Executive Engineer, Survey And ... vs M/S Ashok Kumar
2023 Latest Caselaw 9023 Raj

[2023:RJ-JD:33410-DB]

HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Misc. Appeal No. 1481/2019

1. Executive Engineer, Survey And Investigation, Lift Division First, Ignp Rawatsar

2. The State Of Rajasthan, Through District Collector, Hanumangarh.

----Appellants Versus M/s Ashok Kumar, Contractor, 265 Durga Colony, Hanumangarh.

                                               ----Respondent


For Appellant(s)              :    Mr. Pankaj Sharma, AAG with
                                   Mr. Deepak Chandak
For Respondent(s)             :    Mr. V.K. Aggarwal
                                   Mr. Dalpat Singh Solanki


             HON'BLE MR. JUSTICE VIJAY BISHNOI
              HON'BLE MS. JUSTICE REKHA BORANA
                                    Judgment

03/11/2023
(PER HON'BLE MS. JUSTICE REKHA BORANA)

1. The present appeal has been preferred against the order

dated 22.01.2019 passed by the Commercial Court, Jodhpur

(hereinafter referred to as 'the learned Court below') in Civil Misc.

'A' Case No.47/2018 (NCV No.31/2018) whereby the objections

under Section 34 of the Arbitration and Conciliation Act, 1996 (for

short 'the Act of 1996') preferred by the appellants against the

award dated 30.07.2016 passed by learned Arbitrator have been

rejected. Vide the award, the learned Arbitrator had proceeded on

to pass an award for an amount of Rs.30,23,450/- in favour of the

claimant-firm with interest @ 9% per annum till the date of award

which, the non-claimant was directed to pay within 3 months

failing which, further interest was awarded @ 9% per annum till

[2023:RJ-JD:33410-DB] (2 of 11) [CMA-1481/2019]

the date of actual payment. The counter claim as preferred by the

respondent State was rejected.

2. Before proceeding on merits of the present appeal, it is

relevant to note that an application under Order 6 Rule 17 of the

Code of Civil Procedure for amendment of the present appeal and

an application under Order 41 Rule 27, CPC with a prayer for

taking certain documents on record have been filed by the

appellants. Replies to both the applications have been filed on

behalf of the respondents.

Vide order dated 01.04.2022, it was observed that both the

applications would be considered at the time of admission/hearing

of the appeal.

3. So far as the application under Order 6 Rule 17, CPC is

concerned, this Court does not find any ground to entertain the

same for the following reasons :

Firstly, the present is in effect an appeal under Section 37

of the Act of 1996, assailing the order whereby the objections

under Section 34 of the Act of 1996, as preferred by the

appellant-State, had been rejected. As it is the settled position of

law, the scope of interference under Section 34 of the Act of 1996

is very narrow and limited and that under Section 37 is far more

narrower. When the scope of interference in the award as passed

by the Arbitrator itself is limited to the extent of the grounds as

provided under Section 34 of the Act of 1996, the scope to permit

amendment of the present appeal so as to add additional grounds

[2023:RJ-JD:33410-DB] (3 of 11) [CMA-1481/2019]

qua the claims as raised by the claimant-contractor, cannot even

be imagined of.

Secondly, the new grounds as sought to be added in the

present appeal vide the amendment application clearly pertain to

the facts which were not pleaded during the arbitral proceedings.

Further, all the grounds as sought to be raised now are totally

factual in nature. The facts, in terms of law, are not only to be

pleaded but even to be proved. Admittedly, the new facts/grounds

sought to be added vide amendment application were not pleaded

before the Arbitrator and hence were not proved on record.

Therefore, the same cannot be permitted to be raised at this

stage.

The application is therefore, rejected.

4. The application under Order 41 Rule 27, CPC also cannot be

entertained as the documents sought to be brought on record vide

the said application are the ones which were although in

possession of the Department during the arbitral proceedings, but

were not placed on record at that point of time. It is not the case

of the Department that these documents were not in their

possession during the arbitral proceedings. The Department,

having participated in and contested the complete arbitral

proceedings and having even raised objections against the arbitral

award before the Commercial Court, cannot, now at this stage, be

permitted to place on record the documents which were never

even a part of the arbitral proceedings. This Court, in its limited

[2023:RJ-JD:33410-DB] (4 of 11) [CMA-1481/2019]

scope under Section 37 of the Act of 1996, cannot permit any

such document to be taken on record in excess of jurisdiction.

The application under Order 41 Rule 27, CPC is therefore,

rejected.

5. Before proceeding on to the merits of the present appeal,

having perused the judgment passed by the Commercial Court, it

is relevant to take note of the fact that no reason worth the name

has been indicated by the Commercial Court for not accepting the

contentions raised by the appellants. The judgments as relied

upon by the Commercial Court while dealing with the scope of

Section 34 of the Act of 1996, no where prescribe that any order

can be passed by the Court dealing with the objections under

Section 34 of the Act of 1996 in a wholly cursory and slipshod

manner without even dealing with any of the objections as raised

by the objector.

This Court is of the clear opinion that the manner in which

the impugned judgment has been passed by the Commercial

Court cannot be appreciated.

6. Coming to the merits of the present appeal, the facts of the

case are as under:

(A.) Agreement No.10 of 1995-96 was entered into between

appellant no.1 and respondent firm for "Earth Work Excavation

and Double Tile Lining of Sahwa Lift Canal from Km 54.750 -

56.200". The stipulated date for commencement of work was

13.05.1995 and for completion of work was 12.02.1996. However,

there was a delay and the actual date of completion of work was

[2023:RJ-JD:33410-DB] (5 of 11) [CMA-1481/2019]

20.08.2002 and the said delay gave rise to dispute between the

parties.

(B.) Claimant-firm invoked the arbitration clause of the contract

and preferred an application under Section 11(6) of the Act of

1996 before the High Court for appointment of arbitrator. For

resolution of disputes as arisen, the sole arbitrator was appointed

vide order dated 13.11.2013.

(C.) The learned Arbitrator entered into reference and vide the

Award dated 30.07.2016, proceeded on to allow six claims and

reject two claims out of the eight claims raised by the claimant.

The counter-claim as preferred by the appellants was rejected.

(D.) Against Award dated 30.07.2016, the appellants preferred

objections under Section 34 of the Act of 1996 which were

dismissed vide order dated 22.01.2019 of the Commercial Court,

Jodhpur against which the present appeal has been preferred.

7. A brief detail of the claims as raised and the amount as

awarded, is reproduced herein:

Claim           Brief description of Claim                  Amount         Amount
No.                                                         claimed       Awarded
 1      Claim     qua      extra    element       for   Rs.1,38,000/-        Nil
        placement     of    excavated     earth    at
        distant place
 2      Claim towards cartage of sand from Rs.33,38,240/-               Rs.22,85,690/-
        ½ Km length
 3      Claim    towards     hike   in   rates    for    Rs.1,33,500      Rs.54,000
        execution of lining work in 600-meter
        length      after       5/97       because
        department itself had increased the
        Basic Schedule of rates
 4      Claim on account of tiles consumed               Rs.4,97,750         Nil
        in 600-meter lining work done after





 [2023:RJ-JD:33410-DB]                          (6 of 11)                      [CMA-1481/2019]


 5   Claim for 82 MT coal which should                        Rs.1,18,900      Rs.1,18,900
     have      been       given         to     claimant
     contractor in view of norms fixed by
     the Chief Engineer IGNP, Bikaner
     being old coal and found having less
     calorific value
 6   Claim     for    final     bill   amount         duly Rs. 2,88,272/-     Rs. 2,88,272/-
     passed and kept in deposit by non-
     claimant        without       any       notice     to
     claimant firm
 7   Claim towards cartage of Bajri from                     Rs. 12,900/-       Rs. 7,334/-
     distant     source         which        was      not
     available       at   site         stipulated       in
     agreement
 8   Claim towards S.D. deductions made                      Rs. 2,69,254/-   Rs. 2,69,254/-
                                                                 TOTAL        Rs. 30,23,450/-

8. The sole ground raised by learned Additional Advocate

General Mr. Pankaj Sharma appearing for the appellant State

before this Court is that claim Nos.2 & 3 as awarded by learned

Arbitrator are totally erroneous as while computing the amount of

award qua the said claims, the learned Arbitrator applied BSR Rate

approved by the department subsequently in the year 1997.

Learned Arbitrator relied upon the BSR Rates of year 1997

whereby the rates were increased from 25% to 30% keeping in

view the hike in basic rates. Learned AAG submitted that

increased BSR Rates could not have been applied in the present

matter as the agreement in question pertains to the year 1995-96

and the BSR Rates as applicable on the date of acceptance of the

tender could only have been applied while computing the award

qua the claims. The subsequent enhanced rates, if any, could not

have been applied qua the agreement of year 1995-96.

9. Responding to the argument of learned counsel for the

appellants, learned counsel for the respondent submitted that

[2023:RJ-JD:33410-DB] (7 of 11) [CMA-1481/2019]

admittedly, there was a price escalation clause in the agreement

being Clause No.45. The claimant contractor was very well entitled

for the escalation amount due to hike in rates of labour. As the

amount was not claimed by the contractor qua the price/labour

escalation clause, it was very much entitled for the award amount

keeping into consideration the enhanced BSR Rates. Learned

counsel submitted that had the price escalation formula as

provided under Clause 45 been applied, the award amount would

have been far more than what has been awarded by learned

Arbitrator applying the enhanced rates of BSR. Therefore,

approach of learned Arbitrator was perfectly in consonance with

law and the amount as awarded qua claim Nos.2 & 3 deserves to

be affirmed.

10. In the alternate, learned counsel submitted that even if the

ground as raised by learned counsel for the appellants is accepted,

the award amount qua claim Nos.2 & 3 can only be modified to a

certain extent but cannot be set aside as a whole. He submitted

that the accepted rate for earth work excavation and cartage was

Rs.29.97 per cum and calculating the amount for 62,000 cum

excavation and cartage work, it would come to Rs.18,58,140/-

whereas the claim as awarded by learned Arbitrator is for

Rs.22,85,690/-. Therefore, the award amount qua claim No.2,

even if to be modified, has to be affirmed for Rs.18,58,140/-.

11. Heard learned counsel for the parties and perused the

material available on record.

12. Admittedly, the agreement in question was entered into in

the year 1995-96 (Agreement No.10 of 1995-96). The said

agreement was executed after the bid/tender of the contractor

[2023:RJ-JD:33410-DB] (8 of 11) [CMA-1481/2019]

being accepted on the rates as quoted by him. Meaning thereby,

the work contract was granted to the contractor on the rates as

specified in the agreement. If any contractor wishes to claim any

amount qua increase in price of material/labour component, the

same has to be raised in terms of Clause 45 of the agreement.

Once the claim qua price/labour escalation is raised, the

entitlement for the same in terms of Conditions specified in Clause

45, has to be proved before the learned Arbitrator and the learned

Arbitrator, after reaching to a finding that the contractor is entitled

to such escalation amount, would proceed on to award the same

in favour of the contractor.

Admittedly, in the present case, no claim for price/labour

escalation in terms of Clause 45 of the agreement was raised

before the learned Arbitrator. Once it is found that no claim qua

the price escalation was raised, the learned Arbitrator could not

have granted the same in the garb of the increased rates of BSR

and that too, on the rates which came into effect only in the year

1997.

13. As it is the settled position of law, arbitration is an outcome

of the agreement executed between the parties. The Arbitrator,

who derives its authority from the contract, is bound by the terms

of the same. The arbitral proceedings are governed by the

conditions of the contract as entered into between the parties and

the Arbitrator is also bound by the same. The Arbitrator cannot

travel beyond the contract and scope of his jurisdiction is limited

to the conditions of the contract which govern the parties.

[2023:RJ-JD:33410-DB] (9 of 11) [CMA-1481/2019]

14. In the matter of Steel Authority of India Limited vs. J.C.

Budharaja ;(1999) 8 SCC 122, the Hon'ble Supreme Court

observed as under :

"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 arbitrator derives the authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be arbitrary one. 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."

15. In Bharat Coking Coal Ltd. vs. Annapurna Construction;

(2003) 8 SCC 154, the Hon'ble Apex Court observed as under :

"22. There lies a clear distinction between an error within the jurisdiction and error in excess of jurisdiction. Thus, the role of the arbitrator is to arbitrate within the terms of the contract. He has no power apart from what the parties have given him under the contracts. If he has travelled beyond the contract, he would be acting without jurisdiction, whereas if he has remained inside the parameter of the contract, his award cannot be questioned on the ground that it contains an error apparent on the face of the records."

16. Applying the above ratio to the present matter, as observed

above, although there was a price escalation clause in the

[2023:RJ-JD:33410-DB] (10 of 11) [CMA-1481/2019]

agreement, no claim qua the same was raised by the claimant.

The claim, when not raised in terms of the contract, would be

deemed to have been waived. There was no other term/clause

available in the agreement which could entitle the claimant for

payment at enhanced rates. Therefore, in absence of any

term/clause in the agreement, there was no reason whatsoever

available to the Arbitrator to award the claim qua work done at the

escalated rates.

Moreover, the rates as applied by the Arbitrator came into

effect in the year 1997 and the said rates could definitely not have

been applied qua the agreement executed in the year 1995-96. In

the specific opinion of this Court, the award qua claim Nos.2 & 3

on enhanced BSR Rates by the Arbitrator was definitely beyond

the terms of the contract and hence cannot be affirmed to that

extent. The award in question qua claim Nos.2 & 3, hence,

deserves to be modified as the same could have been awarded

only at the accepted rates i.e. Rs.29.97 per cum.

17. In view of the above analysis, amount of Rs.22,85,690/- as

awarded by the Arbitrator qua claim No.2 deserves to be modified

to Rs.18,58,140/-. So far as the award amount of Rs.54,000/- qua

claim No.3 is concerned, the same is set aside and the award

amount qua claim No.3 is quantified to be NIL.

So far as the award qua other claims and award of interest is

concerned, this Court does not find any ground to interfere with

the same and are hence affirmed.

18. No ground qua the rejection of the counter claim of the

appellant State has been raised before this Court and hence, the

award to that extent is hereby, affirmed.

[2023:RJ-JD:33410-DB] (11 of 11) [CMA-1481/2019]

19. As observed at the inception, the Commercial Court passed

the order impugned dated 22.01.2019 without assigning any

reason whatsoever. The agreement in question relates to the year

1995-96 and the arbitral proceedings pertain to the year 2013,

hence this Court, instead of remanding the matter back to the

Commercial Court, in the interest of justice, proceeded on to

modify the award in question.

20. In view of above analysis, the present appeal is partly

allowed. The impugned order dated 22.01.2019 and award dated

30.07.2016 are hereby modified to the extent that the claimant-

contractor would be entitled for an amount of Rs.18,58,140/- qua

claim No.2 and an amount of NIL qua claim No.3. The award qua

other claims and the interest amount is hereby affirmed. The

award qua rejection of the counter claim of the appellant State is

also affirmed.

21. The stay petition and the pending applications, if any, also

stand disposed of.

                                   (REKHA BORANA),J                                             (VIJAY BISHNOI),J
                                    Vij/-









Powered by TCPDF (www.tcpdf.org)