Gables India Pvt. Ltd. vs State of Punjab and Another

G.C. Garg, J.—Facts giving rise to this appeal may in brief be noticed thus;

State of Punjab through its Executive Engineer entered into a contract with the appellant for the construction of a bridge at RD 774.5 Km. on 11.7.1986. A dispute arose between the parties regarding execution of work. The agreement entered into between the parties contained an arbitration clause. Under the arbitration clause, an arbitrator was to be appointed by the Chief Engineer, Construction S.Y.L. Canal Project, Punjab. He appointed Shri Tarlochan Singh as the sole arbitrator after the disputes arose Between the parties. The arbitrator by his award dated August 23, 1990 allowed a sum of Rs. 9,43,618/- in favour of the con tractor. In all these were 12 items against which claim was made and the arbitrator dealt with separately each item of the claim and awarded amounts there against as detailed in the award. A sum of Rs. 6,91,994/- was awarded against claim No. 12 and an amount to Rs. 2,51,634/- was awarded against claim Nos. 1, 2, 4, and 5. The arbitrator, however, did not grant any amount against claim Nos. 3 and 6 to 11.

The contractor moved an application before the learned subordinate judge for directing the arbitrator to file the award and for making it a rule of the Court. The State of Punjab also filed an application praying that the award be set aside on the ground that arbitrator misconducted in the proceedings. The matter was considered by the trial Court and the learned Sub Judge by his order dated January 4, 1992, in view of his finding recorded under issues 1 and 2, set aside the award and accordingly allowed the application Under Sections 30 and 33 of the Arbitration Act. The application moved by the con tractor was dismissed, Aggrieved by the order of the learned Subordinate Judge, the contractor filed the present appeal.

Learned counsel for the appellant at the outset submitted that he confines his relief in this appeal in respect of the claim made against claim item No. 12 only. In the above backdrop, learned counsel for the appellant submitted that the subordinate judge considered the objections of the State of Punjab against claim item No. 12 on the ground of misconduct in para 14 of the judgment under appeal and came to the conclusion that objections in respect of the said claim were not tenable. The trial Court considered the matter regarding this claim in the following words:-

"Claim No. 12 relates to the matter of settlement of account of strata encountered during well sinking. For this purpose the sanctioned rate was Rs. 225/- per cum but the arbitrator allowed Rs. 450/- per cum as the contractor encountered hard strata during well sinking. Accordingly, the arbitrator allowed an amount of Rs. 6,91,994/- on this count. The submission of Ld. Govt. Pleader is that the tendered and sanctioned rate for all type of soil was Rs. 225/- and it being so, the arbitrator could not allow the rate to be Rs. 150/-. To my mind, the matter regarding claim No. 12 does not fall in the extra item. It is in the special circumstances on account of the encountering of hard strata that the arbitrator has allowed enhanced rate of Rs. 450/- per cum. Even otherwise, a perusal of the record shows that in such like situation the department gave Rs. 570.70 per cum against the sanctioned rate of Rs. 258/- for sinking the well where hard strata was encountered in another case. In this connection there is letter No. 138, dated 3.5.1988 of the Chief Engineer Construction SYL Canal Project, Punjab, Chandigarh to the Superintending Engineer, with reference to the letter No. 14337/5-A (72.248) of the Superintending Engineer. It is in such circumstances that the arbitrator enhanced the rate in this case from Rs. 225/-to 450/- per cum which he could. In this regard the case of M/s. Nav Bharat Builders (Supra) is fully applicable. Hence the objection regarding claim No. 12 cannot be sustained."

Learned Subordinate Judge while considering the objection against the grant of amounts in respect of claims 1, 2, 4 and 5, primarily came to the conclusion that the arbitrator misconducted himself in the proceedings. According to him, the arbitrator was required to grant the amount against these claims as per Schedule II of the Extra Items but he did not do and that he also travelled beyond the terms and conditions of the agreement or went beyond reference and decided the matter concerning difference of rates and thus misconducted himself in the proceedings and thus made the award invalid. Learned counsel for the appellant submitted that the conclusion arrived at by the learned subordinate judge to the effect that the arbitrator misconducted himself in the proceedings while granting some amounts against claims 1, 2, 4 and 5 was totally wrong, for the simple reason that the trial Court could not go into the matter as a court of appeal or differed with the reasoning given by the arbitrator while granting various amounts except in cases where the reasoning of the arbitrator was perverse. In any case, the learned counsel submitted that even if the conclusion arrived at by the Court was correct, the contractor was entitled to the amount allowed by the arbitrator against claim item No. 12, the award being separable and the arbitrator having awarded different amounts against different claims and supported each claim by the reasons detailed in the award against each claim. Learned counsel in support of his submission relied upon The Upper Ganges Valley Electricity Supply Company Ltd. Vs. The U.P. Electricity Board, , Food Corporation of India Vs. M/s. Veshno Rice Millers, ; Sudarsan Trading Co. Vs. Government of Kerala and Another, and State of Orissa Vs. Niranjan Swain, . Learned counsel for the appellant laid emphasis that the objection raised by the State of Punjab against the grant of amount against claim item No. 12 was held sustainable and thus, the learned subordinate Judge clearly went wrong in refusing to make the award a rule of the court at least in respect of the amount granted against claim item No. 12.

I have heard the learned counsel for the parties and gone through the record as also the case law cited at the Bar by the learned counsel for the appellant.

By the order under appeal, the learned Subordinate Judge dismissed, the application moved by the contractor and thereby declined to make the award a rule of the court. As noticed above, the appellant before me has confined its relief only qua claim item No. 12 of the award. From the order of the Subordinate Judge it is apparent that prayer for making the award a rule of the Court was rejected primarily on the ground that the arbitrator misconducted himself in the proceedings which made the award invalid. The subordinate Judge lias further observed that on account of the misconduct on the part of the arbitrator, no part of the award could be separated for making it a rule of the court. It is thus quite clear from the observations of the Court below that as part of the award was made a rule of the court as misconduct on the part of the arbitrator was proved.

Once there is no dispute as to the terms of the contract, it is within the domain and the prerogative of the arbitrator to examine different claim and opine whether a particular amount was liable to be paid or any damages liable to be sustained. Similarly, once the parties have agreed to constitute an arbitrator as the sole and final judge of the disputes arising between them, they bind themselves as a rule to accept the award as final and conclusive and the award given by such on arbitrator cannot ordinarily be set aside on the ground of it being erroneous either on facts or in law. Support of this view Can be had from The Upper Ganges Valley Electricity Supply Co. Ltd.''s case (supra).

Next comes up the question, whether an award is liable to be set aside on the ground that the arbitrator has misconducted himself in the proceedings. This question has been elaborately discussed and answered by the apex Court in Joginderpal Mohinderpal and another''s case (supra). It has been held by the Supreme Court that no doubt the award can be set aside if the arbitrator has misconducted himself in the proceedings, but it is difficult to give an exhaustive definition as to what may amount to a misconduct on the part of the arbitrator. It has been categorically observed that whether the error on the part of the arbitrator is one of fact or law, and whether or not his findings of fact are supported by evidence is not a misconduct. All, that is essentially required to be seen is that while giving the award the arbitrator had adhered to the principles of justice, equity law and fair play. In the present case, however, nothing has been brought to my notice or otherwise shown from the pleadings of the parties or the evidence led in the case that the arbitrator has in any way misconducted himself in the proceedings which may render the award invalid as a whole.

Reverting to the facts of this case and in the light of the concession made by learned counsel for the appellant, I am of the opinion that the trial Court after holding that the arbitrator travelled beyond the scope of terms and conditions of the agreement or went beyond the reference in respect of claim items 1, 2, 4 and 5 and thus, misconducted himself in the proceedings, was not justified in declining to make the award a rule of the court even in respect of claim granted against item No. 12. The contractor claimed different amounts against different claim items. The arbitrator did not grant a lump sum against all the claims, but considered each claim separately and awarded some amounts against some of the claims. It is clear from the award as to what amount has been allowed and against which of the claim items. The arbitrator supported the grant of claim against each item by independent reasons but the trial court while considering the objections of the State of Punjab came to the conclusion that the arbitrator while allowing certain amount against claim items 1, 2, 4 and 5 travelled beyond the scope of the terms and conditions of the agreement or went beyond the reference and thus misconducted himself in the proceedings. He, however, as noticed above, came to the conclusion that objection against award of Rs. 6,91,994/- against claim item No. 12 was untenable''. The award in this case is not of the type that a part of it is not severable. Each item has been considered and decided independently and thus, if the amount granted against any item is beyond the agreement or scope of the reference, the same is severable from rest of the award. Support for the view that a valid part of the award can be made a rule of the Court after separating the same from the other part of the award, if the circumstance so permit, is available from the judgment of the Supreme Court in Niranjan Singh''s case (supra). Thus, in the cir cumstances of this case, I have no hesitation to hold that the learned Subordinate Judge has erred in refusing to make the award a rule of the court at least qua claim No. 12 as the claim laid against each item was clearly independent and severable.

In the result the appeal is partly allowed and the award dated August 23, 1990 is made a rule of the court only in respect of the amount awarded against claim item No. 12, i.e. Rs. 6,91,994/- in favour of the appellant. TheA appellant shall be entitled to interest at the rate as awarded by the arbitrator, horn the date of the award till the date of decree and the appellant will be entitled to interest at the rate of 6% pet annum from the date of the decree till payment. There shall, however, be no order as to costs. Decree sheet be prepared accordingly.