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TMI Blog2008 (8) TMI 970X X X X Extracts X X X X X X X X Extracts X X X X ..... for carrying out the work for development of the land at Pappankalan (Dwarka) Project in South-West Delhi, Phase I according to the terms and conditions mentioned in the contract. On disputes having arisen during execution of the work, mainly with respect to the extra cartage, the same were referred to the Sole Arbitrator, Shri A.P. Paracer, Additional Director General (Retd.), C.P.W.D., for adjudication. During the pendency of the arbitration proceedings, the work was still being executed by the Company. 13 Claims (including additional claims) for a sum of Rs. 55.19 lacs approximately were raised by the Company before the Arbitrator. Claim Nos. 1 to 3 were on account of extra lead involved in procurement of stone aggregate specified in agreement Item No.2 i.e., supplying and stacking of graded stone aggregate of size range 90 mm to 40 mm at site. While additional Claim Nos. 1 to 3 pertain to extra lead involved in bringing stone specified in agreement Item Nos. 3 & 4 i.e., supplying and stacking of stone screenings/chipping at site 12.5 mm nominal size. Under Claim No.1, the respondent-Company claimed an extra amount of Rs. 30/- per cubic meter over and above the rates mentioned i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in setting aside the order passed by the learned single Judge with respect to Claim Nos. 1-3 and additional claim Nos. 1-3 inasmuch as the Arbitrator had clearly failed to advert to clause 3.16 of the Agreement which does not provide for extra cartage. According to him, clause 3.16 of the Agreement stipulates that the contractor is responsible for all the extra leads over and above the rate of payment specified in the Agreement. He further contended that since the Arbitrator failed to take note of the relevant condition, namely, clause 3.16, which prohibits extra cartage over and above the rate of payment specified in the Agreement, there is a clear error apparent on the face of the Award and liable to be set aside in terms of Section 34(2) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "the Act"). On the other hand, Mr. U.A. Rana, learned counsel appearing on behalf of the respondent, while supporting the order of the Division Bench contended that in view of the fact that stone was brought from Nooh in Haryana which was found to be more blue, better in appearance and quality, the Arbitrator was fully justified in making the Award in favour of the respond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the Award as granted by the Arbitrator. 7) In order to consider the rival contentions, it is useful to refer the relevant provisions of the Act. Chapter VII of the Act deals with `Recourse against Arbitral Award'. Section 34 enumerates various grounds/circumstances on which the Award can be set aside by the Court which reads as under: "34. Application for setting aside arbitral award. - (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and subsection (3). (2) An arbitral award may be set aside by the Court only if- (a) The party making the application furnishes proof that- (i) A party was under some incapacity, or (ii) The arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or (iii) The party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) The arbitral award deals with a dispute not contemplated by or not falling within the terms of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 SCC 552, this Court in paragraph 3 held as under: "3. In this case, the High Court is of the view that a civil court does not sit in appeal against the award and the power of the court when an award is challenged is rather limited. The award of the arbitrator is ordinarily final and conclusive as long as the arbitrator has acted within his authority and according to the principle of fair play. An arbitrator's adjudication is generally considered binding between the parties for he is a tribunal selected by the parties and the power of the court to set aside the award is restricted to cases set out in Section 30 of the Arbitration Act. It is not open to the court to speculate where no reasons are given by the arbitrator, as to what impelled him to arrive at his conclusion. If the dispute is within the scope of the arbitration clause it is no part of the province of the court to enter into the merits of the dispute. If the award goes beyond the reference or there is an error apparent on the face of the award it would certainly be open to the court to interfere with such an award. In New India Civil Erectors (P) Ltd. v. Oil & Natural Gas Corpn.(1997) 11 SCC 75 this Court consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to refer the following conclusion as observed in paragraph 10 as under: "10. It was next submitted by the learned counsel for the respondent that if this Court was not inclined to agree with the submission of the learned counsel for the respondent and the interpretation sought to be placed by him on the meaning of "excepted matter" then whether or not the claim raised by the contractor is an "excepted matter" should be left to be determined by the arbitrator. It was submitted by him that while dealing with a petition under Section 20 of the Arbitration Act, 1940 the court should order the agreement to be filed and make an order of reference to the arbitrator appointed by the parties leaving it open for the arbitrator to adjudicate whether a claim should be held to be not entertainable or awardable, being an "excepted matter". With this submission too we find it difficult to agree. While dealing with a petition under Section 20, the court has to examine: (i) whether there is an arbitration agreement between the parties, (ii) whether the difference which has arisen is one to which the arbitration agreement applies, and (iii) whether there is a cause, shown to be sufficient, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he parties. In the guise of doing justice he cannot award contrary to the terms of the contract. If he does so, he will have misconducted himself. Of course if an interpretation of a term of the contract is involved then the interpretation of the arbitrator must be accepted unless it is one which could not be reasonably possible. However, where the term of the contract is clear and unambiguous the arbitrator cannot ignore it." 11) In Hindustan Zinc Ltd. vs. Friends Coal Carbonisation, (2006) 4 SCC 445, the following principles laid down in paragraphs 13 and 14 are relevant for the disposal of the present case: "13. This Court in ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 held that an award contrary to substantive provisions of law or the provisions of the Arbitration and Conciliation Act, 1996 or against the terms of the contract, would be patently illegal, and if it affects the rights of the parties, open to interference by the court under Section 34(2) of the Act. This Court observed: (SCC pp. 718 & 727-28, paras 13 & 31) "13. The question, therefore, which requires consideration is--whether the award could be set aside, if the Arbitral Tribunal has not followed the mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the term "public policy" in Renusagar case, it is required to be held that the award could be set aside if it is patently illegal. The result would be award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) in addition, if it is patently illegal. Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void." 14. The High Court did not have the benefit of the principles laid down in Saw Pipes, and had proceeded on the assumption that award cannot be interfered with even if it was contrary to the terms of the contract. It went to the extent of holding that contract terms cannot even be looked into for examining the correctness of the award. This Court in Saw Pipes has made it clear that it is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved Delhi Quartz stone which was not as per CPWD specifications and specifications mentioned in the tender document, stones were brought from Nooh, Haryana which satisfied those specifications. As rightly pointed out by the learned 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 which reads as under: "3.16 - The collection and stacking of material shall include all leads. The rates quoted by the contractor shall hold good irrespective of the source from which the material are brought so long as they conform to the specifications. The closure of particular quarry will not entitle the contractor to any revision in the rates." 16) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material from Nooh quarry, Haryana, the Contractor will be entitled to the extra lead for bringing the said material from Nooh. As rightly pointed out by learned counsel for the appellant, in the present case, 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. 18) Under these circumstances, we allow the appeal of DDA and set aside the judgment and order dated 10.8.2001 passed by the Division B ..... X X X X Extracts X X X X X X X X Extracts X X X X
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