{"id":219923,"date":"1997-02-17T00:00:00","date_gmt":"1997-02-16T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/the-new-india-civil-erectorsp-vs-oil-natural-gas-corporation-on-17-february-1997"},"modified":"2017-05-12T13:09:26","modified_gmt":"2017-05-12T07:39:26","slug":"the-new-india-civil-erectorsp-vs-oil-natural-gas-corporation-on-17-february-1997","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/the-new-india-civil-erectorsp-vs-oil-natural-gas-corporation-on-17-february-1997","title":{"rendered":"The New India Civil Erectors(P) … vs Oil & Natural Gas Corporation on 17 February, 1997"},"content":{"rendered":"
Supreme Court of India<\/div>\n
The New India Civil Erectors(P) … vs Oil & Natural Gas Corporation on 17 February, 1997<\/div>\n
Author: B J Reddy<\/div>\n
Bench: B.P. Jeevan Reddy, Sujata V. Manohar<\/div>\n
           PETITIONER:\nTHE NEW INDIA CIVIL ERECTORS(P) LTD.\n\n\tVs.\n\nRESPONDENT:\nOIL & NATURAL GAS CORPORATION\n\nDATE OF JUDGMENT:\t17\/02\/1997\n\nBENCH:\nB.P. JEEVAN REDDY, SUJATA V. MANOHAR\n\n\n\n\nACT<\/a>:\n\n\n\nHEADNOTE:\n\n\n\nJUDGMENT:\n<\/pre>\n
\t\t      J U D G M E N T
\n     B.P. JEEVAN REDDY, J.\n<\/p>\n
     Leave granted. Heard Shri F.S. Nariman, learned counsel
\nfor the\t appellant and\tthe learned Attorney General for the
\nrespondent-corporation.\n<\/p>\n
     A contract\t was entered  into between the appellant and
\nthe Oil\t & Natural Gas Corporation (O.N.G.C), whereunder the
\nappellant undertook the construct 304 pre-fabricated housing
\nunits  at  Panvel,  Phase-I.  The  appellant  commenced\t the
\nconstruction  but  did\tnot  complete  it  even\t within\t the
\nextended period.  The respondent  thereupon  terminated\t the
\ncontract and  got the said work done through another agency.
\nDisputes arose between parties in the above connection, each
\nparty raising  claims against the other, which were referred
\nfor decision  to two  arbitrators  (joint  Arbitrators).  By
\ntheir award  dated 18th\t June ,1991. the arbitrators decided
\nthat while  the O.N.G.C. shall pay to the appellant a sum of
\nRs. 1,09,04,789\/-, the appellant shall pay to the O.N.G.C. a
\nsum of\tRs.41,22,178\/-. In the other words the appellant was
\nheld entitled  to a  net amount\t of Rs.67,82,620\/-  with the
\ninterest at  the rate of 18 per cent per annum from the date
\nof award till the date of payment or till the date of decree
\nwhichever was  earlier.\t While\tthe  appellant\tapplied\t for
\nmaking the  said award\ta Rule of the Court, the respondent-
\ncorporation filed  objections seeking  to have the award set
\naside. The  learned Single Judge overruled the objections of
\nthe respondent-corporation  and made the award a Rule of the
\nCourt. Corporation appealed against the same, which has been
\npartly allowed by the Division Bench.\n<\/p>\n
     The appellant had claimed various amounts under as many
\nas  19\t heads,\t while\tthe  respondent-corporation  claimed
\ncertain amounts\t under three heads. The arbitrators rejected
\nthe appellant`s\t claim under  heads 3,5,7,8,10,11,12 and 18.
\nThey awarded  various amounts  under the  other\t heads,\t the
\ntotal of  which came  to Rs.1,09,04,789\/-.  So\tfar  as\t the
\nrespondent`s claims  are concerned, the arbitrators rejected
\nclaim No.2  but accepted  claim No.1  (partly)\tand  awarded
\nvarious amounts totalling Rs. 41,22,178\/-.\n<\/p>\n
     In the appeal before the Division Bench the respondent-
\ncorporation confined  its attack  only to claims 1,4,6,9 and\n<\/p>\n
13. The Division Bench rejected the respondent`s contentions
\nwith respect  to claims\t 1 and\t13 but\tupheld the same with
\nrespect to  claims 4,6 and 9. Only the appellant has come to
\nthis Court  challenging the  Judgment of the Division Bench.
\nWe shall deal with these three claims in their proper order.
\nClaim No.4:  Appellant`s claim No.4 arises on account of the
\nshortage of  cement in\tthe bags supplied by the respondent.
\nThe appellant`s case was that the corporation had undertaken
\nto supply  cement to  it in bags, each bag containing 50 kg.
\nof cement,  but as  a matter  of fact,\tthe cement  actually
\nfound in the bags fabricated housing units at Panvel, Phase-
\nI. The\tappellant   commenced the  construction but  did not
\ncomplete it  even within the extended period. The respondent
\nthereupon terminated the contract and got the said work done
\nthrough other  agency. Disputes arose between the parties in
\nthe above  connection, each party raising claims against the
\nother,\t which\t  was\treferred   for\t decision   to\t two
\narbitrators(joint arbitrators).\t By their  award dated\t18th
\nJune, 1991,  the arbitrators decided that while the O.N.G.C.
\na sum  of Rs.41,22,178\/-.  In other  words the appellant was
\nheld entitled  to a  net amount\t of Rs.67,82,620\/-  with the
\ninterest at  the rate of 18 per cent per annum from the date
\nof award  till the  date of  payment or\t till  the  date  of
\ndecree whichever  was earlier.\tWhile the  appellant applied
\nfor  making  the  said\taward  a  Rule\tof  the\t court,\t the
\nrespondent-corporation filed  objections seeking to have the
\naward set  aside. The  learned Single  Judge  overruled\t the
\nobjections of  the respondent-corporation and made the award
\na Rule\tof the Court. Corporation appealed against the same,
\nwhich have been partly allowed by the Division Bench.\n<\/p>\n
     The appellant had claimed various amounts under as many
\nas  19\t heads,\t while\tthe  respondent-corporation  claimed
\ncertain amounts\t under three heads. The arbitrators rejected
\nthe appellant`s\t claim under  heads 3,5,7,8,10,11,12 and 18.
\nThey awarded  various amounts  under the  other\t heads,\t the
\ntotal of  which\t  came to  Rs.1,09,04,789\/-. So\t far as\t the
\nrespondent`s claims  are concerned, the arbitrators rejected
\nclaim No.2  but accepted  claim No.1 (partly) and claim No.3
\n(partly)   and\t  awarded    various\tamounts\t   totalling
\nRs.41,22,178\/-.\n<\/p>\n
     In the appeal before the Division Bench the respondent-
\ncorporation confined  its attack  only to claims 1,4,6,9 and\n<\/p>\n
13. The Division Bench rejected the respondent`s contentions
\nwith respect  to claims\t 1 and\t13 but\tupheld the same with
\nrespect to  claims 4,6 and 9. Only the appellant has come to
\nthis Court  challenging the  Judgment of the Division Bench.
\nWe shall deal with these three claims in their proper order.\n<\/p>\n
     Claim No.\t4| Appellant`s\tclaim NO.4 arises on account
\nof the\tshortage of   cement  in the  bags supplied  by\t the
\nrespondent. The\t appellant`s case  was that  the corporation
\nhad undertaken\tto supply  cement to  it in  bags, each\t bag
\ncontaining 50  kg. of  cement, but  a matter  of  fact,\t the
\ncement actually\t found in  the bags  was less. The appellant
\ncomplained of  the same\t to the\t officers of the corporation
\nfrom time  to time  and a record of the shortages has indeed
\nbeen kept  by the  parties. On\tthis  count,  the  appellant
\nclaimed\t a   sum  of  Rs.3,96,984.50p.,\t against  which\t the
\narbitrators awarded  an amount\tof Rs.3,70,221.50 paise. The
\ndefence\t of  the  corporation  was  that  according  to\t the
\nstipulation contained  in Schedule – A to the Tender notice,
\nthe corporation\t was   not to  be held\tresponsible for\t any
\nvariation in  the weight  of the cement in the bags supplied
\nby them. The relevant stipulation read as follows |
\n     “Ordinary port-land
\n     construction cement M.T. 830\/- Ex
\n     commission`s Godown, Greater
\n     Bombay.\n<\/p>\n
     NOTE|- 20\t(Twenty\t bags)\tbags  if
\n     cement shall  mean one metric tonne
\n     for   the\t purpose   of\trecovery
\n     irrespective   of\t  variation   in
\n     standard weight of cement filled in
\n     bags.”\n<\/p>\n
     The appellant`s  case, however,  was  that\t though\t the
\nSchedule to  the  Tender    notice  did\t contain  the  above
\nstipulation, the  appellant had,  in its  letter  dated\t 5th
\nMarch, 1984,  which was\t in the\t nature of  a counter-offer,
\nclearly stipulated  that “ordinary portland cement”, Rs 8.30
\nper metric  tonne,[each 50 kg. bag]” will be supplied by the
\ncorporation “at\t site”, The  appellant had stipulated in the
\nsaid letter that the terms set out by it therein “shall take
\nprecedence over…..  tender conditions”.  It is pointed out
\nby Shri\t Nariman that  the said\t letter forms  part  of\t the
\ncontract between  the parties  and that\t indeed it  is\tthis
\nletter which  contains the arbitration clause whereunder the
\ndisputes between the parties adjudicated by the arbitrators.
\nIt is further submitted by the learned counsel that in their
\nacceptance letter  dated 10th January, 1985, the respondent-
\ncorporation merely  stated that\t the cement will be supplied
\nonly at Bombay and not at the site, but did not say anything
\nwith respect  to the  stipulation in  the appellant`s letter
\ndated 5th March 1984 (counter-offer) that each bag of cement
\nsupplied to it shall contain 50.kg of cement.\n<\/p>\n
     The Division Bench has not referred to the letter dated
\n5th  March,  1984  nor\tthe  acceptance\t letter\t dated\t10th
\nJanuary, 1985,\tbut has\t rejected the appellant’s claim only
\nand exclusively\t with reference\t to the\t stipulation in\t the
\nschedule to the Tender notice. Mr. F.S. Nariman submits that
\nthe  Division  Bench  was  in  error  in  holding  that\t the
\narbitrators exceeded  their authority  in awarding  the said
\namount. According  to him,  the arbitrators merely construed
\nthe relevant stipulation as contained in the schedule to the
\nTender notice  read with  the appellant`s  letter dated\t 5th
\nMarch, 1984 (counter offer) and the corporation’s acceptance
\nletter dated  10th January,  1985 – which they were entitled
\nto do.\tIt is  submitted that  since the  award\t is  a\tnon-
\nspeaking award [though it has awarded separate amounts under
\neach head  of claim]  no interference  is permissible on the
\nground that  the arbitrators  have misconstrued the terms of
\nthe agreement.\tOn the\tother hand,  the learned    Attorney
\nGeneral submitted  that the  modified or  qualified  in\t any
\nmanner by  the appellant’s  letter dated 10th January, 1985,
\nand, therefore,\t the Division  Bench was  right in rejecting
\nthis claim  as\tprohibited  by\tthe  agreement\tbetween\t the
\nparties. We are of the opinion that it appears to be border-
\nline case.  It is  possible to\ttake either view. It must be
\nremembered that in this case there is no formal contract and
\nthe terms  of the  agreement have  to be  inferred  from the
\nTender notice  and the\tcorrespondence between\tthe parties.
\nSince the  attempt of  the Court should always be to support
\nthe award  within the  letter of  law, we  are\tinclined  to
\nuphold the award on this count [claim No.4]. Accordingly, we
\nreverse the  judgment of  the Division\tBench to  the  above
\nextent. The  amount awarded  by the  arbitrators under\tthis
\nclaim is affirmed.\n<\/p>\n
     Claim No.6:  The claim of the appellant under this head
\nis  in\t a  sum\t  of  Rs.53,11,735.60p,\t against  which\t the
\nArbitrators have  awarded an  amount of Rs. 49,91,327\/-. The
\ndispute\t between   the\tparties\t  is  with  respect  to\t the
\nmethod\/mode of\tmeasuring the  constructed area. The case of
\nthe respondent\tis that\t according to the tender conditions,
\nas well\t as clause  (10) of  the aforesaid  letter dated 5th
\nMarch, 1984  (written by  the appellant to the corporation),
\nthe area  covered by balconies is liable to be excluded from
\nthe  measurements.   We\t may  refer  to\t clause(10)  of\t the
\nappellant’s own\t letter dated 5th March, 1984 which reads as
\nfollows:\n<\/p>\n
     “Mode  of\t measurement|-\tWe  have
\n     based our price on the total build-
\n     up area  of one  floor [four flats]
\n     including\tstair-case   and  common
\n     corridor  but  excluding  balconies
\n     only. Hence work should be measured
\n     on\t the  build-up\tarea,  excluding
\n     balcony areas.”\n<\/p><\/blockquote>\n
     The tender condition is to the same
\n     effect.<\/p><\/blockquote>\n
     The above\tstipulation clearly says that total build up
\narea of a floor shall include stair case and common corridor
\nbut shall  exclude balconies.  It  expressly  provides\tthat
\n“work should  be measured  on the  build-up area   excluding
\nbalcony area”.\tIt is  undisputed that\tin the\tplan of\t the
\nflats  attached\t  to  the   Tender  notice,  balconies\twere
\nprovided. Shri\tNariman contended  that the  said plans were
\nmodified later\tand that  the flats  as finally constructed,
\ndid not\t have any  balconies  and,  hence,  no\tquestion  of
\nexcluding the  balconies area  can arise. Shri Nariman could
\nnot, however,  bring to\t our notice any agreed or sanctioned
\nplan modifying\tthe plan  attached to the Tender notice. The
\nappellant  could   not\thave  constructed  flats  except  in
\naccordance with\t the plans  attached  to  the Tender notice,
\nunless of course there was a later mutually agreed  modified
\nplan – and there is none in this case. We cannot, therefore,
\nentertain the  contention at  this stage  that there  are no
\nbalconies  at\tall  in\t the  flats  constructed  and  that,
\ntherefore, the\taforesaid stipulation  has no  relevance. We
\nmust proceed  on the  assumption that  the plans attached to
\nthe Tender notice are the agreed plans and that construction
\nhas been made according to them and that in the light of the
\nagreed stipulation  referred to\t above, the areas covered by
\nbalconies should  be excluded. In this view of the matter we
\nagree with  the Division  Bench that  the arbitrators  over-
\nstepped\t their\t authority  by\tincluding  in  area  of\t the
\nbalconies in  the measurement  of the  build-up area.  It is
\naxiomatic that\tthe  arbitrator\t being\ta  creature  of\t the
\nagreement, must\t operate within\t the  four  corners  of\t the
\nagreement and cannot travel beyond it. More particularly, he
\ncannot award  any amount which is ruled out or prohibited by
\nthe terms  of the  agreement. In  this case,  the  agreement
\nbetween the  parties clearly  says  that  in  measuring\t the
\nbuild-up area,\tthe balcony  area should  be  excluded.\t The
\narbitrators could  not\thave  acted  contrary  to  the\tsaid
\nstipulation and\t awarded  any  awarded\tany  amount  to\t the
\nappellant on the account. We, therefore, affirm the decision
\nof the Division Bench on this score [Claim No.6]
\n     Claim  No.9:   The\t appellant   claimed  an  amount  of
\nRs.32,21,099.89p.  Under   this\t head,\t against  which\t the
\narbitrators have  awarded a sum of Rs.16,31,425\/-. The above
\nclaim was  made on  account of\tescalation in  the  cost  of
\nconstruction during  the period\t subsequent to the expiry of
\nthe original  contract period. The appellant’s claim on this
\naccount was  resisted  by  the\trespondent-corporation\twith
\nreference to  and on  the basis\t of the\t stipulation in\t the
\ncorporations’ acceptance  letters dated\t 10th January,\t1985
\nwhich stated  clearly that  “the above\tprice is firm and is
\nnot subject  to any  escalation under whatsoever ground till
\nthe completion of the work”. The Division Bench held, and in
\nour opinion  rightly, that  in the  face of the said express
\nstipulation between  the parties,  the appellant  could\t not
\nhave claimed any amount on account of escalation in the cost
\nof construction carried on by him the expiry of the original
\ncontract period.  The aforesaid stipulation provides clearly
\nthat there  shall be  no escalation on any ground whatsoever
\nand the said prohibition is effective till the completion of
\nthe work.  The learned arbitrators, could not therefore have
\nawarded any  amount on\tthe ground  that the  appellant must
\nhave incurred extra expense in carrying out the construction
\nafter the  expiry  of  the  original  contract\tperiod.\t The
\naforesaid stipulation  between the  parties is\tbinding upon
\nthem both  and the  arbitrators. We  are of the opinion that
\nthe learned  single Judge  was not right in holding that the
\nsaid prohibition  is  confirmed\t to  the  original  contract
\nperiod and  does not operate thereafter. Merely, because the
\ntime was  made the  essence of the contract and the work was
\ncompleted within  15 months,  it does  not follow  that\t the
\naforesaid stipulation was confirmed to the original contract
\nperiod this  is not a case of the arbitrators construing the
\nagreement. It  is a  clear case\t of the\t arbitrators  acting
\ncontrary  to  the  stipulation\/condition  contained  in\t the
\nagreement between  the parties.\t We  therefore,\t affirm\t the
\ndecision of  the Division Bench on this Count as well [claim
\nNo.9].\n<\/p>\n
     So far  as the  position of  the law  on the subject is
\nconcerned, there  is hardly any dispute between the parties.
\nIt is sufficient to refer to the well considered decision of
\nthis Court  in Sudarshan  Trading Company  V. Government  of
\nKerala [A.I.R.[1989]  S.C. 890],  within it  has been held |
\n“…..\tif   the  parties   set\t limits\t to  action  by\t the
\narbitrator, then the arbitrator had to follow the limits set
\nfor him\t and  the  court  can  find  that  he  exceeded\t his
\njurisdiction on\t proof\tof  such  excess…..  Therefore  it
\nappears to  us that  there are\ttwo different  and  distinct
\ngrounds involved  in many  of the  cases. One  is the  error
\napparent on  the face  of the  award, and  the other is that
\narbitrator exceeded  his jurisdiction.\tIn the\tlatter case,
\nthe courts  can look  into the\tarbitration agreement but in
\nthe former, it cannot, unless the agreement was incorporated
\nor recited in the award”.\n<\/p>\n
     For the  above reasons,  the appeal is allowed in part,
\ni.e.,  to   the\t extent\t  of  claim  No.  4  (in  a  sum  of
\nRs.3,70,221.50p.).  In\t other\trespects,   the\t appeal\t  is
\ndismissed. There shall be no order as to costs.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India The New India Civil Erectors(P) … vs Oil & Natural Gas Corporation on 17 February, 1997 Author: B J Reddy Bench: B.P. Jeevan Reddy, Sujata V. Manohar PETITIONER: THE NEW INDIA CIVIL ERECTORS(P) LTD. Vs. RESPONDENT: OIL & NATURAL GAS CORPORATION DATE OF JUDGMENT: 17\/02\/1997 BENCH: B.P. JEEVAN REDDY, SUJATA V. 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