1984 (3) TMI 425 - SC - Indian Laws

Summary

Issues Involved:
1. Jurisdiction of the Arbitrator.
2. Compensation for Increase in Cost.
3. Arbitration Clause Interpretation.
4. Validity of the Arbitrator's Award.

Summary:

1. Jurisdiction of the Arbitrator:
The primary issue was whether the claim for compensation due to an increase in the cost of imported pile driving equipment and technical know-how fees fell within the purview of the arbitration clause (Clause 40) of the General Conditions of Contract. The arbitrator was specifically asked to decide this jurisdictional question. The Supreme Court held that a specific question of law touching upon the jurisdiction of the arbitrator was referred to the arbitrator, and therefore, the arbitrator's decision on this matter is binding on the parties. The Court emphasized that when parties refer a specific question of law to an arbitrator, the decision is final and cannot be set aside merely because the court would have arrived at a different conclusion.

2. Compensation for Increase in Cost:
The appellant claimed compensation due to an increase in the cost of imported pile driving equipment and technical know-how fees, which was initially estimated at Rs. 2 crores. The arbitrator awarded Rs. 99 lakhs to the appellant with interest. The Supreme Court found that the entire contract was based on the understanding that the contractor would invest Rs. 2 crores in foreign exchange for importing the necessary equipment and know-how. The Court noted that the respondent had initially agreed to this investment and the claim for compensation was justified as the actual expenditure exceeded the estimated amount.

3. Arbitration Clause Interpretation:
Clause 40 of the General Conditions of Contract was interpreted to determine whether the claim for compensation fell within its scope. The clause was found to be of the widest amplitude, covering any claim arising out of or relating to the contract or the execution of the works. The Supreme Court held that the claim made by the contractor was covered by the arbitration clause as it was related to the contract and the execution of the works.

4. Validity of the Arbitrator's Award:
The respondent challenged the award on the grounds that it was insufficiently stamped and that the arbitrator exceeded his jurisdiction. The Supreme Court upheld the award, noting that the arbitrator had the jurisdiction to decide the specific question of law referred to him and that the award was sufficiently stamped. The Court restored the judgment of the Subordinate Judge, Ernakulam, which had made the award a rule of the court, and set aside the High Court's decision.

Conclusion:
The Supreme Court allowed the appeal, set aside the High Court's judgment, and restored the Subordinate Judge's order, making the arbitrator's award a rule of the court. The Court held that the arbitrator's decision on the specific question of law referred to him was binding and that the claim for compensation was covered by the arbitration clause.