State of
Rajasthan Vs. M/S. Nav Bharat Construction Company [2010] INSC 24 (8 January
2010)
Judgment
IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 2500 OF
2001 State of Rajasthan .... Appellant Versus M/s. Nav Bharat Construction
Company .... Respondent WITH CIVIL APPEAL NO.2501 OF 2001
TARUN
CHATTERJEE,J.
1.
The appellant, State of Rajasthan, invited tenders for
construction of Bhimsagar Dam in which one of the tenderer was the respondent.
The tender of the respondent was accepted. Accordingly, a contract was awarded
to the respondent and under the contract the work was to be started on 16th of
November, 1978 and the date of completion was fixed on 15th of May, 1981. One
of the terms of the contract was that if any difference or dispute arises
between the parties, such dispute or difference shall be referred to arbitration.
However,
the work was not completed within the time allotted and 1 time was thereafter
extended. Inspite of extension of time, the work was not completed. For that
reason, the State of Rajasthan terminated the contract and got the remaining
work done from some other contractor.
2.
The respondent raised various claims which were rejected by the
State of Rajasthan. The respondent, therefore, moved an application under
Section 20 of the Arbitration Act, 1940 (in short the `Act') for referring the
claims mentioned therein to arbitration. The District Judge, Jhalawar by an
order dated 11th of November, 1982 held that only one claim was referable to
arbitration and refused to refer the other three claims to arbitration. The
respondent filed an appeal before the High Court of Rajasthan at Jaipur and the
High Court by its order dated 7th of June, 1984 held that it was for the
Arbitrator to decide whether the claims were to be awarded or not and
accordingly directed that all the four claims be referred to arbitration. The
disputes were referred to two Arbitrators. The respondent, however, filed 39
claims amounting to Rs.42,59,155.56 before the Arbitrators. The parties led
oral and documentary evidence. There was a difference of opinion between the
two Arbitrators. Therefore, the Arbitrators referred the dispute to an 2
Umpire. The State of Rajasthan, the appellant herein, thereafter filed an
application under Section 11 of the Act for removal of the Umpire on the ground
of bias. This application was dismissed on 16th of November, 1993. The
appellants filed a revision case which also came to be dismissed by the High
Court in January, 1995. The Umpire entered into the reference and passed an
award on 29th of May, 1995.
3.
The State of Rajasthan, the appellant herein, filed objections
under Sections 30 and 33 of the Act which were dismissed by the trial court and
in appeal the respondent filed a cross appeal claiming compound interest. The
High Court by a judgment dismissed both the appeals. Feeling aggrieved, both the
parties approached this Court and two Civil Appeals were registered.
C.A.No.2500 of 2001 was by the State of Rajasthan which was aggrieved by the
dismissal of their objection filed under Sections 30 and 33 of the Act and
C.A.No.2501 of 2001 was by the respondent against the dismissal of their claim
for compound interest. By a judgment and order dated 4th of October, 2005
passed in the aforesaid two appeals, this Court had set aside the award of the
Umpire and the judgment of the High Court by the following directions:
3
"Under the circumstances and for reasons set out hereinabove, we set aside
the award and appoint Justice N.Santosh Hegde, a retired Judge of this Court as
the Umpire. The Umpire, Mr.V.K.Gupta shall forthwith forward all papers and
documents to Justice N.Santosh Hegde at his residence i.e. 9, Krishna Menon
Marg, New Delhi. The parties shall appear before Justice N.Santosh Hegde on
6.10.2005 at 5.p.m. at 9, Krishna Menon Marg, New Delhi. Justice N.Santosh
Hegde shall fix his fees which shall be borne by both the parties equally.
Justice N.Santosh Hegde is requested to fix the schedule and give his award
with a period of 4 months from the date of receipt of all the papers and
documents from the outgoing Umpire Mr.V.K.Gupta. The award to be filed in this
Court.
We leave
the question of grant of interest open to be decided by the Umpire in
accordance with law.
Lastly,
it is clarified that this is not a new reference but a continuation of the
earlier proceeding and thus the Arbitration Act, 1940
shall continue to apply."
4.
Accordingly, in compliance with the judgment of this Court as
aforesaid, Mr.Justice N.Santosh Hegde, (as His Lordship then was), entered into
reference and passed his award on 9th of September, 2006. Now the State of
Rajasthan has filed an application for making the award a rule of the Court and
at the same time the respondent filed an objection under Sections 30 and 33 of
the Act. An Interlocutory Application was also filed by the respondent
challenging the jurisdiction of this Court to make the award absolute and also
to consider the objections raised by the respondent against the award 4 passed
by the Umpire in pursuance of the order passed on 4th of October, 2005.
According to the respondent, who appeared in person, the application and
objections filed by the parties must be sent back to the court of competent
jurisdiction for deciding the same in accordance with law, because after the
judgment was passed and the earlier award was set aside by the impugned
judgment, this Court had become functus officio to entertain such applications.
Therefore, before we go into the question regarding the objections raised by
the respondent under Sections 30 and 33 of the Act and the application for
making the award a rule of the Court, we must first deal with the Interlocutory
application, that is to say, whether this Court still retains the jurisdiction
to entertain the award passed by the Umpire or to consider the objections to
the same or the matter should go back to the court of competent jurisdiction
for considering the said application and objections in accordance with law.
According to Mr. Mool Chand Luhadia, appearing in person, this Court is ceased
to have jurisdiction after the appeal was disposed of and a new Umpire was
appointed who passed an award on 9th of September, 2006. In support of this
contention that this Court cannot have the jurisdiction to entertain the
application filed by the appellant to make the award a rule of the court 5 and
also the objection filed under Sections 30 and 33 of the Act, he had relied on
certain decisions of this Court out of which strong reliance was placed on the
decision in Garwal Mandal Vikas Nigam Ltd. vs. Krishna Travel Agency [2008 (6)
SCC 741] and also the decision in Bharat Coking Coal Ltd. vs Annapurna
Construction [2008 (6) SCC 732]. This submission of Mr.Luhadia, who appeared in
person was contested by Mr.Pallav Shishodia, learned senior counsel appearing
on behalf of the State of Rajasthan. According to Mr.Shishodia, in view of the
decision of a three-Judge Bench of this Court in Mcdermott International Inc.
vs. Burn Standard Co. Ltd and Others [2005 (10) SCC 353], this question is no
longer res integra. In our view, the submission of Mr.Shishodia must be
accepted. From the judgment of this Court dated 4th of October, 2005, it has
been made clear by this Court in the operative part of the same, as noted
herein earlier, that the award that would be passed by the Umpire must be filed
in this Court and secondly it was clarified in the judgment itself that this
was not a case of a new reference but a continuation of the earlier proceeding
and thus the Act shall continue to apply. In Mcdermott International Inc.
(supra), a three- Judge Bench decision of this Court clearly observed that
since the 6 Arbitrator was directed to file his award in this Court, the
objections as well as the entertainability of the application of the appellant
for making the award a rule of the Court must be filed in this Court alone and,
therefore, this Court has the jurisdiction to entertain the application of the
appellant and also the objections filed by the respondent. In view of the
discussions made herein above and in view of the three-Judge Bench decision of
this Court, namely, Mcdermott International (supra), it would not be necessary
for us to deal with the other two decisions as referred to herein earlier. That
apart, in the judgment dated 4th of October, 2005, it has been made clear that
the award was to be filed in this Court and that this was not to be taken as a
new reference but a continuation of the earlier proceeding, thus the Act shall
continue to apply. Accordingly, the question regarding entertainability of the
aforesaid two applications namely, the application for making the award a rule
of the court and the objections under Sections 30 and 33 of the Act filed in
this Court could not arise at all.
5.
Let us now consider the objections filed by the respondent against
the award passed by the Umpire under Sections 30 and 33 of the Act. Since we
have already overruled the objections raised by the 7 respondent about the
entertainability of the two applications by this Court, we now deal with the
objections filed by the respondent in respect of the various claims made by
them for passing an award in their favour. According to Mr.Luhadia, since the
first award of the Umpire Mr.V.K.Gupta was set aside, and a new Umpire was
appointed after setting aside the said award it would be evident from the judgment
of this Court that the intention of this Court was to permit the respondent to
raise all their objections to the claims put forward by it including the claim
No.2 and 26. We are unable to accept this contention of Mr.Luhadia. So far as
Claim No.2 and 26 are concerned, on a perusal of the judgment of this court, it
is difficult to accept the argument of Mr.Luhadia as we find from the said
judgment that the claim Nos. 2 and 26 were elaborately considered in the
judgment and this Court in the said judgment came to a clear finding with
regard to Claim No.2 and 26 that the respondent would not be entitled to such
claims. While rejecting Claim Nos. 2 and 26, this Court categorically made the
following observations which we reproduce herein below :
"As
regards claim No. 2 Mr. Luhadia fairly admitted that Clause 5.11(iii) of the
Contract requires chiseling of stones on all sides. He however submitted that
the rates given in Schedule G were only for chiseling of stones on 8 one side.
He submitted that this was clear from Note 1 under Schedule G which stated that
Schedule G was based on B.S.R. 1975. He submitted that B.S.R. 1975 showed that
such rates were only for chiseling stones on one side. He submitted that when
the stone has to be chiseled on all sides the rates given in B.S.R. 1975 were
to be applied. He submitted that claim No. 2 was based on those rates. We are
unable to accept this submission of Mr. Luhadia. The Contract is very specific.
The work specified in the Contract has to be done at the rates specified in
Schedule `G`. Even though Schedule G may be based on B.S.R. 1975 it is not
exactly as B.S.R. 1975.
Where in
respect of a work specified in the contract the rate has been given in Schedule
G that work could only be done at that rate. Works specified in the Contract
does not become extra work. It is only in respect of extra work that rates
specified in B.S.R. 1975 can be applied. To us it is clear that the claim No. 2
is contrary to the terms of the Contract. It is barred by Clauses 57, 60 and 61
of the Contract. As regards claim No. 26, Mr. Luhadia relied upon the case of
Tarapore & Co. v. State of M.P. [1994 [3] SCC 521]. In this case, the
question was whether the contractor was entitled to claim extra amounts because
he had to pay increased wages to his workers. This Court has held that the
contractor would have tendered on the basis of the then prevailing wages and as
the contract required the contractor to pay the minimum wages if the minimum
wages increased it was an implied term of the contract that he would not be
entitled to claim the additional amount. However, it must be noted that, in
this case, there was no term in the contract which prohibited any extra claims
being made because of the increase in wages. Clause 31 of the Special Conditions
of the Contract, which has been reproduced hereinabove, specifically bars the
contractor from claiming any compensation or an increase in rate under such
circumstances. Not only that but the Respondent had with their initial tender
put in a term which provided that if there was any increase in the minimum
wages by the Government the rates quoted by him would be increased 9 by the
same percentage. At the time of negotiation this clause was dropped. Thus, the
Respondent had themselves specifically agreed not to claim any compensation or
increase by reason of increase in wages. This claim could therefore not have
been granted."
From a
reading of this paragraph 30 of the judgment of this Court, it is clear that
this Court in the judgment has, in detail, considered Claim Nos.2 and 26 and on
consideration of the materials on record and the terms of the contract between
the parties rejected the aforesaid two claims. In this view of the matter, we
must accept the finding of the Umpire that since these two claims were clearly
and elaborately considered and thereafter rejected by this Court in the said
judgment, it was not open for him to reconsider the same while passing the
award. In view of this conclusion arrived at by this Court in the aforesaid
judgment, the Umpire was fully justified in not reconsidering the same while
passing an award.
6.
The jurisdiction of the court to set aside an award under Section
30 of the Act has now been settled by catena of decisions of this Court as well
as by the different High Courts in India. Taking those principles into
consideration, it would thus be clear that under Section 30 of the Act it must
be said that the court is not empowered 10 to re-appreciate the evidence and
examine the correctness of the conclusions arrived at by the Umpire in
considering an application for setting aside the award. In this connection, we
may refer to a decision of this Court in the case of Bhagwati Oxygen Ltd. vs.
Hindustan Cooper Ltd. [2005 (6) SCC 462]. In that decision, this Court observed
in paragraph 25 as follows :- "This Court has considered the provisions of
Section 30 of the Act in several cases and has held that the court while
exercising the power under Section 30, cannot re-appreciate the evidence or
examine correctness of the conclusions arrived at by the Arbitrator.
The
jurisdiction is not appellate in nature and an award passed by an Arbitrator
cannot be set aside on the ground that it was erroneous. It is not open to the
court to interfere with the award merely because in the opinion of the court,
another view is equally possible. It is only when the court is satisfied that
the Arbitrator had mis-conducted himself or the proceedings or the award had
been improperly procured or is "otherwise" invalid that the court may
set aside such award."
7.
Similarly in the case of Food Corporation of India vs. Chandu
Construction [2007 (4) SCC 697] in which one of us (Chatterjee,J.) was also a
party, it was held that when the Arbitrator or the Umpire as the case may be,
had ignored the specific terms or had acted beyond the four corners of the
contract, it was open for the court in the exercise of its power under Section
30 of the Act to set 11 aside the award on the ground that the Arbitrator could
not ignore the law or misapply the terms of the contract in order to do what he
thought was just and reasonable. That apart, the law is also settled as
referred to herein earlier that the jurisdiction of the court under Section 30
of the Act is not appellate in nature and the award passed by the Umpire cannot
be set aside on the ground that it was erroneous. It is also not open to the
court to interfere with the award merely because in the opinion of the court,
another view is equally possible. Keeping these principles as laid down by this
Court in the aforesaid two decisions, let us now consider the award passed by
the Umpire in respect of the claims of the respondent excluding Claim Nos. 2
and 26.
8.
Since Claim Nos.4, 6, 9, 13, 23, 32, 33, 36 and 38 of the
respondent were accepted by the Umpire and the Award has been passed in respect
of the said claims in favour of the respondent, it would not be necessary for
us to deal with this part of the award any further. So far as Claim Nos. 1, 3,
5, 7, 8, 10, 11, 12, 14-22, 24, 25, 27, 28, 29,30, 31, 34, 35, 37 and 39 are
concerned, we find that the Umpire after going through the objections of the
respondent and after hearing the parties in respect of these claims rejected
the same and 12 we do not find any reason to set aside the said award on the
ground that the jurisdiction of the court is not appellate in nature nor such
an award could be found to be erroneous. Accordingly, we do not find any reason
to accept the objections of the respondent in this regard.
The
objections are overruled.
9.
Before parting with this judgment, there is another aspect to be
considered at this stage. As noted herein earlier, the respondent has claimed
compound rate of interest which was not granted by the Umpire. The claimant had
claimed compound interest with quarterly rest while the respondent had opposed
the said rate of interest. While rejecting the said claim of the claimant, the
Umpire had rightly observed that there was no necessity for him to fix any
other rate of interest because on the basis of the award passed by the Umpire,
the claimant had to return the substantial amount received by him. In view of
that, the Umpire in his award directed that difference of amount which has now
become refundable by virtue of the award would be returned back to the State of
Rajasthan with interest from the date of recovery by the claimant and the same
was allowed by the previous Umpire till the date of repayment/recovery.
10.
We do not find any reason to differ from the award of the Umpire
on this score, because the Umpire has rightly considered the entire aspect of
interest and passed an award which can never be said to be erroneously rejected
by him.
11.
For the reasons aforesaid, we allow the application for making the
award a rule of the court and reject the objections filed under Sections 30 and
33 of the Act by the respondent. There will be no order as to costs.
............................J. [Tarun Chatterjee]
...........................J.
New Delhi;
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