West Bengal State Electricity Board vs Bengal Traders

Ajoy Nath Ray, J.—This is an application for setting aside of an unreasoned award of an Umpire.

A point has been raised about the jurisdiction of this Court, but there is no substance in it. It is stated in para. 3 of the affidavit-in-opposition that the West Bengal State Electricity Board carries on business at 9 Old Post Office Street, Calcutta, within the local limits of the Ordinary Original Civil Jurisdiction of this Court and it is merely replied in para. 4 of the reply that the said office has no relation to the contract of the Respondent. In my opinion no-further discussion on this point is necessary.

Mr. Mullick has next submitted that the Umpire went beyond his jurisdiction because he awarded sums claimed on account of escalation. According to Mr. Mullick Clause 49 of the Contract which is extracted as Annex. ''C'' to the petition prohibits such award on account of escalation. He said that not only could escalation not be awarded, but also that there was no question of any award of interest upon such claim, which was in reality a claim for damages. In support of this proposition he relied upon the recent Supreme Court case of a learned in Associated Engineering Co. Vs. Government of Andhra Pradesh and another, He pointed out that in that case also there was an award upon heads which were prohibited from further claims by the contractor by reason of a contractual clause. He placed a portion of the judgment from paras. 21 to 25 and said that Their lordships of the Supreme Court clearly laid down in that case that an Arbitrator had no jurisdiction to award damages or sums of money in opposition to prohibitions contained clearly in contractual clauses.

That case, I must frankly confess, is indeed an authority for that proposition. If I were to look into the Contract and if I were to look into Clause 49 of the Contract and if I came to the conclusion that on a whole reading of the Contract including Clause 49 the claimant award-holder was prohibited from claiming on account of escalation, then, I would have to set aside the award if the authority of Associated Engineering Co. bound me.

In my opinion, however, the said authority does not bind me because there are larger Benches of the Supreme Court speaking otherwise.

Mr. Hironmoy Datta, appearing for the award-holder, has relied upon a decision of a Three Judge Bench in the case of N. Chellappan Vs. Secretary, Kerala State Electricity Board and Another, Mathew J. speaking for the Bench said inter alia as follows in para. 12:

The Umpire as Sole Arbitrator was not bound to give a reasoned award and if in passing the award he makes a mistake of law or of fact that is no ground for challenging the validity of the award. It is only when a proposition of law is stated in the award and which is the basis of the award and that is erroneous can the award be set aside or remitted on the ground of error of law apparent on the face of the record.

On the basis of this proposition, even if I assume that the Umpire committed an error both of law and of fact in permitting an award for damages to be made in the face of Clause 49 of the Contract, I would not be entitled to set aside the award. The result would be diametrically opposite if I were to apply the dicta of the Two Judge Bench.

The old and long standing dictum in the case of Champsey Bhara 50 I.A. 324 was quoted and again reaffirmed by a Three Judge Bench of the Supreme Court in the case of Hindusthan Construction Co. AIR 1992 S.C. 3192. There also it is stated that an award cannot be set aside for a mistake upon law or a mistake upon fact unless these mistakes also produce a statement or proposition of law appearing on the face of the award which is erroneous and which forms the basis of the award.

The question of a mistaken application of Clause 49 of the Contract to the claim, therefore, is not a question of jurisdiction, but a question of a mistake, either of law or of fact, or of both. The same does not appear on the face of the award. The award cannot therefore be set aside.

Mr. Mullick submitted that the Umpire was not competent to decide upon the question of a damages for escalation at all. I am unable to agree. The arbitration clause is wide enough to encompass claims in relation to escalation, be they permissible in the face of Clause 49 or be they not so permissible. There was no lack of jurisdiction on the part of the Arbitrators or the Umpire to pass an award upon the claim for escalation. It is inconceivable in the face of the present arbitration clause that a suit, if filed, by the claimant for escalation would not be liable to be stayed u/s 34 if the other side had so applied. Thus, the question of application of Clause 49, or the question of not applying Clause 49, are both questions relating to the merits of the controversy and are not questions relating to the lack of jurisdiction of the Umpire to decide at all.

Mr. Mullick has further said that there has been misconduct or perversity on the part of the Umpire and thus the award is also liable to be set aside.

Apart from relying upon the aforesaid Two Judge Bench Supreme Court decision, Mr. Mullick had also relied upon another Two Judge Bench of the Supreme Court in the case of Continental Construction AIR 1988 S.C. 1160. This case is not so clearly different from the old law (and this is said with the utmost respect possible) as the other Two Judge authority. If paras. 6 and 8 in the judgment of the Continental Construction are read and fully applied, it might indeed indicate that a Court examining an award might have to look into the issue whether the extra cost could be granted by the Arbitrator in the terms of the Contract. In view of the other larger Supreme Court Bench decisions I am bound to hold that an arbitral Court cannot so look into it as it would be like sitting in appeal over the award which is non-speaking.

However, in the case of Continental Construction, Their lordships in paragraph 6, came to the conclusion that, (whether for awarding contrary to the contractual clause or not) the Arbitrator had misdirected himself and Their lordships said again in para. 8 that the Arbitrator had (for such reason or other) misconducted himself.

If a case of misdirection or misconduct can be made out, even outside the terms of the award or the contract, then the award can indeed be set aside. If the Supreme Court finds that a particular decision verges upon non-application of mind, or is to be treated as misdirection or misconduct, then the same is a finding in that particular case. But where ever the Supreme Court lays down a principle for a finding, that forms the basis of a binding precedent upon me and the rest of Courts in India.

It was further said in Continental Construction Co. in para. 10 that the agreement as a whole was to be read. Indeed if merely Clause 49 is put up for consideration of the Court, no Court can be satisfied with a reading of that single clause and conclude immediately that the same is a complete bar to any claim for escalation. The whole contract is to be looked into and the pleadings have to be looked into, the full facts have to be considered. An Arbitration Court is no place for such an exercise.

Mr. Mullick said that the Umpire permitted notes to be handed up by the award-holder on the last date of hearing which was July 10, 1991 and that the Respondents had no chance to deal with the same. I do no find that any prayer was made for a chance to deal with the same or that the said prayer was refused by the Umpire. Mr. Mullick also said that the Umpire had stated on the face of the award that he considered the depositions whereas there was no oral evidence. The word ''depositions'' might refer not only to formal statements of witnesses under oath but also to statements of facts orally made before the Arbitrator or Umpire by a party or its representative. It need not necessarily always be taken down in writing, though that is what we are used to in a regular Civil Court of law.

Thirdly, Mr. Mullick said that the Umpire in the forwarding letter to the Registrar on the Original Side had said that the award dated August 12, 1991, was being forwarded by him as requested by M/s. Bengal Traders, the claimant. Mr. Mullick said that such a request must have been made, if at all, between last date of hearing, i.e. July 10, 1991 and August 12, 1991. It is thus attacked as a private and one sided communication between the Umpire and the claimant. I am unable to accept that contention. The Court is not to infer misconduct or an underhand dealing of the Umpire unless something positive or cogent is shown to that effect. It cannot be said by the parties today, that at no time during the reference before the Umpire the question of filing of the award had ever arisen. The Umpire does not say that Bengal Traders requested specifically for filing in the High Court, though Mr. Mullick would have interpret the Umpire''s letter so. It would be placing a disproportionate overemphasis upon a single-sentence like the one under consideration to infer thereupon that the award-holder has had private and improper communication with the Umpire and thus, on the basis of the single phrase in the forwarding letter, to upset the entire award which is otherwise perfectly good and valid.

This application is accordingly dismissed with costs assessed at 250 GMs.

A stay of operation of this order is prayed for but the same is refused.

The judgment upon award matter appears in the list today. There will be a judgment upon award. The claimant would be entitled to the costs of the proceedings in the reference as well as to the costs, of obtaining this decree upon the award. The claimant will be further entitled to interest upon judgment @ 12 % per annum which is also the rate awarded by the Umpire.

All parties and others concerned to act on a signed copy of the directed order on the usual undertaking.