JUDGMENT
M.Y. Eqbal, J.
1. These two aforementioned Misc. appeals under Section 39 (i) (vi) of the Arbitration Act arise out of the common judgment and order dated 30-11-1991 passed by the Subordinate Judge I, Ranchi, in Misc. Case No. 29 of 1987 whereby and whereunder the learned Court below affirmed the award passed by the arbitrator but set aside the award of grant of interest during the pendency of arbitration proceeding.
2. The facts of the case lie in a very narrow compass. An agreement was executed by and between National Coal Development Corporation now Central Coalfield Limited and M/s. S. K. Samanta and Company on 4th April, 1975 for the execution of work of diversion of Godo Nala at Bokaro Colliery in the district of Giridih. Subsequently disputes and differences arose with regard to payment of bills and the Chairman-cum-Managing Director of the appellant-Central Coalfield Limited appointed Mr. P.N.S. Pradeep. General Manager Transport as arbitrator by letter dated 14-1-1983 and the following terms of reference were forwarded to the arbitrator for decision :–
(a) Whether the claim made by M/s. S. K. Samanta & Co. are genuine and admissible under the terms of the agreement?
(b) If the claims are admissible whether all or any or more of them are barred by limitation?
(c) Whether in view of Clause 5 of the general terms and conditions of contract interest is payable at the rate of 18% per annum as claimed or any interest at all?
3. Both the parties appeared before the arbitrator and filed their statement of claim, counter statement, rejoinder and supporting documents. The learned arbitrator after considering the materials produced before him and after hearing the parties gave its award on 22-6-1987 by which the respondent contractor was held entitled to payment under most of the claims made by him. The arbitrator further held that the claimants are entitled to interest. After the award was filed in the Court of the sub-Judge, Ranchi, the appellant-Central Coalfield Limited filed
objection under Section 30 and 33 of the Arbitration Act and prayed for setting aside the award on various grounds. The learned Subordinate Judge after hearing the parties by the impugned order affirmed the award passed by the arbitrator but set aside the grant of interest during the pendency of the arbitration proceeding. Hence the appellant-Central Coalfield Limited filed Misc. Appeal No. 76 of 1992 (R) against that part of the order by which the award has been made rule of the Court and the appellant-contractor filed Misc. Appeal No. 21 of 1992 (R) against that part of the order by which the award of interest has been set aside.
4. Mr. Debi Prasad, learned Senior Counsel appearing on behalf of the Central Coalfield Limited assailed the impugned order passed by the learned Court below making the award rule of the Court as being illegal and wholly without jurisdiction. Learned counsel firstly submitted that the arbitrator while making the award acted arbitrarily and irrationally and travelled beyond the contract. According to the learned counsel the arbitrator illegally and erroneously ignored Clause (3) of the general terms and conditions of the contract which specifically bars the contractor from making the claim in the variation of the quantities of work. The arbitrator further committed legal misconduct by ignoring the specific clause of contract which stipulates that the claim would become barred by limitation if the contractor fails to submit claim for any such additional work done during any month on or before 15th day of the next following month. Learned counsel has drawn my attention to the letter of the C.C.L. dated 18-2-1975 and submitted that in 1975 itself the appellant C.C.D. refused to entertain the claim. In support of his contention learned counsel relied upon the decision of the Apex Court in the case of K. P. Poulose v. State of Kerala, AIR 1975 SC 1259 and in the case of Associated Engineering Co. v. Govt. of Andhra Pradesh, (1991) 4 SCC 93 : (AIR 1992 SC 232). However, Mr. Debi Prasad has very fairly submitted that there is no dispute that the contractor shall be paid for the extra work, but only dispute is that the contractor shall be paid according to the agreed rate. As regards the award of interest, learned counsel submitted that the learned Court below rightly set aside the interest part of the award and against that part of the order the instant
appeal filed by the contractor is not. entertainable. In this connection learned counsel relied upon a decision of the Apex Court in the case of State of U.P. v. Ram Nath International Const. Pvt. Ltd., AIR 1996 SC 782.
5. On the other hand Mr. Ajit Moitra, learned counsel appearing on behalf of the appellant-contractor in support of the award and the impugned order making it rule of the
Court, submitted that the award being a non-speaking award having been confirmed by the learned Court below, this Court should not interfere with the award. Learned counsel relied upon various decisions of the Apex Court and submitted that, the power of the Court in the matter of interference with the award under Section 30 of the said Act is limited one. According to the learned counsel, if the claim was for payment of higher rate or for additional work is considered by the arbitrator and non-speaking award is given then the Court should not interfere with the award. Reference has been made to the decision of the Supreme Court in the case of Hindustan Construction Co. Ltd. V. Governor of Orissa, AIR 1995 SC 2189, in the case of State of U.P. v. Ram Nath International Const. Pvt. Ltd,. AIR 1996 SC 782 and in the case of Ram Nath International Construction Pvt. Ltd. v. State of U.P., AIR 1998 SC 367. Learned counsel further challenged the impugned order as being illegal and wholly without jurisdiction so far as it relates to setting aside the award of interest. According to the learned counsel, the law with regard to power of the arbitrator in the matter of grant of interest has been set at rest by the Apex Court and even in absence of any agreement or contract for payment of interest, the same may be awarded by the arbitrator. In this connection, learned counsel relied upon the decision of the Apex Court in the case of Secretary, irrigation Department, Govt. of India v. G. C. Roy, AIR 1992 SC 732 and in the case of Board of Trustees for the Port of Calcutta v. Engineer-De-Space-Age, AIR 1996 SC 2853.
6. Before appreciating the rival contentions of the parties, it would be proper to look into the facts of the case and evidence adduced by the parties before the arbitrator. I am fully conscious of the power of the Court in the matter of interference with the award.
but in view of the terms of reference it would be necessary to look into the facts and evidence on record for coming to a right decision.
7. It was the specific case of the appellant-C.C.I. at the very inception that the work allotted to the contractor was to be completed within five months from 10th day of the work i.e. much prior to 1975, but the work could not be completed within the stipulated time rather it was completed on 30-4-1977. According to the C.C.I. the claim of the contractor for the additional work was rejected as early as in 1975 by letter dated 18-12-1975. However, a dispute arose and the matter was referred to arbitration along with the terms of reference that was to be adjudicated by the arbitrator. One of the terms of reference is “whether the claims of the contractor are genuine and admissible under the terms of the agreement.” At this juncture it would be useful to look into the proviso of Clause (3) of the general terms and conditions of the agreement. The said proviso reads as under :
(a) Contractor/contractors shall not be entitled to any payment for any additional work done unless he/they have received an order in writing from the Executive Engineer for such additional work.
(b) The contractor/contractors shall be bound to submit his/their claim for any such additional work done during any month on or before the 15th day of the following month accompanied by the additional work; and
(c) The Contractor/contractors shall not be entitled to any payment in respect of such additional work if he/they fail to submit his/ their claim within the aforesaid period.
8. From bare perusal of the proviso to Clause (3) of the contract, it is manifest that the claim for additional work done by the contractor was maintainable subject to furnishing of claim within the period specified therein. However, in view of the fair stand taken by Mr. Debi Prasad that there is no dispute with regard to claim for payment in respect of extra work but the only dispute is with regard to payment of extra work at the enhanced rate. In that view of the matter, I am, therefore, of the opinion that the award of arbitrator under the different heads of claim for extra work is perfectly legal and valid and the same should not be disturbed. Those claims are as follows :–
Claim No. 1.
Earthwork in excavation in rock requiring chiselling (where blasting is prohibited) or blasting done as per agreed method. Rs. 5,76,945.67
The Claimant is entitled to Rs. 3,52,992/- (Rupees three lakhs fifty two thousand nine hundred ninty two) only. The respondent shall pay to the claimant the said amount.
Claim No. 2.
Extra, for specified lead and left. Rs. 86.542.00
The claimant is entitled to Rs. 52,948/- (Rupees fifty two thousand nine hundred forty eight) only.
The respondent shall pay to the claimant the said sum.
9. Now I will deal with the award in respect of Claim Nos. 5, 6 and 8 which are as follows :–
Claim No. 5
Enhancement rates for excavation in soil of rock and hard rock with leads and lifts.
The claimant is entitled to Rs. 1,20,000/- (Rupees one lakh twenty thousand) only.
Rs. 3,05,846.35
The respondent shall pay to the claimant the said sum.
Claim No. 6.
Increased overheads due to prolongation of works.
The claimants entitled to Rs. 1,20,000/- (Rupees one lakh twenty thousand) only.
Rs. 2,20.000.00
The respondent shall pay to the claimant the said sum.
Claim Np. 8.
Extra rates for quantities of works executed in earth work in foundation in slush PCC work and brick work done in Dam No. 1 and 2 in or underwater and liquid mud.
The claimant is entitled to Rs. 31,948/- (Rupees thirty one thousand nine hundred forty eight) only.
Rs. 63,896.00
The respondent shall pay to the claimant the said sum.
Under claim No. 5, it appears that the arbitrator has awarded a sum of Rs. 1,20,000/- being the amount for enhancement of rate including earth work. Similarly under Claim No. 6, the arbitrator awarded increased overheads due to prolongation of works and under Item No. 8, the arbitrator awarded extra rates for quantities of works. As noticed above, there was no terms and conditions in the contract agreement under which the contractor was made entitled to claim enhanced rate and/or extra rate for the work done or due to prolongation of the work. As noticed above, the work was to be completed within five months, but it was completed after two years. It also appears that initially the contractor submitted its claim with the C. C.I. for the extra work done
by it which was rightly or wrongly rejected by the C.C.I. on the ground that the claims were not submitted within the time. However, the dispute was referred to the arbitrator with the specific terms of reference as to whether the claim for additional work is admissible under the terms of the agreement or not. In the arbitration proceeding the contractor filed his statement of claim in which besides the claim for additional work, the contractor advanced his claim for additional work at the enhanced rate and extra rate and not as per rate agreed in the agreement. So far as the claims made by the contractor under heads of these claims, I am of the opinion that the arbitrator while awarding these claims has completely overlooked and ignored the terms of reference and the terms
and conditions of the contract. The arbitrator acted arbitrarily in allowing the claim at the enhanced rate which is outside the purview of the contract and terms of reference. A similar question arose before the Apex Court in the case of Associated Engineering Co. v. State of Andhra Pradesh, (AIR 1992 SC 232) (supra), where their Lordships held that a dispute as to the jurisdiction of the arbitrator is not a dispute within the award, but one which has to be decided outside the award. An Umpire or arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract”. It was further held as under :
“24. The arbitrator cannot act arbitrarily, irrationally, capriciously, or independently of the contract. His sole function 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 travelled outride the bounds of 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 specialised branch of the law of agency (See Mustill and Boyd’s Commercial Arbitration, 2nd Edn. page 641). He commits misconduct if by his award he decides matters excluded by the agreement (See Halsbury’s Laws of England, Vol. II, 4th Edn. para 622). 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.”
9A. Mr. Moitra, learned counsel appearing on behalf of the appellant-contractor, put heavy reliance on the decision of the Apex Court in the case of Ram Nath International Construction Pvt. Ltd. v. State of U.P., (AIR 1998 SC 367) (supra) for the proposition that when the dispute with regard to payment of extra item of work, when specifically referred to arbitrator then it cannot be said that the award is beyond the scope of reference. The fact of that case was quite different. In that case before the Supreme Court dispute was with regard to extra item of works done by the contractor for which rate was not specified in the agreement. In view of the fact that the dispute was expressly referred to arbitration. Their Lordships held that it cannot be said that the dispute is beyond the scope of reference. The relevant passage of paragraph 8 of the judgment of the Apex Court is quoted hereunder
“8. The rate for the work of excavation of the canal does not appear to be specified. The respondent contended before the arbitrator that payment at the rate of Rs. 29/-per cubic metre covered every kind of earth work and not just the earth work involved in Lip Cutting. While according to the appellant, this was extra work for which payment had not been specified and had to be agreed upon. There was clearly a dispute on the issue and the reference to arbitration clearly covers this dispute. The first item of office memorandum referring the dispute to arbitration relates to rate for extra work of earth work beyond lip cutting in the reach Kms. 189.50 to Kms. 190.70. In view of the fact that this dispute was expressly referred to arbitration, we fail to see how it can be said that the decision on this dispute by the arbitrator is beyond the scope of the reference. Both parties argued this question before the arbitrator. The arbitrator has given a speaking award giving detailed reasons why he considers this work as extra work for payment is required to be made to the contractor. We are not examining the correctness or otherwise of the conclusion reached by the arbitrator. It is a matter of interpretation of the contract and was referred by the parties to arbitration. The High Court was not right in coming to the conclusion that this dispute was beyond the scope of the reference to arbitration.”
10. In this instant case, the fact is that initially the quantities of work allotted to the contractor was approximately subject to reduction or enhancement of quantities of work for which rate was specified in the agreement. According to the contractor itself, quantity of original work was approximately one lakh Cft and there had been
abnormal increase of the quantities of work up to six lakh Cft. In my opinion, therefore, certainly the contractor is entitled to payment for the extra work and additional quantities of work done by it at the agreed rate but not at the enhanced rate as claimed by the contractor. Mr. Moitra put reliance on the decision of the case of Sfate of U.P. v. Ram Nath International Const. Pvt. Ltd., (AIR 1996 SC 782) (supra). In that case in course of the execution of the contract, drawings and design were changed, as a result of which there was abnormal increase of the quantity of work and for which increase of quantity of work when the contractor claimed higher rate and gave the analysis before the arbitrator, the same was not disputed by the State and the arbitrator accepted the rate. In that context Their Lordships held that when the arbitrator has considered all the relevant materials and there being no legal proposition which was formed the basis for acceptance of a higher rate and the Court will not be justified in interfering with the same. The Apex Court further laid down the proposition of law with regard to the Jurisdiction of the Court in the matter of interference with the award. Their Lordships held as under :
“The jurisdiction of the Court to interfere with an award of an arbitrator is undoubtedly a limited one. The adjudication of the arbitrator is generally binding between the parties and it is not open to the Court to attempt to probe the mental process by which the arbitrator has reached his conclusion. Award of an arbitrator can be set aside by a Court only on the grounds indicated in Section 30 of the Arbitration Act. It is not open to the Court to reassess the evidence to find whether arbitrator has committed any error or to decide the question of adequacy of evidence and the Court cannot sit on the conclusion of the Arbitrator by re-examining and reappreciating the evidence considered by the arbitrator. At the same time the arbitrator is a creature of the agreement itself and therefore is duty bound to enforce the terms of the agreement and cannot adjudicate a matter beyond the agreement itself. If the arbitrator adjudicates a claim of a contractor with reference to the clauses of the agreement itself whereby the agreement gets engrafted into the award, it will be open to the Court to examine those clauses of the agreement and find out the correctness of the conclusions of the arbitrator with reference to those clauses. Bearing in mind the aforesaid parameters for exercise of jurisdiction by Court in examining the legality of an award of an arbitrator, the award in hand as well as the order of the Subordinate Judge and that of the High Court requires scrutiny.”
11. In the light of the above proposition of law laid down by the Apex Court, if I examine the facts of the instant case it will appear that in the initial work order quantities of work allotted to the contractor was approximate but subsequently quantity of work was increased. However, the work was; not executed by the contractor within the specified period and on request made by the contractor, the period of completion was extended by the appellant C.C.L. time to time. There are several letters produced by the C.C.L. before the arbitrator in support of the fact that the contractor was time to time informed about unsatisfactory progress of the work at the site. In one of the letters the appellant C.C.L. informed the contractor that if the work is not completed by 30th April, 1976, the appellant C.C.L, reserves its right to terminate his contract work. It further appears that out of the claims made by the contractor, claim Nos. 5 and 6 were rejected by the appellant C.C.L. vide letter dated 21-8-1979 as it was the consistent stand of the appellant C. C. L. that there was no escalation clause in the agreement for additional payment or payment of overhead charges due to prolongation of execution of work. In that view of the matter, I am of the opinion that the aforesaid decision relied upon by Mr. Moitra is not applicable in the facts and circumstances of the present case. Mr. Moitra lastly relied upon the decision of the Apex Court in the case of Hindustan Construction Ltd. v. Govt. of Orissa (AIR 1995 SC 2189) for the proposition that if the arbitrator awards escalation charges not regulated by the agreement then it cannot be said that there is error on the face of the award and the award cannot be set aside on that ground. The relevant portion of the facts of that case before the Apex Court is reproduced herein below :
“On behalf of the appellant, it was demonstrated that the aforesaid no liability clause in the supplementary agreement related to Clause 13 of the original agreement under the heading, “Compensation for delay in works’, It says that the contractors rates are
based on the assumption that the contract will be completed by 30th September, 1982 and the contractor shall not claim “any compensation or revision of rates if the work gets delayed up to 6 months beyond the contract completion time i.e. 30-9-1982″. If further says that if the contract completion date gets delayed beyond 31-3-1983 for the reasons not attributable to the contractor the rates shall be revised for the unfinished work as on 31 -3-1983 by Engineer-in-charge in consultation with the contractor, subject to the approval of the government. When in the supplementary agreement in clauses VI and VII it was said that extra arrangement for completion of the work as per the agreed schedule shall be done by the contractor without liability to the Government of Orissa or without liability to both contracting parties, it was with reference to the aforesaid Clause 13 which stipulated compensation for delay in works. According to the appellant, the Special Tribunal has awarded extra amount in respect of escalations of labour charges which had been stipulated in para 12.1 of the agreement saying that for the increase in the cost of labour the Contractor shall be paid extra as per the formula given in the said clause. In other words, the escalation charges allowed to the appellant by the Special Tribunal is in respect of escalation of the labour charges and that was not regulated by Clauses VI and VII of the supplementary agreement. The teamed counsel for the appellant pointed out from the award that the Special Tribunal was conscious of clause 13 relating to ‘compensation for delay in works’ and ‘labour escalations’ under Clause 12.1 of the agreement. It has been said in the award that the competent authority by a letter dated 16-10-84, addressed to the appellant, had categorically assured that the appellant shall be paid the escalation charges under Clauses 12.1, 12.2 and 12,3 of the special conditions. The Tribunal has also held that the said authority was competent to give such assurance on behalf of the State apart from the fact that under Clauses 1-2.1, 12.2 and 12.3 of the special conditions, the appellant was entitled to the escalation charges. In this background, it cannot be said that there is any error apparent on the face of the award which required an interference by the High Court.”
In the instant case, as noticed above,
there is no such clause in the agreement which entitled the contractor to claim payment for the additional work at the enhanced rate. Moreover, in the instant case at the very inception the appellant C.C.L. repudiated the claim and denied and disputed the claim for payment of additional work at the enhanced rate.
12. Having regard to the facts and circumstances of the case, I am of the opinion that the arbitrator was not justified in giving award in respect of claim Nos. 5, 6 and 8 and the rest part of the award, as stated above, is justified and there cannot be any interference.
13. The grievance of the contractor in Misc. Appeal No. 21 of 1992 (R) is that although the arbitrator awarded pendente lite interest but the learned Court below set aside that part of the award and held that the contractor would be entitled to 10% interest from the date of the decree. I do not want to go into detail in this question as because the law has been settled by the Apex Court in series of decision. Reference may be made to the decisions of the case of Secretary, irrigation Department, Govt. of India v. G. C. Roy (AIR 1992 SC 732) (supra) and the Board of Trustees v. Engineers-De-Space-Age (AIR 1996 SC 2853) (supra) and the case of Ram Nath International Construction Pvt. Limited v. State of U. P. (AIR 1998 SC 367) (supra). In the light of the law laid down by the Supreme Court, I have no hesitation in holding that the impugned order passed by the Court below so far as it relates to interest is bad in law and liable to be set aside. The award of the arbitrator with respect to the interest is, therefore, liable to be made rule of the Court.
14. For the reasons aforesaid, Misc. Appeal No. 21 of 1992 (R) is allowed and the impugned order of the Court below so far as it relates to interest is set aside and the award in relation to interest is made rule of the Court. Misc. Appeal No. 76 of 1992 (R) is allowed in part and that part of the impugned order and the award with regard to claim Nos. 5, 6 and 8 is aside. In the facts and circumstances of the case, there will be no order as to costs.