TMI Blog2003 (8) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... amed arbitrator, we would direct that the disputes in relation to claim item Nos. 3, 7 and 11 be referred to Hon ble Mr. Justice D.N. Prasad, a retired Judge of the Jharkhand High Court on such terms and conditions as may be mutually agreed upon by the parties. The learned arbitrator is requested to consider the desirability of making his award as expeditiously as possible keeping in view the fact that the matter has been pending for a long time. - CIVIL APPEAL NOS. 5647-48 OF 1997 - - - Dated:- 29-8-2003 - V.N. KHARE AND S.B. SINHA, JJ. Ajit Kumar Sinha for the Appellant. S.B. Upadhyay for the Respondent. JUDGMENT S.B. Sinha, J. - These appeals are directed against the judgment and order dated 29-4-1997 passed by the High Court of Patna, Ranchi Bench, Ranchi in Appeal from Original Order No. 169 of 1995 (R) whereby and whereunder the appeal preferred by the appellant herein from a judgment and order dated 3-6-1995 passed by the Subordinate Judge, 4th Court, Dhanbad in Title (Arbitration) Suit No. 109 of 1994 was dismissed. Facts: 2. The basic fact of the matter is not in dispute. The parties hereto entered into a contract for construction of 140 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the High Court by reason of the impugned judgment. Submissions: 7. Mr. Ajit Kumar Sinha, learned counsel appearing on behalf of the appellant, inter alia, submitted that the respondent having accepted the final bill, a further claim by it was inadmissible. The learned counsel pointed out that as a special case the appellant granted 95% advance wherefor no interest was to be charged. The said advance was to be adjusted from the running bills. In that view of the matter, the learned counsel would contend that the arbitrator committed an illegality in entertaining Claim Item Nos. 3 and 7. The learned counsel would urge that the respondent having been granted extension, it was obligatory on the part of the learned arbitrator to consider as to whether the respondent was entitled to any compensation for the alleged loss occurred on the ground of delay in completion of work, particularly when it was agreed that the extension of time was granted subject to payment of penalty. The learned counsel would further submit that in terms of the contract the appellant had been supplied with all the essential raw materials, namely, cement, steel etc. which would cover about 95% of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te payment of the bills is concerned, the arbitrator has arrived at a finding of fact that there had been an inordinate delay in respect of 10th R/A bill for Rs. 4,85,403.31 which was paid after a lapse of one year from the date of completion of work on 15-1-1988 and a sum of Rs. 54,737.53 was awarded as damages @ 12% on the said amount for the period of 343 days to the appellant. 12. So far as Claim Item No. 3 is concerned, the question which arose for consideration before the arbitrator was as to whether any extra work had been done or not. The case of the appellant was that the respondent had not done any extra work. The arbitrator had considered the materials on record for the purpose of arriving at a finding of fact that certain extra work had been done by the respondent where for only a sum of Rs. 84,942.02 was awarded in place and instead of Rs. 1,58,862.26. 13. However, Mr. Sinha is correct in his submission that the learned arbitrator has not taken into consideration the effect and purport of the following clause in the contract: "Provided always that : ( a )Contractor/Contractors shall not be entitled to any payment for any additional work done unless he/they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ged any interest in respect of the said advance. It is further not in dispute that cement @ Rs. 51 per bag, mild steel rounds @ Rs. 5,460 per metric tonne and tor steel @ Rs. 5,810 per metric tonne were supplied by the appellant. However, the claim relating to material escalation was confined to six articles which were allegedly not supplied by the appellant, namely, bricks, AC sheets, angles, doors, frames and shutters etc. 17. So far as these items are concerned, in our opinion, the learned sole arbitrator should have taken into consideration the relevant provisions contained in the agreement as also the correspondences passed between the parties. The question as to whether the work could not be completed within the period of four months or the extension was sought for on one condition or the other was justifiable or not, which are relevant facts which were required to be taken into consideration by the arbitrator. 18. It is now well-settled that the Arbitrator cannot act arbitrarily, irrationally, capriciously or independent of the contract. 19. In Associated Engg. Co. v. Government of AP [1991] 4 SCC 93, this Court clearly held that the arbitrators cannot travel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law, and in no other way. Any decision which proceeds, on a different basis lies outside the scope of the arbitrator s mandate to bind the parties. The award is accordingly void for want of jurisdiction, since the arbitrator has done something which the parties never authorized him to do. Secondly, it would be possible to draw support from a line of authority culminating in three important decisions during the past decade which approach the question whether a Tribunal can effectively decide contrary to law by using the word jurisdiction in the first of the three senses indicated above. Whilst a reconciliation of this decision is a matter for a treatise on administrative law, there is no doubt that in relation to certain kinds of Tribunal the law has recognised a distinction between errors of law which go to jurisdiction and those which do not, and that there is a difference between Tribunal which has arrived at a decision by asking itself the wrong question, and one which has correctly identified the question, but has supplied the wrong answer in terms of law. Following up this line of authority, it could be said that an arbitrator empowered to decide the rights of the parties un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The dispute as to jurisdiction is a matter which is outside the award or outside whatever may be said about it in the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such jurisdictional error needs to be proved by evidence extrinsic to the award. 28. In the instant case, the umpire decided matters strikingly outside his jurisdiction. He outstepped the confines of the contract. He wandered far outside the designated area. He digressed far away from the allotted task. His error arose not by misreading or misconstruing or misunderstanding the contract, but by acting in excess of what was agreed. It was an error going to the root of his jurisdiction because he asked himself the wrong question, disregarded the contract and awarded in excess of his authority. In many respects, the award flew in the face of provisions of the contract to the contrary. 29. The umpire, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al position in regard to the effect of an award is not in dispute. It is well-settled that as a general rule, all claims which are the subject-matter of a reference to arbitration merge in the award which is pronounced in the proceedings before the arbitrator and that after an award has been pronounced, the rights and liabilities of the parties in respect of the said claims can be determined only on the basis of the said award. After an award is pronounced, no action can be started on the original claim which had been the subject-matter of the reference... This conclusion, according to the learned Judge, is based upon the elementary principle that, as between the parties and their privies, an award is entitled to that respect which is due to judgment of a court of last resort. Therefore, if the award which has been pronounced-between the parties has in fact, or can, in law, be deemed to have dealt with the present dispute, the second reference would be incompetent. This position also has not been and cannot be seriously disputed. " (p. 836) 31. In Union of India v. Jain Associates [1994] 4 SCC 665, this Court upon following K.P. Poulose s case ( supra ) and Dandasi Sahu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the face of the award. Whether under the context of the terms and conditions of a contract, a stipulation in the form and nature of clause 14( ii ), operates as a special provision to the exclusion of section 73 of the Indian Contract Act is a matter of appreciation of facts in a case, and when the decision thereon is not patently absurd or wholly unreasonable, there is no scope for interference by Courts dealing with a challenge to the award...." (p. 486) 34. In W.B. State Warehousing Corpn. v. Sushil Kumar Kayan [2002] 5 SCC 679, this Court opined: "...In order to determine whether the arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant can raise a particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit the parties to raise a point before the arbitrator and if there is a specific bar in the contract to the raising of the point, then the award passed by the arbitrator in respect thereof would be in excess of his jurisdiction...." (p. 684) 35. The High Court was, therefore, required to consider, the objections filed by the Appellant herein from the aforementioned po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigate into the merits of the case or to examine the documentary and oral evidence in the record for the purposes of finding out whether or not the arbitrator has committed an error of law. The Court as a matter of fact, cannot substitute its own evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties." (p. 350) However, as noticed hereinbefore, this case stands on a different footing, namely, that the arbitrator while passing the award in relation to some items failed and/or neglected to take into consideration the relevant clauses of the contract, nor did he take into consideration the relevant materials for the purpose of arriving at a correct fact. Such an order would amount to misdirection in law. 38. We are, therefore, of the opinion that the matter requires reconsid-eration. Having regard to the facts and circumstances of the this case and particularly keeping in view the fact that the matter relates to pure interpretation of document which gives rise to question of law and instead and in place of remitting the matter to the named arbitrator, we would direct that the disputes in relation to claim item Nos. 3, 7 an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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