both the appeals Civil miscellaneous appeals have been filed under Section 39 of the Arbitration and Reconciliation Act, against the order dated 06.11.2001 passed in Arbitration Original Petition Nos.1 of 1998 & 5 of 1997 by the Third Additional Subordinate Court (Motor Accident Claims Tribunal), Tiruchirapalli.
The orders passed in Arbitration Original Petition Nos.1 of 1998 & 5 of 1997 by the Third Additional Subordinate Court, Tiruchirapalli are being challenged in the present civil miscellaneous appeals.
Arbitration Original Petition No.1 of 1998:
2.The respondent herein as petitioner has filed the Arbitration Original Petition No.1 of 1998 praying to pass a decree in pursuance of arbitral award passed by the arbitrators.
3.It is stated in the petition that the petitioner is a registered Contractor in Tamil Nadu Water Supply and Drainage Board and he has been given contract in Manapparai Circle and accordingly an agreement has come into existence between the petitioner and the Tamil Nadu Water Supply and Drainage Board. In the agreement, there is a clause to the effect that if a dispute arises, the same can be referred to arbitrators. In pursuance of the same, the petitioner has filed Original Petition No.8 of 1996, wherein the retired District Judge by name Ramalingam and retired Executive Engineer by name R.Shanmugavel have been appointed as arbitrators. The arbitrators after considering the divergent contentions raised on either side, has passed their arbitral award on 29.08.1997 to the tune of Rs.5,42,868/-. In order to get a decree in pursuance of arbitral award, the present petition has been filed.
4.It is stated in the counter filed on the side of the respondents therein that the respondents have already filed Arbitration Original Petition No.5 of 1997 so as to set aside the arbitral award dated 29.08.1997 and the petitioner has not filed the present petition with pure and clean hands and therefore, the same deserves dismissal.
Arbitration Original Petition No.5 of 1997:
5.The appellants 1 & 2 herein as petitioners have filed Arbitration Original Petition No.5 of 1997 praying to set aside the arbitral award dated 29.08.1997 passed by the arbitrators.
6.It is stated in the petition that the respondent herein has already filed a petition on 30.01.1994 so as to appoint arbitrators and the same has been dismissed and subsequently he has filed Original Petition No.8 of 1996 for the appointment of arbitrators and accordingly the arbitrators have been appointed and they decided that the petitioners herein should pay Rs.5,42,868/- to the respondent herein. The arbitrators without knowing the prevailing circumstances have erroneously passed their award. The respondent herein has not proved the alleged loss sustained by him. Under the said circumstances, the present petition has been filed praying to set aside the arbitral award dated 29.08.1997.
7.In the counter filed on the side of the respondent, it is stated that only as per the orders of the Court, the arbitrators have been appointed and after considering all the contentions raised on either side, they rightly passed an award and the same is not liable to be set aside and therefore, the present petition deserves dismissal.
8.The Court below, after considering the rival contentions raised on either side, has allowed Arbitration Original Petition No.1 of 1998 and dismissed Arbitration Original Petition No.5 of 1997. Against the award passed in Arbitration Original Petition No.1 of 1998, Civil Miscellaneous Appeal No.1616 of 2002 has been filed and likewise, against the order passed in Arbitration Original Petition No.5 of 1997, Civil Miscellaneous Appeal No.1617 of 2002 has been filed.
9.Since common questions of law and facts are involved in both the civil miscellaneous appeals, common judgment is pronounced.
10.Before contemplating the rival submissions made by either counsel, it has become shunless to perorate the following admitted facts:
It is an admitted fact that in between the petitioner found in Arbitration Original Petition No.1 of 1998 and the respondents therein an agreement has come into existence on 27.01.1992. As per the terms of the agreement, the contractor viz., the petitioner found in Arbitration Original Petition No.1 of 1998 has to perform 20% of work within three months, 50% of the works within 6 months, 80% of the work within 9 months and 100% of work within 12 months and further the respondents found in Arbitration Original Petition No.1 of 1998 have to supply pipes, etc. to the Contractor viz., petitioner found in Arbitration Original Petition No.1 of 1998. The Contractor is also bound to supply cement, steel, jointing materials, yarn, lead, bolts, nuts, rubber sheets, etc. Further in the agreement, it is stated that if there is any dispute arises between parties, the same shall be referred to arbitrators.
11.The petitioner found in Arbitration Original Petition No.1 of 1998 has already filed a petition in Original Petition No.8 of 1996, wherein he has clearly narrated the lapses committed by the respondents found in Arbitration Original Petition No.1 of 1998. The main grievance of the Contractor viz., petitioner found in Arbitration Original Petition No.1 of 1998 is that the respondents therein have failed to supply pipes, etc. within the stipulated period and due to that delay has occurred and he has sustained loss on various heads to the tune of Rs.9,93,640/-. Since Original Petition No.8 of 1996 has been filed for the appointment of arbitrators, the Court has appointed arbitrators. The arbitrators, after analysing all the contentions raised on either side, has awarded Rs.1,17,060/- towards labour charges, Rs.7,500/- towards reexcavation of trenches, Rs.8,467/- towards pay of technical assistants, Rs.81,000/- towards tractor and trailer hire charges, Rs.47,333/- towards loss of profit and Rs.2,81,508/- towards price escalation. In aggregation Rs.5,42,868/- has been awarded.
12.In pursuance of the arbitral award passed by the arbitrators, for passing a decree Arbitration Original Petition No.1 of 1998 has been filed and in order to set aside the same, Arbitration Original Petition No.5 of 1997 has been filed. As stated earlier, the Court below has allowed the Arbitration Original Petition No.1 of 1998 and dismissed Arbitration Original Petition No.5 of 1997.
13.The learned counsel appearing for the appellants in both the civil miscellaneous appeals has vehemently contended that the arbitrators have passed an arbitral award to the tune of Rs.5,42,868/- and in fact they exceeded their limit and without any basis they passed arbitral award in question to the said sum of Rs.5,42,868/- and further there is no agreement with regard to escalation in rates of labour and materials and therefore, the entire arbitral award passed by the arbitrators is liable to be set aside and under the said circumstances, the Arbitration Original Petition No.5 of 1997 has been filed, but the Court below without considering the contentions urged on the side of the appellants/petitioners has erroneously dismissed Arbitration Original Petition No.5 of 1997 and erroneously allowed Arbitration Original Petition No.1 of 1998 and therefore, the orders passed by the Court below are liable to be set aside.
14.In support of the contentions urged on the side of the appellants/petitioners in Arbitration Original Petition No.5 of 1997, the following decisions have been accited.
a)2001 (4) Supreme Court Cases 241 (Ramachandra Reddy & Co. Vs. State of A.P. and others) wherein the Honourable Apex Court has held that higher rates for additional or excess work done by the contractor cannot be awarded by arbitrator, himself a creature of the agreement, unless such rates are expressly or impliedly provided for under the agreement. Further it has been held that escalation in rates of labour and materials can only be granted on the basis of agreement. Mere grant of extension of time would not entitle contractor to claim extra payment for increases in rates of labour and materials.
The facts of the case mentioned in the decision referred to above are that the contractor has claimed payment at higher rate for excavation of unexpectedly large quantities of hard rock, on the basis of clause in agreement relating to supplemental items which are "found essential, incidental and inevitable during execution of the work". Therefore, it is very clear that unexpectedly large quantities of hard rock have to be removed by the contractor and he removed the same and subsequently he claimed higher rates for additional or excess work done by him. Under the said circumstances, the Honourable Apex Court has held that without any basis in agreement, escalation in rates of labour and materials cannot be granted merely on the basis of grant of extention of time.
b)2006 (11) Supreme Court Cases 181 (McDermott International Inc. Vs. Burn Standard Co. Ltd. and others) wherein the Honourable Apex Court has held that the 1996 Act makes provision for the supervisory role of courts, for the review of the arbitral award only to ensure fairness. Intervention of the Court is envisaged in few circumstances only, like, in case of fraud or bias by the arbitrators, violation of natural justice, etc. The Court cannot correct errors of the arbitrators. It can only quash the award leaving the parties free to begin the arbitration against if it is desired. So, the scheme of the provision aims at keeping the supervisory role of the Court at minimum level and this can be justified as the parties to the agreement make a conscious decision to exclude the Court's jurisdiction by opting for arbitration as they prefer the expediency and finality offered by it.
Further the Honouable Apex Court has held that the arbitral award can be set aside if it is contrary to (a)fundamental policy of Indian Law; (b) the interests of India; (c) justice or morality; or (d) if it is patently illegal or arbitrary. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the Court. Lastly, where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute, would come within the purview of
Section 34 of the Act.
15.From the close reading of the decision reported in 2006 (11) Supreme Court Cases 181 (Mc.Dermott International Inc. Vs. Burn Standard Co. Ltd. and others) one can easily discern that the Court is not competent to correct errors committed by arbitrators and at the most it can set aside the arbitral award on the basis of the grounds mentioned as (a) to (d).
16.In order to repel the argument advanced by the learned counsel appearing for the appellants/ petitioners in Arbitration Original Petition No.5 of 1997, the learned counsel appearing for the respondents in both the civil miscellaneous appeal has ingeniously contended that as per the agreement dated 27.01.1992 the appellants have to supply pipes, etc. to the respondent herein and since the appellants have not supplied pipes, etc. as agreed to, the respondent has sustained heavy loss and under the said circumstances, Original Petition No.8 of 1996 has been filed by the respondent as petitioner for appointing arbitrators and accordingly the Court has appointed two arbitrators and the arbitrators, after analysing all the rival contentions raised on either side, have rightly passed an award under various heads, to the tune of Rs.5,42,868/- and the Court below, after considering the nature of the arbitral award passed by the arbitrators, has rightly allowed Arbitration Original Petition No.1 of 1998 and also rightly dismissed Arbitration Original Petition No.5 of 1997 and therefore, the orders passed by the Courts below are perfectly correct and the same do not require any interference.
17.In support of his contention, he has meticulously drawn the attention of the Court to the following decisions;
a)2009 (5) MLJ 145 (SC) (M.P. Housing Board Vs. Progressive Writers & Publishers) wherein it has been held that interpretation of a contract is a matter for the arbitrator to determine. Even in a case where the award contained reasons, the interference therewith would still be not available within the jurisdiction of the Court, unless of course the reasons are totally perverse or award is based on wrong proposition of law.
b)1999(2) Law Weekly 310 (Santhanam Vs. R.Chandravelu and the Tamil Nadu Housing Board) wherein this Court has held that if time was of the essence of the contract as pleaded, Board ought not to have extended the time at any cost and it could have even cancelled the contract.
c)2003 (7) Supreme Court Cases 396 (State of U.P. Vs. Allied Constructions) wherein the Full Bench of the Honourable Apex Court has held that the power of the Court to interfere is restricted by virtue of
Section 30. The Court cannot reappraise the evidence. Interpreting a contract is matter within the jurisdiction of the arbitrator. Unless one or the other condition under
Section 30 of the Act is satisfied, the award cannot be set aside.
18.At this juncture, it would be apropos to look into the provision of Section 30 of the Arbitration Act (X of 1940) and the same reads as follows;
"Grounds for setting aside award.- An award shall not be set aside except on one or more of the following grounds, namely,-
a)that an arbitrator or umpire has misconducted himself or the proceedings;
b)that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35;
c)that an award has been improperly procured or is otherwise invalid."
19.From the conjoint reading of the decisions referred supra as well as the provision of
Section 30 of the said Act, it is very clear that the power of the Court to make interference in an arbitral award is only in consonance with the provisions of
Section 30 of the said Act. To put it in nutshell, an arbitral award can be set aside only on the basis of one or more grounds mentioned in the said Section and the court cannot reappraise the available evidence and further interpreting a contract is a matter within the jurisdiction of arbitrator.
20.With these legal backdrops, the Court has to look into the rival submissions made by either counsel. The main grievance of the appellants in both the civil miscellaneous appeals is that the arbitrators have exceeded their limit and there is no contract with regard to higher rates for additional or excess works.
21.As enunciated earlier, the contract between the parties has come into existence on 27.01.1992 and as per the terms of contract, the appellants herein have to supply pipes, etc. to the contractor viz., respondent herein and further the entire works should be completed within twelve months. The specific contention urged on the side of the respondent herein/contractor is that as per the terms of contract the appellants herein have not supplied pipes, etc. to the respondent/contractor and due to that delay has occurred and since delay has been caused by the appellants, the respondent/contractor has paid excess labour charges, payments towards reexcavation of trenches, pay to technical assistants, hire charges to the tractor and trailer, loss of profit and also price escalation.
22.It is an admitted fact that the respondent herein as petitioner has filed Original Petition No.8 of 1996 wherein it is prayed to appoint arbitrators. In Original Petition No.8 of 1996, the respondents therein has filed a detailed counter. In fact, this Court has closely perused the entire dates on which supply of pipes have been made. It is not an exaggeration to say that that the appellants herein have not supplied pipes properly and the supply of pipes have been made very belatedly. It has already been pointed out that the respondent contractor must finish his work within 12 months. Since pipes have not been supplied within the stipulated period, the delay in completing the work has occurred. It is also equally an admitted fact that the respondent/contractor has finished his work after a lapse of one year from the date on which he has to complete his work. Therefore, it is quite normal that the respondent/contractor has sustained heavy loss towards various heads.
23.The arbitrators, after considering the claim made by the respondent contractor towards various heads and also after analysing the rival contentions raised on either side, has fixed Rs.1,17,060/- towards labour charges, Rs.7,500/- towards reexcavation of trenches, Rs.8,467/- towards pay of technical assistants, Rs.81,000/- towards tractor and trailer hire charges, Rs.47,333/- towards loss of profit and Rs.2,81,508/- towards price escalation.
24.It has already been pointed out that due to the belated supply of pipes to the respondent/ contractor, he has not been able to complete his work as agreed by him and also as per the terms of contract, and for completing the work assigned to him, he has taken one more year. It is a humdrum that prices of materials are increasing day by day and the charges of labours are also equally increasing. The arbitrators, after considering all the contentions raised on either side, has rightly fixed amounts towards labour charges, reexcavation of trenches, pay to technical assistants, tractor and trailer hire charges, loss of profit and price escalation. Since due to lapses on the part of the appellants/petitioners in Arbitration Original Petition No.5 of 1997, the respondent/contractor has not been able to complete his work as agreed by him and he has taken one more year for completing the same, it is needless to say that the appellants/petitioners in Arbitration Original Petition No.5 of 1997 are liable to pay the amount fixed in arbitral award.
25.In fact, this Court has closely perused the entire arbitral award. The arbitrators have dealt with each and every item in detail and ultimately fixed the amounts as stated above. The acts of arbitrators as well as their decision have not come within the purview of Section 30 of the Arbitration Act (X of 1940). Unless any one of the grounds mentioned in the said Section is in existence as per the decision rendered by the Full Bench of the Honourable Apex Court, the arbitral award in question cannot be set aside. Therefore, it is very clear that the award passed by the arbitrators is well within the limits of law and also in terms of contract. Under the said circumstances, the argument advanced by the learned counsel appearing for the appellants is sans merit, whereas the argument advanced by the learned counsel appearing for the respondent is really having subsisting force.
26.In fine, both the civil miscellaneous appeals deserve dismissal and accordingly are dismissed with costs. The orders passed in Arbitration Original Petition Nos.1 of 1998 & 5 of 1997 by the Third Additional Subordinate Court, Tiruchirapalli are confirmed.
gcg To
1.The Third Additional Subordinate Judge, Tiruchirapalli.