State of Orissa & ANR Vs. Kalinga
Construction Co. (P) Ltd.  INSC 186 (11 September 1970)
11/09/1970 GROVER, A.N.
CITATION: 1971 AIR 1650 1971 SCR (2) 110
Arbitration--Award by arbitrator after
considering and believing certain evidence-If open to court to sit in appeal
over such award-Arbitration Act. 1940. Ss. 30 and 33.
The respondent Company's tender for the
movement and depositing of earth on the right dyke of the Hirakud Dam was
provisionally accepted by the Government in December 1951.
The work started in Fehr any 1952 and a
formal contract was executed in March 1953. The earth work was done by manual
labour for a year in the beginning and thereafter it was done to a large extent
by machinery. The vertical movement was styled as "lift" and the
horizontal movement as "lead".
When the company started employing the heavy
machinery from the beginning of 1953 onwards a number of ramps had to be
constructed to enable the machinery to go up from the borrow pits to the dyke.
After the work was completed, the respondent Company was paid a certain amount
on the basis of a scale set out in the contract; but it claimed an additional
substantial sum in respect of lifts and extra leads and certain other items
together with the interest on the amounts duo. It was provided in the contract
that if the average lead mentioned bad to be exceed, the orders of the Chief
Engineer in writing had to, be obtained by the contractor. The respondent
Company claimed that it had 'sought the orders of the Chief Engineer in writing
for the extra leads resulting from the conversion of lifts into leads and that
although the Chief Engineer did not himself make any such order, the
Superintending Engineer with whom the Company had been dealing did sign an
order for the Chief Engineer. The contract provided for arbitration of disputes
and differences. After the matter was taken up for arbitration, issues were
framed by the arbitrator and considerable oral and documentary evidence was led
by both the parties before him. On the basis of this evidence the arbitrator
found that the tender must be taken to have been made and accepted on the basis
that the whole work was to be done by manual labour; he believed the evidence
of the Chief Engineer that he passed no order allowing any extra leads and
eventually held that no further amount was payable by the Government to the
Company. The respondent thereafter filed a plaint under Sections 30 and 33 of
the Indian Arbitration Act, 1940, challenging the award on various grounds and
praying for it to be set aside. The subordinate Judge who heard the ease set
aside the award in March 1962.
In an appeal to the High Court the two Judges
who constituted the Division Bench gave dissenting judgments, i.e. one of them
holding that the award could not be sub stained and the other one being of the
view that the award was not liable to be set aside. The appeal was then heard
by a third judge who held that the award was liable to be set aside on two of
the issues; as he held these issues to be severable, he proceeded to set aside
the award in reason appeal to this Court, 185
HELD : The appeal must be allowed and the
order of the High Court setting aside the award in part must be reversed. The
proceedings instituted by the respondent under Sections 30 and 33 of the
Arbitration. Act must be dismissed.
A bare perusal of the judgment of the third
learned Judge of the High. Court clearly showed that he decided the matter as
it he was entertaining an appeal against the award. He re-examined and
reappraised the evidence which had been considered and believed by the
arbitrator It was not open to the High Court to sit in appeal on the
[189 C] Once it was found that under the
terms of the contract the Order of the Chief Engineer in writing had to be
obtained before the work involving additional leads was executed in the absence
of any such written order it was not open to the court to hold that the
appellant was liable for payment of extra leads by applying some principle or
rule analogous to estoppel. Although it was true that the company had been
writing to the Engineering Department in the matter and that the latter did
not, for a considerable time, send any reply but the Company was debarred from
asking for any additional payment in the absence of the Chief Engineer's order
in writing. If the arbitrator came to that conclusion, it could not be said that
there was any error apparent in his award which would justify setting aside.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 2023 of 1969.
Appeal from the judgment and decree dated
February 18, 1965 of the Orissa High Court in Misc. Appeal No. 53 of 1962.
S. T. Desai, Gobind Day and R. N. Sachthey,
for the appellants.
V. T. Rangaswami; T. Raghavan, B. Datta, D.
N. Mishra and J. B. Dadachanji, for the respondent.
The Judgment of the Court was delivered by
Grover, J. This is an appeal by certificate from a judgment of the Orissa High
Court relating to an award given by Shri A. V. Viswanatha Sastri an Ex-Judge of
the Madras High Court in a dispute which arose between the respondent and the
Union of India in respect of a claim made by the former for a sum of Rs.
35,45,080.91 which was stated to be due for earth work done on the right dyke
of the Hirakud Dam.
The Chief Engineer, Hirakud Dam, invited
tenders on behalf of the Union of India for execution of work specifying
certain details as to how tender-, were to he submitted. It appears that before
the tenders were invited certain estimates were prepared in the office of the
The intending contractors were to submit
tenders stating the rate for depositing earth on the Right Dyke site including
all lifts and leads. The respondent company submitted a tender which, according
to the Chief Engineer, was not in the form invited by him as certain extraneous
L235Sup.CI-13 186 matters were stated to have been introduced. The Chief
Engineer and the representatives of the respondent company held a conference at
which certain agreements were arrived at. The tender of the contractor was
provisionally accepted on December 28, 1951; the formal contract was executed
much later on March 21, 1953. The work started in February 1952 and took four
years for completion. The earthwork was done by the company by manual labour
for a year in the beginning and thereafter it was done to a large extent by
The earth required to erect the dyke was dug
up from certain areas demarcated by the Engineering Department near the site of
the dyke. The places from which the earth had to be taken were called
"borrow pits" or "borrow areas". The company dug up earth
from the "borrow pits" and dumped it on the site of the dyke upto the
required specifications. This involved movement of the loose earth both
vertically and horizontally from the borrow pit to the dyke. The vertical
movement was styled as "lift" and the horizontal movement as
"lead". When the company started employing the heavy machinery from
the beginning of 1953 onwards a number of ramps had to be constructed to enable
the machinery to go up from the borrow pits to the dyke.
It has not been disputed that for the
earthwork done by the company it received payment from the Government of an
amount aggregating Rs. 1,08,19,543.00. This amount was paid in accordance with
the rate in item I-A of the contract (Ext.
P-69). According to that rate Rs. 45/were to
be paid for 100 cubic feet of earthwork of all kinds of soil laid in 6"
layers with rough dressing including all lifts and average lead not exceeding.
10". According to the company an additional sum of Rs. 26,20,798.75 was
due in addition to the amount already paid in respect of extra leads including
lifts. An amount of Rs. 2 lakhs was claimed on account of the construction of
ramps. The company further claimed a sum of Rs. 5,34,282-16 on account of
interest on the aforesaid two amounts. This claim was disputed by the Union of
India and it was maintained on its behalf that the company had been fully paid
for the earthwork done by it according to the terms of the contract and that
the company was not entitled to payment for lifts nor was there any occasion
for leads in excess of an average of to and further that the ramps in so far as
they were outside the dyke were not to be paid for while those which had been
incorporated in the dyke had already been paid for as a part of the dyke.
The agreement by which reference was made to
the arbitrator was as follows :"The disputes and difference between the
parties relating to payment of lift equivalent and leads for 187 machine route
are referred to the arbitration of Shri A. V. Viswanatha Sastri, retired High
Court Judge, Madras and his award shall be final and binding on the
parties." On November 16, 1958 the following issues were framed by he
Arbitrator by the consent of both the parties (i) Is the claimant entitled to
any payment for lifts under the terms 'of the contract between the parties ?
NOTE : Both sides agree that I foot of lifts is equal to 12-2-1/2 feet of lead.
(ii) Whether the claimant is entitled to
payment for machine leads where machines have been used for earthwork and if
so, on what basis and at what rates? (iii)Whether in the case of machine leads,
lifts are not taken into account as pleaded by the Union of India ? (iv)
Whether the claimant is entitled to the cost incurred in putting tip the ramps
? (v) Is the Union of India estopped from denying liability for payment of
lifts and machine leads for the reasons stated in paragraphs 1 1 to 14 of the
Statement Claim of Ramlinga Construction Co. (P) Ltd. ? (vi) Is the claimant
entitled to interest for the period during which the-amounts payable to the
claimant remained unpaid by the Government, if so. at what rate .? (vii)What is
the amount due to the claimant from the Union of India ?" A good deal of
oral and documentary evidence was led by both the parties before the
arbitrator. After discussing the same he came to the following conclusions :-1.The
tender must be taken to have been made and accepted on the basis that the whole
work was to be done by manual labour.
2.According to the terms of the contract if
the averages lead of IO had to be exceeded the orders of the Chief Engineer in
writing had to be obtained by the contractor and then the extra lead 188 was to
be paid for at the rate of Rs. 1.12 As. per 1000 cubic feet. The company did
raise the question of payment for lifts as early as December 30, 1952 and
sought the orders of the Chief Engineer in writing for the extra lead resulting
from the conversion of lifts into leads but the Chief Engineer never made any
order in writing. The arbitrator believed the evidence of the Chief Engineer
Shri kanwar Sain that he passed no orders allowing the company an extension of
lead beyond the average 10. As the obtaining of the written order of the Chief
Engineer was an essential condition which had to be complied with before. a
claim for extra lead could be made the company was not entitled to payment for
the extra leads beyond the average 10.
(3)The letter Ext. P-6 dated March 30, 1953
which was signed by the Superintending Engineer for the Chief Engineer had not
been proved to have been written either under the instructions of the Chief
Engineer or approved by him. In this letter it was stated, inter alia, that the
words "average 10 leads mentioned in the special conditions of the
agreement include the initial lead and lift and all other lifts between the
borrow area and the Dyke". The Chief Engineer's evidence relating to Ext.
P-6 was believed.
The final conclusion of the arbitrator on
issue No. 1 was that under the terms of the contract between the parties the
rate of Rs. 45/per 1000 cubic feet covered all lifts and that lifts had not to
be separately paid for. On issue No. 2 the company's claim for extra payment
for machine leads was held to be untenable. The finding on issue No. 3 was that
in case of machine leads lifts were not to be taken into account. On issue No.
4 the arbitrator held that the company was not entitled to recover the costs
incurred in putting up the ramps. On issue No. 5 it was decided that the
Government was not estopped from denying liability for payment for lifts and
machine leads. On issues 6 and 7 the arbitrator found that no amount was payable
by the Union of India to the company nor was the Union liable to pay any
The respondent company filed what was called
a plaint under ss. 30 and 33 of the Indian Arbitration Act 1940 in the court of
the Subordinate Judge, Sambalpur, challenging the award on various grounds and
prayed that it be set aside.
It was further prayed that another arbitrator
be appointed to make a fresh award regarding the disputes between the parties.
The Subordinate Judge set aside the award by his order dated March 17, 1962.
The Union of India preferred an appeal to the High Court which was beard by
Barman and Das, JJ. Learned judges gave dissenting judgments, Burman J., was of
the view that the award could not be sustained whereas Das J., was of the
opinion that the award was not liable to be set aside. The appeal was then
heard by a third 189 Judge G. K. Misra J. On issues 1 and 2 Misra J. agreed
with the judgment of Barman J., but on issues 3 and 4 he concurred with the,
decision of Das J. According to his judgment the award could not be set aside
on issues 3 and 4 whereas it was liable to be set aside on issues 1 and 2. As
the issues were severable he set aside the award only on issues 1 and 2.
A bare perusal of the judgment of Misra J.
would show that lie decided the matter as it he was entertaining an appeal
against the award itself. He re-examined and re-appraised the evidence which
had been considered by the arbitrator and held that the arbitrator was wrong in
coming to the conclusion that the work was contemplated by the contract to be
done by manual labour alone. According to him under the agreement payment for
machine leads was contemplated from the very beginning or at any rate was not
excluded. He examined a large volume. of evidence including Ext. P-6 as also
the oral evidence of the Chief Engineer Shri Kanwar Sain and held that from the
course of correspondence it was clear that in dealing with the contractor or
the Executive Engineer almost all the letters on behalf of the Chief Engineer
were being dealt with by the Superintending Engineer.
Once Ext. P-6 was admitted to be genuine and
was issued by the Superintending Engineer in the ordinary course of
correspondence it was for the appellant to establish by production of the
relevant records that that letter had been issued without authority of the
Chief Engineer. Misra J., had no hesitation in holding that Ext. P-6 was
written under the authority of the Chief Engineer and was binding between the
parties. Here again what Misra J., id was to appreciate the evidence which had
been considered by the arbitrator, in particular, the testimony of the Chief
Engineer. The arbitrator had believed the statement of the Chief Engineer that
Ex. P-6 had neither been issued under his authority nor with his approval. Once
this part of his statement was believed by the arbitrator it was not open to
Misra J.. to sit in appeal over the conclusion of the arbitrator in proceedings
for setting aside the award.
The other serious error into which Misra J.,
fell was to record a finding on the payment for extra leads beyond 10 in
reversal of the conclusion of the arbitrator. This is what the learned judge
proceeded to say:
"The next point for consideration is
whether the payment for extra leads beyond 10 are to be rejected because the
Chief Engineer's order in writing had not been obtained before the work
involving additional leads was executed.
Both under Ex. P. 2 and Ext. P. 69 this term
had been incorporated. In the peculiar circumstances of this case, however, it
must be taken that the 190 condition had been fulfilled even though there was
no order in writing. It was for the Executive Engineer and the Superintending
Engineer, who were getting the work done by the Company, to obtain the order in
writing or not to allow the Company, to work beyond 10 leads including lifts
without obtaining the order of the Chief Engineer in writing." Once it was
found that under the terms of the contract the order of the Chief Engineer in
writing had to be obtained before the work involving additional leads was
executed and in the absence of any such written order it was not open to the
court to hold that the appellant-Union of India-was liable for payment of extra
leads beyond 10 by applying some principle or rule analogous to estoppel. It is
no doubt true that the company had been writing to the Engineering Department
in the matter and that the latter did not, for a considerable time, send any
reply but the company was debarred from asking for any additional payment in
the absence of the Chief Engineer's order in writing. If the arbitrator came to
that conclusion it could not said that there was any error apparent in his
award which would justify setting it aside.
For the reason given above the appeal is
allowed and the order of the High Court setting aside the award dated July 19,
1959 in part as indicated in the judgment of Misra J., is hereby reversed. The
proceedings instituted by the respondent under ss. 30 and33 of the Indian Arbitration
Act, 1940, shall stand dismissed. In. view of the entire circumstances the
parties are left to bear their own costs in this Court.