Build India Construction System Vs. U.O.I
 Insc 257 (7 May
Lahoti & B.N. Agrawal R.C. Lahoti, J.
response to a Notice Inviting Tenders (NIT) issued by the respondent on
12.9.1984, the appellant submitted the tender based on the tender document
issued by the respondents. The tender submitted by the appellant was accepted.
On 22.2.1985, the appellant signed a letter to the following effect:- "CA
No (GE) B-10 OF 85 86 SERIAL PAGE No.23
CONDITIONS OF CONTRACT IAFW-2249)(1976 PRINT) LUMP SUM CONTRACT FOR IAFW-2159
CONTRACT FOR ARTIFICERS WORK (IAFW-1821) MEASUREMENT CONTRACT IAFW-1779 &
copy of GENERAL CONDITIONS OF CONTRACTS (IAFW-2249 1976 PRINT) with Errata No.
1 to 27 and Amendment No. 1 to 27 has been supplied to me/us and is in my/our
possession. I/We have read and understood the provisions contained in the
aforesaid GENERAL CONDITIONS OF CONTRACTS before submission of this tender and
I/We agree that I/We shall abide by the terms and conditions thereof, as
modified, if any elsewhere in these tender documents.
is hereby further agreed and declared by me/us, that the GENERAL CONDITIONS OF
CONTRACTS-IAFW-2249 (1976 PRINT) including Conditions 70 there pertaining to
settlement of disputes by arbitration containing 30 pages (Serial Page Number 1
to 30) with Errata Numbers 1 to 27 and amendment Numbers 1 to 27 form Part of
these Tender documents.
SIGNATURE OF ACCEPTING
: ___________" The respondents accepted the tender and a contract was
entered into between the parties on 29.5.1985. It is not in dispute that the
contract contains an arbitration clause requiring all disputes, between the
parties to the contract (other than those for which the decision of the CWE or
any other person is by the contract expressed to be final and binding) shall,
after written notice by either party to the contract to the other of them, be
referred to the sole arbitration of an Engineer Officer to be appointed by the
authority mentioned in the tender documents. There are other recitals contained
in the arbitration clause which are not relevant for our purpose. What is
relevant to mention is that the clause does not provide for a reasoned award or
a speaking award being given by the arbitrator. There is nothing in the
arbitration clause spelling out an obligation on the part of the arbitrator to
give reasons for the findings arrived at by him.
4.9.1986, the Government of India, Ministry of Defence, New Delhi sanctioned an
amendment in the general conditions of the contract which reads as under:-
"Amendment No. Page No. Particulars 48 24 Condition 70 Sub para 9.
Add the following at the Print end of the sub paras:
the value of the claims or counter claims in an arbitration reference exceeds
Rs.1 lakh the arbitration shall given reasons for the award.
Sanction of the Government is also accorded for incorporation of the above
mentioned amendment at the appropriate place in the earlier prints of IAFW
This amendment shall come into effect from 3.10.1986." Disputes arose
between the parties leading to cancellation of contract by the respondents on
3.11.1987 and again on 4.4.1990. On 31.5.1991, the respondents appointed a
Senior Engineer Officer as the sole arbitrator in accordance with the
arbitration agreement. On 28.9.1995, the arbitrator published his award
allowing the appellant's claim to the extent of Rs.80,000/- only and rejecting
the respondents' counter claim. The award was made a rule of the court by the
learned Single Judge of the High Court. In an appeal preferred by the
respondents, the decree passed by the learned Single Judge has been set aside
by the Division Bench of the High Court which has also directed the award to be
set aside and remitted back to the arbitrator for proceeding afresh and making
a reasoned award. For doing so the Division Bench has relied on the amendment
dated 4th September,
1986 and held it to be
applicable to the contract between the parties.
aggrieved by the judgment of the Division Bench, the appellant has preferred
this appeal by special leave.
singular question arising for decision in this appeal is whether the amendment
dated 4.9.1986 applies to the general conditions of contract as applicable to
the parties, and therefore, the arbitration clause should have been read as
amended casting an obligation on the arbitrator to give a reasoned award.
Singh, learned counsel for the appellant, has submitted that the amendment
dated 4.9.1986 applies only to the contracts entered into on and after that
date and in any case the respondents could not have amended the general
conditions of contract all by themselves and without the consent of the
appellant and, therefore, the arbitration clause governing the parties was the
one as contained in the general conditions of contract which existed and were
applicable on 29.5.1985, the date on which the contract was entered into
between the parties. Shri Prateek Jalan, learned counsel for the respondents,
has, however, submitted that the acceptance letter signed by the appellant on
22.2.1985 should be read and interpreted as the appellant having authorized the
respondents to amend the general conditions of contract and also as the
appellant having agreed to bind itself by the general conditions of contract as
modified from time to time and, therefore, the parties and the arbitrator
should all be held bound by the amendment dated 4.9.1986 and any award given in
breach of the arbitration clause as amended should be held as void.
reading of the acceptance letter dated 22.2.1985 signed by the appellant
clearly suggests a copy of general conditions of contract with (i) errata
numbers 1 to 27, and (ii) amendment numbers 1 to 27 having been supplied by the
respondents to the appellants and having been read and understood by the
appellant followed by appellant's agreement to abide by the terms and
expression 'as modified', qualifies the terms and conditions contained in the
general conditions of contract as on and till that day.
is nothing contained in the acceptance letter, either expressly or by necessary
implication, to spell out the appellant having authorized the respondents to
carry out modifications in the terms and conditions of the contract otherwise
than by mutual agreement and to hold the appellant bound by such modifications
though not consented to by him and though not even brought to his knowledge.
learned counsel for the respondents has placed forceful reliance on a single
bench decision of Calcutta High Court in Benode Calcutta 232, as also on a few
other authorities. Benode Behary Roy's case (supra) related to a service
dispute. The plaintiff took up an employment with the respondent company the
bye-laws whereof provided for the release of gratuity on retirement.
Subsequently the company amended the bye-laws and provision for gratuity was
deleted. The plaintiff laid a claim for gratuity submitting that on the date of
plaintiff's entering into contract of employment with the company there was a
provision for gratuity and the bye-laws could not have been amended without the
consent of the plaintiff so as to take away his right to gratuity. The learned
single Judge held that the letter of appointment did not make gratuity an
express term in the contract of service and the claim for gratuity could only
be based on the bye- laws. The bye-laws contained an express provision that
they could be altered or added to at any time by the Board of Directors. The
contract did not give the plaintiff any vested right, in fact or in law, to the
gratuity. Right to claim gratuity depended not on the contract but on the
bye-laws and such right could arise only "on retirement". In this
background the learned single Judge of Calcutta High Court laid down the principle
that there is nothing repugnant to the law of contract to have as one of the
express terms of the contract itself that it will be alterable at the instance
of one party alone. If one contracting party gives to the other contracting
party the right to alter the terms of the contract between them the Court ought
to uphold the sanctity of a contract. But then it is necessary for the Courts
to examine with care the terms and true construction of such contract; else
there is the risk or danger of misdirected righteousness in the name of
sanctity of contract.
analysis of Benode Behary Roy' case (supra), clearly points out that reliance
thereon by learned counsel for the respondents is entirely misconceived so far
as the facts of the present case are concerned. Shri Jalan also invited our
attention to a few passages from Anson's Law of Contract (27th Edition, 1998,
at p.494), Treital's Law of Contract (10th Edition, 1999, at p.55) and speech
of Staughton LJ in Court of Appeal in Lombard Tricity Finance Ltd. also give
one of the parties the power unilaterally to vary the obligations and if such
power can be spelled out from the terms of the contract and is held to be
lawful then a unilateral variation of obligation by one party shall be binding
on the other party to the contract. On principle, there may not be a dispute
with the legal proposition so forcefully advanced by the learned counsel.
However, the question is of its applicability to the case at hand. As we have
already pointed out, the letter of acceptance dated 22.2.1985 cannot be so read
as to spell out the appellant having conferred any authority on the respondents
to modify or alter the terms of the contract except by mutual agreement and to
bind itself by such variations. The arbitration clause is contained in the
contract entered into between the parties. Its terms could not have been varied
except by mutual agreement. Moreover the amendment dated 4.9.1986 itself
provides for its coming into effect from 3.10.1986, i.e. on 30th day after the
date of the amendment. That amendment clearly cannot have any relevance for
interpreting the arbitration clause contained in the contract entered into
between the parties much before the date of amendment coming into effect.
are several other factors which preclude the respondents from urging such a
plea. The reference to arbitrator does not suggest an obligation having been
cast on the arbitrator to give reasons for the award. Such a plea, as has been
urged in this Court, was not taken by the respondents before the arbitrator.
Even in the objections filed in the court, the validity of the award has not
been specifically questioned on the ground of its having been given in breach
of any obligation of arbitrator to give reasons as spelled out by the
arbitration clause. The judgment of the learned single Judge does not show such
a plea having been urged before him. In the objection petition there is a vague
and general plea raised that rejecting the claims forming subject matter of
cross objection and allowing the claim of the appellant without assigning any
reason was bad. Such an omnibus and general plea cannot be read as submitting
that the amendment dated 4.9.1986 applied to the contract between the parties
and that in view of the amended arbitration clause the unreasoned award was
appears that the plea was for the first time raised at the appellate stage
before the Division Bench of the High Court. Unwittingly the Division Bench
fell into the error of entertaining such a plea and disposing of the appeal by
upholding the same though the plea was not even available to the respondents to
be raised at that stage.
end, the learned counsel for the respondents made an alternative submission
that assuming the ground which prevailed with the Division Bench for setting
aside the award does not appeal to this court, then the matter should be sent
back to the Division Bench for dealing with such other objections to the
validity of the award as may be available to the respondents. Reliance was placed
on Food SCC 521. In the facts and circumstances of this case, we are not
inclined to accept that submission. The judgment of the Division Bench does not
show any plea, other than the one on which the decision of the Division Bench
is based, having been taken before the Division Bench yet not having been dealt
with by the Division Bench as unnecessary in view of its opinion formed on one
of the pleas raised by the appellants. The learned single Judge has noted in
his judgment ___ "the entire arguments of the learned counsel were on the
facts of the case. He has not pointed out any legal flaw or error in the award
of the arbitrator. Thus, there is no substance in the objection raised".
We do not also find any other plea deserving consideration having been taken up
either in the objection petition before the learned single Judge or before the
Division Bench which may call for a remand by this Court for further hearing.
the foregoing reasons, the appeal is allowed. The judgment of the Division
Bench is set aside and the decision dated 20th October, 1999 by the learned single Judge is
LAHOTI ) .........................J.
AGRAWAL ) May 7, 2002.