Arb.A. 4/2006 BEFORE HON’BLE MR. JUSTICE AMITAVA ROY JUDGMENT AND ORDER (ORAL) (Amitava Roy, J) This appeal U/s. 37 of the Arbitration and Conciliation Act, 1996 (hereinafter f or short referred to as the Act) witnesses a challenge to the judgment and order dated 07.11.2005 passed by the learned Addl. District Judge, Kamrup, Guwahati i n Misc.(Arbitration) Case No.26/2003 rejecting the application U/s.34 of the Act filed by the appellant-Union of India. By the decision impugned, the challenge made by the appellant-Union of India to the arbitral award dated 08.10.2002 ari sing out of an arbitration proceeding pertaining to the contract agreement No.CO N/GL/31 dated 23.03.1993 was partially allowed. As its (appellant-Union of Indi a) plea for annulment of the award, vis-à-vis the respondent-contractor’s claim for loss of profit was declined, it is before this Court for redress. 01. We have heard Mr. J. Singh, learned Standing Counsel, N.F. Railw ay for the appellant-Union of India and Mr. R. Hussain, learned counsel for the respondent-contractor. 02. The background of facts, in brief has to be essentially narrated . The parties had entered into a contract, whereunder, the respondent was entru sted with the work of conversion of Guwahati-Lumding Metre Gauge Section of the N.F. Railway into Broad Gauge. While the works were in progress, the contract w as determined by the appellant-Union of India acting under Clause 60(1) thereof. A dispute arose as a consequence of rescission of the contract and eventuall y with the intervention of this Court U/s.11 of the Act arbitrators were appoint ed for resolution thereof. The parties, thereafter, submitted their respective claims before the joint arbitrators who finally on the completion of the proceed ings made and published their award dated 08.10.2002. The appellant-Union of Ind ia being aggrieved by the award of sums on two counts in favour of the responden t-contractor namely, (1) of loss of profit (claim No.9) and (2) interest (claim No.12.) filed an application U/s.34 of the Act before the learned court below as sailing the validity and sustainability thereof. By the impugned judgment and or der, though the impugnment to the grant of interest was sustained, the same vis- à-vis loss of profit was negated. 03. The learned court below on a survey of a number of decisions of the Apex Court, as well as of this Court having a bearing on the scope of scruti ny of an award made by an arbitrator by a court of law, concluded that though de tailed reasons had not been recorded for allowing the claim of the respondent-co ntractor against ’loss of profit’, the same per se did not vitiate the award. 04. Mr. Singh has urged with reference to Clause 61(2) and 63 of the General Conditions of Contract (hereinafter for short referred to as the G.C.C. ) governing the parties qua the transaction involved that it being apparent ther efrom that any dispute regarding loss of profit was not referable to arbitration being within the purview of excepted matters , the arbitrary proceedings per taining thereto was obviously void, and thus the award to that effect being non est in law the same ought to have been adjudged as such by the learned court bel ow. The learned Standing Counsel in this regard emphasised that the factum of a ppointment of the arbitrators in the instant case with the intervention of this Court, did not neuter this proposition. As Clause 61(2) and 63 of the G.C.C. are binding of the parties, the respondent-contractor’s claim for loss of profit ou ght not to have been entertained by the arbitrators in any view of the matter, h e maintained. To reinforce his arguments, Mr. Singh has placed reliance on the decisions of the Apex Court in (2002) 4 Supreme Court Cases 45 GENERAL MANAGER, NORTHERN RAILWAY AND ANOTHER vs SARVESH CHOPRA; (2003) 4 Supreme Court Cases 80 FOOD CORPORATION OF INDIA vs. SURENDRA, DEVENDRA & MAHENDRA TRANSPORT CO. and of this Court in 2003(2) GLT 390 GENERAL MANAGER, N.F. RAILWAY, MALIGAON & ORS v s. NASIM KHAN. 05. Mr. Hussain as against this, has insisted that it being apparent on a plain reading of Clause 61(2) and 63 of the G.C.C. that only a decision of the railways on the necessity and propriety of expenditures incurred by a contr actor in the expectation of completion of whole of the works is envisaged within excepted matters not only the dispute between the parties pertaining to the l oss of profit was validly referred to the arbitration, the award on that count i n the face of the relevant materials on record is also sustainable in law and on facts. With particular reference to Clause 63 of the G.C.C., the learned couns el has urged that as none of the other ’excepted matters’ contemplated therein i nclude any dispute regarding loss of profit, the plea to the contrary raised on behalf of the railways is apparently flawed and thus was rightly rejected by the learned court below, Mr. Hussain sought to substantiate his contentions by refe rring to the decision of this Court rendered in S.K. AGARWALA vs. UNION OF INDIA & OTHERS 2001(1) Gauhati Law Journal 183. 06. We have extended our thoughtful consideration to the pleadings o n record and the rival arguments advanced. There is no dissension on the applica bility of the general conditions of contract to the works involved. Clause 61 & 63 of the G.C.C., which occupy the centre stage of the debate, deserve extracti on for ready reference. 61(1) The Railway shall be entitled to determine and terminate the contract at any time should, in the Railway’s opinion the cessation of work become necessary owing to paucity of funds or from any other cause whatever, in which case the v alue of approved materials at site and of work done to date by the Contractor wi ll be paid for in full at the rates specified in the contract. Notice in writin g from the Railway of such determination and the reason therefor shall be conclu sive evidence thereof, (2) Should the contract be determined under sub-clause (1) of this clause and th e Contractor claims payment for expenditure incurred by him in the expectation o f completing the whole of the works, the Railway shall admit and consider such c laims as are deemed reasonable and are supported by vouchers to the satisfaction of the Engineer. The Contractor shall have no claim to any payment of compensa tion or otherwise, howsoever on account of any profit or advantage which he migh t have derived from the execution of the work in full but which he did not deriv e in consequence of determination of the contract. The Railway’s decision on th e necessity and propriety of such expenditure shall be final and conclusive. & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & & 63. All disputes and difference or any kind whatsoever arising out of or in co nnection with the contract, whether during the progress of the works or after th eir completion and whether before or after the determination of the contract, sh all be referred by the Contractor to the Railway and the Railway shall within a reasonable time after their presentation make and rectify decisions thereon in w riting except the decisions for which provisions has made in clause 18, 22(5), 3 9, 45(a), 55(1), 55(2) (v), 61 (2) and 62(1) (b) of the General Conditions of Co ntract or in any clause of the Special or Additional Special Conditions of contr act shall be final and binding on the Contractor, provided further that Except Matters stand specifically excluded from the purview of the arbitration clause and shall not be referred to arbitration. 07. Whereas, 61(1) recognizes the right of the railways to determine the contract in the eventualities as mentioned therein, Sub-clause (2) thereof provides for payments to the respondent-contractor on prematured determination t hereof. Sub-clause (2) in particular, deals with a claim of the contractor towar ds expenditure incurred by him in expectation of completion of the whole of the works, which, if made, is required to be admitted and considered by the railways to the extent, the same are deemed to be reasonable and supported by vouchers t o the satisfaction of its engineers. Clause 61(2) makes it apparent that the de cision of the railways in this regard would be final and conclusive. It further mandates that the contractor would have no claim to any payment of compensation or otherwise on account of any profit or advantage, which he might have derived from the execution of the work in full, had the contract not been determined. V isibly, this claim towards compensation or otherwise on account of profit or adv antage as per Clause 61(2) does not admit of any consideration whatsoever by the railways is untenable. Clause 63 excludes from the purview of arbitration, dec isions by the Railways made amongst others in Clause 61(2) of the G.C.C or in an y clause of the special or additional conditions, nomenclatured as ’excepted ma tters’. Clause 63 embodies an absolute ban to the reference of such excepted mat ters to arbitration. 08. Whereas, the railways seek to contend that the respondent-contra ctor’s claim for loss of profit is within domain of such ’excepted matters’ as i s specified in Clause 63, the respondent-contractor, pleads to the contrary main taining that though such claim is not entertainable under Clause 61(2), the same does not signify a prohibition to the reference of any dispute between the part ies pertaining thereto for arbitration. 09. The Apex Court in General Manager, Northern Railway and Another (Supra), while dealing with the issue of permissibility of reference to arbitrat ion of a dispute otherwise within the domain of ’excepted matters’ comprehended in the contract involved therein answered in clear terms in the negative. Their Lordships held that not only the reference to arbitration in such a case is void , the award made on that count is also liable to be set aside on the ground of e rror on the face of the record or being vitiated by a legal misconduct of the ar bitrator. It was clarified that the consequence would be the same even if the r eference to arbitration is by a court of law. That such a reference of dispute to arbitration would amount to excess in the exercise of jurisdiction of a court of law was held by the Apex Court in FOOD CORPORATION OF INDIA vs. SURENDRA, DE VENDRA & MAHENDRA TRANSPORT CO. (Supra). The same view was reiterated by this Co urt in GENERAL MANAGER, N.F. RAILWAY, MALIGAON & ORS vs. NASIM KHAN (Supra). 1 0. The unanimity of the pronouncements as above, therefore, demonst rates beyond doubt that in case any claim is lodged within ’excepted matters’ en visaged by the parties and is referred to as such in the contract agreement, ref erence thereof to arbitration would be invalid and the award to that effect woul d not only be vitiated by an error on the face of the record, but also embody th e potential of visiting the arbitrator(s) with the charge of legal misconduct. Does a cumulative reading of Clause 61(2) & 63 of the G.C.C. i n the instant proceeding render the claim of loss of profit bear reference there of to arbitration being within ’excepted matters’? 11. A Single Bench of this Court in S.K. AGARWALA vs. UNION OF INDIA & OTHERS (Supra) being seized with the same question answered the same in the a ffirmative. On an analysis of the aforementioned two clauses of the G.C.C. it h eld the view that it was only the decision of the railways on the contractor’s c laim for expenditure incurred by him in the expectation of completing the whole of the works that fell within the confines of excepted matters visualised in C lause 63 of the G.C.C. and thus was not referable to arbitration. In other word s, it was of the view that though Clause 61(2) in clear terms did not entertain the contractor’s claim for payment of compensation or otherwise on account of an y profit or advantage, which he might have derived from the execution of the wor k in full, it per se was not included with excepted matters as contemplated by Clause 63 of the general conditions of contract. The learned Single Judge in t he facts of the case, however noticed that the work had never started and that t he contract had been closed without any liability on any side. It, however, vis -à-vis the claim of the contractor for loss of profit observed that no decision of the railways was necessary. 12. Clause 63 of the G.C.C., which is under the chapter settlement o f disputes outlines the excepted maters which are not referable to arbitration . In terms thereof, all disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the wo rks or after their completion or whether before or after the determination there of would be referred to by the contractor to the railway and the latter would wi thin a reasonable time make and rectify decisions in writing except the ’decisio ns’ for which provisions have made in Clause 18, 22(5), 39 45(a), 55(1), 55(2)(v ), 61 (2) and 62(1) (b) of the G.C.C. or any other clause of the special or addi tional special conditions of contract. In terms of the said clause excepted ma tters would stand specifically excluded from the arbitration clause and would n ot be referred to arbitration. 13. Clause 63 therefore comprehends in clear terms the ’excepted mat ters’ to be the decisions as contemplated inter alia in 61(2), which is only lim ited to the contractor’s claim for expenditure incurred by him in the expectatio n of completion of the whole works and not with regard to any kind of profit or advantage which he might have derived from the execution thereof in full. Claus e 61 (2) evidently does not contemplate any decision of the railways relating to the contractor’s claim for compensation or otherwise towards profit or advantag e. As Clause 63 of the G.C.C. apparently signifies an exclusionary effect vis-à -vis disputes and differences between the parties, otherwise referable to arbitr ation, in our estimate the language used therein ought to be strictly construed. The railways having consciously excluded only the decisions for which provisio ns have been made amongst others in Clause 61(2) of the G.C.C., it would be both impermissible and inexpedient to permit an interpretation to either constrict o r enlarge the purport and scope thereof. This is more so, as any enlargement of the concept of excepted matters would have the effect of restricting the catego ries of disputes and differences between the parties for resolution by an arbitr ary proceeding which is a generally accepted expeditious and inexpensive mode of settlement thereof. Viewed in the above perspective, we find ourselves one wit h the opinion expressed by this Court in S.K. AGARWALA (Supra). 13. We are therefore, inclined to sustain the plea raised on behalf of the respondent-contractor. As no decision, either had been contemplated or re corded by the railways, vis-à-vis his claim for loss of profit, we are constrain ed to hold that the bar to this effect in Clause 61(2) notwithstanding, the same cannot be contemplated to be within the realm of excepted matters referred to in Clause 63 of the G.C.C. The authorities cited on behalf of the appellant-U nion of India-railways, in the face of the above determination are of no avail t o it. The appeal, therefore, lacks in substance and is dismissed. No costs. JUDGE JUDGE Benoy