TMI Blog1999 (4) TMI 586X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties prior to the making of the reference shows that the arbitrators were called upon to construe the contract in order to determine whether the contractor was entitle to claim revision of rates and if so what should be the revised rates. The construction placed on the contract by the contractor cannot be said to an implausible one. Even if the arbitrators construed the terms of the contract incorrectly it cannot be said that the award was in excess of their jurisdiction. Their jurisdiction clearly was to construe the terms of the contract and their decision thereon is final and binding on the parties. Thus the High Court was right in not setting aside the award relating to the decision of the arbitrators in respect of dispute No. 1,2 and 4 in the present case. - Appeal (civil) 712 of 1986 - - - Dated:- 15-4-1999 - B.N. KIRPAL D.P. MOHAPATRA, JJ. JUDGMENT KIRPAL, J. Having failed before the High Court in getting the non-speaking award of the arbitrators set aside the appellant has filed the present appeal by special leave with the expectation that it will be successful in its aforsesaid endeavour. With regard to the construction of Giri Hydel Electirc Proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the revised rates based on market rates would be payable to the respondent when the total value of the work exceeded the deviation limit,i.e., the total contract value plus 20 per cent, as was contended by the respondent herein, or whether the revised rates/market raies would be payable against each item as and when the work performed against any item exceeded the deviation limit of 20 per cent, which is the case of the appellant herein. As agreement between the parties with regard to the aforesaid dispute could not be arrived at reference was made to arbitration in June, 1975. Vide its letter dated 24th April, 1975 the respondent had written to the Chief Engineer of the appellant submitting a list of disputes for arbitration. After the reference was made the respondent filed its claim before the arbitrators and wrote a letter dated 4th June, 1975 to them in which it was, inter alia, stated that aforesaid letter of 24th April, 1975 contained the items under disputes which were being referred to arbitration. Copy of the letter dated 24th April, 1975 was annexed to the letter dated 4th June, 1975 addressed to the arbitrators. After the arbitrators entered upon the referene they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or prmanent and whether original, altered, substituted or additional." The contention of the appellant herein before the arbitrators was that the contract was an item rate contract but it is only in respect of those items that revise market rates are to be paid which crossed the deviation limit. The rate of work in excess of deviation limit, according to the appellant herein, was required to be determined only in accordance with the provisions contained in Clause 12A which reads as follows : Clause 12A : In the case of contract or substituted items which individually exceed the quantity stipulated in the contract by more than the deviation limit, excpt the items relating to foundation work, which the contractor is required to do under Clause 12 above, the contractor shall, within 7 days from the receipt of order, claim revision of the rates supported by proper analysis in respect of such items for quantities in execess of the deviation limit, notwithstanding the fact that the rates for such items exist. In the tender for the main work or can be derived in accordance with the provisions of sub-clause (ii) of Clause 12, and the Engineer-in-Charge may revise their rates, having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... legal misconduct on the part of the arbitration ? If so, what is its effect. OP Objector. The contractor thereafter filed an application (B.N.P.No.35 of 1978) with a prayer that an additional issue be framed with the result that the following issue was framed on 24.4.1978 : Whether or not the objection petition of the respondent is legally maintainable ? OP Parties" The patties prodcued their evidence on the various issues and finally the learned single judge (C.R. Thakur, J.) vide his judgment dated 5.4.1979 held that except of the award pertaining to dispute No.7 the rest of the award did not suffer from any error apparent on the record. The appellant then filed an appeal before the Division Bench which by its judgment dated 4th March, 1985 upheld the decision of the single judge. Hence this appeal. On behalf of the appellant two main contentions had been urged by Sh. Maninder Singh. He submitted that on the correct interpretation of the contract and of Clause 12A in particular the arbitrators had no jurisdiction to revise the rates of any item merely becuse the overall value of the contract which was executed had been exceeded by 20 per cent. The submission was that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two Judges before referring to decisions of larger benches. In Tarapore and Company v. Cochin Shipyard Ltd., Cochin and Anr., [1984] 2 SCC 680 there is an elaborate discussion on the question as to when an award can be set aside referring to all the decisions on the point till then it was observed at page 718 that "the discussion leads to the inescapable conclusion that a specific question of law touching the jurisdiction of the arbitrator was specifically referred to the arbitrator and therefore the arbitrator's decision is binding on the parties and the award cannot be set aside on the sole ground that there was an error of law apparent on the face of the award." In U.P. Hotels and Ors. v. U.P. State Electricity Board, [1989] 1 SCC 359 it was observed as follows : "If a specific question of law is submitted to the arbitrator for his decision and he decides it, the fact the decision is erroneous does not make the award bad on its face so as to permit it being set aside; and where the question referred for arbitration is a question of construction, which is, generally speaking, a question of law, the arbitrator's decision cannot be set aside only because the court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the jurisdiction of the arbitrator has been succinctly brought out in the decision of this Court in Sudersan Trading Company v. Government of Kerala, [1989] 2 SCC 38, where this Court held at page 56 as follows: "In Halsbury's Laws of England II. 4th Edn. Vol. 2 para 622 one of the misconducts enumerated, is the decision by the arbitrator on a matter which is not included in the agreement or reference. But in such a case one has to determine the distinction between an error within the jurisdiction and an error in excess of the jurisdiction..............Whether a particular amount was liable to be paid or damages liable to be sustained, was a decision within the competency of the arbitrator in this case. By purporting to construe the contract the court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond jurisdiction. It has to be determined that there is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised............ At page 57 in para 32 it is held "..................Once there is no dispute as to the contract, what i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 5. They make no reference to the contract or any of its clauses. Yet the State contends that since these are items covered by certain terms of the contract, the Court should look at those terms and interpret them, if this done, it is said, the State's interpretation is bound to be accepted and that apparently accepted by the arbitrators will be found to be wrong. It is this contention that has been accepted. This cannot be done. Even if, in fact, the arbitrators had interpreted the relevant clauses of the contract in making their award on the impugned items and even if the interpretation is erroneous, the Court cannot touch the award as it is within the jurisdiction of the arbitrators to interpet the contract. Whether the interpretation is right or wrong, the parties will be bound; only if they set out their line of interpretation in the award and that is found eroneous can the Court interfere." (emphasis added) A Two Judge Bench of this Court in K.R. Raveendranathan v. State of Kerala and Anr., [1996] 10 SCC 35 observed that on the question that whether the arbitrator had exceeded its jurisdiction, there appered to be a conflict between the decision of Sudersan Trading Comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim made in the arbitration proceedings. In this case the arbitration clause is widely worded. The dispute which was referred to the arbitrators, inter alia, related to the construction of the contract. The contract did visualise the contractor raising a claim for revision of rates. The dispute was as to when such a claim could be raised. According to the appellant herein this being an item rate contract the revision of rates could take place only in accordance with Clause 12A when there was a deviation of more than 20 per cent with regard to individual items. On the other hand the terms of contract, according to the claimant, permitted a claim being made of revision in rates if there was an increase of 20 per cent of the total value of the contract. The dispute before the arbitrators, therefore, clearly related to the interpretation of the terms of the contract. The said contract was being read by the parties differently. The arbitrators were. therefore, clearly called upon to construe or interpret the terms of the contract. The decision thereon, even if it be erroneous, cannot be said to be without jurisdiction. It cannot be said that the award showed that there was an error o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... high Court set aside the award of the arbitrators. While upholding the decision the Court observed that the arbitrators had over-stepped their award by including the area of balcony in the measurement of the built up area. The term of the contract clearly stipulated that in the total builtup area of the floor the balconies are to be excluded and not to be taken into account. The contractor, therefore, could not raise any claim in respect of this area. The contract prohibited payment in respect of the balconies as shown in the sanctioned plan. Merely because the balconies were enclosed did not permit any payment being made in respect thereof. It was in view of these facts that this Court held that the arbitrators had acted on the excess of their jurisdiction because the award was contrary to the term relating to the mode of measurement and in the interpretation of which term there was no dispute. In other words, construction of the contract was not in issue in the arbitration proceedings in that case. The interpretation of the term of contract did not arise in that case. The contract prohibited payment in respect of balconies but the award of the arbitrator had awarded an amount in ..... 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