2008 (3) TMI 727 - SC - Indian Laws

Summary

Issues Involved:
1. Entitlement to further claims post-acceptance of the final bill.
2. Legality of the interest awarded from the date of the decree.
3. Justification for damages due to late payment of bills.
4. Validity of claims for extra work done.
5. Legitimacy of claims for losses due to prolongation of work and material escalation.
6. Arbitrator's jurisdiction and adherence to the contract terms.
7. Misconduct and errors in the arbitration process.

Issue-wise Detailed Analysis:

1. Entitlement to Further Claims Post-Acceptance of the Final Bill:
The Court found that merely accepting the final bill did not preclude the respondent from raising further claims. It was noted that there was no declaration from the respondent stating they would not raise any further claims upon accepting the final bill. Therefore, the respondent was not estopped from making additional claims.

2. Legality of the Interest Awarded from the Date of the Decree:
The Court agreed with the appellant that the High Court erred in granting interest from the date of the decree under Section 29 of the Arbitration Act. The Subordinate Judge had not granted such interest, and it was not a clerical or arithmetical mistake that could be corrected under Section 152 of the Code of Civil Procedure. The respondent's remedy was to either appeal or file a review petition, not to seek correction under Section 152.

3. Justification for Damages Due to Late Payment of Bills:
The arbitrator found an inordinate delay in the payment of the 10th R/A bill, which was paid a year after the work's completion. Damages were awarded at 12% on the delayed amount for 343 days. The Court upheld this finding as it was based on factual determination by the arbitrator.

4. Validity of Claims for Extra Work Done:
The arbitrator awarded a sum for extra work done by the respondent. However, the Court noted that the arbitrator failed to consider specific contractual clauses that required written orders for additional work and timely submission of claims. The arbitrator's jurisdiction was confined to the contract's terms, and ignoring these terms was an error.

5. Legitimacy of Claims for Losses Due to Prolongation of Work and Material Escalation:
The Court scrutinized the claims related to losses due to work prolongation and material escalation. The appellant had provided a secured advance and essential materials, and the arbitrator should have considered the contract's provisions and relevant correspondences. The arbitrator's failure to do so was deemed an overreach of his jurisdiction.

6. Arbitrator's Jurisdiction and Adherence to the Contract Terms:
The Court emphasized that an arbitrator must operate within the contract's confines and cannot disregard its terms. The arbitrator's role is to arbitrate within the contract's terms, and any deviation or overreach constitutes a jurisdictional error. The Court cited several precedents underscoring that arbitrators cannot act beyond their contractual mandate.

7. Misconduct and Errors in the Arbitration Process:
The Court identified several instances where the arbitrator acted beyond his jurisdiction, ignored critical contractual clauses, and failed to consider relevant materials. These actions amounted to legal misconduct. The Court referenced multiple cases to highlight that such errors warrant judicial intervention.

Conclusion:
The appeals were allowed to the extent that the matter required reconsideration. The disputes related to Claim Item Nos. 3, 7, and 11 were referred to a retired Judge of the Jharkhand High Court for arbitration. The Court directed the new arbitrator to expedite the award process, considering the prolonged nature of the case. No costs were awarded.