IN THE HIGH COURT OF KERALA AT ERNAKULAM

PRESENT

THE HONOURABLE MR. JUSTICE P.B.SURESH KUMAR

&

THE HONOURABLE MRS. JUSTICE C.S. SUDHA

MONDAY, THE 13

TH

DAY OF DECEMBER 2021 / 22ND AGRAHAYANA, 1943

ARB.A NO. 38 OF 2020

AGAINST THE ORDER DATED 30.11.2019 IN OP(ARB) 664/2012 OF ADDITIONAL

DISTRICT COURT-V, EKM

APPELLANT/RESPONDENT:

M/S.NAVAYUGA ENGINEERING COMPANY LTD

REGISTERED OFFICE, 48-917, DWARAKA NAGAR,

VISHAKHAPATTANAM 530-016,

REPRESENTED BY ITS AUTHORISED SIGNATORY

BY ADVS.SANTHOSH MATHEW

SRI.ARUN THOMAS

SRI.JENNIS STEPHEN

SRI.VIJAY V. PAUL

SMT.KARTHIKA MARIA

SMT.VEENA RAVEENDRAN

SRI.ANIL SEBASTIAN PULICKEL

SMT.DIVYA SARA GEORGE

SMT.JAISY ELZA JOE

SHRI.ABI BENNY AREECKAL

SMT.LEAH RACHEL NINAN

SMT.SHARAN PREM

RESPONDENT/PETITIONER:

UNION OF INDIA

REPRESENTED BY THE CHIEF ENGINEER (NW),

NAVAL BASE P.O.,KOCHI-682 004.

BY ADV SRI.K.SHRI HARI RAO, CGC

THIS ARBITRATION APPEAL HAVING COME UP FOR ADMISSION ON

30.11.2021, THE COURT ON 13.12.2021 DELIVERED THE FOLLOWING:

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“C.R.”

P.B.SURESH KUMAR & C.S.SUDHA, JJ.

--------------------------------------------------

Arbitration Appeal No.38 of 2020

-----------------------------------------------

Dated this the 13

th

day of December, 2021

JUDGMENT

C.S.Sudha, J.

The Hon’ble Supreme Court in Project Director, National

Highways Authority of India v. M. Hakeem, (2021 SCC Online

473) held that Section 34 of the Arbitration and Conciliation Act, 1996

(the Act) does not contemplate modification of an award by a court in a

proceeding under the said Section. Now the question is what

constitutes modification of an award? If the Arbitrator has awarded

separate amounts on various independent claims, would setting aside

some of the claims, which are separable and independent of the

remaining claims, constitute a modification of the award? This is one

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major issue apart from the justifiability of interference made by the

court below and the arbitrability of certain disputes decided by the

Arbitrator, that calls for an adjudication in this case.

2.First, a brief reference to the facts of the case-

The appellant and the respondent herein entered into a

contract for the provision of Parade Ground, PT Complex, Athletic

Track, Swimming Pool, Covered PT and Drill Shed etc. at

Ezhimala. The work was completed on 31/10/2007. Disputes arose

between the parties and hence the matter was referred for

arbitration. Sri.N.D.Bhagatkar, Chief Engineer (QS&C), C/o.

Commander Works Engineer, Pune was appointed as the sole

Arbitrator. 31 claims were raised before the Arbitrator by the

claimant for a total amount of Rs.16,04,07,582/- with interest.

Claims 1 to 5, 7, 8, 10, 11, 14, 15,16 to 20, 27, 30 and 31 were

allowed and the remaining claims were rejected. The Arbitrator by

award dated 21.5.2012 granted an amount of Rs.3,93,24,065/- with

interest at the rate of 9% per annum w.e.f. 13/09/2009 to the date of

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award to be paid within 90 days from the date of award, failing

which interest was to be paid @ 11% from the date of award till

payment. The claim of the respondent for Rs.11 lakhs (Rs.5 lakhs

for cost of arbitration and Rs.8,38,032/- for repair of roof) was

rejected by the Arbitrator.

3.The respondent/Union of India (UoI) preferred O.P.

Arb. Appeal No.664/2012 before the District Court, Ernakulam

challenging the award. The Court confirmed the award under claim

no.2, 3,10,11,14,15,20 and 27 and set aside the award under claim

no.1,4,5,7,8,16, and 19. The award under claim no.31 was

modified. The award of Rs.3,93,24,065/- was thus reduced to

Rs.22,36,380/- plus cost of Rs.28,402/-. Aggrieved, the

appellant/claimant is before us.

4.Heard Sri. Anil Sebastian Pulickel, the learned counsel

for the appellant and Sri.K.Shri Hari Rao, the learned Central

Government Counsel for the respondent.

5.According to the learned counsel for the appellant, the

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court below went wrong in partly setting aside the award, which in

effect, is a modification of the award. This is not permissible under

Section 34 of the Act. It was pointed out that in a proceeding

under Section 34, the court can only set aside an award on any of

the grounds mentioned in S. 34(2) or 34 (2-A) and in no case, can

the court modify an award or set aside an award partially except in

the contingency provided under the proviso to S.34 (2)(a) (iv). If

at all the court finds that a portion or part of the award is bad, the

remedy lies in S. 34 (4), goes the argument. Reference was made

to Hakeem’s (supra) case in support of the argument that the court

has no power to modify an award. The learned counsel, in all

fairness, has also brought to our notice, decisions which have held

that the doctrine of severability can be applied to awards which are

severable. Raghul Construction Engineers and Contractors v.

N.T.P.C. [(2005) SCC Online Kerala 389]; R.S. Jiwani

Mumbai v. Ircon International Ltd. Mumbai (2010 (1)

Mh.L.J 547); Anugraha Engineers & Contractors v. Union of

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India (2014-1-L.W.132); Saptarishi Hotels Pvt. Ltd. v.

National Institute of Tourism and Hospitality Management

(2019 SCC Online TS 1765) are the decisions referred to by the

learned counsel. Therefore, the argument advanced is that the

present appeal is liable to be allowed and the order of the court

below can be set aside on this preliminary point itself, without this

Court going into the merits of the case. On the other hand, it was

submitted on behalf of the respondent that there is no infirmity or

illegality in the impugned order as canvassed by the appellant.

6.In Raghul Construction (supra) a Division Bench of

this Court held that if some portions of the award are without

jurisdiction, such part alone can be set aside if it will not affect the

award in respect of disputes which are arbitrable. The whole award

need not be set aside. However, this decision is rendered on the

basis of the Arbitration and Conciliation Act, 1940, which

contained a specific provision for modification of the award, that

is, Section 15. In the present Act, no such provision for

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modification of the award has been made. Therefore, the principle

laid down in Raghul Construction (supra) cannot be applied to

the facts of the present case as it is the 1996 Act that is applicable

here.

7.In R.S. Jiwani's (supra), the questions of law that arose

for consideration before a Full Bench of the Bombay High Court

were - (i) whether the doctrine of severability could be applied to

an award in a proceeding under Section 34 of the Act; and (ii) the

scope of the proviso to Section 34(2)(iv) and whether its

application is restricted to clause (iv) alone or whether it applies to

the whole of Section 34(2) of the Act. It was held that the doctrine

of severability an established concept, has been applied to the law

of contract since time immemorial. The intention of the Legislature

in enacting the 1996 Act is to free the Arbitral Tribunal from the

rigours of strict rules of procedure and permit least interference by

the court. An arbitral award is final and binding on the parties and

even on persons claiming under them in terms of Section 35 of the

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Act. Therefore, it would be unjust and unfair to deny the statutory

rights accrued to the parties by not applying the doctrine of

severability if some part of the award is unsustainable and where

other part of the award is found to be good and enforceable in law

by the court in exercise of its powers under Section 34 of the Act.

However, the case would be different where it is not possible or

permissible to sever the award. If the bad part of the award is

intermingled and interdependent upon the good part of the award,

then it is not possible to sever the award as the illegality may affect

the award as a whole. In such cases, it may not be possible to set

aside the award partially. There is no bar in law in applying the

doctrine of severability to awards which are severable. If the

principle of severability can be applied to a contract and even to a

statute, then there is no reason why it cannot be applied to a

judgment or an award containing resolution of disputes between

parties and providing them such relief as they may be entitled to in

the facts of the case. When partial challenge to an award is

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permissible, then certainly partial setting aside of an award is also

possible. Regarding the proviso to Section 34(2) (a) (iv), it was

held that it has to be read ejusdem generis to the main Section, as

in cases falling in that category, there is an absolute duty on the

court to invoke the doctrine of severability where the matter

submitted for arbitration is clearly separable from matters not

referred for arbitration.

8.Anugraha Engineers (supra) was a case in which the

court under Section 34 of the Act set aside the award in part in

respect of claims 1, 2 and 6 and upheld the award in respect of the

remaining claims (there were about a total of 15 claims). The

Madras High Court held that the remedy lies in sub-section (4) of

Section 34 of the Act and that the court while dealing with an

application under Section 34 can either set aside the award in its

entirety or dismiss the application, but it cannot set aside the award

in part. In other words, the court dealing with an application under

Section 34, cannot assume the power of an appellate forum and

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modify the award. Hence, the order of the court below was held to

be infirm and defective and therefore liable to be set aside.

9.Hakeem (supra) was a case in which land was acquired

under the National Highways Act, 1956. The Competent Authority

under the said Act awarded very low amounts as compensation,

that is, amounts ranging from Rs.46.55/- to Rs.83.15/- per sq.

meter. No infirmity was found in this, by the District Collector who

made the arbitral award. However, in the proceedings under

Section 34, the District Court enhanced the amount of

compensation to Rs.645/- per sq.meter, thereby modifying the

award of the District Collector. In appeal, a Division Bench of the

Madras High Court upheld the modification made. The respondent

therein, namely, the National Highways Authority of India took up

the matter before the Hon'ble Supreme Court. The Apex Court,

after examining various other decisions held that in a proceeding

under Section 34, the court does not have the power to modify an

award. The Apex Court disagreed with the findings of the High

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Court which held that merely because the words 'modify' or 'vary'

is not indicated in Section 34, it would not take away the

jurisdiction of the court exercising its jurisdiction under Section

34 to interfere with the award passed by the Arbitrator partially;

that if such a power is not vested with the court, it would lead to

multiplicity of proceedings which was never intended by the

legislature while framing Section 34; that a reasonable

interpretation to Section 34 would only lead to the irresistible

conclusion that the court can modify or vary the award of the

Arbitrator if it is contrary to the material evidence adduced by the

parties; that even otherwise, as contemplated under Section 34 (2)

(v)(b)(ii) of the Act, when the award passed by the Arbitrator is in

conflict with the public policy of our country, reversal or

modification of such award passed by the Arbitrator is well within

the provisions contained under Section 34 of the Act. The Apex

Court noticed that the question has been settled finally in

McDermott International Inc. v. Burn Standard Ltd [(2006)

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11 SCC 181], Kinnari Mullick vs Ghanshyam Das Damani

and Dekshin Haryana Bijli Vitran Nigam Ltd. v. Navigant

Technologies Pvt. Ltd. (2021 SCC Online SC 157). Further,

to state that the judicial trend appears to favour an interpretation

that would read into Section 34, a power to modify, revise or vary

the award would be to ignore the previous law contained in the

1940 Act; as also to ignore the fact that 1996 Act was enacted

based on the UNCITRAL Model Law on International Commercial

Arbitration, 1985, which makes it clear that even the limited

judicial interference on extremely limited grounds not dealing

with the merits of an award, the 'limited remedy' under Section 34

is co-terminus with the 'limited right', namely, either to set aside an

award or remand the matter under the circumstances mentioned in

Section 34 of the Act. It further held, if one were to include the

power to modify an award in Section 34, one would be crossing

the lakshman rekha and doing what, according to the justice of a

case, ought to be done. In interpreting a statutory provision, a

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Judge must put himself in the shoes of the Parliament and then ask

whether Parliament intended this result. The Parliament very

clearly intended that no power of modification of an award exists

in Section 34. It is only for the Parliament to amend the aforesaid

provision in the light of the experience of the courts in the working

of the Act and to bring it in line with other legislations the world

over. Holding so, the decision of the Madras High Court was

overruled. The Apex Court also noted that decisions of the

Supreme Court modifying awards were in exercise of its powers

under Article 142 of the Constitution of India, which power cannot

be exercised by other courts.

10.In Saptarishi Hotels case (supra), the Telangana High

Court held that by applying the doctrine of severability, an award

can be set aside in part.

11.By referring to Hakeem's case (supra), it was submitted

on behalf of the appellant that the Hon'ble supreme Court has in

quite unambiguous terms held that modification of an award under

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Section 34 is impermissible. That being the law of the land, the

court below went wrong in interfering with the award and setting

aside some of the claims, which is nothing but modification of the

award and hence impermissible.

12.According to us the dictum in Hakeem's case (supra)

can be distinguished on facts. As stated earlier, the District Court in

the proceedings under Section 34 found that the amount of

compensation granted to the land owners under the National

Highway Act by the authorities under the Act was abysmally low

and therefore enhanced the compensation to Rs.645/- per sq.mtr. in

the place of Rs.46.55/- to Rs.83.15/- per sq.mtr. This is the

modification that has been interdicted by the Apex Court.

However, the situation in the case on hand is different. A total of

31 claims amounting to Rs.16,04,07,582/- was made by the

appellant/claimant before the Arbitrator. An award of

Rs.3,93,24,065/- with interest was granted by the Arbitrator. The

court below in the proceeding under Section 34 initiated by the

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respondent/UoI, confirmed the award on some claims and set aside

the award on certain other claims. The claims are independent and

separate. This is not a case in which the award of compensation

under any particular head was revised/changed or altered, but a

case in which the portion of the award relating to certain

independent claims were set aside.

13. In this context, we refer to the decision of the Hon'ble

Supreme Court reported in 2011 KHC (Online) 4418)

(M/s.J.G.Engineers Pvt. Ltd. vs. UoI). The claimant in the said

case was awarded the work of extension of terminal building at the

Guwahati Airport. Disputes arose between the parties and the

matter was referred for arbitration. The claimant filed a statement

of claims before the Arbitrator. Claims 1 to 11 were for

Rs.2,38,86,198.31/- which was subsequently reduced to

Rs.2,06,70,495/-. Claim 12 was for interest @18% p.a. and claim

13 was towards cost of arbitration. The Arbitrator awarded a sum

of Rs.1,04,58,298/- with interest and cost. The proceedings under

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Section 34 initiated by the UoI was dismissed. This order was

reversed by the Guwahati High Court in the appeal filed by the UoI

and the award was fully set aside. The Apex Court did not agree

with the judgment of the High Court setting aside the entire award.

In paragraph 18 it was held thus -

“18. The arbitrator had considered and dealt with claims (1),

(2, 4 and 5), (6), (7 and 8), (9) and (11) separately and

distinctly. The High Court found that the award in regard to

items 1, 3, 5 and 11 were liable to be set aside. The High Court

did not find any error in regard to the awards on claims 2, 4, 6,

7, 8 and 9, but nevertheless chose to set aside the award in

regard to these six items, only on the ground that in the event of

counter claims 1 to 4 were to be allowed by the arbitrator on

reconsideration, the respondents would have been entitled to

adjust the amounts awarded in regard to claims 2, 4, 6, 7, 8

and 9 towards the amounts that may be awarded in respect of

counter claims 1 to 4; and that as the award on counter claims

1 to 4 was set aside by it and remanded for fresh decision, the

award in regard to claim Nos. 2, 4, 6, 7, 8 and 9 were also

liable to be set aside. It is now well­ settled that if an award

deals with and decides several claims separately and distinctly,

even if the court finds that the award in regard to some items is

bad, the court will segregate the award on items which did not

suffer from any infirmity and uphold the award to that extent.

As the awards on items 2, 4, 6, 7, 8 and 9 were upheld by the

civil court and as the High Court in appeal did not find any

infirmity in regard to the award on those claims, the judgment

of the High Court setting aside the award in regard to claims

2,4,6,7,8 and 9 of the appellant, cannot be sustained. The

judgment to that extent is liable to be set aside and the award

has to be upheld in regard to claims 2, 4, 6, 7, 8 and 9.”

(Emphasis supplied)

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14.As in the aforesaid decision, in the case on hand also,

the award has dealt with and decided several claims separately and

distinctly. Therefore, if the court finds the award with regard to

some claims to be bad, the court can segregate the award on items

which did not suffer from any infirmity and uphold the award to

that extent. If such an interpretation is not given, it would result in

gross injustice and absurd results because the court would have to

set aside that portion of the award also which suffers from no

infirmity. This certainly cannot be what was contemplated by the

Legislature. No reference has been made to J.G. Engineers Pvt.

Ltd. (supra) in Hakeem's case nor has it been distinguished or

overruled. The decision in J.G. Engineers Pvt. Ltd. is apparently

not under Article 142 of the Constitution also. That being the

position, we find that the doctrine of severability can be applied to

proceedings under Section 34 also because as held in R.S. Jiwani

(supra), if a person can challenge an award in part, certainly the

court can also set aside an award in part. That being the position,

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we negative the argument advanced on behalf of the appellant that

the impugned order is liable to be set aside on the said preliminary

ground alone.

15.Having negatived the challenge on the preliminary

point, we proceed to consider whether the court below was

justified in setting aside the award in respect of some of the claims.

We will refer to the claims in the order in which arguments were

advanced challenging the findings of the court below. Reference

was first made to claim no.19. The said claim is relating to

‘additional payment for excavation of hard rock by chiseling’.

Under this head/claim, an amount of Rs.34,38,452.87/- was

claimed. The award of Rs.34,38,453/- granted by the Arbitrator has

been set aside by the court below. It was pointed out on behalf of

the appellant that the fact that excavation of hard rock was done, is

not in dispute. The dispute is only with regard to the mode of

excavation, that is, was it done by way of blasting or was it by

chiseling. The contract of agreement does not specify the method

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to be used for excavation. However, it has been stipulated in the

contract that if the appellant/claimant resorts to blasting, he must

get necessary permission/sanction from the authorities concerned.

Further, if excavation is done by chiseling, the claimant is entitled

to a higher rate and if it is done by blasting, he would be entitled

only to a lower rate. The Arbitrator after analyzing the evidence

adduced before him found that the excavation of hard rock had

been done by chiseling and hence awarded the aforesaid amount.

According to the appellant/claimant, the finding of the court below

that the Arbitrator never considered this aspect is wrong. On the

other hand, a detailed discussion regarding this aspect is very much

available in the award. The court went wrong in interfering with

the factual findings of the Arbitrator. Reference was made to

Madnani Construction Corporation Pvt. Ltd. vs. UoI

[(2010)1 SCC 549] to substantiate the argument on this aspect.

16.The respondent/UoI, disputed the claim of excavation

by chiseling and contended that it was the responsibility of the

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claimant to have obtained the necessary permit/sanction from the

District Collector. The claimant had commenced the work on

05.05.2003, but applied for permission only on 03.09.2004, i.e.,

after a lapse of sixteen months. Excavation of hard rock was done

by blasting only. The fact that blasting alone was done, is evident

from the works' diary maintained at the work site which also

contains the signature of the appellant/claimant. Further, this

amount was never claimed by the claimant during the currency of

the work through Running Account Receipts (RARs). Further, the

appellant/claimant had during the currency of the contract,

requested for extension of time due to delay in getting permission

from the authorities concerned for blasting of rock. The Accepting

Officer by Deviation Order (DO), granted extension with no

financial effect. After that, several RARs were paid to the claimant.

The claimant then never claimed any amount for chiseling.

Therefore, this would show that the claim now made under this

head is only an after-thought. The claimant countered the

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contentions of the respondent/UoI by filing a rejoinder, in which he

reiterated his claim and contended that he could not obtain

permission for blasting. The work diary, namely, Ext.GP-46 relied

on by the respondent is a fabricated document created

subsequently to suit the case of the respondent.

17.The Arbitrator in paragraph 74.9 of the award

considered the rival contentions of the parties and found that

excavation had been done by way of chiseling. The Arbitrator

noticed that the Station Commander had imposed certain

restrictions relating to the execution of the contract. The Arbitrator

also took note of the differences seen in the handwriting, ink and

pen in the entries seen in Ext.GP-46 works diary produced and

relied on by the respondent and so concluded that the argument

advanced by the claimant against the works diary is justified. It

was also found that there was no dispute regarding the calculated

quantities, but the only objection was that the amounts were never

claimed in any of the RARs. The Arbitrator found that when the

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work had admittedly been done by the claimant, the same cannot

be expected to have been done gratuitously ; that the claimant

expected a DO to be issued by the respondent/UoI, but the latter

took considerable time in issuing various DOs and that some had

been issued even after the completion of the work and hence in

such circumstances, the argument of the respondent that the

claimant ought to have claimed the amounts under this head in the

RARs is not justifiable and so accepted the claim and awarded

Rs.34,38,453/-.

18.The court below deals with this claim in paragraph 29

of the impugned order which reads thus -

“29. Claim No.19 relates to additional payments for excavation by

chiseling of hard rocks. As per CA claim 26.5 in Sl. Page 223

controlled blasting contractually agreed with written permission of

GE and District Authorities. As per G.P.46 work diary it also noted

the blasting work done in field and signed by petitioner and

respondent. Without considering the admission and evidence the

arbitrator concluded that the respondent carried out the work by

chiseling and granted the amount as claimed by the respondent

which is patently illegal, unfair and unreasonable that it shocks the

conscience of the court and liable to be interfered and do so.”

19.The finding that admission made by the claimant had

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not been taken note of by the Arbitrator, is factually incorrect. The

claimant never admitted the entries in the works diary, on the other

hand he disputed the authenticity/genuineness of Ext.GP-46 works

diary, which contention was found to be probable from the facts,

circumstances and evidence on record by the Arbitrator. This

factual finding of the Arbitrator ought not to have been interfered

with by the court below. It is settled law that the Arbitrator is the

master of facts. Finding on facts by the Arbitrator, cannot be easily

interfered with unless and until they are found to be perverse or

patently illegal. Here, in the instant case, the Arbitrator has given

clear and cogent reasons which can in no way be termed as

perverse, unfair or one shocking the conscience of the court as held

by the court below. The court below has committed a patent

mistake by interfering with the award of the Arbitrator under claim

no.19 and hence, we set aside the finding of the court below under

claim no.19.

20.Now, to claim no.5 which is described as 'provision of

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links 1, 2 and 3 around cafeteria', an amount of Rs.13,06,196.51/-

claimed was allowed by the Arbitrator. The same has been set

aside. It is submitted on behalf of the appellant that the dispute

here was, whether this work is covered by the Contract Agreement

(CA) or whether it is extra works. If it is included in the CA, the

claimant is not entitled to the amount claimed, but on the other

hand, if it is extra works, he is entitled to the said amount.

According to the claimant, the work done under claim no.5 is extra

works and hence he is entitled to the amount claimed. Claim no.5

is dealt with by the Arbitrator in paragraph 16 of the award. The

contract entered into between the parties is admittedly a lump sum

contract. The claimant before the Arbitrator contended that links 1

to 3 constructed as instructed by the Garrison Engineer (GE), was

not part of lump sum contract for the construction of the cafeteria

building. These works were completed as directed by the GE as

early as in September/October, 2008. However, when the claimant

realised that no payments were made for the said links in the

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RARs, he brought it to the notice of the GE by way of Ext.C5/S-2

letter. He reminded the authority concerned of the matter by

various subsequent correspondences also. However, no action was

taken by the respondent/UoI. Hence, by way of Ext.C5/S-5 letter

dated 30.1.2009, he informed the GE of his intention to claim these

works as extra works with interest through arbitration. The

respondent/UoI contended that the claim is not admissible as the

work forms part of the lump sum contract and that they are not

extra works. The Arbitrator, after hearing both sides and examining

the documentary evidence adduced by both sides, concluded that

the links were not included in the CA or in the drawings and

therefore in the absence of details in the CA, it cannot be

considered that the links had been included in the lump sum and

not payable unless it had been so specifically mentioned in the

contract. The Arbitrator found that as the drawings did not indicate

the two ends of the links and also did not indicate which link forms

part of which building, it cannot be held to be part of the CA and

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hence found the claim to be sustainable and awarded the aforesaid

sum. The court below in paragraph 24 of the impugned order deals

with claim no.5 which reads thus -

“24. Claim No.5 relating to construction of links 1, 2 and 3 around

that cafeteria. The respondent as well as well as arbitrator clearly

admitted that there is no stipulation in the contract to do the said

work, but according to arbitrator there is 'no end' in the drawing and

therefore the respondent is entitled to get the amount since they

conducted the work, link 1, 2 and 3 around that cafeteria. It is

evident from page 23(R) of CA that L1,2 & 3 are excluded. There is

no compulsion to the respondent to do the work if he is in a

dilemma or if the contract not specified with regard to the work. He

could have avoid the same then and there and proceed further after

getting clear a written consent from the petitioner. Here the

respondent allegedly conducted the work according to their own

interpretation, unilaterally and claiming the amount. The same is

against the contract and the Arbitrator cannot go beyond the contract

and found that the award regarding claim No.5 is contra to the

contract and liable to be interfered. Therefore as per the contract the

petitioner is not liable to pay the said amount and the findings of the

arbitrator is in conflict with the contract and set aside awarding of

claim No.5.”

21.The learned counsel for the appellant submitted that the

court below has taken up a stand which neither party had and also

that a pure finding of fact which cannot and ought not to have

been interfered with, has been interfered with, which finding of the

court below cannot be sustained. Reference was made to

M/s.Enkay Construction Company vs. Delhi Development

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Authority [ILR (2006)(II) Delhi 249] in which it was held that

based on Section 70 of the Contract Act, which embodies the

equitable principle of restitution and prevention of unjust

enrichment, any extra works done, which work is not expressly or

impliedly included in the original contract, the beneficiary is

obliged to pay for the benefit he receives and that a Government is

also not outside the purview of Section 70 of the Contract Act.

22.As rightly pointed out by the learned counsel for the

appellant, the finding of the court below is apparently incorrect.

The respondent/UoI had no case that the work had been done by

the claimant, unilaterally and according to his “own

interpretation”. On the other hand, their specific case is that the

works done are not “extra works” but part of the CA and hence the

claimant is not entitled to any further sum. They do not dispute the

claim that the works had been carried out as instructed by the GE.

The finding of the Arbitrator regarding this claim was also purely a

factual one, based on the materials placed before him and which

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finding is supported by cogent reasons. No interference was called

for and there is no justification for the interference also. Hence, the

finding of the court below on claim no.5 is liable to be set aside.

23.Claim no.8 is relating to “extension of link (1) between

substation and flotilla office, PT shed 2 to link 10”. An amount of

Rs.2,81,516.70/- claimed was allowed by the Arbitrator. This was

set aside by the court below. According to the learned counsel, the

dispute involved here also, was whether this work was part of the

CA or was it extra works. Paragraph 26 of the impugned order by

which award relating to claim no.8 was set aside, is nothing but a

verbatim reproduction of the contentions of the respondent/UoI in

the claim petition, which is not supported by any reason(s)

whatsoever and hence is also liable to be set aside.

24.Paragraph 63 of the award deals with claim no.8. The

claimant contended that this work is not part of the CA, but it was

extra work and hence he has to be reimbursed for the same. The

respondent/UoI contended that the claim was inadmissible as they

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form part of the CA. Paragraph 63.6 of the award deals with the

finding of the Arbitrator regarding this claim. The Arbitrator after

hearing both sides and considering the documentary evidence

produced by either side, found that the CA and drawings were not

clear on this aspect. The contract did not mention that the links are

included in the lump sum and that the respondent/UoI had failed to

establish their contention that the work had been executed by

another contractor and hence found the claim to be justifiable and

so awarded Rs.2,81,516/- to the claimant.

25.Paragraph 26 of the impugned order deals with claim

no.8 which reads thus -

“26. Claim No.8: relating to extension of link 1 between Sub

station and Flotilla office and PT shed 2 to link 10. It forming

part of lump sum as per the drawing number 3TZH-Links

-WDAP IS3 (serial No.143.3.TZH links space WADP 2 S3

(serial No.144 and 3TZH – links – WDAP. Space 3 SP(serial

No.145). As per schedule 'A' note No.6.1.2 in serial page No.18

(R)the all drawing shall be deemed to be included in respective

cost of building unless specifically excluded. Hence it is clear

and unambiguous what are included and what are excluded in

lump sum. As per the contractual conditions link No.10 is part

and parcel of quoted lump sum and the arbitrator ignored these

two vital contract conditions and arbitrarily awarded the full

amount as claimed by the respondent. According to the

arbitrator in the absence of specific stipulation, supported the

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view of respondent and allowed the claim. The said conclusion

is in conflict with the contractual terms of 6.1.2 and liable to be

interfered and do so.”

26.It is apparent that no reasons have been given for setting

aside the specific findings of the Arbitrator. The court below does

not say any or for what reasons the Arbitrator was wrong in

concluding so. Hence, the factual findings supported by reasons,

set aside for no apparent reasons, is liable to be set aside.

27.Claim no.16 is relating to 'certain additional works

carried out in link 5 at the canopy'. An amount of Rs.39,783.12/-

claimed was granted by the Arbitrator. According to the claimant,

when the construction of link 5, roof and canopy was at the final

stage, the GE vide Ext.C16/S-1 letter dated 24.8.2005 demanded

extension of the link inside the canopy-roof reinforcement. The

claimant by letter dated 25.8.2005 brought it to the notice of the

GE that this was a delayed request on their part. However, he

carried out the work as directed by the GE and requested for a DO.

He also informed the GE that such changes entail some additional

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works beyond the terms of the contract and hence he needed to be

reimbursed and a proper DO issued. However, no action was taken

by the GE for 19 months. Hence, as per Ext.C16/S-5 letter dated

28.11.2008, he sent a draft DO for the additional works done and

requested the GE to issue a DO. Again, no action was taken by the

GE. According to the claimant, the extension of link 5 was ordered

on 24.8.2005 by the introduction of two revised drawings. These

are not missing details and as changes have been brought in as

directed by the GE, he is entitled to be reimbursed. On the other

hand, the respondent/UoI contended that the changes made in the

drawings relating to this work were changes falling under missing

details and so the claim is liable to be rejected.

28.The Arbitrator in paragraph 71.7 of the award has given

his findings on this claim. It was found that the CA has failed to

demarcate the scope of work under lump sum and that the

respondent had added supplemental details at a later stage. It was

also found that the respondent through their consultant continued

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to give details after the commencement of the work and then

claimed them as missing details. It was found that such details

could not be determined or foreseen at the tender stage itself and

therefore in the interest of justice and equity, the claim needs to be

upheld.

29.Claim no.16 dealt with in paragraph 28 of the impugned

order reads thus -

“28. Claim No.16 relates to additional works carried out in link 5 at the canopy

and the arbitrator allowed the claim on the conclusion that the contract failed to

demarcate scope of work under lump sum. There is clear stipulation in

condition 6 B in GCC IAWF 2249 that lump sum contract based on pre priced

schedule 'A' and the rates as inserted in MES. Therefore contract terms are

clear and the arbitrator cannot take a decision in conflict with the contract.

Hence the conclusion of arbitrator in claim No.16 is liable to be interfered and

do so.”

30.It is pointed out that here-again, the finding of the court

below is sans any reason; that there is no clause as 6B in the GCC

as mentioned in the impugned order and this finding of the court

below is also a reproduction of the allegations of the respondent

herein in the claim petition. To substantiate the argument that the

court below is bound to give reasons, the learned counsel relied on

a decision of the Delhi High Court namely, Jai Singh vs. DDA

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(MANU/DE/1254/2008), in which it has been held that merely

saying that claim is not in terms of the agreement or that the claim

has not been established, is not sufficient and they do not constitute

reasons for the conclusion. Therefore, in such circumstances the

court would be compelled to peruse the records to find out whether

the Arbitrator's conclusions are in accordance with law or not.

However, that is not the scope of enquiry while entertaining a

challenge to arbitration awards.

31.As pointed out by the appellant, here again the court

below does not say in what way the finding of the Arbitrator is

against the contractual provision. The court has not addressed the

rival claims of the parties as to whether the work done is extra

works/new elements or whether it is missing details of the existing

details/elements. We went through the General Conditions of

Contracts I.A.F.W.-2249 (GCC), but were not able to locate

condition 6B as referred to in the impugned order. We find only

conditions 6A, 6(A)(A) with sub clauses (a) to (f), 6(A)(B), 6(A)

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(C), 6(A)(D) and 6(A)(E). Probably it is condition 6(A)(B) that has

been referred to by the court below. Even if that be so, the court

below has not stated the reasons for concluding so. On the other

hand, the Arbitrator has given reasons for his conclusion and a

finding based on facts ought not to have been interfered with. As

the court below went wrong, the finding relating to claim no.16 is

also liable to be set aside.

32.Claim no.7 is relating to 'provision of local granite stone

cladding in lieu of Sadarhally stone cladding'. An amount of

Rs.49,68,150.61/- claimed was allowed by the Arbitrator. This

again has been set aside by the court below. According to the

appellant/claimant, as per CA it was 50 mm. Sadarhally stone

cladding that was to be provided on the walls of the various

building to be constructed. The respondent/UoI after the

commencement of the work wanted a change of cladding from

Sadarhally stone to 150 mm. thick local granite stone. This was a

deviation to item no.60 of part IX of schedule A. Though rates

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were to be calculated as per condition 62(A)(a) of the GCC, the

respondent prepared a star rate/revised rate for only Sadarhally

stone 50 mm. thick, which according to the claimant is contrary to

the contractual condition contained in 62(A)(a) of the GCC. The

respondent contended that pricing of any deviation to the CA is

governed by condition 62 of the GCC and as per 62(B)(a),

deviation is to be priced at applicable rate in the relevant part of

schedule (A) in which the deviation is involved. Therefore, the

question is whether the rate of this item which is pre-priced in

schedule (A) part IX under item 60 can be made applicable to

schedule A part I in pricing deviation. Condition 62(B)(a) of the

GCC says that the rate to be applied in such cases is the rate

mentioned in the relevant portion of the schedule in which the

deviation is involved. Here the deviation made is in schedule (A)

part I, whereas the pre-priced rate inserted by the respondent is in

schedule (A) part XI. Therefore, the respondent contended that the

rates applicable to schedule (A) part XI cannot be made applicable

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to the works or deviations made in the other schedules, which in

this case is schedule (A) part I. It was pointed out on behalf of the

appellant that the fact that the deviation sought by the

respondent/UOI for cladding with local granite stone with 150 mm.

thickness, has been done by the claimant is not in dispute. The only

dispute is whether the rates are to be given as provided in condition

62(A)(a) or 62(B)(a) of the GCC.

33.The finding of the Arbitrator on this claim is available at

paragraph 62.11 of the award. The Arbitrator after hearing the

parties and examining the records, accepted the case of the

claimant that, it is the rate as provided under condition 62(A)(a) of

the GCC that is to be awarded and proceeded to do so. The finding

of the court below on this claim is found at paragraph 25 which

reads thus -

“25. Claim No.7 relates to use of local granite stone cladding in lieu of

Sadarahally stone cladding. The said change was effected as per Deviation

Order No.65. It is clear that the deviation order was signed and admitted by

respondent, so the applicable rate in D.O.No.65 applicable to both and

condition 62 of GCC IAFW 2249 also covered this point. Therefore the

granting of the said claim by the arbitrator is in conflict with the terms of the

respective contract which is liable to be interfered and do so.”

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34.According to the appellant, the court below has taken

up a case which neither side has; that the finding is also a

reproduction of the contentions of the respondent relating to claim

no.7 in their application under Section 34; that the finding is

without actually understanding the issue involved and without

expressing any opinion on the actual issue involved and that no

reason(s) is discernible from the conclusion of the court below

which prompted it to set aside the award. This argument advanced

is also justified as it appears that the court below has not

comprehended the actual issue involved between the parties

relating to this claim. As noticed earlier, the actual dispute is

whether the rates provided under condition 62(A)(a) is applicable

or whether it is the rates provided under condition 62(B)(a) that is

applicable. This has not been addressed by the court below. On the

other hand, this point has been squarely dealt with by the

Arbitrator. In setting aside the award under this claim, not only has

the court not dealt with the actual dispute involved but has also set

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aside the award on the said claim on totally irrelevant grounds,

which both sides did not canvass. Hence, the finding of the court

below on claim no.7 is also not sustainable.

35.Now, coming to claim no.1 which is described as

‘additional cost of anchor fasteners towards difference in cost of

supply of M/s. CANCO make anchor fasteners in lieu of

M/s.HILTI’. An amount of Rs.4,03,550/- claimed and awarded by

the Arbitrator has been set aside by the court below. According to

the claimant, the CA provides for fixing of jalli with Rawal plugs

or fasteners. But when the works started, the GE insisted on using

HILTI heavy duty fasteners in the place of Rawal plugs. On

enquiry with M/s.HILTI the claimant was told that HILTI anchor

bolts are no longer being manufactured and that it would take

about 6 to 7 weeks for the manufacturer to make an alternate

model. Therefore, after proper enquiries and as CANCO make

stainless steel anchor bolts as fasteners are equivalent to HILTI, the

same was submitted for the approval of the GE. The GE

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approved the same also. CANCO anchors are in no way inferior to

HILTI and they also satisfied the GE's technical requirements. But

the rates were revised by the GE for the CANCO fasteners used

and a lower rate awarded. As per the amendment drawing, it was

provided that anchor fasteners of HILTI or its equivalent shall be

used for fixing of stone jallis and therefore the respondent could

not have revised the rates and granted a lower rate against the

terms of the agreement. The respondent/UoI contended that

initially the claimant had submitted a sample anchor bolt. The

same was not approved as it was not as per the contract provisions.

Therefore, he was asked to submit a sample as per the CA.

Thereafter, without getting the approval of the GE, the claimant

started using an anchor, to which the respondent objected. The

claimant then informed that HILTI anchor fasteners have become

obsolete and hence he suggested CANCO fasteners. As per

condition 7 of the GCC, any change from the original contract

specifications is a deviation and therefore when approval of

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CANCO fasteners was given by the GE, it was made clear that it

will be subject to the contract conditions. It was also contended

that though CANCO bolts are inferior to HILTI bolts, they serve

the purpose of holding the cladding in place and hence it was

approved subject to the contract conditions. The revised rate for

deviations is based on quotations obtained and hence it was

contended that the claimant is not entitled to the amount claimed

by him.

36.The Arbitrator after hearing both sides, examining the

records and after visiting the site, proceeded to give his findings

which are at paragraph 56.5 of the award. The Arbitrator also

examined the sample of fastener submitted by the claimant during

the hearing. The Arbitrator found that no technical appraisal had

been provided by the Consultant of the respondent and that there

were misrepresentations and incomplete details in the contract. The

contract, according to the Arbitrator, should have been precise and

based on availability of the product in the market. Further, the

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respondent also failed to technically differentiate HILTI made

fasteners from CANCO in order to justify their revision of rates by

granting lower rates for CANCO. Therefore, the Arbitrator

concluded that CANCO cannot be said to be not equivalent to

HILTI and awarded the amount claimed by the claimant.

37.The court below set aside the award under claim no.1

by holding thus –

“20. In P.R.Shah, Shanu and Stock Brocker (P) Ltd. v. M/s.B.H.H. Securities (P)

Ltd. reported in AIR 2012 SC 1866 the apex court held that An arbitral tribunal

cannot of course make use of their personal knowledge of the facts of the

dispute, which is not a part of the record, to decide the dispute. There is no

details of his visit or notice to the petitioner or entered it into any record by the

Arbitrator herein. Therefore the findings based on subjective satisfaction of

facts or personal knowledge shall not be form part of conclusion of the award.

Of course there is price difference in HILTI and CANCO product and that

should be settled as per the rates of MES schedule stipulated under conditions

No.62 of GCC-IAWF 2249. In condition 62 it clearly provides under clause (G)

that an alteration of work or additions have been covered by the contractor the

rates shall be decided by GE, if it is not satisfied refer the matter to CWE within

7 days of receipt of decision of GE decision of CWE shall be final and binding.

It further provides if additional work done by the contractor, the Engineer-in-

charge shall appraise the value there of and if any dispute then the decision of

GE thereon shall be final and binding. Therefore the claim is limited by

condition No.62 and the award of the amount, against the condition No.62 of

GCC IAFW 2249, rate of MES schedule, is against the terms of contract and

against fundamental policy of Indian Law, in conflict with the contract between

parties and against morality of justice and the said claim is liable to be set aside

u/s 34 of the Act and do so.”

It was pointed out on behalf of the claimant that the conclusion of

the court below that the Arbitrator had used his personal

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knowledge in arriving at his finding on the claim is a totally

incorrect statement and a ground which neither party had raised.

The respondent never raised any grievance/objection regarding the

site visit by the Arbitrator either at the time of his visit or during

the course of arguments before the court below. The Arbitrator is a

technical expert with experience in this field and hence the reason

why the parties chose him so that he can properly assess the factual

issues by relying on his expertise and experience. It is settled that it

is permissible for technically qualified Arbitrators to use their

expertise, technical or general knowledge about a trade to decide a

matter and that the same can never be termed as personal

knowledge of the Arbitrator. According to the claimant this has

been clarified by the Apex court in P.R. Shah Shares and Stock

Brokers Pvt. Ltd. v. B.H.H. Securities Pvt.Ltd. (2012) 1

SCC 594, the very same decision relied on by the court below.

Further a reading of the award would show that the conclusions are

not based on the site visit. Moreover, the site visit was not made for

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gathering evidence but for appreciating the evidence led by the

parties, which is perfectly in order, goes the argument.

38.We think that the arguments advanced are justified. The

Arbitrator has not based his finding on claim no.1 on the basis of

the information collected/gathered from his visit to the site. We

have already referred to the grounds on which the Arbitrator

arrived at his conclusion and it is apparent and obvious that the

same is not based on his visit to the site. Moreover, there is

nothing wrong in the Arbitrator making site visits. It is only that

his personal knowledge cannot be used to decide the dispute.

Here, no personal knowledge is seen used by the Arbitrator to

arrive at his conclusions regarding claim no.1. The Arbitrator

admittedly an expert in this field, based on the materials placed

before him found that CANCO fasteners could in no way be

termed inferior to HILTI fasteners, a decision apparently taken

after analyzing the technical aspects, which ought not to have been

disturbed by the court below as it has obviously no technical

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knowhow on the matter. Hence, the finding of the court below on

this count is also liable to be set aside.

39.Claim no.4 is described as 'cost for provision of

retaining walls (RCC) in front of PT shed'. An amount of

Rs.9,84,075.23/- claimed and allowed by the Arbitrator has been

set aside by the court below. As per the original drawing forming

part of the CA, the roof of some of the buildings to be constructed

were to be pyramidal shape over space frame. But later it was

changed to hipped roofs. As per the stipulation in the CA, the pipe

grid system connected with Nodes is space frame system and the

pipe grid system connected with welding is not space frame

system. According to the claimant, this was not part of the lump

sum contract. However, the respondent in spite of his objection

termed the same as part of the lump sum contract. The claimant did

not agree to the same and hence signed the DO under protest. The

respondent/UoI contended that the lump sum cost of building does

not include the cost of space frame items listed under schedule (A)

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part XII. These items related to space frame are to be measured and

paid under schedule (A) part XII. The pipe systems connected with

Nodes are space frame system and those connected with welding

are not part of the space frame system and hence the works done

by the claimant shall not be measured and paid under schedule (A)

part XII.

40.The Arbitrator after considering the oral and

documentary evidence and also inspecting the work site, gave his

finding which is at paragraph 59.17 of the award. The Arbitrator

found that the respondent had not mentioned or indicated clearly

the details of the roofing and the structure in the CA or in the

drawings. He found that the structure pertaining to the roof was

joined at the Nodes. He held the claim to be sustainable as he

found that there was no clear stipulation or mention of members or

that the roofing was intended to be included in the lump sum of the

building by the respondent. The contract also did not stipulate

which part of the roof had been included in the lump sum. Hence,

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he allowed the claim. This was also set aside by the court below

by finding thus -

“23. Claim No.4 relates to provision of hipped roof in lieu of Pyramidal roof

in its space frame building. As per note 18 serial Page No.20(R) of CA item

No.1 to 4 schedule A Part-I the lump sum cost of building do not include the

cost of 'space frame' items listed under schedule A. part of XII. According to

the arbitrator the petitioner never indicated the details of roofing in the

contract and the contract do not stipulate which part of the roof is including in

Lump sum and the arbitrator granted claim No.4 in toto. As per Note 18 (Para

20 of CA) all items shown on drawing shall be deemed to be included in

respective cost of building unless specifically excluded. In note 18(Page

20(R)) it clearly states that those items which are related to space frame only

are to be measured and paid under schedule 'A' part XII. The pipe grid system

connected with NODES are 'space frame system.' The pipe system connected

with welding etc are not part of 'space frame system' and under no

circumstances quantities of these items shall be measured and paid under

schedule A part XII. The arbitrator also gathered information at the time of his

visit to the site without maintaining any record. Therefore the conclusion that

absence of exact mention of members and roofing intended to be included in

lump sum of building is against the terms of contract and liable to be set aside

under section 34 of the Act and do so.”

41.According to the appellant, the findings of the

Arbitrator are based on technical details which ought not to have

been disturbed by the court below, who is not an expert in this area.

Here again, we find that the court below has erred in concluding

that the Arbitrator has based his finding on personal knowledge

which is obviously not the case. Hence this finding is also liable to

be set aside.

42.Now coming to claim no.17 which is described as

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'additional amount due for pricing of works at quoted rates than

rates fixed in amendment no.1 and for not considering certain

items of payment'. An amount of Rs.88,17,476/- claimed was

allowed by the Arbitrator. According to the respondent/UoI, this is

an excepted matter because as per condition 65 of the GCC, the

final bills shall be submitted within three months of physical

completion of the works to the satisfaction of the Engineer-in-

charge. It also says that no further claims shall be made by the

contractor after the submission of final bills and that the said

claims shall be deemed to have been waived and extinguished.

Amendment no.1 to the CA, according to the respondent, was

signed by both parties and therefore the contract stood amended.

No claim was made before submission of the final bill and

therefore all such claims must be deemed to have been

extinguished and waived. According to the claimant, the final bill

was signed under protest; that the respondent did not act in

accordance with condition 66 of GCC by failing to make payment

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of the admitted amounts of the final bill within the period of six

months stipulated in the condition and that there was undue

influence and coercion due to which he was forced to sign

amendment no.1. The fact that the claimant had objection to

amendment no.1 was also conveyed at the earliest to the

respondent.

43.The Arbitrator after a detailed discussion found the case

of undue influence and coercion in execution of amendment no.1

put forward by the claimant to be probable and true. About 14

instances have been cited by the Arbitrator, which would show or

indicate or justify the allegation of undue influence, and one

among them shows the failure of the respondent to release even

admitted amounts due to the claimant. It was also found that the

claimant was all along objecting to the amendment made and that

the amendment made was not on mutual consent. The Arbitrator

found there was no justification or reasonable contractual necessity

for the respondent to have amended the contract by way of

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amendment no.1. After perusal of the facts and circumstances in

the case, the Arbitrator was convinced that the respondent had

erred in mentioning the correct quantities of earth work involved in

schedule (A) part IX and when they noticed the error, they made all

efforts to cover it up by various methods. When they realised their

mistake, some part of the work had already been executed and

therefore the attempt of the respondent was to cover up the same

by way of amendment in the contract. The Arbitrator found that

there was absence of any communication between the parties so as

to conclude that the amendment had been made through mutual

consent. There was no offer or acceptance for concluding the new

contract in supplement to the main contract. The intention and act

on the part of the GE and the respondent in delaying and not

paying a huge amount of about Rs.1 Crore, according to the

Arbitrator, was certainly indicative of the undue influence

exercised by the respondent, a stronger party in the contract. The

Arbitrator noticed that the respondent was finding flimsy reasons

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for not honoring the bills on time. In paragraph 72.11, as stated

earlier, about 14 instances have been cited by the Arbitrator which

would substantiate the claim of undue influence and coercion on

the part of the respondent. In item no.2 in the table given in the

said paragraph, the Arbitrator has noticed that one of the RARs

was held up and returned for want of signature of the claimant,

though the representatives of the claimant were readily available at

the site. It was also found that there was no rhyme or reason for the

claimant to voluntarily agree to reduce the rates drastically from

the quoted rates through any amendment when the contract

provided for variation as deviation. The error/mistake committed

by the respondent to assess the correct and sufficient quantities in

the contract cannot be foisted upon the claimant by the respondent

being a stronger party in the contract. It was found that the

claimant was able to establish that though he had protested to the

amendment as soon as it was made, the same had been foisted on

him. On examination of the disputed amendment no.1, the

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Arbitrator found that it was apparent that not even variations

admissible in the contract at contract rates were given its due

importance and that the respondent had framed an amendment with

varying quantities and applying rates on quantities unilaterally

decided by them. It was also found that if the claimant had not

agreed to the terms unilaterally put forward by the respondent,

there was also the possibility of the respondent getting huge

quantity of earth work done through other agencies at lesser rates.

The rate fixed in the amendment was not based on any realistic

analysis of the rates except that it was the rate quoted by the

second lowest tender, which rates the Arbitrator found did not have

any bearing or any connection with the contract. The amendment

thus was found to be made in the absence of free consent which

was one of the essential factors for entering into a contract. The

Arbitrator concluded that the variation though allowable in the

contract was ignored in the amendment; that there was no offer and

acceptance; that huge payments were delayed thus putting the

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claimant under pressure and undue influence; the basis for arriving

at the rates for the works done as per the amendment was not in

any way justifiable; that the respondent had not taken any action to

revise the amendment when it was objected to by the claimant

except contending that the same was signed voluntarily by the

claimant and that there was no record to show that the claimant

was heard before the amendment was finalized indicating the

arbitrary and unreasonable procedure adopted by the respondent.

Hence, the Arbitrator concluded that these aspects clearly showed

arbitrariness and undue influence exercised by the respondent, the

stronger party in the contract. Hence, an amount Rs.88,17,476/-

was awarded to the claimant.

44.The court below set aside this finding of the Arbitrator.

The finding is at paragraphs 9 to 13 of the impugned order. We are

not quoting the entire portion as it is a comparatively long

discussion in the order. The sum and substance of the finding of

the court below is that there was no undue influence exercised by

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the respondent as the relationship was purely contractual and not

fiduciary in nature; that several amendments and deviations had

been affected, all of which are admitted by the claimant except

amendment no.1 and so the same shocks the conscience of the

court; the fact that the claimant put his signature in amendment

no.1 implies offer and acceptance; that the burden of proving

undue influence has not been discharged as per the provisions of

the Evidence Act ; that the claim of undue influence has been

accepted by the Arbitrator without any evidence; that the claimant

signed the amendment with the oblique motive of filing a claim

petition and that there was no pressure on the claimant in executing

the work as it was an agreement mutually agreed to between the

parties. According to the court below, the conclusion of the

Arbitrator that the delay caused by the respondent in honoring

huge admitted payments was indicative of the undue influence, is

against morality and justice because the claimant is entitled to get

his payments if any, with interest if there was any delay illegally

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caused by the respondent. The court below further held that there

was no pressure on the claimant in doing the work except the

contractual obligation which had been mutually agreed to.

Therefore, according to the court below the conclusion of the

Arbitrator that one amendment alone was executed under undue

influence is not in conformity with morality and justice and hence

it shocked the conscience of the court. The court below expressed

its concern and anguish in public money going into the hands of

undeserved persons. Hence the court below proceeded to conclude

that in the absence of claim no.17 in the final bill, the dispute is not

arbitrable as condition no.65 of the GCC has not been satisfied.

45.This finding again will have to go as the Arbitrator on

facts found that the claimant had raised this issue before the final

bill had been submitted and so the dispute is arbitrable and not an

excepted matter as contended by the respondent. He also found

that the claimant had to agree to the amendment due to undue

influence and coercion and has given a detailed description

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supported by cogent reasons for arriving at this conclusion. Now,

even if the opinion and conclusion of the Arbitrator is wrong or a

different opinion/view is possible, that alone is not a ground for the

court to interfere in its jurisdiction under Section 34 as it is not

sitting in appeal. Merely because the claimant had affixed his

signature to the amendment, would not bar him from raising the

plea of undue influence or coercion if he had raised it at the earliest

possible opportunity and is able to bring in factors or

circumstances establishing the same. The finding of the court

below relating to undue influence seems to have been made

without understanding the ground realities. If the RARs or part

bills are not cleared in time, it would certainly be putting pressure

on the claimant. These bills have to be honored in time so as to

enable the claimant to maintain his liquidity. Otherwise, he would

inevitably find it difficult to carry out the works as the expenditure

involved ran into crores of rupees. Further, Section 19(1) of the

Act says that the Arbitral Tribunal is not bound by the

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Code of Civil Procedure or the Indian Evidence Act. Therefore, the

court below clearly erred in holding that the claimant had failed to

establish undue influence or coercion as per the provisions of the

Evidence Act and hence the said finding is also liable to be set

aside.

46.Now, coming to claim no.18 which is described as

‘additional cost towards space frame under schedule A part XII’.

An amount of Rs.1,52,64,424.33/- claimed was awarded by the

Arbitrator. This has also been set aside by the court below.

According to the claimant, the design of the space frame was

altered on four occasions and the last alteration brought about was

from pyramidal roof to hipped roof. However, the Quality

Assurance Plan (QAP) for the space frame work was not approved

for quite some time. It was approved only on 13.10.2006 and the

sample of materials involved in the space frame work approved on

4.12.2008. The claimant anticipating difficulties in getting a DO

prepared, star rates/revised rates made and the DO finalized, opted

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a path of least resistance so that the RAR payments would not be

delayed, informed the Chief Engineer (CE) that if the condition of

cost of solid Nodes and hollow Nodes are kept at par, the same

would be acceptable to him. However, the claimant was not

agreeable to the rates fixed by the GE which had been fixed

without taking into account the condition put forward by him, i.e.,

he was ready to carry out the work provided the cost of solid grade

Nodes and hollow Nodes are kept at par. Therefore, he signed the

DO on protest and also informed the GE that he is reserving his

right to go in for an adjudication of the dispute. The respondent

contended that based on the consent of the claimant, Amendment

no.3 to CA had been issued. According to the respondent the unit

of measurement mentioned in the CA is kilograms and therefore

hollow Nodes is also liable to be measured in terms of its weight

and accordingly the same was so weighed and payment made. The

respondent also took up a contention that the dispute regarding this

matter is an excepted one and hence not arbitrable. This contention

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of the respondent was countered by the claimant by filing a

rejoinder in which he contended that the hollow Nodes and solid

Nodes are entirely different in their specifications. The claimant

had agreed to rate per piece i.e., the same cost for one piece of

hollow Nodes as well as solid Nodes. The manufacture of hollow

Nodes involves different materials and highly sophisticated

machining process and so the cost of manufacture of hollow Nodes

is much higher than solid Nodes. Hollow Nodes weigh much lesser

than the solid Nodes but the expenses involved in its manufacture

is high. That is the reason why he had agreed for the deviation

provided the same rate was given for both Nodes. The claimant

also pointed out that the contention of the respondent that the issue

is not arbitrable is incorrect as he had raised the issue much before

the submission of the final bill as contemplated under condition 65

of the GCC.

47.The Arbitrator after considering all the materials before

him, found that the dispute has come up because of lack of clear

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and sufficient clarity regarding Amendment no.3. The claimant had

clearly informed the GE of his condition relating to the rates of the

Nodes. However, this was not incorporated in the amendment. The

amendment ought to have contained a clear clause regarding the

basis on which the rates would be awarded, i.e., whether it would

be rate per piece / per Node or based on their weight in kilograms.

Without specifying the same, it is unjust for the respondent to

contend that rates would be given based on kilograms because

hollow Nodes would be much lighter than solid Nodes. The cost of

manufacture of hollow Nods is higher and so if rates are given on

the basis of their weight in kilograms and not per piece as agreed to

by the claimant, the same would result in great loss to the claimant.

It was also found that the dispute had been raised by the claimant

before the finalization of the final bill and hence the dispute is not

an excepted matter as contended by the respondent and so found

the dispute to be arbitrable and proceeded to award a sum of

Rs.1,52,64,424/-.

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48.The court below set aside the award under claim no.18,

the finding of which reads thus -

“14. Claim No.18 also challenged by the petitioner at the preliminary

stage since it covered as per amendment No.3, dated 30.12.2006. The

said amendment was admitted by the respondent and arbitrator but

according to the arbitrator it was incomplete since the rate not specified

therein. The said work is related to part – XII – space frame and claim of

additional towards space frame an amount of Rs.1,52,64,424.33/-. The

respondent has agreed to change materials of nodes and props at par with

the costs existing in CA. In the amendment it clearly stated as third

clause that, the above changes had taken place to suit they decide

parameters of the designee provided by specialists agencies as per C.A.,

as projected by the contractor and approved by the competent authority.

It concluded to facilitate the execution space from work by the specialist

firm engaged by the contractor (respondent). The amendments was based

on mutual agreement and the arbitrator overlook that aspect and granted

an amount for the entire roofs including Pipe grid based on that the

amendment was incomplete. The said act of the arbitrator is not in

accordance with the agreement of parties since the said matter concluded

in amendment No.3 and the same is not arbitrable and it ought to have

been included in the final bill as per condition 65of IAFW 2249.”

“15. The respondent has not even denied the execution of this

amendment No.3, through which change of design effected. But the

arbitrator has noted that after the amendment the respondent has signed it

under protest. There is no need of executing amendment or contract with

protest. If the respondent not agreeing with the amendment he could

have avoid it. As per the original contract the solid nodes included and as

per amendment it changed into hollow nodes and fixed rates based

Kilogram. The arbitrator granted the claim of respondent based on same

price or solid nodes since the difference of rate is not mentioned in

Amendment No.3. As per amendment No.3 third clause it clearly stated

that the amount should be as per with the approval of the Competent

Authority though the design supplied by the specialized agency through

the contractor. According to the arbitrator since the rate of hollow nodes

not mentioned in amendment No.3, the amendment is to be considered as

incomplete. As per condition No.62 Valuation of Deviation mentioned in

detail based on rate applicable in the MES schedule and it should be

adopted if there any difference in price. Without considering the

contractual rate, as mentioned in condition 62 of GCCIAFW 2249 the

arbitrator allowed the entire claim put forward by the respondent.

Ofcourse hollow nodes value is less than solid nodes always. Therefore

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granting of price equal to solid nodes is unreasonable that shocks the

conscience of court and patently illegal. In the amendment No.3 itself in

first and second clause it clearly mentioned that amended accordingly

without any extra cost to the department (petitioner). That itself shows

that it shall not cause any extra cost than the real cost and not higher than

fixed earlier. The granting of said claim No.18 is also against the terms

of the respective contract and patently illegal. The said claim ought to

have been incorporated in the final bill but not included and it waived or

terminated under condition No.65 of GCC IAFW 2249 and not

arbitrable. Therefore the said claim, claim No.18 is not arbitrable and

will not come under the purview of arbitration.”

49.It was argued on behalf of the appellant that the finding

of the court below is an unreasoned departure from the view of the

Arbitrator. Here again, the court has interfered in a matter in which

it has no expertise or knowhow, whereas the Arbitrator an expert in

this field is in a much better position to adjudicate the same. This

argument advanced on behalf of the appellant is also justified. The

court below is seen to have observed in its discussion - “…. Of

course, hollow nodes value is less than solid nodes always. …”

The basis on which this finding has been made is not known and is

unclear. Probably as pointed out on behalf of the appellant, a

commonsensical approach has been taken by the court below to

conclude so. Here is a case where the claimant has specifically

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contended that the cost of manufacture of hollow Nodes is more

compared to solid nodes. This has not been disputed by the

respondent and the said claim has not been rejected by the

Arbitrator also. This point is not seen addressed and the court

below without properly comprehending the situation seems to have

arrived at its conclusion based on a common man’s understanding

of the same, which appears to be apparently incorrect. The findings

of the Arbitrator supported by cogent reasons ought not to have

been interfered with by the court below. Further, it was after

examining the communications between the parties and other

materials, the Arbitrator had concluded that the dispute had been

raised by the claimant before the finalization of the final bill as

contemplated under condition 65 of the GCC. These materials have

also not been referred to and without referring to the same, the

court below concluded that the claim is not arbitrable. The findings

of the Arbitrator based on facts and supported by reasons is not

liable to be interfered with hence this finding of the court below is

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also liable to be set aside.

50.Finally, coming to claim no.31 which deals with

'arbitration cost'. An amount of Rs.3 Crores was claimed. The

Arbitrator awarded Rs.5 lakhs. The court below reduced it to

Rs.28,402/-. Paragraph 32 of the impugned order reads thus -

“32. Claim No.31 relating to cost of arbitration, awarded an amount of `5

lakhs out of claim of `30,00,000/-. The contention is that without any basis

it granted. Since the respondent preferred arbitration he has to bear the

expense and the amount of cost is tenable. As per award the arbitrator

awarded total amount of `3,93,24,065/- to the respondent and cost of

`5,00,000/- awarded by rejecting the claim of `30,00,000/- which comes

1.27% of total award amount. Arbitrator exercised his discretion and there

is no ground to interfere in it. Therefore the respondent is entitled to get

1.27% of the amount fixed by this court, `22,36,380/- (Total of claim

Nos.2,3,10, 11, 14, 15, 20 and 27) which comes `28,402/- and this claim

found accordingly.”

51.The finding of the Arbitrator regarding costs and the

rate has not been disturbed. The reduction came about only

because the aforesaid claims have been set aside. This finding will

also have to necessarily go in the light of our above made

conclusions.

52.Before concluding, we place on record our appreciation

for the assistance given by Adv.Anil Sebastian Pulickel, the learned

counsel for the appellant who was meticulous in his arguments and

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had painstakingly taken us through all the relevant portions of the

award as well as the corresponding portions in the impugned

order.

For the aforesaid reasons, the appellant succeeds. The

appeal is allowed and the award of the Arbitrator is restored.

All pending interlocutory applications, if any, shall

stand disposed of.

Sd/-

P.B.SURESH KUMAR , JUDGE

Sd/-

C.S.SUDHA, JUDGE

STK/ami

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