Orissa Mining Corporation Ltd. Vs.
Prannath Vishwanath Rawlley  INSC 164 (12 August 1977)
CITATION: 1977 AIR 2014 1978 SCR (1) 295 1977
SCC (3) 535
CITATOR INFO :
R 1979 SC1977 (6)
Arbitration Act, 1940 (10 of 1940)-S.
20-Scope of-Extra claim, over and above the claim made in the plaint and shown
in the reference, made before the arbitrator-Arbitrator-If competent to
entertain fresh claim without reference from court.
The respondent entered into a contract with
the appellant for the transport of iron ore from quarry Nos. 1 and 2 being
worked out by the appellant, to the railway siding.
As the instance of the appellant the
respondent later transported iron ore from quarry No. 5 situated at a distance
of about 2 KM from the other two quarries. Having failed to recover from the
appellant the extra cost which was Rs. 68,582 for transport and a sum of Rs.
25,000 for constructing a road between quarry Nos. 1 and 2 and quarry No. 5,
the respondent filed in the court of subordinate Judge an application under s.
20 of the Arbitration Act, 1940. The dispute was referred to a sole arbitrator.
Before the arbitrator the respondent made a
claim of Rs. 68,582, apart from the claim for an identical amount made in the
plaint. The arbitrator disallowed the claim for construction of the road but
allowed the additional claim of the respondent and gave an award for a sum of
The appellant's application alleging that the
arbitrator acted without jurisdiction in allowing the additional claim of Rs.
68,582 was rejected by the Subordinate Judge on the ground that there was no
error apparent on the face of the record and that the arbitrator did not exceed
The High Court dismissed the appellant's
Allowing the appeal to this Court,
HELD : When an agreement is filed in court
and order of reference is made, then. the claim as a result of the order of
reference is limited to a particular relief and the arbitrator cannot enlarge
the scope of the reference and entertain fresh claims without a further order
of reference from the court. [299H] In the instant case the arbitrator has
exceeded his jurisdiction in embarking on the extra claim. put forward before
him by the respondent. When the claim had been specified in the plaint and when
the reference was confined to the claim made in the plaint, the arbitrator
would have to restrict his award only to that claim. [299F] The High Court has
misconstrued the claim. There was no claim for transport of iron ore between
quarry Nos. 1 and 2 and the railway siding; the only claim was for the transport
for the extra distance. [299A]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 769 of 1976.
Appeal by Special Leave from the Judgment and
Decree dated 20-2-76 of the Orissa High Court in M.A. 75/75.
K. Sawhney and M. K. Garg for the Appellant
G. B. Pai, Miss Uma Mehta and R. K. Mehta for the Respondent.
The Judgment of the Court was delivered by
KAILASAM, J.-This appeal is preferred by the Orissa Mining Corporation Ltd., (a
Government of Orissa undertaking) by special 296 leave against the judgment and
decree dated February 20, 1976 of the High Court of Orissa whereby the High
Court upheld the judgment of the Subordinate Judge, Rourkela refusing to set
aside the award of the arbitrator directing payment of certain moneys to the
The respondent is a partnership firm carrying
on business of transport, mining loading and unloading etc. with its office at
Rourkela. The appellant called for a tender for the work of raising of iron ore
in Khandadhar Mines and transporting it to Barsuan Railway siding, including
wagon loading. An agreement was entered into between the, appellant and the
respondent for a period of one year with effect from May 25, 1971. The
estimated value of the contract was Rs. 6.77,040.
The respondent under the terms of the contract
was required to work in quarry Nos. 1 and 2 in Khandadhar Mines but during the
progress of the work, on the directions of the appellant, the respondent worked
in quarry No. 5 also which was at a distance of about 2 K.M. from quarry Nos. 1
As the respondent had to cover an extra
distance between quarry Nos. 1 & 2 and quarry No 5 he demanded extra cost
for the transport. The respondent also demanded cost for construction of a road
at the schedule rate provided by the State P.W.D., Orissa, and submitted two
bills, Bill No. 1 dated March 31, 1972 and Bill No,. 2 dated May 1, 1972 for
Rs. 62,477.50 and Rs, 6,104.60 respectively amounting to Rs. 68,582.00 in all
for the extra load in transporting. A claim was also made towards the cost of
constructing a road from quarry No. 5 for Rs. 25,000. As in spite of repeated
reminders the appellant did not pay for the bills the respondent called upon
the appellant to refer the disputes for arbitration according to the contract.
The respondent filed an application under section 20 of the Arbitration Act for
a direction to the appellant to file the agreement in court and for the
appointment of a Superintending Engineer of the State P.W.D. as the sole
arbitrator and a reference to him to give his award on the dispute. The
respondent, for the purpose of Court fee and jurisdiction, valued the suit at
Rs. 93,582, The Subordinate Judge, Rourkela, after notice to the appellant and
after hearing the parties ordered "that the said agreement be filed, and
it is further ordered that the following matters in difference specified in the
said agreement No. 4/F2 of 1971 arising in this suit namely for demand of
payment of Rs. 93,582.00 on account of raising iron ore from quarry No. 1 and 2
at Khandadhar Mine and transporting the same, to the Barsuan Railway siding
including loading of wagons and also for the same work as per the subsequent
order in respect of quarry No. 5 which was at a distance of 2 kilometers away
from quarry No. 1 and 2 and for extra charges for this extra load of
transporting and for construction of a road from quarry Nos. 1 and 2 to the,
quarry No. 5 be referred for determination...... of the Arbitrator." The
arbitrator on receipt of the order of reference issued notice to the parties
calling upon them to file their respective statements and the documents on
which they intended to rely on and to produce witnesses. The parties filed
their respective statements and the arbitrator took up the hearing of the
dispute. The respondent in 297 these proceedings made a claim of Rs. 68,582
under the head "4. Extra as the distance came to 14 Km. after verification
from the same quantity mentioned in the Bill No. 1 and 11." The arbitrator
inspected the site and measured the distances. Regarding the claimof Rs. 25,000
for construction of the road the arbitrator found that the respondent is not
entitled to it and rejected the claim.
Regarding the claim for transport of the iron
ore for the extra distance from quarry No. 5, the respondent made an
additionalclaim for Rs. 68,582 apart from the claim which he made in the
plaintunder Bill Nos. 1 and 11 for Rs. 68,582 on the ground that the extra
distance came to 1.4 Kms. after verification. The arbitrator found the actual
distance between quarry No. 1 and 2 and quarry No. 5 approximately 1.70 Kms.
and allowed a sum of Rs. 1,16,570 under this head. He also directed the
appellant to release the security deposits and earnest money amounting to Rs.
32,954.48 and pay the respondent on or before
August 31, 1974. The award also provided that the appellant shall pay interest
to the respondent at the rate of six per cent per annum on the amount of award
and on the amount of security and earnest money from the date of the passing of
the award i.e. May 31, 1974.
Aggrieved at this award the appellant filed
an application before the Subordinate Judge, Rourkela, the court that had made
the reference to arbitration, for setting aside the award or in the alternative
for remitting the award for further consideration various contentions were
raised in the application. It is material for this appeal to ,refer only to the
main ground of attack on the award, namely that the arbitrator had traversed
beyond the reference made by the court by its order of reference in that though
the claim was only for Rs. 93,582 inclusive of the claim for road construction
for Rs. 25,000 which was negatived by the arbitrator, he acted without
jurisdiction in allowing any claim overRs. 68,582.It was also contended that
the arbitrator was in errorin directing the return of the security deposits and
The Subordinate Judge, Rourkela, by his order
dated February 11, 1975, found that there was no error apparent on the face of
the record which may make the, award unsustainable. It also found that the
arbitrator did not exceed his jurisdiction and decreed the suit as per the
terms of the award., Dissatisfied with the order of the Subordinate Judge the
appellant, Orissa Mining Corporation Ltd., took up the matter in appeal to the
High Court of Orissa. The High Court confirmed the order of the Subordinate
Judge holding that the order of reference made by the court to the arbitrator
Was not only in respect of the respondent's claim for Rs. 93.582 on account of
raising of iron ore from quarry Nos. 1 and 2 and transporting the same to
Barsuan rialway station but also for the same work as per the subsequent order
in respect of quarry No. 5 which was at a distance of 2 kilometres away from
quarry Nos. 1 and 2. The main contention that was raised before the High Court
was that the reference to the arbitrator being for determining the correctness
of the respondent's claim of Rs. 93,582, 8-- 768SCI/77 29 8 only the arbitrator
went beyond his jurisdiction and authority by giving an award for Rs. 1,16,570
towards transportation charges in favour of the respondent. The direction as to
the refund of the security deposits and earnest money was also challenged.
The High Court held that "In the order
of reference Rs. 93,582 has been referred to as a dispute on account of raising
iron ores from quarry Nos. 1 and 2 and transporting the same to Barsuan railway
siding. The dispute relating to extra claim on account of raising and
transporting iron ores as per the, subsequent order from quarry No. 5 has also
been specifically referred to the arbitrator as it appears from the order of
reference. The correctness of the reference order not having been challenged
the same is not open to question." It further held that "it is futile,
to argue that the reference made to the arbitrator was only confined to the
respondent's claim of Rs. 93,582 and that the arbitrator in awarding Rs.
1,16,570 exceeded his authority and jurisdiction." We feel that the High
Court has misconstrued the claim. There was no dispute in regard to raising of
iron ore from quarry Nos. 1 and 2 and transporting it to the railway siding.
The whole dispute was regarding the claim for transporting the iron ore for the
extra distance from quarry No. 5. Paragraphs 5, 6 and 7 of the plaint make this
position clear. Paragraph 5 states that while the respondent was executing the
work in quarry Nos. 1 and 2 he was ordered to work in quarry No. 5 which was at
a distance of about 2 Kms from quarry Nos. 1 and 2. According to paragraph 6
the respondent demanded extra cost for the transport from the said quarry as
the distance increased.
Paragraph 7 states that accordingly the,
respondent submitted bill No. 1 dated March 31, 1972 and bill No. 2 dated May
1, 1972 making a total claim of Rs. 68,582. The point of attack on the award
was therefore missed by the.
High Court. it was that while the total claim
under the plaint regarding the transport of extra distance was confined to Rs.
68,582 and the reference to the arbitrator was also for the same amount, the
arbitrator acted beyond the scope of the arbitration in taking into account the
claim which was put forward by the respondent for an extra sum of Rs. 68,582.
It was sought to be contended by Mr. Pai, the learned counsel for the,
respondent, that though the plaint claim was confined to Rs. 68,582 the order
of reference is wider in scope and included other claims beyond the claim for
Rs. 93,582. The order of reference is rather vague and not clear and is in the
following terms :
" and it is further ordered that the
following matters in difference specified in the said agreement No. 4/F2 of
1971 arising in this suit namely for demand of payment of Rs.
93,582 on account of raising iron ore from
quarry Nos. 1 and 2 at Khandadhar Mine and transporting the same to the Barsuan
Railway siding including loading of wagons and also for the same work as per
the subsequent order in respect of quarry No. 5 which was at a distance of 2
K.M. away from quarry Nos. 1 and 2 and for extra charges for this extra load of
transporting......." The order of reference appears to have been an
attempt by the court to put all the reliefs claimed for in the plaint in one
sentence. As 299 admittedly there was no claim for transport of the iron ore
between quarry Nos. 1 and 2 and the railway siding, the only claim was for the
transport of the iron ore for the extra distance. The view of the High Court
was therefore on a misunderstanding of the relief prayed for by the respondent
in the plaint.
Mr. Pai while admitting that the reference
to: arbitration was only as regards the transport of the iorn ore for the extra
distance submitted that the claim was not confined to Rs. 93,582 only but
should be understood as a claim for the extra transport which may amount to
more than Rs. 93,582.
We refrain from going into the merits of the
claim for not only the extent of the extra distance covered is in dispute but
also the charges for transport for a kilometer. The plea of the respondent in
that while he, submitted Bill Nos.
1 and 2 and claimed Rs. 68,582, the Bills
were on the basis that the extra distance was only 1 K.M. but actually the
distance was 2 Kms. and therefore he claimed twice the amount. The respondent
submitted that the distance should be construed as 2 Kms. though it was found
to be 1.4 Kms.
On behalf ,of the appellant it was submitted
that this plea should not be entertained as, the original Bills were on the
basis of 2 Kms. and as the distance has been proved to be shorter he would not
be entitled even to the claim made, in the plaint. The contentions on the
merits need not be gone into.
On a reading of the plaint, we are, satisfied
that the claim for transporting the iron ore for the extra distance is limited
to Rs. 68,582 ,and the whole claim after including the claim for construction
of the road is confined only to Rs. 93,582. The arbitrator having disallowed
Rs. 25,000 being the claim for construction of the road should have confined
his award only to. Rs. 68,582. The claim of additional Rs. 68,582 before the
arbitrator was clearly beyond the order of reference which incorporated the
reliefs prayed for in the plaint by the respondent herein. It would have been
different if the entire claim relating to the transport of the iron ore for the
extra distance was made without specifying the amount of claim. When the amount
has been. specified in the plaint and when the reference is confined to the
claim made in the plaint, the arbitrator would have to restrict his award only
to the claim. We are satisfied that in this case the arbitrator has exceeded
his jurisdiction in embarking on the claim that was the first time put forward
before him by the respondent. There is therefore an error ,apparent on the face
of the award.
Section 20(1) of the Arbitration Act, 10 of
1940, provides that where a difference has arisen and where any person have
entered into an arbitration agreement they may apply to the court having
jurisdiction in the matter to which the agreement relates, that the agreement
be filed in court.
Sub-section (4) to section 20 provides that
the court shall order the agreement to be filed, and shall make an order of
reference to the arbitrator appointed by the parties. When an agreement is
filed in court and order of reference is made then the claim as a result of the
order of reference is limited to a particular relief and the arbitrator cannot
enlarge the scope of the reference and entertain fresh 300 claims without a
further order of reference from the court.
On a construction of section 20 of the Arbitration
Act the plea on behalf of the appellant will have to be accepted.
In the circumstances of the case we do not
think that the award should be set aside,' as the learned counsel for the
appellant has also no objection in accepting the award in so far as it relates
to Rs. 68,582. We feel that the award to the extent of Rs. 68,582 and interest
at the rate of 6 per cent per annum from the date of the award be confirmed.
Regarding the direction as to return of
security deposits and earnest money, as it is not the case of the appellant
that the respondent is not entitled to the amount, we do not feel called upon
to interfere with the order directing the appellant to pay the, amount to the
respondent with interest at 6% per annum from the date of the award i.e. May
31, 1974. The parties will bear their own costs.