Oil & Natural Gas
Corp. Vs. M/S Wig Brothers Builders & Enginnr. P. Ltd [2010] INSC 843 (8
October 2010)
Judgment
Non-reportable IN THE
SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.8817 OF
2010 (Arising out of SLP (C) No.12188/2009) Oil & Natural Gas Corporation
... Appellant M/s. Wig Brothers Builders & Engineers Pvt. Ltd. ....
Respondent
R.V.RAVEENDRAN,J.
1.
Leave
granted.
2.
The
appellant (also referred to as `ONGC') entrusted a construction work to the
respondent under a contract dated 11.10.1983. Clause 25 of the contract
provided for settlement of disputes by arbitration. Certain disputes arose
between the parties in regard to the said contract and they were referred to a
sole arbitrator on 31.12.1986. The claimant made several claims aggregating to
Rs.82,89,000/-. ONGC made counter claims aggregating to Rs.1,24,87,000/-. The
arbitrator awarded Rs.9,50,000/- under the first claim, 2 Rs.7,80,132/- under
the second claim, Rs.4,77,129/- under fifth claim and several smaller amounts
under claims 3, 4, 6 to 13, 15, and 17, in all aggregating to Rs.25,26,270/-.
The arbitrator also awarded 12% pendente lite interest and 6% from the date of
the award/decree. The counter claims were rejected.
3.
The
ONGC challenged the said award by filing a petition under sections 30 and 33 of
the Arbitration Act, 1940 (`Act' for short). The civil court (Additional
District Judge, Dehradun) dismissed the said petition filed by ONGC and made
the award a rule of the court. ONGC filed an appeal before the Uttarakhand High
Court. By impugned judgment dated 14.6.2007, the High Court upheld the judgment
of the civil court making the award the rule of the court, subject only to one
change, by reducing the rate of pendente lite interest from 12% to 6% per
annum. The said judgment is challenged by ONGC in this appeal by special leave.
4.
It
is now well settled that a court, while considering a challenge to an award
under sections 30 and 33 of Arbitration Act, 1940, does not examine the award,
as an appellate court. It will not reappreciate the material on record. An
award is not open to challenge on the ground that the arbitrator 3 had reached
a wrong conclusion or had failed to appreciate some facts. But if there is an
error apparent on the face of the award or if there is misconduct on the part
of the arbitrator or legal misconduct in conducting the proceedings or in
making the award, the court will interfere with the award. Keeping the said
principles in view, we will consider the challenge.
5.
The
award has been made with reference to several claims. The appellant has not
been able to make any valid ground to attack except with reference to claim
No.(1). In fact, the learned counsel for appellant rightly concentrated upon
the award on claim No.(1), which relates to the claim for compensation for loss
on account of prolongation of the completion period on account of the ONGC's
failure to perform its contractual obligations. The arbitrator has held that
the delay in completion was due to the fault of both the contractor and ONGC
and that both are equally liable for the delay of 19 months. The arbitrator
held that as both were equally liable, the contractor was entitled to
compensation at the rate of Rs.1 lakh for a period of 9 = months (that is half
of the period of delay of 19 months) in all Rs.950,000/-. The arbitrator has
observed that there is no provision in the contract by which the contractor can
be estopped from raising a dispute in regard to the said claim. But clause 5A
of the contract pertains to extension of time for 4 completion of work and
specifically bars any claim for damages. The said clause is extracted below :
"In the event of
delay by the Engineer-in-Charge to hand over to the contractor possession of
land/lands necessary for the execution of the work or to give the necessary
notice to the contractor to commence work or to provide the necessary drawing
or instructions or to do any act or thing which has the effect of delaying the
execution of the work, then notwithstanding anything contained in the contract
or alter the character thereof or entitle the contractor to any damages or
compensation thereof but in all such cases the Engineer-in-Charge may grant
such extension or extensions of the completion date as may be deemed fair and
reasonable by the Engineer-in Charge and such decision shall be final and
binding."
6.
In
view of the above, in the event of the work being delayed for whatsoever
reason, that is even delay which is attributable to ONGC, the contractor will
only be entitled to extension of time for completion of work but will not be
entitled to any compensation or damages. The arbitrator exceeded his
jurisdiction in ignoring the said express bar contained in the contract and in
awarding the compensation of Rs.9.5 lakhs. This aspect is covered by several
decisions of this Court. We may refer to some of them. In Associated
Engineering Co. v. Government of A.P. - 1991 (4) SCC 93, this Court observed :
"24. The
arbitrator cannot act arbitrarily, irrationally, capriciously or independently
of the contract. His sole function is to arbitrate in terms of the contract. He
has no power apart from what the parties have given him under the contract. If
he has travelled outside the bounds of the contract, he has acted without
jurisdiction. ..."
5 In Rajasthan State
Mines & Minerals Ltd. v. Eastern Engineering Enterprises - 1999 (9) SCC
283, this Court held :
"The rates
agreed were firm, fixed and binding irrespective of any fall or rise in the
cost of the work covered by the contract or for any other reason or any ground
whatsoever. It is specifically agreed that the contractor will not be entitled
or justified in raising any claim or dispute because of increase in cost of
expenses on any ground whatsoever. By ignoring the said terms, the arbitrator
has travelled beyond his jurisdiction as his existence depends upon the
agreement and his function is to act within the limits of the said agreement.
This deliberate departure from the contract amounts not only to manifest
disregard of the authority or misconduct on his part but it may be tantamount to
mala fide action.
It is settled law
that the arbitrator is the creature of the contract between the parties and
hence if he ignores the specific terms of the contract, it would be a question
of jurisdictional error which could be corrected by the court and for that
limited purpose, agreement is required to be considered. ....
He cannot award an
amount which is ruled out or prohibited by the terms of the agreement."
In Ramnath
International Construction (P) Ltd. v. Union of India - 2007 (2) SCC 453, a similar
issue was considered. This Court held that clause 11(C) of the General
Conditions of Contract (similar to clause 5A under consideration in this case)
was a clear bar to any claim for compensation for delays, in respect of which
extensions had been sought and obtained. This Court further held that such a
clause amounts to a specific consent by the contractor to accept extension of
time alone in satisfaction of claims for delay and not to claim any
compensation; and that in view of such a bar 6 contained in the contract in
regard to award of damages on account of delay, if an arbitrator awards
compensation, he would be exceeding his jurisdiction.
7.
In
view of the above, the award of the arbitrator in violation of the bar
contained in the contract has to be held as one beyond his jurisdiction
requiring interference. Consequently, this appeal is allowed in part, as
follows :
a. The judgment of the
High Court and that of the civil court making the award the rule of the court
is partly set aside in so far as it relates to the award of Rs.9.5 lakhs under
claim No.(1) and the award of interest thereon.
b. The judgment of the
civil court as affirmed by the High Court in regard to other items of the award
is not disturbed.
..............................J.
(R V Raveendran)
.............................J.
New
Delhi;
Back
