TMI Blog1991 (7) TMI 369X X X X Extracts X X X X X X X X Extracts X X X X ..... os. III, Vi and IX and affirmed the decree for the other claims. The main appeal Nos. 338 339 of 1991 arising from S.L.P. (C) Nos. 1573 1574 of 1986 are by the Associated Engineering Co. (hereinafter referred to as `the Contractor'). It challenges the judgment of the High Court setting aside the decree of the Civil Court in respect of Claim Nos. III, VI and IX. The other appeals arising from S.L.P. (C) Nos. 7071 7072 of 1986 are by the Government of Andhra Pradesh and they are against the judgment of the High Court confirming the decree of the Civil Court in respect of Claim Nos. II, IV and VII(4). The High Court set aside Claim Nos. III, VI and IX on the ground that those claims were not supported by the agreement between parties and that the arbitrator travelled outside the contract in awarding those claims. While that portion of the judgment of the High Court is supported by the Government, the Contractor submits that the High Court exceeded its jurisdiction in interfering with non-speaking award. The Government challenges the judgment of the High Court in so far as it affirmed the findings of the Civil Court in respect of Claim Nos. II IV and VII(4) on the ground t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsequent reduction in top width of banks used as roadway'. The other set of claims relate respectively to `Labour Escalation'; `Refund of excess Hire Charges of Machinery'; and' `Stand conveyance'. The umpire after reciting the background of the dispute which led to his entering upon reference on 16.12.82 to decide the dispute and the relevant agreement between the parties deals with the claims seriatim. As regards Claim No. III, he says: I hereby declare and award and direct the respondent to compensate the claimants towards escalation in the cost of napaslabs calculated at ₹ 4.25 (Rupees four and paise twenty five) per Sq. Met. of napa slab lining, under item 11 of schedule A of the agreement for the entire work and make payments accordingly . The main criticism levelled by the Government against this award is that there was no provision in the contract for escalation of the cost or price of napa-slabs. The escalation provision in the contract related to labour, diesel oil, tyres and tubes, as provided in Item 35 thereof. There was no escalation provision in the contract as far as napa-slabs were concerned. The price for these slabs had been de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y a construction of the contractual provisions, but by merely looking at the matters covered by the contract. Claim No. VI-Payment of Extra Lead for water. This is what the arbitrator says: I hereby declare and award and direct the Respondent to pay extra towards additional lead for water i.e. 3 K. Ms. over the specified lead of 2 K.Ms. in the agreement for items 4, 5, 6, 10 and 11 of Schedule A . As regards this claim, Mr. Dewan reiterates his contention that the award is silent as to the reasons and, therefore, the Court should not interfere. Mr. Madhava Reddy on the other hand submits that the award speaks as to the reasons for allowing the claim for extra amount towards additional lead for water i.e. for 3 K.Ms. over and above the specified lead of 2 K.Ms. But counsel says, the agreement provides for no payment at all for any lead and much less for any additional lead. He refers to the specific provision of the agreement regarding water. He says that the Contractor had to make its own arrangements for supply of water at work site for all purposes including quarry. There is no provision in the contract for making any payment to the Contractor for the water brought b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... within the batching plant area, maintenance of all haul roads including those formed by the Department shall be the responsibility of the contractors. Existing roads and roads under the control of N.S. Project can be made use of by the Contractor. Any other haul roads required by the Contractor and not specified in plan shall be carried out by the Contractor at his cost. 8.(A) 1. WIDENING OF BANKS The canal banks will be widened to 5 meters and 3 meters width respectively by the Department for right and left banks to facilitate transport of materials. The contractor however has to maintain the haul roads . In the absence of any provision to pay for extra expenditure and in the light of the specific provision placing the sole responsibility for the maintenance of the haul roads on the Contractor, the arbitrator had no jurisdiction to award 50% at extra rate of ₹ 4 per Sq. Meter. The contract contains no provision for payment of any amount outside what is strictly specified under the clause. In the circumstances, Mr. Madhava Reddy says, the High Court was perfectly justified in coming to the conclusion, which it did, as regards the arbitrator acting outside his jurisdicti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e arbitrator made the award in respect of labour escalation. Escalation under this item is in fact, as stated above, provided for under the contract, but in terms thereof. The grievance of the Government is not because the umpire awarded escalation for labour, but because he allowed escalation otherwise than as provided under the contract. The contract under Item 35 provides- `Increase or decrease in the cost due to labour shall be calculated quarterly in accordance with the following formula: V1 = 0.75 P1 X R(i-i)100 10 V1 = increase or decrease in the cost of work during the quarter under consideration due to changes in rates for labour. R = the value of the work done in Rupees during the quarter under consideration 1 = the average consumer price index for industrial workers (wholesale prices) for the quarter in which tenders were opened (as published in Nalgonda District by the Director of Bureau of Economics and Statistics, Andhra Pradesh). P1 = Percentage of labour components (specified in schedule in appendix-9 of the item).i = the average consumer price index for industrial workers (wholesale prices) for the quarter under consideration. Price adjustment clause sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of any escalation under Claim No. III for napa-slabs or Claim No. VI for extra lead of water or Claim No. IX for flattening of canal slopes or Claim No. II for escalation in labour charges otherwise than in terms of the formula prescribed by the contract. The conclusion is reached not by construction of the contract but by merely looking at the contract. The umpire travelled totally outside the permissible territory and thus exceeded his jurisdiction in making the award under those claims. This is an error going to the root of his jurisdiction: See Jivarajbhai Ujamshi Sheth Ors. v. Chintamanrao Balaji Ors., AIR 1965 SC 214. We are in complete agreement with Mr. Madhava Reddy's submissions on the point. As regards Claim Novs. IV and VII(4), we see no merit in Mr. Madhava Reddy's contentions. Claim No. IV relates to `Refund of excess hire charges of machinery and payment towards losses suffered as a result of poor performance of department machinery and also direction for the future'. This claim, was rightly allowed by the arbitrator and his decision was rightly upheld by High Court. The Government was, in terms of the contract, bound to compensate the Contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be liable to be set aside. As stated by Lord Parmoor: .......It would be impossible to allow an umpire to arrogate to himself jurisdiction over a question which on the true construction of the submission was not referred to him. An umpire cannot widen the area of his jurisdiction by holding, contrary to the fact, that the matter which he affects to decide is within the submission of the parties ....... . Attorney-General for Manitoba v. Kelly Others, [1922] 1 AC 268, 276. Evidence of matters not appearing on the face of the award would be admissible to decide whether the arbitrator travelled outside the bounds of the contract and thus exceeded his jurisdiction. In order to see what the jurisdiction of the arbitrator is, it is open to the Court to see what dispute was submitted to him. If that is not clear from the award, it is open to the Court to have recourse to outside sources. The Court can look at the affidavits and pleadings of parties; the Court can look at the agreement itself. Bunge Co. v. Dewar Webb, [1921] 8 L1. L.Rep. 436(K.B.). If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. See the principles state in Anisminic Ltd. v. Foreign Compensation Commission., [1969] 2 AC 147; Pearlman v. Keepers and Governors of Harrow School, [1979] 1 Q.B. 56; Lee v. Showmen's Guild of Great Britain, [1952] 2 Q.B. 329; M.L. Sethi v. R.P. Kapur, AIR 1972 SC 2379; The Managing Director. J. and K. Handicrafts v. M/s. Good Luck Carpets, AIR 1990 SC 864 and State of Andhra Pradesh Anr. v. R.V. Rayanim, AIR 1990 SC 626. See also Mustill Boyd's Commercial Arbitration, Second Edition; Halsbury's Laws of England, Fourth Edition,Vol. 2. The umpire, in our view, acted unreasonably, irrationally and capriciously in ignoring the limits and th clear provisions of the contract. In awarding claims which are totally opposed to the provisions of the contract to which he made specific reference in allowing them, he has misdirected and misconducted himself by manifestly disregarding the limits of his jurisdiction and the bounds of the contract from which he derived his authority thereby acting ultra fines compromissi. In the circumst ..... 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