JUDGMENT
S.K. Jha, J.
1. Miscellaneous Appeal No. 373 of 1970 by Messrs Patel Engineering Company Ltd. (hereinafter referred to as ‘the Company’) is directed against the judgment and order dated the 29th of September, 1970 of the Second Subordinate Judge, Patna setting aside the Award filed in that Court by the Umpire on an application made under Sections 30 and 33 of the Indian Arbitration Act. 1940 (hereinafter referred to as ‘the Act’) by the respondent Indian Oil Corporation Limited (hereinafter referred to as ‘the Corporation’). The appellant Company is also the petitioner in the connected Civil Revision No. 1515 of 1970, in which it has challenged the order dated the 16th of September, 1970, passed by the learned Subordinate Judge overruling a preliminary objection raised by the appellant company to the maintainability of the application under Sections 30 and 33 of the Act. Since the order on the preliminary objection already stands merged in the final order on merits, which is the subject-matter of the appeal, specific grounds have also been taken in the appeal itself challenging the aforesaid order. I propose to deal with this part of the appellant’s case, which is the subject-matter of the civil revision application, last of all.
2. It may be mentioned at the outset that the respondent Corporation is the successor-in-interest of the Indian Refineries Limited, which had entered into a contract with the appellant Company on the 1st of November, 1961. The said contract gave rise to the dispute which was referred initially to two Arbitrators Mr. N.D. Daftary and Mr. H.K. Choudhary. These Arbitrators having differed, the matter was referred to Mr. J.N. Talukdar, the Umpire who submitted his Award dated the 2nd of June, 1969 before the learned Subordinate Judge. Notices were duly issued to the parties by the Court below. The respondent Corporation on receipt of the notice filed its objection challenging the Award by an application dated the 26th of June. 1969. The Court below by the impugned judgment and order held that the reference in question to the Arbitrators and umpire was not a specific reference and that there was error of law apparent on the face of the Award. On these findings the learned Subordinate Judge set aside the Umpire’s Award
3. The relevant facts have been set out in detail in the judgment of the Court below. Yet, for the purpose of appreciating the points raised by learned counsel for the parties in course of argument, some essential relevant facts may be set out hereinafter.
In July, 1961 Messrs Indian Refineries Ltd. (Since merged in the respondent Corporation) to whom also I shall hereinafter refer for the sake of convenience and brevity as ‘the Corporation’, issued notice calling for tenders for certain concrete and other civil engineering works for the Oil Refineries at Barauni. The last date for receiving the tenders was the 14th of September, 1961. Documents giving the conditions of tender and the schedule of quantities of work to be done (including two maps one site plan and a lay out plan) were available to tenderers on payment. Preliminary drawings and general specifications of the buildings, structures etc. from Project report which were not for sale were available for inspection in the office of the Chief Engineer of the Corporation at Barauni from the 15th of July, to the 7th of September 1961. For concrete work which constituted a large part of the tender, the tenderers were required to quote, for each grade a rate per cubic metre (M3) for the finished concrete work inclusive of the cost of shuttering and other incidental charges involved in the manufacture of concrete. It may be mentioned here that in common parlance ‘shuttering means a sort of ‘frame work’ or scaffolding. The Chief Engineer of the appellant Company inspected the drawings and other papers mentioned in the tender documents in early August. 1961. Ho was of the view that the quantity of shuttering that would be required in the process of finishing the concrete work could not be ascertained from the drawings and papers which he saw. On the 26th of August. 1961 an addendum to the tender documents was issued which inter alia, included Clause 17 in the tender which ran as follows:–
“Clause 17 of Addendum No. 1
The quantity of shuttering involved in concrete and reinforced concrete work will be approximately 75000 M2. The quantity is mentioned to give a rough idea to the tenderer about the shuttering work that may be involved in concrete and reinforced concrete.”
On the 11h September, 1961 the appellant Company sent its tender forwarding therewith a letter with a list of assumptions and conditions, one of which asked for deletion of Sub-clause (ii) of paragraph 11, Chapter 2 of the General Conditions. On the 11h of Sept., 1961 the tender was opened and on the 1st of November, 1961 it was accepted by the Corporation with certain modifications in the aforesaid Clause 11 of the General Conditions of the Contract, Originally, Clause 11 ran as follows-
“11. No Compensation for Inaccuracies in Particulars.
No payment compensation or allowance, will be made to the Contractor nor will the contractor be entitled thereto by reason of any extra expense or loss which may be caused or arise during the execution of the contract from-
(i) any inaccuracies, his statements or omissions in the contract documents or any of them in reference to surface water or other levels or to the water in foundation or otherwise.
(ii) any other error, misstatement or omission whatsoever in the contract documents or any of these or in any other information supplied to the Contractor.
The rates quoted shall be deemed to cover and provide for all such risks.” This clause by agreement of the parties was modified thus-
“Agreed modification.
11. No Compensation for Inaccuracies in Particulars.
“It is agreed that sub-para, (ii) reading as “any other error ……… supplied to the contractor” may be deleted from this clause and that sub-para. (i) relates to water only.”
The tender with agreed modifications was accepted on the 1st of November. 1961, as already stated, and the appellant Company started work. The volume of concrete work which was agreed to be done by the Contractor Company was 1,02,424 M3 with a stipulation that any extra amount of concrete work that may be done in pursuance of the contract shall be paid for by the respondent Corporation to the appellant Company. There is no dispute that after the execution of the work contracted for the appellant Company had done actually 1,17,522 M3 of concrete work and the excess in this regard was actually paid for and received by the appellant Company. In course of the completion of the concrete work on the 18th of April. 1962 the Chief Engineer of the appellant Company wrote to the Chief Engineer of the respondent Corporation that a separate record of shuttering should be maintained as the contract rates were based on 75.000 M2 and extra quantity of shuttering shall have to be paid for.
On the 13th of July. 1962 the Chief Engineer of the respondent Corporation replied stating that the rate for concrete work was inclusive of shuttering and, therefore, there was no necessity for maintaining a separate record for shuttering. He also emphasized that 75.000 M3 indicated shuttering materials (timber and steel). By a letter dated the 18th of July. 1962 the Chief Engineer of the appellant Company protested against the contents of the aforesaid letter and correspondence ensued between the parties. When the work was completed, the total ‘shuttering area’ admittedly went up to 4,38,127 M2 and the appellant Company raised a dispute regarding its claim in respect of the extra shuttering area at Rs. 18.84 paise per M2. The respondent Corporation opposed the disputed claim on, inter alia, three main grounds– (1) that the figure of 75,000 M2 was meant to assist the tenderers and was a rough estimate of the shuttering materials required for the concrete and reinforced concrete work and that figure did not represent the contract area of shuttering involved; (2) that an estimate of the total shuttering surface was available for inspection to the tenderers, if they were examined with due diligence: and (3) that there was no rate for shuttering as a separate Item in the contract; the contract rate provided for the finished concrete and reinforced concrete work including centering, shuttering, wherever required, placing of concrete, consolidation, curing etc. as per specifications, all labour and materials complete. The Umpire gave his Award and recorded his findings in these terms:–
“5. My findings are :–
Findings
(1) The figure 75000 M2 in Clause 17 of the Addendum indicates shuttering work and not shuttering materials.
(2) That the claimants were under a real handicap in forming an estimate of the total contract area from inspection of the preliminary drawings is amply proved by the faltering manner in which Shri B. Prasad (D. W. 1), the Chief Engineer of the Respondents has tried to uphold this proposition, and the time spent and the results obtained by two other engineers (D. W. 3 and D. W 6) of the Respondents when they were asked to do this exercise. The claimants were, therefore, justified in relying on the statement in Clause 17 as meaning the total shuttering work involved.
(3) The actual shuttering work is almost six times the indicated figure and this large excess cannot be treated as within normal variations in such cases. The extra shuttering which was done not gratuitously for the respondents should be paid for.
(4) After allowing for the increase in the volume of concrete work from 1.02,424 M3 in the tender to 1.17,522 M3 on completion of the work and a 10 % margin in 75000 M2, the extra shuttering for which the claimants are entitled to payment is 3.43,466 M2 or, say 3,43000 M2.
(5) The claimants have claimed payment for extra shuttering at Rs. 18.84 per M2; the evidence produced in support is not satisfactory. The matter may be considered on the basis of the total payment made by the claimants to their contractors who actually did the work. Shri P.N. Naik, Chief Engineer of the Claimants has stated (Q.72) that Rs. 54 lakhs was paid to their contractors for shuttering work only. This gives an average expenditure of Rs. 12.30 per M2 up to level.
To this 15% for Rs. 1.85) should be added as a fair margin for the claimants and an average rate of Rs. 14.15 per M2 is thus obtained which is considered reasonable in the circumstances. This rate has been adopted in the award. “AWARD”
The claimants are awarded a sum of Rs. 48,53,500.00 (Rupees Forty eight lakhs fifty three thousand and five hundred only) for extra shuttering work done for the Respondents. This amount will bear simple interest of 5% (Five per cent.) per annum from 3-2-1965, the date of commencement of the arbitration proceedings before the present arbitrators to 2-6-1969, the date of this award. Each party will bear its Own cost,
Dated, Calcutta the Sd. J.N. Talukdar.
2nd June. 1969. Umpire.”
4. Mr. Chagla, learned counsel for the appellant Company contended firstly, that in this case there was a specific reference on the construction of Clause 17 of the Addendum to the Contract (tender) and that, therefore, the decision of the Umpire was not open to challenge. Secondly, that even if it was not a specific reference there was no error in law apparent on the face of the Award and since no reasons had been given the Court could not interfere and it was not permissible for the Court to look into the contract. The question as to what legal principles guided the Umpire in giving his Award was a matter of mere conjecture and surmise and it was not permissible for the Court to imagine any such legal principle and any error in law cannot be culled out with reference to any document which is not incorporated in the Award. Incidentally, it was argued that the decision of the Umpire is not under Section 70 of the Indian Contract Act because the decision is under the contract and not de hors it. Further, that it was quite open to the Umpire to award compensation quantum meruit, as the matter did arise out of the contract and was well within the jurisdiction of the Umpire. I propose to deal with each of the points seriatim.
5. Apropos the first point, there is no dispute, nor could there indeed be any, between learned counsel for the appellant Company and the learned Solicitor General for the respondent Corporation, regarding the principle of law which is firmly established that if a specific question of law is submitted to the Arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not make the Award bad on its face so as to permit of its being set aside (Alopi Parshad v. Union of India, AIR 1960 SC 588: Kapoor Nilokheri v. Union of India, AIR 1973 SC 1338; Government of Kelantan v. Duff Development Co. Ltd., 1923 AC 395 (HL) and Rajmani Sinha v. Basant Sinha. AIR 1973 Pat 26). It is also equally well settled that the question of construction of any agreement, document, or term of the contract is a question of law. Even in such cases, however, there is high authority both of Indian and English Courts for the view that the Courts are not powerless to interfere if it appears from the Award that the Arbitrator has proceeded illegally in reaching his decision for example, he has decided on evidence which is inadmissible or on principles of construction which the law does not countenance or some thing of that nature. (Thawardas Pherumal v. Union of India, AIR 1955 SC 468; Government of Kelantan’s case (Supra)). In the instant case, therefore, it will have to be seen as to whether, in fact, there was a specific question of law referred for arbitration or not. Learned counsel for the appellant Company urged that since there was no agreement of reference reduced into writing, we should look to the correspondence between the parties culminating in the reference to find out what the dispute was about. In this connection, learned counsel drew our attention to a letter dated the 18th of April, 1962 (Ext. 4) from the Chief Engineer of the appellant Company to the Chief Engineer of the respondent Corporation saving-
“Our rates, on concrete item which includes shuttering work are based on the statement 75.000 M2 shuttering given by you under Clause 17 in page 9 of the Addendum No. 1. In case if there is any increase in the quantity as stipulated in the tender document, we should be paid for such extra quantity.”
A letter in reply dated the 13th of July, 1962 (Ext. 6) was sent by the Chief Engineer of the respondent Corporation to the Contractor Company saving-
“The rate of concrete work as agreed upon and noted in the tender document is inclusive of all shuttering scaffolding etc., and so there is no necessity of maintaining any separate record for shuttering. As Indicated in Clause 17 on page 9 of the Addendum No. 1, only a very approximate quantity of shuttering (timber and steel) has been indicated.”
Similarly learned counsel drew our attention to Exhibits. 7, 9, 12, 13, 17, 19, 20, 21, 25 and 27, which are pieces of correspondence between the Parties wherein the aforesaid Clause 17 of the Addendum No. 1 has been referred to at some places. It was submitted that these pieces of correspondence read together would show that the ultimate reference to arbitration was with regard to the true construction and effect of Clause 17 aforesaid and thus it was a specific reference on a question of law. I, however, do not feel persuaded to hold that that is the inference warranted from the entire correspondence between the parties. The learned Solicitor General has rightly pointed out that apart from Exts. 47, 50, 51 and 52 and the Article of Agreement between the parties dated the 28th of March, 1965, to all of which I shall presently refer. Ext. 27 relied upon by the appellant Company by itself warrants an inference to the contrary. Ext. 27 is a letter dated the 13th of April, 1963 from the appellant Company to the respondent Corporation in which for the first time reference to arbitration had been suggested. In this letter the appellant Company wrote to say,
“We agree that we quoted our rates for the concrete work including shuttering, scaffolding etc., but we had assumed that the total quantity of shuttering work that we shall be called upon to carry out would be 75,000 M2 approximately as mentioned in the Addendum and had based our concrete rate on this information ….. though the concrete rate is inclusive of shuttering the element of shuttering included in the rate of 75,000 M2 which is given in the Addendum to the contract. Therefore, our contention is that in case the quantity of shuttering work is more than 75,000 M2 the excess should be measured and paid extra ………… As this matter has taken a lot of time it will be better to have the same decided by means of arbitration.”
It will thus be seen that in this letter which speaks of the matter to be decided by arbitration, there is no assertion that the subject-matter of dispute was only regarding the effect and construction of Clause 17 to the Addendum. Ext. 47 is a letter dated the 8th of October. 1963 from the appellant Company to the respondent Corporation, the relevant portion of which may be quoted below:–
“Re: Construction of Buildings. Civil Engineering Works — Barauni Refinery Project.
Settlement of claims on account of shuttering and increase in minimum wages.
With reference to the meeting our Shri A.K. Patel and Shri C.K. Chokshi had with your Shri M.V. Rao on 7th instant, at Delhi, in accordance with your telegram dated the 3rd instant, we have to inform you as under.
After reviewing the different proposals made by Shri Rao, we have to inform you that the above disputes be referred to the arbitration…….”
The dispute which alone is the subject-matter of the present case was thus mentioned by the appellant Company itself in the aforesaid document as the ‘settlement of claims on account of shuttering’, as the claim on account of increase in minimum wages became the subject-matter of a separate arbitration proceedings, with which we are not concerned. Ext. 50 which is a letter dated the 31st of October. 1963 the 4th of November, 1963 from the respondent Corporation to the appellant Company in reply to the aforesaid letter dated the 8th of October. 1963 describes the subject as ‘settlement of claims on account of shuttering and increase in minimum wages’. So also Exhibit 51, a letter dated the 4th of December. 1963 from the respondent Corporation to the appellant Company shows amongst the claims preferred by the Contractor Company from time to time as being not tenable in terms of the contract including in Item No. 1 “claim for extra shuttering work,” Ext. 52, a letter dated the 9th of December. 1963 from the appellant Company to the respondent Corporation in reply to the letter (Ext. 50) describes the disputes as ‘settlement of claims on account of shuttering and increase in minimum wages’. It will thus be seen that none of the documents, in which a reference to arbitration has been suggested or agreed to specifically refer to the construction or effect of Clause 17 to the Addendum. The dispute as understood by the parties was all along “settlement of claims on account of extra shuttering work”, tO crown all, after the Arbitrators had entered upon the work of reference ah Article of Agreement was executed between the parties on the 28th of March. 1965 which after enunciating the past recitals of reference of two disputes, namely.-
“(1) Claim by the Contractor for excess shuttering stated to have been done by them in connection with the works.
(2) Claim by the Contractor for additional payment due to alleged increase in minimum wages in connection with the works.”
recorded a future agreement in these terms; "(3) The reference to arbitration to the Arbitrators in connection with the said two disputes, namely :-- (a) Claim by the Contractor for excess shuttering stated to have been done by them in connection with the works. (b) Claim by the Contractor for additional payment due to alleged increase in minimum wages in connection with the works.
shall be treated as separate reference to arbitration and accordingly the Arbitrators and if necessary the Umpire shall make a separate award in respect of each of the said dispute.” It is thus clear that although when the Arbitrators originally entered upon the reference, there was no agreement in writing between the parties as to the disputes referred for arbitration, they have made it clear in the Article of Agreement aforesaid that the relevant dispute at all time was the ‘claim by the Contractor Company for excess shuttering said to have been done by them in connection with the works”. This, in my view, makes it abundantly clear that the relevant dispute with which we are concerned and which was referred to the Arbitrators and to the Umpire was not on any question of law or any specific reference with regard to the construction or effect of Clause 17 to Addendum No. 1. but a general reference with regard to the claim of the Contractor Company for the excess shuttering work. The documents discussed above do not show that both sides wanted the decision of the Arbitrator on a point of law. And it is well settled that parties who make a reference to arbitration have the right to insist that the Tribunal of their choice shall decide their dispute according to law, so that, before the right can be denied to them in any particular matter, the Court must be very sure that both sides wanted the decision of the Arbitrator on a point of law rather than that of the Courts and that they wanted his decision on that point to be final (Thawardas Pherumal’s case (AIR 1955 SC 468) (supra)). The first point of Mr. Chagla is, therefore, not acceptable.
6. This then brings us to the next point as to whether there is any error in law apparent on the face of the Award which can justify the Court’s interference with it. It was contended by learned counsel for the appellant Company that the Umpire has not recorded any reasons in the Award and it was not within the jurisdiction of the Court to conjecture or surmise as to what was passing in the mind of the Umpire. Nor. was it permissible to the Court to visualise as to what legal principle guided the Umpire in giving his Award. It was contended that no document was incorporated with the Award and as such no reference to the terms of the contract or the tender document was permissible in order to find out whether there was any error apparent on the face of the Award. Reliance in this connection was placed on the decision of the Judicial Committee of the Privy Council in the case of Champsey Bhara and Co. v. Jivraj Balloo. 1923 AC 480 = 50 Ind App 324 = (AIR 1923 PC 66) and on the decisions of the Supreme Court in Bungo Steel v. Union of India, AIR 1967 SC 378 and Firm Madanlal Roshan Lal v. Hukumchand Mills Ltd., AIR 1967 SC 1030. It is well settled that a Court dealing with an Award does not sit as a Court of Appeal and merely because in the opinion of the Court a different conclusion was more proper it will not be entitled to set aside the Award. As a necessary consequence, in the decisions mentioned above, it has been laid down that if the Arbitrator gives a lump sum Award without recording his reasons and without indicating the principles of law on which he has proceeded, the Award is not vitiated on that account and it is only when the Arbitrator proceeds to give his reasons or lay down principles in fixing the amount of compensation that the Court is competent to examine whether he has proceeded contrary to law. It will, therefore, have to be seen as to whether in the instant case, the Umpire in his Award has merely given a lump sum Award without proceeding to follow any legal principles or not. After reciting the cases of the parties, the Umpire has incorporated Clause 17 of the Addendum in his findings and in his finding No. 4 he has referred to the tender for the purpose of calculating the increase in the volume of concrete work resulting in such extra shuttering as was in consequence of such increase in the volume of concrete work. The tender to which a reference has been made in finding No. 4 of the Umpire for the volume of concrete work itself shows that the rate for cement concrete work was “including centering, shuttering, wherever required, placing concrete, consolidation, curing etc. as per specifications, all labour and materials complete”. On the contrary. Clause 17 of Addendum No. 1 specifically referred to by the Umpire nowhere prescribes any rate for the shuttering work. In view of the express contract fixing the rate for the finished concrete and reinforced concrete work which expressly includes all costs of shuttering, it cannot be said that the claim of the appellant Company flowed from the contract. The Award of the Umpire has made specific reference to Clause 17 of the Addendum and to that part of the tender document by which the volume of concrete work has been fixed and the Umpire has given his Award having regard to those clauses. In similar circumstances in the case of Absalom Ltd. v. Great Western (London) Garden Village Society. 1933 AC 592 the House of Lords held that since the Arbitrator had made reference to a clause in a certain set of conditions, and having regard to that clause given in his Award, he had in so acting incorporated the clause in question in the Award and that it was plain that he had misunderstood the provisions of the clause and that, therefore, there was an error in law apparent on the face of the Award. In D.S. Balaiber & Co. Ltd. v. Leopold Newborne (London) Ltd., (1953) 2 Lloyd’s LR 427 a case relied upon by learned counsel for the appellant. Denning. L. J. succinctly explained this aspect of law at page 429 thus-
“The question whether a contract, or a clause in a contract, is incorporated into an award is a very difficult one. As I read the case, if the arbitrator says: “On the wording of this clause I hold”, so-and-so, then that clause is impliedly incorporated into the award because he invites the reading of it; but if an arbitrator simply says, “I hold that there was a breach of contract”, then there is no incorporation”.
AS already stated above, in view of the express contract fixing the rate for the finished concrete work inclusive of shuttering, and that contract having in fact been performed and the appellant Company having admittedly received payment in respect of such finished work as expressly stipulated to be paid therein, no Award could undoubtedly be given on any vague plea of equity. Reference in this connection may be made to the decision in the case of Alopi Parshad, (AIR 1960 SC 588) (Supra).
7. As a connected issue it will then have to be seen as to whether the Umpire has given any reason or invoked any legal principle for the purpose of basing his Award thereon. His finding No. 3 clearly states that “this large excess cannot be treated as within normal variations in such cases. The extra shuttering which was done not gratuitously for the respondents should be paid for”. By the ‘respondents’ the Umpire was referring to the appellant Company. The reasons thus given by the Umpire are–(1) that the excess was not within normal variations and (2) that extra shuttering was done not gratuitously, and, therefore, the appellant Company should be paid for it. This, in my view, is the legal principle forming the basis of the Umpire’s Award. The Court is, therefore, entitled to examine the legality of invoking this principle. As is said in Halsbury’s Laws of England, Third Edition, Volume 2, Page 60, Foot Note (q). Foot Note (q):
“The authorities distinguish two types of cases: (i) where a specific question of law is submitted to the arbitrator; and (ii) where a matter or matters in which a question of law becomes material are submitted. In the former the Court cannot, but in the latter it can and will interfere, if an error of law appears on the face of the award, 1933 AC 592 (HL).” This question at once involves the incidental points of Mr. Chagla that the decision of the Umpire is not under Section 70 of the Indian Contract Act because it is under the contract and not de hors it; and that compensation quantum meruit could be awarded by the Umpire. As can be well seen from the finding already quoted above, the Umpire has proceeded to give the Award on the basis that the extra shuttering was not done gratuitously and that, therefore, the appellant Company should be paid for it. This is certainly not under the contract, but independently of it. On a fair interpretation of the Award it is really based either on the principles of Section 70 of the Indian Contract Act or on compensation quantum meruit. In either case it will be de hors the contract and, therefore, not within the jurisdiction or competence of the Umpire. This position in law finds support from the decision of the Supreme Court in the case of V.R. Subramanyam v. B. Thayappa, AIR 1966 SC 1034 where while repelling the argument that the respondent having failed to Drove any agreement, should not have been awarded by the Court compensation quantum meruit or on any other principle of law for the additional construction work done over and above the work contracted for, their Lordships of the Supreme Court held at page 1036:
“If a party to a contract has rendered service to the other not intending to do so gratuitously and the other person has obtained some benefit, the former is entitled to compensation for the value of the services rendered by him. Evidently, the respondent made additional constructions to the building and they were not done gratuitously. He was, therefore, entitled to receive compensation for the work done which was not covered by the agreement. The respondent claimed under an oral agreement compensation at prevailing market rates for work done by him; even if he failed to prove an express agreement in that behalf, the Court may still award him compensation under Section 70 of the Contract Act”.
Thus compensation for work done not gratuitously for the benefit of another person not under a contract is always under Section 70 of the Contract Act. I am reinforced in my view on the appellant’s own pleading. The petition of objection filed by the appellant Company to the respondent Corporation’s application under Sections 30 and 33 of the Act in the Court below clearly states in paragraph 15 that Clause 17 of the Addendum was intended to give information upon which the appellant was entitled to rely and the information given by the said clause was a part of the description of the concrete work for which the claimant was asked to quote and as the quantity of shuttering work exceeded the quantity specified in Clause 17, the appellant Company was entitled to additional payment either as extra or for work not done gratuitously and that the appellant Company had informed the respondent Corporation that the Additional work would have to be paid for extra or by way of compensation as aforesaid. It is thus clear that the Award is not based on the terms of any agreement express or implied in the written contract. It is outside the scope of the arbitration clause. Merely because Section 70 of the Indian Contract Act has not been expressly mentioned as such by the Umpire in Ms finding No. 3, it cannot be said that the basis given by him is actually on the terms of the written or any implied contract. Such an Award, on the authority of the decision of the Supreme Court in the case of M/s. Alopi Parshad, (AIR 1960 SC 588) (Supra) cannot be upheld.
8. Mr. Chagla contended, rather vehemently, on the authority of the decisions in Government of Gibraltar v. Kenney, (1956) 2 QB 410 and Astro Vencedor Compania Naviera S. A. of Panama v. Mabanaft G. M. B. H., (1971) 3 WLR 24 = ((1971) 2 All ER 1301). that compensation quantum meruit was well within the scope of the arbitration clause and that, therefore, the Umpire was competent to give his Award on that principle. Before referring to these cases. I may at once set out some well-established principles of law. Quantum meruit is based or a quasi-contract and arises in a sense on an implied contract and not on any express agreement. As observed by the House of Lords in the case of Heyman v. Darwins Ltd., 1942 AC 356 at 399 = (1942) 1 All ER 337 at 360 of the All ER per Lord Porter:
“What, then, is the effect of such repudiation if it be accepted ? In such a case the injured party may sue upon the contract forthwith whether the time for performance is due or not, or, if he has wholly or partially performed his obligation, he may in certain cases neglect the contract and sue upon a quantum meruit. In the former case he is still acting under the contract. He requires to refer to its terms at least in order to ascertain the damage, and may require to refer to them also if the repudiation of the contract is in issue. In the latter case he is not proceeding under it, but upon auasi-contract. The obligation he incurs and the sum he recovers may differ from those provided in the contract and are not dependent upon its terms”.
It will thus be seen that where a party to a contract has wholly or partially performed his obligation he may neglect the contract and sue upon a quantum meruit But while the contract has not been neglected or repudiated and a claim is based upon the terms of the contract, the principle of quantum meruit cannot be invoked. As held by the Supreme Court in the case of Alopi Parshad (AIR 1960 SC 588) (Supra), compensation quantum meruit is awarded for work done or services rendered, when the price thereof is not fixed by a contract. In the instant case, since the rate for the finished concrete work expressly included shuttering work and the parties had limited their claim on the express terms of the contract of which the arbitration clause was but a part, there was no scope for the application of the principle of quantum meruit. Adverting now to the cases relied upon by learned counsel for the appellant Company, it will be seen that the case of Government of Gibraltar (1956) 2 QB 410 (Supra) involved a reference to the Arbitrator on the question whether the contract was frustrated. In that case it was conceded that the Arbitrator had jurisdiction to determine whether the contract was frustrated and upon such a term of reference the point being considered by the Court was as to whether after the contract was held by the Arbitrator to be frustrated the claim Quantum meruit could be gone into by him as in close association with the contract and was an incident which arose as a consequence of the contract. While dealing with this question Sellers J., held at Page 422:
“It is true that a quantum meruit is a auasi-contract and arises, in a sense, on an implied contract and not on any express agreement, but in my view, in the circumstances of this case (although it may not be in all cases) the quantum meruit is an incident which arises out of the contract. It is not a remedy for breach nor does it arise on frustration but it is an incident, which does arise as a consequence of the contract or “arising out of” it. It is only necessary to look at the points of claim and to visualize what will be involved in the arbitration to see the close association between the written contract and the claim advanced in this way on a quantum meruit.” And the reason why in the circumstances of that case Quantum meruit was treated as an incident arising out of the contract has been given by Sellers. J., himself when the learned Judge says:
“Indeed, it would give rise to a difficult and highly unsatisfactory position if the arbitrator were to be left to decide whether the facts and circumstances amounted to a frustration or to a repudiation of the contract, or. putting it in another way, whether they were such that the contract had ceased to exist, and then, having arrived at that conclusion, it should be said that the matter as to quantum had to be referred to the Court”.
It will thus be seen that the special distinguishing features of the reference to arbitration was what justified Sellers. J., in coming to his conclusion. So, also, while pointing out the distinctive features of the case of Astro Venceder (1971) 3 WLR 24 (Supra) Lord Denning M. R. himself pointed out that:–
“It is in accordance with Admiralty Court practice and very convenient to deal with a claim for damages for wrongful arrest of a ship at the same time as the claim for which the arrest was made”.
On a careful consideration of the numerous decisions cited at the Bar. I am of the view that in the circumstances of the present case, compensation on the basis that the acts “done not gratuitously” should be paid for either on the principles of Section 70 of the Indian Contract Act or as compensation quantum meruit was de hors the contract and did not invest the Umpire acting under the arbitration clause with the power to invoke either of the two legal principles.
9. There is vet another aspect of the matter which deserves consideration at this stage. As already stated earlier Clause 17 of the Addendum specifically says that the quantity of shuttering involved is mentioned to give a rough idea to the tenderers about the shuttering work that may be involved in concrete and reinforced concrete work and paragraph 15 of the pleading of the appellant Company which has already been referred to above also expressly states that the aforesaid clause was intended to give information upon which the appellant was entitled to rely and the appellant Company understood the said clause as a part of the description of the concrete work the rate of which it was asked to quote. The appellant Company, therefore, on its own case relied on the aforesaid information in quoting the rates for the finished concrete or reinforced concrete work. The language of Clause 17 is not consistent with any assumption that the quantity of shuttering involved in the execution of the contract was likely to exceed by far the quantity and that for such excess there was to be additional payment. At the highest Clause 17 could be treated merely as a representation made by the Corporation to the appellant Company and could either enable the appellant Company to repudiate the contract or to sue for the breach of a warranty. Clause 17 aforesaid even if held to be a part of the contract by its own force, there is nothing in it to make it an enforceable term of the contract as it stands. In either view of the matter, therefore, the matter for payment of extra shuttering work on the basis of Clause 17 could not be within the competence of the Umpire to decide.
The Award of the Umpire, therefore, has rightly been held by the Court below to be vitiated by error in law apparent on the face of the Award and as being not within his jurisdiction.
10. Learned Solicitor General for the respondent Corporation also urged that the impugned Award of the Umpire was also vitiated in law in so far as he had awarded interest pendente lite. Though this question loses much of its significance in view of what I have already held above, since the matter has been fully canvassed at the Bar. I may also deal with this aspect of the case. It was contended on behalf of the respondent Corporation relying upon the decision of the Supreme Court in the case of Thawardas Pherumal. AIR 1955 SC 468 (Supra) and a Bench decision of this Court in Union of India (Military Department) v. Ramdas Oil Mills, Jamshedpur, AIR 1968 Pat 352 that no interest pendente lite could be granted by the Arbitrator on the analogy of Section 34 of the Code of Civil Procedure, since the Arbitrator was not a Court nor did the Code apply to Arbitrators. Before discussing the principle of law. I may at once state here that in the statement of claim filed by the appellant Company before the Arbitrators in para. 27 the appellant Company claimed interests from the dates of the respective bills and also from the date of the commencement of the arbitration and in any event from the date of the Award. Great reliance was placed by the learned Solicitor General upon the following observation of Bose. J. in the case of Thawardas:
“It was suggested that at least interest from the date of ‘suit’ could be awarded on the analogy of Section 34 of the Civil Procedure Code. 1908. But Section 34 does not apply because an arbitrator is not ‘Court’ within the meaning of the Code nor does the Code apply to arbitrators, and, but for Section 34, even a Court would not have the power to give interest after the suit. This was, therefore, also rightly struck out from the award”.
This observation of Bose, J. came for consideration by the Supreme Court on numerous subsequent occasions; to wit. Nachiappa Chettiar v. Subramaniam Chettiar, AIR 1960 SC 307; Satindar Singh v. Umrao Singh, AIR 1961 SC 908; Union of India v. Bungo Steel, AIR 1967 SC 1032 and The State of Madhya Pradesh v. Saith and Skelton (P.) Ltd., AIR 1972 SC 1507 and it was always distinguished and cribbed and cabined to the facts of that case. In the case of Thawardas Pherumal AIR 1955 SC 468 Bose, J. was considering the question of award of interest on an unliquidated sum covered by the Interest Act, 1839, the four conditions of which were not found to have been satisfied in that case, and it was only incidentally that observations with regard to Section 34 of the Code of Civil Procedure were made. The Supreme Court has, in the subsequent decisions mentioned above, held categorically that it was open to doubt whether the aforesaid observations of Bose. J. in Thawardas Pherumal’s case support or were intended to lay down such a broad and unqualified proposition. In the case of Nachiappa Chettiar (Supra) Gaiendragadkar, J. (as he then was) was considering the legality of the award of interest upto the 5th of December, 1944, one day prior to the date of the final Award dated the 6th of December 1944 and it was held that the, interest had been rightly awarded. This case was sought to be distinguished by the learned Solicitor General on the ground that the matter was referred to arbitration on a reference through the Court and, therefore, the powers pf the Arbitrator were held to be conterminous with the powers of the Court. But in the case of Satindar Singh (Supra) the same learned Judge was dealing with the case of interest awarded by the Arbitrator from the date of the taking over possession of immovable property by the State Government under Section 8 (1) (b) of the Punjab Requisitioning and Acquisition of Immovable Properties Act, 1953 (Act XI of 1953). In the Statute there was no provision for interest and it was argued that in the absence of any express statutory provision the Arbitrator had no jurisdiction to award interest for the period before the Award. This argument was repelled and it was held that under general principle the granting of interest was legal, as the claim of interest was equivalent to the right to retain possession by the owner of the land from which he was dispossessed. In the case reported in AIR 1967 SC 1032, the Supreme Court held that though in terms Section 34 of the Code of Civil Procedure does not apply to arbitration proceedings, the principle of that section can be applied by the Arbitrator for awarding interest in cases where the Court in a suit having jurisdiction of the subject-matter covered by Section 34 could grant decree for interest. All disputes in suit including question of interest were referred to the Arbitrator and, therefore, the Arbitrator had authority to grant interest. This was a case of reference to arbitration without the intervention of the Court in pursuance of an usual arbitration clause in the agreement. This principle was reiterated by the Supreme Court in the case of the State of Madhya Pradesh (Supra). As I have already pointed out above, a claim, with regard to interest pendente lite was also put forward before the Arbitrators and hence the Umpire could in law award interest. It is worth while to refer in this connection to Russell on Arbitration, 17th Edition at page 256:
“An arbitrator may award interest, by virtue of his implied authority to follow the ordinary rules of law”.
For the foregoing reasons, in the instant case, it cannot be said that the Umpire had no jurisdiction to award interest pendente lite. This objection of learned Solicitor-General has, therefore, no force.
11. This then brings us to the only remaining question with regard to the merits of the civil revision application. As already stated, this application is directed against the order of the Court below rejecting the preliminary technical objection raised by the appellant petitioner to the maintainability of the respondent’s application under Sections 30 and 33 of the Act. It was urged on behalf of the appellant petitioner that the verification of the pleadings was not in accordance with the mandatory requirements of Order 6, Rule 15 (1) of the Code of Civil Procedure as amended, by the Patna High Court. It was, therefore, urged that the application objecting to the Award ought not to have been entertained. The short facts relevant for appreciating the objection taken may be stated thus. The petition under Sections 30 and 33 of the Act was signed and verified by Maj. Gen. Chand N. Das. General Manager of the Refineries Division, Barauni Refinery of the Corporation on 24-6-1969. In the verification portion though the General Manager stated
“I…………… do hereby solemnly declare that the statements made in paragraps 1, 2, 3, 4, 5, 6, 7, 10 and 16 are true to the best of my knowledge and the statements made in paragraphs 8, 9, 11, 12, and 13 are true to the information derived by me from the record of the arbitration proceedings which I verily believe to be true, and the statements made in Paragraph 15 there including the grounds taken thereon are my submissions before this Hon’ble Court”, at the end it was stated “I sign this verification at my office at Barauni, district Monghyr, Bihar, on this 24th day of June, 1969”. An affidavit in support of the statements made in the aforesaid petition was sworn by one Binod Shankar, an employee of the Corporation on the 25th of June, 1969 and the petition so verified and affidavited was filed in the Court below on the 26th of June. 1969. It seems some objection was taken in course of the hearing of the application that the affidavit of Binod Shankar was not in accordance with law, as in that affidavit it had not been clearly stated as to under what authority he had sworn the affidavit and which portions of the petition were true to his knowledge or belief and the source of his information, if any. The respondent Corporation thereafter filed another affidavit of Binod Shankar sworn on the 21st of Jan., 1970 wherein it was stated by the deponent that he had been authorised by the General Manager, Barauni. Refinery to swear the affidavit on his behalf, and that he was an employee of the Corporation and was fully conversant with the facts and circumstances of the ease. Paragraphwise verification of the contents was also clearly made. This clearly was in conformity with the Patna High Court Amendment of Order 6, Rule 15 (1) which reads as follows:
“Save as otherwise provided by any law for the time being in force, the facts stated in every pleading shall be verified by solemn affirmation or on oath of the party or of any of the parties pleading or of some other person proved to the satisfaction of the Court to be acquainted with the facts of the case, before any officer empowered to administer oath under Section 139 of the Code”.
It will thus be seen that the Court below felt satisfied that Binod Shankar aforesaid was acquainted with the facts of the case and affidavit had been duly sworn by him. The mere fact that the General Manager did not himself swear the affidavit before the petition was filed or that the articles or memorandum of association of the Corporation were not produced before the Court below for proving that either the General Manager had the due authority to swear the affidavit or to authorise any other employee of the Corporation to so swear an affidavit would not in my view make any difference in the least. The contention of learned counsel for the appellant petitioner that in the absence of any proof that the General Manager was the authority competent to verify or that he had due authority to auhorise Binod Shankar to swear the affidavit, the application ought not to have been entertained does not deserve any merit for two reasons. Firstly, it was admitted at the Bar that such an objection or a demand for the production of the proof was never made before the hearing of the case had already proceeded on a number of dates before the Court below. Secondly, if such an objection had been raised at an earlier stage and the Court below would have felt satisfied that it had any substance, further opportunity could have been given to the respondent Corporation to remove the defect for it is well settled that where the defect can be remedied by amendment, the Court may give leave to amend or give further particulars. Another objection which was taken before this Court bv learned counsel for the appellant petitioner was that since the applicant under Sections 30 and 33 of the Act was the Corporation, unless it were proved that the General Manager had the authority to verify it, which proof must be furnished bv wav of evidence bv the Corporation, the application ought not to have been entertained. It was at too late a stage that the point was taken before, the Court below when the hearing had sufficiently advanced and, therefore, it did not lie in the mouth of the Company to raise such an objection at such a late stage. I do not, therefore, find any illegality much less any error of jurisdiction in the order of the Court below rejecting the technical objection raised on behalf of the Company bv its order dated the 16th of September, 1970.
12. In the result, therefore. I do not find any merit either in the appeal or in the civil revision application and both are accordingly dismissed. The appellant shall pay the costs of the miscellaneous appeal, but there will be no order as to costs of civil revision application.
Untwalia, C.J.
I agree.