Karnataka High Court
M/S Larsen And Toubro Limited vs M/S Bangalore Metro Rail Corporation ... on 20 May, 2025
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COMAP NO. 526 OF 2022
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 20TH DAY OF MAY, 2025
PRESENT
THE HON'BLE MR JUSTICE V KAMESWAR RAO
AND
THE HON'BLE MR JUSTICE S RACHAIAH
COMAP NO. 526 OF 2022
BETWEEN
M/S LARSEN AND TOUBRO LIMITED,
HAVING OFFICE AT L AND T HOUSE,
BALLARD ESTATE,
NAROTTAM MORARJI MARG, MUMBAI-400 001,
REPRESENTED BY ITS AUTHORIZED SIGNATORY
MR C.A.VENKATESH.
...APPELLANT
(BY SRI. ANIRUDH KRISHNAN,
SRI. RAMKRISHORE KARANAM AND
SMT. GARIMA KIRTI, ADVOCATES FOR
SRI. NISCHAL DEV B R, ADVOCATE)
AND
M/S BANGALORE METRO RAIL CORPORATION LIMITED,
HAVING OFFICE AT:
III FLOOR, BMTC COMPLEX,
K.H.ROAD, SHANTINAGAR,
BANGALORE-560 027.
...RESPONDENT
(BY SRI. K ARAVIND KAMATH, SENIOR COUNSEL FOR
SRI. BALA NIKIT AND
SRI. K N NAGARAJ, ADVOCATES)
THIS COMAP IS FILED UNDER SECTION 13(1A) OF THE
COMMERCIAL COURTS ACT, 2015 READ WITH SECTION 37 OF
THE ARBITRATION AND CONCILIATION ACT, 1996, PRAYING
TO SET ASIDE THE IMPUGNED ORDER DATED 28.10.2022
PASSED BY THE COURT OF THE LXXXIII ADDL. CITY CIVIL AND
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COMAP NO. 526 OF 2022
SESSIONS JUDGE, BENGALURU IN COM.A.S.NO.141/2018 AND
ALSO THE ARBITRAL AWARD DATED 30.04.2018 PASSED BY
THE ARBITRAL TRIBUNAL, ETC.
THIS APPEAL HAVING BEEN HEARD AND RESERVED FOR
JUDGMENT ON 25.01.2025, COMING ON FOR
PRONOUNCEMENT OF JUDGMENT THIS DAY, V KAMESWAR
RAO J., DELIVERED THE FOLLOWING:
CORAM: THE HON'BLE MR JUSTICE V KAMESWAR RAO
AND
THE HON'BLE MR JUSTICE S RACHAIAH
CAV JUDGMENT
(PER: THE HON'BLE MR JUSTICE V KAMESWAR RAO)
This is an appeal filed under Section 13(1A) of the
Commercial Courts Act, 2015 read with Section 37 of the
Arbitration and Conciliation Act, 1996 ('Act of 1996' in
short) challenging the order dated 28.10.2022 in
Com.A.S.No.141/2018 passed by the Court of LXXXIII
Additional City Civil and Sessions Judge, Bengaluru,
('Sessions Judge' in short) whereby the learned Sessions
Judge has allowed the suit partially, which was filed under
Section 34 of the Act of 1996.
2. The said suit under Section 34 of the Act of 1996
was filed by the respondent herein challenging the
COMAP NO. 526 OF 2022
Arbitration Award dated 30.04.2018, whereby the learned
Sessions Judge has stated as under:
"ORDER
Arbitration Suit filed under Section 34
of the Arbitration & Conciliation Act by the
plaintiff employer is partly allowed on
following terms.
The award of the learned Arbitral
Tribunal dated 30/4/2018, as regards
awarding of Rs.28,74,82,181/- on the basis
of its finding on issue No.1(d) towards loss
suffered by the contractor on account of
delay is set aside.
Arbitration suit challenging award with
regard to other findings and award on other
claims and counter claims is dismissed."
3. Suffice to state, that the suit filed under Section
34 of the Act of 1996 was partially allowed and the award
of the Arbitral Tribunal dated 30.04.2018 as regards grant
of Rs.28,74,82,181/- on the basis of its finding on Issue
No.1(d) towards the loss suffered by the appellant herein
on account of delay, is set aside.
4. The subject matter of the appeal is primarily a
contract entered between the parties for construction of
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three elevated Metro Stations at Yeshwanthpur, Soap
Factory and Mahalaxmi Stations. The respondent herein
accepted the tender vide Letter of Acceptance dated
05.06.2009. An agreement was also entered on
21.12.2009 for the execution of the works. The contract
period was for 22 months. The execution of the project is
governed by various contracts entered into between the
parties including the General Conditions of Contract (in
short 'GCC') and the Special Conditions of Contract.
5. The relevant facts for the purpose of this appeal
shall also include the stipulations that, when the
respondent shall consider grant of extension at the end of
22 months, it would not pay any compensation and that
despite any grant of extension of time, the contractor
should always treat that time is the essence and should
take all steps to complete the contract works at the
earliest. It was also a contractual condition that, not all
drawings would be issued at once and that it would be
issued depending upon the actual progress of work at site
well in time before commencement of the activity. The
COMAP NO. 526 OF 2022
land was also to be given progressively depending on the
issues of demolition of structures.
6. After the execution of the agreement, the lands
were handed over to the appellant as specified in the
Letter of Acceptance dated 05.06.2009. The majority of
the portion of construction of the three elevated stations
came up on the median portion of the road and the land in
that regard was handed over progressively. It was the
case of the respondent that the remaining 15% of the land
at the Soap Factory Station was handed over late due to
litigation pending in this Court and thereafter in the
Hon'ble Supreme Court till 10.05.2012. The General
Consultant conducted meetings at regular intervals and
recorded the minutes of the meetings, which were signed
by their representatives. It was also the case of the
respondent that, the appellant had prepared and
submitted the base line program showing plans to
complete the project in time. It is a conceded position
that five extensions of time were granted by the
respondent herein. First extension of time was from
05.04.2011 to 30.11.2011 without liquidated damages
COMAP NO. 526 OF 2022
and with price variation. The next extension was between
01.11.2011 to 31.05.2012 and the same was without
liquidated damages, but price variation frozen as on
30.11.2011. The second extension of time granted was
up to 30.04.2013 without liquidated damages and with
price variation in continuation from 30.11.2011. The third
extension of time was up to 30.09.2013 without liquidated
damages, with price variation for Yeshwanthpur and
Mahalaxmi Metro Stations upto 30.06.2013 and for Soap
Factory station was upto 30.09.2013. The fourth
extension time was up to 31.01.2014 without penalty, but
price variation frozen for Yeshwanthpur and Mahalaxmi
Metro stations upto 30.06.2013 and for Soap Factory, the
extension of time was granted upto 30.09.2013. The fifth
extension of time was from 01.12.2013 to 31.03.2014
without penalty, but price variation frozen for
Yeshwanthpur and Mahalaxmi stations up to 30.06.2013
and for Soap Factory up to 30.09.2013.
7. The Arbitral Tribunal has partially allowed the
claims of the appellant and rejected the counter claims of
the respondent. It was in this background the aforesaid
COMAP NO. 526 OF 2022
suit was filed by the respondent. The challenge of the
respondent was to the entire award granted in favour of
the appellant herein.
8. The issue No.1(d) is relatable to the loss suffered
on account of delay by the respondent.
Submissions:
9. The submission of Sri. Anirudh Krishnan, learned
counsel for the appellant is primarily that, (i) though
there is an exclusion clause, the same is void and (ii) the
reliance placed by the appellant on the judgment of the
Hon'ble Supreme Court in the case of General Manager,
Northern Railways and Another Vs. Sarvesh Chopra
[(2002) 4 SCC 45] in relation to exclusion clauses is
obiter and the findings in ONGC Vs. Wig Brothers
Builders and Engineers Private Limited [(2010) 13
SCC 377] case is ratio decidendi and to reject the award
granting damages to the appellant, is untenable.
According to him, even the manner of reference by the
learned Sessions Judge to the judgment of Assam State
Electricity Board and Others Vs. Buildworth (P)
COMAP NO. 526 OF 2022
Limited [(2017) 8 SCC 146] is misplaced, as the
three-Judge Bench judgment deals only with bar on
escalation clause. It does not deal with bar on delay
damages clause and hence the decision in Wig Brothers
Builders (P) Ltd. (supra) is binding precedent, is
untenable. Even in respect of the judgment in the case of
the State of West Bengal Vs. Pam Developments
Private Limited [MANU/WB/1044/2016], the
conclusion of the learned Sessions Judge that the said
judgment is not a binding precedent, because, the Hon'ble
Supreme Court has disposed of the appeal in that case
with the consent of the parties, and leaving all the
questions of law open, is also untenable. It was the
submission that, even the Sessions Judge has erred in
Paragraph 62 of the impugned order to reject the
argument of the appellant on exclusion clauses being void
on the ground that it was raised for the first time at the
stage of Section 34. In fact, it is his submission that the
Sessions Judge has re-assessed the entire evidence and
held that the requirement of notice contemplated in
COMAP NO. 526 OF 2022
Sarvesh Chopra's case (supra) was not met by the
appellant.
10. He also stated, the learned Sessions Judge could
not have substituted the view of the Arbitral Tribunal with
its view under Section 34 application. In as much as the
Arbitral Tribunal has held that the decision of the Sarvesh
Chopra (supra) is applicable to the present case, as the
requirement of notice was not considered in the case of
Wig Brothers Builders (P) Ltd. (supra). According to
him, the Arbitral Tribunal reconciled the conflict between
the cases of Sarvesh Chopra (supra) and Wig Brothers
Builders (P) Ltd. (supra), on the basis of the facts in the
present case. He stated that, the learned Sessions Judge
ignoring the scope of Section 34, held that Wig Brothers
Builders (P) Ltd.'s case (supra) is applicable to the
present case on the basis that the finding in the Sarvesh
Chopra (supra) is ratio decidendi, is untenable. In
support of his submission, he has relied upon the
judgment of the Hon'ble Supreme Court in the case of
Atlanta Limited Vs. Union of India [(2022) 3 SCC
739], wherein according to him, it is held that is
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COMAP NO. 526 OF 2022
well-settled principle of law that challenge cannot be laid
to the award only on the ground that the Arbitral Tribunal
has drawn its own conclusion or failed to appreciate the
relevant facts. Nor can the court substitute its own view
on the conclusion on law or on facts as drawn by the
Arbitral Tribunal, as if it is sitting in appeal. He stated, in
the present case, the learned Sessions Judge substituted
the Arbitral Tribunal's view with his view on the question
of law and on facts, which is not permitted under Section
34 of the Act of 1996. According to him, the grounds
pertaining either to a question of fact or an issue of
interpretation of the contract are within the exclusive
domain of the Arbitral Tribunal. Moreover, even the issue
which has been canvassed as an issue of law by the
respondent is in essence a question of fact.
11. He stated, the case of the respondent is based
on Clauses 2.2 and 8.3 of the GCC, which prevents the
Arbitral Tribunal from granting damages in the light of the
decisions of the Hon'ble Supreme Court in the case of Wig
Brothers Builders (P) Ltd. (supra), Ramnath
International Vs. Unition of India [(2007) 2 SCC
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COMAP NO. 526 OF 2022
453] and Rajasthan State Mines and Minerals Vs.
Eastern Engineering Enterprises [(1999) 9 SCC
283]. He stated that the issue is not as to whether the
Arbitral Tribunal has erred in law, but whether the facts
before the Arbitral Tribunal fit within the four corners of
Sarvesh Chopra's case (supra), which is essentially a
question of fact.
12. He also stated that, the decision of Arbitral
Tribunal is not opposed to the fundamental policy of
Indian Law as it does not violate the law prevalent in
India. In fact, according to him, the Arbitral Tribunal had
considered the decisions submitted by the respondent
herein and held that the said decision were inapplicable to
the present facts of the case. He lays stress on the fact
that the Arbitral Tribunal having analyzed the decisions of
the Wig Brothers Builders (P) Ltd. (supra) and
Sarvesh Chopra (supra) to hold that the findings in the
Sarvesh Chopra are applicable to the present case, it was
not open to the learned Sessions Judge to re-assess the
findings in that regard. He has heavily relied on the
Explanation to Section 34(2)(b)(ii), to contend that the
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challenge shall not entail review on the merits of the
dispute. Further, the proviso to Section 34(2A) states
that the award shall not be set aside merely on the ground
of an erroneous application of law or by re-appreciation of
evidence. It is his submission that the learned Sessions
Judge, contrary to the provisions has undertaken an in
depth analysis of the merits of the case as is evident from
the impugned order.
13. Even otherwise, it is his submission, assuming
without admitting that, there is an error in the application
of law by the Arbitral Tribunal it is at best of erroneous
application of law, which cannot be interfered with at the
stage of Section 34 of the Act of 1996. Therefore, the
impugned order is liable to be set aside on this ground.
14. The submission of Sri. Krishnan is also that, the
decision in Wig Brothers Builders (P) Ltd. (supra) is
not the latest decision on the applicability of the exclusion
clause. In this regard, he has referred to three-Judge
Bench decision in the case of Assam State Electricity
Board (supra). According to him, in the said decision, the
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Hon'ble Supreme Court quoted with approval the validity
of the principles laid down in the case of Sarvesh Chopra
(supra) and K.N. Sathyapalan Vs. State of Kerala
[(2007) 13 SCC 439]. It was his submission that, the
judgment in the case of Assam State Electricity Board
(supra) and Sarvesh Chopra (supra) have been applied
by various Courts, such as a decision of the Calcutta Court
in the case of Pam Developments Private Limited
[MANU/WB/1044/2016] and Mintoolal Brijmohandas
Vs. State of Madhya Pradesh [AIR 2005 MP 205] and
T.A. Choudhary Vs. State of A.P [2003 SCC Online
A.P 494]. He stated that, the Arbitral Tribunal has applied
the principles laid down in the case of Sarvesh Chopra
(supra) since it was quoted with approval in Assam State
Electricity Board (supra), which is three-Judge Bench
judgment. Hence, the decision of the three-Judge Bench
in Assam State Electricity Board (supra) prevails over
the decision of the Hon'ble Supreme Court in Wig
Brothers Builders (supra). Moreover, the decision of the
Wig Brothers Builders (supra) does not deal with the
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enforceability of the exclusion clauses which is evident
from paragraphs No.5 and 6 of the judgment.
15. He stated that in Wig Brothers Builders
(supra), the award of the Arbitrator was set aside only on
the basis that the Arbitrator ignored the provision which
barred contractor to claim compensation in place of delay
attributed to the employer. Whereas in the present case,
the Arbitral Tribunal discussed the applicability of Clauses
2.2 and 8.3 of GCC and concluded that the same are not
applicable to the facts of the present case in paragraph
No.28.23 of the award. According to him, the decision in
Wig Brothers Builders (supra) is silent on the aspect of
whether clauses which bar compensation are applicable
even when the contractor puts employer on notice.
Hence, the decision of Wig Brothers Builders (supra) is
not applicable to the present case.
16. He stated that, the escalation is one of the heads
of delay damages and hence the finding of the learned
Sessions Judge is contrary to settled principles of
construction law. He stated that, it is settled law that the
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contractor due to the breach of the employer will be
entitled to the loss of over head and profit, direct losses
on account of idle labour and of the reduced productivity
from machinery and equipment, increase cost of materials
and labours claim for enhancement. He had also relied
upon the work on Building and Engineering Contract by
Sri. B.S. Patil under the heading of 'Assessment of
Damages Payable to the Contractor'. He has also referred
to the relevant portion from 'Keating on Construction
Contracts' under the heading 'Possible Heads on Claim for
Delay'. He stated, even if the judgment of Calcutta High
Court in the Pam Developments Private Limited
(supra) was distinguished by the learned Sessions Judge,
the appellant has also relied upon the judgment in the
case of Mintoolal Brijmohandas (supra) and T.C.
Chowdhary (supra), where damages were granted
relying on the principles set out in Sarvesh Chopra
(supra) despite existence of no damages clause in the
contract. However, the learned Sessions Judge chose to
ignore the aforesaid judgments and relied upon the case
of Pam Developments Private Limited (supra), which
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is clearly erroneous. That apart, it is his submission that
the appellant had relied upon the judgment in the case of
Simplex Concrete Piles Limited Vs. Union of India
[(2010) 115 DRJ 616] and All India Power Engineer
Federation and Others Vs. Sasan Power Limited
[(2017) 1 SCC 487] to argue that the contract barring
claim for compensation is contrary to Sections 23, 55 and
73 of the Indian Contract Act, 1972 ('Contract Act' for
short). Further, Section-73 cannot be waived by consent
of the parties and hence clauses which bar the claim of
compensation is contrary to public policy and void. Even
the conclusion drawn by the learned Sessions Judge in
Paragrah-16 of impugned order, re-assessing merits of
the case to hold that the appellant failed to put the
respondent on terms as per the findings in Sarvesh
Chopra's case (supra) is untenable. In other words it is
his submission that, the said findings are beyond the
scope of Section 34 and the impugned order is liable to be
set aside. He stated that the appellant while requesting at
the time of first extension, informed the respondent that,
it would claim all the financial implications in the extended
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period of contract. Consequently, the appellant had
submitted the claim for additional costs periodically from
17.08.2011 to 23.07.2012. The first denial from the
respondent had come only on 25.09.2012. In fact, the
appellant had duly responded to the letter vide its letter
dated 11.10.2012, wherein the appellant clearly put the
respondent on the terms that 'No Damage Clause' would
not be applicable. He also stated that the Arbitral Tribunal
had referred to various correspondences between the
parties and on perusal thereof, the Arbitral Tribunal
concluded that the appellant had put the respondent on
notice. The respondent's silence for more than a year
made the appellant to believe that it will not be entitled to
the additional costs in the extended contract period. The
respondent had a duty to speak on the relevant point and
hence, the silence for more than a year amounts to
acceptance. He has also relied upon the paragraphs
No.27.6 to 27.16 of the arbitral award to contend that the
Arbitral Tribunal has considered each of the
correspondences relied upon by both the parties in
relation to grant of EOTs and finally concluded in
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paragraph No.28.23 of the award that the appellant had
put the respondent on terms and consequently, Clauses
2.2 and 8.3 of GCC are not applicable.
17. He has also stated that, there are other
exceptions carved out by the Courts against application of
exclusion clauses like clauses- 2.2 and 8.3 of the GCC for
the following reasons:-
(i) The Clauses-2.2 and 8.3 of the GCC are
contrary to Section 73 of the Contract Act
and hence, void in the light of Section 23 of
the Act.
(ii) The application of Clauses-2.2 and 8.3 of
the GCC is restricted only to the contract
period.
(iii) The Clauses- 2.2 and 8.3 of the GCC would
not apply to Judicial Forum such as the
Arbitral Tribunal.
(iv) Clauses- 2.2 and 8.3 of the GCC would not
come to the rescue of the respondent, as the
respondent has fundamentally breached its
obligation.
(v) Sections 54 and 55 of the Contract Act
provides a right to claim compensation
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independent of the contract clauses- 2.2
and 8.3, which restrain the contractor from
claiming compensation.
(vi) Clauses- 2.2 and 8.3 of the GCC would not
apply in light of Doctrine of Active
Interference. In support of his submissions,
he has relied upon the following judgments:
INDEX OF AUTHORITIES
Particulars
Sl.No.
Scope of challenge under Section 37 and Section 34 of the
Arbitration and Conciliation Act, 1996
1. Atlanta Limited V. Union of India (2022) 3 SCC 739 Para 19
2. Haryana Tourism Limited V. Kandhari Bevarages Limited
(2022) 3 SCC 237 Para 9
3. Associate Builders v. DDA, (2015) 3 SCC 49
Para 18, 27, 31, 33, 40
4. Ssangyong Engineering & Construction Co. Ltd. V. National
Highways Authority of India, 2019 (15) SCC 131 Para 34,35,
36, 37, 38, 39
5. Union of India V. Warsaw Engineers and Ors, ILR 2022 Kar
251 Para 7 to 19
Putting on terms- Exception to Exclusion Clauses
6. General Manager, Northern Railways and another v. Sarvesh
Chopra (2002) 4 SCC 45 Para 8 and 15
7. Assam State Electricity Board and others v. Buildworth
Private Limited, (2017) 8 SCC 146 Para 10, 11, 13, 16 to
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18, 20
8. Mintoolal Brijmohandas v. State of Madhya Pradesh, AIR
2005 MP 205 Para 6, 12 to 70
9. G.Ramachandra Reddy and Company v. Union of India and
anr (2009) SCC Online SC 762 Para 36
10. State of West Bengal V. Pam Developments Private Limited,
MANU/WB/1044/2016 Para 108-111
11. West Bengal v. Pam Developments Pvt. Ltd. (2017) 4 CALLT
366 (HC) Para 1, 61 to 73
12. State of West Bengal V. Pam Developments Private Limited,
order of the Supreme Court dated 22.01.2016 in Civil Appeal
Exclusion Clauses are violative of Section 55 and Section 73 of
the Indian Contract Act and are void by virtue of Section 23 of
Indian Contract Act
13. Simplex Concrete Piles (Ltd) v. Union of India, 2010 (115)
DRJ 616 Para 10 to 19
14. MBL Infrastructures Limited v. Delhi Metro Rail Corporation,
2023 SCC Online Del 8044 Para 38 to 40, 44 to 61
15. All India Power Engineer Federation and Others v. Sasan
Power Limited, (2017) 1 SCC 487 Para 17 to 19
Judgments Relied upon by the Respondent
16. ONGC V. Wig Brothers Builders and Engineers Private
Limited (2010) 13 SCC 377 Para 6 to 11
17. Ramnath International V. Union of India, (2007) 2 SCC 453
Para 11 to 20
18. Rajasthan State Mines and Minerals v. Eastern Engineering
Enterprises. (1999) 9 SCC 283 Para 21 to 23
Heads of damages arising out of delays
19. Videsh Sanchar Limited v. Shapoorji Pallonji and Company
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Limited, 2008 (1) CHM 721 Para 43
20. Relevant Portion of Keating on Construction Contracts, 10th
Edition
21. Relevant Portion of Building and Engineering Contracts, by
B.S.Patil
Each precedent must be looked into based on the context
22. Padma Sundara Rao (dead) and Ors. V. State of TN and Ors.
(2003) 3 SCC 533 Para 9
Judgments on Exclusion Clauses
23. C.H.Ramalinga Reddy V. Superintending Engineer and Anr
(1999) 9 SCC 610 Para 17 to 19
24. Continental Constructions Co. Ltd v. State of M.P., (1988) 3
SCC 82 Para 5 and 8
ADDITIONAL INDEX OF AUTHORITIES
Sl.No. Particulars
1. NTPC Ltd. V. Deconar Services Pvt. Ltd., (2021) 19 SCC 694
Para 18 to 22 and 26
2. Daelim Industrial Company v. Numaligarh Refinary Ltd.,
2006(4) GLT847 Para 144, 147, 176 and 177
3. Numaligarh Refinery Ltd v. Daelim Industrial Company.,
2007(3) ARBLR378(SC) Para 12, 13
4. Njattumkalayil Construction Company v. State of Kerala.,
2020 SCC Online Ker 7351 Para 12, 14, 17, 18, 22
5. State of Kerala V. Mohammad Kunju 2008 SCC Online Ker
83 Para 5
6. Union of India V. Vishva Shanti Builders (India) Pvt. Ltd.,
2024 SCC Online Del 5018 Para 115 to 122, 125 to 127, 130
to 139
7. Union of India V. Chiraj Stock & Security Pvt. Ltd., 2024:
DHC:1581 Para 3,7,17,18,19 to 24, 28 to 30
8. State of West Bengal V. Bright Construction.,
MANU/WB/0695/2005 Para 6 to 8
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9. K.N.Sathyapalan V.State of Kerala (2007) 13 SCC 43 Para
30,31
18. On the other hand, Sri. Aravind Kamath, the
learned Additional Solicitor General of India for the
respondent would justify the impugned order passed by
the learned Sessions Judge, whereby the learned Sessions
Judge has set aside the finding of the Arbitral Tribunal
awarding an amount of Rs.28,74,82,181/- on Issue
No.1(d) as loss suffered by the appellant on account of
delay. According to him, the Arbitral Tribunal being a
creature of the contract, is totally bound by the terms of
the contract and as per Section 28(3), the Arbitral
Tribunal should take into account the terms of contract
while passing the award and also not following the
judgment of the superior Courts would render the award
as oppose to fundamental policy of Indian Law and is in
conflict with the public policy of India. He stated that, the
award is in conflict with the public policy of India on
various grounds including disregarding binding principle of
the judgment of the Hon'ble Supreme Court in the case of
Wig Brothers Builders (supra) and for not following
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Section 73 of the Contract Act and as well as Section
28(3) of the Act of 1996. He contended that, the Arbitral
Tribunal recording a finding that Clauses 2.2 and 8.3 bars
compensation as referred to in the judgment in Sarvesh
Chopra (supra) and on an improper consideration of the
said judgment has concluded that damage clause would
not restrict the appellant from claiming compensation, as
the appellant had issued notice claiming compensation,
which finding of the Tribunal is per-se incorrect and
amounts to mis-application of the provisions of the
Contract Act. He stated that the decisions relied upon by
the Arbitral Tribunal are not applicable to the present
case. The Arbitral Tribunal has also ignored the vital
evidence in arriving at a conclusion that there is notice
issued by the appellant claiming compensation. That
apart, it was his submission even in respect of the
quantification of damages, the Tribunal has committed
serious jurisdictional errors. It granted 50% of the
compensation claimed on the untenable ground that the
GCC contemplates that the delay on account of contractor
and employee is 50:50 though such finding was in respect
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of the EOT-I & 2 and for subsequent three extensions,
there were no extension by 50:50 delay. But, the Tribunal
has failed to note this fact. That apart, it was his
submission that, even the grant of compensation on the
basis of bald statements without producing any evidence
to show actual loss suffered by the appellant, the Tribunal
has committed a grave error. He heavily relied upon the
various paragraphs of the impugned Judgment in support
of his submissions.
19. He stated that, any judgment by the Court has
to be seen what is the ratio decidendi, which shall prevail
and not every observation found therein. In support of
this proposition he stated, the judgment in the case of
Sarvesh Chopra (supra) has no applicability. On a
similar proposition, he has relied upon the decision in
M.P. Gopalakrishnan Nair & Anr Vs. State of Kerala &
Ors [2005] Insc 265 (20 April 2005). That apart, he
stated that, one fact can make difference in conclusion in
two cases, even when same principles are applied. In
support of his submission, he has relied upon the decision
in Regional Manager and Another Vs. Praveen Kumar
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Dubey [(1976) 3 SCC 334]. He seeks the dismissal of
the appeal.
Analysis:
20. Having heard the learned counsel for the parties
and perused the record, the only issue which arises for
consideration is, whether the learned Sessions Judge is
justified in setting aside the arbitral award qua Issue
No.1(d), whereby the Arbitral Tribunal has granted an
amount of Rs.28,74,82,181/- in favour of the appellant?
21. The above issue has to be decided by considering
the effect of Clauses 2.2, and 8.3 of the GCC, which
contemplate the appellant/contractor is entitled for only
extension of time for executing the work in certain
situations like delay in handing over of the site, etc., by
the employer, but no compensation shall be payable. For
the sake of convenience, we reproduce both the above
clauses as under:
"2.2. The Employer shall grant the Contractor
right of access to, and possession of,
the Site progressively for the completion
of Works. Such right and possession
may not be exclusive to the Contractor.
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The Contractor will draw/modify the
schedule for completion of Works
according to progressive possession/
right of such sites.
If the Contractor suffers delay from
failure on the part of the Employer to
grant right of access to, or possession of
the Site, the Contractor shall give notice
to the Engineer in a period of 28 days of
such occurrence. After receipt of such
notice the Engineer shall proceed to
determine any extension of time to
which the Contractor is entitled and
shall notify the Contractor accordingly.
For any such delay in handing over of
site, Contractors will be entitled to only
reasonable extension of time and no
monetary claims whatsoever shall be
paid or entertained on this account.
xx xx xx xx xx
8.3. In case of delay on the part of the
Contractor, the Contractor shall be liable
to pay liquidated damages and any
other compensation for the damages
suffered by the Employer as per Clause
8.5. This is without prejudice to the
right of the Employer to rescind the
Contract.
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Failure or delay by the Employer or the
Engineer, to hand over to the Contractor
the Site necessary for execution of
Works, or any part of the Works, or to
give necessary notice to commence the
Works, or to provide necessary
Drawings or instructions or clarifications
or to supply any material, plant or
machinery, which under the Contract, is
the responsibility of the Employer, shall
in no way affect or vitiate the Contract
or alter the character thereof, or entitle
the Contractor to damages or
compensation thereof but in any such
case, the Engineer shall extend the time
period for the completion of the
Contract, as in his opinion is / are
reasonable."
(Emphasis supplied)
22. The Arbitral Tribunal has decided the issue in
paragraphs No.28.15 to 28.37 of the award, which we
reproduce as under:
"xx xx xx xx xx
28.15). After hearing the parties, we are of the
view that we should first take up the issue with
regard to the applicability or ron applicability of
these two clauses to the case on hand. If the clauses
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are applicable, then the other legal questions
including legality of the clauses being contrary to
Section 73 of the Contract Act or other proposition
raised by the learned Counsel for the Claimant would
not arise. Therefore, we deem it proper to initially
deal with these two clauses.
28.16). It is no doubt true that a plain reading
of the two clauses would categorically show that no
compensation in the case of delay by an Employer in
terms of Contract. There can be no two opinion on
this. At this stage we must notice certain case laws
decided in some what identical circumstances as
cited by the learned Counsel for the Respondent.
28.17). The 1 judgment is reported in (2010)
13 SCC 377 (Oil and Natural Gas Corporation -vs-
Wig Brothers Builders & Engineers Pvt )td. A
somewhat identical clause is seen in para 6 of the
said judgment. The learned Judges after noticing the
facts have ruled in para 7 reading as under:-
"7. In view of the above, in the event
of the work being delayed for whatsoever
reason, that is, even delay which is
attributable to ONGC, the contractor will
only be entitled to extension of time for
completion of work but will not be entitled
to any compensation or damages. The
arbitrator exceeded his jurisdiction in
ignoring the said express bar contained in
the contract and in awarding the
compensation of Rs.9.5 lakhs. This aspect is
covered by several decisions of this Court.
We may refer to some of them".
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28.18). The next judgment is reported in
(2007) 2 SCC 453 (Ramnath International -vs- Union
of India). Here again some what similar clause came
up for consideration and the Apex Court has ruled in
para 12 reading as under:-
"12. Clause (C) provides that where
extension have been granted by reason of
delays enumerated in clause (A) which were
beyond the control of the contractor, or on
account of the delay on the part of the
employer specified in clause (B), the
contractor is not entitled to make any claim
either for compensation or otherwise,
arising in whatsoever manner, as a result of
such extensions. After enumerating certain
delays, sub-clause (viii) of clause (A)
specifically mentions delay on account of
any other cause beyond the control of the
contractor. The causes for delays specified
in clause (A), thus, encompass all delays
over which the contractor has no control.
This will necessarily include any delays
attributable to the employer or any delay
for which both the employer and the
contractor are responsible. The contract
thus provides that if there is any delay,
attributable either to the contractor or the
employer or to both, and the contractor
seeks and obtains extension of time for
execution on that account, he will not be
entitled to claim compensation of any
nature, on the ground of such delay, in
addition to the extension of time obtained
by him. Therefore, the claims for
compensation as a consequence of delays,
that is Claim 24 of the Hangar Contract and
Claims 13 to 16 of the Road Contract are
barred by clause 11 (C)".
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28.19). Ultimately, the Apex Court in para 18
has held as under:-
"18. In spite of having held that both
were responsible for the delay and having
noticed the arguments based on clause 11
of the General Conditions of Contract, the
arbitrator proceeded to award damages on
the ground of delay on the reasoning that
the contractor is entitled to compensation,
unless the employer establishes that the
contractor has consented to accept the
extension of time alone in satisfaction of his
claim for delay. As rightly held by the High
Court, which decision we have affirmed
while considering Question (i), clause © of
the GCC is a clear bar to any claim for
compensation for delays, in respect of which
extensions have been sought and obtained.
Clause 11 © amounts to a specific consent
by the contractor to accept extension of
time alone in satisfaction of his claims for
delay and not claim any compensation".
28.20). The next decision cited by the learned
Counsel for the Respondent is reported in (1999) 9
SCC 283 (Rajasthan State Mines & Minerals Limited -
vs-Eastern Engineering Enterprises & Another). In
this judgment the Court has considered again a
similar ho compensation clause and the Apex Court
has held in para 44 as under:-
"44. (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. The
arbitrator acting beyond his jurisdiction is a
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different ground from the error apparent on
the face of the award.
(g). In order to determine whether the
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 contractor 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 or
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 prohibited by the terms of
the agreement. Because of a 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
a wider arbitration clause such claim
amount cannot be awarded as the
agreement is binding between the parties
and the arbitrator has to adjudicate as per
the agreement".
28.21). From these judgments what is clear to
us is that when a Contract provides for no
compensation clause, even in the event of delay on
the part of the Employer that no compensation could
be awarded by an Arbitrator on the ground of delay
and any grant is beyond its power/jurisdiction.
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28.22). Per contra the learned Counsel for the
Claimant would say that the two Judgments in ONGC
and Ramnath International are not applicable to the
facts of this case since in those cases there was no
notice issued by the Contractor as in the present
case at the time of Extension of Time. In fact the
learned Counsel would say that there is another
judgment of the Supreme Court reported in (2002) 4
SCC 45 (Northern Railway -vs- Sarvesh Chopra). He
also refers to the judgment. reported in (2009) 6
SCC 414 (Ramachandra Reddy -vs- Union of India).
We have seen these two cases cited by the learned
Counsel for the Claimant. In the case of Northern
Railway the Apex Court in paras 14 and 15 has
noticed the American Jurisprudence and also the
effect of notice reading as under:-
"14. American jurisprudence
developed so as to avoid the effect of such
clauses and permitted the contractor to
claim in four situations, namely (i) where
the delay is of a different kind from that
contemplated by the clause, including
extreme delay, (ii) where the delay
amounts to abandonment (iii) where the
delay is a result of positive acts of
interference by the owner, and (iv) bad
faith. The first of the said four exceptions
has received considerable support from
judicial pronouncements in England and the
Commonwealth. Not dissimilar principles
have enables some Coramonwealth courts
to avoid the effect of 'no damage' clauses."
15. Thus, it appears that under the
Indian law, in spite of there being a contract
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between the parties whereunder the
contractor has undertaken not to make any
claim for delay in performance of the
contract occasioned by an act of the
employer, still a claim would be
entertainable in one of the following
situations (i) if the contractor repudiates the
contract exercising his right to do so under
Section 55 of the Contract Act, (ii) the
employer gives an extension of time either
by entering into supplemental agreement or
by making it clear that escalation of rates or
compensation for delay would be
permissible, (iii) if the contractor makes it
clear that escalation of rates or
compensation for delay shall have to be
made by the employer and the employer
accepts performance by the contractor
inspite of delay and such notice by the
contractor putting the employer on terms."
28.23). In the judgments relied upon by the
learned Counsel for the Respondent, the Apex Court
has no doubt earlier ruled that no compensation is
payable in the event of a clause of no compensation
in terms of the Contract. There can be no quarrel
over this proposition. But a Court of law has to
understand the principles laid down in a judgment in
the light of the facts placed in that case. We see
from the judgments cited by the learned Counsel for
the Respondent that there was no notice as in the
present case with regard to compensation in terms
of the documents placed before us. However, the
learned Counsel for the Respondent would argue that
the Court has to read the judgment in the light of
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documents available in the case on hand. We do not
accept this contention. We cannot ignore the
admitted facts while applying the legal principles to a
case on hand. No where in those judgments there is
a reference to any notice whatsoever issued by the
contractor in those cases. In the present case, as
mentioned earlier, there is a notice issued by the
Claimant followed by several letters. In the light of
noticing the notice, the judgment of Northern
Railways, is applicable and law laid down therein.
However, the learned Counsel for the Respondent
would say that the latest judgment, namely ONGC
and other cases are to be followed. There can be no
two opinion on this. In fact, the Full Bench of the
Karnataka High Court has ruled that in the case of
judgments by two Judges. the latter judgment has to
prevail. If those latest judgments are distinguishable
on facts, certainly the Tribunal has to take into
consideration the earlier judgment of the Supreme
Court. Therefore, on facts we are satisfied that in the
light of the notice in terms of the material available
on record, we are of the view that the judgment
cited by the learned Counsel for the Respondent are
inapplicable and on the other hand the judgment of
the Apex Court in Northern Railway case is applicable
to the facts of this case. Therefore, respectfully
following the law laid down in (2002) 4 SCC 45, we
deem it proper to hold that the Claimant is entitled
for a claim of compensation despite clauses 2.2 and
8.3 in the light of the claimant putting on notice the
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Respondent with regard to claim of compensation in
the case on hand.
28.24). At this stage we also notice the
judgment of the Supreme Court in the case of G.
Ramachandra Reddy wherein the Court has
considered the interpretation of a contract. The
Supreme Court has ruled in para 19 of the said
judgment reading as under:-
"19. We may, at the outset notice the
legal principles governing dispute between
the parties. Interpretation of a contract may
fall within the realm of the arbitrator. The
Court while dealing with an award would not
re-appreciate the evidence. An award
containing reasons also may not be
interfered with unless they are found to be
perverse or based on a wrong proposition of
law. If two views are possible, it is trite, the
Court will refrain -itself from interfering".
28.25). Therefore, we have interpreted clauses
2.2 and 8.3 of the GCC in the light of the admitted
fact of notice to claim compensation at the time of
accepting Extension of Time by the Claimant.
28.26). Having come to this conclusion, the
next question is as to whether a complicated
question of law with regard to clauses binding on the
Tribunal; exclusion not applicable to the extended
period; exclusion period not applicable when there is
a fundamental breach; Doctrine of active
interference; reciprocal promissory estoppels, and
Sub-silentio are not required to be gone into in the
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light of our accepting the notice contention and the
applicability of Northern Railway case. Therefore, we
deem it proper not to express any opinion on these
contentions urged by the parties. Therefore, in terms
of law and in terms of the facts available in this case,
the Claimant is entitled to claim compensation and
claim of compensation is certainly arbitrable by this
Tribunal. We accept the contention of the learned
Counsel for the Claimant.
28.27). The next question is with regard to
quantum of Compensation. The Claimant has
claimed an amount of Rs.57,49,64,363/- in the
Claim Statement. The quantum is justified by the
Claimant on the ground that the Claimant has
suffered at the hands of the Respondent providing a
right to claim damages. The Claimant has claimant
has claimed a total amount of Rs.57,49,64,363/-
under the following heads:-
Sl.No. Description Amount
1 Overheads 20,30,20,630/-
payable due to
extended period
of contract
2 Additional amount 4,08,83,578/-
payable towards
plant and
machinery cost
3 Additional amount 16,01,44,127/-
towards labour
charges
4 Additional amount 2,61,39,435/-
payable towards
formwork cost
due to extension
of contract
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period
5 Amount payable 24,43,888/-
towards frozen
price variation
clause from
30.6.13 to YPR
and MHL and
30.9.2013 for SOP
6 Amount payable 14,23,32,705/-
on account of loss
of profit
Total 57,49,64,363/-
28.28). Before we consider the quantum, we
have to see the law on the subject. The Supreme
Court has noticed the facts in the decision reported
in AIR 2017 SC 3336 (Assam State Electricity Board
& Ors -vs- Buldworth Private Limited). In the said
case the Supreme Court has in para 13 has noticed
its earlier judgment in P.M. Paul -vs- Union of India
(1989 Supp (1) SCC 368). In the concluding
paragraph of para 13 the Supreme Court has held as
under:-
"13. This Court held that the
contractor was justified in seeking price
escalation on account of an extension of
time for the completion of work. Once the
arbitrator was held to have the jurisdiction
to determine whether there was delay in the
execution of the contract due to the
Respondent, the latter was liable for the
consequence of the delay; namely, an
increase in price."
28.29). The Court again in para 15 has held as
follow:-
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"15. The award comports with
principles of law governing price escalation
firmly established by decision of this Court.
For these reasons, we find merit in the
contention of learned Counsel appearing on
behalf of the Claimant that the award does
not suffer from any error apparent on the
face of the record in so far as the aspect of
price escalation is concerned".
28.30). The Calcutta High Court in the decision
reported in (2017) 4 CALLT 366 (HC) (State of West
Bengal -vs- Pam Developments Private Limited),
after noticing various judgments of the Supreme
Court in para 74 has held as under:-
"74. On such tests as permissible, the
award in the present case could scarcely
have been touched. The arbitrator found
that it was the appellant which was to
blame for the delay in the completion of the
work and that the appellant allowed the
work to progress beyond the stipulated time
and accepted the completion thereof. Once
party accepts the belated performance of a
reciprocal obligation, the other would be
entitled to make a claim for damages and if
the former party is found to be in breach,
the prohibitory or no damage clauses in the
contract for its benefit may be legitimately
interpreted by the arbitrator to lose their
applicability during the extended period of
the work. If the arbitrator, on his
appreciation of the circumstances leading to
the extension of the period of completion of
the work, finds the employer to be in breach
which results in the work not being
completed on time, the arbitrator's finding
that the prohibitory clauses would not apply
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to the extended period would not be
outlandish or per se perverse. However,
even on such finding if the quantum of the
amount awarded shocks the conscience of
the court, the court can interfere with the
quantum".
28.31). In the light of these case laws in the
event of a breach the Claimant is entitled to claim
damages against the Respondent. However, a plea of
waiver was raised by the learned Counsel for the
Respondent. We do not agree that the facts of the
case would show that the Claimant has waived its
right at the time of entering into contract or at the
time of accepting the EOTs. Having come to the
conclusion that the Claimant is entitled for
compensation, the Claimant has chosen to claim
damages under various heads as referred to above.
28.32). The learned Counsel for the Claimant
in the Written Argument has given the details of
quantification of losses suffered by the Claimant
under 6 different headings. The total compensation
claimed under these 6 different headings works out
to Rs.57,49,64,363/-. The learned Counsel for the
Claimant has given alternative quantification in the
light of rulings of courts of law. The details are
provided at pages 110 and 111 of the Written
Argument. In terms of alternative quantification the
Overhead and profit component is claimed @ 20% of
the contract value which works out to
Rs.32,34,38,049/- and Plant and Machinery
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component is claimed @ 18% which works out to
Rs.29,10,94,244/-.
28.33). The learned Counsel for the Claimant
has placed before us the judgment of the Apex Court
reported in (2006) 11 SCC 181 (Mc.Dermott
International Inc. -vs- Burn Standard Co.Ltd.,
wherein the Apex Court has considered the Hudson
Formula and also a judgment of the Apex Court in
A.Τ. Brij Paul Singh & Ors-vs- State of Gujarat (AIR
1984 SC 1703) The Apex Court in the said case has
ruled that different formula can be applied in
different circumstances and the question as to
whether damages should be computed by taking
recourse to one or the other formula, having regard
to the facts and circumstances of a particular case,
would eminently fall within the domain of the
arbitrator. We have seen the case on hand. As
mentioned earlier, there are breaches on either side
and we have also considered the facts as placed
before us. We also see that in so far as profit is
concerned the Supreme Court has ruled in Brij Paul
case that what would be the measure of profit would
depend upon facts and circumstances of each case.
But there shall be a reasonable expectation of profits
is implicit in a works contract. In the case on hand
the profit margin seems to be on the higher side to
us.
28.34). In so far as the quantum is concerned,
we find from the material on record that the claim is
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supported by Ex.C297 and C285. Similarly, Head
office Overheads is supported by Ex.C285 and C295.
Additional amount payable is also supported by
Ex.C297. At this stage we must notice that the
Respondent was asked to inspect the bulky
document and they have not chosen to do the same.
In the circumstances, Ex.C297 requires to be
accepted.
28.35). In so far as additional amount towards
Plant and Machinery is concerned the same is
supported by Ex.C285 and C297. The Labour Cost is
supported by Ex.C297. The amount payable towards
frozen account is justified in terms of Ex.C297. In so
far as Loss of Profit is concerned, we have already
ruled that in the light of law laid down by the Apex
Court, the Claimant is entitled to claim the same.
28.36). From the material on record we have
ruled that both parties have committed breach of the
terms of the Contrast in terms of the Contract
conditions. Compensation is payable in terms of the
law aid down by Courts of law. Who has to be
blamed for the delay and how much is to be
apportioned is the question that requires our
consideration. From the material on record it is been
that a huge project is undertaken by the Claimant.
The Claimant must have expected some unforeseen
circumstances including court proceedings etc.
Therefore, the Claimant must be aware that there
may be delay due to some breaches on the peculiar
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facts of the case. The Engineer while recommencing,
has stated that the violation can be 50 50 on the
peculiar facts of the case. We see a communication
dated 27.4.2011 wherein the GC has noticed various
factors and in the concluding paragraph he has
stated GC has reviewed in detail various reasons of
delay on account of BMRCL and contractor and it is
concluded that the duration of delay is distributed
approximately 50: 50 on BMRCL account and
Contractor's account. In the communication
addressed to the Chief Engineer dated 28.4.2017 the
Manager Mr.Balakrishna has stated that considering
the delay on account of Contractor and on account of
delay in providing Drawings and site handing over
EOT is considered approximately in the ratio of 50:
50 under clause 8.4.1. The Engineer is the person
who is in the forefront of the works who has to
assess the entire works. The delay and the breach
has been assessed by him as 50: 50. Taking into
consideration the breaches on either side and also
the finding of the man in the field, we deem it proper
to award only 50% of the claim of compensation to
the Claimant in the case on hand.
28.37). We are of the view that the facts of the
case do not warrant the calculation at
Rs.20,30,20,630/- (towards Overheads) plus
Rs.14,23,32,705/- plus Rs.4,08,83,578/- (towards
Plant and Machinery in addition to other causes). We
are not inclined to provide per centage basis as
claimed in page no.111 of the Written Argument.
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Therefore, our findings is that the Claimant is
entitled for 50% of Rs.57,49,64,363/- which works
out to Rs.28,74,82,181/-. In conclusion, the Claims
of the Claimant on this head is partly accepted in
terms of our earlier findings. The Claimant is entitled
for Rs.28,74,82,181/-. Accordingly Issue No. 1 (d) is
partly allowed."
The conclusion of the Arbitral Tribunal is by interpreting
clauses 2.2 and 8.3 of the GCC in the light of the fact of,
notice to claim compensation at the time of accepting
extension of time by the appellant. While coming to the
said conclusion, the Arbitral Tribunal has followed the
judgment of the Hon'ble Supreme Court in Sarvesh
Chopra (supra). Whereas, the Sessions Judge while
disagreeing with the conclusion drawn by the Arbitral
Tribunal, has by giving finding in paragraphs No.53 to 63,
set aside the award on that issue.
... ...
23. It is noted from the decision of the learned
Sessions Judge that the learned Sessions Judge did not
agree with the conclusion drawn by the Arbitral Tribunal
by referring to the judgment of the Hon'ble Supreme
Court in Sarvesh Chopra (supra) to hold that Sarvesh
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Chopra (supra) could not be applied to the present case
and even requirements mentioned therein are not present
in this case.
24. So it needs to be decided (as stated above)
whether, in view of Clauses 2.2 and 8.3 of the GCC which
bars monetary claims/damages on delay, the appellant is
entitled to claim the same?
25. In the judgment of Sarvesh Chopra (supra),
the Hon'ble Supreme Court has in paragraphs No.8 and
15, held as under:
"8. In our opinion those claims which are
covered by several clauses of the Special Conditions
of the contract can be categorized into two. One
category is of such claims which are just not leviable
or entertainable. Clauses 9.2, 11.3 and 21.5 of the
Special Conditions are illustrative of such claims.
Each of these clauses provides for such claims being
not capable of being raised or adjudged by
employing such phraseology as "shall not be
payable", "no claim whatsoever will be entertained
by the Railways", or "no claim will/shall be
entertained". These are "no claim", "no damage", or
"no liability" clauses. The other category of claims is
where the dispute or difference has to be determined
by an authority of the Railways as provided in the
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relevant clause. In such other category fall such
claims as were read out by the learned counsel for
the respondent by way of illustration from several
clauses of the contract such as General Conditions
Clause 18 and Special Conditions Clauses 2.4.2(b)
and 12.1.2. The first category is an "excepted
matter" because the claim as per the terms and
conditions of the contract is simply not
entertainable; the second category of claims falls
within "excepted matters" because the claim is liable
to be adjudicated upon by an authority of the
Railways whose decision the parties have, under the
contract, agreed to treat as final and binding and
hence not arbitrable. The expression "and decision
thereon shall be final and binding on the contractor"
as occurring in clause 63 refers to the second
category of "excepted matters".
xx xx xx xx xx
15. In our country question of delay in
performance of the contract is governed by Sections
55 and 56 of the Indian Contract Act, 1872. If there
is an abnormal rise in prices of material and labour,
it may frustrate the contract and then the innocent
party need not perform the contract. So also, if time
is of the essence of the contract, failure of the
employer to perform a mutual obligation would
enable the contractor to avoid the contract as the
contract becomes voidable at his option. Where time
is "of the essence" of an obligation, Chitty on
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Contracts (28th Edn., 1999, at p. 1106, para 22-
015) states
"a failure to perform by the stipulated
time will entitle the innocent party to (a)
terminate performance of the contract and
thereby put an end to all the primary
obligations of both parties remaining
unperformed; and (b) claim damages from
the contract-breaker on the basis that he
has committed a fundamental breach of the
contract ('a breach going to the root of the
contract') depriving the innocent party of
the benefit of the contract ('damages for
loss of the whole transaction')".
If, instead of avoiding the contract, the contractor
accepts the belated performance of reciprocal
obligation on the part of the employer, the innocent
party i.e. the contractor, cannot claim compensation
for any loss occasioned by the non-performance of
the reciprocal promise by the employer at the time
agreed, "unless, at the time of such acceptance, he
gives notice to the promisor of his intention to do
so". Thus, it appears that under the Indian law, in
spite of there being a contract between the parties
whereunder the contractor has undertaken not to
make any claim for delay in performance of the
contract occasioned by an act of the employer, still a
claim would be entertainable in one of the following
situations: (i) if the contractor repudiates the
contract exercising his right to do so under Section
55 of the Contract Act, (ii) the employer gives an
extension of time either by entering into
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supplemental agreement or by making it clear that
escalation of rates or compensation for delay would
be permissible, (iii) if the contractor makes it clear
that escalation of rates or compensation for delay
shall have to be made by the employer and the
employer accepts performance by the contractor in
spite of delay and such notice by the contractor
putting the employer on terms."
The facts in the above case are, the respondent
Sri. Sarvesh Chopra was granted work of construction of
bored piles 500 mm dia by cast in-sutu method for
widening and raising of Pul Mithai (S). A contract was
entered into between the parties on 27.04.1985. The
contract was subject to general conditions of the contract
of the Railways read with special conditions. Disputes
arose between the parties and the respondent moved a
petition under Section 20 of the Arbitration Act, 1940
praying for the arbitration agreement be filed in the Court
and six claims set out in the petition be referred to the
arbitrator for adjudication. A learned Single Judge of the
Delhi High Court directed two claims to be referred, but as
to claims 3 to 6, he formed an opinion that the claims
being 'excepted matters' within the meaning of clause 63
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of the GCC, the same are not liable to be referred to
arbitration. In an intra-court appeal, the Division Bench
has set aside the order of the learned Single Judge and
also directed the four claims be referred to the arbitration.
The Hon'ble Supreme Court has also in paragraph No.18,
stated as under:
"18. In the case before us, the claims in
question as preferred are clearly covered by
"excepted matters". The statement of claims, as set
out in the petition under Section 20 of the Arbitration
Act, does not even prima facie suggest why such
claims are to be taken out of the category of
"excepted matters" and referred to arbitration. It
would be an exercise in futility to refer for
adjudication by the arbitrator a claim though not
arbitrable, and thereafter, set aside the award if the
arbitrator chooses to allow such claim. The High
Court was, in our opinion, not right in directing the
said four claims to be referred to arbitration."
Be it noted the Hon'ble Supreme Court has inter alia
justified clause 63 of the GCC. In other words, it held the
clause is binding. The Hon'ble Supreme Court has also in
paragraph No.10, while disagreeing with the plea urged by
the counsel for the respondent, has stated as under:
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"10. It was next submitted by the learned
counsel for the respondent that if this Court was not
inclined to agree with the submission of the learned
counsel for the respondent and the interpretation
sought to be placed by him on the meaning of
"excepted matter" then whether or not the claim
raised by the contractor is an "excepted matter"
should be left to be determined by the arbitrator. It
was submitted by him that while dealing with a
petition under Section 20 of the Arbitration Act, 1940
the court should order the agreement to be filed and
make an order of reference to the arbitrator
appointed by the parties leaving it open for the
arbitrator to adjudicate whether a claim should be
held to be not entertainable or awardable, being an
"excepted matter". With this submission too we find
it difficult to agree. While dealing with a petition
under Section 20, the court has to examine: (i)
whether there is an arbitration agreement between
the parties, (ii) whether the difference which has
arisen is one to which the arbitration agreement
applies, and (iii) whether there is a cause, shown to
be sufficient, to decline an order of reference to the
arbitrator. The word "agreement" finding place in the
expression "where a difference has arisen to which
the agreement applies", in sub-section (1) of Section
20 means "arbitration agreement". The reference to
an arbitrator on a petition filed under Section 20 is
not a function to be discharged mechanically or
ministerially by the court; it is a consequence of
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judicial determination, the court having applied its
mind to the requirements of Section 20 and formed
an opinion, that the difference sought to be referred
to arbitral adjudication is one to which the arbitration
agreement applies. In the case of Food Corpn. of
India [(1999) 4 SCC 491] relied on by the learned
counsel for the respondent, it has been held as the
consistent view of this Court that in the event of the
claims arising within the ambit of "excepted
matters", the question of assumption of jurisdiction
by any arbitrator either with or without the
intervention of the court would not arise. In Union of
India v. Popular Builders [(2000) 8 SCC 1] and Steel
Authority of India Ltd. v. J.C. Budharaja, Govt. and
Mining Contractor [(1999) 8 SCC 122] , Ch.
Ramalinga Reddy v. Superintending Engineer
[(1999) 9 SCC 610 : (1994) 5 Scale 67] (para 18)
and Alopi Parshad and Sons Ltd. v. Union of
India [AIR 1960 SC 588 : (1960) 2 SCR 793] SCR at
p. 804 this Court has unequivocally expressed that
an award by an arbitrator over a claim which was not
arbitrable as per the terms of the contract entered
into between the parties would be liable to be set
aside. In Prabartak Commercial Corpn. Ltd. v. Chief
Administrator, Dandakaranya Project [(1991) 1 SCC
498] a claim covered by "excepted matter" was
referred to the arbitrator in spite of such reference
having been objected to and the arbitrator gave an
award. This Court held that the arbitrator had no
jurisdiction in the matter and that the reference of
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the dispute to the arbitrator was invalid and the
entire proceedings before the arbitrator including the
awards made by him were null and void."
(Emphasis supplied)
In paragraphs No.11 to 13, the Hon'ble Supreme Court
has also dealt with the three judgments, which we
reproduce as under:
"11. In Continental Construction Co. Ltd. v.
State of M.P. [(1988) 3 SCC 82] the contract
provided for the work being completed by the
contractor in spite of rise in prices of material and
labour charges at the rates stipulated in the contract.
It was held that on the contractor having completed
the work, it was not open to him to claim extra cost
towards rise in prices of material and labour. An
award given by the arbitrator for extra claim given
by the contractor was held to be vitiated on the
ground of misconduct of the arbitrator. There were
specific clauses in the agreement which barred
consideration of extra claims in the event of price
escalation.
12. In Ch. Ramalinga Reddy v. Superintending
Engineer [(1999) 9 SCC 610 : (1994) 5 Scale 67]
claim was allowed by the arbitrator for "payment of
extra rates for work done beyond agreement time at
schedule of rate prevailing at the time of execution".
Clause 59 of the A.P. Standard Specifications, which
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applied to the contract between the parties, stated
that no claim for compensation on account of delays
or hindrances to the work from any cause would lie
except as therein defined. The claim was found to be
outside the defined exceptions. When extensions of
time were granted to the appellant to complete the
work the respondents made it clear that no claim for
compensation would lie. For both these reasons, this
Court held that it was impermissible to award such
claim because the arbitrator was required to decide
the claims referred to him having regard to the
contract between the parties and, therefore, his
jurisdiction was limited by the terms of the contract.
13. A Division Bench decision of the High Court
of Andhra Pradesh in State of A.P. v. Associated
Engineering Enterprises, Hyderabad [AIR 1990 AP
294 : (1989) 2 An LT 372] is of relevance. Jeevan
Reddy, J. (as His Lordship then was), speaking for
the Division Bench, held that where clause 59 of the
standard terms and conditions of the contract
provided that neither party to the contract shall
claim compensation "on account of delays or
hindrances to the work from any cause whatever",
an award given by an arbitrator ignoring such
express terms of the contract was bad. We find
ourselves in agreement with the view so taken."
In the above paragraphs of the judgment in Sarvesh
Chopra (supra), Hon'ble Supreme Court has quoted with
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approval the aforesaid judgments, which are for the
proposition that, when there are specific clauses in the
agreement which barred consideration of extra claims,
then the award overlooking the claims to that extent
stands vitiated. If that be so, it is clear as a daylight the
conclusion of the Hon'ble Supreme Court in Sarvesh
Chopra (supra) is that, an Arbitrator has no jurisdiction to
adjudicate a dispute which is not arbitrable.
26. The conclusion in paragraph No.15 on which
much reliance has been placed by Sri. Krishnan, the
Hon'ble Supreme Court has highlighted in what
eventualities in spite of there being a contract between
the parties whereunder the contractor has undertaken not
to make any claim for delay, still a claim would be
entertainable, in the following manner:
i. if the contractor repudiates the contract exercising
his right to do so under Section 55 of the Contract
Act;
ii. the employer gives an extension of time either by
entering into supplemental agreement or by making
it clear that escalation of rates or compensation or
compensation for delay would be permissible;
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iii. if the contractor makes it clear that escalation of
rates or compensation for delay shall have to be
made by the employer and the employer accepts
performance by the contractor in spite of delay and
such notice by the contractor putting the employer
on terms.
27. It may be stated here, in Sarvesh Chopra
(supra), the Hon'ble Supreme Court has accepted the
appeal and set aside the order of the Division Bench of the
High Court which had referred the four claims despite the
same being 'excepted matters'. In other words, the
Hon'ble Supreme Court held that, the agreement need to
be given effect to.
28. We may state here, the conclusion of the learned
Sessions Judge with regard to the judgment in the case of
Sarvesh Chopra (supra) can be noted from paragraphs
No.56 to 58, which we reproduce as under:
"56. On going through the entire decision, as
rightly argued by the learned senior counsel for the
plaintiff, decision in Sarvesh Chopra is not on the
point as to whether inspite of having a clause barring
payment of compensation or damages for the delay
caused by the employer, Contractor is entilte for
compensation. This decision is on the point as to,
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whether excepted matter could be referred to the
arbitration and whether particular dispute is an
excepted matter. The Hon'ble Supreme Court in this
decision, has held for the reasons mentioned in the
decision that particular dispute in claim 3,4 and 5
were excepted matters. The Hon'ble Supreme Court
has upheld the decision of single judge of Hon'ble
High Court of Delhi who has held that the claim No.3
to 6 which were excepted matters were not liable to
be referred to arbitration. Therefore on looking to
the facts of the case before the Hon'ble Supreme
Court and finding of the Supreme Court, point as to,
whether compensation could be claimed by the
contractor, inspite of having a clause in the contract
that employer is not liable to pay any damages or
compensation to the contractor for the delay caused
by employer, was not for consideration before
Hon'ble supreme Court.
57. In Sarvesh Chopra decision, Hon'ble
Supreme Court in para 15 has considered Section 55
and 56 of the Indian Contract Act which deal with
contract in which, time is essence of the contract and
held that, it appears that in Indian law though the
contractor had undertaken not to make any claim for
delay in performance of the contract occasioned by
an act of the employer, still a claim would be
entertainable if the contractor had intimated the
employer about such claim and employer accepts
performance inspite of such notice by the contractor.
This finding of the Hon'ble Supreme Court do not
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appear to be ratio decidendi of the decision in
Sarvesh Chopra, as this point as to whether
contractor can claim delay compensation if he has
put the employer to notice while seeking extension,
was not the point involved in the case and is not the
basis for decision in Sarvsh Chopra.
58. On the other hand, subsequent decision of
the Hon'ble Supreme Court in Wig Brothers which is
reported in 2010 is directly on the point. In Wig
brothers, it is clearly held that in view of clause 5(a)
of the contract barring claim for damages at the time
of extension of time, if work is delayed for whatever
reasons and including delay attributable to the ONGC
i.e employer, contractor will not be entitle for any
compensation or damages and will be entitle to
extension of time only and that, the finding of the
Arbitrator awarding compensation in violation of the
bar contained in the contract is held to be beyond
jurisdiction. This finding of the Hon'ble Supreme
Court in the decision in Wig Brothers is ratio
decidendi of the case and would be binding
precedent. Apart from this, even in C.H.Ramalinga
Reddy decision, referred above, which is decision of
three Judges Bench of Hon'ble Supreme Court, is
also on similar point wherein the Hon'ble Supreme
Court has held that where the contract plainly barred
the appellant from making any claim, it was
impermissible to make an award in respect thereof.
It is also held that the jurisdiction of the arbitrator is
limited by the terms of the contract. Therefore, these
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decisions relied by the plaintiff would make it very
clear that no damage clause for the delay appearing
in clause 2.2 and 8.3 are binding clauses of the
contract and not a mere statement."
(Emphasis supplied)
29. The learned Sessions Judge is right in stating
that the decision of the Hon'ble Supreme Court in
paragraph No.15 do not appear to be ratio decidendi of
the decision in Sarvesh Chopra (supra) that is, whether
the contractor can claim delay compensation if he has put
the employer to notice while seeking extension as the
same was not the issue involved in the case.
30. Insofar as the judgment in the case of Assam
State Electricity Board (supra) is concerned, in the said
case, the Hon'ble Supreme Court has noted the fact that
the High Court has adverted to the decision in the case of
Sarvesh Chopra (supra) in support of the principle that if
a party to a contract does not rescind it by invoking
Sections 55 and 56 of the Contract Act and accepts the
belated performance of reciprocal obligations, the other
party would be entitled to make a claim for damages. In
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any case, the Hon'ble Supreme Court by noting the fact
that the High Court has given a finding that the appellant
Board has not refuted the claim of the
contractor/respondent of idle charges, etc., and at the
same time, the bills of the contractor/respondent on
account of idle charges, escalation prices, etc., were put
up for consideration, the act of the respondent clearly
indicates that the appellant has impliedly admitted the
substance and justification of the claim of the contractor
and has dismissed the appeal. The judgment is clearly
distinguishable on facts as no such case has been set up
by the appellant in this case.
31. In Mintoolal Brijmohandas (supra), which is a
judgment of the Madhya Pradesh High Court, the relevant
clause 2.1.22 of the contract was on the following terms:
"If the materials are not supplied in time, the
contractor will not be allowed any claim for any loss
which may be caused to him, but only extension of
time will be given at the discretion of the Executive
Engineer and Superintending Engineer if applied for
by the Contractor before the expiry of the contract."
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The High Court has referred to the judgment of the
Hon'ble Supreme Court in Sarvesh Chopra (supra) and
finally in paragraphs No.16 to 20, stated as under:
"16. Vide Exhibit P-9 the contractor
acknowledging the letter issued by the Department
contractor had incorporated the following:
"We would have completed this work
also and the canal system not opened for
testing and Irrigation from 18/19 Nov.
1981. You will please appreciate the
Earthwork could not be done due to
constant flow of canal water through the
structure and we had no other alternative
but to disband the establishment.
The canal waters is still flowing and
lively to continue for another 2 months and
it is practically impossible to retain the
labourers without any work.
We had requested for grant of
extension upto 15-1-1982 and are not
interested for any further extension of time.
You are requested to finalise the contract
and prepare our final (sic) failure is not
allowing us to do the work upto 15-1-1982
by opening the canal earlier. We cannot
wait for indefinite period to complete the
work. In the past we have already suffered
huge losses due to such stoppage".
17. Vide Exhibit P-10, the compensation was
also demanded. Vide Exhibit P-11, dated 18-3-1982
the Executive Engineer quoted clause 2.1.22 and
indicated that no claim of delayed supply of material
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would be entertained. Vide Exhibit P-13, the
Superintendent Engineer mentioned that the
Department would not be responsible for any loss
sustained by the Contractor. At this juncture we
would also like to refer to Exhibit P-14 by which the
Executive Engineer had written to the
Superintendent Engineer. The two paragraphs which
are relevant for the present purpose are as under:
"Your kind attention is invited to our
letter dated 10-4-1982 wherein we had
requested for your decision to our claims
submitted by us vide our letter dated 5-2-
1982.
You will please appreciate that our
huge amount is blocked and we shall be
very much thankful if you will please decide
the same early."
18. There was recommendation vide Exhibit P-
15, by the Executive Engineer. The question that
arises for consideration is whether there has been
performance by the contractor. We have referred to
this document to show that the claimant had
imposed terms and conditions but there has been no
explanation by the owner. The owner allowed the
claimant to carry on with the work. It is perceptible
that the final bill inasmuch as he has been permitted
to do the work. As performance has been accepted
we are disposed to think the claim would be covered
under the third para of Clause 2.1.22 would not be a
impediment for entertaining his claim.
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19. After the hearing was concluded the
learned counsel for the respondent cited a few
decisions by making a mention, wherein the view
taken is that "interpretation of contract" is a matter
for the arbitrator to decide and the court cannot
substitute its own decision in place of the decision of
the arbitrator. We do not think that the cited cases
have any relevance for deciding the question arising
for consideration in this appeal. None of the cases is
an authority for the proposition that the question
whether a claim is an "excepted matter" or not must
be left to be decided by the arbitrator only and not
adjudicated upon by the court while disposing of a
petition under Section 20 of the Arbitration Act,
1940. We cannot subscribe to the view that
interpretation of arbitration clause itself can be or
should be left to be determined by the arbitrator and
such determination cannot be done by the court at
any stage.
20. In view of the aforesaid premises the
award passed by the Tribunal need not be interfered
with inasmuch the Tribunal has analyzed every claim
in proper perspective and had quantified that on
basis of material in record. There is no perversity of
the approach. The main contention urged before us
about the arbitrability of the claims. We are inclined
to hold that the claims are based on the materials on
record and there is no jurisdiction to interfere in this
Civil Revision."
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Suffice to state, the High Court has not interfered with the
award though it held that Tribunal would have entertained
the claim. The High Court on a finding that the Tribunal
has analyzed every claim and also it held there is no
perversity, it dismissed the appeal. The judgment shall
not help the case of the appellant.
32. Similarly in the case of G.Ramachandra Reddy
and Company (supra) on which reliance has been placed
by Sri. Krishnan, the issue relevant for the purpose of the
case was, whether the claim No.4 accepted by the High
Court with regard to damages granted on a finding that
the termination of the contract was illegal and malafide, it
held that no such plea was raised by the respondent
before the High Court. It is not such a case here and
hence, the judgment is clearly distinguishable.
33. Similarly on the three cases of State of West
Bengal -Vs.- Pam Developments Private Limited
[MANU/WB/1044/2016, 2017 SCC OnLine Cal
13272 and Civil Appeal No.1126-1127/2019 dated
22.01.2019], the Sessions Judge has held as under:
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"42. The learned counsel for the defendant has
referred to a decision of the Hon'ble High Court of
Calcutta reported in MANU/WB/1044/2016 (State of
West Bengal v. Pam Developments Private Limited)
in which the single judge of the Hon'ble High Court
has considered the decision in Sarvesh Chopra. The
learned counsel for the defendant has also relied on
the decision of the Division Bench, between the
same parties, reported in 2017 SCC Online Calcutta
13272. In this appeal Division Bench of Hon'ble High
Court in para 61 has held under,
"... The moot question that arises is
whether any amount awarded by an
arbitrator on account of damages in respect
of a head of claim covered by a prohibitory
or no damage clause in the agreement
would be liable to be set aside in a
challenge under Section 34 of the 1996 Act
as being contrary to the substantive law in
force in India or as being in conflict with the
public policy of India or on the ground of it
being patently illegal or falling foul of the
judicially acknowledged tests of perversity
or shocking to the conscience. The ancillary
issue which arises is whether the dictum at
paragraph 15 of Sarvesh Chopra is relevant
in assessing a challenge to an arbitral award
under Section 34 of the 1996 Act and if so
would there be no exception beyond the
three as recognized in such dictum...."
On this point the Hon'ble High Court in para 73 has
held,
"... But the more important facet of
the dictum in Sarvesh Chopra is that a no-
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damage clause is by no means the end of
the matter in respect of a claim made under
a prohibited head; there could be
exceptions to the prohibition. Once so much
is apparent from the dictum, the next
aspect would be whether such dictum
provides room for only such of the
exceptions as noticed therein. Even if the
dictum is read in such strict sence which it
ought not to be, since a judgment is not
read as a statute or an edict on stone - the
essence of the dictum is that even a
prohibitory clause and its application is open
to interpretation. Once it is recognized that
it may be permissible to interpret the
efficacy of a prohibitory clause or its
application or applicability in a particular
situation, that would make such matter fall
within the exclusive domain of the
arbitrator. The arbitrator may make a
mistake and may rule against the
applicability of a prohibitory clause in a
particular set of circumstances; but that, by
itself, would not be amenable to correction
by a court in a challenge under Section 34
of the 1996 Act, unless it is found to be in
conflict with the pubic policy of India or,
under the newly incorporated Section 34(2-
A) on the ground of patent illegality or the
judicially acknowledged strict grounds of
perversity or shocking to the conscience of
the court..."
43. On going through this decision, no doubt, it
supports the contention of defendant and deals with
awarding compensation inspite of contract having no
damages clause. However, learned counsel for the
plaintiff has referred to the decision of Hon'ble
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Supreme Court in Civil Appeal No.1126-1127 of 2019
dated 22/1/2019 (State of West Bengal v. Pam
Developments Private Limited) which is an appeal
against the judgment of the Division Bench of the
Hon'ble Calcutta High Court. In this decision the
Hon'ble Supreme Court has disposed the matter by
consent of both the parties and left all the questions
of law open. On the basis of this decision, the
learned counsel for the plaintiff has argued that the
decision in Pam Developer is not a binding
precedent, as all the questions of law are left open."
(Emphasis supplied)
We agree with the conclusion of the learned Sessions
Judge to hold that the Hon'ble Supreme Court has left the
question of law open. Hence, these judgments shall not
help the case of the appellant.
34. On the other hand, the judgments which have
been relied upon by Sri. Kamath are primarily as under:
34.1. In the case of Wig Brothers (supra) wherein
reliance has been placed on paragraphs No.6 and 11, the
same are reproduced as under:
"6. The arbitrator has observed that there is no
provision in the contract by which the contractor can
be estopped from raising a dispute in regard to the
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said claim. But Clause 5-A of the contract pertains to
extension of time for completion of work and
specifically bars any claim for damages. The said
clause is extracted below:
"In the event of delay by the
Engineer-in-charge to hand over to the
contractor possession of land/lands
necessary for the execution of the work or
to give the necessary notice to the
contractor to commence work or to provide
the necessary drawing or instructions or to
do any act or thing which has the effect of
delaying the execution of the work, then
notwithstanding anything contained in the
contract or alter the character thereof or
entitle the contractor to any damages or
compensation thereof but in all such cases
the Engineer-in-charge may grant such
extension or extensions of the completion
date as may be deemed fair and reasonable
by the Engineer-in-charge and such decision
shall be final and binding."
xx xx xx xx xx
11. In view of the above, the award of the
arbitrator in violation of the bar contained in the
contract has to be held as one beyond his jurisdiction
requiring interference. Consequently, this appeal is
allowed in part, as follows:
(a) The judgment of the High Court
and that of the civil court making the award
the rule of the court is partly set aside
insofar as it relates to the award of Rs. 9.5
lakhs under Claim 1 and the award of
interest thereon.
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(b) The judgment of the civil court as
affirmed by the High Court in regard to
other items of the award is not disturbed."
(Emphasis supplied)
34.2. Similarly in the case of Ramnath
International (supra), reliance has been placed on
paragraphs No.11 to 20, wherein it is inter alia held clause
11(c) of the GCC is a clear bar to any claim for
compensation for delay in respect of which extensions had
been sought and obtained. The Hon'ble Supreme Court
held that such a clause amounts to a specific consent by
the contractor to accept extension of time alone and
satisfaction of claims for delay and not to claim any
compensation.
34.3. Similarly in the case of Rajasthan State
Mines and Minerals (supra) wherein reliance was placed
on paragraphs No.21 to 23, the same are reproduced as
under:
"21. Despite the admission by the contractor, it
is apparent that the arbitrator has ignored the
aforesaid stipulations in the contract. In the award,
the arbitrator has specifically mentioned that he has
given due weightage to all the documents placed
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before him and has also considered the admissibility
of each claim. However, while passing the award
basic and fundamental terms of the agreement
between the parties are ignored. By doing so, it is
apparent that he has exceeded his jurisdiction.
22. Further, in the present case, there is no
question of interpretation of clauses 17 and 18 as
the said clauses are so clear and unambiguous that
they do not require any interpretation. It is both, in
positive and negative terms by providing that the
contractor shall be paid rates as fixed and that he
shall not be entitled to extra payment or further
payment for any ground whatsoever except as
mentioned therein. The rates agreed were firm, fixed
and binding irrespective of any fall or rise in the cost
of the work covered by the contract or for any other
reason or any ground whatsoever. It is specifically
agreed that the contractor will not be entitled or
justified in raising any claim or dispute because of
increase in cost of expenses on any ground
whatsoever. By ignoring the said terms, the
arbitrator has travelled beyond his jurisdiction as his
existence depends upon the agreement and his
function is to act within the limits of the said
agreement. This deliberate departure from the
contract amounts not only to manifest disregard of
the authority or misconduct on his part but it may
tantamount to mala fide action.
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23. It is settled law that the arbitrator is the
creature of the contract between the parties and
hence if he ignores the specific terms of the contract,
it would be a question of jurisdictional error which
could be corrected by the court and for that limited
purpose agreement is required to be considered. For
deciding whether the arbitrator has exceeded his
jurisdiction reference to the terms of the contract is
a must. It is true that arbitration clause 74 is very
widely worded, therefore, the dispute was required
to be referred to the arbitrator. Hence, the award
passed by the arbitrator cannot be said to be without
jurisdiction but, at the same time, it is apparent that
he has exceeded his jurisdiction by ignoring the
specific stipulations in the agreement which prohibit
entertaining of the claims made by the contractor. In
the letter dated 5-2-1985 appointing the sole
arbitrator, it has been specifically mentioned that
agreement dated 14-5-1981 was executed by and
between the parties and that the contractor has
raised the claims as mentioned in the letter dated 7-
9-1983 which was denied by the Company and at
the request of the contractor, the sole arbitrator was
appointed to adjudicate the claims made by the
contractor vide his letter dated 7-9-1983. This
reference to the arbitrator also clearly provides that
reference was with regard to the dispute arising
between the parties on the basis of the agreement
dated 14-5-1981. It nowhere indicates that the
arbitrator was empowered to adjudicate any other
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claims beyond the agreement between the parties.
No such issue was referred for adjudication. Even the
arbitrator in his interim award has specifically stated
that he was appointed to adjudicate the disputes
between the parties arising out of the agreement
dated 14-5-1981."
(Emphasis supplied)
35. The learned Sessions Judge has also referred to
the judgment in the case of Associated Engg.
Co. v. Govt. of A.P. [(1991) 4 SCC 93], wherein in
paragraph No.46 of the impugned order, he has held as
under:
"46. In another decision reported in (1991) 4
SCC 93 (Associated Engineering Company v.
Government of Andhra Pradesh and another)
judgment of Hon'ble High Court was confirmed by
the Hon'ble Supreme Court, in which the Hon'ble
High Court had held that no compensation is payable
when three is a specific bar in the contract. It is held
in para 8 that
"...In the absence of any provision in
the contract, the arbitrator had no
jurisdiction to make an award for escalation.
This contention of the government was
accepted by the High Court..."
and the same is upheld by the Hon'ble Supreme
Court in para 24 and 25 as under:
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"24. The arbitrator cannot act
arbitrarily, irrationally, capriciously or
independently of the contract. His sole
function is to arbitrate is to arbitrate in
terms of the contract. He has no power
apart from what the parties have given him
under the contract. If he has traveled
outside the bounds of the contract, he has
acted without jurisdiction. But if he has
remained inside the parameters of the
contract and has construed the provisions of
the contract, his award cannot be interfered
with unless he has given reasons for the
award disclosing an error apparent on the
face of it.
25. An arbitrator who acts in manifest
disregard of the contract acts without
jurisdiction. His authority is derived from
the contract and is governed by the
Arbitration Act which embodies principles
derived from a specialised branch of the law
of agency. He commits misconduct if by his
award he decides matters excluded by the
agreement. A deliberate departure from
contract amounts to not only manifest
disregard of his authority or a misconduct
on his part, but it may tantamount to a
mala fide action. A conscious disregard of
the law or the provisions of the contract
from which he has derived his authority
vitiates the award..."
36. In C.H.Ramalinga Reddy (supra), the Hon'ble
Supreme Court has in paragraph No.18, held as under:
"18. The judgment in Sudarsan Trading
Co. v. Govt. of Kerala [(1989) 2 SCC 38 : (1989) 1
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SCR 665] does not assist the appellant, if fully read.
It was there observed that there are two different
and distinct grounds involved in many cases
concerning the setting aside of arbitration awards.
One is that there is error apparent on the face of the
award and the other is that the arbitrator exceeded
his jurisdiction. In the latter case the court can look
into the arbitration agreement but in the former it
cannot. An award may be set aside on the ground
that the arbitrator had exceeded his jurisdiction in
making it. In the case before us, the arbitrator was
required to decide the claims referred to him having
regard to the contract between the parties. His
jurisdiction, therefore, was limited by the terms of
the contract. Where the contract plainly barred the
appellant from making any claim, it was
impermissible to make an award in respect thereof
and the Court was entitled to intervene."
(Emphasis supplied)
37. In Steel Authority of India Ltd. v. J.C.
Budharaja, Govt. and Mining Contractor [(1999) 8
SCC 122], the Hon'ble Supreme Court has in paragraphs
No.15 and 17, stated as under:
"15. Clause 32 of the agreement specifically
stipulates that no claim whatsoever for not giving
the entire site on award of work and for giving the
site gradually will be tenable and the Contractor is
required to arrange his working programme
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accordingly. Clause 39 further stipulates that no
failure or omission to carry out the provisions of the
contract shall give rise to any claim by the
Corporation and the Contractor, one against the
other, if such failure or omission arises from
compliance with any statute or regulation of the
Government or other reasons beyond the control of
either the Corporation or the Contractor. Obtaining
permission from the Forest Department to carry out
the work in the wildlife sanctuary depends on
statutory regulations. Clause (vi) of the general
conditions of the contract also provides that failure
or delay by the Corporation to hand over to the
Contractor possession of the lands necessary for the
execution of the work or any other delay by the
Corporation due to any other cause whatsoever
would not entitle the Contractor to damage or
compensation thereof; in such cases, the only duty
of the Corporation was to extend the time for
completion of the work by such period as it may
think necessary and proper. These conditions
specifically prohibit granting claim for damages for
the breaches mentioned therein. It was not open to
the arbitrator to ignore the said conditions which are
binding on the contracting parties. By ignoring the
same, he has acted beyond the jurisdiction conferred
upon him. It is settled law that the arbitrator derives
the authority from the contract and if he acts in
manifest disregard of the contract, the award given
by him would be an arbitrary one. This deliberate
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departure from the contract amounts not only to
manifest disregard of the authority or misconduct on
his part, but it may tantamount to mala fide action.
In the present case, it is apparent that awarding of
damages of Rs 11 lakhs and more for the alleged
lapses or delay in handing over the work site is, on
the face of it, against the terms of the contract.
xx xx xx xx xx
17. It is to be reiterated that to find out
whether the arbitrator has travelled beyond his
jurisdiction and acted beyond the terms of the
agreement between the parties, the agreement is
required to be looked into. It is true that
interpretation of a particular condition in the
agreement would be within the jurisdiction of the
arbitrator. However, in cases where there is no
question of interpretation of any term of the
contract, but of solely reading the same as it is and
still the arbitrator ignores it and awards the amount
despite the prohibition in the agreement, the award
would be arbitrary, capricious and without
jurisdiction. Whether the arbitrator has acted beyond
the terms of the contract or has travelled beyond his
jurisdiction would depend upon facts, which however
would be jurisdictional facts, and are required to be
gone into by the court. The arbitrator may have
jurisdiction to entertain claim and yet he may not
have jurisdiction to pass award for particular items in
view of the prohibition contained in the contract and,
in such cases, it would be a jurisdictional error. For
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this limited purpose reference to the terms of the
contract is a must. Dealing with a similar question
this Court in New India Civil Erectors (P) Ltd. v. Oil
and Natural Gas Corpn. [(1997) 11 SCC 75] held
thus: (SCC p. 79, para 9)
"It is axiomatic that the arbitrator
being a creature of the agreement, must
operate within the four corners of the
agreement and cannot travel beyond it.
More particularly, he cannot award any
amount which is ruled out or prohibited by
the terms of the agreement. In this case,
the agreement between the parties clearly
says that in measuring the built-up area,
the balcony areas should be excluded. The
arbitrators could not have acted contrary to
the said stipulation and awarded any
amount to the appellant on that account." "
(Emphasis supplied)
38. Same is the position in the judgment of Union of
India v. Chandalavada Gopalakrishna Murthy and others
[(2010) 14 SCC 633], wherein the following has been stated:
"7. A similar question raised before this Court
was considered by a three-Judge Bench of this Court
in Ch. Ramalinga Reddy v. Superintending
Engineer [(1999) 9 SCC 610] . This Court held in
that case that if the contract is extended under the
terms of the contract, compensation cannot be
awarded by the arbitrator. The aforesaid judgment
has been followed in another decision of this Court
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in Northern Railway v. Sarvesh Chopra [(2002) 4
SCC 45]
39. The learned Sessions Judge was of the view that,
the Hon'ble Supreme Court in paragraph No.15 of
Sarvesh Chopra (supra) on which reliance has been
placed by the learned counsel for the appellant, has
considered Sections 55 and 56 of the Contract Act, which
deals with contract in which time is the essence of the
contract and held that it appears in Indian law, though the
contractor had undertaken not to make any claim for
delay in performance of the contract occasioned by an act
of the employer, still a claim would be entertainable if the
contractor had intimated the employer about such a claim
and employer accepts performance in spite of such notice
by the contractor. The Sessions Judge's view is, this
finding of the Hon'ble Supreme Court do not appear to be
ratio decidendi of the decision in Sarvesh Chopra (supra)
as the point was to whether contractor can claim delay
compensation if he has put the employer to notice while
seeking extension was not the point involved in the case
and is not the basis for decision in Sarvesh Chopra
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(supra). In paragraph No.59, the Sessions Judge after
referring to various judgments of those relied upon by
Sri. Kamath, which we have reproduced above, held that
the decision of Sarvesh Chopra (supra) will not entitle
the contractor to claim compensation in violation of
specific terms of the contract prohibiting such claim of the
contractor:
"59. As per the decisions, starting from
Continental Construction Company till Wig Brothers,
relied by the plaintiff, when contract specifically bars
payment of compensation to the contractor for delay
caused by the employer, the contractor is not entitle
for compensation and such clause in the contract
cannot be ignored while passing the award and such
award in violation of the terms of the contract, as
held in Wig Brothers is beyond the jurisdiction of the
arbitrator and it requires interference. The decision
in Sarvesh Chopra is on different facts and is not on
the point involved in the present case. Learned
Arbitral Tribunal without going through the facts of
the said decision, has erroneously applied the same
to the present case, which is not permissible. As held
in Wig Brothers, such finding of the learned Arbitral
Tribunal by ignoring or violating terms of contract is
a jurisdictional error which requires interference.
Even I also do not permit such claim for
compensation in the decision in Chandalavada
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Gopalakrishna, referred above, it is stated in para 7
that, in the decision in Ramachandra Reddy and
even in Sarvesh Chopra it is held that compensation
cannot be awarded by the Arbitrator if contract is
extended under the terms of the contract. Therefore,
decision in Sarvesh Chopra as considered in
subsequent decisions by the Hon'ble Supreme Court,
including decision in Nicholas Piramal India Limited,
do not support such claim for compensation.
Moreover, even in Sarvesh Chopra decision which is
the basis for finding of the arbitrator, the decision in
Ramalingareddy and also the decision in State of UP
v. Associate Engineer and Continental Construction
are all referred with approval. Therefore the decision
in Sarvesh Chopra will not entitle the contractor to
claim compensation in violation of specific terms of
the contract prohibiting such claim for
compensation."
40. We are in agreement with such a conclusion of
the Sessions Judge. As stated above, the Hon'ble
Supreme Court in Sarvesh Chopra (supra), has in
paragraphs No.11 to 13, referred to judgments of the
Hon'ble Supreme Court i.e., Continental Constructions
Co. Ltd. (supra), C.H.Ramalinga Reddy (supra) and
Associated Engg. Co. v. Govt. of A.P. of the Andhra
Pradesh High Court on the identical issue in view of
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specific clause in the contract disentitling the contractor
from claiming damages and held, such a claim cannot be
made.
41. In fact, in paragraph No.10 of Sarvesh Chopra
(supra) also, reference has been made to various
judgments on identical issue. It may be stated here that,
the Hon'ble Supreme Court has referred to those
judgments with approval on the proposition of law which
arises therein and also in this case. Even otherwise, the
conclusion of the Hon'ble Supreme Court in paragraph
No.15 being an obiter dicta of the Hon'ble Supreme Court
and binding on the Courts below including the Arbitral
Tribunal, then also it needs to be seen, whether (iii) of the
situation highlighted by the Hon'ble Supreme Court when
a contractor can claim damages has been satisfied. We
are of the view the said situation has not been satisfied in
this case. Before we give our finding on the same, it is
necessary to state that, the Arbitral Tribunal in paragraphs
No.27.7 to 27.16 has dealt with the five extensions which
were sought by the appellant and granted by the
respondent. It may be stated here that in all the five
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extensions granted, there was no claim for compensation.
It was only for price variation. The respondent had in first
extension, granted the extension without LD, but with
price variation clause. It is also noted that subsequent to
allowing the extension of time, the appellant in further
communication(s), sought additional cost/compensation.
This has been interpreted by the Arbitral Tribunal to mean
that, it is an admitted fact notices have been given by the
appellant to claim compensation at the time of accepting
extension of time by the appellant and as such, the bar
under clause 2.2 and 8.3 shall not be applicable. This
finding according to us, is untenable. This we say so for
the following reasons:
i. The appellant has, on each occasion, accepted the
extension of time without compensation/damages.
ii. The appellant has acted upon the extension of time.
iii. Having acted on the extension of time, could not
have submitted request for damages/compensation
on a subsequent date.
iv. The respondent having accepted the performance by
the appellant with no compensation/damages,
further request for compensation/damages is not
contemplated.
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So it follows, the finding of the Arbitral Tribunal that the
appellant has given notice to claim compensation at the
time of accepting extensions, is clearly untenable for the
above reasons. Further notice, which is contemplated is
the notice for extension of time and not a notice after
accepting the extension of time. This is for the simple
reason, the employer i.e., the respondent must know on
what grounds the extension is being sought. In this case
the extensions having been granted without
compensation/damages, any subsequent request for
compensation/damages shall not be maintainable. Any
inaction of the respondent on such request has no effect
in law. It is the decision of the respondent to give
extension of time with price variation, which will bind the
parties. It follows, the clause (iii) of paragraph No.15 of
Sarvesh Chopra's judgment (supra) for the appellant to
claim damages/compensation has not been satisfied.
42. Sri. Krishnan has also relied upon the judgment
of the Hon'ble Supreme Court in the case of NTPC Ltd.
(supra) in support of his submissions by relying on the
judgment in the case of Sarvesh Chopra (supra). Suffice
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to state, the Hon'ble Supreme Court has, in paragraph
No.25 of the judgment, has stated as under, as such the
judgment shall not help the case of the appellant:
"25. In NorthernRailway v. Sarvesh Chopra
[Northern Railway v. Sarvesh Chopra, (2002) 4 SCC
45] , the Court was seized of a matter pertaining to
a reference to arbitration. The considerations of a
court in such a matter are distinct from those of a
court in appeal over the final award of an arbitrator.
Be that as it may, in that case, a contractual clause
between the parties specifically excluded any claims
of the contractor arising out of delays attributable to
the opposite party, which is not the case in the
present matter.
43. Similarly the judgment in the case of
Njattumkalayil Construction Company (supra),
specifically paragraphs No.12 and 13, is/are
distinguishable on facts and in view of our findings above.
44. Even the judgment in the case of Mohammad
Kunju (supra) is distinguishable on facts and in in view of
our findings above.
45. Even the judgment in the case of Vishva Shanti
Builders (India) Pvt. Ltd. (supra) is distinguishable on
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facts as can be seen from paragraph No.135 of the
judgment and in view of our findings above. We
reproduce paragraph No.135 as under:
"135. In the present case, it has been held by
the learned Arbitrator that majority of the delay was
been caused by the petitioner. The reasoning for the
same is borne out of the record, as recorded in
paragraph 21.20.1-21.20.4 (which records the
submissions of the parties) as well as the documents
on record. It is further corroborated by the fact that
UOI did not levy any compensation of VSB, despite
the fact that the contract empowered it to do so. The
extension was granted for reasons being "beyond the
contractor's control". Before the Arbitrator, UOI was
not able to justify why it did not levy compensation
on VSB for extensions. Hence, the Arbitrator was of
the view that majority of the fault for delay was
attributed to UOI. Relying upon judicial precedents,
he observed that where no fault could be attributed
to the contractor, granting amount towards loss of
profit and overhead could not be faulted with. The
Arbitrator has also relied upon the reasoning under
Claim No. 15 to state that since VSB had put UOI to
notice that it would claim damages due to extension,
and UOI had granted the extension and continued
the work without replying to the said notice, the
same would make the prohibitory clause redundant,
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especially in light of Sarvesh Chopra (supra). I find
no infirmity in the said reasoning."
(Emphasis supplied)
46. Insofar as the judgment in the case of Chiraj
Stock & Security Pvt. Ltd. (supra), the judgment is
distinguishable on facts and in view of our findings above.
47. Similarly, the judgment in the case of Bright
Construction (supra) is distinguishable on facts in view
of paragraph No.8 of the judgment.
48. Insofar as reference to K.N. Sathyapalan
(supra), is concerned, suffice to state, in view of our
findings above, the judgment is distinguishable on facts.
49. At this stage, we may reproduce the findings of
the learned Sessions Judge on extension sought, in
paragraph No.60 as under:
"60. Apart from this, in the decision in Sarvesh
Chopra in para 15 (iii) it is mentioned that, if
contractor makes it clear that escalation of rates or
compensation for delay shall have to be made by the
employer and the employer accepts performance by
the contractor in spite of delay and inspite of notice,
then the contractor is entitle for compensation. Even
if this observation is held to be applicable to present
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case, same is not properly applied by the Arbitral
Tribunal. On looking to EOT sought by claimant on 5
times, only in EOT-1, claimant contractor had stated
that he is seeking extension of time and that cost
implication would be submitted to the employer
later. In application for second EOT dated
24/3/2012, contractor had requested for grant of
EOT as per clause 8.4 of GCC with price variation
clause. In EOT 3, 4 and 5 also no notice of reserving
claim for compensation was given. Employer is not
informed that contractor will be seeking EOT subject
to payment of damages or compensation in EOT 2 to
5. Even first EOT application stating that the losses
are not attributable to the contractor and they are
beyond the control and only after BMRCL fulfilled the
obligation, they will be seeking final extension along
with financial implication, cannot be said to be a
clear notice of the contractor seeking escalation of
rate or compensation for delay. On reading request
for EOT 1 to 5, none of them are putting specific
condition that only if compensation for delay is
given, they would proceed with the work and they
are seeking extension of time with the condition that
escalation of rate or compensation for delay would
be made by the employer. Therefore, this
requirement of putting the employer on notice about
such claim for compensation itself is not clearly
present in any of the applications given for EOT.
Though there is some reference to the financial
implication in EOT-1, EOT-2 to 5 do not contain any
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such reservation of making claim for compensation.
However, learned Arbitral Tribunal has mentioned
that in EOT-2 also there is notice by the employer
which is not found in the EOT application. Regarding
EOT 3 to 5 even the Arbitral Tribunal has not
mentioned in the award that there is such claim for
compensation reserved by the contractor. Apart from
this, after receiving request for EOT, GC and the
plaintiff have considered the contention of the
contractor and have given EOT, but while doing so,
in none of the documents of EOT, employer had
agreed to pay any compensation for the financial
implication on the contractor and it is specifically
mentioned that extension of time is given under
clause 8.3 or that other conditions of contract
continues to apply. Clause 8.3 do not permit
compensation to the claimant. Even from this angle,
even if the decision in Sarvesh Chopra is said to be
applicable, requirement mentioned in the decision is
not complied in. the present case. For all these
reasons, decision in Sarvesh Chopra cannot be
applied to the present case and even. requirement
mentioned in that decision are not present, in this
case."
(Emphasis supplied)
50. We agree with the conclusion of the learned
Sessions Judge that, in none of the letters granting
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extension of time, the respondent had agreed to pay the
compensation.
51. Sri. Krishnan had raised an issue of clauses 2.2
and 8.3 are void, being in violation of Sections 23, 55 and
73 of the Contract Act. Though the said aspect had not
been dealt with by the Arbitral Tribunal, the learned
Sessions Judge did deal with the issue and held that such
a plea was not raised before the Arbitral Tribunal.
According to this Court, assuming such a plea was raised,
the same would not be sustainable in law. This we say so
because, the appellant having accepted the said clauses of
the GCC without any demur and executed and contract
and moreover it has not been shown to us that declaration
that the clauses are void has been sought in the claim
petition, the prayer to hold clauses 2.2 and 8.3 as
void/unconscionable could not have been/cannot be
considered, nor granted by the Arbitral Tribunal/Sessions
Judge or by this Court. The reliance placed by Sri.
Krishnan on the judgments of Simplex Concrete Piles
Limited (supra), MBL Infrastructures Limited (supra)
and All India Power Engineer Federation (supra) shall
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have no applicability to the facts of this case. The
paragraph No.62 of the Sessions Judge order dealing with
this issue is reproduced as under:
"52. In one more decision of Hon'ble Supreme
Court in Oil and Natural Gas Corporation v. Wig
Brothers Builders and Engineers Private Limited,
reported in (2010) 13 SCC 377, Hon'ble Supreme
Court in para 7 has held by considering the relevant
clauses of the contract that,
"62. The learned counsel for the
defendant by referring to the decision in All
India Power Engineer Federation and others
v. Sasan Power Limited reported in (2017)
1 SCC 487 has argued that Contract barring
claim for compensation which is
inconsistent with Section 73 of the Contract
Act itself is not effective and is to be
ignored. In this decision the Hon'ble
Supreme Court in para 17 has held that the
terms of an instrument of pledge, such as
there is in this case, giving an unqualified
power of sale, are inconsistent with the
provisions of Section 176 of the Contract
Act, and, therefore, by virtue of Section 1
of that Act must give place to the express
provisions of the Act. The learned counsel
has argued that when there is specific
section in contract in providing
compensation like Section 73, 63 and 55,
clauses like 2.2 and 8.3 of the GCC barring
contractor from claiming compensation are
void. This point was not raised before the
learned Arbitral Tribunal and cannot be
permitted to be raised for the first time in
this suit. Moreover in most of the decisions
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referred above, similar clauses of the
contract were involved and in none of those
decisions, including decision in Sarvesh
Chopra, validity of such clauses are
questioned and such clauses are not held to
be void. Hence this contention of the
learned counsel which is raised for the first
time in the course of arguments cannot be
accepted."
52. Insofar as the plea of Sri. Krishnan by stating
that once the Arbitrator has interpreted the clauses of
contract by taking a plausible view, the interference by
the Section 34 Court is uncalled for, by relying on the
judgments of the Hon'ble Supreme Court in Atlanta
Limited (supra), Haryana Tourism Limited (supra),
Associated Builders (supra), Ssangyong Engineering
& Construction Co. Ltd. (supra), Warsaw Engineers
(supra) is concerned, there is no dispute on the
proposition of law as advanced by Sri. Krishnan. But at
the same time, it is also settled law that the Tribunal is
required to decide the dispute in accordance with the
terms of the contract. The above finding of ours clearly
show that there is a departure from terms of the contract,
which is a ground for interference. In this regard, we may
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state, the learned Sessions Judge has held, the award in
respect of Issue No.1(d) for an amount of
Rs.28,74,82,181/- is against specific terms of contract and
also binding decision of the Hon'ble Supreme Court and as
such, a jurisdictional error has been committed by the
Tribunal and is against the fundamental policy of Indian
law and therefore against public policy and requires to be
set aside. The said conclusion of the Sessions Judge is in
conformity with the law laid down in Associate Builders
v. DDA (supra) wherein, in paragraphs No.27 and 31, it is
stated as under:
"27. Coming to each of the heads contained
in Saw Pipes [(2003) 5 SCC 705 : AIR 2003 SC
2629] judgment, we will first deal with the head
"fundamental policy of Indian law". It has already
been seen from Renusagar [Renusagar Power Co.
Ltd. v. General Electric Co., 1994 Supp (1) SCC 644]
judgment that violation of the Foreign Exchange Act
and disregarding orders of superior courts in India
would be regarded as being contrary to the
fundamental policy of Indian law. To this it could be
added that the binding effect of the judgment of a
superior court being disregarded would be equally
violative of the fundamental policy of Indian law.
xx xx xx xx xx
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31. The third juristic principle is that a decision
which is perverse or so irrational that no reasonable
person would have arrived at the same is important
and requires some degree of explanation. It is settled
law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account
something irrelevant to the decision which it
arrives at; or
(iii) ignores vital evidence in arriving at its
decision,
such decision would necessarily be perverse."
53. We may also refer to paragraph No.36 of the
judgment of the learned Sessions Judge, wherein he has
stated as under:
"36. The learned counsel for the defendant has
argued that the finding of the tribunal is by relying
on the decision of Hon'ble Supreme Court and also is
based on facts and the evidence placed before it and
therefore as held. in this decision, same cannot be
interfered. The learned counsel has also referred to
Section 28(3) of the Arbitration & Conciliation Act
which has been considered in para 32 of this
judgment. As rightly submitted by the learned
counsel, as per Section 28(3) as appearing earlier,
the tribunal was to decide the matter in accordance
with the terms of the contract, but after amendment,
tribunal is obliged to take into account the terms of
the contract. Therefore, there is a serious departure
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from earlier requirement of deciding the matter in
terms of the contract and now the tribunal is
required to take into account the terms of the
contract. This is so held in the decision of Ssangyong
Engineering and Construction Company Limited v.
National Highways Authority of India, reported in
(2019) 15 SCC 131."
(Emphasis supplied)
54. Though Sri. Krishnan has referred to the other
judgments in the cases of Atlanta Limited (supra) and
Haryana Tourism Limited (supra) on the proposition of
scope of challenge under Sections 37 and 34 of the Act of
1996 is limited, in view of our conclusion above and also
reference made to the judgment in the case of
Associated Builders (supra), wherein the Hon'ble
Supreme Court has reiterated the scope of Section 34 of
the Act of 1996, need is not felt to deal with the said
judgments. Sri. Krishnan has also referred to the
judgment in the case of Videsh Sanchar Limited (supra)
in respect of justification for grant of damages on the
ground of delay. In view of our conclusion above, the
issue does not fall for consideration and hence, the
judgment has no relevance. Insofar as the judgment in
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the case of Padma Sundara Rao (supra) is concerned,
the same is relied upon by Sri. Krishnan to contend that
each precedent must be looked into based on the context.
There is no dispute on the proposition.
55. Insofar as the judgment in the case of
Municipal Corporation of Delhi Vs. Gurnam Kaur
[(1989) 1 SCC 101] is concerned, there is no dispute on
the proposition laid down therein.
56. In view of our discussion above, we are of the
view that the challenge by the appellant to the order
dated 28.10.2022 passed by the learned Sessions Judge in
Com.A.S.No.141/2018 is without merit.
The appeal is dismissed.
No costs.
Sd/-
(V KAMESWAR RAO)
JUDGE
Sd/-
(S RACHAIAH)
JUDGE
KGR / PA
