Sewa Sons Builders vs Union Of India And Anr.
2002 Latest Caselaw 189 Del

JUDGMENT

J.D. Kapoor, J.

1. There is no gainsaying the fact that the Arbitrator is an instrument of the agreement and is not over it. If the Arbitrator traverses beyond the terms of the agreement such an award is liable to be set aside. He has to remain within the four corners of the agreement. However, at the same time, it is cardinal principal that the sanctity of the award should always be preserved because the parties choose their own forum reposing their full faith not only in his competence but also in his integrity and impartiality. The parties, are, therefore restrained from picking holes with the findings of the Arbitrator unless bias or perversity is manifest and pronounced.

2. At the same time, the court should also refrain from re-appreciating or re-assessing the evidence or material on which the Arbitrator has based his findings. If this is allowed, it would amount to functioning of court as appellate court which it is not. This is neither the object of Arbitration Act nor the permissible area. The above principles have been culled out mainly in view of the objections of the respondent to the award that the Arbitrator has gone beyond his brief and has transgressed to the area that did not belong to him.

3. For instance, counter-claim no.1 which was on account of levy compensation under Clause 2 of the agreement is entirely contrary to the scope of Clause 2 of the agreement read with Clause 25 as the item pertains to levy of compensation and it falls within the ambit of excepted matters as Sub clause 25 makes the decision of the Superintending Engineer in this regard final, binding and not open to challenge either before the Arbitrator or before the Court.

4. Admittedly, the Superintending Engineer levied the compensation amounting to Rs.2,06,364/- under Clause 2 after giving show cause notice to the petitioner. However, the Arbitrator went into the merits of the findings of the Superintending Engineer and rejected the counter-claim of the respondent by observing that "Respondent were not entitled to levy compensation under Clause 2 of the agreement as it was the respondents who alone were responsible for the delay."

5. This observation of the Arbitrator stems from claims 7 & 8. The findings as to claim no. 2 of the petitioner is to the effect that the work got prolonged due to the delay by the respondent and also the finding with regard to claim no.7 that the respondent was not empowered to levy compensation. As to claim no.2, the Arbitrator returned the finding that the entire delay was on the part of the respondent. As to claim no.7, the Arbitrator found that the respondents were not entitled to rescind the contract. The findings of the Arbitrator with regard to claim no.8 were to the effect that time was not essence of the contract and the same was set at large and the compensation was levied much after rescission of work.

6. Mr. Dilip Singh, learned counsel for the respondent-UOI has emphatically urged that in spite of the findings of the Arbitrator with regard to claims of the petitioner, the Arbitrator was not empowered to interfere with the findings/decision of the Superintending Engineer arising from Clause 2 read with Clause 25 and thus this finding is completely without jurisdiction.

7. In support of this contention, Mr. Singh has placed reliance upon Vishwanath Sood v. Union of India and another wherein same Clauses of the agreement were under consideration. Supreme Court held that the opening words of the arbitration Clause viz. "except where otherwise provided in the contract" placed the question of awarding compensation outside the purview of the Arbitration. The compensation, determined either by the Engineer-in-charge or on further reference by the Superintending Engineer was not capable of being called in question before the Arbitrator.

8. However, the Supreme Court also observed that the levy of compensation under the said Clause cannot be said to be in the nature of an automatic levy to be made by the Engineer-in-charge based on the number of days of delay and the estimed amount of work as the reference in the Clause is the requirement that the work shall throughout the stipulated period of the contract be proceeded with due diligence and the reference in the latter part of the Clause that the compensation has to be paid "in the event of the contractor failing to comply with" the prescribed time schedule make it clear that the levy of compensation is conditioned on some default or negligence on the part of the contractor. It further held that while the Clause fixes the rate of compensation at 1 per cent for every day of default it takes care of prescribe the maximum compensation of 10 per cent on this ground and it also provides for a discretion to the Superintending Engineer to reduce the rate of penalty from 1 per cent, though the Clause does not specifically say so. However, the final conclusion of the Supreme Court as to the question of awarding compensation is that such a compensation is outside the purview of the Arbitrator. The compensation, determined either by the Engineer-in-charge or on further reference by the Superintending Engineer was not capable of being called in question before the Arbitrator.

9. According to Mr. Sandeep Sharma, learned counsel for the petitioner-claimant interpretation of Clause 2 lays down specific time and specific period within which the contractor shall comply with the time schedule. In the event, the contractor fails to comply with the same, he shall be liable to pay compensation as the Superintending Engineer may decide. Thus, according to Mr. Sharma, first and foremost condition of Clause 2 is until and unless the blame of delay is on the door of the contractor, the Superintending Engineer is not empowered to levy compensation.

10. On the face of it, when we read Clause 2 with Clause 25, there is no other interpretation than to conclude that the parties had left decision of levy entirely to the discretion of the Superintending Engineer. Had it not been so, the claims 1, 2, 7 and for that purpose claim 8 preferred by the petitioner arising out of delays on the part of the respondent would not have been allowed nor would have the petitioner-claimant permitted to prefer such claims on the ground of delays on the part of respondent. It is respective of the contrary findings of the Arbitrator and Superintending Engineer on the point of delay.

11. Once parties agree that the a particular item will be excepted matter, none of the parties is permitted to take up such dispute by way of preferring claim in that regard. In spite of the observations made by the Superintending Engineer with regard to Clause 2 learned Arbitrator observed that the words in the aforesaid Clause can have reference only to the provisions such as the one in parent thesis in Clause 2 by which certain types of determinations are left to the administrative authorities. If that be so, the word 'except' in the contract would become meaningless and conclude that the question of awarding compensation is outside the purview of the Arbitrator and that the compensation determined under Clause 2 either by the Engineer-in-charge or Superintending Engineer will not be capable of being called in question.

12. The Hon'ble Supreme Court reading Clauses 2 & 25 together held that the conclusion is irresistible that the amount of compensation chargeable under Clause 2 is a matter which has to be adjudicated under Clause 2 either by the Engineer-in-charge or Superintending Engineer and will not be capable of being called in question nor can it be referred to arbitrator under Clause 25.

13. In view of the aforesaid discussion, the findings of the Arbitrator with regard to counter-claim no.1 are not justified, are beyond jurisdiction and are therefore liable to be set aside.

14. As regards remaining claims including claim No. 4, the findings of the Arbitrator are finding of facts based upon material and therefore not open to challenge. However, it is contended by Mr. Singh, learned counsel for the respondent that claim No.4 has been awarded for the time extended after the stipulated period which is beyond the jurisdiction of the Arbitrator as Clause 10(CC) clearly provides that contractor shall be compensated for escalation in price and it shall be available for the work done during the stipulated period of contract including such period for which the contract was validly extended under Clause 5 without any action under Clause 2.

15. In support of this contention, he has relied upon Delhi Development Authority v. U. Kashyap 1999(1) Arb.L.R. 88 wherein in response to respondent's letter, the Executive Engineer, Housing Division sent a letter to the respondent pointing out that for any increase in the prices of material and labour respondent shall be compensated as per provision of Clause 10(CC) for the work done not only during the stipulated period of the contract but also for such period for which the contract is validly extended. However formulla for escalation in the price of materials and labour, when due, has been provided in Clause 10(CC). In the aforesaid case, the Arbitrator deviated from the said formulla and the award was set aside.

16. As per contention of Mr. Singh since in the instant case, the Superintending Engineer had levied compensation under Clause 2, the award for escalation under Clause 10(CC) was wrongly granted by the Arbitrator being without jurisdiction as compensation for escalation is not permissible until contract is validly extended under Clause 5 without any action under Clause 2 which in other words means that if time is extended after levy of compensation, then compensation under Clause 10(CC) is not available.

17. In Associated Engineering Co. v. Government of Andhra Pradesh and Anr. , a specific formulla had been provided under item 35 and therefore it was held that functioning of the umpire was to make an award in accordance with that formulla and not to alter the said formulla without jurisdiction.

18. In the instant case, one claim was considered for Clause 10(CC) for general increase. However, no other award in respect of same item was made by the Arbitrator. In U. Kashyap and Associated Engineering cases, the Arbitrator had not only deviated from the formulla but also awarded the compensation twice under the same head. However, in the instant case, the Arbitrator has awarded claim No. 4 in strict terms of Clause 10(CC) and therefore cannot be deemed as an award being sans jurisdiction. The learned Arbitrator has returned categorical findings that the delay was entirely and squarely on the part of the respondent and therefore the question of transgressing the provisions of Clause 10(CC) by the Arbitrator does not arise much less deviation from by formulla itself.

19. I, therefore, do not find any substance in the contention of learned counsel for respondent-UOI that award in granting compensation under Clause 10(CC) was impermissible once levy has been made under Clause 2 by the Superintending Engineer. In the result, award is set aside so far as counter claim is concerned and is maintained so far as remaining claims are concerned. Suit is decreed in terms of the amount awarded against those claims. However, in view of the fact that awarded amount along with interest was deposited in this court on the filing of the award, the interest started running from the said date. If any discrepancy is detected in this regard, the petitioner is given liberty to raise the same while filing the execution.

20. Petitioner as well as objections (I.A.No. 1331/97) stand disposed of.