T.R. Gupta vs National Hydroelectric ...
2006 Latest Caselaw 15 Del

JUDGMENT

Sanjay Kishan Kaul, J.

Page 172

IA 6895/1995 (under Sections 30 and 33 of the Arbitration Act, 1940)

1. The respondent NHPC invited tender for construction of a barrage, head regulator and other appurtenant works on Sarda River for its Tanakpur Hydro Electric Project on 29.1.1985. The tender documents were issued Page 173 which were to form a part of the contract. The petitioner submitted its tender on 22.4.1985. Pre-bid conference was also held with the petitioner and the tender of the petitioner was accepted by issuing a letter of intent dated 15.10.1985 and the letter of award dated 26.12.1985. The contract was executed on 5.2.1986.

2. The letter of award dated 26.12.1985 includes the Schedule of Quantities and prices and thus item-wise rates for contract work were available. The said letter was modified by another letter of award dated 10.11.1986 and as a result thereof a supplementary agreement dated 17.3.1987 was executed between the parties containing revised Schedule A of Rates and Quantities for various items of contract work.

3. The scope of the work included the construction of Head Regulator, Right Abuttment, Right Side Afflux Bund, Silt Excluder Tunnel, Five Undersluice Bays on Right Side including Divide Wall, 250 mt. Reach of Power Channel. There was some revisioning of the original Schedule of Quantities as per the supplementary agreement.

4. The petitioner addressed a letter dated 27.3.1987 to the Manager of the respondent asking him to settle the rates for laying and pouring of concrete for the cut-off walls. The petitioner claimed that they were entitled to at least the rate given for Toe Walls of Rs. 568.49 per cubic metre. The Manager of the project recommended the case to the Senior Manager vide his letter dated 1.9.1987 on the basis that the rate for pouring of concrete in cut-off walls was not provided in the Schedule of Rates and the rate for concreting of Toe Walls provided in item 5A in the Schedule of Rates be given to the contractor for concreting of the cut-off walls. This recommendation was not accepted by the Chief Engineer (Contracts) by his letter dated 2.12.1987 who took the view that the cut-off was part of the raft itself and, therefore, could only be paid as per item 5A. The petitioner again wrote on 19/23.8.1987 for reconsideration of their claim but despite the recommendation of the Manager by the letter dated 7.1.1988, the Chief Engineer in the Corporate Office rejected the claim by the letter dated 9.7.1988.

5. In view of the aforesaid dispute, the petitioner asked for arbitration on 27.9.1988 and in terms of arbitration clause 55, the Chief Engineer, CPWD appointed Shri Swami Dial, retired Chief Engineer, CPWD as the Sole Arbitrator. The said letter (Ex.R/15) reads as under:

I am pleased to appoint you as an arbitrator in the dispute arising out of contract No. NH/Contracts/CC-II/AGMT/TP-01/B with M/s. T.R. Gupta Contractors Ltd., 12-A/B, Gandhi Nagar, Jammu-180004 for the work of construction of Barrage, Head Regulator and other Appurtenant works of Tanakpur H.E. Project in respect of the rate for concreting in cut off walls.

6. The Arbitrator entered upon reference and after the evidence of the petitioner had been completed, the parties made a joint application to this court praying that the arbitrator be replaced by Justice Avadh Behari Rohtagi (Retd.). The said application bearing OMP No. 102/1991 was allowed by the order dated 12.5.1993 and the new arbitrator was permitted to proceed further with the arbitration matter from the stage where it was left off by the previous arbitrator.

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7. The arbitrator has made and published his award on 7.3.1995. The claim of the petitioner was dismissed and the parties were left to bear their own costs.

8. The petitioner was aggrieved by the said award and thus filed these objections under Section 30 and 33 of the Arbitration Act, 1940 (hereinafter referred to as 'the said Act').

9. Learned counsel for the petitioner fairly submitted that in a challenge to an award, this court would not sit as a court of appeal re-appraising evidence. It is not the jurisdiction of this court to set aside an award merely on the ground that it may have come to a different conclusion from that of the Arbitrator so long as the conclusion of the Arbitrator is a plausible one. Learned counsel thus confined his submissions only to two propositions: first, the Arbitrator failed to follow the terms of reference; second, there was no evidence or material to come to the conclusion arrived at by the Arbitrator.

10. The fulcrum of the submission of the learned counsel for the petitioner is that the mandate for the Arbitrator was to determine the rate for concreting the cut-off walls while the Arbitrator has wrongly framed the principal question as to whether the cut-off wall referred to in the claim of the petitioner was an independent construction work or an integral part of the main structure. Thus, the submission was that it was not the jurisdiction of the Arbitrator to go into the question as framed but only to fix the rate.

11. Learned counsel, in order to substantiate the plea, referred to the judgment of the apex court in Rajasthan State Mines and Minerals Ltd. v. Eastern Engineering Enterprises and Anr., 1999 (3) Arb. LR 350. It was observed in para 42 as under:

42. From the resume of the aforesaid decisions, it can be stated that:

a) It is not open to the Court to speculate, where no reasons are given by the Arbitrator, as to what impelled 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.

d) If no specific question of law is referred, the decision of the Arbitrator on that question is not final, however much it maybe within his jurisdiction and indeed essential for him to decide the question incidentally. In a case where specific question of law touching upon the jurisdiction of the arbitrator was referred for the decision of the arbitrator by the parties, then the finding of the arbitrator on the said question between the parties may be binding.

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 Page 175 containing the arbitration clause. Arbitrator acting beyond his jurisdiction - is a different ground from the error apparent on the fact 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 arise a particular claim before the Arbitrator. If there is a specific terms 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.

h) The award made by the arbitrator disregarding the terms of the reference of the arbitration agreement or the terms of the contract would be a jurisdictional error which requires ultimately to be decided by the Court. He cannot award an amount which is ruled out or prohibited by the terms of the agreement. Because of specific bar stipulated by the parties in the agreement, that claim could not be raised. Even if it is raised and referred to arbitration because of wider arbitration clause such claim amount cannot be awarded as agreement is binding between the parties and the Arbitrator has to adjudicate as per the agreement. This aspect is absolutely made clear in continental Construction Co. Ltd (supra) by playing upon the following passage from Alopi Parshad v. Union of India, (supra), which is to the following effect.

There it was observed that a contract is not frustrated merely because the circumstances in which the contract was made, altered. The Contract does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of event which they did at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the Courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous.

i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action.

ii) The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks just and reasonable; the Arbitrator is a tribunal selected by the parties to decide the disputes according to law.

12. Learned counsel relies upon sub-para (h) of the aforesaid paragraph to submit that once the terms of reference are disregarded, the same would amount to jurisdictional error. Thus, the arbitration clause cannot be novated.

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13. Learned counsel referred to the judgment of the apex court in Tamil Nadu Electricity Board v. Bridge Tunnel, Constructions and Ors., 1997 (2) Arb.LR. 01 where it was observed in para 24 as under:

24. It would thus be seen that the Arbitrator, while deciding the admitted dispute, subject matter of adjudication, may decide the dispute in reference to the agreement. That would be within his jurisdiction. In such jurisdictional issue, even if an error is committed that may not be an error apparent on the face of the record because the Arbitrator, the chosen forum, may commit an error in exercising his jurisdiction. However, if he, by a speaking award, decides it on a wrong proposition of law, it will be an error apparent on the face of record and liable to correction. If the arbitrator decides a dispute which is beyond the scope of his reference or beyond the subject matter of the reference or he makes the award disregarding the terms of reference or the arbitrator agreement or terms of the contract, it would jurisdictional error beyond the scope of reference, he cannot clothe himself to decide conclusively that dispute as it is an error of jurisdiction which requires to be ultimately decided by the court. This court has pointed out the distinction between latent and patent error of jurisdiction in Tarapore Co.'s Case thus:

It has to be seen whether the term of the agreement permitted entertainment of the claim by necessary implication. It may be stated that we do not accept the broad contention of Mr. Nariman that whatever is not excluded specifically by the contract can be subject matter of claim by a contractor. Such a proposition will mock at the terms agreed upon. Parties cannot be allowed to depart from what they had agreed. Of course, if something flows as a necessary concomitant to what was agreed upon, courts can assume that too as a part of the contract between the parties.

14. Learned counsel thus emphasised that it was not permissible for the Arbitrator to go beyond the scope of reference, or beyond the subject matter or disregard the terms of reference.

15. Learned counsel referred to the judgment of this court in ISM Airport Techniques v. Airports Authority of India, 2005 (3) Arb. LR 495 where in para 8, the observations of the apex court in Food Corporation of India v. Joginderpal Mohinderpal and Anr., were taken note of:

It is necessary to find whether the arbitrator has misconducted himself or the proceedings legally in the sense whether the arbitrator has gone contrary to the terms of reference between the parties or whether the arbitrator has committed any error of law apparent on the face of the award.

16. learned counsel for the petitioner next referred to the judgment of the Supreme Court in Tarapore and Co. v. State of Madhya Pradesh, 1994 (1) Arb.LR. 341 to advance the proposition that if there be a case of patent lack of jurisdiction, acquiescence of the parties would not be material inasmuch as Page 177 it is settled law that by agreement, jurisdiction cannot be conferred. This judgment has been cited to rebut any submission which may arise from the learned counsel for the respondent that the petitioner fully participated in the proceedings, issues were framed and decided.

17. Learned counsel for the petitioner submits that the learned Arbitrator has basically proceeded only on the basis of published material and treaties including of Hudson to come to a conclusion that it is necessary with proper foundation to provide a cut-off or artificial impervious barrier under the heel of the dam and thus the cut-off wall is an engineering compulsion and it is impossible to build a barrage without cut-off wall. It is submitted that even assuming for the sake of argument that the said concept is incorrect, this does not preclude the petitioner from claiming certain rates for the work done.

18. It is the submission of the learned counsel for the petitioner that clause 18 of the contract deals with deviations and provides for the manner of calculations for such deviations. The clause provides that the rates already provided in Schedule of Quantities shall apply in respect of the same items for which there is variation. In case the same items are not available, the rate shall be derived from the quoted rates of analogous items in the Schedule of Quantities and actual observance at site.

19. Learned counsel for the respondent, however, disputes the submissions of the learned counsel for the petitioner and submits that the Arbitrator has arrived at a finding after detailed scrutiny of the merits of the case based on interpretation of clauses of contract and appreciation of the evidence on record. It is further submitted that there can be no dispute about the nature of reference since the order of reference has to be read in the context of the respective stands taken by the parties.

20. On consideration of submissions of the learned counsel for the parties, perusal of the award and the material placed before the Arbitrator, I am of the considered view that it cannot be said that the Arbitrator has exceeded the terms of reference or not followed the same. The dispute which gave rise to the arbitration has to be kept in mind while construing the nature of reference made. It is not in dispute that the stand of the petitioner vide the letter dated 27.3.1987 was that it is entitled for payment of cut-off walls at the rates similar to Toe Walls as provided in item 5(b) of Schedule A. This was followed up by the letter dated 12.8.1987 to the effect that in fact a higher rate is entitled as the work was much more difficult and laborious than doing shuttering work and laying the concrete. On the other hand, the stand of the respondent was that the claim of the petitioner could not be entertained. The respondent vide its letter dated 14.12.1987 stated as under: The issue has been examined in Corporate Office and it is communicated that concreting in cut-off portion is a part of raft itself and payment for it shall be made in item No. 5(a) i.e. providing and laying plain/reinforced cement concrete for Barrage and Head Regulator raft. Hence the payment made for cut- off concrete as per Item No. 5(a) of the Schedule A of the contract Agreement is solely correct. As such the claim for execution of item No. 5(b) for cut-off concrete be treated as rejected.

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21. A perusal of the aforesaid shows that the respondent believes that the concrete in cut-off portion is part of the raft itself which is liable to be paid in terms of item 5(a) which provides for laying plain/reinforced cement concrete. The item for which the petitioner was claiming the amount was thus being treated as part of the awarded contract for which no extra payment was required to be made. The recommendation of the Manager that the petitioner's demand for payment may be considered under clause 5(b) instead of 5(a) was not accepted by the Chief Engineer. It is in view thereof that the reference was made to the earlier Arbitrator vide the letter dated 23.2.1989 in respect of the rate for concrete in cut-off wall. This does not imply that the petitioner is entitled to some amount and the only dispute was about the quantum of amount. The very entitlement of the petitioner was in question and the reference must be understood in that context. The issues framed by the Arbitrator also substantiate this plea.

22. In view of the aforesaid position, it cannot be said that the Arbitrator had novated the arbitration clause or went beyond the scope of the reference. There can be no quarrel with the proposition advanced by learned counsel for the petitioner that in case of the Arbitrator going beyond the scope of such reference, the same would amount to a misconduct and the award would be liable to be set aside. Thus, the judgments referred to by learned counsel for the petitioner on the principles of law are not applicable as the present case is not one where the Arbitrator has actually exceeded the reference.

23. The second limb of the submission of the learned counsel for the petitioner is in fact linked to the first limb since the plea arises from the fact that the Arbitrator ought to have gone into the nature of the work. It is not in dispute that witnesses were produced by both the sides but the Arbitrator found that the petitioner failed to establish its case. The reference to the Treaties and the texts has been made to understand the nature of the work which was claimed by the petitioner to be an additional work/deviation. It is only if the said work was found to be an additional work/deviation, could the question of fixing of the rate for the same arise. The finding of the Arbitrator is that no extra amount was payable to the petitioner since the work in question formed a part of the contract work already assigned to the petitioner for which payment had been provided for. It is in this context that the respondent took this stand before the Arbitrator that the full payment of cut-off walls had already been made to the petitioner at the agreed rates fixed for the main structure and nothing further was payable to the petitioner.

25. The Arbitrator while considering the claims of the petitioner in fact even permitted the petitioner to enhance the claims from Rs. 7 lakhs to Rs. 40,64,000/- and rejected the contention of the respondent that the same would amount to enlargement of the scope of reference. The Arbitrator observed that the terms of reference were wide and was to adjudicate the dispute in respect of rate for concreting in cut-off walls.

26. The Arbitrator has in fact even considered and appreciated the evidence produced by the petitioner. The claim of the petitioner was based on the ground that the construction joint exists in the structure as per construction Page 179 drawing No. 3104 and, therefore, cut-off walls are an extra work. The respondent's witnesses stated that no construction joints had been provided in the structure. The witness of the petitioner in cross-examination Shri M.L. Seroo admitted that there was no joint. He further admitted that there is no line of demarcation between the so called cut-off walls and the four structures. The witness went on to state that there was a line of convenience and not part of the drawing. The Arbitrator thus found that the cut-off wall was not an independent item.

27. In order to determine the scope of the work, the Arbitrator has rightly taken note of the contract between the parties. The Arbitrator observed that in most construction drawings, the description of the work to be carried out would be found in technical documents. The drawings were thus held to have contractual force and the description of the work to be done by the contractor was found to be decisive in this behalf. The Treaties of Hudson have been relied upon for the proposition that ordinary construction contracts are to be interpreted using the contract documents as a whole to determine the exact work required to be done for the contracted price. In order to carry out the descripted work properly, cut-off walls will inevitably and invariably be necessary as per the observations of Hudson. It was thus found that the same did not amount to an extra work as it was part of the indispensable necessary work which would form a part of the originally assigned work.

28. Another aspect taken note of by the Arbitrator was that the work was awarded to two parties: the petitioner and the Hindustan Steel Construction Limited. If one party was unable to complete the work, the other party was obliged to complete it. The rates of the petitioner were higher in respect of items in clause 5(a) and 5(b) and thus the claim for additional amount by the petitioner was held to be unjustified also for that reason.

29. The fundamental issue thus was rightly considered by the Arbitrator as to whether the work for which the petitioner was claiming certain rates was or was not part of the original contract. In case the same formed part of the original contract then irrespective of the difficulty involved or the cost involved, the petitioner was required to complete the same without payment of any extra rate.

30. In view of the aforesaid, I find no error in the award. The objections are dismissed.

CS (OS) No. 953/1995

31. The objections to the award having been dismissed, the award 26.12.1985 of Justice Avadh Behari Rohtagi (Retd.) is made rule of the court leaving the parties to bear their own costs.

32. Decree sheet be drawn up accordingly.