JUDGMENT
R.L. Anand, J.
1. This is a Civil Revision and has been directed against the order dated 21.10.1998, passed by the Additional District Judge, Hisar, who allowed the appeal of the Satrod Kalan Cooperative Society by setting aside the order dated 8.11.1996 passed by the Court of Civil Judge (Sr. Division), Hisar, who had rejected the application under Section 14 of the India Arbitration Act and refused to make the award dated 14.8.1995 as rule of the Court and the award was set aside.
2. Some facts can be noticed in the following manner. State of Haryana filed an application under Section 14 of the Indian Arbitration Act, 1940 to get the award filed in the Court from the Arbitrator Shri R.S. Rana. After the award was filed the State of Haryana filed the objections and made a prayer that the award be set aside, it was inter alia pleaded by the State of Haryana that compensation amounting to Rs. 7790/- was levied on the society by the Executive Enginner concerned by invoking the relevant clause of the agreement because the work was not completed within time despite repeated requests by the department. The Arbitrator was appointed on the request of the department but he misconducted himself and passed the award which was without jurisdiction. He had no authority to arbitrate on the act of the defendant under clause 2 of the agreement and he also baselessly rejected the claim regarding the amount on account of work allotment to another contractor because the work was not completed by the society.
3. Society filed the reply to the objections of the State and from the above pleadings of the parties the trial Court framed the following issues;-
1. Whether the award is liable to be set aside on the grounds taken in the objection petition ? OPD
2. Relief.
4. The parties led evidence in support of their case and on the conclusion of the proceedings, vide order dated 8.11.1996, the learned Civil Judge (Sr. Division) Hisar allowed the objections and set aside the award and refused to make it rule of the Court for the reasons given in paras No. 5, 6, 7 and 8 of the said order which are reproduced as under :-
“5. It has been rightly argued by the Govt. Pleader that the arbitrator could not have gone into the matter regarding the compensation levied by the Executive Engineer concerned under the agreement and the society, could have moved the Superintending Engineer concerned for reducton or any other modification. He has supported his view with the authority reported as Vishwananth Sood v. Union of India and another, AIR 1989 Supreme Court 952, It was held in the said case that since time is made essence of the contract for the purpose of construction, the clause in it, stipulating compensation to be paid by the contractor for delay, is invokable and the decision of the Superintending Engineer on the matter of compensation has to be taken to be final. Such matter cannot be referred to arbitration.
6. Counsel for the society, however, has argued that department itself went for arbitration andbecause the award does not suit the Government, they have not (now ?) come forward for setting it aside. These arguments did not hold any ground because the department is not estopped from challenging the award even though reference to arbitration was made by it. If an award is illegal or without jurisdiction, it has to be set aside.
7. Since the arbitrator acted beyond jurisdiction and beyond the scope of the argeement in disallowing the compensation, the award cannot be allowed to stand. In view of Vishwanath Sood’s case (supra) the matter regarding compensation could not be refererd to the arbitrator and if it was so refferred by the department concerned, the same is to be treated as an illegal reference and any award passed qua the same is of no avail.
8. The argument of the counsel for the agency i.e. society that the arbitrator also rightly rejected the claim of the department regarding the risk and cost incurred by it in getting the work done from another agency, also does not help the agency in any way because the contention is based on the ground that the claim was made beyond the period of limitation. In such cases, however, there cannot be said to be any limitation running from the date when the previous contract came t’o an end or when default was made by the first contractor but such claim could have been made by the deparmtent only after it got the work done from the other agency and could calculate the
damages. The period of limitation would start running from that time and not prior to it.”
5. Aggrieved by the decision dated 8.11.1996, the Society filed an appeal before the Court of learned District Judge, Hisar who, for the reasons given in para No. 12 and 13 of the impugned order allowed the appeal of the society and the award dated 14.8.1995 was made as rule of the Court. Paras No. 12 and 13 of the order dated 21.10.1998 are reproduced as under :-
“12. The award has been set aside simply on the ground that in view of the ratio of the case titled Vishwanath Sood v. Union of India and another reported in AIR 1989 SC 952 the time being the essence of the contract for the purpose of construction and mere being stipulation for compensation to be paid by the contractor for delay, any dispute regarding the amount of compensation cannot be referred for arbitrator To my mind the ratio of the case referred by the learned Civil Judge (Sr. Division) is not applicable to the facts and circumstances of this case.
13. There is no dispute that in the present case as well as in the case cited above there is a stipulation which makes the time essence of the contract and there is stipulation regarding the payment of compensaion in case there is delay in completion of the construction work. In both the cases there is also stipulation that any of the party, aggrieved by the amount of compensation can make representation to the Superintending Engineer whose decision shall be final. However in the case cited above the arbitration clause in agreement started with an opening phrase “except otherwise provided in the contract”. Interpreting the abovesaid phrase the Hon’ble Supreme Court held that as there is a provision regarding representation against the amount of award, so the clause regarding arbitration is not applicable. However, in the present case there is no such phrase at the beginning of the arbitration clause (clause 25) of the agreement. So in view of the agreement in this case all the disputes including the dispute regarding amount of compensation could be referred for arbitration. There is difference in the wording of the clause mentioned in the case cited above and arbitration clause of this case. So the ratio of the case cited above is not applicable to the facts and circumstances of the present case”.
6. Not satisfied with the decision of the first appellate Court, the State has come in the present revision.
7. I have heard Shri Sultan Singh, learned AAG, Haryana, appearing on behalf of the petitioner and Shri K.S. Danoya, Advocate, appearing on behalf of respondent No. 1 and with their assistance, have gone through the record of this case.
8. Learned counsel for the petitioner has submitted that the arbitrator has illegally held that the society was not bound to make any payment as compensation to the State of Haryana. He further submitted that the Ar-
bitrator has exceeded his jurisdiction and thus, he misconducted himself when he gave the award against the spirit of the agreement itself. As per the agreement arrived at between the State and the Society if any compensation was levied by the Executive Engineer under the agreement, in that eventuality, any party could go to the Superintending Engineer concerned for the reduction or any modification, meaning thereby that the jurisdiction of the arbitrator was taken away for adjudicating this issue. In this case the State intentionally made the time essence of contract so that the contract may be performed within the stipulated time by the contractor which was not so done. That was the reason that compensation was imposed upon the society amounting to Rs. 7790/-. The remedy of the society was to approach the Superintending Engineer which who had the right to reduce or modify the amount.
9. The learned counsel for the respondent, however, submitted that since it is a dispute between the parties and moreover, the State has gone before the Arbitrator, therefore, it is not now open to the State to say that Superintending Engineer has the power to modify the amount.
10. I do not subscribe to the argument raised by the learned counsel for the respondent. When the parties have agreed to oust the jurisdiction of the arbitration on a particular issue, that arrangement is binding on the parties.
11. In this view of the matter, the revision is allowed and the impugned order dated 21.10.1998 is hereby set aside and the order passed by the trial Court dated 8.11.1996, stands restored. It is hereby observed that it will always be open to the society to approach the Superintending Engineer for the modification or for the reduction of the amount which was imposed by the Executive Engineer.
12. Revision allowed.