THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA CIVIL REVISION PETITION No.261 OF 1995 AND CIVIL MISCELLANEOUS APPEAL No.2522 OF 2001 Dated: 10/11/2009 Between: Union of India … Appellant And K.Mahaboobkhan and Others … Respondents THE HON’BLE SRI JUSTICE V.V.S.RAO AND THE HON’BLE SRI JUSTICE B.N.RAO NALLA CIVIL REVISION PETITION No.261 OF 1995 AND CIVIL MISCELLANEOUS APPEAL No.2522 OF 2001 COMMON ORDER: (per Hon’ble Sri Justice V.V.S.Rao) Aggrieved by common Judgment, dated 18.04.1994 in O.S.No.235 of 1991 and O.P.Nos.115 and 123 of 1991, Union of India represented by its Chief Engineer, South Central Railway, Secunderabad, filed these two maters. Civil revision petition No.261 of 1995 is filed against O.S.No.235 of 1991 and C.M.A.No.2522 of 2001 is filed against O.P.No.123 of 1991. In view of the order we propose, it is not necessary to elaborate the factual background in detail. For better appreciation of the matter, the skeleton facts are mentioned in the ensuing paragraphs. First respondent (hereafter called, the Contractor) under an agreement, dated 01.02.1985 was awarded the work of development of maintenance facilities for Box ‘N’ wagons at Gooty, construction of auxiliary office, wheel and lathe shed, water supply and drainage arrangements, electrical sub station & lavatory block, at an estimated cost of Rs.13,07,804/-. The contract stipulates the completion of work within four months from the date of issue of acceptance letter on 18.03.1985. Be that as it is, the work was completed on 31.05.1986. The contractor obtained five extensions as he could not complete the work within the stipulated time. Disputes arose. Contractor requested General Manager, South Central Railway, Secunderabad, to refer twenty eight (28) claims to arbitration in accordance with clause 64 of General Conditions of Contract (GCC). The latter referred eight (8) claims to joint arbitrators in accordance with Section 14 of the Arbitration Act, 1940. The parties filed their statements. The arbitrators passed an award on 25.06.1991 partly allowing all eight claims. A total sum of Rs.6,99,065/- was awarded. The details of the amounts claimed and amounts awarded are as follows. Claim Number Amout claimed Rs. Amount awarded Rs. Claim one 1,76,700/- 1,35,000/- Claim two 3,300/- 2,570/- Claim three 60,000/- 38,030/- Claim four 78,400/- 27,000/- Claim five 12,158/- 11,465/- Claim six 9,98,592/- 3,30,000/- Claim seven 1,05,485/- 95,000/- Claim eight 62,018/- 60,000/- The arbitrators filed O.S.No.235 of 1991 under Sections 14(2) and 17 of the Arbitration Act before the Court of III Additional Judge, City Civil Court, Hyderabad, for making the award rule of the Court. The contractor filed O.P.No.115 of 1991 under Section 30 of the Arbitration Act insofar as claim numbers 1 and 6 are concerned with a prayer to modify the award by granting interest at 20% per month from 01.07.1986 till realization. The Railways filed O.P.No.123 of 1991 to set aside the award. By common Judgment, dated 18.04.1994, the lower Court decreed O.S.No.235 of 1991 and dismissed the petitions filed by the contractor and Railways. As noticed supra, Railways have filed civil revision petition against O.S.No.235 of 1991 and civil miscellaneous appeal against O.P.No.123 of 1991. Learned standing counsel for Railways made the following submissions. The award of the arbitrators is not based on any evidence, and that therebeing no reasons for the award, it is bad in law. He places reliance on Sikkim Subba Associates v State of Sikkim[1], Union of India v Satyanarayana Construction Company[2] and State of Rajasthan v Ferro Concrete Construction Private Limited[3]. Secondly, as per clause 17(3) of GCC, contractor is not entitled to damages or compensation, even if there is delay in handing over the site and/or even if there is extension granted by Railways for completion of the work. In view of this, the award insofar as claim Nos.1, 6 and 7 is unsustainable. Thirdly, as per clause 63 of GCC, claim Nos.4 and 5 being “excepted items”, the dispute in relation thereto is not arbitrable and lastly, no reference was made to arbitration with regard to interest, and therefore, grant of interest for pre-reference period and pendente lite is unsustainable. He also submits that as the arbitrators ignored the binding covenants of the contract, they committed misconduct in passing award. Per contra, learned counsel for contractor submits that when the arbitrators passed award after taking into consideration the entire material, unless there is a glaring error apparent on the face of record or proven misconduct, the award cannot be interfered with. With the assistance of learned standing counsel for Railways, we have perused the award. Dealing with claim No.1 arbitrators recorded as follows. Claim No.1: Compensation towards losses by way of idle labour, plant & machinery etc. The contractor based his claim due to several delays caused by the Railway in handing over the site for execution of work. In the counter filed by the Railways, it has been stated that reasons for not handinv over sites were beyond their control. The contractor has supported his claim by producing copies of several letters addressed to the Railway Administration. It is established that delay has occurred in handing over the site to the claimant, and that the claimant deserves to be compensated for the loss sustained due to idling of labour and plant & machinery. After examining the claim by the ‘Claimant’, the counter of the ‘Respondent’, we award and determine that the ‘Respondent’ do pay to the ‘Claimant’ a sum of Rs.1,35,000/- (Rupees one lakh thirty five thousand only). We have only quoted the consideration of the arbitrators in relation to claim No.1 as an illustration. Even while dealing, claim Nos.2 to 8, the arbitrators followed the same modus operandi. No reasons were given nor evidence adduced by parties was referred to. When the contractor claimed an amount of Rs.1,76,000/- under claim No.1, an amount of Rs.1,35,000/- was awarded and when the contractor claimed Rs.60,000/- under claim No.3, an amount of Rs.38,030/- was awarded. Except awarding reduced amounts under different claims, the reasons why the amounts were reduced and the reasons why the amounts were awarded to contractor with reference to the correspondence and the agreement have not been adverted to. Therefore, we are convinced that the award passed by arbitrators is unsustainable. The trial Court made an observation that the arbitrators considered the materials placed before them. We do not find any justification in the same. Therefore, we persuaded learned counsel for Railways that the award as confirmed by civil Court cannot be sustained in law. That takes us to the relief to be granted in these matters. As held by Supreme Court in Sikkim Subba (supra) and Fernandes (supra), if the arbitral award does not contain reasons or an award is based on surmises and assumptions without reference to any evidence, the same is liable to be set aside. In appropriate cases, the matter can be remitted to arbitrators. In this case, the award was passed on 25.06.1991. During pendency of these cases, third respondent one of the arbitrators died. It is not clear whether second respondent (another arbitrator) is still in employment or not. In these circumstances, we deem it appropriate to remit the matter to General Manager, South Central Railway, Secunderabad, with a direction to appoint fresh arbitrators in accordance with clause 64 of the GCC as the matter is pending for the last about twenty five years. We direct the General Manager to pass orders appointing arbitrators within a period of six weeks from the date of receipt of copy of this order. Thereafter, the arbitrators may complete the proceedings and pass award as expeditiously as possible. The civil miscellaneous appeal and civil revision petition are accordingly allowed. The impugned award dated 25.06.1991 and Judgment and decree dated 18.04.1994 in O.S.No.235 of 1991 and O.P.Nos.115 and 123 of 1991 are set aside. _______________ (V.V.S.RAO, J) ____________________ (B.N.RAO NALLA, J) 10.11.2009 pln [1] (2001) 5 SCC 629 [2] 2005 (3) ALT 460 (DB) [3] 2009 (3) Arb. LR 140 (SC)