K. P. Poulose Vs. State of Kerala
& ANR  INSC 101 (21 April 1975)
CITATION: 1975 AIR 1259 1975 SCR 214 1975 SCC
CITATOR INFO :
D 1989 SC 606 (8)
Arbitration Act, s. 30 (a)-Scope of.
For the construction of three overhead
reservoirs tenders were invited. The appellant was the successful tenderer for
the work. The notification inviting tender,., gave a description of the soils
at the places of constructions.
Sometime later, however, the Research
Institute of the State Government recommended a different mode of foundation in
respect of one reservoir and the department accordingly gave instruction to the
appellant to adopt the process recommended by the Research Institute. The
appellant executed the work in accordance with the recommendations of the
Research Institute and claimed a higher payment on the ground that the work
done by him was not included in the original design because when he submitted
his tender he assumed the site conditions to be as represented in the Schedule
to the notification. The Department, having refused the claim. the dispute was
referred to Arbitration under cl. 34 of the tender notification. The Chief
Engineer who was the, sole Arbitrator gave a speaking order based on an
examination of the documents.
The High Court set aside the judgment of the
Subordinate Judge and restored the order of the Arbitrator.
On appeal to this Court it was contended that
the Arbitrator was, guilty of legal misconduct in conducting the proceedings in
that the material documents were absolutely ignored by the Arbitrator,
resulting in miscarriage of justice.
Allowing the appeal.
HELD : Under s. 30(a) of the Arbitration Act
an award can be set aside when an Arbitrator has misconducted himself or the
proceedings. Misconduct under s. 30(a) has not a connotation of moral lapse. It
Comprises legal misconduct which is complete if the Arbitrator on the face of
the award arrives at an inconsistent conclusion even on his own finding or
arrives at a decision by ignoring very material documents which throw abundant
light on the controversy to help a just and fair decision. It is in this sense
that the Arbitrator has misconducted the proceedings in this case.
In the instant case the two documents which
the Arbitrator failed to consider were material documents to arrive at a just
and fair decision to resolve the controversy between the Department and the
appellant. In the background of the controversy in this case even if the
Department did not produce these documents before the Arbitrator it was
incumbent upon him to get hold of all the relevant documents including those
two documents for the purpose of a just decision. The award, therefore, suffers
from a manifest error apparent ex facie. [218ABC]
CIVIL APPELLATE JURISDICTION CIVIL APPEAL No.
1485 OF 1974 Appeal by special leave from the judgment and decree dated 29-1-73
of the Kerala High Court in A.S. No. 357 of 1972.
S.V. Gupte, C. J. Balakrishnan and A. S.
Nambiar, for the appellant.
215 T. S. Krishnamurthy Iyer anti K. R.
Nambiar, for the respondents.
The Judgment of the Court was delivered by
GOSWAMI, J.--This is an appeal by special leave against the judgment of the
Kerala High Court setting aside the judgment of the Subordinate Judge,
Ernakulam and restoring the award of the Arbitrator who had earlier refused the
claim of the appellant.
The appellant (briefly the contractor) was a
successful tenderer for construction of three zonal R.C.C. Overhead Reservoirs,
two in Matencherry and one in Cochin, in connection with the Ernakulam
Mattencherry Water Supply Scheme. In the schedule annexed to the notification
inviting tenders under the heading 'Site', it was stated that "the soil at
the site for Reservoir No. 1 and Reservoir No. 2 is loose clay and for
Reservoir No. 3, sandy". The tenderer was to execute an agreement on a
stamped paper before commencing work. It appears later on the Kerala
Engineering Research Institute, Poochi. Soil Mechanics and Foundation Division
(briefly the Research Institute) submit- ted a report (Ext. P. 10 dated
September 14, 1965) that the sub-soil at the three places chosen as sites for
the reservoirs upto 16 in showed that the top soil was sand, the middle layer
clay, and the bottom layer, silty sand or sand.
It was stated that the clay found at the
three places was of a highly compressible nature and hence pile foundation was
preferable and that as the top strata was sandy, jetting had to be resorted to
for driving the piles through this strata.
After receipt of the opinion of the Research
Institute, respondent No. 2 (hereinafter to be described as the Department)
gave instructions to the contractor to adopt the process of jetting for driving
piles for the tank at Thoppumpady which is alone in dispute in this case. On
October 7, 1965, the Chief Engineer after scrutinising the pile design of the
contractor wrote to him, inter alia, as follows :
"The piles as per design submitted with
raft like cap may be adapoted for tank at Thoppumpady where the length of pile
suggested by the research division is in the region of 30 ft................
Jetting has to be resorted to in the top strata where sandy layer is met
with.... Your statement that piles of more than 30 ft. length is very difficult
to be driven in Ernakulam is not quite convincing to the Department.
Any how a decision will be taken on this only
after ascertaining the details regarding the practical difficulties if any from
agencies actually engaged in such type of works in the locality.
Meanwhile you may please execute the
agreement and start the work on the Reservoir at Thoppumpady receiving further
instructions from Executive Engineer, Public Health, Alwaye" (Ext. P. 1).
On February 21, 1966, the contractor wrote to
the Executive Engineer informing him that as per instructions of the Research
Institute and 10 SC/75-15.
216 site conditions he provided jetting
arrangements for driving the piles although the process of jetting was not
included in his tender. He enclosed the details of expenditure on that account
and mentioned that for the pile casting he used extra reinforcement for
additionally strengthening the head of piles due to the site, condition. He
pointed out that this was not included in his original design. The sum and
substance of the contractor's grievance was that he assumed the site condition
to be as represented in the schedule to the notification inviting tenders and
submitted his original design on that basis and since, however, the site
condition was found to be different and on the advice of the Research Institute
jetting had to be resorted to involving extra expenditure he was entitled to
claim additional amount for the work of jetting. The Department, however,
refused the claim which led to the arbitration under; clause 34 of the tender
notification. The Arbitrator was the Chief Engineer.
It appears the award was based on examination
of documents and after hearing arguments of the parties.
The award with which we are concerned is a
speaking one and gives the reasons for the decision against the contractor.
Mr. Gupte, the learned counsel for the
appellant submits that the Arbitrator was guilty of legal misconduct in
conducting the proceedings. He submitted that two very material documents,
Exts., P. 11 and P. 16, were absolutely ignored by the Arbitrator resulting in
miscarriage of justice. On the other hand Mr. Krishnamurthy Iyer submitted that
these documents were not even marked before the Arbitrator; they were marked
only before the Subordinate Judge. According to him, therefore, there is no
foundation for the grievance.
We have been taken through all the relevant
documents by the learned counsel for both sides and we are satisfied that Ext.
P. 11 and Ext. P. 16 are material documents to arrive at a just and fair decision
to resolve the controversy between the Department and the contractor. In the
background of the controversy in this case even if the Department did not
produce these documents before the Arbitrator it was incumbent upon him to get
hold of all the relevant documents including Exts. P. 11 and P. 16 for the
purpose of a just decision. Ext. P. 1 1 dated September 8, 1966, is a
communication from the Superintending Engineer to the Chief Engineer with
regard to the objections raised by Audit in connection with the construction of
The following extract will explain the
position then taken by the Department:- "The contention of the Accountant
General that jetting was resorted to by the contractor to facilitate the
driving of the piles is not correct. Had it not been for jetting, it would not
have been possible for the piles to reach the required depth of 30', passing
through sandy strata and we would have been constrained to stop with a smaller
depth viz., upto the point of refusal for penetration of the pile by hammering.
It was, therefore, in the interest 217 of the work that jetting was insisted
upon by the Department for pile driving. The contractor had to resort to
jetting under instructions from the Department.
The Accountant General has stated that the
department is not bound to pay extra for adopting the method of jetting for
pile driving. This does not appear correct since the method of jetting was
adopted in the interest of the department in view of the sandy stratum
obtaining at the site as against the indication given by the department that
the soil is clayey upto a depth of nearly 200 ft. No doubt, the contractor was
asked to ascertain the nature of the soil; but this does not imply that he was
to conduct exploratory borings to confirm the classification given by the
department in the tender within the short span of time available for submitting
Earlier also on July 25, 1966, as per Ext. P.
16 the Executive Engineer had written to the Chief Engineer wherefrom paragraph
4 is revealing "Even though while inviting tenders for the work there was
a condition that the tenderer should examine the soil condition it was not
expected, of them to do soil testing in detail within the period available to
them to tender for the work. A clear indication regarding the nature of the
strata that is likely to be met with was also furnished at the time of inviting
tenders. After complete ,oil investigation the strata was found to be different
from that furnished by the department and so in my opinion technical
specification has changed. In the circumstances jetting clone by the contractor
can be considered as an extra item".
We now come to the Award. Although the
Arbitrator has held that "jetting, however, is not an authorised extra
covered by the agreement", he has made the following significant
observation which is inconsistent with his conclusion that the contractor has
no right for extra payment for the jetting :
"The Chief Engineer has rejected the
claims of the 'contractor on grounds of non-inclusion of this (jetting) in the
agreement which was executed subsequent to the direction issued by the
department to adopt jetting. The Chief Engineer's decision totally ignores the
next sentence in that letter 'Meanwhile you may execute the agreement'. By this
sentence the issue of extra payment for jetting is left open even after the
execution of the agreement".
If the above is the conclusion of the
Arbitrator, rejection of the claim on the ground that "jetting, however,
is not an authorised extra covered by the agreement" cannot be anything
but rationally inconsistent. The award, therefore, suffers from a manifest
error apparent ex facie.
218 Under section 30(a) of the Arbitration
Act an award can be set aside when an Arbitrator has misconducted himself or
the proceedings. Misconduct under section 30(a) has not a connotation of moral
lapse. It comprises legal misconduct which is complete if the Arbitrator on the
face of the award arrives at an inconsistent conclusion even on. his own
finding or arrives at a decision by ignoring very material documents which
throw abundant light on the controversy to help a just and fair decision. It is
in this sense that the Arbitrator has misconducted the proceedings in this
We have, therefore, no hesitation in setting
aside such an award. In the result the judgment of the High Court is set aside
and that of the Subordinate Judge is restored. The award of the Arbitrator thus
stands quashed. The Arbitrator will complete the proceedings after considering
all the relevant documents including Ext. P. 11 and Ext. P. 16 after giving
opportunity to the parties. The appeal is allowed with costs.
P.B.R. Appeal allowed.