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TMI Blog1995 (9) TMI 394X X X X Extracts X X X X X X X X Extracts X X X X ..... the respondents was accepted for ₹ 7,26,31,325/- and after discussions and negotiations the work was awarded to the respondents and a formal agreement was entered into between the petitioners and the respondents on 22nd January 1982. Clause 25 of the Conditions of the contract contained in arbitration clause between the petitioners and the respondents. This clause envisaged settlement of disputes between the petitioners and the respondents through the appointment of a sole arbitrator by competent authority as provided for therein. 2. During the pendency of the contract, the respondents invoked arbitration in accordance with the arbitration agreement and contained in the contract and vide their letter dated 22nd February 1985 addressed to one K. K. Sud, the then Chief Engineer of the petitioner, raised certain claims against the petitioners and enclosed therewith a list of certain disputes which had then arisen by and between the petitioners and the respondents. The Chief Engineer was requested by the respondents to appoint a sole arbitrator in terms of the arbitration agreement contained in the said clause 25 of the Contract. The Chief Engineer of the petitioners in charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5. Since further disputes arose between the petitioners and the respondents in connection with the further claims of the respondents against the petitioners arising out of or in relation to the said contract, the respondents vide their letter dated 23rd October, 1986 addressed to the Chief Engineer of the petitioners requested the said appointing authority to refer the same to arbitration. The Chief Engineer of the petitioners in his capacity as the appointing authority vide his letter dated 29th December, 1986, referred such further disputes between the petitioners and the respondents and the further claims of the respondents against the petitioners aggregating to ₹ 5,81,00,000/- (comprised of the claims bearing Nos. 17 to 23) to arbitration of the said K. D. Bali. This reference in respect of the respondents' said claims against the petitioners for ₹ 5,81,00,000/- is hereinafter referred to as the third reference . The arbitrator entered upon the third reference on 5th January, 1987. 6. In the first reference, the arbitrator has made and published his award on 5th March, 1988 which has been filed in this court. The arbitration petition No. 188 of 1988 has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trator on which the court cannot substitute its own decision. If on a view taken of a contract, the decision of arbitrator on certain amounts awarded is a possible view though perhaps not the only correct view, the award cannot be examined by the court. 8. It may further be stated that an award can be set aside if the arbitrator misconduct himself of the proceedings or proceeds beyond his jurisdiction. There is a distinction between disputes as to the jurisdiction of the arbitrator and the disputes as to in what way that jurisdiction should be exercised. A distinction has to be drawn between an error within the jurisdiction and an error in excess of the jurisdiction. An award may be remitted or set aside on the ground that the arbitrator in making it had exceeded his jurisdiction. An award can be set aside where there is error apparent on the face thereof i.e. if there is any proposition of law which is apparent on the face thereof and it is erroneous and is made basis for it. An award is not invalid merely because by a process of interference and arguments it may be demonstrated that the arbitrator has committed some mistake in arriving at his conclusion. As held by the Honorab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irst reference as also in the third reference, the petitioners have challenged the awards made in the first reference and in the third reference alleging that the arbitrator misconducted himself by permitting price variation, contractor's profit and overhead expenses at 25%, escalation, adopting wrong measurements, awarding loss of profit to the respondents and by deviating from the terms of the contract. The petitioners have challenged the awards in the second reference alleging that the awarding of the claim by the arbitrator has been on ad hoc basis and not on proper consideration of materials placed before the arbitrator. 10. The respondents have filed their affidavits in each of the said petitions and while denying the allegations of the petitioners as contained in the petitions affidavits filed on behalf of the petitioners, have stated that the appointment of the arbitrator in each reference has been in accordance with the arbitration agreement contained in clause 25 of the Conditions of the Contract and the arbitration references were properly and legally made. The respondents have further stated that the awards contain reasons as contemplated and required by the arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e otherwise provided in the contract all questions and dispute relating to the meaning of the specification, designs, drawings and instruction hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any other question claim, right, matter or thing whatsoever, in any way arising out of or relating to the contract designs, drawings, specifications, estimates, instructions, orders of these conditions or otherwise concerning the work or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer International Airports Authority of India in charges of the work at the time of dispute or if there be no Chief Engineer, the administrative head of the Department of Engineering of said authority at the time of such appointment. It will be no objection to any such appointment that the arbitrator so appointed is an International Airports Authority of India's Employee that he had to deal with the matters to which the contract relates and that in the course of his duties as Internation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disputes or if there be no Chief Engineer, the Head of the Department of Engineering of the petitioners at the time of such appointment. It is therefore clear that the sole arbitrator was required to be appointed by the Chief Engineer of the petitioner in charge of the work at the time of the disputes and it was only if there was no such Chief Engineer that the arbitrator was required to be appointed by the Administrator or the Administrative Head of the Department of Engineering of the petitioners. In each of the aforesaid references, the arbitrator was appointed by the Chief Engineer of the petitioners in charge of the work at the time of arising of the disputes between the petitioners and the respondents and consequently the appointment of the sole arbitrator on each occasion was in consonance with the said arbitration agreement and as such, valid and legal. It may also be mentioned here that the Chief Engineer of the petitioners in charge of the work, the appointing authority, at the time of arising of the disputes between the petitioners and the respondents and at the time of appointment of the said K. D. Bali as sole arbitrator, was the Administrative Head of the Departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gineer of the Petitioner the appointing authority to the said K. D. Bali, the arbitrator. Such second and third references made to K. D. Bali, incidentally the same arbitrator, can under no circumstances be said to have been made after the right of the parties to the contract for making reference to arbitration was exhausted. The disputes which constituted the subject matters of the first reference, the second reference and the third reference consisted only of such disputes which were referred by the Chief Engineer of the petitioners to the arbitrator who was appointed in accordance with the arbitration agreement between the petitioners and the respondents. Once the arbitrator in accordance with the said agreement to refer the disputes to arbitration between the petitioners and the respondents was appointed, the disputes and/or claims and/or counter claims arising out or in relation to the contract could be referred to the Arbitrator by or at the instance of either of the parties to the Contract and this exactly was done in the said references. Needless to state that in arbitration proceedings under same arbitration agreement, successive reference of various disputes arising from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itioners had raised before him. 14. There is no substance whatsoever in the contentions of the Petitioners that the Arbitrator misconducted himself merely by changing the avenue of arbitration for the Petitioners office at Santa Cruz to Indian Merchant Chambers Hall at Churchgate more particularly when the Indian Merchant Chambers Hall was considered to be more convenient avenue where at all parties could attend to the proceedings before the Arbitrator without any difficulty. The contentions of the petitioners that the Arbitrator (sic) is also devoid of any merit. In this regard it would be appropriate to mention that the petitioners had filed an Arbitration Petition No. 234 of 1987 in this Court for revoking the authority of the Arbitrator also on the ground that the Arbitrator had bias approach. By the judgment dated 1st/2nd Feb. 1988 delivered in the said petition, the petition was dismissed with costs. While dismissing the said petition, Pendse, J. of this court (as he then was) observed as under : It is sad and distressing that the petitioners, which is a Government undertaking and which has chosen to appoint Respondent No. 1 who is holding high Government Office and ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cceded to his prayer about the conduct of the proceeding. It will be a sad day in the administration of justice if such be the state of law. In view of the decision of this court in the said Arbitration Petition No. 234 of 1987 and of the Honourable Supreme Court, the Petitioners should have kept restraint in making the same baseless allegations against the Arbitrator which have already been adjudicated upon as aforesaid. Suffice it to say that the Arbitrator was having no bias against the Petitioners and the approach of the Arbitrator in conduct of the proceedings before him was fair and judicious. 15. Each of the said Awards contain reasons as contemplated and required by the said arbitration agreement and as held by the Honourable Supreme Court in the case of Sudersan Trading Co. (supra), it is not for the court to decide the reasonableness of the reasons given by the arbitrator. The findings and conclusions arrived by the Arbitrator in each of the said reference by the Arbitrator in each of the said reference is neither contrary to the record not internally inconsistent. No extraneous consideration has prevailed upon the Arbitrator in making the said Awards so as to viti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10, 12, 12(a), 14 and 25, conditions 14(a) and 14(b) mentioned in the said letter dated 16th Oct. 1981 relating to escalation by reason of labour wages and price variation and conditions 13 and 14 mentioned in the said letter dated 1st Nov. 1981 relating to variation in quantities and escalation were binding on the parties to the contract as integral part thereof. As regards the condition 14 laid down in the said letter dated 16th Oct. 1981 as modified by condition 14 in the said letter dated 1st Nov. 1981, in the said Award dated 5th March, 1988, the Arbitrator has stated as under : Condition 14 as a laid down by the Claimants in their letter dated 16-10-1981 and 1-11-1981 which forms the part of the agreement makes the Claimants entitled for price variation according to the formulas laid down therein which is applicable to the gross amount of the bill inclusive of the value of extra/substituted items. However, while determining the rates, the costs at the relevant have been kept in view. Awarding price variation on such items under these circumstances might lead to undue benefit to the claimants. I feel that the ends of justice and fair play will be met by the rejecting this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id condition 14 contained in the said letter dated 16th Oct., 1981 as modified by the said letter dated 1st November, 1981 superseded the printed condition 10(c) contained in the contract. There was no misconstruction of the said conditions of the contract by the Arbitrator, the Arbitrator did not ignore the conditions of the Contract read with the conditions incorporated Tin the said two letters also forming integral part of the Contract. The Arbitrator did not misconduct himself or the proceedings before him. There is no error of law on the face of the Award. The respondents also claimed ₹ 1,43,14,791/- for escalation in labour wages in terms of condition 14(a) mentioned in the said letter dated 16th Oct., 1981 read with modifications as contained in the said letter dated 1st November, 1981 both forming part of the Contract between the parties thereto. The said condition was incorporated for neutralising the effect of rise in labour wages, if any, by the Competent Authority. It was a built-in condition with incorporated formulae to work out the neutralisation component. Both conditions viz., conditions 14(a) and 14(b) with identical percentage of 18.5% in the respective for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the petitioners, the printed condition 12 or 12(a) in the contract were superseded and as rightly held by the Arbitrator, the said condition 13 contained in the said letter dated 16th Oct., 1981 modified by the said condition 13 contained in the said letter dated 1st Nov., 1981 had overriding effect on the condition 12 or 12(a) in the contract. 22. On interpretation of the terms and conditions of the contract including those mentioned in the said two letters referred to hereinabove, the view taken by the Arbitrator is a possible view. As held by the Honourable Supreme Court in the case of Sudershan Trading Co. (supra), if on interpretation of the terms of the contract, the view taken by the Arbitrator is a possible view, it is not for the court to take a different view than the view taken by the Arbitrator. The Arbitrator was an expert having full knowledge of working of engineering contracts. In the facts of the case, it was not necessary for the respondents to lead any evidence before him to explain the formulae for fixation of rate which the Arbitrator has fixed on interpretation of the terms and conditions of the contract including those contained in the said two lette ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only to indicate his mind as to how he reached a particular conclusion. In the instant reference, in each of the Awards made by the Arbitrator, the Arbitrator has given reasons and indicated his mind as how he reached the conclusions arrived at by him. The Arbitrator has considered the statements of the parties, the documentary evidence and the arguments advanced before him. His Award are final both on fact and law. He has not exceeded his jurisdiction and there is no error apparent on the face of either of the said Awards. 23. The Honourable Supreme Court in the case of K.N. Co-operative Society v. Union of India AIR1973SC1338 , has in terms held that where an arbitrator is called upon to decide the effect of the agreement he is really to decide the question of law that is of interpreting the agreement and hence his decision is not open to challenge. Even in the case of Food Corporation of India v. Joginderpal Mohinderpal [1989]1SCR880 , the Honourable Supreme Court has reiterated that the court could not sit in appeal over the view of arbitrator by re-examining and re-assessing the evidence on record. 24. In the case of Associated Engineering v. State of Andhra Pradesh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sons Ltd. v. Union of India [1960]2SCR793 , on which also reliance has been placed by Mr. Shah, has no application. Since, the arbitrator has not ignored any material document brought before him nor arrived at an inconsistent conclusion, even the principle laid down by the Honourable Supreme Court in the case of K. P. Poulose v. State of Kerala AIR1975SC1259 , on which also reliance has been placed by Mr. Shah, to the effect the misconduct on the part of an arbitrator comprises legal misconduct which is complete if the arbitrator on the face of the award arrives at an inconsistent conclusion even on his own finding or arrives at a decision by ignoring very material documents which throw abundant light on the controversy to help a just and fair decision, has no applicability. Even the unreported judgment of the Division Bench of this court presided over by Pendse J. in the case of International Airport Authority of India v. M/s. Three Circle (delivered on 14th August 1992 in appeal No. 756 of 1991) has no application as contrary to facts of instant case, the general principles of justice and equity were invoked therein by by-passing specific provisions of the agreement between ..... X X X X Extracts X X X X X X X X Extracts X X X X
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