TMI Blog1988 (3) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... r payment. Upon refusal of the Superintending Engineer to pay the claim and his refusal to refer the matter to arbitration, the petitioner moved the learned District Judge under Section 20 of the Arbitration Act, 1940 (hereinafter called 'the Act') for filing of the arbitration agreement and for reference of the disputes to the arbitration. On 24th April, 1976 the learned District Judge allowed the petitioner's application and directed the respondent, State of Madhya Pradesh to file the agreement in Court and made a reference for specific question to the arbitration. The High Court on 22nd September, 1976 dismissed the State's appeal against the order of the District Judge. Thereafter in March, 1977 Retired Engineer-in-Chief, P.W.D. Bhopal was appointed arbitrator. There was an award dated 29th October, 1978 on all the issues referred, partly allowing the petitioner's claim. The award was filed in the Court of the District Judge and the respondent filed objections to the award under Sections 30 and 33 of the Act and the petitioner filed replies. The District Judge made the award a rule of the Court. The respondent appealed to the High Court. The High Court reman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntract. The decision of the Superintending Engineer of the Circle for the time being shall be final, conclusive and binding on all parties to the contract upon all question relating to the meaning of the specification, design drawings and instructions hereinbefore mentioned and as to the quality of workmanship or material used on the work or as to any other question, claim, right matter or thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders, or those conditions or otherwise concerning the work of execution or failure to execute the same, whether arising during the progress of the work, or after the completion or abandonment thereof. Provided that if the contractor is dissatisfied with the final decision of the Superintending Engineer in respect of any matter, he may within 28 days after receiving notice of such decision give notice in writing to the Superintending Engineer requiring that the matter may be referred to the arbitration and furnishing detailed particulars of the dispute or difference specifying clearly the point at issue. If the contractor fails to give such notice within the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner contractor had to incur extra cost of material and labour to the tune of ₹ 14,72,456 within the contract period for executing work assigned to it? 4. Whether the contractor had incurred extra cost of ₹ 8,84,336 for the work beyond the contract period due to unforeseen circumstances? 5. Whether the petitioner's claim on both the counts was in whole or in part of it was barred by time in terms of Clause 3.3.15? 6. Whether the contract was rendered ineffective in terms of Section 56 of the Contract Act due to unexpected change in the market rate of material and labour charges? 7. Was the claim not entertainable in accordance with the terms of the contract under Clause 3.3.32 , 3.3.33 and 3.3.34 during the extended period of contract? 8. Was the work delayed because of the presence of shale-zone in the foundation which factor was not made known to the contract? 9. Whether the contractor was entitled to extra costs of damages for the delay caused on account of shale-zone? The Division Bench came to the findings as follows: 1. The contractor did incur expenditure on wetting and washing of stones in Masonry Group-II, Tawa Masonry Dam but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the application under Section 20 could not be dismissed on the ground that the claim would not ultimately succeed. The District Judge found and in our opinion rightly that the question regarding extra cost was a general question and not a specific legal question and the decision of the arbitrator was not final one. The arbitrator misconducted himself in allowing the claim without deciding the objection of the State. In view of the specific clauses, the appellant was not legally entitled to claim for extra cost. The decision of this Court in Seth Thawardas v. Union of India [1955]2SCR48 is of no avail on this point. 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. The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. The arbitrator is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not he can be set right by the Court provided his error appears o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lenge. The limits of the jurisdiction of the Court to challenge the award are well-settled. While considering objection under Section 30 of the Act, the Court does not act as an appellate court, it can only interfere with the award if the arbitrator misconducts himself or the proceedings or if the award has been made after the issue of an order by the Court superseding the arbitration or if the arbitration proceedings have become invalid under Section 35(c) of the Act or the award has been improperly procured or is otherwise invalid. The Judicial Committee in Champsey Bhara Co. v. Jivraj Balloo Spinning Weaving Co. Ltd. A.I.R. 1923 P.C. 66 has laid down the extent of the jurisdiction of the Court to set aside an award on the ground of an error in making the award. It has been reiterated that the award of the arbitrator may be set aside on the ground of an error on the face thereof only when in the award or in any document incorporated with it as for instance, a note appended by the arbitrator, stating the reason for his decision, there is found some legal proposition which is the basis of the award and which is erroneous. See also in this connection Re. King Duveen [1913] 2 K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matter, the award, in our opinion, was properly set aside by the learned District Judge and the High Court was right in not interfering with it. 9. The question about specific reference on a question of law was examined by this Court recently in the case of Tarapore and Company v. Cochin Shipyard Ltd., Cochin and Anr. [1984]3SCR118 . There it was observed that if the agreed fact situation, on the basis of which agreement was entered into, ceases to exist, the agreement to that extent would become otiose. If rate initially quoted by the contractor became irrelevant due to subsequent price escalation, it was held in that case that contractor's claim for compensation for the excess expenditure incurred due to the price rise could not be turned down on ground of absence of price escalation clause in that regard in the contract. Agreement as a whole has to be read. Reliance was placed very heavily on this decision on behalf of the appellant before us. It has to be borne in mind that in the instant case there are specific clauses referred to hereinbefore which barred consideration of extra claims in the event of price escalation. That was not so in Tarapore and Company' ..... X X X X Extracts X X X X X X X X Extracts X X X X
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