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TMI Blog2010 (7) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... o in Clause 2.03 of tender notice. In response, the respondent submitted a tender which was accepted culminating in the issue of a work order dated 10th January 1983 in its favour. It is common ground that the appellant by its communication dated 13th October 1983 exercised the option available to it in terms of Clause 2.03 of the NIT and extended the contract for a further period of one year ending 14th January 1985. 3. The extension aforementioned was accepted by the respondent in terms of its communication dated 7th December 1983 in which it was inter-alia pointed out that statutory revisions in the wages of Mormugao Dock Labour Board (for short M.D.L.B.) that had come about during the period of one year need be considered while extending the contractual period. In response, the company by its letter dated 27th January 1984 pointed out that Clause 2.03 of Schedule II of N.I.T. provided for increases on account of statutory revisions made upto 15th January 1984 alone to be considered for purposes of granting rate escalation. Increases in wages that may have been under negotiations or those granted on a later date with retrospective effect could not consequently be considere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two Arbitrators was not. 6. Aggrieved by the majority Award, the appellant filed Arbitration Petition No. 19 of 1993 before the High Court of Bombay for setting aside the same. A Single Judge of the High Court of Bombay (S.N. Variava, J. as His Lordship then was) allowed that prayer and set aside the award holding that the same was contrary to clause 2.03 of the NIT forming part of the contract executed between the parties. Even the plea of limitation succeeded before the learned Single Judge who held that the claim made by the respondents was barred by time. Undeterred the respondents assailed the said order before a Division Bench of the High Court in Appeal No.884 of 1997 which allowed the appeal, set aside the order passed by the Single Judge and restored the majority Award made by the two Arbitrators. The High Court took the view that the interpretation placed upon Clause 2.03 of the contract between the parties by the majority of the arbitrators was a logical interpretation which could provide a sound basis for the Award made by them. 7. Appearing for the appellant, Shri Shyam Divan did not pursue the challenge to the validity of the Award on the ground that the clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned in Clause 2.01, the contractor shall be bound to continue to do the work and render services on the same terms and conditions, as contained herein, during such extended period, except for the statutory increase in the wages of Dock Labour allowed by the Mormugao Dock Labour Board, for which documentary evidence shall have to be furnished by the contractor...... .. Note: The rates indicated against first and 2nd year above have been taken from MDLE S Circulars from time to time. But the rates at which the contact is initially awarded shall remain firm throughout the period of one year from he date of award and shall not be subject to any escalation whatsoever. Similarly, the rates allowed for the extended period of one year, if any, after considering the statutory increase, if any, in the wages of Dock Labour will also remain firm throughout the extended period of one year and shall not be subject to any escalation whatsoever, irrespective of any subsequent increase in the wages of Dock Labour allowed retrospectively by the Mormugao Dock Labour Board. 10. A careful reading of the above especially the Note appended to Clause 2.03 (supra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the commencement of the extended period. It is manifest from a reading of the Note that once an option is exercised the rate applicable to the extended period shall stand revised taking into consideration the revision of wages if any. Any such revision must of necessity be made as on the date of the commencement of the extended period. Once that is done the said rate would remain firm till the end of the second year. The contract does not, in our opinion, envisage settlement or revision of the rate by reference to any stage post commencement of the extended period. Even otherwise a contract for the extended period could become effective only if rates applicable to that period are settled or are capable of being ascertained. Rates actually determined or determinable by reference to 15th January, 1984 the date when the extended period commenced, could include revision in wages made upto that date. Any revision in the wages of the dock labourers which the M.D.L.B. may have ordered subsequent to 15th January, 1984 would have no relevance even if such revision was made retrospectively from the date of the commencement of the extended period. The Note makes it abundantly clear that re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n award contrary to the terms of the contract executed between the parties. That question is no longer res integra having been settled by a long line of decisions of this Court. While it is true that the Courts show deference to the findings of fact recorded by the Arbitrators and even opinions, if any, expressed on questions of law referred to them for determination, yet it is equally true that the Arbitrators have no jurisdiction to make an award against the specific terms of the contract executed between the parties. Reference may be made, in this regard, to the decision of this Court in Steel Authority of India Ltd. v. J.C. Budharaja, Government and Mining Contractor, (1999) 8 SCC 122 where this Court observed : .. that it is settled law that the arbitrator derives authority from the contract and if he acts in manifest disregard of the contract, the award given by him would be an arbitrary one; that this deliberate departure from the contract amounts not only to manifest disregard of the authority or misconduct on his part, but it may tantamount to mala fide action ... It is true that interpretation of a particular condition in the agreement would be within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders are not judicial orders. Its functions are not judicial functions. It cannot exercise its power ex debito justitiae. The jurisdiction of the arbitrator being confined to the four corners of the agreement, he can only pass such an order which may be the subjectmatter of reference. 21. Reference may also be made to the decisions of this Court in Associated Engineering Co. v. Government of Andhra Pradesh Anr. (AIR 1992 SC 232), Jivarajbhai Ujamshi Sheth Ors. v. Chintamanrao Balaji Ors. (AIR 1965 SC 214), State of Rajasthan v. Nav Bharat Construction Co. (AIR 2005 SC 4430), Food Corporation of India v. Surendra, Devendra Mahendra Transport Co. (2003) 4 SCC 80 , which sufficiently settle the law on the subject. 22. That leaves us with the question whether the valid part of the award can be saved by severance from the invalid part. Before the Arbitrators the respondent-Chairman had quantified the claim at ₹ 27,91,984.29 on account of escalation of the rates consequent upon statutory increases in the wages of M.D.L.B. during the extended period of contract. A further sum of ₹ 9,88,713.20 on account of escalation in the wages of other categories of wor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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