TMI Blog1999 (9) TMI 770X X X X Extracts X X X X X X X X Extracts X X X X ..... except in case of diesel would be granted. Hence, by ignoring the same the arbitrator has travelled beyond his jurisdiction. It amounts to deliberate departure from the contract. Further, the reference to the arbitrator is solely based upon the agreement between the parties and the arbitrator has stated so in his interim award that he was appointed to adjudicate the disputes between the parties arising out of the agreement. No specific issue was referred to the arbitrator which could confer jurisdiction on the arbitrator to go beyond the terms of the contract. Hence, the award passed by the arbitrator is, on the face of it, illegal and in excess of his jurisdiction which requires to be quashed and set aside. - CIVIL APPEAL NO. 1202 OF 1992 - - - Dated:- 20-9-1999 - D.P. WADHWA AND M.B. SHAH, JJ. Dr. A.M. Singhvi, P.K. Ganguli, Pankaj Kumar Singh for the Appellant. B. Sen, Ashok H. Desai, A. Mishra, A.P. Dhamija, Pradeep Aggarwal, L.P. Singh and Sushil Kumar Jain for the Respondent. JUDGMENT Shah, J. - By the impugned judgment and order dated 17-12-1991, the High Court of Judicature of Rajasthan at Jodhpur, dismissed the S.B. Civil Miscellaneous Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d awarded ₹ 65 lakhs to the claimants. Paragraph 1 of the said award mentions that Mr. C.S. Jha was appointed as the sole arbitrator 'to decide the disputes between the parties arising out of the agreement dated 14-5-1981'. It also recites that by the consent of the parties, arguments were heard claimwise and out of 7 claims submitted by the claimants, hearing in respect of claim Nos. 2, 3 and 5 was completed. It is also stated that when final award would be made in respect of the entire proceedings, interim award would be integrated into and forms part of the final award. The appellant challenged the interim award on 15-1-1986 in the Court of District Judge, Udaipur. 5. Thereafter, on 18-2-1986 the sole arbitrator made final award. It, inter alia, provides that after considering the long drawn arguments and examination of documentary evidence and having made detailed examination of the calculations 'I have given due thought and weightage to all that was placed/argued before me, as regards admissibility as well as quantum of each claim by going through details of work done under each item of claim as filed before me.' Thereafter, he awarded ₹ 1.07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arbitrator and thus the arbitrator has not disclosed it'. The learned Judge further observed that the appellant never asked the arbitrator to decide his objection at initial stage or final stage and this conduct of the appellant goes to show that he has waived the objection, otherwise he ought to have asked the arbitrator to decide at proper stage. The Court held that even before District Judge, the point of jurisdiction was never raised and the issues framed were with regard to clauses 17 and 18 which were decided against the appellant. 9. Dr. A.M. Singhvi, the learned senior counsel appearing on behalf of the appellant contended that the judgment and order passed by the High Court is, on the face of it, illegal because all throughout the appellant has contended that claims made by the respondent No. 1 were not entertainable in view of clauses 17 18 of the agreement. He submitted that, on the face of it, claims made by the respondent No. 1 were for prohibited or excepted items under clauses 17 18 of the agreement between the parties. Therefore, he submitted that the arbitrator travelled beyond his jurisdic- tion in awarding the compensation for the said claims. He r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r at his cost. The remuneration payable under this contract for the work aforesaid is inclusive of this element which includes cost of explosives, its accessories transportation, salary and wages of its crew/blasters etc., or otherwise. In view of aforesaid, the contractor shall obtain necessary permission/s from the Director General of Mines Safety and/or other competent authorities for undertaking the blasting operation independently at the aforesaid areas covered by this contract as also obtain necessary licence for the explosive magazine etc. The contractor shall do all that are required to be done to obtain the necessary permission etc., from the competent authorities immediately without any further loss of time and shall make regular and continuous efforts for the same if for the present such permission is not granted to him/her. In the event of the contractor failing to obtain such permission required from the competent authority for doing blasting operation in the areas covered by this contract after all genuine and effective efforts, the company may at the request of the contractor and subject to its convenience take up the blasting operation in the areas entrusted to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... blasting or idling of his equipment or his labour or any rise in the landed cost of explosives at any time or during the currency of this agreement or on any ground or any reason of any account, whatsoever. At the time of blasting in the areas being worked by the company or by the contractor if the company is required to carry out blasting operation, the contractor shall be required to vacate the areas if the areas fall within blasting zone, worked by him for which the contractor shall not be entitled for any claim, additional payment whatsoever. 18. Contractor's remuneration for works under the Contract: In consideration of the performance of the work, fulfilment of all the obligations, terms and conditions of this agreement by the contractor in execution of the work covered by its contract in and from the aforesaid areas, the contractor shall be paid remuneration calculated at the rate of ₹ 35.80 (thirty-five and eighty paise) all inclusive per cubic meter in respect of over-burden and/or ore actually excavated, mined, removed, transported, disposed off, dumped, dozed, levelled and spreaded including drilling, blasting, mucking, loading and unloading, etc., wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lubricants, tyres, tubes, explosives, spares etc. statutory or otherwise or increase in the wages of minimum wages or on any other ground or reason or account, whatsoever. Relevant part of arbitration clause 74 is as under: All disputes and differences arising out of or in any way touching or concerning this contract whatsoever, except as to any matter, the 'decision of which is expressly vested in any authority in this contract, shall be referred to the sole arbitration of the person appointed by the managing director of company who shall have status of a Mines Manager having 1st Class Mines Managers Certificate and having experience not less than five years in open cast mining as Mines Manager'. 12. At this stage, we would refer to the relevant portion of letter dated 7-9-1983 written by the contractor to the appellant as the dispute for the said claims made in the letter are referred to for arbitration. 1.After stating the reasons in delay in starting the work, it is mentioned: In view of above, we now request RSMML to consider our case and condone the theoretical delay, which, in fact, was not there and also give us necessary, relief as to consequenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime plus ₹ 1.82 per cu.m. or rock handled so far. 6.Claim for Transportation of ore: After stating reasons in detail, it is claimed thus: Till 31st August, 1983 mined and transported 45,456 tonnes of ore and mixed ore from Eastern Saddle and Footwall, the additional expenses involved in this operation are: ( i )Care being taken during mining to avoid as much as possible admixture of ore and over-burden, and ( ii ) Additional transportation involved for taking it to the crusher instead of the dump yard. Towards this we have to make claim of ₹ 6 towards this mining cost per tonne and ₹ 4 towards transportation cost per tonne making the total to ₹ 4,05,660 for 40,566 tonnes of ore after allowing % of the total excavation volume of footwall i.e. 3.36 lakhs cu.m. To sum up, claims under various heads are as under: ( i )Not to levy and damages for not starting work in time and to treat 1st August, 1991 as the date of start of work and thereafter calculate 3 years for completing this work under this contract; ( ii )To release performance bank guarantee of 5 lakhs furnished in your favour by way of additional security deposit; ( ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncurred on account of Agreement with RPMS for wages to labourers. Claim reimbursement @ ₹ 1.82 per cu.m. for excavation done/to be done on account of respondent entering into an agreement with RPMS dated 26-5-81 Ex.C/I of the Arbitration proceedings. 6. Claim for release of additional securities deposit Claimed release of duly discharged bank guarantee of ₹ 5 lacks on Account of Addl. Security deposit. 7. Claim for reimbursement of additional expenses on account of revised wage structure w.e.f 1-4-83 Claim reimbursement of Re. .90 per cu.m. of excavation done since 1-4-83 or to be done thereafter as per Ex.C/ 58 and C/68. 8. Interest Claimed interest on the amount of Award @ ₹ 18 per annum or decree whichever is earlier. 14. As stated earlier by interim award, arbitrator has awarded ₹ 65 lakhs for claims No. 2, 3 5. Thereafter, by final award, he has awarded total sum ₹ 1.07 crores with 12.5 per cent interest with effect from 5-2-1985. 15. Before discuss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r increase in rate of excavation work at footwall area and claim No. 4 for reimbursement of additional costs for mining and transport of ore is against the stipulation of clause 18 as narrated above, which inter alia, specifically provides as under: ( a ) 'The contractor shall be paid remuneration calculated @ ₹ 35.80 (Rupees thirty-five and eighty paise only) all inclusive per cubic meter in respect of over-burden and/or Ore actually excavated transported....' ( b )The contractor shall be only entitled to payment of composite rate as aforesaid and no other or further payment of any kind of item, whatsoever, shall be due and payable by the company to the contrac- tor under this agreement except as aforesaid. ( c )The rates shall remain in firm, fixed and binding irrespective of any fall or rise in the cost of mining operations of the work covered by the contract or for any other reason or any account or any ground whatsoever. 17. Similarly, claim No. 2 for increase in costs of work due to use of high explosives instead of use of ANFO mixture and claim No. 3 for reimburse- ment for losses suffered due to non-availability of explosive is also against ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said clauses are so clear and unambiguous that they do not require any interpretation. It is both, in positive and negative terms by providing that contractor shall be paid rates as fixed and that he shall not be entitled to extra payment or further payment for any ground whatsoever except as mentioned therein. The rates agreed were firm, fixed and binding irrespective of any fall or rise in the cost of the work covered by the contract or for any other reason or any ground whatsoever. It is specifically agreed that contractor will not be entitled or justified in raising any claim or dispute because of increase in cost of expenses on any ground whatsoever. By ignoring the said terms, arbitra- tor has travelled beyond his jurisdiction as his existence depends upon the agreement and his function is to act within the limits of the said agree- ment. This deliberate departure from the contract amounts not only to manifests disregard of the authority or misconduct on his part but it may tantamount to mala fide action. 22. It is settled law that the arbitrator is the creature of the contract between the parties and hence if he ignores the specific terms of the contract, it would be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in his jurisdiction. 24. The learned counsel for both the parties submitted that law on this subject is well-settled. However, they referred to various decisions to buttress their respective contentions. To do justice to their contentions, we would refer to the various decisions of this Court relied upon by them. In Jivarajbhai Ujamshi Sheth v. Chintamanrao Balaji [1964] 5 SCR 481, the dispute arose between the partners of a firm on retirement of partners which was referred to the arbitrator. The arbitrator has passed non- speaking award. While revoking the award, the High Court in concur- rence with the court below upheld two objections: ( a )that the arbitrator exceeded his jurisdiction; and ( b )that he was guilty of misconduct in receiving some evidence behind the back of one partner, Chintaman Rao. 25. Before this Court, it was contended that the deed of partnership as well as the order of reference left the arbitrator a free hand and even if the arbitrator wrongly interpreted the deed of partnership and had included the depreciation and appreciation while valuing partnership property, no question of jurisdiction could arise. The partnership deed referre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sitting in appeal over his interpreta- tion, in view of the passage quoted above from Chempsey's Bhara Co.'s case ( supra ) but if the parties set limits to action by the arbitrator, then the arbitrator had to follow the limits set for him, and the court can find that he has exceeded his jurisdiction on proof of such action . 26. The next decision on which reliance is placed is Continental Construc- tion Co. Ltd. v. State of M.P. JT 1988 (2) SC 95. In the said case, it was contended by the contractor that contract could not be completed within stipulated time because of alleged gross delay on the part of the State in allotment of work and discharge of its obligation under the contract. He had, therefore, incurred unforeseen expenditure and claimed damages to the tune of ₹ 5,29,812. The matter was referred to the retired Engineer- in-Chief, PWD, Bhopal, who partly allowed the contractor's claim. The award was set aside by the District Judge. The appeal was also dismissed by the High Court and in appeal before this Court, it was contended that the contractor was not entitled to extra cost for material and labour in terms of the contract. This Court h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ensation made by the Contractor demurred and disputed by the respondent would be covered within the scope, ambit and width of the arbitration clause was specifically referred by the parties for the decision of the arbitrator. In such cases, the award cannot be set aside on the ground that there is an error of law on the face of the award. The senior learned counsel, Mr. Ashok H. Desai has heavily relied upon this decision in support of his contention that in the present case also, arbitration clause 74 is very widely worded. Dealing with arbitration clause, Court observe 'arbitration clause so widely worded, as disputes arising out of the contract or in relation to the contract or execution of the works, would comprehend within its compass a claim for compensation related to estimates and arising out of the contract. The test is whether it is necessary to have recourse to the contract to settle the dispute that has arisen'. Further, while interpreting such clause, the Court has held as under: We may now turn to some decisions to which our attention was drawn. The first case we would like to refer to is A.M. Mair Co. v. Gordhandass Sagarmull [1950] SCR 792. The Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the arbitrator may not accord with the view of the Court, the award cannot be set aside on the ground that there is an error of law apparent on the face of the record. Facts and issues in the present case are quite different as stated above. 29. In Sudarshan Trading Co. v. Government of Kerala JT 1989 (1) SC 339, this Court posed the following questions for its decision: How should the court examine an award to find out whether it was a speaking award or not; and if it be a non-speaking award, how and to what extent the court could go to determine whether there was any error apparent on the face of the award to be liable for the interference by the court. The other question that arises in this case is, to what extent can the court examine the contract in question though not incorporated or referred to in the award. 30. In that case also, the arbitrator has passed the non-speaking awards but with regard to each and every claim it has separated and passed the order either accepting or rejecting the claim or partly accepting the claim of the contractor. 31. After referring to the various decisions including Jivarbhai Ujamshi Sheth case ( supra ) the Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. The Court further held as under: An arbitrator who acts in manifest, disregard of the contract acts without jurisdiction. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialised branch of the law of agency ( see Mustill and Boyd's Commercial Arbitration, 2nd edn., p. 641). He commits misconduct if by his award he decides matters excluded by the agreement ( see Halsbury's Laws of England, Volume II, 4th edn., para 622). A deliberate departure from contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award. 33. The learned counsel for the respondent relied upon the case of Hindustan Construction Co. Ltd. v. State of Jammu Kashmir [1992] 4 SCC 217. In the said case, the Court has observed that award was a non- speaking one and contained no reasoning which could be declared to be faulty; the scope of the Court's jurisdiction in interfering with the non- speaking awar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d wages to labour by the contractor pursuant to statutory revision of minimun wages by the Government or increase in rates of fair wages by wage committee binding on the contractor under conditions of tender notice. In the said case, court considered the distinction between the latent and patent jurisdiction of the arbitrator in deciding the disputes and after referring to the arbitration clause, observed that: Any dispute relating to or arising out of or in any way connected with the contract has to be referred to arbitration. It cannot be said that there was patent lack of jurisdiction on the part of arbitrators in having gone into the question of reimbursement; at the best it could be said that arbitrators had no jurisdiction to entertain the claim and hence a case of latent lack of jurisdiction. 36. After considering the decisions in Continental Construction Co. Ltd.'s ( supra ) and Tarapore Co's. case ( supra ), this court held that as there was absence of escalation clause, it was not a case where on the basis of the terms of the agreement entered between the parties, it can be held that arbitrator had no jurisdiction to make the award. The court obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tors (P.) Ltd. v. Oil Natural Gas Corpn. [1997] 11 SCC 75, this court again considered the contention wherein the arbitrator has passed award contrary to the specific stipulation/condition contained in the agreement between the parties. The Court observed thus: It is axiomatic that the arbitrator being a creature of the agreement, must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount which is ruled out or prohibited by the terms of the agreement. In this case, the agreement between the parties clearly says that in measuring the built up area, the balcony areas should be excluded. The arbitrators could not have acted contrary to the said stipulation and awarded any amount to the appellant on that account. 40. The aforesaid judgment was considered in H.P. State Electricity Board v. R.J. Shah Co. JT [1999] (3) SC 15 and in paragraph 26, the court held as under: In order to determine whether the arbitrator has acted in excess of jurisdiction what has to be seen is whether the claimant could raise a particular dispute or claim before the arbitrator. If the answer is in affirmative, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are given by the arbitrator, as to what impelled arbitrator to arrive at his conclusion. ( b )It is not open to the court to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by the terms of the award. ( c )If the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his adjudication then the court cannot interfere. ( d )If no specific question of law is referred, the decision of the arbitrator on that question is not final, however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. In a case where specific question of law touching upon the jurisdiction of the arbitrator was referred for the decision of the arbitrator by the parties, then the finding of the arbitrator on the said question between the parties may be binding. ( e )In a case of non-speaking award, the jurisdiction of the Court is limited. The award can be set aside if the arbitrator acts beyond his jurisdiction. ( f )To find out whether the arbitrator has travelled beyond his jurisdic-tion, it would be necessary to consider ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, the performance of the contract may become onerous. ( i )The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action. ( ii )The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks just and reasonable; the arbitrator is a tribunal selected by the parties to decide the disputes according to law. 43. In view of the aforesaid law and the facts stated above, it is apparent that the award passed by the arbitrator is against the stipulations and prohibitions contained in the contract between the parties. In the present case, there is no question of interpretation of clauses 17 18 as the language of the said clauses is absolutely clear and unambiguous. Even the contractor has admitted in his letter demanding such claims that the contract was signed with clear understanding that the rate under the contract was firm and final and no escalation in rates except in case of diesel would be granted. Hence, b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
