2003 (9) TMI 539 - SC - Indian Laws

Whether the District Judge and the High Court Madras exceeded their jurisdiction in passing the impugned judgments? Whether the appellant or the first respondent had committed a breach of contract? Held that - Appeal dismissed. As the appellant failed to get that part of the award which was made by the arbitrator in favour of the first respondent set aside the basic conclusion of the High Court cannot be faulted. The Court upon setting aside the whole award could have remitted back the matter to the arbitrator in terms of section 16 of the Act or could have appointed another arbitrator but at this juncture no such order can be passed as the award in part has become final.

Issues Involved:
1. Delay in completion of the contract.
2. Termination of the contract.
3. Claims and counter-claims by the appellant and the first respondent.
4. Misconduct by the arbitrator.
5. Jurisdiction of the District Judge and High Court in setting aside the award.

Detailed Analysis:

1. Delay in Completion of the Contract:
The appellant and the first respondent entered into a contract for constructing an auditorium complex, initially set for completion on 15-3-1981. Due to an increased scope of work, the contract was amended, extending the completion date to 31-12-1982. Despite this, the appellant terminated the contract on 28-2-1983, after the due completion date. The arbitrator awarded compensation to both parties, attributing delays to both. However, the District Judge found the appellant responsible for a 1654-day delay in accepting designs, which the arbitrator did not consider, thus vitiating that part of the award.

2. Termination of the Contract:
The appellant terminated the contract after its completion date without granting further extension. The District Judge and High Court found this termination unjustified, as the contract could not be terminated post the completion date. The arbitrator's decision to award compensation to the appellant for extra expenditures to complete the work was inconsistent with his finding that the appellant was responsible for delays.

3. Claims and Counter-claims:
The first respondent claimed Rs. 23,59,534.72, while the appellant claimed Rs. 90,58,167.42. The arbitrator awarded Rs. 14,31,463 to the first respondent and Rs. 33,95,000 to the appellant. The District Judge found the awards inconsistent, as the arbitrator awarded damages to the first respondent for delays caused by the appellant but also compensated the appellant for completing the work left by the respondent, which was contradictory.

4. Misconduct by the Arbitrator:
The District Judge held that the arbitrator committed misconduct by accepting calculation sheets from the appellant on the last hearing date without prior intimation to the first respondent. The arbitrator's inconsistent findings on who caused the breach of contract and his failure to consider relevant facts or reliance on irrelevant factors constituted legal misconduct.

5. Jurisdiction of the District Judge and High Court:
The appellant argued that the District Judge and High Court exceeded their jurisdiction by setting aside the award, asserting that the award was non-speaking. However, both courts found the award inconsistent and based on misconduct by the arbitrator. The High Court upheld the District Judge's decision, emphasizing that the arbitrator's inconsistent conclusions amounted to misconduct. The appellant's failure to challenge the award in favor of the first respondent rendered the finding of breach by the appellant final, operating as res judicata.

Conclusion:
The Supreme Court upheld the decisions of the District Judge and High Court, finding no legal infirmity. The arbitrator's inconsistent findings and failure to consider relevant facts constituted legal misconduct, justifying the setting aside of the award. The appeals were dismissed, affirming the lower courts' judgments.

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