SUPREME COURT OF INDIA
D.D. Sharma
Vs
Union of India
Appeal (Civil) 6678 of 1999, Civil Appeal No.1984 of 2000
(V. N. Khare (CJI) and S. B. Sinha)
27/04/2004
JUDGMENT
S. B. SINHA, J.
These appeals arise out of a common judgment and order dated 15.09.1998
.passed by a Division Bench of the Gauhati High Court in FA No. 8 of 1993
whereby and whereunder an objection filed by the Union of India purported to be
in terms of Section 30 of the Arbitration Act, 1940
was allowed in part.
The parties hereto admittedly entered into a contract for construction of six
permanent major bridges on Lekhabali Basar-Along Road in State of Arunachal
Pradesh wherefor a notice inviting tender was issued by the Chief Engineer,
Project Vartak, Director General (Border Roads). Shri D.D. Sharma, appellant in
Civil Appeal No. 6678 of 1999, (hereinafter referred to as 'the contractor')
pursuant thereto and in furtherance thereof made an offer. Negotiations admittedly
took place between the parties in relation thereto.
The notice inviting tender, inter alia, stipulated that the entire work was to
be completed within 36 months from the date of handing over the site which
would be within one month from the date of issue of acceptance letter. It was
further stipulated that the notice of tender shall form part of the contract.
It appears that the Union of India proposed an alternative design and in
response thereto the contractor by his letter dated 25.8.1983 made an offer on
the terms and conditions stipulated therein, clause 6 whereof reads as under :
All other terms and conditions will be as per NIT except that the tender is
valid for all the 6 bridges and cannot be divided. To avail the coming working
season if the work is allotted within 60 days of opening of the tender, we are
ready to offer suitable rebate."
The Union of India in response thereto showed its inclination but requested the
contractor to withdraw various stipulations/conditions specified in his tender in
terms of a letter dated 30.09.1983 stating:
"You are requested to withdraw various stipulations/conditions
specified by you in your tender as brought out above. In case you consider that
the withdrawal of the stipulation/conditions involve financial effect you are
requested to indicate the same for each withdrawal/modification of condition
separate itemwise." *
The contractor replied thereto stating:
"We are pleased to withdraw all our terms and conditions besides our
condition no.4 for design assumption and the interim payment schedule as the
same has been prepared keeping conformity with the estimate. As such the same
will form a part of contract. We are also pleased to inform you that if the
work is allotted to us, we will offer a rebate of Rs.90, 000.00 only per
bridge. For withdrawal of the above stated conditions and for offering rebate,
the Department will have to give us 10% advance over our L.S. tendered amount
against H.G. Bond of Industrial Cooperative Bank Ltd. Gauhati. This 10% advance
will have to be adjusted proportionately along with the interim payment and the
B.G. Bond for the adjusted amount will have to be released from time to
time." *
From a perusal of the said counter offer made by the contractor it will appear
that one of the conditions laid down therein was to the effect that all
withdrawal of conditions and rebate would be made subject to the conditions
stated therein. It was, therefore, a conditional offer.
By another letter dated 22.11.1983, the contractor offered further rebate on
10% mobilization advance, stating:
"In partial modification to our rebate offered by us vide our letter
under reference at serial (2) we are pleased to offer the following final
rebate if the department gives interest free 10% over our L.S. tendered amount
against B.G. bond of Industrial Cooperative Bank Ltd., Gauhati. This 10%
advance will have to be adjusted proportionately along with the interim payment
and the B.G. bond for the adjusted amount will have to be released from time to
time.
The Rebates of the Bridges are as follows: These rebates are over and above the
rebates mentioned in our letter at Serial (2) under reference.
1. Nallah at 15.5 m
Rs.9, 18,000.00
2. Laiko at 20.442 km
Rs.6, 21,000.00
3. Cane at 25.841 km
Rs.6, 48,000.00
4. Saiki at 63.88 km
Rs.9, 18,000.00
5. Kiddi at 96.542 km
Rs.9, 18,000.00
6. Sipu at 148.3 km
Rs.6, 66,000.00
-----------------------
Rs.46, 89,000.00 (Rupees forty six lakhs eighty nine thousand only.),
This rebate has been offered subject to our condition that the work is allotted
to us by 31st December 1983 and if the work is allotted to us as a whole,
without breaking up the same partwise as referred to in para 5 of your letter
no.27537/DGBRE/VTK/72/E8 dt. 30th Sep. 1983. Hope this clarified all the points
raised by you." *
The said offer was, thus, again a conditional one.
The Central Government by a letter dated 1.3.1984 addressed to the Director
General Border Roads, conveyed the sanction of the President to the variation
from the standard and special conditions of the contract, inter alia, stating:
"Mobilisation Advance
After acceptance of the tender and at the time of placing the work order on the
contractor he shall be paid on demand 10% interest free mobilization advance of
the contract value against the bank guarantee bond from a Scheduled Bank
.
The loan advance shall be recovered proportionately from his 'on account'
payment made to him under the contract and in such a way that by the time 50%
of the work is completed the entire advance would be recovered. The first
installment commencing from the first on account payment and Bank Guarantee
Bond will be released for the adjusted amount. If the advance thus made is
utilized by the firm for purpose other than for which it was provided the
entire advance together with interest at 12% p.m would be recovered from the
firm in one installment." *
It is not in dispute that the Union of India could not hand over the site to
the contractor within the stipulated period. The period of contract, however,
was extended from time to time.
Admittedly, the notice inviting tender contained an arbitration agreement.
Disputes and differences having arisen between the parties, the matter was
referred to the arbitration of Brig. S.B. Joshi, Chief Engineer.
Before the learned Arbitrator, inter alia, four claims were raised by the
contractor which are: "Claim No. 1(a)
Refund of payment of sum offered as rebate on account of placing Work Order for
all the six bridges as a whole Rs.5, 40, 000.00. Claim No.1(b) Refund of rebate
offered subject to the condition that 10% interest free mobilization advance is
paid in one lump sum and the work is allotted as a whole Rs.46, 89, 000.00
Claim No.1 (c)
Escalation as per terms of contract on claim 1(a) and (b) considering these as
part of quoted lump sum as calculation Rs.60, 591.00 & Rs.5, 21, 131.00
Claim No.2 Extra infructuous/Uncompleted expenses, expenses and loss of profit
due to enlargement of period of performance Rs.10, 00, 000.00
The learned Arbitrator rejected the claim of the contractor in respect of Claim
No. 1(c) but partially allowed Claim Nos.1(a), 1(b) and 2 to the extent of
Rs.90, 000/-, Rs.6, 48, 000/- and Rs.5, 00, 000/- respectively.
The contractor filed an application before the Court of the Assistant District
Judge, Tezpur which was marked as Money Suit (Arbitration) Case No. 12 of 1990,
purported to be under Sections 14(2) and 17 of the Arbitration
Act, 1940 praying therein for a direction upon the Arbitrator to file a
copy of the award and to make the same rule of the court.
The Union of India filed an objection thereto purported to be under Section 30
thereof. By reason of a judgment and order dated 26.8.1992, the learned
Assistant District Judge at Tezpur : Sonitpur, rejected the application filed
by the Union of India for setting aside the award and made the same rule of the
Court.
Aggrieved by and dissatisfied therewith, an appeal was filed by the Union of
India before the Gauhati High Court which was marked as F.A. No. 8 of 1993.
The High Court allowed the appeal in part holding, inter alia, , that having
regard to the delay in handing over the site for Cane Nallah Bridge, the award
of Rs.5, 00, 000/- for the damages caused to the contractor although justified
but as the contractor made two offers of rebate in terms of its letters dated
25.8.1983 and 22.11.1983 which had not been considered by the learned
Arbitrator, the award in respect thereof was not sustainable, and a part of the
award could be served, it set aside the award for a sum of Rs.7, 38, 000/-.
The parties are in appeals before us against the said judgment.
Mr. K.K. Rohtagi, learned counsel appearing on behalf of the appellant, would,
inter alia, submit that the award being a non-speaking one and having regard to
the fact that the learned Arbitrator in his award categorically stated that he
had taken into consideration all the documents, the High Court must be held to
have committed a manifest error in interfering therewith. The learned counsel
would contend that the two offers of rebate referred to by the High Court in
the impugned judgment being conditional ones and the conditions precedent
therefor having not been fulfilled, the contractor was entitled to make his
claim on rebate. According to the learned counsel, one of the rebates was
offered if the amount of 10% mobilization advance is given at a time which
admittedly was not done, as has been noticed by the High Court itself in the
impugned judgment. It was further contended that the second rebate was offered
by the contractor on the condition that the mobilization advance of 10% should
be proportionately deducted from the bills for the entire period of 36 months
whereas the Union of India directed recover of the said amount within a period
of 18 months.
Handing over of possession of site within the stipulated period, Mr. Rohtagi
would contend, had a direct relationship with the requirement of deployment of
heavy machinery and staff and as a result of non-compliance of the said
condition of contract on the part of the Union of India, the contractor had
suffered a huge loss as it had to keep machinery idle for a long time and bear
other cost of establishment unnecessarily.
Mrs. Anil Katiyar, learned counsel appearing on behalf of the respondent, on
the other hand, would submit that as the contractor had claimed a sum of more
than Rs.6, 00, 000/- as escalation cost and the same having been duly granted,
no further claim by the contractor was admissible.
The jurisdiction of the court to set aside an arbitration is well-settled. The
court, inter alia, can set aside an award if the arbitrator has misconducted
himself or the proceedings. The jurisdiction of the court in interfering with a
non-speaking award is very limited.
It is also trite that correspondences exchanged by the parties are required to
be taken into consideration for the purpose of construction of a contract.
Interpretation of a contract is a matter for the Arbitrator to determine, even
if it gives rise to determination of a question of law. The Arbitrator in his
award dated 5.10.1990 categorically stated that "he had examined and
considered the pleadings submitted by and on behalf of the parties and
documentary and oral evidences were produced before him by the parties". *
It has not been disputed that the documents in question referred to in para 17
of the judgment of the High Court were filed before the learned Arbitrator.
The arbitrator was, thus, required to consider as to whether the contractor can
substantiate his claim relying on or on the basis of non-compliance of the
conditions precedent in relation to the offer of rebate made by it in his
letters dated 25.8.1983 and 22.11.1983. The said contention evidently was,
thus, a subject matter of determination by the Arbitrator. An Arbitrator being
a judge chosen by the parties, his decision would ordinarily be final unless
one or the other condition contained in Section 30 of the Arbitration Act is
satisfied for the purpose of setting aside his award. Once it is held that the
construction of an agreement fell for consideration of the Arbitrator, the
determination thereupon shall not ordinarily be interfered with.
The court's jurisdiction in this behalf is merely to see whether the Arbitrator
has exceeded his jurisdiction or not. The High Court did not point out any
material on the basis whereof it could be said to have been established that
the two documents in question had not been considered by the learned
Arbitrator. Such a conclusion could be arrived at if the award was a speaking
one. The award being not a speaking one, the averments made therein should be
accepted at their face value unless contrary is proved by the party questioning
the validity of the award.
The learned counsel appearing on behalf of the Union of India has failed to
point out that any material was brought on records on the basis whereof the
findings of the High Court could be justified.
In Continental Construction Ltd. vs. State of U.P. [ ], it was, inter
alia, held : "16.The award is a non-speaking one. It is trite that the
court while exercising its jurisdiction under Section 30 of the Arbitration Act, 1940 can interfere with the award only in
the event the arbitrator has misconduct himself or the proceeding or there
exists an error apparent on the face of the award.
17. the learned Civil Judge and the High Court have not found that the umpire
acted arbitrarily, irrationally, capriciously or independent of the contract.
No finding has been arrived at that the umpire has made conscious disregard of
the contract which was manifest on the fact of the award." *
This Court in State of U.P. vs. Allied Constructions [ ], observed:
...Interpretation of a contract, it is trite, is a matter for arbitrator to
determine (see M/s Sudarsan Trading Co. vs. The Government of Kerala, ).
Section 30 of the Arbitration Act, 1940 providing
for setting aside an award is restrictive in its operation.
Unless one or the other condition contained in Section 30 is satisfied, an
award cannot be set aside. The arbitrator is a Judge chosen by the parties and
his decision is final. The Court is precluded from reappraising the evidence.
Even in a case where the award contains reasons, the interference therewith
would still be not available within the jurisdiction of the Court unless, of
course, the reasons are totally perverse or the judgment is based on a wrong
proposition of law. As error apparent on the face of the records would not
imply closer scrutiny of the merits of documents and materials on record. One
it is found that the view of the arbitrator is a plausible one, the Court will
refrain itself from interfering..."
Yet again in H.P. State Electricity Board vs. R.J. Shah and Company [1999 (4)
SCC 214], it was held: "26. In order to determine whether the
arbitrator has acted in excess of jurisdiction what has to be seen is whether
the claimant could raise a particular dispute or claim before an arbitrator. If
the answer is in the affirmative then it is clear that the arbitrator would
have the jurisdiction to deal with such a claim. On the other hand if the
arbitration clause or a specific term in the contract or the law does not
permit or give the arbitrator the power to decide or to adjudicate on a dispute
raised by the claimant or there is a specific bar to the raising of a
particular dispute or claim then any decision given by the arbitrator in
respect thereof would clearly be in excess of jurisdiction. In order to find
whether the arbitrator has acted in excess of jurisdiction the court may have to
look into some documents including the contract as well as the reference of the
dispute made to the arbitrators limited for the purpose of seeing whether the
arbitrator has the jurisdiction to decide the claim made in the arbitration
proceedings." *
In Rajasthan State Mines & Minerals Ltd. vs. Eastern Engineering
Enterprises and Another [ , this Court, opined :
"44. (a) It is not open to the Court to speculate, where on reasons are
given by the arbitrator, as to what impelled the arbitrator to arrive at his
conclusion. (b) It is not open to the Court to admit to probe the mental
process by which the arbitrator has reached his conclusion where it is not
disclosed by the terms of the award.
(c) If the arbitrator has committed a mere error of fact or law in reaching his
conclusion on the disputed question submitted for his adjudication then the
Court cannot interfere.
(e) In a case of non-speaking award, the jurisdiction of the Court is limited.
The award can be set aside if the arbitrator acts beyond his jurisdiction.
f) To find out whether the arbitrator has travelled beyond his jurisdiction, it
would be necessary to consider the agreement between the parties containing the
arbitration clause. Arbitrator acting beyond his jurisdiction is a different
ground from the error apparent on the face of the award.
(g) In order to determine whether arbitrator has acted in excess of his
jurisdiction what has to be seen is whether the claimant could raise a particular
claim before the arbitrator. If there is a specific term in the contract or the
law which does not permit or give the arbitrator the power to decide the
dispute raised by the claimant or there is a specific bar in the contract to
the raising of the particular claim then the award passed by the arbitrator in
respect thereof would be in excess of jurisdiction." *
It has not been shown before us on behalf of the Union of India that there
exists any provision in the contract which precluded the arbitrator from
deciding the dispute or there existed any specific bar in the contract
precluding the contractor to raise such a claim. Once it is held that the
Arbitrator had the jurisdiction, no further question shall be raised and the
court will not exercise its jurisdiction unless it is found that there exists
any bar on the face of the award. # [See Pure Helium India (P) Ltd. vs. Oil
& Natural Gas Commission].
While considering a speaking award this court has, however, albeit in a
different context in Union of India v. M/s Banwari Lal & Sons (P) Ltd.
[ ] noticed :
"17. It is now well settled that when a question of law is referred to
the arbitrator the award cannot be set aside only if a different view is
possible. However, it is also trite that if no specific question of law is
referred, the decision of the Arbitrator on that question would not be final,
however, much it may be within his jurisdiction and indeed essential for him to
decide the question incidentally. Only in a case where specific question of law
touching upon the jurisdiction of the arbitrator was referred for determining
his jurisdiction by the parties, then the finding of the arbitrator on the said
question between the parties may be binding.
18. It is also trite that where the award contains reasons, the same may be
interfered, inter alia, when it is based on a wrong proposition of law.
However, when the view of the arbitrator is a plausible one, the Court would
not normally interfere." *
Furthermore, as we do not find that there existed any material on records to
show that the Arbitrator while making an award ignored any material documents,
the impugned judgment cannot be sustained, which is set aside accordingly. #
In the result Civil Appeal No.6678 of 1999 filed by the contractor is,
therefore, allowed and Civil Appeal No.1984 of 2000 filed by the Union of India
is dismissed. No costs.