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2008 (8) TMI 970 - SC - Indian LawsValidity of Arbitral Award - work relating to development of land - claim of extra rate of ₹ 30/- per cubic meter over and above the rate agreed to in the Agreement for extra cartage involved in bringing the stone aggregate - Binding effects of Agreement on parties in the absence of specific clause - Whether the Arbitrator as well as the Division Bench of the High Court were justified in granting the Award or the appellant-DDA has made out a case for setting aside the Award in respect of those claims with reference to the terms of the Agreement duly executed by both parties? Stand of the claimant that apart from the Agreement dated 18.4.1990, both parties were agreed to abide by the conditions mentioned in the letter dated 10.4.1990 of the claimant, M/s R.S. Sharma Co. to the Chief Engineer (WZ), DDA, Vikas Minar, New Delhi. HELD THAT - As rightly pointed out by the ld ASG appearing for DDA, there is no specific clause in the terms of agreement for extra cartage for bringing stones from elsewhere. In this regard, the appellant heavily relied on clause 3.16 of the Agreement. The perusal of the Award of the Arbitrator as well as the judgment of the Division Bench clearly shows that they did not advert to the above clause 3.16. It is relevant to point out that the extra cartage has been awarded by the Arbitrator without adverting to clause 3.16 of the Agreement, hence, the learned single Judge was wholly justified in partially setting aside the Award in respect of the claims with respect to the extra cartage. We also perused the pleadings and evidence placed on record pertaining to Claim Nos. 1-3 and additional Claim Nos. 1-3. As rightly observed by the learned single Judge, there was no material on record to substantiate the case of the claimant, viz., DDA had insisted upon the claimant for using the stone aggregates brought from Nooh in Haryana. In those circumstances and of the fact that the terms and conditions of the Agreement are binding on both the parties, in the absence of specific clause with regard to payment of extra cartage and in view of clause 3.16, the respondent- claimant cannot claim extra cartage @ ₹ 30/- per cubic meter on the ground of extra lead involved in bringing the stone aggregates from Nooh in Haryana. The Division Bench like the Arbitrator proceeded on the sole basis that DDA had compelled the claimant-Company from bringing the stone aggregates from Nooh in Haryana and committed an error in affirming the erroneous conclusion arrived at by the Arbitrator insofar as the additional claims are concerned. The award is completely silent on the relevant clause viz. clause 3.16 of the Agreement which makes it clear that the contractor is wholly responsible for all the extra leads. In fact, the Arbitrator has given no reason whatsoever so far as the rate claimed for the extra lead by the claimant and has verbatim accepted the claim without giving any justification for the same. As rightly pointed out by learned counsel for the appellant, there is nothing on record to show that the Department had insisted upon bringing the stone aggregate only from Nooh. Hence, the contractor will not be entitled to the increased rates for extra lead. Without a specific request or additional clause, the Arbitrator in respect of Claim Nos. 1-3 and additional Claim Nos. 1-3 proceeded on the wrong assumption that the Department had insisted upon the use of stone aggregate to be brought from Nooh, hence, the learned single Judge is perfectly right in holding that there is an error apparent on the face of the Award and the Award is liable to be set aside. As stated earlier, the Arbitrator has ignored clause 3.16 of the contract and made a departure from the contract while granting relief in respect of Claim Nos. 1-3 and additional Claim Nos. 1-3 and the same, in our view, cannot be sustained. Therefore, we allow the appeal of DDA and set aside the judgment and order passed by the Division Bench and restore the order of the ld single Judge insofar as Claim Nos. 1-3 and additional Claim Nos. 1-3 are concerned.
Issues Involved:
1. Validity of the Arbitrator's Award regarding extra cartage claims. 2. Interpretation and application of clause 3.16 of the Agreement. 3. Grounds for setting aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. Detailed Analysis: 1. Validity of the Arbitrator's Award regarding extra cartage claims: The primary dispute revolved around the extra cartage claims made by the respondent-Company for transporting stone aggregates from Nooh, Haryana, instead of Delhi. The Arbitrator awarded the respondent-Company an extra rate of Rs. 30 per cubic meter for this additional lead. The learned single Judge of the Delhi High Court set aside the Arbitrator's Award concerning these claims, citing a lack of material evidence to support the claims. However, the Division Bench of the High Court reversed this decision, reinstating the Arbitrator's Award and granting interest at 12% p.a. from the date of the decree until payment. 2. Interpretation and application of clause 3.16 of the Agreement: Clause 3.16 of the Agreement explicitly states that the contractor is responsible for all extra leads over and above the rate of payment specified in the Agreement, and the closure of a particular quarry does not entitle the contractor to any revision in rates. The appellant-DDA argued that the Arbitrator failed to consider this clause, which prohibits extra cartage over the agreed rates. The Supreme Court found that both the Arbitrator and the Division Bench did not address clause 3.16, which is crucial to the dispute. The learned single Judge's decision to set aside the Award on these claims was deemed justified as the Arbitrator's Award was contrary to the terms of the Agreement. 3. Grounds for setting aside an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996: Section 34(2) of the Act specifies the grounds for setting aside an arbitral award, including if the award is contrary to substantive provisions of law, the terms of the contract, or is patently illegal. The Supreme Court reiterated the principles from previous judgments, emphasizing that an award could be set aside if it is contrary to the fundamental policy of Indian law, the interest of India, justice or morality, or if it is patently illegal. The Court concluded that the Arbitrator's Award, which ignored clause 3.16 and was based on an erroneous premise, constituted an error apparent on the face of the record and was contrary to the terms of the Agreement. Conclusion: The Supreme Court allowed the appeal by the DDA, setting aside the Division Bench's judgment and restoring the order of the learned single Judge regarding Claim Nos. 1-3 and additional Claim Nos. 1-3. The Court held that the Arbitrator's Award was contrary to the terms of the Agreement and lacked material evidence to support the extra cartage claims. There was no order as to costs.
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