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TMI Blog2003 (10) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Respondent. JUDGMENT S.B. Sinha, J. - Questions of some importance arise for consideration in this application filed by the respondent-herein under sections 30 and 33 of the Arbitration Act, 1940 questioning an award dated 29-4-2002 passed by three learned arbitrators appointed by this Court. BACKGROUND FACTS 2. Army Welfare Housing Organization (for short AWHO ) and Sumangal Services (P.) Ltd. (for short Sumangal ) entered into an agreement for development of land and construction of a composite housing project on a turnkey basis on approximately 17.9 acres of land situate on the VIP Road, in the town of Kolkata. For the said purpose a draft agreement initially drawn up was given finality by Articles of Agreement dated 28-8-1993. Certain terms and conditions, however, had been altered therein with mutual consent. 3. The project was envisaged to be completed in three phases. Considerable progress was made in the matter of construction of work in Phase I. The plots where the said work was being carried out fell under the local administration of Gopalpur Arjunpur Gram Panchayat. The building plan for Phase I was sanctioned by the said Gram Panchayat in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elf to kindly give special consideration to our plan and approve the same at the earliest. Yours faithfully, (Raghu Nandan) Brig. (Retd.) DT DY MD For Managing Director" Such permission was granted only on 9-3-1995. 6. According to Sumangal, despite the fact that no building plan was filed or sanctioned for Phase II and Phase III but as per instruction of AWHO it proceeded with the construction of Phase II. Such an application was filed for the first time on 19-5-1995. It stands admitted that the proposed height of the towers was more than the permissible one. 7. The municipal authorities vide its letter dated 23-5-1995 directed stoppage of work in six/seven blocks where allegedly unauthorized construction was being carried out stating : "We came to learn that some 8 blocks of 5 storied buildings were approved by erstwhile panchayet before the origination of the above municipality. After the birth on 13-1-1994 as per norms of W.B.M. Act, 1993 and Calcutta Gazette, new plans if any, or construction job if any, has to be approved of by this Municipal Authority. We learnt some additional 6/7 blocks are being constructed at your VIP project for which no pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f your infrastructural development like construction of Road, Drains etc., does not arise at all at the moment . We would request you fervently to submit the panchayat recommended plan on the basis of which we will proceed further. Thanking you" [Emphasis supplied] 9. In the meantime the architect and the project engineer of AWHO met the Chairman of the Municipality and it was allegedly agreed that the work need not be stopped in the buildings for which the plans have already been approved. Sumangal, therefore, was advised not to stop the work for which plans have already been approved. ( See letter of AWHO to Sumangal dated 27-5-1995). 10. AWHO by their letters dated 25th July, 1995 and 11th August, 1995 advised Sumangal to reorganize and recommence its work by employing sufficient strength of labour and bringing the required material to site by 11th September, 1995 to ensure that the progress of the work is substantially increased. It was threatened that if suitable action is not taken in this behalf by Sumangal AWHO may be compelled to take action under clause 129( e ) of the Contract. 11. It appears that Sumangal replied thereto by its letter dated 14th August, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant District Judge, Barasat (Title Suit No. 867 of 1995) and in the High Court of Delhi (Suit No. 2442 of 1995). It is agreed to by learned counsel for the parties that those disputes and differences be referred for adjudication to an arbitrator. With consent of the parties, we refer the disputes arising out of the two suits noticed above to Shri H.R. Khanna, Former Judge of this Court, who shall enter upon the reference and make his Award within the statutory period. The learned Arbitrator shall fix his own fee and the manner of its payment. The parties shall be at liberty to file their claims/counter-claim before the Arbitrator. With the reference of the disputes and differences between the parties to the learned Arbitrator, the two suits pending at Barasat and in the Delhi High Court shall stand withdrawn from the respective courts where those are pending. Copy of this order shall be sent to the concerned courts for due compliance. The learned Arbitrator shall file the Award in this Court. It is directed that no other court shall interdict the arbitration proceedings. The appeal is disposed of accordingly. No costs." 17. Even before filing the statements of claims a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellers who had sold absolutely and for ever their plots of land vide registered sale deeds which were subsequently mutated and its land use changed from agricultural to residential by the competent authority under the West Bengal Land Reform Act in favour of the Party No. 2, but are now claiming that the Deed of Sale was in reality a document or security ? ( e )Whether or not the keys of the godown at contract site which the Party No. 1 is illegally holding in its custody be given back to Party No. 2 to utilize the stores contained therein before commencing the work. ( f )Any other relief in the circumstances of the case may also be passed/awarded." 18. The learned arbitrator, however, was not inclined to accede to the said request. Thereafter, an application was filed by AWHO before the learned Arbitrator to the effect that it may be allowed to commence and complete uninterrupted construction work as well as development of the housing project at the risk of Sumangal. Sumangal filed a reply to the said application. 19. An order was passed on the said application of AWHO by the learned arbitrator on 1-11-1997 subject to the following conditions : ( a )The question ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s has been smoothly carried out and the results of measurements have been accepted by both the parties. As the proceedings of arbitration would take considerable time before the final award is given, to expedite the execution of the remaining unfinished work, party No. 2 was allowed to commence and complete the unfinished work which was the subject-matter of the contract between the parties. In my opinion the order made on November 1, 1997 was in the interest of justice and not to let the remaining work remaining unfinished till the time of the final award. As the order was made ex debito justitiae it call for no review or modification. In any case, it has been made clear that this order would be subject to the final decision of the case and without prejudice to any of the rights of the parties. Another point made in the application of party No. 1 is that it was working as stated in the order of November 1, 1997 that 16 blocks/buildings existed at site have gone through the order dated November 1, 1997, and no where it is stated therein that 16 blocks/buildings exist at the site. I, therefore, find no ground to review/modify the order dated November 1, 1997. The application a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possession of 14.17acres of land in dispute and the property built thereon, the issue is decided in favour of AWHO and against SSPL. Issue Nos. 4 5 Since we are of the view that the sale deeds executed in favour of AWHO cannot be regarded as documents by way of security for the advance taken by SSPL from AWHO and that no charge was created on the lands in dispute, the issues are decided in favour of AWHO and against SSPL. Issue No. 6 Since we have held that the claims made by AWHO fall within the ambit of the scope of reference as laid down in the order of the Hon ble Supreme Court, the issue is decided in favour of AWHO and against SSPL. Issue Nos. 7 8 No submission was made on behalf of SSPL with regard to these issues. The issues are decided against SSPL and in favour of AWHO. Issue Nos. 9 10 Since we have found that as per the agreement between AWHO and DMA, the Architect was to provide drawings and specifications of the proposed flats and external services and it was the duty of SSPL to take follow up action in the matter of obtaining sanction from the statutory bodies and it was not the responsibility of the Architect to obtain sanction from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly the plans for Phase II were approved by the Municipality on April 23, 1997. The issue is decided accordingly. Issue No. 18 We have found that AWHO issued the working drawings for the project to SSPL and the delay in issuing some of the drawings was not very material. The issue is decided accordingly. Issue No. 19 No submissions were made by SSPL in support of this issue. The issue is accordingly decided against SSPL and in favour of AWHO. Issue Nos. 20 22 The alterations in the layout of the built up area of Phase I buildings were made by AWHO in the full knowledge of SSPL and the said alterations were not material because they were subsequently revalidated by the Municipality in sanctioning the revised plans. The issues are accordingly decided against SSPL and in favour of AWHO. Issue No. 21 There was no change in the height of the buildings in respect of Phase I inasmuch as the height of the blocks in Phase I were not above the heights as per the sanctioned plans. The heights of the blocks constructed in Phase II for which plans had not been approved were in excess of the height limitations prescribed in the building regulations. No objection Certifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14.17 acres of land located at Mauza Tignonia and Koikhali, VIP Road, 24 Parganas (North), Calcutta transferred in their favour by various Vendors/Land Owners is allowed. 4.Claim No. 2 of AWHO for cost of completion of balance work at the risk and expenses of SSPL is allowed to the extent of Rs. 6,97,00,000.00. 5.Claim No. 3 of AWHO is disallowed. 6.Claim No. 4 of AWHO is disallowed. 7.Claim No. 5 of AWHO is disallowed. 8.Claim No. 6 of AWHO is disallowed. 9.Claim No. 7 of AWHO is allowed to the extent that interest would be payable @ 12 per cent per annum on the amount of Rs. 6,97,00,000.00 awarded under Claim No. 2. Interest shall be payable from the date of the award till payment is made. 10.Claim No. 8 of AWHO regarding costs is allowed to the extent that SSPL will reimburse AWHO towards half share of the arbitrators fee, ad-ministrative expenses and the other incidental expenses for the conduct of the arbitral proceedings. Each party shall bear the costs and expenses incurred by it for prosecuting the arbitral proceedings." SUBMISSIONS 29. Mr. K.N. Bhat, the learned senior counsel appearing on behalf of Sumangal would raise the following contentions : ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although it was not a party thereto. ( viii )The finding of the arbitrator that the frustration was a self-induced one is not based on any pleadings or materials on record. In any event collusion between Sumangal and the municipal authorities was neither pleaded nor proved. ( ix )In any view of the matter the learned arbitrator committed a legal misconduct insofar as they applied a wrong principle of law as regard determination of quantum of damages. 30. In support of the aforementioned contentions, reliance has been placed by Mr. Bhat on Steel Authority of India Ltd. v. J.C. Budharaja, Government Mining Contractor [1999] 8 SCC 122 1 , Shyama Charan Agarwala Sons v. Union of India [2002] 6 SCC 201, McGregor on Damages, 16th edition, pages 1142 and 1143 and Mertens v. Home Freeholds Co. Ltd. [1921] All E.R. Rep. 372. 31. Mr. Arvind Kumar Tiwari, the learned counsel appearing on behalf of the appellant, on the other hand, would submit that as the learned arbitrator passed an interim order with the consent of the parties, Sumangal at a later stage cannot be permitted to take a different stand. In view of the interim order passed by one of the learned arbit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under : "In the premise, it is most respectfully prayed that in order to enable Party No.2 to commence early and unjustified completion of unfinished work as well as development of the housing project at the risk of the Party No. 1 permission and liberty may be granted to Party No. 2/applicant to forthwith take such steps to commence and complete the unfinished works including all such development work on 14.17 acres of land owned by Party No. 2 at VIP Road, Calcutta as may be fit and appropriate for the normal functioning of the housing project and peaceful and safe habitation of the allottees of the Party No. 2/applicant. Party No. 1, its Directors, Officers, employees, agents and/or attorneys be also directed to hand over the keys of the stores, offices, and material lying at contract site which keys the Party No. 1 is illegally holding in its custody. The materials lying at site have already been paid for by Party No. 2. Party No. 1, its directors, employees, agents and/or attorneys be directed not to interfere in any manner in the development and construction of the unfinished housing project by Party No. 2 through such agencies as Party No.2 may deem fit and proper." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grant of such a prayer which would virtually put a final seal over the disputes. We have hereto-before quoted the purported order dated 1stSeptember, 1997 which ex facie demonstrate that the arbitrator assumed jurisdiction to pass the said interim order at the behest of AWHO. Furthermore, as noticed hereinbefore, Sumangal filed a review application which was also dismissed in the manner noticed hereinbefore. The said interim order was, thus, not passed with consent of parties. If the learned arbitrator has no jurisdiction to pass an interim order, even by consent no such jurisdiction could be conferred - United Commercial Bank Ltd. v. Their Workmen AIR 1951 SC 230 and Hakam Singh v. Gammon (India) Ltd. AIR 1971 SC 740. 37. In Hiscox v. Outhwaite [1991] 2 Lloyd s Law Reports 1, it is stated : "No act of the parties can create in the courts a jurisdiction which Parliament has said shall vest, not in the courts, but exclusively in some other body. Nor again can a party submit to, so as to make effective, a jurisdiction which does not exist: which is perhaps another way of saying the same thing. The argument we are here rejecting seems to be based on a confusion bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ta Investments [(1982) 1 SCC 561 : 1982 SCC (Cri.) 283] ? (5) What is the scope of section 14 of the Act ?" 41. This Court held that a prospective investor like the respondent therein is not a consumer. The question of the appellant-company trading in shares does not arise and in that view of the matter the Consumer Disputes Redressal Forum has no jurisdiction whatsoever to pass an order of interim injunction. 42. Having regard to section 14 of the Consumer Protection Act, it was held: "44. A careful reading of the above discloses that there is no power under the Act to grant any interim relief of (sic or) even an ad interim relief. Only a final relief could be granted. If the jurisdiction of the Forum to grant relief is confined to the four clauses mentioned under section 14, it passes our comprehension as to how an interim injunction could ever be granted disregarding even the balance of convenience." 43. In absence of an agreement to the contrary, in terms of the provisions of Arbitration Act, 1940 an arbitrator can pass only an interim award or a final award. Such awards are enforceable in law. The award of an arbitrator whether interim or final are capable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... licability cannot arise. 4. So far as Court s inherent jurisdiction under section 151, C.P.C. is concerned, I do not think that on the facts and circumstances of this case inherent jurisdiction can be exercised to stay the pending application in view of the fact that the City civil court is incompetent to decide the issues pending before me in the application under section 33 of the Act." (p. 283) 48. In Debendra Nath Singha v. Dwijendra Nath Singha AIR 1970 Cal. 255, the law is stated in the following terms : ". . . On a proper construction of section 41 of the Arbitration Act and of section 41( b ) in particular, I am of the opinion, that the Court has the power and jurisdiction to appoint a receiver or to make any order of interim injunction or to make orders in respect of other matters set out in the Second Schedule in appropriate cases for the purpose of, and in relation to arbitration proceedings; but this power and jurisdiction of the Court cannot be exercised, if the exercise of any such power would prejudice any power which might be vested in an arbitrator or Umpire for making orders with respect to any of such matters. I am further of the opinion that in view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... umar Mehta v. Gobind Ram Bohra [1990] 1 SCC 193 and Smt. Kanak v. U.P. Avas Evam Vikas Parishad 2003 (7) SCALE 157. Whether the award is vitiated as general conditions of contract had not been complied with ? Before the learned arbitrators a question was raised as regard applicability of clauses 129( e ) and 130 of the general conditions of contract which read as follows : "129. Determination. The Organization may, without prejudice to any other right or remedy which shall have accrued or shall accrue thereafter to the Organization, cancel the contract in part or whole in any of the following cases: If Contractor : ( a )to ( d )****** ( e )In the opinion of the Organisation/Architect at any time whether before or after the date or extended date for completion makes defaults in proceeding with the work with due diligence and continues in that state after reasonable notice from the Architect and or Organisation, or 130. Whenever the Organisation exercises his authority to cancel the contract under clause 129, he may complete the works by any means at the contractor s risk and expense provided always that in event of cost of completion after alternative ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of clause 130 of the agreement would amount to a legal misconduct. Having regard to the facts and circumstances of the case, as would be discussed in details hereinafter. It was incumbent on the part of the Arbitrators to apply "due diligence" clause contained in clause 129( e ), more cautiously. They were further required to consider as to whether "due diligence" clause be applied where the alleged violation of contract was only in relation to a small part thereof. The learned arbitrators were, in law, bound to consider the relevant provisions of the contract and in particular those which deal with the rights and liabilities of the parties. 53. This aspect of the matter has not been taken into consideration by the learned arbitrators while making the award. Thus, they failed to take into consideration a relevant fact. 54. In Steel Authority of India Ltd. s case ( supra ), this Court categorically stated the law thus : ". . . It was not open to the arbitrator to ignore the said conditions which are binding on the contracting parties. By ignoring the same, he has acted beyond the jurisdiction conferred upon him. It is settled law that the arbitrator derives the author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o whether the claim of the contractor is de hors the terms or not was a matter which fell for consideration before the arbitrator. He was bound to consider the same. The jurisdiction of the arbitrator in such a matter must be held to be confined to the four-corners of the contract. He could not have ignored an important clause in the agreement; although it may be open to the arbitrator to arrive at a finding on the materials on records that the claimant s claim for additional work was otherwise justified." 57. As regard the duty of the arbitrator to take into consideration the relevant provisions contained in the agreement, it was observed : "So far as these items are concerned, in our opinion, the learned sole arbitrator should have taken into consideration the relevant provisions contained in the agreement as also the correspondences passed between the parties. The question as to whether the work could not be completed within the period of four months or the extension was sought for on one condition or the other was justifiable or not, which are relevant facts and were required to be taken into consideration by the arbitrator. It is now well-settled that the Arbitrator ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be considered by the learned arbitrators. They could not have been simply ignored the same on the premise that an interim order has been passed by the arbitrator. An arbitrator cannot be equated with a court of law. Whereas court has an inherent power; an arbitrator does not have. It is a Tribunal of limited jurisdiction. Its jurisdiction is circumscribed by the terms and reference. An arbitrator can act only within the fourcorners of the agreement and not beyond thereto. 60. Yet again this Court in Union of India v. V. Pundarikakshudu Sons 2003 (7) SCALE 323 dealt in details about an award which was found to be inconsistent, observing : "The question as to whether one party or the other was responsible for delay in causing completion of the contract job, thus, squarely fell for consideration before the arbitrator. The arbitrator could not have arrived at a finding that both committed breaches of the terms of contract which was ex facie unsustainable being wholly inconsistent. Clause 54 of the contract could be invoked only when the first respondent committed breach of the terms of the contract. An action in terms thereof could be taken recourse to in its entirety or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs, the selection of specialist contractors, the inspection of work carried out, the solution of difficulties encountered during the course of erecting the building, condemning and dealing with defective work, the issue of certificates under the terms of the contract and advising or ruling on disputes between the owner and the contractor. Thus it will be seen that although it is the primary and vital function of the architect to create new ideas of amenity and design and to set down those ideas on a drawing-board, his duties extend far into other fields of technical knowledge and business management. On the other hand, while he will remain primarily responsible to the owner for all matters of design, modern techniques of construction and specialized building products and processes in fact demand expertise and skill for which he will inevitably not always be personally qualified. The employment of outside consultants or the less satisfactory (from the legal point of view if the employer s interest is to be properly protected) device of delegating important design functions to specialist and sub-contractors and suppliers, are therefore a frequent and inevitable accompaniment of many ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stated : "In a contract, where there is certificate clause which is a condition precedent to payment and an arbitration clause of some third person other than the architect, the builder cannot recover without the certificate, and neither the arbitrator nor the court (apart always from some misconduct of the architect), has jurisdiction to consider any matters. In respect of which the certificate of the architect by the terms of the contract is made a condition precedent." 72. An architect sometimes is appointed as an arbitrator and no payment can be made except on his certificate and sometimes his position is that of a person whose certificate is held to be a condition precedent for invoking the arbitration clause - Bristol Corpn. v. John Ajrd Co. [1911-13] All E.R. Rep. 1076, Hickman Co. v. Roberts [1911-13] All E.R. Rep. 1485 and South India Rly. Co. Ltd. v. S.M. Bhashyam Naidu AIR 1935 Mad. 356. 73. These decisions were considered by a Division Bench of the Madhya Pradesh High Court in Heavy Electricals (India) Ltd. v. Pannalal Devchand Malviya AIR 1973 MP 7. 74. In this view of the matter, we are of the opinion that the arbitrator could not ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsed by the Organisation to the Company and shall be adjusted against the total amount payable to the Architects by the Organisation." Architectural services have not been defined in the agreement. However, in a letter dated 12-6-1991 issued by AWHO to M/s. Dulal Mukherjee Associates it was mentioned that obtaining and getting preparation of municipal drawings and obtaining sanctions was the architect s responsibility, stating : "1. Please refer to your letter of 4 Jun. 1991 following the detailed discussions on the project held on 3 4 Jun. 1991 at this HQ. 2. As per understanding arrived at between AWHO and M/s Sumangal Services Pvt. Ltd. your employment and payment will be controlled by AWHO. Please note that the rate of Rs. 6 per sq.ft. as agreed between you and M/s. Sumangal Services Pvt. Ltd. remain operative for Architectural services including supervision. 3. For the release of payment the amount of Rs. 5 lacs that is already been paid by M/s. Sumangal Services Pvt. Ltd. to you as on date will also be taken into account. Recoveries @ Rs. 6 per sq.ft. will be considered as overall payment and will be recovered from M/s. Sumangal Services Pvt. Ltd. during execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of Sumangal to get the plan sanctioned. In any event, such a contractual obligation for the purpose of attracting the penal clauses must appear from the contract itself and not from any other document. 79. The learned arbitrators in their award did not point out any specific clause in terms whereof it was for Sumangal to get the plan sanctioned. It merely relying or on the basis of a letter of Sumangal made it partially liable therefor. 80. No document exists to show that Sumangal had any legal liability to get the Municipal plan sanctioned. 81. Section 204 of the West Bengal Municipal Act, 1993 prohibits erection of any building excepting with the previous sanction of the Board of Councillors. In terms of section 205 it is for the person who intends to erect or re-erect a building to submit an application with a building plan in such form. 82. The provisions of the West Bengal Municipal Act, 1993 go to show that it was for AWHO to submit an application for sanction of the building plan together with requisite documents therefor. Ordinarily, the duty to pursue sanction of a plan is of the owner or its authorised representative. Such a job, it is common e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Neither any party can undertake any construction activity on the pains of facing criminal charge nor any court of law/Arbitral Tribunal encourage such violation either directly or indirectly. 85. Furthermore, risk and cost clause cannot be invoked on failure of the party to respond to its self-imposed obligation. Damages are to be paid for wilful breach of the terms of conditions of the contract. Such a breach must be in relation to an express agreement entered into by and between the parties. An alleged breach on the part of a builder cannot be founded on a mere ipse dixit . The learned arbitrators in their award purported to have held : ". . . That SSPL had a role in getting the plans sanctioned by the competent authority is borne out by letter of AWHO to SSPL dated October 25, 1995 (Ex. E-45, AWHO, Vol. 3, p. 356) and the reply of SSPL dated December 9, 1994 (Ex. E-103, AWHO, Vol. 17, p. 54) to the said letter of AWHO. In the said letter of AWHO dated October 25, 1994, it was stated : 7. Sanctioning of building plan and revised layout plan. Sanction of building plan and revised lay out plans has already been considerably delayed. This is effecting the progress of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stion as regard its enforceability, we may notice the following passage from Immami Appa Rao v. Gollapalli Ramalingamurthi [1962] 3 SCR 739: "Reported decisions bearing on this question show that consideration of this problem often gives rise to what may be described as a battle of legal maxims. The appellants emphasised that the doctrine which is pre-eminently applicable to the present case is ex dolo malo non oritur actio or ex turpl cause non oritur actio . In other words, they contended that the right of action cannot arise out of fraud or out of transgression of law; and according to them it is necessary in such a case that possession should rest where it lies in pari delicto potior est conditio possidenties ; where each party is equally in fraud the law favours him who is actually in possession, or where both parties are equally guilty the estate will lie where it falls. On the other hand, respondent 1 argues that the proper maxim to apply is nemo allegans suam turpitudinum audiendum est , whoever has first to plead turpitudinum should fail; that party fails who first has to allege fraud in which he participated. In other words, the principle invoked by respondent 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether building plans for Phase II and Phase III would be sanctioned and if so within what time could only a matter of speculation but the same would be irrelevant for determining the liabilities of the parties which was required to be guided by commercial considerations. 94. The liability to pay damages must arise out of contract and not otherwise. The award does not specifically say so. FRUSTRATION OF CONTRACT 95. Section 56 of the Indian Contract Act reads thus : " Agreement to do impossible Act. An agreement to do an act impossible in itself is void. Contract to do act afterwards becoming impossible or unlawful. A contract to do an act which, after the contract is made becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful. Compensation for loss through non-performance of act known to be impossible or unlawful. Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promise did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rfect than discharge by the performance of the original promise. In the words of Professor Corbin already cited, society no longer commands performance - nothing more can be demanded of the promisor." 99. In Emden and Gill s Buildings Contracts and Practice , Seventh Edition, pages 162-163, it is stated that liability to pay damages for non-performance of an impossibility only arises where the contract is absolute and unrestricted by any condition expressed or implied. It is further stated that a difficulty may not in all circumstances amount to impossibility. But even in that event the terms and conditions relating to performance of the contract may stand eclipsed. 100. The transaction was a commercial one. Sumangal could not plead frustration of contract if it itself had abandoned it Hauman v. Nortje [1914] A.D. 293, at p. 297 and Hoenig v. Issacs [1952] 2 All E.R. 176, at p. 178H). 101. It is well-settled that a builder renouncing his obligations could not claim substantial performance. 102. In Hudson s Building and Engineering Contracts at page 484, the law is stated as: "A further overriding principal to be deduced from the cases, it is submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not due to any breach of his duty as a bailee. But, this special situation excepted, the rule as to burden of proof laid down in the Joseph Constantine case can be defended on the ground that generally catastrophic events which prevent performance do occur without the fault of either party. To impose the burden of disproving fault on the party relying on frustration is therefore less likely than the converse rule to lead to the right result in the majority of cases." 105. It is interesting to note that at page 700 of the said treatise, the learned author states : "The further question arises whether a contract can be frustrated by an event brought about by the negligent act of one of the parties. Lord Simon has put the case of a prima donna who lost her voice through careless catching cold. He seemed to incline to the view that she could plead frustration so long as the incapacity was not deliberately induced in order to get out of the engagement. This particular result can perhaps be justified by the difficulty of foreseeing the effect of conduct on one s health. But it is submitted that generally negligence should exclude frustration: for example, the plea should have fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ability to pay damages would indisputably arise only in the event a breach of contract has taken place. Clause 130 of the general conditions of the contract could be invoked only in the event of breach on the part of Sumangal and if AWHO could in law take recourse to clause 129 of the Contract. 110. For the purpose of invoking clause 129( d ) of the general conditions of contract, it was incumbent upon the learned arbitrators to arrive at a specific finding that a breach of the terms of condition has been committed by Sumangal. Such breach must be in relation to a term of the contract between the parties. 111. If a breach has occurred in respect of an agreement, to which Sumangal is not a party, clause 129 could not have been invoked. 112. The law relating to damages in this behalf is stated in McGregor on Damages, 16th edition at paras 1142 and 1143 in the following terms : "The normal measure of damages is the cost to the owner of completing the building in a reasonable manner less the contract price, and possibly, in addition, the value of the use of the premises lost by reason of the delay. This measure of cost of completion less contract price is laid down by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his house at a reasonable time and in a reasonable manner, and is not entitled to delay for several years and then, if prices have gone up, charge the defaulting builder with the increased price. " 113. We may, however, notice that in Clark v. Woor [1965] 1 W.L.R. 650 and East Ham Borough Corpn. v. Bernard Sunley Sons Ltd. [1966] AC 406, law almost to the similar effect has been laid down. 114. In Hudson s Building and Engineering Contracts at pages 1034-35, it is stated : "Builders constructed a school with serious defects in fixing the stone facing. The contract was in the 1956 RIBA standard form. Some years after the final certificate, a stone fell and the owners discovered the defects. The arbitrator found that the defects could have been, but in fact were not, discovered or noticed by the architect during the course of his normal supervision of the work. At the date of the breach (which the parties agreed should for purposes of convenience be treated as the date of completing the work), the cost of repair would have been considerably less, due to rising prices, than it was when the owners finally discovered the defects. Held, by Melford Stevenson J., Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a prevention brought about by his own act, and the proper measure of damages was what it cost the plaintiff to complete the house as soon as the statutory restriction ceased, less any amount which have been due and payable to the builder if he had proceeded with due diligence up to the date when the licence was refused. In a leading case, the House of Lords has held that the proper measure of damages is the cost of re-instatement, such cost must be assessed at the time when the defects are discovered and are put right." 116. Sumangal, thus, could have been found liable for drawings if inter alia it was guilty of one or the other misconducts as referred to hereinbefore. TITLE IN RESPECT OF 14.17 ACRES OF LAND: 117. Claim No. 1 related to title of 14.17 acres of land. Sumangal entered into an agreement on a turnkey basis. The contention of Sumangal is that the lands were transferred in the name of AWHO by way of security. This may or may not be so. But, herein we are only concerned with the question as to whether the award can be set aside or not. The learned arbitrator took into consideration the respective contentions of the parties and came to the conclusion that tit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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