely attributable, to the SEB resulting in escalation had to be paid. It is not understandable as to how it could be said that on the one hand escalation was admissible due to delays of the appellant, and still a ceiling was placed on the same.
(e) As per the Letter dated 29.4.1991 of CEA, the amounts of the claims submitted by the respondent were included in the estimates of the project.
(f) SEB is statutory authority under Section 2(7) of the Electricity Act, 2003 and is an authority under Article 12 of the Constitution of India and has monopoly in respect of an essential public utility, namely, generation and distribution of the Electricity Energy. It has to act in a fair and just manner bearing in mind the principle of business common sense.
51. In the circumstances, the award of the Umpire deserves to be upheld.
52. As regards transportation, respondent has submitted that the original contract (LOI) gave the estimated tonnage of 31671.7973 MT and in the claim petition in paragraph 27 (i) it was stated by the respondent that they were entitled to balance transportation work after March, 1985 including escalation. The respondent had relied on a copy of the note of UPSEB signed by the Executive Engineer, Deputy G.M. (O & M), G.M., Anpara, S.E. (MMC), S.E. (Engineer of the Contract). The aforesaid note was signed by the aforesaid officials on 01.11.1988, 07.11.1988 and 27.12.1988. In the said note, on page 270, it has been mentioned as below:
upto March, 1985, the firm have transported 29010.70 MT of materials AND AS SUCH AFTER March, 1985 the expected tonnage to be transported may be of the order to 3452 MT. Since the firm have transported major part of the equipments upto March, 1985 without payment of escalation their request for payment of escalation and compensation on account of abnormal hike in minimum wages beyond contractual period deserves to be considered.
53. In the proceedings dated 9.10.1995, the arbitrators have made certain queries and issued certain directions to give details of various issues. The respondent, pursuant to aforesaid directions, submitted an explanatory note dated 10.1.1996. In para 9 of the said note, it was mentioned that details of the work done and the payments made thereof are mentioned in Annexure I.. Annexure-I contains the unit wise tonnage erected and payments released till November, 1995. A perusal of the aforesaid Annexure would indicate that in respect of three units erection of 35391.7973 MT had been made regarding which payments have also been made. In view of the undisputed facts that till March, 1985, 29010 MT had been transported and that admittedly 35391 MT in total had been erected, the transportation made by the respondents was of 35,391 MT-29010 MT = 6381 MT. In view of the delay, the cost of transportation had increased and thus an escalated price of 6381 MT had to be made by the SEB on undisputed facts.
54. In reply to the claim of the respondent, the appellant has mentioned in II/299 which is as under:
The first party is guilty of procuring confidential documents of the second party stealthily. The first party should be required to explain as to how it obtained the alleged documents. From time to time, the notes were prepared in the office of the second party but decisions were taken after deliberations. The said note does not have any bearing for the purpose of taking decision relating to the claim lodged by the first party.
55. However, the appellants have not disputed the claim but is only questioning as to how the respondent procured the note dated 1.11.1988. From what has been stated above, it would be evident that there was unimpeachable and undisputed evidence of 6381 MT of transportation after March, 1985, for which the respondent is entitled. The two learned arbitrators were totally wrong in holding that there was no evidence regarding the transportation. The umpire has allowed all the claims of the respondent including transportation. As stated earlier, a non speaking award, in whole or in part, cannot be interfered with unless it is demonstrated to be totally perverse. In these backgrounds, the respondent is entitled to the amount claimed for the transportation.
56. It has vehemently been urged that a contract has to be interpreted on the principle of business common sense which in the present case would mean that if because of delays, which were solely attributable to the appellant, the consequence of the delay (over all escalation on the cost over run) has to be met by it. The appellant had admitted the delays giving rise to escalation on the tonnage and further gives escalation on the HPJs but only in respect of limited number of HPJs. Therefore, it belies the assertion of the appellant as also the business common sense.
57. One of the submissions made by the appellant is that it was not open for the Umpire to have proposed a settlement. In this regard it may be mentioned that such a proposal was made to bring about amicable settlement. The respondent had agreed to reduce it entire claim by 36%. The Umpire directed the parties to exchange in writing the offer made by the claimant and the reaction of the Appellant. When no information was received, a letter was sent by the Umpire to the appellants requiring them to respond within two weeks. Thereafter, the Umpire sent a telegram. Again no response was received. It was in these circumstances that the Umpire made the award. However, considering that the appellant is a public utility organization, it was directed that only 64% of the amount claimed by the claimant would be payable to them. Such an amount was to be paid within three months from the publication of the award. In case, the respondent failed to pay the amount, it had to pay the entire amount claimed by the claimant with interest @ 12% i.e. from 24th March, 1998 to the date of entire amount is paid.
58. We find force in the submissions advanced by the respondents that on a difference of opinion on one or more issues by the arbitrators, the Umpire can decide all the issues in view of the settled proposition in this regard. Section 3 read with Clause No. 2 and 4 on the First Schedule to the Arbitration Act, 1940, lays down that upon the difference of the opinion among arbitrators, the umpire would enter into reference. The scope of the jurisdiction of the court under Section 30 and 33 of the Act has been considered in several cases and the following decisions have been relied upon by the respondent:
i. Continental Construction Ltd. v. State of U.P. : 2003 (8) SCC 4.
ii. State of U.P. v. Allied Constructions : 2003 (7) SC 396 para 4
iii. HP State Electricity Board v. R.J. Shah and Company : 1999 (4) SCC 214.
iv. Arosan Enerprises Ltd. v. UOI : 1999 (9) SCC 449
v. Hariom Maheshwari v. Vineet Kumar : 2005 (1) SCC 379
vi. Indu Engg. and Textiles Ltd. v. DDA : 2001 (5) SCC 691
vii. Maharashtra State Electricity Board v. Sterlite Industries : 2001 (8) SCC 482.
viii. G. Ramchandra Reddy and Co. v. UOI : 2009 (6) SCC 414.
59. Apart from the above cases, it would be useful to mention that in the Interpreation of contract by Kim Lewison, it has been observed in paragraph 1.06 that while interpreting a contract, the main object and intent of the contract has to be seen. In Law Land Company Ltd. v. Consumers Association Limited (1980) 255 EG 617, it has been observed that the Court should be guided by commercial purpose and that commercial solution has to be found to the problem posed. In Citibank N.A. v. TLC Marketing PLC : 2008(1) SCC 481 the Apex Court observed that the contract is a commercial document and must be interpreted in a manner to give efficacy to the contract rather than to invalidate. Narrow technical approach is not proper.
60. From the perusal of the aforesaid decision, it would be evident that Umpire can go into all the issues even if there was agreement on certain issues. The Court is precluded from reappraising evidence, even in cases where the award contains the reasons, and no interference can be made unless the award is totally perverse. Once it is found that the view of the arbitrator is a plausible one, court will refrain itself from interfering. The Court cannot examine and interpret the contract to see whether the claim was sustainable.
61. In Arosan Enterprises Ltd. v. UOI : 1999 (9) SCC 449, it has been held that the jurisdiction is restricted and that there can be no reappraisal of evidence. Unless there is total perversity or it is based on wrong proposition of law. In para 37, it has been observed that the error apparent on the face of the record does not imply closer scrutiny of the merits of the documents and the materials on the record. It would be useful to reproduce paragraph 36 and relevant lines of paragraph 38:
36. Be it noted that by reason of a long catena of cases, it is now a well settled principle of law that reappraisal of evidence by the Court is not permissible and as a matter of fact exercise of power by the Court to reappraise the evidence is unknown to proceedings under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the court unless of course, there exist a total perversity in the award of the judgement is based on a wrong proposition of law. In the event however two views are possible on a question of law as well, the court would not be justified in interfering with the award.
38. ...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 fact, that is no ground for challenging the validity of the award. It is only when a proposition of law is stated in the award and which is the basis of the award, and that is erroneous, can the award be set-aside or remitted on the ground of error of law apparent on the fact of the record.
62. In U.P. Hotel v. U.P.SEB : (1989) 1 SCC 359 which was followed in Indu Engg. and Textiles Ltd. v. DDA : 2001 (5) SCC 691, it has been observed that an error of construction of the agreement or even that there was an error of law in arriving at a conclusion, such an error is not an error which is amenable to correction even in a reasoned award under the law. The Apex Court in paragraph 7 of the report further observed that Apex Court had consistently laid stress on the position that an arbitrator is a Judge appointed by the parties and as such the award passed by him is not to be lightly interfered with.
63. In G. Ramachandra Reddy and Co. v. Union of India : 2009 (6) SCC 414, it has been reiterated in para 19 that the courts would not reappraise the evidence.
64. On examination of the impugned order passed by the court below in light of the proposition of law laid down in the aforesaid cases, we find that the court below has dealt with all the issues and gave a reasoned judgment so as to hold that the award was good in law and the Umpire acted within its jurisdiction while dealing with the issues and making the award. The court below has correctly rejected the objections filed by the appellants and has rightly relied on the judgments of the Supreme Court in Puri Constructions Pvt. Ltd. v. UOI : 1989 (1) SCC 411. The lower court has observed that each and every point dealt in the award of the umpire is related to, either the terms of the original contract or with the terms of the Amendment made thereafter. It has further been categorically observed that the Court is not competent or required to look into the issue that how much of determination has to be done by the Umpire on each issue dealt therein and held that the award made by the umpire is clear, unambiguous and reasoned one. The Court below categorically held that merely by the reason that the award is short or in brief, it cannot be held to be invalid. The Apex Court has observed in a number of decisions that the award made by the arbitrator need not be a speaking one. Further the learned Court appreciated the law laid down by the Apex Court that the award cannot be set-aside simply by the reasons that in the facts and circumstances of the case, there were two views possible and the arbitrator adopted the one. The Apex Court in G. Ramachandra [supra] observed that Interpretation of a contract may fall within the realm of the arbitrator. The Court while dealing with an award would not re-appreciate the evidence. An award containing reasons also may not be interfere with unless they are found to be perverse or based on a wrong proposition of law. If two views are possible, it is trite, the Court will refrain itself from interfering.
65. The appellant has based its case primarily on the ground that the Umpire could have either abide by the award made by B.L. Justice Loomba or Justice D.B. Deshpande and therefore the Umpire could not have gone beyond the same. By doing so, the Umpire misconducted. In Blue Star Ltd. v. Elite Radio and Appliance; : 1991(39) BLJR 1044, the Apex Court the Apex Court after considering various decisions and referring the book, namely Mustill and Boyd on Commercial Arbitration, held in clear words that the Umpire will have the jurisdiction to hear on all points and not only on the point of purported disagreement between the two Arbitrators. Therefore, the assertion of the appeallant cannot be held to be conceivable one, as the Umpire does have the jurisdiction to enter into each and every issue referred or dealt in the award of arbitrators or mentioned in the contract. In view of the decision rendered in Blue Star Ltd [supra] it was open and within its jurisdiction of the Umpire to decide all the points and not only upon those as to which the Arbitrators disagreed. There are no words of limitation so as to curtail the jurisdiction of the Umpire or limit his direction in making the Award. Needless to mention here that the Apex Court has held in catena of judgments that the Awards made by the Arbitrator or Umpire need not be a reasoned one, and thus it cannot be held to be invalid simply because it is a non-speaking one.
66. In view of the aforesaid discussions, we find no infirmity or illegality in the impugned orders and the appeal is hereby dismissed. The amount deposited by the appellant before this Court shall be paid to the respondent within a month.
67. Costs easy.