{"id":176427,"date":"2003-10-08T00:00:00","date_gmt":"2003-10-07T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/m-d-army-welfare-housing-vs-sumangal-services-pvt-ltd-on-8-october-2003"},"modified":"2018-11-09T22:46:55","modified_gmt":"2018-11-09T17:16:55","slug":"m-d-army-welfare-housing-vs-sumangal-services-pvt-ltd-on-8-october-2003","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/m-d-army-welfare-housing-vs-sumangal-services-pvt-ltd-on-8-october-2003","title":{"rendered":"M.D., Army Welfare Housing … vs Sumangal Services Pvt. Ltd on 8 October, 2003"},"content":{"rendered":"
Supreme Court of India<\/div>\n
M.D., Army Welfare Housing … vs Sumangal Services Pvt. Ltd on 8 October, 2003<\/div>\n
Author: S.B. Sinha<\/div>\n
Bench: Cji., Brijesh Kumar, S.B. Sinha.<\/div>\n
           CASE NO.:\nAppeal (civil)  1725 of 1997\n\nPETITIONER:\nM.D., Army Welfare Housing Organisation\t\t\n\nRESPONDENT:\nSumangal Services Pvt. Ltd.\t\t\t\t\n\nDATE OF JUDGMENT: 08\/10\/2003\n\nBENCH:\nCJI., BRIJESH KUMAR & S.B. SINHA.\n\nJUDGMENT:\n<\/pre>\n
J U D G M E N T <\/p>\n
S.B. SINHA, J :\n<\/p>\n
 \tQuestions of some importance arise for consideration in this
\napplication filed by the respondent-herein under Sections 30 and 33 of
\nthe Arbitration Act, 1940 questioning an award dated 29.4.2002 passed by
\nthree learned arbitrators appointed by this Court.\n<\/p>\n
BACKGROUND FACTS:\n<\/p>\n
 \tArmy Welfare Housing Organization (for short ‘AWHO’) and Sumangal
\nServices Pvt. Ltd. (for short ‘Sumangal’) entered into an agreement for
\ndevelopment of land and construction of a composite housing project on a
\nturn-key basis on approximately 17.9 acres of land situate on the VIP
\nRoad, in the town of Kolkata.  For the said purpose a draft agreement
\ninitially drawn up was given finality by Articles of Agreement dated
\n28.8.1993.  Certain terms and conditions, however, had been altered
\ntherein with mutual consent.\n<\/p>\n
 \tThe project was envisaged to be completed in three phases.
\nConsiderable progress was made in the matter of construction of work in
\nPhase I.  The plots where the said work was being carried out fell under
\nthe local administration of Gopalpur Arjunpur Gram Panchayat.  The
\nbuilding plan for Phase I was sanctioned by the said Gram Panchayat in
\nSeptember, 1991 in terms whereof 11 blocks of houses could be
\nconstructed.  The said area, however, became a municipality in terms of
\nthe West Bengal Municipal Act, 1932 known as Rajarhat Gopalpur
\nMunicipality. West Bengal Municipality Act, 1932, however, was repealed
\nand replaced by West Bengal Municipal Act, 1993.\n<\/p>\n
 \tIt is not in dispute that pursuant to or in furtherance of the
\nsaid agreement Sumangal entered into negotiations with the owners of the
\nagricultural lands for sale thereof wherefor sale deeds in respect of
\n2.32 acres of land were executed by the owners in favour of AWHO.
\nSumangal received the amount for consideration from AWHO paid to the
\nowners upon furnishing a Bank guarantee as also subject to the condition
\nthat it will get the said land converted into Bastu.\n<\/p>\n
Lands measuring about 13 acres had already been converted into
\nBastu.  On or about 8.12.1994, an application was made by AWHO for
\nmodifications or revisions in the Master Plan wherefor a revised Master
\nPlan was submitted for approval of the Municipality stating:\n<\/p>\n
 \t“Tel: 3010820\t     Army Welfare Housing Organisation
\n\t\t\t\t\tSouth Hutments, Kashmir House,
\n\t\t\t\t\tRajaji Marg, New Delhi-110011<\/p>\n
\t\tB\/03020\/CAL-II\/AWHO\t\t 8 Dec 94
\nThe Chairman,
\nRajarhat Gopalpur Municipality
\nRaghnunathpur,
\nCalcutta-700059<\/p>\n
\tSUBMISSION AND FINAL APPROVAL OF
\n  PLAN FROM MUNCIPAL AUTHORITY \t\t<\/p>\n
Dear Sir,<\/p>\n
1.\tThis is to bring to your kind notice that our
\norganization has undertaken the construction of
\n“Own your own House” housing project for the
\nbenefit of our Defence Personnel at no Profit no
\nLoss basis.  We have engaged M\/s Dulal Mukherjee
\n& Associates as consulting Architect for the
\nproject.\n<\/p>\n
2.\tAs per demand\/requirements for the housing for
\nArmy personnel, our Architect made a Master Plan
\nof the project and also plans for 04 types of
\nDwelling Units (05 Storyed) which were approved
\nby the Gram Panchayat vide Sanction No.181\/91
\ndated 18 Sep. 91.\n<\/p>\n
3.\tIn this connection we would like to mention that
\ndue to site constraints and also to meet the
\ndemand for housing among Army personnel, minor
\nModifications\/Revisions have been made to the
\nMaster Plan and also to the Individual Dwelling
\nUnits which were sanctioned earlier.\n<\/p>\n
4.\tWe are submitting herewith the revised Master
\nPlan and also individual Plan for Dwelling Units
\n(Additions and Alterations) for your approval.
\nWe therefore make an appeal to your goodself to
\nkindly give special consideration to our plan
\nand approve the same at the earliest.\n<\/p>\n
Yours faithfully,<\/p>\n
(Raghu Nandan)
\nBrig (Retd)
\nDT & DY MD
\nFor Managing Director”\n<\/p>\n
 \tSuch permission was granted only on 9.3.1995.\n<\/p>\n
 \tAccording to Sumangal, despite the fact that no building plan was
\nfiled or sanctioned for Phase II and Phase III but as per instruction of
\nAWHO it proceeded with the construction of Phase II.  Such an
\napplication was filed for the first time on 19.5.1995.  It stands
\nadmitted that the proposed height of the towers was more than the
\npermissible one.\n<\/p>\n
 \tThe municipal authorities vide its letter dated 23.5.1995 directed
\nstoppage of work in six\/seven blocks where allegedly unauthorized
\nconstruction was being carried out stating:\n<\/p>\n
“We came to learn that some 8 blocks of 5
\nstoried buildings were approved by erstwhile
\npanchayet before the origination of the above
\nmunicipality.  After the birth on 13.01.94 as
\nper norms of W.B.M. Act ’93 and Calcutta
\nGazette, new plans if any, or construction job
\nif any, has to be approved of by this Municipal
\nAuthority.\n<\/p>\n
We learnt some additional 6\/7 blocks are being
\nconstructed at your VIP project for which no
\nplan was submitted to the Engineering Division
\nof this office for approval.  This is a gross
\nviolation of W.B.M. Act ’93 and ’79 T & C
\nDevelopment Planning Act.\n<\/p>\n
It is further learnt that the 7\/8 blocks
\nconstructed by you on the basis of the plan
\nsanctioned by erstwhile panchayet has also been
\nseverely deviated from actuality – which is also
\npunishable under the law.\n<\/p>\n
We strongly believe that an esteemed
\norganization like you, will not indulge in such
\nillegal activities and refrain from all such
\nunapproved\/unauthorized works.”\n<\/p>\n
Sumangal thereafter sought advice of AWHO by a letter dated 24th
\nMay, 1995 pointing out therein that if any construction activity is
\ncarried out despite objections of Local Authority, persons involved
\nwould be liable for punishment both under criminal as well as civil law.
\nIt reiterated the said stand by a letter dated 25th May, 1995 drawing
\nAWHO’s attention to the provisions of Sections 204, 214 and 440 of the
\nWest Bengal Municipal Act, 1993 and requesting it for its response also
\nto its earlier letter dated 24th May, 1995.  Sumangal did not receive any
\nreply thereto and hence by its letter dated 27th May, 1995 stated:\n<\/p>\n
“If clear out instructions are not received from you
\nby 29th May, we shall be compelled to demobilize.
\nPlease advise urgently.  We shall be constrained to
\nconsider your silence as your agreement to our
\ndemobilization.”\n<\/p>\n
The engineers of municipality visited the project site a number of
\ntimes but the sanctioned plan had allegedly not been produced.  In the
\naforementioned situation, the Chairman of the Municipality issued a
\nletter to the Project Manager, AWHO on 21.7.1995 stating:
\n“Dear Sir,<\/p>\n
Our engineers have visited your project site
\nnumber of times and discussed with your
\nengineers about the drawing, design and other
\ninfrastructurals projects placed before them.
\nThe undersigned also took the opportunity to
\nmeet with you and talk to your M\/s Dulal
\nMukherjee & Associates where we have inter
\nchanged our views and the norms of Municipal
\nRules & Regulations.\n<\/p>\n
Our engineer has been asking you for the
\nerstwhile panchayet recommended plan by which
\nyou have constructed already 8-9 blocks.  All
\nthe time he has come back without result.\n<\/p>\n
You would appreciate that without a plan already
\napproved by erstwhile panchayet, we can not
\ncheck\/judge the present position or the
\nviability of your project.  Hence the question
\nof your infrastructural development like
\nconstruction of Road, Drains etc. does not arise
\nat all at the moment.\n<\/p>\n
We would request you fervently to submit the
\npanchayet recommended plan on the basis of which
\nwe will proceed further.\n<\/p>\n
Thanking you”\n<\/p>\n
\t\t\t\t\t\t(Emphasis supplied)<\/p>\n
 \tIn the meantime the architect and the project engineer of AWHO met
\nthe Chairman of the Municipality and it was allegedly agreed that the
\nwork need not be stopped in the buildings for which the plans have
\nalready been approved.  Sumangal, therefore, was advised not to stop the
\nwork for which plans have already been approved. (See letter of AWHO to
\nSumangal dated 27.5.1995).\n<\/p>\n
 \tAWHO by their letters dated 25th July, 1995 and 11th August, 1995
\nadvised Sumangal to reorganize and recommence its work by employing
\nsufficient strength of labour and bringing the required material to site
\nby 11th September, 1995 to ensure that the progress of the work is
\nsubstantially increased.  It was threatened that if suitable action is
\nnot taken in this behalf by Sumangal AWHO may be compelled to take
\naction under clause 129(e) of the Contract.\n<\/p>\n
 \tIt appears that Sumangal replied thereto by its letter dated 14th
\nAugust, 1995.  In its response to the said letter dated 14th August,
\n1995, AWHO drew the attention of Sumangal to the fact that there are
\ncertain types of work which would not come within the purview of the
\nstop work notice by the Municipality and as such the same could have
\nbeen carried out.  It was stated:\n<\/p>\n
“…You are again advised to reorganise your
\nwork by employing sufficient labour and bringing
\nin the required material to ensure that the
\nprogress of the work is substantially increased
\nby 15 Sep 95 failing which AWHO may be compelled
\nto take action under clause 129 (e) on page 176
\nof Contract Agreement.  This is without
\nprejudice to any other right or remedy which
\nshall have accrued or shall accrue to the
\nOrganisation.”\n<\/p>\n
 \tSome correspondences thereafter passed between the parties and by
\nits letter dated 10th October, 1995 AWHO ultimately cancelled the
\ncontract with effect from 17th October, 1995.\n<\/p>\n
 \tA civil suit was filed by Sumangal before the 1st Assistant
\nDistrict Judge at Barasat being suit No. 867 of 1995 praying for a
\ndeclaration that the contract was void. Certain consequential reliefs
\nwere also prayed therein in relation to the said termination of
\ncontract.\n<\/p>\n
 \tAn application purported to be under Section 20 of the Arbitration
\nAct, 1940 was filed by the AWHO before the Delhi High Court which was
\nmarked as Suit No. 2442 of 1995 for appointment of an arbitrator in
\nterms of the arbitration agreement contained in Clause 136 of the
\ngeneral terms and conditions of the contract.\n<\/p>\n
 \t In the said civil suit Sumangal prayed for an order of injunction
\nwhich was refused whereagainst an appeal was preferred in the High Court
\nof Calcutta and by reason of an interim order dated 28.3.1996 the
\nparties were directed to maintain status quo.  A SLP was filed by AWHO
\nagainst the said order.\n<\/p>\n
 \tThis Court in the said S.L.P., however, without going into the
\ncorrectness or otherwise of the interim order dated 28.3.1996 of the
\nHigh Court passed the following order:\n<\/p>\n
“Leave granted.\n<\/p>\n
This appeal calls in question the order of
\nthe High Court of Calcutta dated 28.3.1996.\n<\/p>\n
\tIn view of the developments which have
\ntaken place in this Court, it is not necessary
\nto refer to the detailed facts of the case.
\nAdmittedly, disputes and differences have arisen
\nbetween the parties and those are pending
\nadjudication in the  Court of the First
\nAssistant District Judge, Barasat (Title Suit
\nNo.867 of 1995) and in the High Court of Delhi
\n(Suit No.2442 of 1995).  It is agreed to by
\nlearned counsel for the parties that those
\ndisputes and differences be referred for
\nadjudication to an arbitrator.  With consent of
\nthe parties, we refer the disputes arising out
\nof the two suits noticed above to Shri H.R.
\nKhanna, Former Judge of this Court, who shall
\nenter upon the reference and make his Award
\nwithin the statutory period.  The learned
\nArbitrator shall fix his own fee and the manner
\nof its payment.  The parties shall be at liberty
\nto file their claims\/counter-claim before the
\nArbitrator.\n<\/p>\n
\tWith the reference of the disputes and
\ndifferences between the parties to the learned
\nArbitrator, the two suits pending at Barasat and
\nin the Delhi High Court shall stand withdrawn
\nfrom the respective courts where those are
\npending.  Copy of this order shall be sent to
\nthe concerned courts for due compliance.\n<\/p>\n
\tThe learned Arbitrator shall file the
\nAward in this Court.  It is directed that no
\nother court shall interdict the arbitration
\nproceedings.\n<\/p>\n
\tThe appeal is disposed of accordingly.  No
\ncosts.”\n<\/p>\n
 \tEven before filing the statements of claims and counter-claims;
\nthe parties jointly requested the learned arbitrator to pass an interim
\naward as regard the ownership of the lands as to whether AWHO by reason
\nof the purported deeds of sale became the absolute owner of the property
\ncomprising 14.17 acres of land wherefor the following issues were raised
\nby Sumangal:\n<\/p>\n
“a)\tWhether or not AWHO\/Party No.2 is the
\nabsolute owner of the suit property
\ncomprising of 14.17 acres of land vide
\nregistered Sale Deeds, mutation and
\nconversion certificates issued by the
\ncompetent authority, in favour of the
\npetitioner including the properties built
\nthereon and that the land so acquired
\nabsolutely and for ever by the Party
\nNo.2\/AWHO and the property built thereon
\nis not a returnable security, which
\nproperty pursuant to the cancellation of
\ncontract is neither refundable nor can be
\nsame be reconveyed to Party No.1 and\/or
\nland sellers?\n<\/p>\n
b)\tWhether Party No.2 and\/or Party No.1
\nand\/or the land sellers have a first
\nand paramount charge on the said land
\nsold\/transferred to the Party No.2
\nabsolutely and forever, particulars
\nwhereof are given the Annexures1
\n(Colly), annexed hereto, and that
\nwhether after sale of the said plots of
\nland by the land sellers, to the Party
\nNo.2 vide registered sale deed based
\nupon an understanding as spelled out in
\nthe developer’s agreement and power of
\nattorney and affidavits etc. executed
\nby and between the land seller and
\nParty No.1, which as is alleged by
\nParty No.1 have since become void and
\ninoperative, and therefore, is the
\nParty No.1 entitled for the payment of
\na sum of Rs.38 lakhs 47 thousand as
\npleaded in paragrtaph 56 of its Title
\nSuit No.867 of 1995?\n<\/p>\n
c)\tWhether the Party No.1 has a first and
\nparamount charge on the construction,
\nbuildings and all other materials that
\nare lying at and within the land
\ntransferred\/sold by the land sellers
\nthrough Party No.1 to the Party No.2
\nfor it’s claim on the basis of item
\nrate contract as alleged claimed for
\nthe alleged loss and damages suffered
\nby the Party No.1 as stated in it’s
\nTitle Suit No.876 of 1995?\n<\/p>\n
d)\tWhether in alternative a decree for
\nspecific performance of the agreement
\nreferred to in paragraph 69 of the
\naforesaid title suit above and
\nreconveyance of the lands mentioned in
\nSchedule G to the Suit in favour of the
\nParty No.1 or the land seller can be
\ndecreed either in favour of the Party
\nNo.1 and\/the land sellers who had sold
\nabsolutely and for ever their plots of
\nland vide registered sale deeds which
\nwere subsequently mutated and its land
\nuse changed from agricultural to
\nresidential by the competent authority
\nunder the West Bengal Land Reform Act
\nin favour of the Party No.2, but are
\nnow claiming that the Deed of Sale was
\nin reality a document or security?\n<\/p>\n
e)\tWhether or not the keys of the godown
\nat contract site which the Party No.1
\nis illegally holding in it’s custody be
\ngiven back to Party No.2 to utilize the
\nstores contained therein before
\ncommencing the work.\n<\/p>\n
f)\tAny other relief in the circumstances of
\nthe case may also be passed\/awarded.”\n<\/p>\n
 \tThe learned arbitrator, however, was not inclined to accede to the
\nsaid request.  Thereafter, an application was filed by AWHO before the
\nlearned Arbitrator to the effect that it may be allowed to commence and
\ncomplete uninterrupted construction work as well as development of the
\nhousing project at the risk of Sumangal. Sumangal filed a reply to the
\nsaid application.\n<\/p>\n
 \tAn order was passed on the said application of AWHO by the learned
\narbitrator on 1.11.1997 subject to the following conditions:\n<\/p>\n
(a)\tThe question as to whether such an order can be passed at the
\nrisk of Sumangal can be raised only at the time of final award.\n<\/p>\n
(b)\tThe development work may be confined to 14.17 acres of land which
\nwas the subject matter of sale and which it was stated had been
\ndemarcated at the site.\n<\/p>\n
(c)\tAll those works could be subject to the ultimate decision of the
\ncase.\n<\/p>\n
(d)\tAWHO shall not give final possession of any of those flats or part
\nof the land to any one including the person described as
\nallottees.\n<\/p>\n
(e)\tThe said order was without prejudice to any of the contentions
\nwhich may be raised by the parties.\n<\/p>\n
(f)\tConstructions and development work would be of the same kind and
\nspecifications as were provided in the contract at competitive
\nrates through an established contractor after inviting tenders
\ntherefor.\n<\/p>\n
  It was further stated therein :\n<\/p>\n
“It is agreed by both the parties that the
\ncontract produce for the construction of 16
\ntowers and such 16 towers already exist on the
\nsite.  If any new tower is constructed by party
\nNo. 2 or its contractor, party No. 1 would not
\nbe liable for it.”\n<\/p>\n
 \tA review application was filed before the Arbitrator by Sumangal
\nwherein several questions including the power of arbitrator to pass an
\ninterim order of injunction were raised but the same was rejected
\nstating:\n<\/p>\n
“It has been vehemently argued that the
\nArbitrator has no power to make the kind of
\ninterlocutory order made on November 1, 1997. In
\nthis respect learned counsel for party no.1 has
\nalso emphasized that effected the once the
\nprayer for interim award has not been granted,
\nthe order dated November 1, 1997 which was in
\nthe nature of an interim award was unwarranted.
\nI find myself unable to accede to this
\ncontention.  So far as that order is concerned,
\nit was made expressly clear that the said order
\nwould be without prejudice to any of the
\ncontentions which might be raised by the
\nparties.  It was also added that all the works
\nwhich party no.2 is being allowed to do would be
\nsubject to the ultimate decision of the case,
\nthe order thus makes it clear that there was no
\nfinality attached to that order and that it
\nwould be subjected to the ultimate decision of
\nthe case. As such the order cannot be deemed to
\nbe an interim award.\n<\/p>\n
Coming to the other contention that the
\nArbitrator has no power to make an interlocutory
\norder dated November 1, 1997. I find that the
\nwork of measurements has been smoothly carried
\nout and the results of measurements have been
\naccepted by both the parties.  As the
\nproceedings of arbitration would take
\nconsiderable time before the final award is
\ngiven, to expedite the execution of the
\nremaining unfinished work, party no.2 was
\nallowed to commence and complete the unfinished
\nwork which was the subject matter of the
\ncontract between the parties.  In my opinion the
\norder made on November 1, 1997 was in the
\ninterest of justice and not to let the remaining
\nwork reaming unfinished till the time of the
\nfinal award.  As the order was made ex debito
\njustitiae it call for no review or modification.
\nIn any case, it has been made clear that this
\norder would be subject to the final decision of
\nthe case and without prejudice to any of the
\nrights of the parties.\n<\/p>\n
Another point made in the application of party
\nno.1 is that it was working as stated in the
\norder of November 1, 1997 that 16
\nblocks\/buildings existed at site have gone
\nthrough the order dated November 1, 1997, and no
\nwhere it is stated therein that 16
\nblocks\/buildings exist at the site.\n<\/p>\n
I, therefore, find no ground to review\/modify
\nthe order dated November 1, 1997.  The
\napplication accordingly stands disposed of”.\n<\/p>\n
\tThe learned Arbitrator, therefore, did not determine the question
\nas to whether he had jurisdiction to pass an interim order or not.\n<\/p>\n
 \tNo Award was not passed by the Arbitrator for a long time although
\nseveral extensions had been granted.  On or about 26.2.2000 an
\napplication for revocation of the authority of the arbitrator was filed
\nby Sumangal and by an order dated 11.5.2000 this Court constituted a
\nboard of three arbitrators instead and place of the sole arbitrator.\n<\/p>\n
 \tThe award was filed before this Court on 29.4.2002 by the learned
\narbitrators whereagainst Sumangal filed an application on or about 8th
\nJuly, 2002 under Sections 30 and 33 of the Act.\n<\/p>\n
AWARD:\n<\/p>\n
 \tBefore the arbitrators both the parties filed their respective
\nclaims.  Claim No. 1 of AWHO related to the title, ownership and
\npossession of 14.17 acres of land.  Claim No. 2 of AWHO related to cost
\nof completion of balance work at the risk and expense of Sumangal.  Both
\nthe claims were allowed by the learned arbitrators.\n<\/p>\n
 \tClaim No. 3 related to compensation for delay in performance of
\nthe contract by Sumangal, whereas claim No. 4 related to damages for
\nnon-completion of work resulting in loss of rentals to allottees of
\nAWHO.  Claim No. 5 related to reimbursement of payments made by AWHO
\ntowards the premium on Sumangal’s all risk insurance policy.  Claim No.
\n6 related to damages for delay in transfer of land.  All these claims
\nwere disallowed.\n<\/p>\n
 \tThe claim on interest contained in claim No. 7 and claim of costs
\nof arbitration in claim No. 8 were also allowed.\n<\/p>\n
 \tThe claim of Sumangal relating to title of 14.17 acres of land and
\nclaim for an amount of Rs. 11,40,85,000\/-,  being an alternative claim
\nwas disallowed.\n<\/p>\n
 \tThe learned arbitrators in making the award formulated as many as
\n29 issues which have been answered in the following terms:\n<\/p>\n
“Issue No.1 \t\t<\/p>\n
\tSince we have found that SSPL had failed
\nto discharge their obligation in terms of the
\nAgreement dated August 27, 1993, the issue is
\ndecided against SSPL and in favour of AWHO.\n<\/p>\n
Issue No.2<\/p>\n
Since we have found that AWHO were
\nentitled to terminate the said contract and to
\nget the balance work executed at the expense and
\nrisk of SSPL, the issue is decided in favour of
\nAWHO and against SSPL.\n<\/p>\n
Issue No.3<\/p>\n
\tSince we have found that AWHO are the full
\nowner and in possession of 14.17 acres of land
\nin dispute and the property built thereon, the
\nissue is decided in favour of AWHO and against
\nSSPL.\n<\/p>\n
Issues Nos.4 & 5   <\/span><\/p>\n
Since we are of the view that the sale
\ndeeds executed in favour of AWHO cannot be
\nregarded as documents by way of security for the
\nadvance taken by SSPL from AWHO and that no
\ncharge was created on the lands in dispute, the
\nissues are decided in favour of AWHO and against
\nSSPL.\n<\/p>\n
Issue No.6<\/p>\n
Since we have held that the claims made by
\nAWHO fall within the ambit of the scope of
\nreference as laid down in the order of the
\nHon’ble Supreme Court, the issue is decided in
\nfavour of AWHO and against SSPL.\n<\/p>\n
\t\tIssues Nos.7 & 8 <\/span><\/p>\n
No submission was made on behalf of SSPL
\nwith regard to these issues.  The issues are
\ndecided against SSPL and in favour of AWHO.\n<\/p>\n
\t\tIssues Nos.9 & 10<\/span><\/p>\n
Since we have found that as per the
\nagreement between AWHO and DMA, the Architect
\nwas to provide drawings and specifications of
\nthe proposed flats and external services and it
\nwas the duty of SSPL to take follow up action in
\nthe matter of obtaining sanction from the
\nstatutory bodies and it was not the
\nresponsibility of the Architect to obtain
\nsanction from the statutory bodies including the
\nMunicipality, the issues are decided against
\nSSPL and in favour of AWHO.\n<\/p>\n
\t\tIssues Nos. 11 & 12<\/span><\/p>\n
Since we have found that the Agreement
\ndated August 27, 1993 and the preceding Letter
\nof Intent dated January 4, 1991 and the Draft
\nAgreement dated December 26, 1991 cannot be said
\nto have become impossible of performance and
\ncannot be regarded to have become void on the
\nground of frustration, the issues are decided
\nagainst SSPL and in favour of AWHO.\n<\/p>\n
\t\tIssue No.13    <\/p>\n
It has been found that the construction in
\nrespect of the units in Phase I was started
\nafter obtaining the sanction for the plans from
\nthe Gram Panchayat and though there were some
\ndeviations and alterations from the sanctioned
\nplan but the same could be regularized.  As
\nregards the units which were to be constructed
\nin Phase II it has been found that the said
\nconstruction was made without obtaining the
\nsanction for the plans from the competent
\nauthority but the plans had been submitted for
\napproval during the course of construction and
\nthe said plans were subsequently approved on
\nApril 23, 1997 and the plans for the whole
\nproject were also revalidated. This issue is
\ndecided accordingly.\n<\/p>\n
\t\tIssue No.14 <\/p>\n
We have found that the deviations and the
\nalterations in respect of construction in Phase
\nI were not very material in nature and could be
\nregularized and were in fact regularized when
\nthe revised plans were sanctioned and
\nrevalidated by the Municipality.  This issue is
\ndecided accordingly.\n<\/p>\n
\t\tIssue No.15<\/p>\n
We have found that payments for the RARs
\nfor the construction work upto August 1992 were
\nnot made  since SSPL failed to abide by their
\ncommitment to transfer the balance land by
\nFebruary 15, 1992 and subsequently on the
\ntransfer of the balance land in august 1993 and
\nafter execution of the Agreement dated August
\n27, 1993, the payments for the said work were
\nmade.  This issue is decided accordingly.\n<\/p>\n
\t\tIssue No.16<\/p>\n
We have found that SSPL never raised any
\nobjection regarding construction in respect of
\nworks in Phase II on the ground that there were
\nno sanctioned plans for the same and SSPL
\nobtained benefit in the matter of release of
\npayments on the basis of the order placed for
\nsuch construction.  This issue is decided
\nagainst SSPL and in favour of AWHO.\n<\/p>\n
\t\tIssue No.17 <\/p>\n
It has been found that the Municipality
\nstopped construction work in Phase II but
\nsubsequently the plans for Phase II were
\napproved by the Municipality on April 23, 1997.
\nThe issue is decided accordingly.\n<\/p>\n
\t\tIssue No.18<\/p>\n
We have found that AWHO issued the working
\ndrawings for the project to SSPL and the delay
\nin issuing some of the drawings was not very
\nmaterial.  The issue is decided accordingly.\n<\/p>\n
\t\tIssue No.19<\/p>\n
No submissions were made by SSPL in
\nsupport of this issue.  The issue is accordingly
\ndecided against SSPL and in favour of AWHO.\n<\/p>\n
\t\tIssues Nos.20 & 22 <\/span><\/p>\n
The alterations in the lay out of the
\nbuilt up area of Phase I buildings were made by
\nAWHO in the full knowledge of SSPL and the said
\nalterations were not material because they were
\nsubsequently revalidated by the Municipality in
\nsanctioning the revised plans.  The issues are
\naccordingly decided against SSPL and in favour
\nof AWHO.\n<\/p>\n
\t\tIssue No.21<\/p>\n
There was no change in the height of the
\nbuildings in respect of Phase I inasmuch as the
\nheight of the blocks in Phase I were not above
\nthe heights as per the sanctioned plans.  The
\nheights of the blocks constructed in Phase II
\nfor which plans had not been approved were in
\nexcess of the height limitations prescribed in
\nthe buildings regulations.  No Objection
\nCertificate has been granted by the Airport
\nAuthorities of India Ltd. and it was open to the
\nState Government to relax the height limitation.
\nThe issue is accordingly decided against SSPL
\nand in favour of AWHO.\n<\/p>\n
\t\tIssue No.23<\/p>\n
We have found that the title to the lands
\ntransferred in favour of AWHO under the various
\nsale deeds passed in favour of AWHO independent
\nof the turnkey project and failure of the
\nturnkey project did not have any bearing on the
\ntransfer of title.  The issue is accordingly
\ndecided in favour of AWHO and against SSPL.\n<\/p>\n
\t\tIssue No.24 <\/p>\n
No submissions were made by SSPL with
\nregard to this issue and the issue is decided
\nagainst SSPL.\n<\/p>\n
\t\tIssue No.25<\/p>\n
We have found that AWHO are entitled to
\ncompensation under claim no.2 towards cost of
\ncompletion of the balance work at the risk and
\nexpense of SSPL since SSPL failed to perform
\ntheir part of the obligation under the contract.
\nThe issue is decided in favour of AWHO and
\nagainst SSPL.\n<\/p>\n
\t\tIssue No.26  <\/p>\n
We have found that the title, ownership
\nand possession of 14.17 acres of land which was
\ntransferred in favour of AWHO under the various
\nsale deeds vests exclusively with AWHO and Claim
\nNo.1 made by AWHO has, therefore, been allowed.
\nThe issue is decided in favour of AWHO
\naccordingly.\n<\/p>\n
\t\tIssue No.27<\/p>\n
We have found that SSPL are not entitled
\nto reversion of land.  The issue is accordingly
\ndecided against SSPL.\n<\/p>\n
\t\tIssue No.28<\/p>\n
We have found that SSPL are not entitled
\nto recover any amount from AWHO.  The issue is,
\ntherefore, decided against SSPL.\n<\/p>\n
\t\tIssue No.29<\/p>\n
Since we have found Issue No.28 against
\nSSPL and found that SSPL are not entitled to
\nrecover any amount from AWHO, therefore, the
\nquestion of their entitlement to recover
\ninterest from AWHO does not arise.  The said
\nissue is decided against SSPL.”\n<\/p>\n
\tIn terms of the aforementioned findings, the learned arbitrators
\nawarded:\n<\/p>\n
“We make the Award in the following terms:\n<\/p>\n
1.\tThe claim of SSPL that land admeasuring
\n14.17 acres and structures thereon
\ncomprising of the 14 Blocks\/buildings or
\nany other construction that maybe done by
\nAWHO during the pendency of the
\narbitration proceedings, vests and is
\nowned fully, exclusively and absolutely by
\nSSPL is disallowed.\n<\/p>\n
2.\tThe alternative claim of SSPL for an
\namount of Rs.11,40,85,000.00 is
\ndisallowed.\n<\/p>\n
3.\tClaim No.1 of AWHO in respect of title,
\nownership and possession of land
\nadmeasuring 14.17 acres of land located at
\nMauza Tighonia and Koikhali, VIP Road, 24
\nParganas (North), Calcutta transferred in
\ntheir favour by various Vendors\/Land
\nOwners is allowed.\n<\/p>\n
4.\tClaim No.2 of AWHO for cost of completion
\nof balance work at the risk and expenses
\nof SSPL is allowed to the extent of
\nRs.6,97,00,000.00.\n<\/p>\n
5.\tClaim No.3 of AWHO is disallowed.\n<\/p>\n
6.\tClaim No.4 of AWHO is disallowed.\n<\/p>\n
7.\tClaim No.5 of AWHO is disallowed.\n<\/p>\n
8.\tClaim No.6 of AWHO is disallowed.\n<\/p>\n
9.\tClaim No.7 of AWHO is allowed to the
\nextent that interest would be payable @ 12
\nper cent per annum on the amount of
\nRs.6,97,00,000.00 awarded under Claim
\nNo.2.  Interest shall be payable from the
\ndate of the award till payment is made.\n<\/p>\n
10.\tClaim No.8 of AWHO regarding costs is
\nallowed to the extent that SSPL will
\nreimburse AWHO towards half share of the
\narbitrators’ fee, administrative expenses
\nand the other incidental expenses for the
\nconduct of the arbitral proceedings.  Each
\nparty shall bear the costs and expenses
\nincurred by it for prosecuting the
\narbitral proceedings.”\n<\/p>\n
SUBMISSIONS:\n<\/p>\n
 \tMr. K.N. Bhat, the learned senior counsel appearing on behalf of
\nSumangal would raise the following contentions:\n<\/p>\n
(i)\tA bare perusal of the award would show that the learned
\narbitrators ignored the terms of the agreement.\n<\/p>\n
(ii)\tIn terms of Clause 130 of the general conditions of
\ncontract, AWHO could maintain a claim as regard excess
\namount required for completion of the unfinished work only
\nif the work was completed before a claim was raised or an
\nestimate of the cost of completion is certified by the named
\narchitect.  Despite the fact that none of the aforementioned
\nconditions were fulfilled, the award was made allegedly on
\nthe ground that Clause 130 will have no application while
\nthe completion was permitted by an order passed in a
\njudicial\/ arbitral proceedings. Mr. Bhat would contend that
\nthe arbitrators being creature of the agreement were
\nrequired to act within the fourcorners thereof and cannot by
\nreason of an interim order override the basis of the
\nagreement.\n<\/p>\n
(iii)\tClause 130 of the general conditions of contract would come
\ninto play only when the contract is validly terminated in
\nterms of clause 129.  The termination of contract by AwHO
\nwas on the ground that Sumangal did not resume work in
\nrelation whereto the learned Arbitrators failed to consider
\nthat the question of resumption of work by it did not arise
\nas the Municipality had banned further construction
\nactivities.  Furthermore, the Arbitrators proceeded also on
\na wrong premise that Sumangal failed to obtain sanction of
\nBuilding Plans from the Municipal Authorities.\n<\/p>\n
(iv)\tAs the plans were not sanctioned at the relevant time by
\nstatutory authorities; Section 56 of the Contract Act was
\nattracted having regard to the fact that it was commercially
\nincapable of being performed upon passing of the ban order.\n<\/p>\n
(v)\tAn award ignoring material and relevant documents would be
\nrendered illegal and bad in law. As in the case the
\narbitrators ignored the letter dated 8th December, 1994 of
\nAWHO for regularization of deviations and thus thereby they
\nmust be deemed to have admitted that deviations were done by
\nthem deliberately to suit their own convenience, and as such
\nthe Arbitrators must be held to have misconducted themselves
\nand the proceeding.\n<\/p>\n
(vi)\tFurthermore, being a reasoned award, wrong application of
\nlaw would vitiate the award.\n<\/p>\n
(vii)\tThe award of the arbitrators is vitiated in law as an
\nagreement purported to have been entered into by and between
\nAWHO and the architect was enforced against Sumangal
\nalthough it was not a party thereto.\n<\/p>\n
(viii)\tThe finding of the arbitrator that the frustration was a
\nself-induced one is not based on any pleadings or materials
\non record.  In any event collusion between Sumangal and the
\nmunicipal authorities was neither pleaded nor proved.\n<\/p>\n
(ix)\tIn any view of the matter the learned arbitrator committed a
\nlegal misconduct insofar as they applied a wrong principle
\nof law as regard determination of quantum of damages.\n<\/p>\n
 \tIn support of the aforementioned contentions, reliance has been
\nplaced by Mr. Bhat on Steel Authority of India Ltd. Vs. J.C. Budharaja,
\nGovernment and Mining Contractor [(1999) 8 SCC 122], Shyama Charan
\nAgarwala & Sons Vs. Union of India [(2002) 6 SCC 201], McGregor on
\nDamages, 16th edition, pages 1142 and 1143 and Mertens Vs. Home Freeholds
\nCo. Ltd. and Others [1921] All E.R. Rep. 372.\n<\/p>\n
 \tMr. Arvind Kumar Tiwari, the learned counsel appearing on behalf
\nof the appellant, on the other hand, would submit that as the learned
\narbitrator passed an interim order with the consent of the parties,
\nSumangal at a later stage cannot be permitted to take a different stand.
\nIn view of the interim order passed by one of the learned arbitrators, a
\nnotice inviting tender was issued whereafter contract was awarded to a
\nthird party and, thus, the bid made pursuant thereto could validly be
\nmade the basis of determination of quantum of damages. The plea of
\nfrustration of contract raised by Sumangal has rightly been rejected by
\nthe learned arbitrators as the same was a self-induced one having regard
\nto the fact that it itself got the ban orders issued by the municipal
\nauthorities. In any event Sumangal in terms of the contract being liable
\nfor obtaining sanction of the building plans, must be held to have
\nfailed to perform its part of contract and consequentially has rightly
\nbeen held liable for damages.\n<\/p>\n
FINDINGS:\n<\/p>\n
INTERIM ORDER PASSED BY ONE OF THE ARBITRATORS:\n<\/p>\n
 \tA bare perusal of the order of the learned Arbitrator dated 1st
\nNovember, 1997 would clearly show that interim award was prayed for by
\nthe parties which would have granted substantial reliefs sought for by
\nthem in relation to the title in respect of 14.17 acres of land.  It is
\nadmitted that the parties cooperated with each other in the matter of
\nmeasurement of completed and incompleted works in terms of the
\nArbitrator’s order dated 12th May, 1997 passed in the arbitration
\nproceedings, the compliance whereof was recorded in minute of order
\ndated 19th August, 1997.\n<\/p>\n
 \tThe learned arbitrator admittedly was not inclined to pass an
\ninterim award on the requests of the parties; whereafter only on or
\nabout 23rd October, 1997 an application was filed by AWHO stating:\n<\/p>\n
“That the development of the housing project is
\ncarried out by Party No.2 for it’s allottees on
\nno profit no loss basis which is self financed
\nby the allottees of Party No.2.  Due to breach
\nof contract committed by the Party No.1,
\nallottees of Party No.2 have been denied shelter
\nas well as their life time investments and are
\nsuffering for the want of shelters for
\nthemselves and their families.  Substantial time
\nhas already been lost due to non-performance of
\nParty No.1 and any delay in commencement of the
\nconstruction activity will cause immense
\nfinancial misery and loss of further time (which
\ncannot be given back by any one) to the
\nallottees.  In order to obviate the sufferings
\nof hundreds of allottees who have invested their
\nhard earned money.  Party No.2 therefore prays
\nto the Hon’ble Arbitrator to grant Party No.2
\nfollowing relief:”\n<\/p>\n
 \tThe prayer therein is as under:\n<\/p>\n
“In the premise, it is most respectfully prayed
\nthat in order to enable Party No.2 to commence
\nearly and unjustified completion of unfinished
\nwork as well as development of the housing
\nproject at the risk of the Party No.1 permission
\nand liberty may be granted to Party
\nNo.2\/applicant to forthwith take such steps to
\ncommence and complete the unfinished works
\nincluding all such development work on 14.17
\nacres of land owned by Party No.2 at VIP Road,
\nCalcutta as may be fit and appropriate for the
\nnormal functioning of the housing project and
\npeaceful and safe habitation of the allottees of
\nthe Party No.2\/applicant.\n<\/p>\n
Party No.1, it’s Directors, Officers, employees,
\nagents and\/or attorneys be also directed to hand
\nover the keys of the stores, offices, and
\nmaterial lying at contract site which keys the
\nParty No.1 is illegally holding in it’s custody.
\nThe materials lying at site have already been
\npaid for by Party No.2.\n<\/p>\n
Party No.1, it’s directors, employees, agents
\nand\/or attorneys be directed not to interfere in
\nany manner in the development and construction
\nof the unfinished housing project by Party No.2
\nthrough such agencies as Party No.2 may deem fit
\nand proper.”\n<\/p>\n
 \tSumangal filed a detailed reply thereto.\n<\/p>\n
 \tSumangal further stated that the AWHO was not the owner of the
\nproperty and the real object for such an application was to dispossess
\nSumangal.\n<\/p>\n
 \tIt was further pointed out that such undertaking of the contract
\njob by a third party would frustrate the present arbitration agreement
\nas a result whereof further disputes may arise.  It was contended:\n<\/p>\n
“10.\tThe adjudication of this application
\nwithout a full-fledged examination of the issues
\nwhich have been raised by the parties in these
\nproceedings would render the entire arbitration
\nproceedings infructuous.  It is further stated
\nthat after such directions as prayed for are
\ngiven, the Party No.1 will be deprived of the
\nfruits of any relief which it might obtain on
\nfinal resolution of the disputes involved in
\nthis arbitration proceedings.\n<\/p>\n
11.\tThe allegations contained in the petition
\nare denied (except those which are admitted in
\nrecords of proceedings). The purported
\ncancellation or termination is wrongful.  The
\nquestion of completing the balance
\nwork\/construction at the risk and cost of Party
\nNo.1 does not arise.  The basis of the
\ndevelopment of the housing project between Party
\nNo.2 and its allottees are not known and are
\nneither admitted.  It is denied that Party No.1
\nhas committed any breach.  The allegation
\nrelating to shelter and\/or lifetime investments
\nor suffering are not admitted and in any event,
\ncannot override legal rights.  It is denied that
\ntime has been lost due to alleged non-\n<\/p>\n
performance of Party No.1.  Since the Party No.1
\nis willing to return all moneys which are due to
\nthe Party No.2, the question of suffering
\nfinancial misery of loss cannot arise and the
\nParty No.2 cannot put the blame on the Party
\nNo.1 in these facts and circumstances.\n<\/p>\n
12. The construction work commenced on 14 blocks
\nonly out of a total ordered 16 blocks over an
\narea of 6.36 acres approximately.  The said
\ntotal area of 6.36 acres and the construction
\nthereon belongs to the Party No.1 and the Party
\nNo.1 is entitled to deal with the same.  The
\narea of 7.81 acres over which no construction
\nhave been made also belongs to the Party No.1
\nand the Party No.1 is entitled to deal with the
\nsame.”\n<\/p>\n
 \tIt is, therefore, not correct to contend that the said order was
\npassed on consent of the parties.  For all intent and purport, Sumangal
\ncould not have consented to grant of such a prayer which would virtually
\nput a final seal over the disputes.  We have hereto- before quoted the
\npurported order dated 1st September, 1997 which ex facie demonstrate that
\nthe arbitrator assumed jurisdiction to pass the said interim order at
\nthe behest of AWHO.  Furthermore, as noticed hereinbefore, Sumangal
\nfiled a review application which was also dismissed in the manner
\nnoticed hereinbefore. The said interim order was, thus, not passed with
\nconsent of parties.  If the learned arbitrator has no jurisdiction to
\npass an interim order, even by consent no such jurisdiction could be
\nconferred. (See The United Commercial Bank Ltd. vs. Their Workmen, AIR<\/a>
\n1951 SC 230 and Hakam Singh vs. M\/s Gammon (India) Ltd., AIR<\/a> 1971 SC\n<\/p>\n
740).\n<\/p>\n
In Hiscox \tVs. Outhwaite [1991] 2 Lloyd’s Law Reports 1, it is
\nstated:\n<\/p>\n
“No act of the parties can create in the courts
\na jurisdiction which Parliament has said shall
\nvest, not in the courts, but exclusively in some
\nother body.  Nor again can a party submit to, so
\nas to make effective, a jurisdiction which does
\nnot exist: which is perhaps another way of
\nsaying the same thing.  The argument we are here
\nrejecting seems to be based on a confusion
\nbetween two distinct kinds of jurisdiction: The
\nSupreme Court may, by statute, lack jurisdiction
\nto deal with a particular matter – in this case
\nmatters including superannuation claims under
\ns.8 – but it has jurisdiction to decide whether
\nor not it has jurisdiction to deal with such
\nmatters.  By entering an unconditional
\nappearance, a litigant submits to the second of
\nthese jurisdictions (which exists), but not to
\nthe first (which does not).”\n<\/p>\n
An arbitrator in a situation of this nature had no jurisdiction to
\npass the interim order under the Arbitration Act, 1940 in absence of any
\nspecific agreement in relation thereto. The learned arbitrator by an
\ninterim order could not have placed the parties to a situation which
\nwould travel beyond the subject of disputes and differences referred to
\nthe arbitration. As no claim and counter-claim had been filed before the
\narbitrator, the arbitrator was not even aware of the nature of claims of
\nthe parties.  He neither found any prima facie case nor balance of
\nconvenience for passing the said interim order.  Furthermore, an
\narbitrator is bound by the terms of reference.\n<\/p>\n
 \tAn arbitral tribunal is not a court of law.  Its orders are not
\njudicial orders.  Its functions are not judicial functions.  It cannot
\nexercise its power ex debito justitiae.  The jurisdiction of the
\narbitrator being confined to the fourcorners of the agreement, he can
\nonly pass such an order which may be subject matter of reference.\n<\/p>\n
 \tIn Morgan Stanley Mutual Fund Vs. Kartick Das [(1994) 4 SCC 225]
\nthe jurisdiction of the Consumer Disputes Redressal Forum to pass an
\norder of injunction came up for consideration.  This court having regard
\nto the fact situation obtaining therein formulated the following
\nquestions:\n<\/p>\n
“(1) Whether the prospective investor
\ncould be a ‘consumer’ within the meaning of
\nConsumer Protection Act, 1986 ?\n<\/p>\n
(2) Whether the appellant company ‘trades’
\nin shares ?\n<\/p>\n
(3) Does the Consumer Disputes Redressal
\nForum have jurisdiction in matters of this kind?\n<\/p>\n
(4) What are the guiding principles in
\nrelating to the grant of an ad interim
\ninjunction in such areas of the functioning of
\nthe capital market and public issues of the
\ncorporate sectors and whether certain  ‘venue
\nrestriction clauses’ would require to be evolved
\njudicially as has been done in cases such as
\nState of W. B. v. Swapan Kumar Guha and
\nSanchaita Investments<\/a> ((1982) 1 SCC 561 : 1982
\nSCC (Cri) 283) ?\n<\/p>\n
(5) What is the scope of Section 14 of the
\nAct?”\n<\/p>\n
 \tThis Court held that a prospective investor like the respondent
\ntherein is not a consumer.  The question of the appellant-company
\ntrading in shares does not arise and in that view of the matter the
\nConsumer Disputes Redressal Forum has no jurisdiction whatsoever to pass
\nan order of interim injunction.\n<\/p>\n
 \tHaving regard to Section 14 of the Consumer Protection Act, it was
\nheld:\n<\/p>\n
“44. A careful reading of the above discloses
\nthat there is no power under the Act to grant
\nany interim relief of (sic or) even an ad
\ninterim relief. Only a final relief could be
\ngranted. If the jurisdiction of the Forum to
\ngrant relief is confined to the four clauses
\nmentioned under Section 14, it passes our
\ncomprehension as to how an interim injunction
\ncould ever be granted disregarding even the
\nbalance of convenience.”\n<\/p>\n
 \tIn absence of an agreement to the contrary, in terms of the
\nprovisions of Arbitration Act, 1940 an arbitrator can pass only an
\ninterim award or a final award.  Such awards are enforceable in law.
\nThe award of an arbitrator whether interim or final are capable of being
\nmade a rule of court, decree prepared and drawn up in terms thereof and
\nput to execution.\n<\/p>\n
 \tIt is well-settled that for the purpose of obtaining an interim
\norder a party to the arbitration proceeding during pendency of an
\narbitral proceeding can only approach a court of law in terms of Section
\n41(b) of the Arbitration Act,1940 and not otherwise.  The said provision
\nreads thus:\n<\/p>\n
“41. Procedure and powers of Court.- Subject to
\nthe provisions of this Act of rules made
\nthereunder :\n<\/p>\n
\txxx\t\txxx\t\txxx\t<\/p>\n
(b) the Court shall have, for the purpose of,
\nand in relation to arbitration proceedings, the
\nsame power of making orders in respect of any of
\nthe matters set out in the Second Schedule as it
\nhas for the purpose of, and in relation to any
\nproceedings before the Court :\n<\/p>\n
Provided that nothing in Cl.(b) shall be taken
\nto prejudice any power which may be vested in an
\narbitrator or umpire for making orders with
\nrespect to any of such matters.”\n<\/p>\n
\tIn the instant case the proviso has no application as the
\nArbitrator was not vested with such power.\n<\/p>\n
Jurisdiction of courts in terms of Section 41 of the Act is
\nenumerated in the Second schedule, rules 1 and 4 whereof are as under:\n<\/p>\n
“1. The preservation, interim custody or sale of
\nany goods which are the subject-matter of the
\nreference.\n<\/p>\n
4. Interim injunctions or the appointment of a
\nreceiver.”\n<\/p>\n
Even the Court’s jurisdiction under Section 41(b) of the Act is
\nlimited as it is confined to “for the purpose of and in relation to
\narbitration proceedings”.\n<\/p>\n
Courts, thus, have also no power to grant injunction ex debito
\njustitiae.\n<\/p>\n
\tSee Union of India vs. Raman Iron Foundry<\/a> [(1974) 2 SCC 231] and
\nM\/s H.M. Kamaluddin Ansari and Co. vs. Union of India and Others<\/a> [(1983)
\n4 SCC 417].\n<\/p>\n
We may observe that even provision for stay in a suit under
\nsection 10 C.P.C. is not applicable in relation to an arbitration
\nproceeding.\n<\/p>\n
In Indrajit Sinha vs. B.L. Rathi (AIR 1984 Cal 281), it is stated:\n<\/p>\n
“When Section 32, Arbitration Act, completely
\nprohibits a Civil Court from deciding the
\nexistence and validity of the arbitration
\nagreement and Section 41, Arbitration Act lays
\ndown that the Civil Procedure Code will apply
\nsubject to the provisions and rules of the
\nArbitration Act, 1940, then Section 10, C.P.C.,
\ncannot apply on the facts and circumstances of
\nthis case and the question of its applicability
\ncannot arise.\n<\/p>\n
So far as Court’s inherent jurisdiction under
\nSection 151, C.P.C. is concerned, I do not think
\nthat on the facts and circumstances of this case
\ninherent jurisdiction can be exercised to stay
\nthe pending application in view of the fact that
\nthe City Civil Court is incompetent to decide
\nthe issues pending before me in the application
\nunder Sec. 33 of the Act.”\n<\/p>\n
\tIn Debendra Nath Singha and others vs. Dwijendra Nath Singha and
\nothers reported in AIR 1970 Cal 255, the law is stated in the following
\nterms :\n<\/p>\n
“On a proper construction of Section 41 of the
\nArbitration Act and of Section 41(b) in
\nparticular, I am of the opinion, that the Court
\nhas the power and jurisdiction to appoint a
\nreceiver or to make any order of interim
\ninjunction or to make orders in respect of other
\nmatters set out in the Second Schedule in
\nappropriate cases for the purpose of, and in
\nrelation to arbitration proceedings; but this
\npower and jurisdiction of the Court cannot be
\nexercised, if the exercise of any such power
\nwould prejudice any power which might be vested
\nin an Arbitrator or Umpire for making orders
\nwith respect to any of such matters.  I am
\nfurther of the opinion that in view of the
\nprovisions contained in Section 41 of the
\nArbitration Act, the power and jurisdiction of
\nthe Court to appoint a receiver or to make any
\norder of interim injunction or any order in
\nrespect of the other matters set out in the
\nSecond Schedule are now governed, controlled and
\nregulated by the said section, and apart from
\nthe power and jurisdiction conferred by the said
\nsection, the Court has no power and jurisdiction
\nindependently of the provisions contained in the
\nsaid Section 41 to appoint a receiver, to make
\nany order of interim injunction or any order in
\nrespect of the other matters set out in the
\nSecond Schedule.”\n<\/p>\n
It is useful to notice that such a power has been expressly
\nconferred on the arbitrator in terms of Section 17 of the Arbitration
\nand Conciliation Act, 1996 which is as under:\n<\/p>\n
“17. Interim measures ordered by arbitral
\ntribunal.-(1) Unless otherwise agreed by the
\nparties, the arbitral tribunal may, at the
\nrequest of a party, order a party to take any
\ninterim measure of protection as the arbitral
\ntribunal may consider necessary in respect of
\nthe subject-matter of the dispute.\n<\/p>\n
\t(2) The arbitral tribunal may require a
\nparty to provide appropriate security in
\nconnection with a measure ordered under sub-
\nsection (1).”\n<\/p>\n
A bare perusal of the aforementioned provisions would clearly show
\nthat even under Section 17 of the 1996 Act the power of the arbitrator
\nis a limited one.  It cannot issue any direction which would go beyond
\nthe reference or the arbitration agreement.  Furthermore, an award of
\nthe arbitrator under the 1996 Act is not required to be made a rule of
\ncourt; the same is enforceable on its own force.  Even under Section 17
\nof 1996 Act, an interim order must relate to the protection of subject
\nmatter of dispute and the order may be addressed only to a party to the
\narbitration.  It cannot be addressed to other parties.  Even under
\nSection 17 of the 1996 Act, no power is conferred upon the Arbitral
\nTribunal to enforce its order nor does it provide for judicial
\nenforcement thereof.  The said interim order of the learned Arbitrator,
\ntherefore, being coram non judice was wholly without jurisdiction and,
\nthus, a nullity. (See Kiran Singh and Others Vs. Chaman Paswan and
\nOthers [AIR 1954 SC 340 (6)], Srimathi Kaushalya Devi & Others Vs. Shri
\nK.L. Bansal [(1969) 1 SCC 59], Union of India Vs. Tarachand Gupta and
\nBros. [(1971) 1 SCC 486 at 496], Sushil Kumar Mehta Vs. Gobind Ram Bohra
\n(Dead) through His Lrs. [(1990) 1 SCC 193] and Smt. Kanak & Anr. Vs.
\nU.P. Avas Evam Vikas Parishad & Ors. [2003 (7) SCALE 157]).\n<\/p>\n
WHETHER THE AWARD IS VITIATED AS GENERAL CONDITIONS OF CONTRACT HAD NOT
\nBEEN COMPLIED WITH?\n<\/p>\n
\tBefore the learned arbitrators a question was raised as regard
\napplicability of Clauses 129(e) and 130 of the general conditions of
\ncontract which read as follows:\n<\/p>\n
“DETERMINATION\n<\/p>\n
129. The Organization may, without prejudice to
\nany other right or remedy which shall have
\naccrued or shall accrue thereafter to the
\nOrganization, cancel the contract in part or
\nwhole in any of the following cases :\n<\/p>\n
If Contractor :-\n<\/p>\n
(a)\txxx\txxx\n<\/p>\n
(b)\txxx\txxx\n<\/p>\n
(c)\txxx\txxx\n<\/p>\n
(d)\txxx\txxx\n<\/p>\n
(e) In the opinion of the Organisation\/Architect
\nat any time whether before or after the date or
\nextended date for completion makes defaults in
\nproceeding with the work with due diligence and
\ncontinues in that state after reasonable notice
\nfrom the Architect and or Organisation or\n<\/p>\n
(f)\txxx\txxx\n<\/p>\n
(g)\txxx\txxx”\n<\/p>\n
“130. Whenever the Organisation exercises his
\nauthority to cancel the contract under clause
\n129, he may complete the works by any means at
\nthe contractor’s risk and expense provided
\nalways that in event of cost of completion after
\nalternative arrangements have been finalized by
\nthe Organisation to get the works completed or
\nestimated cost of completion (as certified by
\nthe Architect) and approved by Organisation
\nbeing less than the contract cost, the advantage
\nshall accrue to the Organisation.  If the cost
\nof completion after the alternative arrangements
\nhave been fianlised by the Organisation to get
\nthe work completed or estimated cost of
\ncompletion (as certified by the Architect) and
\napproved by the Organisation exceeds the money
\ndue to the contractor under this contract, the
\ncontractor shall either pay the excess amount
\nassessed by the Architect or the same shall be
\nrecovered from the contractor by other means.”\n<\/p>\n
 \tThe learned arbitrators refused to enter into the questions as to
\nwhether the AWHO had made out a case for canceling the contract and
\ninvoking the risk and expense clause stating :\n<\/p>\n
“We do not consider it necessary to go into the
\nquestion whether clause 130 requires certificate
\nby the Architect in case completion of the work
\nis done at the risk and expense as urged by SSPL
\nor only where the alternative arrangements for
\ncompletion of the work have not been fianlised
\nand estimated cost of completion is to be
\nconsidered, as submitted by AWHO.  In our
\nopinion, clause 130 deals with a situation where
\nAWHO completes or decides to complete the work
\non their own and has no application where the
\ncompletion of\tthe work is being permitted
\nunder an order passed in a judicial\/arbitral
\nproceeding.  The certification by the Architect
\nis intended as a check against an arbitrary
\nclaim towards cost of completion.  Such a check
\nis not required when the completion of the work
\nis done in pursuance of an order in a
\njudicial\/arbitral proceeding because the
\ncourt\/Arbitral Tribunal would examine any such
\ngrievance of the other party.  Since in the
\npresent matter AWHO were allowed to complete the
\nwork under the order of the Sole Arbitrator
\ndated November 1, 1997 which contained
\nappropriate directions regarding the manner in
\nwhich the contract shall be given, the
\ncertification of the Architect contemplated by
\nclause 130 was not required.”\n<\/p>\n
 \tThe approach to the question by the learned arbitrators was wholly
\nerroneous.\n<\/p>\n
 \tAn award made pursuant to an order which has been passed without
\njurisdiction necessarily must be held to be a nullity.  Refusal on the
\npart of the learned arbitrator to consider the effect of clause 130 of
\nthe agreement would amount to a legal misconduct.  Having regard to the
\nfacts and circumstances of the case, as would be discussed in details
\nhereinafter, it was incumbent on the part of the Arbitrators to apply
\n“due diligence” clause contained in clause 129(e), more cautiously.
\nThey were further required to consider as to whether “due diligence”
\nclause be applied where the alleged violation of contract was only in
\nrelation to a small part thereof.  The learned arbitrators were, in law,
\nbound to consider the relevant provisions of the contract and in
\nparticular those which deal with the rights and liabilities of the
\nparties.\n<\/p>\n
 \tThis aspect of the matter has not been taken into consideration by
\nthe learned arbitrators while making the award.  Thus, they failed to
\ntake into consideration a relevant fact.\n<\/p>\n
 \tIn Steel Authority of India Ltd. (supra), this Court categorically
\nstated the law thus:\n<\/p>\n
“It was not open to the arbitrator to ignore the
\nsaid conditions which are binding on the
\ncontracting parties. By ignoring the same, he
\nhas acted beyond the jurisdiction conferred upon
\nhim. It is settled law that the arbitrator
\nderives the authority from the contract and if
\nhe acts in manifest disregard of the contract,
\nthe award given by him would be an arbitrary
\none. This deliberate departure from the contract
\namounts not only to manifest disregard of the
\nauthority or misconduct on his part, but it may
\ntantamount to mala fide action.”\n<\/p>\n
 \tIt was stated”\n<\/p>\n
“Further, the Arbitration Act does not give any
\npower to the arbitrator to act arbitrarily or
\ncapriciously. His existence depends upon the
\nagreement and his function is to act within the
\nlimits of the said agreement. In Continental
\nConstruction Co. Ltd. v. State of M.P.<\/a> (1988) 3
\nSCC 82) this Court considered the clauses of the
\ncontract which stipulated that the contractor
\nhad to complete the work in spite of rise in the
\nprices of materials and also rise in labour
\ncharges at the rates stipulated in the contract.\n<\/p>\n
It is to be reiterated that to find out
\nwhether the arbitrator has travelled
\nbeyond his jurisdiction and acted beyond
\nthe terms of the agreement between the
\nparties, the agreement is required to be
\nlooked into. It is true that
\ninterpretation of a particular condition
\nin the agreement would be within the
\njurisdiction of the arbitrator. However,
\nin cases where there is no question of
\ninterpretation of any term of the
\ncontract, but of solely reading the same
\nas it is and still the arbitrator ignores
\nit and awards the amount despite the
\nprohibition in the agreement, the award
\nwould be arbitrary, capricious and without
\njurisdiction. Whether the arbitrator has
\nacted beyond the terms of the contract or
\nhas travelled beyond his jurisdiction
\nwould depend upon facts, which however
\nwould be jurisdictional facts, and are
\nrequired to be gone into by the court. The
\narbitrator may have jurisdiction to
\nentertain claim and yet he may not have
\njurisdiction to pass award for particular
\nitems in view of the prohibition contained
\nin the contract and, in such cases, it
\nwould be a jurisdictional error. For this
\nlimited purpose reference to the terms of
\nthe contract is a must.\n<\/p>\n
 \t\t\t\t\t\t(Emphasis Supplied)<\/p>\n
 \tIn Shyama Charan Agarwala (supra) this Court referred to the said
\ndecision.\n<\/p>\n
 \tA Bench of this Court recently in Bharat Coking Coal Ltd. Vs. M\/s.
\nAnnapurna Construction [2003 (7) SCALE 20] upon referring to a large
\nnumber of decisions stated:\n<\/p>\n
“The question is as to whether the claim of the
\ncontractor is d’hors the terms or not was a
\nmatter which fell for consideration before the
\narbitrator.  He was bound to consider the same.
\nThe jurisdiction of the arbitrator in such a
\nmatter must be held to be confined to the four-
\ncorners of the contract.  He could not have
\nignored an important clause in the agreement;
\nalthough it may be open to the arbitrator to
\narrive at a finding on the materials on records
\nthat the claimant’s claim for additional work
\nwas otherwise justified.”\n<\/p>\n
 \tAs regard the duty of the arbitrator to take into consideration
\nthe relevant provisions contained in the agreement, it was observed:\n<\/p>\n
“So far as these items are concerned, in
\nour opinion, the learned sole arbitrator should
\nhave taken into consideration the relevant
\nprovisions contained in the agreement as also
\nthe correspondences passed between the parties.
\nThe question as to whether the work could not be
\ncompleted within the period of four months or
\nthe extension was sought for on one condition or
\nthe other was justifiable or not, which are
\nrelevant facts and were required to be taken
\ninto consideration by the arbitrator.\n<\/p>\n
 \tIt is now well settled that the Arbitrator
\ncannot act arbitrarily, irrationally,
\ncapriciously or independent of the contract.”\n<\/p>\n
 \tThis Court further opined:\n<\/p>\n
“There lies a clear distinction between an
\nerror within the jurisdiction and error in
\nexcess of jurisdiction. Thus, the role of the
\narbitrator is to arbitrate within the terms of
\nthe contract. He has no power apart from what
\nthe parties have given him under the contract.
\nIf he has travelled beyond the contract, he
\nwould be acting without jurisdiction, whereas if
\nhe has remained inside the parameter of the
\ncontract, his award cannot be questioned on the
\nground that it contains an error apparent on the
\nface of the records.”\n<\/p>\n
 \tReferring to paragraph 577 of Halsbury’s Laws of England, 4th
\nedition, Commercial Arbitration by Mustill and Boyd at page 598, Alopi
\nParshad & Sons Ltd. Vs. Union of India [(1960) 2 SCR 793], Heyman Vs.
\nDarwin [1942 (1) All ER 327], Associated Engineering Vs. Govt. of A.P.
\n[(1991) 4 SCC 93], State of Orissa Vs. Dandasi Sahu [(1988) 4 SCC 12],
\nK.P. Poulose Vs. State of Kerala [(1975) 2 SCC 236], K.V. George Vs. The
\nSecretary to Government, Water and Power Dept, Tri-vendrum [(1989) 4 SCC
\n595], Satish Kumar v. Surinder Kumar<\/a> [AIR 1970 SC 833], Union of India
\nvs. Jain Associates and Another<\/a> [(1994) 4 SCC 665], Sikkim Subba
\nAssociates Vs. State of Sikkim [(2001) 5 SCC 629], Maharashtra State
\nElectricity Board Vs. Sterilite Industries (India) and Another [(2001) 8
\nSCC 482], W.B. State Warehousing Corporation and Another Vs. Sushil
\nKumar Kayan and Others [(2002) 5 SCC 679], Bharat Coking Coal Ltd. Vs.
\nL.K. Ahuja & Co. [(2001) 4 SCC 86] and Ispat Engineering & Foundry
\nWorks, B.S. City, Bokaro vs. Steel Authority of India Ltd., B.S. City,
\nBokaro<\/a> [(2001) 6 SCC 347] this Court observed:\n<\/p>\n
“However, as noticed hereinbefore, this
\ncase stands on a different footing, namely, that
\nthe arbitrator while passing the award in
\nrelation to some items failed and\/or neglected
\nto take into consideration the relevant clauses
\nof the contract, nor did he take into
\nconsideration the relevant materials for the
\npurpose  of arriving at a correct (sic finding
\nof) fact.  Such an order would amount to
\nmisdirection in law.”\n<\/p>\n
 \tBefore the learned arbitrators a question arose as to whether
\ncertification of architect as regard estimated cost of completion was a
\ncondition precedent for determination of the quantum of damages.
\nConstruction of clauses 129 and 130 having regard to the fact situation
\nobtaining herein was mandatorily required to be considered by the
\nlearned arbitrators.  They could not have been simply ignored the same
\non the premise that an interim order has been passed by the arbitrator.
\nAn arbitrator cannot be equated with a court of law.  Whereas court has
\nan inherent power; an arbitrator does not have.  It is a tribunal of
\nlimited jurisdiction.  Its jurisdiction is circumscribed by the terms
\nand reference.  An arbitrator can act only within the fourcorners of the
\nagreement and not beyond thereto.\n<\/p>\n
 \tYet again this Court in Union of India Vs. M\/s. V. Pundarikakshudu
\nand Sons and Anr.<\/a> [2003 (7) SCALE 323] dealt in details about an award
\nwhich was found to be inconsistent, observing:\n<\/p>\n
“The question as to whether one party or the
\nother was responsible for delay in causing
\ncompletion of the contract job, thus, squarely
\nfell for consideration before the arbitrator.
\nThe arbitrator could not have arrived at a
\nfinding that both committed breaches of the
\nterms of contract which was ex facie
\nunsustainable being wholly inconsistent.  Clause
\n54 of the contract could be invoked only when
\nthe first respondent committed breach of the
\nterms of the contract.  An action in terms
\nthereof could be taken recourse to in its
\nentirety or not at all. If one part of the award
\nis inconsistent with the other and furthermore
\nif in determining the disputes between the
\nparties the arbitrator failed to take into
\nconsideration the relevant facts or based his
\ndecision on irrelevant factors not germane
\ntherefor; the arbitrator must be held to have
\ncommitted a legal misconduct.”\n<\/p>\n
 \tThis Court made a distinction between an award passed within
\njurisdiction and an award without jurisdiction stating:\n<\/p>\n
“In this case the District Judge as also the
\nHigh Court of Madras clearly held that the award
\ncannot be sustained having regard to the
\ninherent inconsistency contained therein.  The
\narbitrator, as has been correctly held by the
\nDistrict Judge and the High Court, committed a
\nlegal misconduct in arriving at an inconsistent
\nfinding as regard breach of the contract on the
\npart of one party or the other.  Once the
\narbitrator had granted damages to the first
\nrespondent which could be granted only on a
\nfinding that the appellant had committed breach
\nof the terms of contract and, thus, was
\nresponsible therefor, any finding contrary
\nthereto and inconsistent therewith while
\nawarding any sum in favour of the appellant
\nwould be wholly unsustainable being self
\ncontradictory.”\n<\/p>\n
\tThis Court cannot sit in appeal over the award of the Arbitrator
\nbut can certainly interfere when the award suffers from non-application
\nof mind or when relevant fact is ignored or irrelevant fact not germane
\nfor deciding the dispute is taken into consideration.\n<\/p>\n
 \tWhere an order has been passed without jurisdiction, the
\nprinciples of estoppel, waiver and acquiescence will have no
\napplication.  There is no estoppel against statute.\n<\/p>\n
 \tThe award, therefore, suffers from legal misconduct on the part of
\nthe arbitrators.\n<\/p>\n
ROLE OF AN ARCHITECT:\n<\/p>\n
 \tAn architect plays an important role in execution of a building
\ncontract.\n<\/p>\n
 \tIn Hudson’s Building and Engineering Contracts at page 243, it is
\nstated:\n<\/p>\n
“An architect is a person who professes skill in
\nthe art of designing buildings to meet his
\nclient’s need, in the organization of the
\ncontractual arrangements for their construction,
\nand in the supervision of work and contractual
\nadministration until final completion.  So a
\nmajor part of an architect’s activities will be
\nconcerned with the preparation of contracts, the
\nobtaining and recommending for acceptance of
\nestimates from builders, the selection of
\nspecialist contractors, the inspection of work
\ncarried out, the solution of difficulties
\nencountered during the course of erecting the
\nbuilding, condemning and dealing with defective
\nwork, the issue of certificates under the terms
\nof the contract and advising or ruling on
\ndisputes between the owner and the contractor.
\nThus it will be seen that although it is the
\nprimary and vital function of the architect to
\ncreate new ideas of amenity and design and to
\nset down those ideas on a drawing-board, his
\nduties extend far into other fields of technical
\nknowledge and business management. On the other
\nhand, while he will remain primarily responsible
\nto the owner for all matters of design, modern
\ntechniques of construction and specialized
\nbuilding products and processes in fact demand
\nexpertise and skill for which he will inevitably
\nnot always be personally qualified.  The
\nemployment of outside consultants or the less
\nsatisfactory (from the legal point of view if
\nthe employer’s interest is to be properly
\nprotected) device of delegating important design
\nfunctions to specialist and sub-contractors and
\nsuppliers, are therefore a frequent and
\ninevitable accompaniment of many major building
\nprojects but, as will be seen, the architect is
\nthe “captain of the ship” and will be the person
\nto whom the owner will normally look if a design
\nfailure occurs, though in some, but not all,
\ncases he will adequately discharge his own
\noverall responsibility if he exercises due
\nprofessional care in referring matters outside
\nhis own expertise to a consultant or specialist
\nsupplier or contractor, particularly if these
\nlatter are engaged on behalf of the owner and
\nnot by the architect himself.”\n<\/p>\n
\tAn Architect has, thus, various roles to play including
\nindependently ruling on disputes between the owner and the contractor.
\n \tIn R. Vs. Architects’ Registration Tribunal, ex. P. Jaggar [1945]
\n2 All ER 131, it is stated:\n<\/p>\n
“An architect is one who possesses, with due
\nregard to aesthetic as well as practical
\nconsideration, adequate skill and knowledge to
\nenable him (i) to originate, (ii) to design and
\nplan, (iii) to arrange for and supervise the
\nerection of such buildings or other works
\ncalling for skill in design and planning as he
\nmight in the course of his business reasonably
\nbe asked to carry out or in respect of which he
\noffers his services as a specialist.”\n<\/p>\n
 \tAn architect has a great role to play in making an estimate.  He
\nis expected to neither under-estimate nor can over-estimate value of the
\nworks. He is bound by his conduct to the owner.  He can be sued for his
\nnegligence. For his misconduct, fees payable to him may be forfeited.
\nHe may incur other liabilities not only under the contract but also
\nunder statute.\n<\/p>\n
 \tClause 130 of the contract casts a burden upon an architect to
\nestimate the damages when a risk and cost clause is invoked against the
\ncontractor.  It is possible to hold that the invocation of arbitration
\nclause would be subject to exercise of the jurisdiction by the architect
\nas a demand has to be made upon the contractor depending on such
\nestimate made by the architect.\n<\/p>\n
 \tIn a given case having regard to the reasonableness of the
\nestimated amount a contractor may pay the same or challenge the same
\neither by an arbitrator or by a court of law.  A dispute may fall for
\nadjudication by an arbitrator or by a court of law only in the event a
\ncontractor refuses to accept such estimate.\n<\/p>\n
 \tIn G.T. Gajria’s Law Relating to Building and Engineering
\nContracts in India, Fourth Edition at page 563, it is stated:\n<\/p>\n
“In a contract, where there is certificate
\nclause which is a condition precedent to payment
\nand an arbitration clause of some third person
\nother than the architect, the builder cannot
\nrecover without the certificate, and neither the
\narbitrator nor the court (apart always from some
\nmisconduct of the architect), has jurisdiction
\nto consider any matters.  In respect of which
\nthe certificate of the architect by the terms of
\nthe contract is made a condition precedent.”\n<\/p>\n
\tAn architect sometimes is appointed as an arbitrator and no
\npayment can be made except on his certificate and sometimes his position
\nis that of a person whose certificate is held to be a condition
\nprecedent for invoking the arbitration clause [See Bristol Corporation
\nv. John Aird & Co. (1911-13) All E.R. Rep. 1076, Hickman and Co. v.
\nRoberts (1911-13) All E.R. Rep. 1485 and South India Rly. Co. Ltd. v.
\nS.M. Bhashyam Naidu, AIR 1935 Mad. 356].\n<\/p>\n
\tThese decisions were considered by a Division Bench of the Madhya
\nPradesh High Court in Heavy Electricals (India) Ltd. Bhopal vs. Pannalal
\nDevchand Malviya [AIR 1973 MP 7].\n<\/p>\n
\tIn this view of the matter, we are of the opinion that the
\narbitrator could not have ignored the role of the architect in terms of
\nclause 130 of the agreement only on the ground that AWHO had been
\npermitted to raise construction, pursuant to or in furtherance of an
\ninterim order. Non-consideration of the said clause in proper
\nperspective by the Arbitrator would amount to a legal misconduct on
\ntheir part.\n<\/p>\n
WHOSE DUTY IT WAS TO GET THE PLAN SANCTIONED:\n<\/p>\n
\tM\/s. Dulal Mukherjee & Associates had been the architect of
\nSumangal.  By reason of the agreement, however, he became an architect
\nof the employer.  It was in the aforementioned situation, the following
\nwas agreed between the parties and the same was recorded in the contract
\nagreement as under:\n<\/p>\n
“26. Company informed that they have negotiated
\nwith M\/s Dulal Mukherjee & Associates, 28-B,
\nShakespeare Sarani, Calcutta as Architects for
\nproviding all Architectural Services for this
\nturn key project.  As per the understanding of
\nthe Company with the Architect, the Company has
\nto pay to the Architect at the firm rate of
\nRs.6\/- per sq. ft. of built-up area excluding
\nstilt area for the turn key project.  The stilt
\narea is not to be taken into account while
\ncalculating the amount of fee payable to the
\nArchitect.  Architect fee for all internal
\nservices, development of land, all external
\nservices and stilt area is deemed to be included
\nin the rates of Rs.6.00 per sq. ft. for built up
\narea.\n<\/p>\n
27. It is hereby mutually agreed and accepted
\nthat the services of the Architect M\/s Dulal
\nMukherjee & Associates, with immediate effect
\nshall be controlled by the Organisation and the
\npayments due to the Architects will be made by
\nthe Organisation direct.  For making this
\npayment an amount calculated at Rs.6.00 per sq.
\nft. of built up area as per para 16(d) above
\nshall not be released by the Organisation to the
\nCompany.  The payments due to the Architect for
\nhis architectural services shall be released by
\nthe Organisation in terms of separate agreement
\nentered by the Organisation with M\/s Dulal
\nMukherjee & Associates, the Architects.  For the
\nArchitectural Services rendered by the Architect
\nupto the signing of this agreement, the Company
\nis fully responsible for any omissions and
\ncommissions.  For all architectural services
\nafter the signing of this agreement, the
\nOrganisation will take the responsibility.  The
\nCompany has paid a sum of Rs.5.00 lacs as adhoc
\nadvance to the Architect.  This amount shall be
\nreimbursed by the Organisation to the Company
\nand shall be adjusted against the total amount
\npayable to the Architects by the Organisation.”\n<\/p>\n
 \tArchitectural services have not been defined in the agreement.
\nHowever, in a letter dated 12.6.1991 issued by AWHO to M\/s. Dulal
\nMukherjee & Associates it was mentioned that obtaining and getting
\npreparation of municipal drawings and obtaining sanctions was the
\narchitect’s responsibility, stating:\n<\/p>\n
“1. Please refer to your letter of 04 Jun 91
\nfollowing the detailed discussions on the
\nproject held on 03 & 04 Jun 91 at this HQ.\n<\/p>\n
2. As per understanding arrived at between AWHO
\nand M\/s. Sumangal Services Pvt. Ltd. your
\nemployment and payment will be controlled by
\nAWHO.  Please note that the rate of Rs.6\/- per
\nsqft. as agreed between you and M\/s. Sumangal
\nServices Pvt. Ltd. remain operative for
\nArchitectural services including supervision.\n<\/p>\n
3. For the release of payment the amount of Rs.
\n5 lacs that is already been paid by M\/s.
\nSumangal Services Pvt. Ltd. to you as on date
\nwill also be taken into account.  Recoveries @
\nRs. 6\/- per sq. ft. will be considered as
\noverall payment and will be recovered from M\/s.
\nSumangal Services Pvt. Ltd. during execution of
\nproject and paid to you on time to time through
\nyour bills.\n<\/p>\n
4. It is also understood that prior to issue of
\nthis letter following works towards the project
\nhas already been undertaken by you.\n<\/p>\n
a)\tPreparation of conceptual plan.\n<\/p>\n
b)\tInteraction with local sanctioning
\nauthorities.\n<\/p>\n
c)\tPreparation of Municipal drawings and
\nobtaining sanction.\n<\/p>\n
5. Based on the discussions between AWHO, M\/s.
\nSumangal Services Pvt. Ltd. and you held in
\nDelhi on 03 & 04 Jun 91 it is decided that till
\nProject Manager and staff has been posted, you
\nwill monitor the progress on behalf of AWHO.
\nYou will also forward a weekly report on the
\nsame.\n<\/p>\n
6. The contract documents between you and AWHO
\nis under drafting and would come in effect when
\nready.\n<\/p>\n
7. Please acknowledge.”\n<\/p>\n
 \tDespite the fact, by reason of the contract agreement the services
\nof the architect were placed solely at the disposal of AWHO, it
\npurported to have entered into another agreement wherein Sumangal was
\nnot a party on or about 24th February, 1992 wherein the responsibility of
\nthe architect was defined as under:\n<\/p>\n
“12. Architects Responsibilities. Except to the
\nextent otherwise stipulated in this agreement,
\nthe responsibility and services of the Architect
\nshall include the  responsibilities  and
\nobligations of  Architects as laid down by the
\nIndian Institute of Architects (except net
\nliability and net schedule of payments) and will
\nparticularly include the following obligations
\nof the Architect :-\n<\/p>\n
\t(e)\tPreparation of drawings for
\nsubmission to civil agencies excluding obtaining
\nsanctions which will be done by
\nbuilder\/contractor but should guide the
\nbuilder\/contractor but should guide the builder\/
\ncontractor in obtaining the same.”\n<\/p>\n
 \tLegally the said agreement was not binding on Sumangal as it was
\nnot a party thereto.\n<\/p>\n
Para 17 of the agreement provides for stages for release of
\npayments which reads thus:\n<\/p>\n
\t\t         \"Stage\t\t\t          Rate per sq.\n                                             ft.of plinth \n\t\t\t\t\t\t\t\t     area     \n\n(aa)\nSanction of plans by Zila \nParishad\/Gram Panchayat\nRs.3.00\n(ab)\nOn registration of converted \nland\nRs.33.00\n(ac)\nDe-watering land and clearance \nof hyaclnth\nRs.2.00\n(ad)\nSurvey and soil test\nRs.1.00\n(ae)\nFilling of earth to raise the \nlevel to VIP Road\nRs.12.00\n(af)\nAlongwith the progress of \nbuilding construction \nRs.15.00\n\n         Total\nRs.66.00\"\n\t\t\n \n<\/pre>\n
\tIt does not appear to be the case of the AWHO that there is a
\ncontractual obligation on the part of Sumangal to get the plan
\nsanctioned.  In any event, such a contractual obligation for the purpose
\nof attracting the penal clauses must appear from the contract itself and
\nnot from any other document.\n<\/p>\n
 \tThe learned arbitrators in their award did not point out any
\nspecific clause in terms whereof it was for Sumangal to get the plan
\nsanctioned.  It merely relying or on the basis of a letter of Sumangal
\nmade it partially liable therefor.\n<\/p>\n
\tNo document exists to show that Sumangal had any legal liability
\nto get the Municipal plan sanctioned.\n<\/p>\n
 \tSection 204 of the West Bengal Municipal Act, 1993 prohibits
\nerection of any building excepting with the previous sanction of the
\nBoard of Councillors.  In terms of Section 205 it is for the person who
\nintends to erect or re-erect a building to submit an application with a
\nbuilding plan in such form.\n<\/p>\n
\tThe provisions of the West Bengal Municipal Act, 1993 go to show
\nthat it was for AWHO to submit an application for sanction of the
\nbuilding plan together with requisite documents therefor.  Ordinarily,
\nthe duty to pursue sanction of a plan is of the owner or its authorised
\nrepresentative.  Such a job, it is common experience, is done by a
\nqualified architect or the persons having regard to their duties to
\nprepare a building plan in terms of the building laws so as to enable
\nthem to make clarifications as and when called upon by the statutory
\nauthorities or in a given case make modifications or alterations
\nthereof. The building plans prepared by the architects only would be
\nsubject-matter of sanction by the municipal authorities.  Furthermore,
\nfrom the letter dated 8.12.1994 also it is evident that AWHO prayed for
\nalterations of the Master Plan and in the said letter it has  clearly
\nbeen stated that M\/s Dulal Mukherjee & Associates had been appointed by
\nthem as consulting architect for the project.  From a perusal of the
\nletter dated 21.7.1995 issued by the Rajarhat Gopalpur Municipality to
\nShri Manohar Singh, Project Manager, AWHO, it would appear that the
\nauthor thereof had discussed the matter with Shri Manohar Singh as also
\nwith M\/s Dulal Mukherjee & Associates and only with them, views were
\nexchanged as regard the norms of Municipal Rules and Regulations. From
\nthe letter dated 27.5.1995 issued by AWHO to Sumangal, it appears that
\nShri Manohar Singh, its Project Manager along with representatives of
\nM\/s Dulal Mukherjee & Associates had a detailed meeting with Chairman,
\nRajarhat Gopalpur Municipality wherein it was agreed that the work need
\nnot be stepped  for which its plans had already been approved.  The
\nalleged responsibility of Sumangal to get the plan sanctioned has been
\nraised only in July-August, 1995, i.e. after the dispute between the
\nparties started.\n<\/p>\n
\tThe municipality made AWHO responsible for coordination and
\nconstruction activities.  The stop work notice was served upon AWHO.
\nAWHO in its letter, as noticed hereinbefore, categorically stated that
\nits representative with the authorised representative of the architect
\nsaw the Chairman in 1995.  AWHO and not Sumangal made other
\ncorrespondences with the Municipality.  If Sumangal was assisting them
\nin getting the plan passed, it, in law, did not incur any liability
\ntherefor. The findings of the learned arbitrators, therefore, do not
\nborne out from the records and are perverse.\n<\/p>\n
\tIt will amount to giving of premium to illegality if it be held
\nthat a party can ignore statutory injunction on the specious plea that
\nthe same is minor in nature and maybe validated by the statutory
\nauthorities in future.  Neither any party can undertake any construction
\nactivity on the pains of facing criminal charge nor any court of
\nlaw\/Arbitral Tribunal encourage such violation either directly or
\nindirectly.\n<\/p>\n
\tFurthermore, risk and cost clause cannot be invoked on failure of
\nthe party to respond to its self-imposed obligation.  Damages are to be
\npaid for willful breach of the terms or conditions of the contract.
\nSuch a breach must be in relation to an express agreement entered into
\nby and between the parties.  An alleged breach on the part of a builder
\ncannot be founded on a mere ipse dixit.  The learned arbitrators in
\ntheir award purported to have held :\n<\/p>\n
“…That SSPL had a role in getting the plans
\nsanctioned by the competent authority is borne
\nout by letter of AWHO to SSPL dated October 25.
\n1995 (Ex.E-45, AWHO, Vol.3, p.356) and the reply
\nof SSPL dated December 9, 1994 (Ex.E-103, AWHO,
\nVol.17, p.54) to the said letter of AWHO .  In
\nthe said letter of AWHO dated October 25, 1994,
\nit was stated :\n<\/p>\n
“7. Sanctioning of building plan and
\nrevised lay out plan.  Sanction of
\nbuilding plan and revised lay out plans
\nhas already been considerably delayed.
\nThis is effecting the progress of the work
\nalso.  Though DMA is taking action but the
\nfollow up action as a part of the turnkey
\nproject is to be taken by you.  Please
\nensure that the sanction is obtained
\nwithout further delay.” (AWHO Vol.3,
\np.357, para 7)<\/p>\n
SSPL in their reply dated December 9, 1994 said
\n:\n<\/p>\n
“g) Sanctioning of building plan – You
\nhave been informed during several
\ndiscussions in your office in New Delhi
\nthat there had been structural change in
\nthe local authority system affecting the
\nproject area.  For some considerable
\nperiod vacuum existed in many standard
\nlocal govt. functions.  However, the new
\nMunicipality authority has recently been
\nformed.  We are following up with the new
\nauthority in respect of the sanctioning
\nprocess.” [AWHO, Vol.17, p.56(g)]    <\/p>\n
\tThe letter dated 25.10.1994 referred to in the award clearly shows
\nthat the architect was asked to take action but allegedly the follow up
\naction was to be taken by Sumangal only on the ground that the project
\nwas a turnkey one.  Sumangal’s letter dated 9.12.1994 merely stated that
\nthere had been structural change in the local authority system affecting
\nthe project area and there had been some vacuum in many standard local
\ngovernment functions and that they had been following up with the new
\nauthority in respect of the sanctioning process.  Presumably in the
\naforementioned backdrop, the learned arbitrators observed :\n<\/p>\n
“We are, therefore, unable to hold that the
\nentire responsibility for obtaining sanction for
\nthe plans from the competent authority had been
\ntransferred from SSPL to AWHO after June 12,
\n1991 and thereafter AWHO and DMA were
\nresponsible for obtaining the said sanction.”\n<\/p>\n
\tThus, merely some role had been attributed to Sumangal in the
\nmatter of getting the plan sanctioned and not a breach of contract
\nleading to incurring its liability under clause 130 of the agreement.\n<\/p>\n
EFFECT OF SUCH AGREEMENT, ASSUMING THERE WAS ONE<\/p>\n
 \tThere cannot be an agreement that somebody would be bound to
\nobtain a statutory order from the statutory authorities, as thereover,
\nhe would have no control.\n<\/p>\n
 \tIn the Law Lexicon, the maxim ‘Ex turpi causa non oritur actio’ is
\ndefined as:\n<\/p>\n
“On a bad (illegal) consideration on action can
\narise.”\n<\/p>\n
 \tAs regard the question as to whether such a contract in its
\nentirety or to some extent would be illegal or not which would give rise
\nto further question as regard its enforceability, we may notice the
\nfollowing passage from Immami Appa Rao and Others Vs. Gollapalli
\nRamalingamurthi and Ors. [(1962) 3 SCR 739]:\n<\/p>\n
“Reported decisions bearing on this question
\nshow that consideration of this problem often
\ngives rise to what may be described as a battle
\nof legal maxims. The appellants emphasised that
\nthe doctrine which is pre-eminently applicable
\nto the present case is ex dolo malo non oritur
\nactio or ex turpi cause non oritur actio. In
\nother words, they contended that the right of
\naction cannot arise out of fraud or out of
\ntransgression of law; and according to them it
\nis necessary in such a case that possession
\nshould rest where it lies in pari delicto potior
\nest conditio possidenties; where each party is
\nequally in fraud the law favours him who is
\nactually in possession, or where both parties
\nare equally guilty the estate will lie where it
\nfalls. On the other hand, respondent 1 argues
\nthat the proper maxim to apply is nemo allegans
\nsuam turpitudinum audiendum est, whoever has
\nfirst to plead turpitudinum should fail; that
\nparty fails who first has to allege fraud in
\nwhich he participated. In other words, the
\nprinciple invoked by respondent 1 is that a man
\ncannot plead his own fraud. In deciding the
\nquestion as to which maxim should govern the
\npresent case it is necessary to recall what Lord
\nWright, M. R. observed about these maxims in
\nBerg v. Sadler and Moore ([1937] 2 K. B. 158,\n<\/p>\n
162). Referring to the maxim ex turpi causa non
\noritur actio Lord Wright observed that “this
\nmaxim, though veiled in the dignity of learned
\nlanguage, is a statement of a principle of great
\nimportance; but like most maxims it is much too
\nvague and much too general to admit of
\napplication without a careful consideration of
\nthe circumstances and of the various definite
\nrules which have been laid down by the
\nauthorities”.\n<\/p>\n
 \tIn Kuju Collieries Ltd. Vs. Jharkhand Mines Ltd. and Others [AIR
\n1974 SC 1892: (1974) 2 SCC 533] this Court held that in relation to a
\ncontract which is hit by Section 23 of the Contract Act Section 65 and
\nSection 70 of the Contract Act shall not apply.  Only in a case where a
\ncontract has become void due to subsequent happenings, the advantage
\ngained by a person should be restored.\n<\/p>\n
 \tThe building plans would be sanctioned provided the same are in
\naccordance with the statutory building rules.  If admittedly the plans
\nas also the constructions were not in terms of rules, question of
\ngetting them sanctioned by a statutory authority would not arise.  Such
\na contract, it is reiterated, would be illegal.  Principle of estoppel
\nwill have not application in relation thereto as that part of the
\nagreement itself would not be enforceable.  In the event, however, the
\nbuilder was merely required to take follow-up action in the matter with
\nthe authorities, the contract may be valid but in that event it must not
\nonly be pleaded and proved that there existed an agreement in that
\nbehalf, but also to how and to what extent the builder failed to perform
\nits part of the contract.  The findings of the learned arbitrators are
\nwithout any materials and without applying the correct legal principles
\nand, thus, the same cannot be sustained.\n<\/p>\n
 \tAdmittedly, the deviations which were minor ones were regularized
\nonly on 23rd April, 1997.  The contract, however, stood terminated on 17th
\nOctober, 1995.\n<\/p>\n
 \tEven in the ordinary course, Sumangal could not have carried out
\nany construction activities in anticipation that such deviations might
\nbe regularized.  Whether such deviations would be regularized in respect
\nof Phase I or whether building plans for Phase II and Phase III would be
\nsanctioned and if so within what time could only be a matter of
\nspeculation but the same would be irrelevant for determining the
\nliabilities of the parties which was required to be guided by commercial
\nconsiderations.\n<\/p>\n
\tThe liability to pay damages must arise out of contract and not
\notherwise.  The award does not specifically say so.\n<\/p>\n
FRUSTRATION OF CONTRACT:\n<\/p>\n
 \tSection 56 of the Indian Contract Act reads thus:\n<\/p>\n
“Agreement to do impossible act:- An agreement
\nto do an act impossible in itself is void.\n<\/p>\n
Contract to do act afterwards becoming
\nimpossible or unlawful:-A contract to do an act
\nwhich, after the contract is made, becomes
\nimpossible, or, by reason of some event which
\nthe promisor could not prevent, unlawful,
\nbecomes void when the act becomes impossible or
\nunlawful.\n<\/p>\n
Compensation for loss through non-performance of
\nact known to be impossible or unlawful:-Where
\none person has promised to do something which he
\nknew, or, with reasonable diligence, might have
\nknown, and which the promise did not know, to be
\nimpossible or unlawful, such promisor must make
\ncompensation to such promisee for any loss which
\nsuch promisee sustains through the non-
\nperformance of the promise.”\n<\/p>\n
Impossibility to fulfill the contractual obligation may arise in
\ndifferent fact situations.\n<\/p>\n
 \tStatutory injunction by a statutory authority may be one of such
\ncauses.  A building bye-law must be scrupulously followed.  Violation of
\nSection 204 of the West Bengal Municipal Act, 1993 attracts penal
\nprovisions contained in Section 440.  It is, therefore, mandatory in
\nnature.  The correspondences between AWHO and the Municipality clearly
\nshow that even infrastructural works were not permitted to be carried
\nout.  Sumangal, therefore, cannot be said to have  committed any
\nillegality in complying with the stop work notice.  To what extent it
\ncommitted breach of the terms of the contract, assuming that it could
\nhave carried out some job as pointed out by AWHO would depend upon the
\ncommercial viability as a large number of workmen were to be engaged
\nalthough it cannot carry out the major construction work, which was a
\nrelevant factor for determining the quantum of damages.  Sumangal might
\nhave been partially liable but it cannot be faulted when it refused to
\ncarry out any constructional work in violation of the stop work notice
\nwhich would attract the penal provisions of Section 440 of the West
\nBengal Municipal Act, 1993.\n<\/p>\n
 \tThe learned arbitrators were also bound to take into consideration
\nthis aspect of the matter.  They failed to do so and misdirected
\nthemselves in law.\n<\/p>\n
\tIn an interesting article titled “The Principle of Impossibility
\nin Contract” by H.W.R. Wade published in Law Quarterly Review Volume 56
\npage 519, it is stated:\n<\/p>\n
“Two points emerge from the argument so far: (I)
\nThere can exist no duty to do an impossible act.
\n(II) A promise is, normally and primarily, a
\npromise of performance simply, and not of
\ndamages in the alternative.  The effect of
\nsupervening impossibility on an existing duty
\ncan now be determined, and in view of conclusion
\n(I) the answer is a simple one.  It must be that
\nthe impossibility causes the duty to cease to
\nexist.  For a duty either exists or it does not\n<\/p>\n
– that is to say, every duty continues until it
\nis discharged, and discharge is the only process
\nknown to the law by which a duty once legally
\nundertaken can be put off the shoulders of the
\nobligee.  Its effect is a complete removal of
\nthe obligation, and discharge by impossibility
\nof performance is no less perfect than discharge
\nby the performance of the original promise.  In
\nthe words of Professor Corbin already cited,
\n‘society no longer commands performance’ –
\nnothing more can be demanded of the promisor.”\n<\/p>\n
 \tIn Emden and Gill’s Buildings Contracts and Practice, Seventh
\nEdition, page 162-163, it is stated that liability to pay damages for
\nnon-performance of an impossibility only arises where the contract is
\nabsolute and unrestricted by any condition expressed or implied.  It is
\nfurther stated that a difficulty may not in all circumstances amount to
\nimpossibility.  But even in that event the terms and conditions relating
\nto performance of the contract may stand eclipsed.\n<\/p>\n
\tThe transaction was a commercial one.  Sumangal could not plead
\nfrustration of contract if it itself had abandoned it.  (See Hauman Vs.
\nNortje [1914] A.D. 293, at p. 297 and Hoenig Vs. Issacs [1952] 2 All
\nE.R. 176, at p. 178H).\n<\/p>\n
 \tIt is well-settled that a builder renouncing his obligations could
\nnot claim substantial performance.\n<\/p>\n
 \tIn Hudson’s Building and Engineering Contracts at page 484, the
\nlaw is stated as:\n<\/p>\n
“A further overriding principle to be deduced
\nfrom the cases, it is submitted, is that a party
\nconsciously in breach, a fortiori a party
\nrepudiating an obligation or abandoning work,
\nshould not be enabled to abuse the doctrine by
\nmaintaining that position while at the same time
\nsuing for remuneration under the contract.  Thus
\nin South Africa, there is long-standing
\nauthority that substantial performance is not
\navailable where work is abandoned, or the method
\nof performance is inconsistent with an honest
\nintention to carry out the work in accordance
\nwith the contract.  Sumpter v. Hedges and Ibmac
\nv. Marshall were clear cases of abandonment.”\n<\/p>\n
 \tSuch a case of abandonment was not made out.  What was made out
\nwas a case of self-inducement frustration.  We repeatedly asked Mr.
\nTiwari to show before us any pleading as regard self-induced frustration
\non the part of Sumangal.  He failed to do so.  No material far less any
\npleading has also been placed before us to show that there had been
\ncollusion by and between Sumangal and municipal authorities in getting
\nthe work stopped.  There exists a presumption as regard the official
\ntransactions having been done in regular course of business.  The onus
\nof proving that plea of frustration was self-induced one is on the party
\nwho alleges that this is the case. (See Joseph Constantine Steamship
\nLine Ltd. Vs. Imperial Smelting Corporation Ltd. [1942] A.C. 154])<\/p>\n
 \tIn Treitel’s Law of Contract, Seventh Edition at page 701, it is
\nstated:\n<\/p>\n
“The onus of proving that frustration is self-
\ninduced is on the party who alleges that this is
\nthe case.  In Joseph Constantine SS Line v.
\nImperial Smelting Corp. Ltd. [(1942) AC 154] a
\nship was disabled by an explosion from
\nperforming her obligations under a charter
\nparty.  The owners were sued for damages and
\npleaded that the explosion frustrated the
\ncharterparty.  The charters argued that the
\nowners must prove that the explosion was not due
\nto their fault, but the House of Lords rejected
\nthis argument and upheld the defence of
\nfrustration although the cause of the explosion
\nwas never explained.  The rule is open to the
\nobjection that the charterer is much less likely
\nthan the owner to be able to show how the
\nexplosion occurred.  This reasoning does,
\nindeed, prevail in one group of cases: a person
\nto whom goods have been bailed, and who seeks to
\nrely on their destruction as a ground of
\nfrustration of the contract of bailment, must
\nshow that the destruction was not due to any
\nbreach of his duty as a bailee.  But, this
\nspecial situation excepted, the rule as to
\nburden of proof laid down in the Joseph
\nConstantine case can be defended on the ground
\nthat generally catastrophic events which prevent
\nperformance do occur without the fault of either
\nparty.  To impose the burden of disproving fault
\non the party relying on frustration is therefore
\nless likely than the converse rule to lead to
\nthe right result in the majority of cases.”\n<\/p>\n
 \tIt is interesting to note that at page 700 of the said treatise,
\nthe learned author states:\n<\/p>\n
“The further question arises whether a contract
\ncan be frustrated by an event brought about by
\nthe negligent act of one of the parties.  Lord
\nSimon has put the case of a prima donna who lost
\nher voice through carelessly catching cold.  He
\nseemed to incline to the view that she could
\nplead frustration so long as the incapacity “was
\nnot deliberately induced in order to get out of
\nthe engagement.” This particular result can
\nperhaps be justified by the difficulty of
\nforeseeing the effect of conduct on one’s
\nhealth.  But it is submitted that generally
\nnegligence should exclude frustration: for
\nexample, the plea should have failed in Taylor
\nvs. Caldwell if the fire had been due to the
\nnegligence of the defendants.  In such a case it
\nwould be unjust to make the other party bear the
\nloss.  A negligent omission should likewise
\nexclude frustration.”\n<\/p>\n
 \tIn Cheshire, Fifoot & Furmston’s Law of Contract (14th Edition) at
\npage 643, the law is stated, thus:\n<\/p>\n
“This rule, that a party cannot claim to be
\ndischarged by a frustrating event for which he
\nis himself responsible, does not require him to
\nprove affirmatively that the event occurred
\nwithout his fault.  The onus of proving that the
\nfrustration was self-induced rests upon the
\nparty raising this allegation.  For instance :\n<\/p>\n
On the day before a chartered ship was due
\nto load her cargo an explosion of such
\nviolence occurred in her auxiliary boiler
\nthat the performance of the charterparty
\nbecame impossible.  The cause of the
\nexplosion could not be definitely
\nascertained, but only one of three
\npossible reasons would have imputed
\nnegligence to the shipowners.\n<\/p>\n
It was held by the House of Lords that, since
\nthe charterers were unable to prove that the
\nexplosion was caused by the fault of the owners,
\nthe defence of frustration succeeded and the
\ncontract was discharged.  It should perhaps be
\nnoted that in many cases a self-induced
\nfrustrating event will be a breach of contract
\nbut this will not necessarily be so.  In
\nMaritime National Fish Ltd. v. Ocean Trawlers
\nLtd [(1935) AC 524], the applicants were not
\ncontractually bound to licence the chartered
\ntrawler but could not excuse failure to pay hire
\nby relying on the absence of a licence.”\n<\/p>\n
 \tEven no case of negligence on the part of Sumangal made out.\n<\/p>\n
 \tThe burden of proof in relation to all these pleas, thus, was on
\nAWHO.  It failed to discharge the same.\n<\/p>\n
QUANTUM OF DAMAGES :\n<\/p>\n
It is not necessary for us to go into the question of quantum of
\ndamages in details but we may observe that the learned arbitrators
\nproceeded on a wrong premise even in relation thereto.  It took into
\nconsideration the subsequent events.  Purported subsequent conduct on
\nthe part of Sumangal became the bed-rock of the findings against it by
\nthe learned arbitrators.  The disputes and differences between the
\nparties were required to be determined as on 10.10.1995.  Conduct of the
\nparties subsequent thereto was wholly irrelevant.  Thus, there exists an
\nerror apparent on the face of the award.\n<\/p>\n
\tLiability to pay damages would indisputably arise only in the
\nevent a breach of contract has taken place.  Clause 130 of the general
\nconditions of the contract could be invoked only in the event of breach
\non the part of Sumangal and if AWHO could in law take recourse to Clause
\n129 of the Contract.\n<\/p>\n
\tFor the purpose of invoking clause 129(d) of the general
\nconditions of contract, it was incumbent upon the learned arbitrators to
\narrive at a specific finding that a breach of the terms of condition has
\nbeen committed by Sumangal.  Such breach must be in relation to a term
\nof the contract between the parties.\n<\/p>\n
  \tIf a breach has occurred in respect of an agreement, to which
\nSumangal is not a party, clause 129 could not have been invoked.\n<\/p>\n
 \tThe law relating to damages in this behalf is stated in McGregor
\non Damages, 16th edition  at paras 1142 and 1143 in the following terms :\n<\/p>\n
“The normal measure of damages is the cost to
\nthe owner of completing the building in a
\nreasonable manner less the contract price, and
\npossibly, in addition, the value of the use of
\nthe premises lost by reason of the delay.  This
\nmeasure of cost of completion less contract
\nprice is laid down by the Court of Appeal in
\nMertens v. Home Freeholds Co., (1921) 2 K.B.
\n526, CA., which must be regarded perforce as the
\nleading case since it proves to be the only one
\ndealing with this issue.  The defendant
\ncontracted to build a house for the plaintiff
\nand was to begin work immediately after
\npossession of the site was given to him.  The
\ndefendant worked well for a month, but then
\ndeliberately failed to proceed with due dispatch
\nin the knowledge that a government embargo on
\nbuilding without licence was to be imposed.  Had
\nhe worked according to contract, the roof could
\nhave been on to the house before the embargo
\ndescended.  Two or three years later the
\nplaintiff completed the work himself, when
\nbuilding was again permitted but when costs had
\nrisen.  It was held that the proper measure of
\ndamages was the cost to the plaintiff of
\ncompletion in a reasonable manner at the
\nearliest moment that he was allowed to proceed
\nwith building, less the amount he would have had
\nto pay the defendant had the defendant completed
\nthe house  as far as the roofing-in at the time
\nagreed by the terms of the contract.  The Court
\nof Appeal reversed the Divisional Court which
\nhad taken for its basic figure not the cost of
\ncompletion but the market value that the
\ncompleted building would have had at the
\ncontractual time due for completion.  Of this
\nLord Sterndale M.R. said :\n<\/p>\n
“They (the Divisional Court) have treated
\nthe contract as if it were one for the
\nsale of goods and have held that the
\nmeasure of damages is the difference
\nbetween the market price of the day of
\nwhat the plaintiff ought to have had and
\nwhat he got.  In my humble opinion that is
\nan entirely wrong way of looking at the
\ncontract.  There is no contract to deliver
\ngoods, and there is no market price for a
\nroofed house.”\n<\/p>\n
\tMertens v. Home Freeholds Co.[(1921)2 K.B.
\n526, C.A.], is also authority for taking the
\ncost of completion as at the time when it became
\nonce again legal to build, although between
\nbreach and the removal of the government embargo
\non building two or three years afterwards costs
\nhad risen substantially.  And conversely, as
\nYounger L.J. pointed out, “if the cost of
\nbuilding had decreased in that time the damages
\nwould have been correspondingly diminished”.
\nThis rule is however subject to the general
\nprinciples of mitigation so that, in the words
\nof Lord Sterndale,<\/p>\n
“the building owner must set to work to
\nbuild his house at a reasonable time and
\nin a reasonable manner, and is not
\nentitled to delay for several years and
\nthen, if prices have gone up, charge the
\ndefaulting builder with the increased
\nprice.”\n<\/p>\n
 \tWe may, however, notice that in Clark and Another Vs. Woor [1965]
\n1 W.L.R. 650 and East Ham Borough Corporation Vs. Bernard Sunley & Sons
\nLtd. [1966 AC 406], law almost to the similar effect has been laid down.\n<\/p>\n
 \tIn Hudson’s Building and Engineering Contracts at page 1034-35, it
\nis stated:\n<\/p>\n
“Builders constructed a school with serious
\ndefects in fixing the stone facing.  The
\ncontract was  in the 1956 RIBA standard form.
\nSome years after the final certificate, a stone
\nfell and the owners discovered the defects.  The
\narbitrator found that the defects could have
\nbeen, but in fact were not, discovered or
\nnoticed by the architect during the course of
\nhis normal supervision of the work.  At the date
\nof the breach (which the parties agreed should
\nfor purposes of convenience be treated as the
\ndate of completing the work), the cost of repair
\nwould have been considerably less, due to rising
\nprices, than it was when the owners finally
\ndiscovered the defects.  Held, by Melford
\nStevenson J., distinguishing Phillips v. Ward
\n[(1956) 1 W.L.R. 471] that since the owners had
\nbeen guilty of no unreasonable delay once they
\ndiscovered the defects, they were entitled to
\nthe greater cost of the repairs at the time they
\ncarried them out.  Held, by the House of Lords,
\naffirming the judge, that the parties must have
\ncontemplated that the architect might fail to
\nnotice defective work.  The cost of repair at
\nthe date of discovering the breach was “on the
\ncards” or a “loss liable to result” from the
\nbreach within the test formulated by Asquith
\nL.J. in the Victoria Laundry case.  Per Lord
\nUpjohn: “where the cost of reinstatement is the
\nproper measure of damages it necessarily follows
\nas a matter of common sense that in the ordinary
\ncase the cost must be assessed at the time when
\nthe defect is discovered and put right and it is
\nnot suggested here that the building owner
\nunreasonably delayed the work of repair after
\ndiscovery of the defect…I am at a loss to
\nunderstand why the negligent builder should be
\nable to limit his liability by reason of the
\nfact that at some earlier stage the architect
\nfailed to notice some defective work…” East
\nHam Borough Council v. Bernard Sunley Ltd.
\n[(1966)A.C.406].”\n<\/p>\n
 \tReference may also be made to illustrations given in Hudson’s
\nBuilding and Engineering Contracts at pages 1038-39.\n<\/p>\n
 \tIn Emden and Gill’s Buildings Contracts and Practice, Seventh
\nEdition, at page 267, the law is stated thus :\n<\/p>\n
“The measure of damages for failure by the
\ncontractor to complete a building or engineering
\ncontract will include first, the difference (if
\nany)between the price of the work as agreed upon
\nin the contract and the cost the employer is
\nactually put to in its completion (i),  and cost
\nof completion means cost of the completion of
\nthe contract work itself.\n<\/p>\n
\t\t\tIllustration<\/p>\n
A builder agreed in May, 1916, to
\nbuild a house for plaintiff for a lump
\nsum, complete within a specified time.
\nAfter starting the work the builder
\nintentionally delayed progress for the
\npurpose of ensuring that the Ministry of
\nMunitions should refuse a licence for
\nconstruction of the house under Defence of
\nthe Realm regulations, and that he would
\nthereby (as he thought) be released from
\nthe contract.  The licence was refused,
\nand the work had to be entirely suspended
\ntill 1919, when plaintiff completed the
\nbuilding. – Held: The builder could not
\ntake advantage of a prevention brought
\nabout by his own act, and the proper
\nmeasure of damages was what it cost the
\nplaintiff to complete the house as soon as
\nthe statutory restriction ceased, less any
\namount which have been due and payable to
\nthe builder if he had proceeded with due
\ndiligence up to the date when the licence
\nwas refused.\n<\/p>\n
In a leading case, the House of Lords has
\nheld that the proper measure of damages is the
\ncost of re-instatement, such cost must be
\nassessed at the time when the defects are
\ndiscovered and are put right.”\n<\/p>\n
 \tSumangal, thus, could have been found liable for drawings if inter
\nalia it was guilty of one or the other misconducts as referred to
\nhereinbefore.\n<\/p>\n
 TITLE IN RESPECT OF 14.17 ACRES OF LAND:\n<\/p>\n
 \tClaim No. 1 related to title of 14.17 acres of land.  Sumangal
\nentered into an agreement on a turn-key basis.  The contention of
\nSumangal is that the lands were transferred in the name of AWHO by way
\nof security.  This may or may not be so.  But, herein we are only
\nconcerned with the question as to whether the award can be set aside or
\nnot.  The learned arbitrator took into consideration the respective
\ncontentions of the parties and came to the conclusion that title has, by
\nreason of the deeds of sale, passed on to AWHO.  While arriving at the
\nsaid finding, the arbitrator has not applied wrong principle of law.
\nSumangal procured land on behalf of AWHO.  It for a specific purpose and
\nwith a view to avoid double payment of stamp duty entered into an
\narrangement whereby the owners of the agricultural land executed sale
\ndeeds in favour of AWHO.  Subject of course to furnishing bank guarantee
\nSumangal received consideration.  Sumangal stated that by getting the
\nland transferred in the their name by way of security at a nominal
\nprice, as part of the turn key project, AWHO has gained enormously to
\nthe tune of about 11.40 crores which they are not entitled to retain
\nlawfully.  They, thus, have unjustly enriched themselves.  It does not
\nappear that such a case has been made out before the learned
\narbitrators.  The plea of unjust enrichment, therefore, cannot be
\nallowed to be raised at this juncture.  Such consideration was passed on
\nto the owners of the land.   Requirements of Section 54 of the Transfer
\nof Property Act in respect of sale transaction were fully complied with.
\nTitle to the said land, thus, apparently vested in AWHO and has become
\nabsolute its owners.  No exception, thus, to that part of the award can
\nbe taken.\n<\/p>\n
CONCLUSION:\n<\/p>\n
\tHowever, we would like to clarify that the observations made
\nhereinbefore were meant for the purpose of demonstrating that the
\nlearned arbitrators failed to apply the correct principles of law but
\nnot for the purpose of determining finally the lis between the parties.
\nIn other words, the questions have been posed and answered for the
\nlimited purpose as to whether the award of the learned arbitrators
\nsuffer from any legal infirmity within the meaning of Sections 30 and 33
\nof the Arbitration Act and no more.\n<\/p>\n
 \tWe, therefore, for the aforementioned reasons, while upholding
\nClaim No. 1 of the award are of the opinion that the award of the
\narbitrations in relation to Claim No. 2 must be set aside.
\nConsequently, no interest thereupon shall be payable.\n<\/p>\n
 \tThe I.A. No. 11 of 2002 is allowed to the aforementioned extent.
\nNo costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India M.D., Army Welfare Housing … vs Sumangal Services Pvt. Ltd on 8 October, 2003 Author: S.B. Sinha Bench: Cji., Brijesh Kumar, S.B. Sinha. CASE NO.: Appeal (civil) 1725 of 1997 PETITIONER: M.D., Army Welfare Housing Organisation RESPONDENT: Sumangal Services Pvt. Ltd. DATE OF JUDGMENT: 08\/10\/2003 BENCH: CJI., BRIJESH KUMAR & S.B. […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-176427","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nM.D., Army Welfare Housing ... vs Sumangal Services Pvt. 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