Oil & Natural Gas
Corporation Vs. M/s. Wig Brothers Builders & Engineers Pvt. Ltd.
J U D G M E N T
R.V.RAVEENDRAN,J.
1.
Leave
granted.
2.
The
appellant (also referred to as `ONGC') entrusted a construction work to the
respondent under a contract dated 11.10.1983. Clause 25 of the contract
provided for settlement of disputes by arbitration. Certain disputes arose between
the parties in regard to the said contract and they were referred to a sole
arbitrator on 31.12.1986. The claimant made several claims aggregating to Rs.82,
89,000/-. ONGC made counter claims aggregating to Rs.1, 24, 87,000/-. The
arbitrator awarded Rs.9,50,000/- under the first claim, Rs.7,80,132/- under the
second claim, Rs.4,77,129/- under fifth claim and several smaller amounts under
claims 3, 4, 6 to 13, 15, and 17, in all aggregating to Rs.25,26,270/-. The arbitrator
also awarded 12% pendent lite interest and 6% from the date of the
award/decree. The counter claims were rejected.
3.
The
ONGC challenged the said award by filing a petition under sections 30 and 33 of
the Arbitration Act, 1940 (`Act' for short). The civil court (Additional
District Judge, Dehradun) dismissed the said petition filed by ONGC and made
the award a rule of the court. ONGC filed an appeal before the Uttarakhand High
Court. By impugned judgment dated 14.6.2007, the High Court upheld the judgment
of the civil court making the award the rule of the court, subject only to one
change, by reducing the rate of pendent lite interest from 12% to 6% per annum.
The said judgment is challenged by ONGC in this appeal by special leave.
4.
It
is now well settled that a court, while considering a challenge to an award
under sections 30 and 33 of Arbitration Act, 1940, does not examine the award, as
an appellate court. It will not re - appreciate the material on record. An
award is not open to challenge on the ground that the arbitrator had reached a
wrong conclusion or had failed to appreciate some facts. But if there is an
error apparent on the face of the award or if there is misconduct on the part of
the arbitrator or legal misconduct in conducting the proceedings or in making
the award, the court will interfere with the award. Keeping the said principles
in view, we will consider the challenge.
5.
The
award has been made with reference to several claims. The appellant has not
been able to make any valid ground to attack except with reference to claim
No.(1). In fact, the learned counsel for appellant rightly concentrated upon
the award on claim No.(1), which relates to the claim for compensation for loss
on account of prolongation of the completion period on account of the ONGC's
failure to perform its contractual obligations. The arbitrator has held that
the delay in completion was due to the fault of both the contractor and ONGC
and that both are equally liable for the delay of 19 months. The arbitrator
held that as both were equally liable, the contractor was entitled to
compensation at the rate of Rs.1 lakh for a period of 9 = months (that is half
of the period of delay of 19 months) in all Rs.950,000/-. The arbitrator has observed
that there is no provision in the contract by which the contractor can be
estopped from raising a dispute in regard to the said claim. But clause 5A of
the contract pertains to extension of time for completion of work and
specifically bars any claim for damages. The said clause is extracted below :
"In the event of delay by the Engineer-in-Charge to hand over to the contractor
possession of land/lands necessary for the execution of the work or to give
the necessary notice to the contractor to commence work or to provide the necessary
drawing or instructions or to do any act or thing which has the effect of delaying
the execution of the work, then notwithstanding anything contained in
the contract or alter the character thereof or entitle the contractor to
any damages or compensation thereof but in all such cases the
Engineer-in-Charge may grant such extension or extensions of the completion
date as may be deemed fair and reasonable by the Engineer-in Charge and such
decision shall be final and binding."
6.
In
view of the above, in the event of the work being delayed for whatsoever reason,
that is even delay which is attributable to ONGC, the contractor will only be
entitled to extension of time for completion of work but will not be entitled to
any compensation or damages. The arbitrator exceeded his jurisdiction in
ignoring the said express bar contained in the contract and in awarding
the compensation of Rs.9.5 lakhs. This aspect is covered by several
decisions of this Court. We may refer to some of them. In Associated
Engineering Co. v. Government of A.P. - 1991 (4) SCC 93, this Court
observed : "24. The arbitrator cannot act arbitrarily, irrationally, capriciously
or independently of the contract. His sole function is to arbitrate in terms
of the contract. He has no power apart from what the parties have given him
under the contract. If he has travelled outside the bounds of the contract, he
has acted without jurisdiction. ..." In Rajasthan State Mines & Minerals
Ltd. v. Eastern Engineering Enterprises - 1999 (9) SCC 283, this Court held :
"The rates agreed were firm, fixed and binding irrespective of any fall
or rise in the cost of the work covered by the contract or for any other
reason or any ground whatsoever. It is specifically agreed that the
contractor will not be entitled or justified in raising any claim or dispute because
of increase in cost of expenses on any ground whatsoever. By ignoring the said
terms, the arbitrator has travelled beyond his jurisdiction as his existence
depends upon the agreement and his function is to act within the limits of
the said agreement. This deliberate departure from the contract amounts not
only to manifest disregard of the authority or misconduct on his part but it
may be tantamount to mala fide action. It is settled law that the arbitrator
is the creature of the contract between the parties and hence if he ignores the
specific terms of the contract, it would be a question of jurisdictional
error which could be corrected by the court and for that limited purpose,
agreement is required to be considered He cannot award an amount which is ruled
out or prohibited by the terms of the agreement."In Ramnath
International Construction (P) Ltd. v. Union of India - 2007 (2) SCC 453, a
similar issue was considered. This Court held that clause 11(C) of the General Conditions
of Contract (similar to clause 5A under consideration in this case) was a clear
bar to any claim for compensation for delays, in respect of which extensions
had been sought and obtained. This Court further held that such a clause amounts
to a specific consent by the contractor to accept extension of time alone in satisfaction
of claims for delay and not to claim any compensation; and that in view of such
a bar contained in the contract in regard to award of damages on account of
delay, if an arbitrator awards compensation, he would be exceeding his
jurisdiction.
7.
In
view of the above, the award of the arbitrator in violation of the bar contained
in the contract has to be held as one beyond his jurisdiction requiring interference.
Consequently, this appeal is allowed in part, as follows :(a) The judgment of
the High Court and that of the civil court making the award the rule of the
court is partly set aside in so far as it relates to the award of Rs.9.5 lakhs
under claim No.(1) and the award of interest thereon.(b) The judgment of the
civil court as affirmed by the High Court in regard to other items of the
award is not disturbed.
..............................J.
(R V Raveendran)
.............................J. (H L Gokhale)
New
Delhi;
October
8, 2010.
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