TMI Blog1999 (9) TMI 815X X X X Extracts X X X X X X X X Extracts X X X X ..... the Patna High Court, Ranchi Bench in Miscellan- eous Appeal No.621 of 1987 under section 39(1)( vi ) of the Arbitration Act, 1940 ( the Act ). The High Court dismissed the appeal filed by the appellant and confirmed the order dated 2-4-1990 passed by the Subordinate Judge, Ist Court, Chas in Arbitration Suit No. 28 of 1988 by which award is made rule of Court with 8 per cent per annum interest from the date of the decree. 2. It is undisputed that the National Mineral Development Corpn., predecessor of the Steel Authority of India Ltd. on 1-8-1977 executed a contract with the respondent for construction of tailing- cum -storage reservoir at Kundi for Megha Taburu Iron Ore Project. As per the terms of the contract, the work was to be completed within a period of two years. During this period, Public Sector Iron and Steel Companies (Re-structuring and Miscellaneous Provisions) Act, 1978 was passed and Steel Authority of India Ltd. became the employer in place of National Mineral Development Corpn. Further, the contractor, N.C. Budharaja also died and was succeeded by the present respondent. 3. After two years of contract period, on 29-8-1979, respondent raised the claim of ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er to the Contractor as hereinafter mentioned the contractor hereby covenants with the employer to construct, complete and maintain the works in conformity with the provisions of contract in all respect. 4.The employer hereby covenants to pay to the contractor in consideration of the construction completion and maintenance of the works the contract price at the time and in the manner prescribed by the contract." Despite the aforesaid fact that the supplementary agreement was executed for the same work at an increased rate, it is stated that the appellant wrote letter dated 3-9-1983 repudiating claim of 18 lakhs on account of damages for any loss sustained by the contractor as claimed by him by his letter dated 29-8-1979. 4. Thereafter, dispute arose, in the year 1985 for the work with regard to second agreement dated 20-12-1980 and the matter was referred to arbitration. In that reference, respondent raised certain claims relating to the work done under the first agreement. On 2-12-1985, the appellant raised an objection that the claim could not be decided by the Arbitrators as the same was pertaining to previous agreement. Thereafter the respondent gave notice dated 2-12-1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hibition for awarding interest from the date of the claim till the date of reference and thereafter. 8. For deciding the controversy, it would be necessary to refer to the material part of the award dated 18-11-1988 which is as under : "The claimant has put forth a claim amounting to Rs. 18,10,014.48 plus interest on the same amount at 30 per cent per annum from 29-8-1979 till date of payment. The amount of interest at the above rate on the claim amount from 29-8-1979 till 18-11-1988, i.e. date of "Award" worked out to Rs. 33,39,351.00 (Rupees Thirty three lakhs thirty nine thousand three hundred fifty one only). Thus the total amount of claims including interest up to the date of award works out to Rs. 51,49,365.48 (Rupees fifty one lakhs forty nine thousand three hundred sixty five and paise forty eight only). On perusal of all documents filed by both parties and relied upon by the parties and keeping in view oral and written submissions and chain of arguments of both parties relating to factual and legal. I am convinced that the claimant sustained losses on account of the following reasons : ( a )The work site is located in the wild life sanctuary of Saran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all have no claim whatsoever against the Corporation if the work or any part thereof covered by these tender documents if postponed to any later date or abandoned in the overall interest of the Corporation or for any other reason. The Corporation s decision in the matter shall be final and binding on the contractor. Clause 32 : Site for execution of work : Site for execution of work will be available as soon as the work is awarded. In case it is not possible for the Corporation to make the entire site available on the award of work the contractor will have to arrange his working programme accordingly. No claim whatsoever for not giving the entire site on award of work and for giving the site gradually will be tenable. Clause 39 : (Force majeruo) : No failure or omission to carry out the provisions of the contract shall give rise to any claim by the Corporation and the contractor, one against the order, if such failure omission arises from an act of God, which shall include natural calamities such as fire, flood, earthquake, hurricane or any postilence, or from civil strike, compliance with any statute or regulation of Government, lockouts and strikes, or from any p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompliance with any statute or regulation of Government or other reasons beyond the control of either the Corporation or the Contractor. Obtaining permission from forest department to carry out the work in wild life sanctuary depends on statutory regulations. Clause ( vi ) of general condition of the contract also provides that failure or delay by the Corporation to hand over to the Contractor possession of the lands necessary for the execution of the work or any other delay by the Corporation which due to any other cause whatsoever would not entitle the contractor to damage or compensation thereof ; in such cases, the only duty of the Corporation was to extend the time for completion of the work by such period as it may think necessary and proper. These conditions specifically prohibit granting claim for damages for the breaches mentioned therein. It was not open to the arbitrator to ignore the said conditions which are binding on the contracting parties. By ignoring the same, he has acted beyond the jurisdiction conferred upon him. It is settled law that arbitrator derives the authority from the contract and if he acts in manifest disregard of the contract, the award given by him ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of interpretation of any term of the contract, but of solely reading the same as it is and still the arbitrator ignores it and awards the amount despite the prohibition in the agreement, the award would be arbitrary, capricious and without jurisdiction. Whether the arbitrator has acted beyond the terms of the contract or has travelled beyond his jurisdiction would depend upon facts, which however would be jurisdictional facts, and are required to be gone into by the court. The arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error. For this limited purpose reference to the terms of the contract is a must. Dealing with similar question this Court in New India Civil Erectors (P.) Ltd. v. Oil Natural Gas Corpn. [1997] 11 SCC 75 held 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt may have to look into some documents including the contract as well as the reference of the dispute made to the arbitrator limited for the purpose of seeing whether the arbitrator has the jurisdiction to decide the claim made in the arbitration proceedings. 17. Further dealing with the similar condition in the contract, such as no claim for price escalation other than those provided therein shall be entertained and the Contractor will not be entitled for any extra rate due to change in selection of querries , this Court in Associated Engg. Co. v. Government of A.P. [1991] 4 SCC 93, observed that four claims mentioned therein were not payable under the contract, in fact, it prohibited such payment and for this purpose. The Court held this conclusion is reached not by construction of the contract but by merely looking at the contract . The Court further observed that the Arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract; his sole function is to arbitrate in terms of the contract. The Court further held thus : "An arbitrator who acts in manifest disregard of the contract acts without jurisdiction. His authority is derived ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irty days of the receipt of notice a penal of three names of persons not directly connected with the work of the contractor who will select any one of the persons named to be appointed as a sole Arbitrator within thirty days of receipt of the names. If the Contractor fails to select the name from the panel and communicate within 30 days, the appointing authority shall appoint one out of the panel sole as arbitrator. If the appointing authority fails to send to the contractor the panel of three names, as aforesaid, within the period specified, the Contractor shall send to the appointing authority a panel of three names of persons who shall all be unconnected with the organisation by which the work is executed. The appointing authority shall on receipt of the names as aforesaid select any one of the persons named and appoint him as the sole arbitrator, if the appointing authority fails to select the person and appoint him as the sole arbitrator within 30 days of receipt of the penal and inform the contractor accordingly, the contractor shall be entitled to invoke the provisions of the Indian Arbitration Act, 1940 and any statutory modification thereof." In view of the aforesaid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held as under: "Russell on Arbitration by Anthony Walton (19th Edn.) at pp. 4-5 states that the period of limitation for commencing an arbitration runs from the date on which the "cause of arbitration" accrued, that is to say, from the date when the claimant first acquired either a right of action or a right to require than an arbitration take place upon the dispute concerned. The period of limitation for the commencement of an arbitration runs from the date on which, had there been no arbitration clause, the cause of action would have accrued: "Just as in the case of actions the claim is not to be brought after the expiration of a specified number of years from the date on which the cause of action accrued, so in the case of arbitrations, the claim is not to be put forward after the expiration of the specified number of years from the date when the claim accrued." Even if the arbitration clause contains a provision that no cause of action shall accrue in respect of any matter agreed to be referred to until an award is made, time still runs from the normal date when the cause of action would have accrued if there had been no arbitration clause." 20. The Court also referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntending that cause of action for referring the claim arises only when the appellant disputed the right of the respondent to recover the damages claimed by him. In the said case, the Court has observed that on completion of the work, the right to get payment would clearly arise, but wherein the final bills have not been prepared and when the assertion of the claim was made on 28-2-1983 and there was non-payment, the cause of action arose from that date. In that case, application under section 20 was filed in January 1986. The Court also observed that: "it is true that the party cannot postpone the accrual of cause of action by writing reminders or sending reminders but where the bill had not been finally prepared, the claim made by a claimant is the accrual of the cause of action. A dispute arises where there is a claim and a denial and repudiation of the claim. The existence of dispute is essential for appointment of an arbitrator under section 8 or a reference under section 20 of the Act. See law of Arbitration by R.S. Bachawat, first addition, page 354. There should be dispute and there can only be a dispute when a claim is asserted by one party and denied by the other on what ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
