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Union of India (Uoi) Vs. D. Bose and ors. - Court Judgment

LegalCrystal Citation
SubjectArbitration
CourtKolkata High Court
Decided On
Case NumberA.F.O.O. No. 48 of 1979 and Award No. 124 of 1978
Judge
Reported inAIR1981Cal95
ActsArbitration Act, 1940 - Sections 16, 30 and 33
AppellantUnion of India (Uoi)
RespondentD. Bose and ors.
Appellant AdvocateP.K. Sen, Adv.
Respondent AdvocateA.C. Bhabhra, Adv.
DispositionAppeal dismissed
Cases ReferredTyebbhai Essubhai Thanawalla v. Abdul Husein Tyeballey
Excerpt:
- s.c. ghose, j.1. this appeal is directed against the judgment and order dated january 19, 1979 passed by t. k. busu j. by and under the said judgment and order the learned trial judge dismissed the application made by the appellant under ss. 16, 30 and 33 of the indian arbitration act, 1940 inter alia for selling aside of an award dated may i, 1978 made by the arbitrator col. gurcharan singh.2. by and under a contract dated 28th september 1972 executed within the jurisdiction of this court, by and between the appellant and the respondent, the respondent agreed to construct for the appellant single man accommodation and messes and certain external services, phase ia (left zone) at binaguri, district jalpaiguri. the agreed value of the said constructions agreed to be constructed by the.....
Judgment:

S.C. Ghose, J.

1. This appeal is directed against the judgment and order dated January 19, 1979 passed by T. K. Busu J. By and under the said judgment and order the learned trial Judge dismissed the application made by the appellant under Ss. 16, 30 and 33 of the Indian Arbitration Act, 1940 inter alia for selling aside of an award dated May I, 1978 made by the arbitrator Col. Gurcharan Singh.

2. By and under a contract dated 28th September 1972 executed within the jurisdiction of this Court, by and between the appellant and the respondent, the respondent agreed to construct for the appellant single man accommodation and messes and certain external services, phase IA (Left Zone) at Binaguri, District Jalpaiguri. The agreed value of the said constructions agreed to be constructed by the respondent was Rupees 1,06,77,167.65 paise. The said contract contained inter alia the following terms:--

'Condition No. 9 -- Suspension of work--'The contractor shall suspend execution of the works or any part or 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 Garrison Engineer. The contractor will be allowed by the GE an extension of time (not less than the period of suspension) for completion of the item or group of items of work for which a separate period of completion is given in the contract and of which the suspended work forms part but no other claims in this respect for compensation or otherwise, howsoever, shall be admitted.'

'Condition No, 11 -- Time, Delay and Extension-- (A) Time is of the essence of the contract and is specified in the contract documents or in each individual works order. As soon as possible after the contract is let or any substantial works order is placed and before work under it is begun, the GE and the contractor shall agree upon a time and progress chart. The chart shall be prepared in direct relation to the time stated in the contract documents or the Works Order for completion of the individual items thereof and/or the Contract or works order as a whole. It shall indicate the forecast of the dates for commencement and completion of the various trade processes or sections of the work, and shall be amended as may be required by agreement between the GE and the contractor within the limitation of time imposed in the contract documents or Works Order. If the works be delayed:--

(i) by force majcure, or

(ii) by reason of abnormally bad weather, or

(iii) by reason of serious loss or damage by fire, or

(iv) by reason of civil commotion, local combination of workmen, strike or lockout affecting any of the trade employed on the work, or

(v) by reason of delay on the part of nominated sub-contractor, or nominated suppliers which the contractor has in the opinion of GE, taken all practicable steps to avoid, or reduce, or

(vi) by reason of delay on the part of contractors or tradesmen engaged by Government in executing works not forming part of the contract, or

(vii) by reason of any other cause, which in the absolute discretion of the Accepting Officer is beyond contractor's control;

then in any such case the officer hereinafter mentioned may make fair and reasonable extension in the completion dates of individual items or groups of items of work for which separate periods of completion are mentioned in the contract documents or works order, as applicable. Upon the happening of any such event causing delay, the contractor shall immediately give notice thereof in writing to G. E. but shall nevertheless use constantly his best endeavour to prevent or make good the delay and shall do all that may reasonably be required to the satisfaction of the G. E to proceed with the Works, extension of time shall be granted as under:--

(a) by G. E. for all Term Contracts;

(b) by Accepting Officer of the contract for all other contracts. Extension of time, as granted above, shall be communicated to the contractor by G. E. in writing and shall be final and binding provided that in the case of contracts (other than Term Contracts) accepted by the G. E., in the event of the contractor not agreeing to the extension granted by the G. E. The matter shall be referred to the G. W. E., whose decision shall be final and binding,

(B) If the works be delayed:--

(a) by reason of non-availability of Government Stores mentioned in Schedule 'B'; or

(b) by reason of non-availability or break down of Govt. Tools and plant mentioned in Schedule 'C';

then in any such event notwithstanding the provisions hereinbefore contained, the G. E., may in his discretion grant such extension of time as may appear reasonable to him and the contractor shall be bound to complete the works within such extended time. In the event of the contractor not agreeing to the extension granted by the Garrison Engineer, the matter shall be referred to the Accepting Ofliccr (or GWE in case of contract accepted by Garrison Engineer) whose decision shall be final and binding.

(C) No claim in respect of compensation or otherwise, howsoever, arising, as a result of extension granted under conditions (A) and (B) above shall be admitted,

'Condition No. 58 -- Fair Wage-

(a) The contractor shall pay not less than the 'fair wage' as defined below or the minimum wage fixed under the Minimum Wages Act, whichever is higher to labourers engaged by him on the work. 'Fair Wage' means wage whether for time or piece work notified at the time of inviting tenders for the work and where such wages have not been so notified, the wages prescribed by the Chief Engineer for the stations at which the work is done.

'Condition 63 -- Variations of prices of Materials incorporated in works consequent on an Act of the Legislature -- If during the progress of the works, the price of any material incorporated in the works is increased by an Act of Legislature, being other than a Sales Tax, and the Contractor shall thereupon necessarily and properly pay in respect of that material (incorporated in the Works) a price which is in excess of the price of that material as prevailing on the date of acceptance of tender or if the price of any material incorporated in the Works as prevailing on the date of acceptance of tender is similarly reduced, the contract sum shall accordingly be varied, provided always that any increase so payable is not, in the opinion of the C. W. E. (whose decision shall be final and binding) attributable to delay in the execution of the Contract within the control of the contractor. The contractor shall, for the purpose of this condition, keep such books of account and other documents as are necessary to show the amount of any increase claimed or any reduction available and shall allow inspection of the same by any duly authorised representative of Government and further shall at the request of the G. E. furnish verified in such a manner as the G. E. may require, any documents as kept and such other information as the G. E. may require.

The contractor shall within a reasonable time of his becoming aware of any alteration in the prices of any such material, give notice thereof in writing to the G. E. stating that the same is given pursuant to this condition together with all information relating thereto which he may be in a position to supply.'

3. The said contract between the parties contained an arbitration clause in the following terms:--

'Condition No. 70 -- Arbitration-- All disputes, between the parties to the contract (other than those for which the decision of the CWE or any other person is by the contract expressed to be final and binding) shall after written notice by either party to the contract to the other of them be referred to the sole arbitration of an Engineer Officer to be appointed by the authority mentioned in the tender documents.

Unless both parties agree in writing such reference shall not take place until after the completion or alleged completion of the works or termination or determination of the contract under Conditions Nos. 55 and 57 hereof:

Provided that in the event of abandonment of the works or cancellation of the contract under Conditions Nos. 52, 53 or 54 hereof, such reference shall not take place until alternative agreements have been finalised by the Government to get the works completed by or through any other contractor or contractors.'

'If the arbitrator as appointed resigns his appointment or vacates his office or is unable or unwilling to act due to any reason whatsoever, the authority appointing him may appoint a new arbitrator to act in his place.

The arbitrator shall be deemed to have entered on the reference on the date he issued notice to both the parties, fixing the date of hearing. The arbitrator may, from time to time with the consent of the parties, enlarge the time, for making and publishing the award.

The arbitrator shall give his award on all matters referred to him and shall indicate his findings, along with the sums awarded, separately on each individual item of dispute.

The venue of arbitration shall be such place or places as may be fixed by the arbitrator in his sole discretion.

The award of the arbitrator shall be final and binding on both parties to the contract.'

4. The respondent undertook the work and completed the same,

5. Thereafter disputes and differences arose between the parties in regard to the quantum of the claim of the respondent in respect of the said works done under the said contract. The said disputes were referred to the arbitration of the named arbitrator Col. Gurcharan Singh in terms of Clause 70 of the said contract.

6. The parties duly filed their statement and counter-statement of claim before the arbitrator and after hearing the parties and considering the evidence both oral and documentary adduced before the arbitrator, the arbitrator made the above-mentioned award dated May 1, 1978 in favour of the respondent. The said award was challenged and sought to be set aside under Sections 16, 30 and 33 of the Arbitration Act, 1940 as mentioned hereinbefore by the appellant. But the appellant's said application was dismissed by the Court of first instance by the above mentioned judgment and order dated Jan. 19. 1979.

7. Mr. P. K. Sen, appearing on behalf of the appellant Union of India, contended that the award should have been set aside by the Court of first instance on the following grounds, to wit:

(1) No finding was recorded by the arbitrator as he was obliged to do by and under the arbitration agreement between the parties.

(2) From time to time the respondent received various amounts on running account and before the last sum was received by the respondent, the, respondent filed a 'No Claim Certificate' whereby the respondent admitted and acknowledged that there was no further claim of the respondent against the appellant and all the outstanding claims of the parties were settled. Thus by reason of submission of the said 'No Claim Certificate' the respondent was debarred from making any further claim either before the appellant or before the arbitrator.

(3) Alternatively the entire claim of the respondent stood satisfied by accord and satisfaction in view of the submission of the above mentioned 'No Claim Certificate by the respondent

(4) No legal and valid evidence was adduced either oral or documentary in support of claims Nos. 1 to 8 and therefore the arbitrator erred in law in allowing the said claims.

(5) The arbitrator acted erroneously and misconducted in failing to apply the Conditions Nos. 9, 11 and 63 of the contract in arriving at his decision and the award therefore is bad and should be set aside.

(6) The Arbitrator acted beyond his authority in granting escalation which he had no jurisdiction or power to do under the contract and thus travelled beyond the contract

(7) The impugned award is beyond the scope of the reference.

8. In support of his submission, Mr. Sen cited various authorities to which we shall advert later in the judgment.

9. Mr. Bhabhra appearing on behalf of the respondent on the contrary submitted that the award was and is quite valid and binding upon the parties. Mr. Bhabhra submitted that the Arbitrator gave his finding in accordance with the arbitration agreement on all the claims of the respondent. The 'No Claim Certificate', according to Mr. Bhabhra, was given while the disputes were pending before the Arbitrator and they were submitted without prejudice to the pending claims in the reference. In any event, according to Mr. Bhabhra whether the 'No Claim Certificate' debarred the respondent from making any other claim was a dispute for adjudication before the Arbitrator and the Arbitrator had decided the same in favour of the respondent. Further according to Mr. Bhabhra whether the contract between the parties discharged by accord and satisfaction was a question of fact for the Arbitrator to decide and the Arbitrator had decided the said question in favour of the respondent Mr. Bhabhra further submitted that there was adequate evidence both documentary and oral before the Arbitrator to enable him to make the award as he has done. Various documents were produced and tendered before the Arbitrator although they were not strictly proved in accordance with the provisions of the Indian Evidence Act, but the Indian Evidence Act does not in terms apply to a proceeding before the Arbitrator. The only thing that the Arbitrator was concerned was to see that there was no failure of application of the principle of natural justice and the parties had ample opportunities to refute the claims of each other or the evidence produced by each other.

10. Lastly Mr. A. C. Bhabhra submitted that although in the instant case specific disputes between the parties were raised before the Arbitrator, they were not pinpointed in the letter demanding reference to arbitration. Mr. Bhabhra further submitted that the exact disputes before going to arbitration need not be specified.

11. The expression 'finding' has been explained in Order XX, Rule 5 of the Code of Civil Procedure, It appears that the term 'finding' is different from the term 'reasons'. 'Finding' is the conclusion arrived at and 'reasons' are the grounds for such conclusion. In the instant case, the arbitrator has come to his finding on each dispute referred to him for adjudication as will appear from the Award made and published by the Arbitrator. But then the Arbitrator has not given any reason for arriving at such find-ing. The Supreme Court in the case of Income-tax Officer, 'A' Ward, Sitapur v. Murli-dhar Bhagawandas reported in : [1964]52ITR335(SC) has referred to the provisions of Order XX, Rule 5 of the Code of Civil Procedure and pointed out the distinction between the expression 'finding' and 'reasons'. The Arbitrator in the instant case, in our opinion, in terms of the contract has duly set out the finding.

12. The 'no claim certificate' mentioned hereinabove was given by the respondent on the conditions set out in their letter dated20-4-1977 addressed to the Garrison Engineer, Binnaguri. The said letter reads asfollows:

'No. CAL/MES/BIN/4/77

Date:

20-4-1977.

To

The Garrison Engineer,

P. O, Bionaguri,

Dist. Jalpaiguri.

CA No. CESZ/13 of 1972-73 prov of single men accommodation, Messes and club and certain external services Phase IA. Banna-guri.

Dear Sir,

We hereby place on record that on your assurance that our pending claims in arbitration will not be prejudiced, we have granted you no claim certificate while signing the final bill as passed by you which did not form part in pending arbitration proceedings.

Thanking yon. Yours faithfully. Foe M/s. D. Bose and Brothers., S. R. Bose.'

13. The contention of Mr P. K. Sen was that the contract including the arbitration clause contained therein came to an end by virtue of the respondent furnishing the 'no claim certificate'. Mr. Bhabhra's contention on the other hand was that the said 'no claim certificate' was given without prejudice to the rights of the claimant and pending the reference itself.

14. In our opinion, the submission of 'no claim certificate' by the respondent to the appellant on the conditions mentioned herein-above or in any event was a dispute within the ambit of the arbitration clause contained in the said contract and was a subject-matter for adjudication by the Arbitrator. The Arbitrator having decided against the appellant on the said issue by making the said award in favour of the respondent, the contentions of Mr. Sen on this point cannot prevail. The next submission of Mr. Sen that the entire claim of the respondent stood satisfied by accord and satisfaction in view of submission of the said `no claim certificate', in our opinion, has no merit. First, whether file claim of the respondent stood discharged by accord and satisfaction was a question of fact for the Arbitrator to decide. The Arbitrator has decided the said question of fact against the appellant. Mr. Sen drew our attention to the case of Kapurchand Godha v. Himayat Ali Khan Azamjah, reported in : [1963]2SCR168 wherein it was held in approving of Illustration `C' to Section 63 of the Indian Contract Act that if A owed a large sum of money to B and B accepted a lesser sum offered by C in full satisfaction of B's claim of A, B cannot recover balance from A after receiving the payment in full satisfaction. The said case merely laid down the principle of accord and satisfaction as enunciated in the Indian Contract Act and does not in any way affect any question involved in the instant appeal. The proposition mooted by Mr. Sen was noted by the Supreme Court in the case of Damodar Valley Corporation v. K. K. Kar, reported in : [1974]2SCR240 . The Supreme Court was pleased to observe that the question whether there had been a full and final settlement of a claim under the contract was itself a dispute arising upon or in relation to or in connection with the contract. Mr. Bhabhra also drew our attention to the case of D. & C. Builders Limited v. Rees reported in (1966) 2 QB 617 wherein it was held that payment by a debtor whether in cash or by cheque of a lesser sum than the amount of the debt was not a settlement of the debt which was binding at law on the creditor. It is clear, therefore, that the question as to whether the claim of the respondent stood discharged by accord and satisfaction was a question of fact and a dispute well within the ambit of the arbitration clause and the Arbitrator decided the said question against the appellant

15. The next contention on behalf of the appellant that there was error apparent on the face of the award inasmuch as there was no evidence on record to support the award is to be scrutinised. It is true that no document was proved strictly in accordance with the principles laid down in the Evidence Act before the Arbitrator. But it should be noted that various documents were produced before the Arbitrator in support of the case of the respondent and there was ample evidence for the Arbitrator to act upon. It is true that evidence in accordance with the provisions of the Evidence Act was not proved or tendered before the Arbitrator. The Evidence Act does not apply to arbitration as is evident from Section 1 of the Evidence Act, 1872. The question of legal or admissible evidence, in our opinion, did not arise, but undoubtedly there was evidence before the Arbitrator on the basis whereof the Arbitrator could come to his finding as he has done. If there was no evidence at all before the Arbitrator the award could be assailed as being erroneous on the face of it But in the instant case there was evidence before the Arbitrator to enable him to come to the finding as he has done. It is true that although the provisions of the Evidence Act, 1872 do not in terms apply to arbitration proceeding, but the principles of Law of Evidence generally apply to arbitration proceeding. By the principles of law of evidence we mean that it is the duty of the Arbitrator to see that there is no violation of principles of natural justice in the proceeding held by him and no evidence is taken behind the back of any party or that no evidence is taken without allowing the other party to scrutinise the same. Law on this point is different in India than that in England and the observation in Russel on Arbitration, (17th Edition) at page 179 to the following effect:

'Arbitrators are bound by the same rules of evidence as the Courts of law, unless the parties have otherwise agreed.

'I have always understood that arbitrators are bound by the same rules of evidence as the Courts of law'; 'A general statement has been made that arbitrators may proceed in receiving evidence without reference to principles of law or equity. Now we know that position to be contrary to law and the practice of the courts'; 'I never understood that arbitrators were at liberty to deviate from those rules which govern the Superior Court ........... I agree .. ... ... ... ... that this is not legal evidence, and, if it is not legal evidence, that it ought not to bo received.'

have no application to an arbitration proceeding in India. In India, in our opinion, the arbitrator is bound to follow the rules of evidence so that there may not be any violation of the principles of natural justice in the proceeding. In the case of Walford Baker and Company v. Macfie and Sons reported in (1915) 84 LJ KB 2221 wherein Lush and Atkin, JJ. came to the view that the principles of Evidence Act must be followed by the Arbitrator has no application, in our opinion, to an arbitration proceeding in this country. Reference in this connection may be made to the case of Chhogmal Rawatmal v. Sankalchand G. Shah reported in (1949) 53 Cal WN 828, But it should be noted that in the said case the award was set aside on the ground that there was error apparent on the face of the award in view of the fact that there was no material at all for the Arbitrator to come to conclusion to which he had come. Emphasis in this connection may be laid on the last few lines in the 2nd paragraph Col. 2 at page 831 of the said report. In the case of Thawardas v. Union of India reported in : [1955]2SCR48 relied on by Mr. Sen the following observation was brought to our notice:

'If no specific question of law is referred either by agreement or by compulsion, the decision of the Arbitrator on that is not final, however much it may be within his jurisdiction and indeed essential, for him to decide the question incidentally.'

Our attention was also drawn to the observation of the Supreme Court appearing at paragraph 18 of the said judgment.

'... ... ... ., ... in the absence of either agreement by both sides about the terms of reference or an order of the Court under Section 20(4) compelling a reference the Arbitrator is not vested with the necessary exclusive jurisdiction. Therefore when a question of law is the point at issue unless 'both' sides 'specifically' agree to refer it and agree to be bound by the Arbitrator's decision the jurisdiction of the Courts to set an arbitration right when the error is apparent on the face of the award is not ousted. The mere fact that both parties submit incidental arguments about a point of law in the course of proceeding is not enough.'

This was cited by Mr. Sen in support of his contention that the Arbitrator went beyond the scope of reference and thus the award is void. In elaborating this point Mr. Sen, contended that by the letter dated 9th June, 1974 appearing at page 34 of the Paper Book addressed by the respondent to the Chief Engineer, only certain items of claims were made. The scope of the arbitration was only with regard to these claims and as the award travelled beyond the claims it was vitiated by an error of law. It, however, appears from the letter dated 10th February, 1977 by which the disputes were sought to be referred to the arbitration, (Pages 38, 39 of the Paper Book) that the reference was not limited to any specific of certain dispute or disputes. Indeed exact specification of disputes before going to arbitration is not necessary. (See Nandram Hanutram v. Raghunath and Sons Ltd. reported in : AIR1954Cal245 . The error in law on the face of the award means that one can find in the award or a document actually incorporated thereto as for instance a note appended by the Arbitrator stating the reasons for his judgment some legal proposition which is the basis of the award and which is erroneous. The error in law must be apparent on the face of the award or some of the documents which form part of the award itself. Documents not connected or incorporated directly into the award cannot be looked into for that purpose. Thus where there is no error apparent on the face of the award it is not open to a Court to go into the proceeding of the Arbitrator. (Sea Champsey Bhara and Company v. Jivraj Baloo, AIR 1923 PC 66 is equal to 50 Ind App 324).

16. The ratio decidendi in Champsey Bhara and Company v. Jivraj Baloo, AIR 1923 PC 66 was approved by the Supreme Court in. Union of India v. Bungo Steel Furniture Pvt. Ltd., : [1967]1SCR324 and again in N. Chellappan v. Kerala S. E. Board, : [1975]2SCR811 . The Supreme Court in the latter case observed 'The umpire as sole Arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact, that is no ground for challenging the validity of the award. It is only when 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 tha ground of error of law apparent on the face of the record ... ... ... ... ... The court has no jurisdiction to investigate into the merits of the case and to examine the documentary and oral evidence on the record for the purpose of finding out, whether or not the Arbitrator has committed an error of law ... ... ... ... ...' It should be noted in this connection that in the case of Thawar-das v. Union of India reported in : [1955]2SCR48 , the award was a speaking award, reasons for the award were given and the said reasons were wrong on the face of them. (See in this connection para. 4 at p. 471, paras. 7, 10 and 17 at p. 474).

17. The award in the instant case does not show any mistake or error on the face of it. It cannot be said also, in our opinion, that the Arbitrator in any way failed to apply Conditions 8, 11 and 63 of the contract set out in the earlier part of the judgment in making the award. In any event, the same does not appear on the face of the award and we are unable thus to come to the said conclusion. The case of Aboobaker Latif v. Reception Committee of the 48th Indian National Congress reported in AIR 1937 Bom 410, the case of Eurasian Equipment and Chemical Ltd. v. Union of India reported in : AIR1974Cal208 and the case of Tyebbhai Essubhai Thanawalla v. Abdul Husein Tyeballey reported in AIR 1924 Bom 149, in our opinion, Jay down that an arbitrator must decide upon the evidence put before him by the parties and that in admitting such evidence he must observe the principles of natural justice. The fact that there was evidence produced before the Arbitrator has been stated in paragraph 14 of the affidavit of Suhas Rajan Bose filed in opposition to the petition for setting aside the award and has been admitted in para. 11 of the affidavit of Dilbagh Roy Bahl appearing at page 71 of the Paper Book wherein the said deponent has said 'I say that the deponent just produced a bunch of papers alleged to be vouchers and other documents but he never proved them according to law and as such the learned Arbitrator misconducted himself in looking at those documents and forming his opinion thereon and making the Award in favour of the respondent on the basis thereof. I say that the alleged documents mentioned in the said paragraph were never proved according to law.

' The fact of proving the claims of the claimant which have been allowed by the Arbitrator in the Award will appear from the face of the Award itself, It is also stated in the judgment of the Court of first instance to the effect: 'cart loads of books and documents were produced before the Arbitrator. Certain measurements were admitted by the parties and so on In that view of the matter, it cannot be said that the findings are based on no evidence.'

18. For the reasons stated in the earlier part of the judgment it appears to us none of the points urged by Mr. Sen can be sustained. The appeal, in our opinion, has no merit and is dismissed with costs.

A.N. Sen, C.J.

19. I agree.


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