Engineer's Pvt. Ltd. Vs. Calcutta Improvement Trust & Anr  Insc
39 (25 January 2002)
Pattanaik & Y.K. Sabharwal Y.K. Sabharwal, J.
dispute and differences between the contractor - appellant and respondent -
Calcutta Improvement Trust (CIT) were determined by award dated 30th September, 1999. The arbitrator held that the
contract was wrongly terminated by CIT and awarded in favour of the contractor
a sum of Rs.24,80,000/- besides interest. The award was challenged by the CIT
by filing an application under Sections 30 and 33 of the Arbitration Act, 1940.
That application was rejected by a learned Single Judge of the High Court. The
appeal of the CIT was, however, allowed by the Division Bench and the award was
set aside. The contractor has challenged the correctness of the decision of the
main grounds on which the award has been set aside by the impugned judgment are
two. First, that the question of the wrongful termination of the contract was
an excepted matter and, thus, not arbitrable. Second, the arbitrator has not
considered the counter claim of the CIT and thereby has failed to exercise
jurisdiction vested in him by law.
the ground of arbitrability, clause 1.9 of the Information and Instructions to
Tenders stipulates that the disputes between the parties to the contract shall
be referable to an arbitrator, other than those for which the decision of the
Engineer is by contract expressed to be final, binding and conclusive. Clause
15 of the contract provides that the certificate of the Engineer as to the
happening of any of the events referred to in the said clause shall be
conclusive proof as between the contractor and the CIT of the statements
contained in such certificate. According to the CIT, in view of Engineer's
certificate dated 3rd November, 1995 certifying that the contractor has
miserably failed to complete the work and with a view to effecting completion
of the work and remedying the breech, it is a fit case for taking action under
clause 16 of the works contract for termination, the question of the validity
of termination is an excepted matter and, therefore, not arbitrable.
to the contractor, however, the Engineer's certificate could only certify as to
the quality or measurement of the work done and it could not give a binding
statement as to who caused the breach or was responsible for delay and these
matters are essentially within the jurisdiction of the arbitrator to be
adjudicated upon and to hold otherwise would render arbitration clause
the case of the contractor is that the issue as to whether the termination is
wrongful was initially framed by the first arbitrator who was the officer on
special duty of the CIT on 3rd March, 1997 at the instance of the CIT itself.
In place of the said arbitrator, the Court appointed the arbitrator who has
made and published the award in question. The arbitrator adopted the said issue
on 24th June, 1998 with consent of both the parties.
counsel for the appellant submits that there were 16 hearings before the
earlier arbitrator and 82 before the present arbitrator. In those proceedings,
the respondent never objected to framing of the issue as to the termination of
the contract or to hearing of the said issue and no objection was taken to the arbitrability
of the issue. The issue of termination was left to be decided by the
arbitrator. In respect of Engineer's certificate dated 3rd November, 1995, it was pointed out that the same
was produced before the arbitrator only on 3rd November, 1998 in the 46th sitting before the
arbitrator. The contention is that under these circumstances, it is not open to
the CIT to urge that the issue of termination of the contract cannot be
adjudicated by the arbitrator.
have perused the counter statement of facts filed by the CIT before the
arbitrator. It is clear therefrom that no objection as to the arbitrability of
the issue of the validity of termination has taken in the said counter
statement. On 3rd
March, 1997, the
following three issues were framed by the arbitrator :
Was the contract wrongfully terminated?
the Claimant entitled to any claim referred to in the statement of Facts?
the Respondent entitled to any claim referred to in the Counter Statement of
facts and Counter Claim?"
arbitration proceedings of 23rd sitting dated 10th July, 1998 show that Engineer's certificate had not been filed. It is
clear that the certificate dated 3rd November, 1995 was produced for the first time on 3rd November, 1998 in the 46th sitting before the
aforesaid facts, learned Single Judge came to the conclusion that the issue
about termination having been gone into by the arbitrator, it was not
permissible for the CIT to take the plea about the non-arbitrability thereof.
counsel for the CIT, however, contends that issue of arbitrability being a
matter of jurisdiction of the arbitrator, learned Single Judge was not correct
in concluding that the CIT could not take that plea and the Division Bench by
the impugned judgment rightly reversed the decision of the learned Single
counsel relies upon the decision in the case of Union of India v. Popular
Builders, Calcutta [(2000) 8 SCC 1] by a three Judge Bench to which one of us
(G.B. Pattanaik, J) was a member in support of the contention that the
existence of an arbitrable dispute is a condition precedent for exercise of
power by the arbitrator. We have no quarrel with this proposition. In the
decision relied upon, on facts, it was found that the final bill that was
prepared by the appropriate authority was accepted by the contractor without
any protest and that the said question had been raised by the Government before
the arbitrator in respect of claim No.2. On these facts, the Court held that
insofar as claim No.2 is concerned, the same could not have been a matter of
reference of an arbitrable dispute and as such, the award to that extent must
be set aside. In fact, this decision is against the respondent inasmuch as in
the said case other claim items in respect whereof the Union of India had not
taken any objection on the same score as in respect of claim No.2, the Bench
held that it was not appropriate to allow the Government to raise that
objection, so far as other items of the claim are concerned and except to the
extent of claim Item No.2 the rest of the award was affirmed.
has also been placed on Steel Authority of India Ltd. v. J.C. Budharaja,
Government and Mining Contractor [(1999) 8 SCC 122]. That is, however, a case
of a speaking award where it was apparent from the award that the arbitrator
had awarded the amount for the items for which there was prohibition in the
contract and thereby he had travelled beyond his jurisdiction and it is in that
context that the Court reiterated that to find out whether the arbitrator has travelled
beyond his jurisdiction and beyond the terms of the agreement between the
parties, the agreement is required to be looked into.
decision has no applicability to the present case.
reliance is placed on U.P. Rajkiya Nirman Nigam Ltd. v. Indure Pvt. Ltd. &
Ors. [(1996) 2 SCC 667]. This is again a decision by a three Judge Bench of
which one of us (G.B. Pattanaik, J.) was a member. The said decision arose out
of an application filed under Section 33 of the Arbitration Act pending the
arbitration proceedings for a declaration that there existed no arbitration
agreement between the parties on the basis of which dispute could be referred
for arbitration. The contention urged was that the arbitrator having been
appointed by the appellant, they could not seek a declaration under Section 33
of the Act. It was held that the arbitrator cannot clothe themselves with
jurisdiction to decide conclusively the arbitrability of the dispute and it is
for the Court to decide that question and, therefore, the appellant is not estopped
to file an application under Section 33 of the Act. This decision again is of
no assistance for deciding the present case. In the case in hand it cannot be
held that the arbitrator per se had no jurisdiction to decide the issue of the
validity of the termination of the contract. It depended upon the factual
issue of termination of the contract in question, on the facts under
consideration before us, does not relate to the jurisdiction of the arbitrator.
going into the scope of clause 1.9 of the Information and Instructions to
Tenders or that of clause 15 of the contract and assuming that issue of
termination of contract can be brought within the scope of the said clauses
and, thus, made an excepted matter but that would depend upon the fact whether
Engineer's certificate under clause 1.9 has been issued or not. Therefore,
specific plea had to be taken that such a certificate was issued and,
therefore, the aspect of termination was not arbitrable. As already noticed, no
such fact was pleaded or contention urged in the counter statement of facts. In
this view, it is not necessary to decide whether the issue of termination of
the contract could be brought within the ambit of the excepted matter or not or
that the Engineer's certificate could be conclusive only as to the quality or
measurement of the work done.
Division Bench was, thus, not correct in coming to the conclusion that the
fundamental terms of the agreement between the parties prohibited the arbitrability
of the excepted matters. The first ground on the basis of which the judgment of
the learned Single Judge was reversed is, thus, not sustainable.
the second ground on which decision of learned Single Judge was reversed by the
impugned judgment, we are concerned in this case with a non- speaking award.
Perusal of the award shows that the arbitrator has considered the claims and
counter claims of the parties. The arbitrator says that "AND WHEREAS I
have considered the claim and counter claim amounts as per statement of facts
and the counter statement of facts..." Again while formulating the award,
the arbitrator awards the amount in full and final settlement of the claim of
the claimant as set out in the statement of facts and the counter claims of the
respondent. In this view, the conclusion of the Division Bench that the
arbitrator has not considered the counter claim of the CIT is contrary to the
record. Therefore, the second ground is also not sustainable.
the foregoing reasons, we set aside the impugned judgment of the Division Bench
and restore that of the learned Single Judge. The appeal is, thus, allowed with