AI Structured Summary
Not yet generated for this judgment
Judgment
N. Kannadasan, J.—The appellant in OSA No. 201 of 1998 was awarded a contract by the first respondent and the contract agreement
provides a period of 36 months to complete the work from the date of handing over the site. The ranks of the parties are given as set out in OSA
No. 201 of 1998 for convenience. Even though the site was handed over to the appellant/contractor on 1.6.1979, the work was not completed
within the stipulated period. It is contended by the appellant that they could not complete the work due to the default on the part of the first
respondent and due to the delay on the part of the first respondent on several counts, the appellant suffered a huge loss.
In view of the delay on the part of the first respondent, the appellant was constrained to seek extension of time to complete the contract and the
period was extended from time to time. Under the said circumstances, the appellant has invoked the arbitration clause. The Arbitrators, after
considering the various records and documents made available before them and after giving opportunity to examine the witnesses and after hearing
the arguments and submissions of both the parties, have passed an award accepting the claim of the appellant with the respect to the claim Nos.
(a),(b),(c),(d) and (e) and quantified the amount therein payable by the first respondent at Rs. 2,01,13,914.00 with interest at 11% from
22.11.1989 till the date of payment or decree whichever is earlier. Even though a counter-claim was made as against the appellant herein by the
first respondent, the same was rejected by the Arbitrators. The first respondent has filed a petition in O.P. No. 368 of 1994 to set aside the award
u/s 30 of the Arbitration Act and the Arbitrators have filed a petition in O.P.No.715 of 1993 u/s 14(2) of the Arbitration Act, 1940, seeking
permission to file the award dated 29.3.1993 before the Court. The learned Judge by a common order dated 30.4.1998 has set aside the award in
respect of four claims viz., claim Nos.(a),(b),(c) and (e) but upheld the award in respect of claim No. (d), but however, restricted the period for
which the interest is payable as from the date of the award till the date of payment. Aggrieved against the said order of the learned Judge, the
appellant filed OSA No. 201 of 1998 as against O.P. No. 368 of 1994 and the first respondent filed two appeals in OSA Nos. 107 and 108 of
1999 against O.P.Nos.715 of 1993 and 368 of 1994 respectively.
The learned Senior Counsel Mr. K. Ramachandran appearing for the appellant contended that inasmuch as the award passed by the Arbitrators
is a non-speaking award and there are no errors apparent on the face of the award or documents accompanying it, the same should not have been
set aside either in part or in full. In this connection, the learned Senior Counsel cited various decisions of the Supreme Court to the effect that the
Courts have no powers to interfere with a non-speaking award. The learned Senior Counsel further contended that the learned Judge has
erroneously proceeded with the matter that the Arbitrators have exceeded their jurisdiction even though they have acted within the terms of
Arbitration Clause. The learned Senior Counsel further contended that inasmuch as the learned Judge has overlooked the fact that the Arbitrators
have chosen one out of the two possible views and as such, their decision ought not to have been set aside as erroneous. The learned Senior
Counsel further contended that inasmuch as the Supreme Court has remitted the matter for fresh consideration and discretion is left to the
Arbitrators to decide the arbitrability of the issues involved and accordingly when the Arbitrators have decided that the issues involved therein are
arbitrable and passed an award, the same ought to have been accepted, unless contrary is proved. He further argued with regard to the nature of
the claim made and the loss suffered by the contractor/appellant and contended that the appellant is entitled to maintain the claim as per the various
terms of the agreement. According to him, the restriction in respect of the period for payment of interest from the date of award instead of from the
date of reference is without any valid reasons and contrary to law.
Per contra, Mr. N.C. Ramesh, learned counsel for the first respondent contended that the appeal itself is not maintainable in view of the fact that
the appellant has chosen to file only one appeal as against O.P.No.368 of 1994, but failed to challenge the order in O.P.No.715 of 1993. On
merits, the learned counsel for the first respondent contended that inasmuch as the tender specification requires the contractor to inspect the
proposed work site with regard to the location and satisfy about the quality and availability of materials, adequacy and nature of access to sites and
other facilities, the first respondent cannot be found fault after completion of the work. After the execution of the agreement, the appellant is not
entitled to claim further amount as if there was a change in location of tailrace gate shaft, extra expenses on account of non-availability of approach
roads and idling charges for the non-use of the machineries/equipments for the excavation of adit 3 head race tunnel (HRT). On the basis of the
specific prohibition contained in the agreement, the learned counsel contended that the appellant cannot make any claim for the extra payment. It is
further contended that the award in respect of claim No. (d) viz., expenses incurred due to the delay in the execution of work is not justified and
the order of the learned Judge in confirming the award on this claim is not sustainable in law on the ground that the contract is a lumpsum contract
and for the extended period the escalation charges were paid to the contractor. The learned counsel further contended that the issues raised by the
contractor before the Arbitrators are not arbitrable under the terms of the contract and as such, the appellant is not entitled for any relief as
claimed.
We have considered the rival contentions of either parties.
The points for determination that arise in this appeal are:-
a) Whether the appeal filed by the appellant against O.P.No.368 of 1994 alone sustainable in law without filing appeal against the order in
O.P.No.715 of 1993?
b) Whether the learned Judge is correct in setting aside the award in respect of four claims except claim No.(d)?
c) Whether the learned Judge is correct in restricting the period for which the interest is payable viz., from the date of the award till the date of
payment instead of from the date of reference?
d) Whether the learned Judge is correct in rejecting the counter claim of the first respondent?
Before we proceed with the matter with regard to various contentions on either side, we propose to deal with the preliminary objection raised
by the learned counsel for the first respondent regarding maintainability.
The learned counsel for the first respondent contended that the present appeal is filed as against the judgment and decree in O.P. No. 368 of
1994 dated 30.4.1998 only, without filing an appeal as against the judgment and decree in O.P. No. 715 of 1993 and as such, the appeal is liable
to be dismissed on the ground of res judicata. In support of the above contention, the learned counsel relied upon the various decisions which are
dealt with in the succeeding paragraphs.
Per contra, the learned senior counsel for the appellant contended that though there are two decrees, the learned Judge has dealt with both the
original petitions by a common judgment and contended that one appeal as against the judgment and decree in O.P. No. 368 of 1994 is
maintainable. The various decisions cited by both the learned counsel are dealt with as hereunder:-
The learned counsel for the first respondent relied upon the decision of the Supreme Court in K.V. George Vs. Secretary to Government, Water
and Power Department, Trivandrum and Another, to the effect that Section 11 of the CPC is applicable to the cases arising under the Arbitration
Act and as such contended that the appeal is not maintainable. In the above decision, it is held that the principles of constructive res judicata is
applicable to arbitration proceedings. But factually the said case is to be distinguishable. It is to be seen that the above said decision arose out of
the claim made by a contractor, raising certain disputes in the first claim petition in pursuance of termination of the contract, chosen to file a second
claim petition subsequently. In the said circumstances, the Supreme Court has held that the principles of res judicata is applicable and the second
claim petition is not maintainable. So the said decision is not applicable to the present case.
The decision of the Apex Court in Ram Prakash Vs. Smt. Charan Kaur and Another, relied on by the learned counsel for the first respondent
has no application for the case on hand in view of the fact that the above SLP arose out of two separate suits filed by the petitioner as well as the
respondent claiming damages against each other and the petitioner''s suit having been dismissed and the order having become final, the respondent
has chosen to file one appeal only against the judgment and decree, dismissing the suit filed by him and the said second appeal is barred by res
judicata.
Similarly, the decision relied upon by the learned counsel for the first respondent in Premier Tyres Limited Vs. Kerala State Road Transport
Corporation, has no application for the present case, since two suits were filed by the plaintiff as well as the defendant and one appeal alone was
filed as against the decree passed in respect of one suit.
Likewise, the decision cited by the learned counsel for the first respondent in Banarsi and Others Vs. Ram Phal, has no application in the
instant case for the reasons stated above.
The learned counsel for the first respondent placed reliance upon the decision of the Supreme Court in Narayana Prabhu Venkateswara
Prabhu Vs. Narayana Prabhu Krishna Prabhu (Dead) by L. Rs., and contended that the appeal is liable to be dismissed on the ground of res
judicata. The abovesaid decision was rendered in the circumstances wherein a decree was passed in a money suit and a separate decree was
passed with regard to a partition suit and one appeal alone was filed before the Apex Court as against the decree granted in the partition suit and
the same was dismissed as res judicata. Even though the common judgment was rendered by the High Court therein even in form, the judgment in
the appeal relating to the money suit was separate from the rest of the judgment. It was further observed therein that there were two separate
decrees. The Apex Court has also taken note of the fact that if the doctrine of res judicata is not applied to a particular case and if two inconsistent
decrees will come into existence, it is not correct to allow such a situation to exist. In the very same decision, the Apex Court has approved the
ratio decidenti of the principle laid down in the earlier case in Narhari and Others Vs. Shankar and Others, to the effect that wherein if two decrees
in substance are one, one appeal is sufficient. The relevant passage of the judgment in Venkateswara Prabhu''s case is extracted here-under:-
Narhari and Others Vs. Shankar and Others, is no doubt the judgment of the Supreme Court of India, although it was, if one may so put it,
the Hyderabad Wing"" of it in a transitional period when a learned Judge of this Court, Mr. Justice Mehr Chand Mahajan, presided over a bench
of which the other two Members were formerly Members of His Exalted Highness the Nizam''s Judicial Committee. Technically, however, it was
this Court''s judgment. In that case, Naik, J. had followed a decision of the Judicial Committee of the Hyderabad State and held that when there
was only one suit and the appeals had been disposed of by the same judgment, it was not necessary to file two separate appeals. It elaborated the
ratio of the decision as follows (at p.757-758):
It is now well settled that where there has been one trial, one finding and one decision, there need not be two appeals even though two decrees
may have been drawn up. As has been observed by Tek Chand J. in his learned judgment in Mst. Lachhmi v. Mst. Bhulli, AIR 1927 Lah 289
mentioned above the determining factor is not the decree but the matter in controversy. As he puts it later in his judgment, the estoppel is not
created by the decree but it can only be created by the judgment. The question of res judicata arises only when there are two suits. Even when
there are two suits, it has been held that a decision given simultaneously cannot be a decision in the former suit. When there is only one suit, the
question of res judicata does not arise at all and in the present case, both the decrees are in the same case and based on the same judgment, and
the matter decided concerns the entire suit. As such, there is no question of the application of the principle of res judicata. The same cannot remain
effective just because it was appealed against with a different number or a copy of it was attached to a different appeal. The two decrees in
substance are one"".
In Pappammal alias Muthu Karuppayyee Ammal Vs. Meenammal and Others, the Bench which made reference to the Full Bench, had to
consider this question. They referred to the decision in Panchanada Velan Vs. Vaithinatha Sastrial and Others, , and pointed out that Full Bench
had clearly indicated the principle to apply in the circumstances of the case that where the object of the appeal being in substance, if not in form, is
to get rid of the very adjudication which is put forward as constituting res judicata that the adjudication should not be held to bar the appeal. The
Bench also added the qualification that the decision must have been rendered at the same time and the suits must have been tried together but it
was not material that they must be cross-suits. The Bench then referred to the decision in Ramaswami Chetti v. Karuppan Chetti, 29 MLJ 551 :
AIR 1916 Mad 1133 which followed the Full Bench decision in Panchanada Velan Vs. Vaithinatha Sastrial and Others, , and held that that
decision is not to be confined to cross suits only but that it is equally applicable to suits between the same parties in which a common question is
raised and decided and an appeal is preferred in only one of the suits.
In the decision in Lakshmi Ammal Vs. Official Receiver and Another, Beasley, C.J., referred to the sentence in the Full Bench judgment to the
following effect.
It would lead to startling results if we were to hold that an appellate tribunal is precluded from dealing with a question which comes before it on
appeal because an inferior Court, upon the same facts but in a case other than the case under appeal, had given a decision which had not been
appealed against, at the same time as the decision in the case under appeal"".
And held that the doctrine of res judicata had no application when the very object of the appeal was to get rid of the decision pleaded in bar. In
K.V. Narayanaswami Aiyar Vs. Sevadappa Goundar, , the decision in Lakshmi Ammal Vs. Official Receiver and Another, ) was followed.
Admittedly, in the instant case, one Original Petition was filed by the first respondent herein to set aside the award passed by the Arbitrators
whereas the other Original Petition was filed by the Arbitrators only seeking permission to file the award in the Court. Had the first respondent
herein not filed O.P.No.368 of 1994 to set aside the award, the benefit of the award passed by the Arbitrators would be available to the appellant
herein. It is only in the petition filed by the first respondent herein, the learned Judge has set aside the claims awarded by the Arbitrators in respect
of four headings out of five headings.
A perusal of the decree arose out of the common judgment by the learned Judge in both the original petitions discloses that the decree
proceeds as if it is a common decree. The relevant portion of the decree is extracted hereunder:-
In the High Court of Judicature at Madras
(Ordinary Original Civil Jurisdiction)
Thursday the 30th day of April 1998
The Hon''ble Mr. Justice R.JAYASIMHA BABU
Orgl. Petn.No.715 of 1993
and
Orgl. Petn.No.368 of 1994
In the matter of Indian Arbitration Act, 1940; and
In the matter of Arbitration in the disputes/claims arising out of and relating to the work of construction of Access Tunnel, cable shafts, Water
Conducter system and power House Cavern etc. of Specification No. C 1261 of Kadamparai pumped storage Hydro Electric project for Tamil
Nadu Electricity Board; and
In the matter of Arbitration Award
dated 29.3.1993.
A. Mohana Krishnan.. Petitioner/Arbitrator
v.
1.The Hindustan Construction Co. Ltd.,
Construction House,
5 Lalchand Hirachand Marg,
Ballard Estates, Bombay-38.
2.The Tamil Nadu Electricity Board,
Mount Road, Thro'' Chief Engineer
HEP, Madras-2. .. Respondents
Original Petition praying that this Court be pleased to (a) permit the petitioner to file the Award dated 29.3.1993, in Court (b) issue notice to
Respondents.
. . . . . .
. . . . . .
. . . . . .
That the Tamil Nadu Electricity Board Mount Road the second respondent in O.P.No.715 of 1993 do pay to the Hindustan Constructions
Company Limited the first respondent in O.P.No.715 of 1993 a sum of Rs. 1,56,08,879.12/- (Rupees one crore fifty six lakhs eight thousand
eight hundred and seventy nine and paise twelve only) with further interest at the rate of 11% p.a. on the sum of Rs.1,00,09,105/- (Rupees one
crore nine thousand one hundred and five only) from this date till the date of realisation.
That the award made by the Arbitrators under the heads claimed (a) (b) (c) and (e) of the claims made by the contractor the first respondent in
both petitions be and are hereby set aside.
That the interest awarded by the Arbitrators for the period from the date of reference to the date of award be and is hereby set aside as being
beyond their jurisdiction in view of clause 13 of section II of the contract; and
That the parties hereto shall bear their respective costs of these proceedings;
The above decree is drafted considering the fact that the learned Judge dealt with the issues in common and a common judgment is passed.
Even in the above appeal any order is passed as against the decree in O.P. No. 368 of 1994, it cannot be construed that an another inconsistent
decree would be available on record.
A Division Bench of the Patna High Court in Union of India (UOI) Vs. B.C. Basu and Another, held that the right of appeal conferred by the
legislature cannot be lightly defeated. It is further observed therein that the mere drawing of a decree will not take away the right of appeal against
the order.
Before 1940, the law relating to arbitration was mainly contained in the Second Schedule to the Code of Civil Procedure, which was repealed
by the Arbitration Act of 1940, a self-contained code in the matter of arbitration. The scheme of the Act is to divide arbitration into three classes.
The first consists of arbitration without intervention of a Court and is contained in Chap.II of the Act which has 17 sections from S. 3 to S. 19. The
second consists of arbitration with intervention of a Court where there is no suit pending, which is in Chap. III of the Act, and there is only one
section (S. 20) therein, as sub-s.(5) thereof applies the other provisions contained in the Act to this type of arbitration also so far as they can be
made applicable. The third type of arbitration is contained in Chap. IV, namely, arbitration in suits. This chapter contains five sections, and Section
25 thereof applies the other provisions of the Act so far as they can be made applicable.
Chapter II makes various provisions with respect to arbitrations of the first type. Reference may be made to a few which are material for our
purpose. Sec. 6 lays down that the authority of an appointed Arbitrator shall not be revocable by death of any party, but it shall not affect the
operation of any law by virtue of which any right of action is extinguished by the death of a person. Sec. 8 gives power to Court to appoint an
Arbitrator or umpire in certain circumstances. Sec. 11 gives power to Court to remove an Arbitrator or umpire in certain circumstances and Sec.
12 gives consequential power to Court to appoint persons to fill vacancies which may have arisen. Sec. 13 provides for powers of the Arbitrators
and Sec. 14 provides for the award to be signed and filed. When the award is filed the Court has to give notice to the parties of the filing of the
award under Sec. 14(2). Under Sec. 15, the Court is given power to modify or correct an award and under Sec. 16 the Court can remit the
award for reconsideration. Sec. 17 provides for judgment in terms of the award and reads thus:-
Where the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the
Court shall, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it,
proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree shall follow and no appeal shall lie from
such decree except on the ground that it is in excess of, or not otherwise in accordance with, the award.
Section 19 gives power to the Court to supersede the arbitration agreement in certain circumstances.
This analysis of the relevant provisions of the Act contained in Chap.II which apply mutatis mutandis to arbitrations of the other two types
shows that the Court has to pronounce judgment in terms of the award if it sees no cause to remit the award or any of the matters referred to
arbitration for reconsideration, or to set aside the award. The Court has to wait for the time given to the parties to make an application for setting
aside the award and where such an application has been made, the Court has to decide it first and if it rejects it, the Court proceeds to pronounce
judgment according to the award. It is clear, therefore, from Sec. 17 that an application to set aside the award is contemplated therein and it is only
when no such application has been made within the time allowed or if such an application has been filed and rejected, the Court proceeds to
pronounce judgment in terms of the award.
The Act, therefore, contemplates the making of an application to set aside an award and the grounds on which such an application can be
made are to be found in Sec. 30. The grounds on which an application can be made for setting aside the award are--
(a) that an Arbitrator or umpire has misconducted himself or the proceedings;
(b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become
invalid under Sec. 35;
(c)that an award has been improperly procured or is otherwise invalid. These are the only grounds on which an award can be set aside under Sec.
30 on the application, if any, filed by the party aggrieved.
We may also refer to Sec. 32 which lays down as follows:-
notwithstanding any law for the time being in force, no suit shall lie on any ground whatsoever for a decision upon the existence, effect or validity
of an arbitration agreement or award, nor shall any arbitration agreement or award be set aside, amended, modified or in any way affected
otherwise than as provided in this Act.
It is clear, therefore, from the scheme of the Act that if a party wants an award to be set aside on any of the grounds mentioned in S. 30 it must
apply within 30 days of the date of service of notice of filing of the award as provided in Art.158 of the Limitation Act. If no such application is
made the award cannot be set aside even on any of the grounds specified in Sec. 30 of the Act. It may be noted that there is no special form
prescribed for making such an application .
We draw support for the above principle in the decision rendered by the Apex Court in Madan Lal Vs. Sunderlal and Another, . In the light of
the above, it is clear that the Act does not envisage any application to pass a decree in terms of an award at the instance or whose favour an award
has been made. For the reasons stated above, we hold that the above appeal which is filed as against the judgment and decree in O.P.No.368 of
1994 which came to be passed on an application filed by the first respondent to set aside the award, is maintainable in law and it is not hit by the
principles of res judicata.
To deal with the further contentions urged by the learned counsel for both the parties, the following facts are necessary:
The appellant herein was awarded a contract by the first respondent and the contract agreement provides a period of 36 months to complete the
work from the date of handing over the site. Even though the site was handed over to the contractor on 1.6.1979, the work was not completed
within the stipulated period and the period of contract was extended from time to time at the request of the contractor and the work was ultimately
completed on 31.3.1988.
The value of the contract was fixed at Rs.10,24,82,900/-. The agreement provides for an escalation clause and the said clause is applicable
even in respect of the extended period. In view of the fact that the agreement has provided escalation clause, the contractor was paid in addition to
the sum of Rs.10,24,82,900/-, a further sum of Rs.4,43,47,411/- towards escalation and a sum of Rs.3,35,50,041/- towards the cost of
additional work, in all totalling to Rs.17,78,97,452/-.
The appellant has made a claim for a further sum of Rs.6,92,16,645.60 on 5.9.1989 which was later on scaled down to Rs.5,58,14,464.56.
The award was passed in respect of five claims out of six claims as detailed here-under:-
------------------------------------------------------------
Head of Claim Amounts Revised Amount
Originally claim Awarded by
claimed Arbitrators
------------------------------------------------------------
Rs. Rs. Rs.
a.Change in
location
of tailrace
gate shaft
from contractual
location 49,22,782.70 40,20,763.20 30,92,531.00
b.Excavation of
adit 3 head
race
Tunnel (HRT) 38,02,870.36 30,83,766.85 17,08,759.00
c.Construction
of HRT Gate
Shaft 2,19,152.74 1,17,046.05 1,07,046.00
d.Extra expenses
incurred and/or
losses suffered
by us due to
delay in
execution of
works of
construction of
Access tunnel,
cable shafts,
water conductor,
systems and power
house cavern etc.
for Kadambarai
Pumped Storage
Hydro Electric
project against
Specification
No.C.1261 2,60,47,094.46 2,29,76,911.83 1,00,09,105.00
e.Revision in
the rate of
works 2,67,33,356.95 2,26,82,621.63 51,96,473.00
f.Revision in
escalation
components 75,02,388.39 28,34,382.00 Nil
--------------------------------------------------
Total 6,92,16,645.60 5,58,14,464.56 2,01,13,014.00
------------------------------------------------------------
Since the learned Judge has extracted the relevant clauses contained in the contract, we do not propose to extract the said clauses. We shall deal
with the claim and counter claim of the respective parties in respect of each claims as set out here-under:-
Claim(a): Change in location of tailrace gate shaft from contractual location:
The appellant has made a claim under this heading on the ground that they have incurred extra expenditure due to the change of location as
directed by the first respondent. With regard to the change in location, Section III Clause 6.3.4 in the contract specifically enables the first
respondent to deviate, alter or make any additions in respect of the work which was awarded. The above clause makes it clear that the contractor
shall not claim any compensation in respect of any deviations or alterations. The said clause also proceeds to the effect that if any particular work
which is omitted from the specification and if the contractor is directed to execute the additional work, the contractor is entitled for the payment in
respect of the additional work it was ordered to execute. Admittedly, in the case on hand, the claim made by the contractor is only towards the
alleged loss sustained by it in respect of change of location which is not permissible in law. Inasmuch as the very same clause sets out a specific
prohibition against claim for any extra payment for additional work other than the schedule of rates, to which alone the contractor is entitled to, the
claim of the appellant for an enhanced amount is not permissible as per the terms of the contract. Since the Arbitrators have exceeded in their
jurisdiction in awarding the amount under claim(a) which is specifically prohibited as per the terms of the contract, we concur with the order of the
learned Judge wherein the award in respect of the above claim is set aside.
Claim(b): Excavation of adit 3 head race Tunnel (HRT):
The appellant has claimed for the payment of extra expenses on account of non-availability of approach roads, additional expenses on account of
tunnelling in Adit-3, extra expenses for construction of by-pass Adit, extra expenses for the construction of masonry-cum-RCC wall and
subsequent dismantling by control blasting; loss on account of idling and non-use of the machinery/equipment and extra expenses on account of
non-availability of access road upto the top of Suge shaft. In this regard, Section-III Clause 6.7.3(ii)(c) categorically proceeds to the effect that the
contractor is not entitled for any additional allowance other than the price indicated in the schedule to the terms of the contract in respect of
excavation of all classes of tunnel. Similarly, Clause 6.6.2(i) in Section-III, it is clearly indicated that the Board will not be responsible for any delay
in the formation of access roads and the contractor will not be eligible for any claims on account of such delay. Section-III 6.4.2(vii) specifically
proceeds to the effect that if the contractor is of the opinion that any additional Adit or construction of shafts are necessary for speedy execution of
the work, it is open to them to do so for which no extra payment for excavation or plugging or filling will be payable. In the light of the abovesaid
specific clauses prohibiting the payment of additional amount claimed, the Arbitrators have exceeded in their jurisdiction while passing award in
respect of the above claim and as such, we concur with the reasoning of the learned Judge in setting aside the above claim.
Claim(c):-Construction of HRT Gate Shaft:
The claim under this heading is made by the appellant on the ground that the location of the head race tunnel gate shaft was changed from its
contractual location and it requires additional work and extra time for the excavation of the shaft on account of the change of location which
resulted in loss on account of idling and non-use of the machinery. As dealt with already, with regard to claim(a), the relevant terms of the contract
specifically prohibits for claiming extra amount on this account and as such, the Arbitrators have exceeded in their jurisdiction in passing the award
and the learned Judge has rightly held that the appellant is not entitled to maintain the claim.
Claim(d): Extra expenses incurred and/or losses suffered due to delay in execution of works of construction of Access tunnel, cable shafts, water
conductor, systems and power house cavern etc., for Kadambarai Pumped Storage Hydro Electric project against Specification No.C.1261:
The appellant while making claim under the above heading has also claimed interest for the delay in payment of bill. As per the terms of the
agreement, the first respondent is expected to adhere to several obligations within the stipulated time. The appellant was able to substantiate before
the Arbitrators that there was delay on the part of the first respondent in fulfilling its obligations within the stipulated time, which fact was taken note
of by the learned Judge also. The claim made by the appellant is on account of the delay on the part of the first respondent for which the amount of
compensation was ordered to be paid. Even though the first respondent makes an attempt to rely upon Clause-20 Section-II of the contract which
proceeds to the effect that any breach or non-observance on the part of the first respondent will entitle the contractor for compensation or damage
to be fixed by the Engineer of the first respondent, the appellant was constrained to make a claim in this regard since they were not adequately
compensated for the actual delay caused by the first respondent Board. Even though the learned counsel for the first respondent contended that
extension of time was granted to the appellant only on their request, that does not prohibit the appellant to claim compensation if the delay is on the
part of the first respondent Board. The Arbitrators, taking note of the fact that due to the delay caused, the appellant has incurred a loss and as
such, the compensation was arrived at by them. The learned Judge while dealing with the above claim has given a finding that the amount claimed
by the appellant by way of interest to the tune of Rs.48,11,655.59 on account of delay in the payment of bills was not permissible having regard to
the recital contained in Clause-13 of Section-II of the contract agreement. Similarly, the learned Judge has rendered a finding that the contractor is
not entitled for idling charges towards machinery and under utilisation. However, the learned Judge while discussing about the total quantum under
this heading in paragraph-56 of the judgment has found that even if the amount under this heading viz., the claim towards interest and escalation
charges for idling of machinery and under utilisation are excluded from the claim made by the appellant, the balance works out to
Rs.1,28,07,302.36 and upheld the award of the Arbitrator which is a lesser than the above amount, viz., Rs.1,00,09,105.00.
A perusal of Clause-13 Section-II which deals with the payment of interest on money due to the contractor clearly proceeds to the effect that
the contractor is not entitled for interest towards arrears or any balance of payment or final settlement of his accounts, to be found due to him. The
learned Judge proceeds on the footing that the payment to which the appellant is entitled is only a payment towards arrears and as such, they are
not entitled for interest. With due respect to the learned Judge, we do not agree with the above reasoning. The present claim of the appellant with
regard to the interest is not relatable to the arrears in payment of any balance or final settlement of his accounts, but however, it is on account of
loss incurred by the contractor due to the delay which is attributable on the part of the first respondent. In view of the fact that the above claim is
not towards any arrears or balance of any payment on account of final settlement of bills but with regard to a specific claim which arose due to the
delay on the part of the first respondent in discharging their obligation, the appellant is liable for compensation including interest. Even though we do
not concur with the views of the learned Judge that the appellant is not entitled to claim interest, we do not propose to alter or interfere with the
amount quantified by the Arbitrators, since the appellant has not raised any specific ground with regard to the order of the learned Judge in
restricting the above claim excluding the interest thereof. Even though the learned counsel for the first respondent strenuously contended that the
award of the Arbitrators as well as the order of the learned Judge in accepting the claim of the appellant under this heading is liable to be set aside,
inasmuch as the first respondent has not made out a case of misconduct or want of jurisdiction or bias on the part of the Arbitrators, we are not
inclined to set aside the order in respect of the above claim. The Apex Court in its decision rendered in Trustees of The Port of Madras Vs.
Engineering Constructions Corporation Limited, , after referring to various earlier decisions, held that the finding of the learned Umpire therein
which came to be passed after perusal of the relevant materials and as such, the High Court ought not to have interfered with the said findings and
if it so, it would amount to re-appraisal of the evidence/materials before the learned Umpire.
In the light of the above decision, we do not propose to interfere with the award of the Arbitrators even with regard to the above claim
concurring with the views of the learned Judge, which would otherwise amount to appraisal of evidence.
Claim(e): Revision in the rate of works:
As regards the above claim, the Arbitrators have chosen to accept the claim of the appellant with regard to the revision of rates as claimed by
them. The Arbitrators have overlooked the fact that the contract is a lumpsum contract and as per the terms of contract, specific clause is provided
for escalation of prices and admittedly the contractor was paid the escalation in cost in respect of the work done during the period of extension
apart from the amount payable for the additional work necessitated in respect of alteration, addition or deviation. However, the appellant has
chosen to claim a further amount which is nothing but a revision of rates which is specifically prohibited under the relevant terms of the contract viz.,
clause 6.7.3 of Sec.III and clause 6.3.2(i) of Sec.I. Hence, we agree with the reasoning of the learned Judge in setting aside the award passed by
the Arbitrators under this claim.
The learned Judge while dealing with the claim of interest awarded by the Arbitrators from the date of the claim, restricted the period for which
the appellant is entitled viz., from the date of award till the date of payment. In this regard, the learned Judge has relied upon Clause-13 of Section-
II of the contract. The learned Judge has also placed reliance upon Clause-20 Section-II and concluded that even though extension of time was
granted by the Engineer, he has not decided the actual compensation payable to the appellant/contractor which decision was arrived at only at the
time of passing the award, and as such, the quantum which could be termed as a ''balance'' as contemplated under Clause-13 of Section-II and
accordingly held that the appellant is not entitled for the interest from the date of claim but only from the date of the award. In this connection, a
perusal of Clause-13 of Section-II of the contract agreement will make the position clear which is extracted here-under:-
Clause-13 of Section-II-Interest on money due to the contractor : No omission by the Engineer to pay the amount due upon certificates shall
vitiate or make void the contract nor shall the contractor be entitled to interest, upon any guarantee fund or payments in arrears nor upon any
balance which may, on the final settlement of his accounts, be found due to him"".
A reading of the above clause makes it clear that it would be applicable only in respect of arrears of guarantee fund or payment in arrears; and
balance amount in final settlement. Admittedly, in the case on hand, the appellant was entitled for compensation in terms of Clause-20 of Section-II
which deals with the obligations on the part of the first respondent Board due to breach or non-observance which resulted in additional expenses
to the appellant herein. The said clause is extracted here-under:-
20.0 BREACH ON THE PART OF PURCHASER NOT TO ANNUL CONTRACT:
No breach or non-observance on the part of the purchaser of any of the agreements herein contained shall annul this contract or discharge the
contractor from the observance and performance thereof or of any part thereof, but compensation of damage (if any) shall be made to the
contractor or at the option of the Engineer an extension of time given to the contract in respect of such breach or non-observance by the purchaser
such compensation or extension of time to be fixed by the Engineer.
A perusal of the above clause clearly provides for the payment of compensation determined by the Engineer. It is only on failure on the part of the
Engineer to determine the said compensation, the appellant was constrained to make a claim by resorting to arbitration proceedings. Had the
Engineer determined the amount of compensation immediately after the completion of the contract or on receipt of the request from the
contractor/appellant, there would not be any further loss including on account of interest. Hence, the claim of the contractor should necessarily date
back to the date on which the claim was made, in which event it includes interest.
As regards the question of awarding interest, the Apex Court in its decision rendered in M/s. Hind Builders Vs. Union of India, after
considering the various earlier decisions has held as follows:-
That apart, on merits also the contention raised that post-award interest has been declined by the High Court is not correct. The contention
overlooks the course of pleadings between the parties. The arbitrators had, in the annexure to the award, computed interest from 5.10.1982 to
26.3.1984 i.e. from the date of the termination of the contract till the date of the award and, in the award, had granted interest on the amount
awarded from the date of award till the date of decree or payment. A point had been raised before the High Court in the memo of objections that
the arbitrators had erred in awarding interest in the manner mentioned in the award but the objection urged by the Union before the learned single
Judge was different one viz., that the arbitrators ought not to have granted interest for the period prior to the date of reference without any
agreement or right in law to claim such interest. It is this contention that was accepted by the learned single Judge who deleted the interest award
prior to the date of the reference and held that the arbitrators had jurisdiction to award interest from the date of the reference till the date of the
award. This did not affect the arbitrators''s direction in the main part of the award, that interest will accrue on the amount of the award (if the said
amount was not paid within 60 days) till the date of payment of decree, whichever is earlier. This part of the award was not questioned. In fact, the
decree drawn up in consequence of the order of the learned single Judge, specifically directs (a) interest on the awarded amount from 6.5.1983
(date of reference) to 26.3.1984 (date of the award); (b) ""thereafter, interest on the amount awarded at 11% from 27.3.1984 to 11.12.1984
(date of the decree); and � interest thereafter at 9% per annum. The objection of the Union in the LPA on the question of interest was only that
the arbitrators had erred in awarding interest from 6.5.1983 to 26.3.1984. It is this contention that was accepted by the Division Bench. The High
Court had, therefore, not decided that the contractors were not entitled to interest beyond the date of the award. This contention of the Union,
therefore, fails and is rejected.
In the light of the above, it is seen that the Apex Court has approved the award of interest from the date of reference as valid one.
The learned counsel for the first respondent relying on the decision of the Apex Court in Durga Ram Prasad Vs. Govt. of A.P., , contended
that the appellant is not entitled to claim any interest. The said decision by the Apex Court is rendered by referring to the relevant clause in the
contract in that case relating to payment of interest, wherein there is specific prohibition from payment of interest which is not applicable with
regard to the claim relatable to the breach on the part of the first respondent.
Even though the Apex Court in its decision rendered in Secretary, Irrigation Department, Government of Orissa and others Vs. G.C. Roy, by
overruling the earlier decision rendered in Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others, has held that the
Arbitrator is entitled to award interest pendente lite. In the said decision, the Apex Court has held as here-under:-
The question still remains whether arbitrator has the power to award interest pendente lite, and if so on what principle. We must reiterate that
we are dealing with the situation where the agreement does not provide for grant of such interest nor does it prohibit such grant. In other words,
we are dealing with a case where the agreement is silent as to award of interest. On a conspectus of aforementioned decisions, the following
principles emerge:
(i) A person deprived of the use of money to which he is legitimately entitled has a right to be compensated for the deprivation, call it by any name.
It may be called interest, compensation or damages. This basic consideration is as valid for the period the dispute is pending before the arbitrator
as it is for the period prior to the arbitrator entering upon the reference. This is the principle of S. 34, C.P.C., and there is no reason or principle to
hold otherwise in the case of arbitrator.
(ii) an arbitrator is an alternative form for resolution of disputes arising between the parties. If so, he must have the power to decide all the disputes
or differences arising between the parties, if the arbitrator has no power to award interest pendente lite, the party claiming it would have to
approach the Court for that purpose, even though he may have obtained satisfaction in respect of other claims from the arbitrator. This would lead
to multiplicity of proceedings.
(iii) An arbitrator is the creature of an agreement. It is open to the parties to confer upon him such powers and prescribe such procedure for him to
follow, as they think fit, so long as they are not opposed to law. (The proviso to S. 41 and S. 3 of Arbitration Act illustrate this point). All the
same, the agreement must be in conformity with law. The arbitrator must also act and make his award in accordance with the general law of the
land and the agreement.
(iv) Over the years, the English and Indian Courts have acted on the assumption that where the agreement does not prohibit and a party to the
reference makes a claim for interest, the arbitrator must have the power to award interest pendente lite. Seth Thawardas Pherumal Vs. The Union
of India (UOI), has not been followed in the later decisions of this Court. It has been explained and distinguished on the basis that in that case there
was no claim for interest but only a claim for unliquidated damages. It has been said repeatedly that observations in the said judgment were not
intended to lay down any such absolute or universal rule as they appear to, on first impression. Until Executive Engineer (Irrigation), Balimela and
Others Vs. Abhaduta Jena and Others, almost all the Courts in the country had upheld the power of the arbitrator to award interest pendente lite.
Continuity and certainty is a highly desirable feature of law.
(v) Interest pendente lite is not a matter of substantive law, like interest for the period anterior to reference (pre-reference period). For doing
complete justice between the parties, such power has always been inferred.
Having regard to the above considerations, we think that the following is the correct principle which should be followed in this behalf.:
Where the agreement between the parties does not prohibit grant of interest and where a party claims interest and that dispute (along with the
claim for principal amount or independently) is referred to the arbitrator, he shall have the power to award interest pendente lite. This is for the
reason that in such a case it must be presumed that interest was an implied term of the agreement between the parties and therefore when the
parties refer all their disputes - or refer the dispute as to interest as such - to the arbitrator, he shall have the power to award interest. This does not
mean that in every case the arbitrator should necessarily award interest pendente lite. It is a matter within his discretion to be exercised in the light
of all the facts and circumstances of the case, keeping the ends of justice in view.
For the reason aforesaid we must hold that the decision in Executive Engineer (Irrigation), Balimela and Others Vs. Abhaduta Jena and Others,
, in so far as it runs counter to the above proposition, did not lay down correct law.
A perusal of the principles laid down by the Apex Court in the above decision makes it clear that the Arbitrator is entitled to award interest
pendente lite which may date back to the date of reference. Admittedly, in the case on hand, the Arbitrators have chosen to award compensation
in respect of claim(d), inclusive of interest by considering the fact that the appellant has incurred a loss from the date of reference. We do not see
any reason to interfere with the decision of the Arbitrators in awarding interest from the date of reference and as such, we do not concur with the
reasoning of the learned Judge in disallowing the claim of interest.
The Apex Court in its decision rendered in State of Orissa Vs. Sudhakar Das (Dead) by Lrs., by following the decision rendered in Secretary,
Irrigation Department, Government of Orissa and others Vs. G.C. Roy, held therein that the dispute referred to the Arbitrator included the claim of
interest is no longer res-integra and stands settled in favour of the claimant and upheld the award of interest pendente lite. In the said decision, the
Apex Court has even permitted the claimant to execute the decree relating to the award of pre-reference interest also on such conditions. Thus, by
applying the above principle, the appellant is entitled to claim interest in respect of claim(d) as per the award of the Arbitrators.
The learned senior counsel for the appellant relied on a number of decisions to the effect that the Court has no jurisdiction to interfere with the
non-speaking award. We are perfectly in agreement with the said contention of the learned senior counsel to the effect that the Courts cannot
lightly interfere with the non-speaking award. However, the Apex Court has clearly laid down the law, the circumstances under which a non-
speaking award can be interfered with for specified reasons. In this connection, it would be appropriate to refer to the proposition of law
enunciated by the Apex Court in its decision rendered in Rajasthan State Mines and Minerals Limited Vs. Eastern Engineering Enterprises and
Another, wherein after referring to the earlier decisions, it is held as follows:-
From the resume of the aforesaid decisions, it can be stated that:
(a) It is not open to the Court to speculate, where no reasons are given by the arbitrator, as to what impelled the arbitrator to arrive at his
conclusion.
(b) It is not open to the Court to admit to probe the mental process by which the arbitrator has reached his conclusion where it is not disclosed by
the terms of the award.
(c) If the arbitrator has committed a mere error of fact or law in reaching his conclusion on the disputed question submitted for his adjudication then
the Court cannot interfere.
(d) If no specific question of law is referred, the decision of the arbitrator on that question is not final, however much it may be within his
jurisdiction and indeed essential for him to decide the question incidentally. In a case where a specific question of law touching upon the jurisdiction
of the arbitrator was referred for the decision of the arbitrator by the parties, then the finding of the arbitrator on the said question between the
parties may be binding.
(e) In a case of a non-speaking award, the jurisdiction of the court is limited. The award can be set aside if the arbitrator acts beyond his
jurisdiction.
(f) To find out whether the arbitrator has travelled beyond his jurisdiction, it would be necessary to consider the agreement between the parties
containing the arbitration clause. The arbitrator acting beyond his jurisdiction is a different ground from the error apparent on the face of the award.
(g) In order to determine whether the arbitrator has acted in excess of his jurisdiction what has to be seen is whether the claimant could raise a
particular claim before the arbitrator. If there is a specific term in the contract or the law which does not permit or give the arbitrator the power to
decide the dispute raised by the claimant or there is a specific bar in the contract to the raising of the particular claim then the award passed by the
arbitrator in respect thereof would be in excess of jurisdiction.
(h) The award made by the arbitrator disregarding the terms of the reference or the arbitration agreement or the terms of the contract would be a
jurisdictional error which requires ultimately to be decided by the court. He cannot award an amount which is ruled out or prohibited by the terms
of the agreement. Because of a specific bar stipulated by the parties in the agreement, that claim could not be raised. Even if it is raised and
referred to arbitration because of a wider arbitration clause such claim amount cannot be awarded as the agreement is binding between the parties
and the arbitrator has to adjudicate as per the agreement. This aspect is absolutely made clear in Continental Construction Co. Ltd by relying upon
the following passage from Alopi Parshad v. Union of India which is to the following effect: (SCC p.88, para-5)
There it was observed that a contract is not frustrated merely because the circumstances in which the contract was made, altered. The Contract
Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the
contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the
course of carrying it out, with a turn of events which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of
currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the courts to absolve a party from liability to
perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become
onerous.
(i) The arbitrator could not act arbitrarily, irrationally, capriciously or independently of the contract. A deliberate departure or conscious disregard
of the contract not only manifests the disregard of his authority or misconduct on his part but it may tantamount to mala fide action.
(j) The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks just and reasonable; the arbitrator is a
tribunal selected by the parties to decide the disputes according to law.
In the abovesaid decision, principles (g) and (h) clearly proceed to the effect that the arbitrator cannot accept a claim which is clearly prohibited in
the terms of the contract. We have already dealt with the various claims which were allowed by the arbitrators contrary to the specific prohibition
contained in the relevant clauses of the contract. In the light of the above decision, we are in complete agreement with the order of the learned
Judge in setting aside the several claims of the award except claim(d).
We are reinforced with the above views by the other decisions of the Supreme Court in Associated Engineering Co. Vs. Government of
Andhra Pradesh and another, , the award passed in respect of the claims is liable to be set aside as the same is without jurisdiction and as such, the
learned Judge has decided the matter in accordance with law. Since the jurisdiction of the Arbitrator flows as contemplated by the terms contained
in the contract, if any conclusion is arrived at contrary to the express prohibition contained in the relevant clauses of the contract, the award in
respect of the said claims can be interfered with, as held by a decision of the Supreme Court in The Managing Director, J. and K. Handicrafts,
Jammu Vs. M/s. Good Luck Carpets, .
As regards the rejection of counter claim is concerned, we do not propose to accept the contention raised by the learned counsel for the first
respondent, since the award passed by the Arbitrators based on relevant records and inspection conducted on the site, we are of the opinion that it
would amount to re-appraisal of evidence, which is not permissible in law as held by the Apex Court in the decision referred to supra.
In the light of the above discussions, we hold that the judgment and decree of the learned Judge is perfectly valid in law except with the
reasoning of the learned Judge in restricting the period for which the interest is payable viz., from the date of the award instead of from the date of
reference.
For the reasons stated above, we modify the judgment and decree of the learned Judge to the effect that the appellant is entitled for a decree
as against the first respondent for a sum of Rs.1,00,09,105.00 (Rupees One Crore Nine Thousand One Hundred and five only) together with the
interest thereon at the rate of 11% p.a. from 22.11.1989 till the date of payment. Accordingly, OSA No.201 of 1998 is partly allowed and OSA
Nos.107 and 108 of 1999 are dismissed. However, there will be no order as to costs.