THE HON’BLE SRI JUSTICE K.C.BHANU CI VIL MISCELLANEOUS APPEAL No. 3761 of 2003 AND CIVIL REVISION PETITION No. 4195 OF 2003 COMMON JUDGMENT: 1. The Civil Miscellaneous Appeal is directed against the order and decree dated 21.3.2003 in Arbitration Original Petition No.19 of 2000 on the file of the Principal Senior Civil Judge, Tirupati, whereas the Civil Revision Petition is directed against the judgment and decree dated 21.3.2003 in Original Suit No.165 of 2000 on the file of the Principal Senior Civil Judge, Tirupati. 2. Since both the cases arise of same Award passed by the first respondent, they are being taken up for disposal together. 3. For better appreciation of facts, the appellants/petitioners are hereinafter referred to as ‘the Department’, the first respondent is referred to as ‘the Arbitrator’, and the second respondent is referred to as ‘the Contractor’. 4 The brief facts that are necessary for disposal of these cases may be stated as follows: The Department invited tenders vide notice No.17/Cable/87-88/82, dated 1.6.1990 for execution of work of excavation of trenches at Tirumala and other places for laying cables. As the amount quoted by the Contractor was the lowest, his tender was accepted by the Department and Ex.C3-Work Order dated 21.6.1990 was issued by the Department. The works entrusted to the Contractor under the above said order consist of- (i) excavating trenches of required width and depth in soils of different nature, in metal roads, in tar roads and concrete roads; (ii) recovery/laying of cables of all sizes in trenches, and (iii) covering the cables of all sizes with ‘U toughs or bricks or Cuddapah slabs as supplied by the Department. In the work order, different rates were fixed for excavating trenches in various types of soils viz. ordinary soils, hard soils, rocky soils, metal roads, tar roads and cement concrete roads. After handing over site to the Contractor, he made all necessary arrangements to complete the work. On 2.7.1990, he commenced the work. While excavating the trenches in Tirumala, it had become necessary for the Contractor to cut some of the trenches in hard rock, which was not contemplated at the time of issue of work order by the Department. Neither the tender schedules supplied to the Contractor nor the tender acceptance letter issued by the Department provided for any rate for cutting trenches in hard rock. Cutting trenches in hard rock requires greater effort involving more labour and blasting material, and blasting also cannot be resorted to freely and the rock had to be cut and removed by chiseling. So, the cost of cutting trenches in hard rock is very high when compared to the rates of excavation in hard soils. The Contractor made a representation on 8.10.1990 to the Department for fixing a reasonable higher rate for cutting hard rock. In pursuance of the same, the Divisional Engineer (Telecom), on behalf of the District Manager (Telecom), Tirupati, called for a report from the Assistant Divisional Engineer, who submitted a report dated 24.4.1991 requesting for approval of an appropriate rate for cutting in hard rock. It is also stated in the said report that the Telecom District Manager, Tirupati had also inspected the cable laying work in Tirumala during execution of the work and observed the cable trench passing through hard rock. The Contractor completed the work including rock cutting. The Contractor submitted bills claiming additional payment for the extent of cutting carried out by him in hard rock in various reaches, and the Assistant Divisional Engineer, Telecom (cables), while forwarding the Contractor’s letter dated 19.8.1991, stated that the Contractor was assured of payment for cutting in hard rock at appropriate rate by the Telecom District Manager. But, the Department did not settle the claim giving additional payment for the work done in hard rock cutting. The Department also did not release the earnest money deposit. After waiting for substantial period, the Contractor sent representation dated 28.7.1992 to the Telecom District Manager, Hyderabad, requesting him to settle the claim. As the Department failed to settle the claim thereafter also, the Contractor got issued a notice dated 12.9.1992 under Section 80 of the Code of Civil Procedure, 1908 (for short, ‘CPC’) to the Department to settle the claim and for interest @ 24% per annum, otherwise he would invoke the Arbitration clause and get the matter referred to Arbitration. As there was no response from the Department, the Contractor filed Original Suit NO.237 of 1992 on the file of the Principal Senior Civil Judge, Tirupati for appointment of an Arbitrator as provided under clause (6). On contest, the suit was decreed on 26.07.1996 appointing the first respondent as Arbitrator. On 20.04.1998, the Arbitrator passed Award allowing two claims viz. costs of excavation of hard rock at Rs.1,70,040/- and refund of Earnest Money Deposit of Rs.12,500/-, with interest and costs. Challenging the Award, the Department filed Original Petition No.19 of 2000 before the trial Court under Sections 30 and 33 of the Arbitration Act, 1940 to set aside the Award, whereas the Contractor filed Original Suit No.165 of 2000 under Sections 14 and 17 read with 20 of the Act, to make the Award of the Arbitrator as the Rule of the Court. Vide the impugned order and judgment, the trial Court dismissed the Original Petition and decreed the Original Suit. Challenging the same, the present appeal and revision have been preferred by the Department. 5 The points that arise for determination in these two cases are: “Whether there are any grounds to set aside the Award dated 20.04.1998 passed by the Arbitrator under Section 30 of the Arbitration Act, 1940 (for short, hereinafter referred to as ‘the Act’)? and “Whether the judgment and decree dated 21.3.2003 passed in Original Suit No.165 of 2000 on the file of the Principal Senior Civil Judge, Tirupati, in making the Award dated 20.04.1998 passed by the Arbitrator as the Rule of the Court under Section 17 of the Act, are correct, legal and proper ?” 6. The learned counsel appearing for the appellants/petitioners (Department) contended that the Award dated 20.4.1998 passed by the Arbitrator by directing payment of Rs.300/- per cubic meter for 654 cubic meters for cutting hard rock soil, is without any basis and outside the terms and conditions of the contract; that, Section 70 of the Indian Contract Act, 1872 (for short, hereinafter referred to as ‘the Act, 1872’) has no application to the facts of the case; that the Award is passed in disregard to the express terms of the contract and the rates agreed in pursuance of the contract, and so, it is arbitrary and without jurisdiction; that the claim of the Contractor is barred by limitation as the limitation has to be computed from 8.10.1990, on which date the claim was made; that, the Award of the Arbitrator is based on his personal opinion and knowledge, which is impermissible, and that no Award could be passed for extra or additional work not covered by the tender and its consequential order of work order, and therefore, he prays to set aside the order and decree dated 21.3.2003 in Arbitration Original Petition No.19 of 2000 and the judgment and decree dated 21.3.2003 in Original Suit No.165 of 2000, on the file of the Principal Senior Civil Judge, Tirupati, and set aside the Award dated 20.04.1998 passed by the Arbitrator. 7. On the other hand, the learned counsel for the Contractor contended that the contract entered into between the parties is with regard to excavation of trenches for laying cables, pipes through ordinary soils, hard soils and rock soils, but, the Contractor faced with hard rock soil during the progress of the work; that, the claim for grant of extra rate over and above the rates mentioned in work order, has been placed before the Department while carrying out the work on 8.10.1990, and in pursuance thereof, the Department deputed concerned officer for the purpose of verifying the truth or otherwise of the claim made by the Contractor, and he recommended for payment extra rate for excavating the hard rock soil, which involves additional expenditure; that, after completion of the contract work, the Contractor has not endorsed any full and final settlement of the claim, and therefore the claim is well within the time. The learned counsel further contended that in view of Section 70 of the Act, 1872, it is clear that the Department assured the Contractor to the effect that a reasonable price would be paid for carrying out the work in order to have a streamline of work; that the Contractor has not done the work gratuitously and the appellants enjoyed the said work and therefore, he is entitled for the claim under Section 70 of the Act, 1872. It is his further contention that no grounds are raised either before the Civil Court or before this Court, that the findings of the Arbitrator are perverse, and that if two views of interpretation of agreement or document are possible and the lower court takes one view, it is not open to this Court to take a different view with regard to the findings of fact; that, in the absence of any perverse finding or any error or difficulty in arriving at the finding of facts on the part of the Arbitrator, the order under challenge needs no interference by this Court, and therefore, he prays to dismiss both the appeal and the revision. 8. The factual matrix is not in serious dispute. In pursuance of the tender notification issued by the Department for excavation of trenches of required width and depth for laying underground cables, pipes and reinstatement of work for the value of Rs.5.00 lakhs as per the tender specifications, the Contractor filed his tender and it was accepted. Thereafter, on 21.6.1990, the work order for excavation of work for laying cables requiring the Contractor to complete the work within one year, was issued. Within 15 days thereafter, the Contractor started the work. During the course of carrying out the contract work, he found hard rock in the process of excavation. As rate for excavation of trenches in hard rock is not covered by the work order or tender notification, the Contractor said to have made a representation dated 8.10.1990 for fixing a reasonable higher rate in so far as excavation of hard rock is concerned. In pursuance thereof, the Department called for a report from the Assistant Divisional Engineer (Telecom). As no rate was fixed for cutting of hard rock, the Contractor submitted another representation on 8.4.1991. In pursuance of the said representation, the Assistant Divisional Engineer submitted a report on 24.4.1991 duly reporting about cutting of hard rock in the process of excavation. As no favourable orders were passed, he made another representation dated 13.5.1991 and 19.8.1991. On 17.9.1991, Assistant Divisional Engineer submitted another report. But, no rate was fixed inspite of submitting reports by the officials of the Department. Therefore, the Contractor got issued statutory legal notice dated 12.9.1992 claiming an amount of Rs.2,43,754/-, and thereafter filed Original Suit No.237 of 1992 on the file of the Principal Senior Civil Judge, Tirupati for appointment of an Arbitrator under Section 8 of the Act, 1940. On 26.07.1996, the Principal Senior Civil Judge, Tirupati appointed the first respondent herein as Arbitrator. After conducting enquiry, the Arbitrator passed an award for an amount of Rs.1,70,040/- being the value of the expenditure incurred by the Contractor for cutting of hard rock to an extent of 654 cubic meters @ Rs.300/- per cubic meter, after deducting Rs.40/- per cubic meter already paid, and also directed the Department to release the Earnest Money Deposit of Rs.12,500/- and granted interest at 21% per annum on the above amounts. 9. The only dispute is with regard to payment of the amount incurred for excavating trenches in hard rock soil. As per the work order, the rate fixed is Rs.40/- per cubic meter in respect of hard soil and Rs.40/- per cubic meter in respect of rocky soil for hilly areas. There is no reference in the work order with regard to payment for excavation of trenches in hard rock soil. The place of excavation of trenches for laying cables, pipes, etc. is located in Tirumala hills. While excavating trenches in Tirumala, the Contractor has to cut some of the trenches through hard rock for which rate was not contemplated in the work order. Admittedly, the claim of the Contractor was not made after completion of the work. While carrying out the work, he faced some difficulty in excavating trenches in hard rock soil, which involved greater effort of using more labour and blasting material, and therefore, within four months after commencement of the work, the contractor made a representation duly bringing the said fact to the notice of the Department. No doubt, copy of the said representation dated 8.10.1990 was not marked before the Arbitrator by both the parties, but, at the same time, the Department appears to have received the said representation as seen from the subsequent correspondence between the Contractor and the Department. Several representations were made by the Contractor to the Department to fix rate for cutting of hard rock work. No doubt, the Department has not agreed in writing to give a reasonable rate for cutting the hard rock work. But, according to the Contractor, the concerned official of the Department orally assured the Contractor to complete the work so that they could fix a reasonable rate for cutting the hard rock soil. 10. It is not disputed by the Department that the Contractor while digging trenches for the purpose of laying underground cables, pipes, etc. has cut 654 cubic meters of hard rock. It is not in dispute that the Department is not liable for payment of additional work carrried, which is not provided for in the work order without the previous written sanction of the Department, and the same was accepted by the Contractor. But, it is not a case of Contractor carrying out any additional work. The Sub Divisional Engineer (Telecom) was examined on behalf of the Department before the Arbitrator. He has not denied or disputed about execution of the work by the Contractor with regard to cutting hard rock, but his contention is that payment for cutting of hard rock is not covered under the work order or the tender. 11. In the above factual back ground, the claim of the contractor is based upon Section 70 of the Act, 1872, which reads: “Where a person lawfully does anything for another person or delivers anything to him not intending to do so gratuitously, and such another person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of or to restore, the thing so done or delivered.” The claim for compensation by one person against another under Section 70 of the Act, 1872 is not based on any subsisting contract between the parties; its basis is that something had been done by one party for the other which the other party has voluntarily accepted. From the above provision, it is clear that three essential conditions are necessary for invoking Section 70 of the Act viz. (1) something has been done for another person lawfully; (2) the thing done must be done without intention to do so gratuitously; and (3) a person enjoys the benefit thereof. On this aspect, the learned counsel for the Contractor relied on a decision in Gujarat Electricity Board v. S.A. Jais & co. & others[1], wherein it is held thus: “… Therefore, according to their Lordships, such a claim can be governed only by residuary Art.120 which provided six years from the date when the right to sue accrues. This decision completely concludes the present question where also the claim is not for price of work done which arises out of the contract to pay the price and which is not a claim for compensation for any breach, but which is clearly a claim for enhanced rate because of changed circumstances and because the contract schedule of rates did not provide for any such rates for rock cutting work.” It is also a case where in the contract between the parties, there was no rate fixed insofar as hard rock cutting work is concerned as the same involved skilled labour and extra expenditure. It is also held that rock cutting work can be done either by blasting or by chiseling. Such work of rock cutting by manual labour would surely call for a totally different rate. Normal presumption is to apply that such a price schedule would cover the rate only of the described item or ancillary, incidental work, it would not cover in its ambit such a totally different kind of work which requires a totally different rate. Therefore, considering all these aspects, the claim for enhanced rate, in view of changed circumstances, is permissible. But, in that case, the High Court reduced the amount to be paid to the plaintiff therein for rock cutting work. Aggrieved by the said judgment, the Contractor therein filed Civil Appeal before the Supreme Court. The Civil Appeal was partly allowed by the Supreme Court in the judgment in S.A. Jais & Company & others v. The Gujarat Electricity Board[2], wherein it is held thus: “..The main reason for coming to the above conclusion which appealed to the Gujarat High Court, and also appealed to us, is that it is well known that the charge for rock-cutting would be much higher than the charge for excavation of soil or murram as rock-cutting would involve more labour and heavier cost and no contractor would agree to the same rate for excavation of soil and for rock- cutting.” Therefore, from the above decision, it is clear that even though there was no specific mention of excavation of rock or cutting of rock under the contract, it is held that, that item cannot be regarded as the item covered under the contract or to be paid for at the contract rate of excavation, impliedly accepting the principle laid down under Section 70 of the Act, 1872. 12. However, the learned counsel for the Department relied on a decision in Puran Lal Sah v. The State of U.P.,[3] wherein it is held thus: “The principle of quantum meruit is rooted in English law under which there were certain procedural advantages in framing an action for compensation for work done. In order to avail of the remedy under quantum meruit, the original contract must have been discharged by the Defendant in such a way as to entitle the Plaintiff to regard himself as discharged from any further performance and he must have elected to do so. The remedy it may be noticed is however, not available to the party who breaks the contract even though he may have partially performed part of his obligation. This remedy by way of quantum meruit is restitutory that is it is a recompense for the value of the work done by the Plaintiff in order to restore him to the position which he would have been in if the contract had never been entered into. In this regard it is different to a claim for damages which is a compensatory remedy aimed at placing the injured party, as near as may be in the position which he would have been in, had the other party performed the contract.” From the above decision, it is clear that Section 70 of the Act, 1872 can be invoked and compensation can be awarded for the work done or service rendered when the rate thereof is not fixed by the Contract. In this case also, the work done by the Contractor is not in terms of the contract because the contract does not prescribe the rate for cutting of hard rock work for laying underground cables. As rightly contended by the learned counsel for the Contractor, if the three ingredients of Section 70 of the Act, 1872 are fulfilled, then the Contractor is entitled for the compensation on the principle of quantum meruit. No doubt, the work of cutting of hard rock is outside the work order, but the Contractor has not executed the work gratuitously and the Department has derived benefit for laying cables, pipes through hard rock. As the contractor does the work under the contract, if no price is fixed, he is entitled to be paid a reasonable sum for engaging the additional labour and incurring additional expenditure for blasting of hard rock or chiseling the same. But, at the same, reasonable rate has to be fixed for the said work. Such fixing should not be arbitrary or capricious. 13. It is one of the contentions of the learned counsel for the Department that the Arbitrator exceeded his jurisdiction or went beyond the terms of the agreement and therefore it would be a jurisdictional error so as to interfere with the Award passed by the Arbitrator. For that proposition, he relied on a decision in Steel Authority of India Limited v. J.C. Budharaja, Government and Mining Contractor[4], wherein it is held thus: (para 17). “It is to be reiterated that to find out whether the arbitrator has travelled beyond his jurisdiction and acted beyond the terms of the agreement between the parties, agreement is required to be looked into. It is true that interpretation of a particular condition in the agreement would be within the jurisdiction of the arbitrator. However, in cases where there is no question of interpretation of any term of the contract, but of solely reading the same as it is and still the arbitrator ignores it and awards the amount despite the prohibition in the agreement, the award would be arbitrary, capricious and without jurisdiction. Whether the arbitrator has acted beyond the terms of the contract or has travelled beyond his jurisdiction would depend upon facts, which however would be jurisdictional facts, and are required to be gone into by the Court. Arbitrator may have jurisdiction to entertain claim and yet he may not have jurisdiction to pass award for particular items in view of the prohibition contained in the contract and, in such cases, it would be a jurisdictional error. For this limited purpose reference to the terms of the contract is a must. Dealing with similar question this Court in New India Civil Erectors (P) Ltd. v. Oil and Natural Gas Corporation (1997) 11 SCC 75 : (1997 AIR SCW 941 : AIR 1997 SC 980) (para 7 of AIR) held thus : "it is exiomatic that the arbitrator being a creature of the agreement, must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount which is ruled out or prohibited by the terms of the agreement. In this case, the agreement between the parties clearly says that in measuring the built-up area, the balcony areas should be excluded. The arbitrators could not have acted contrary to the said stipulation and awarded any amount to the appellant on that account".” From the above decision, it is clear that whether the Arbitrator acted beyond the terms of the contract or not, would depend upon the facts of each case and interpreting a particular condition in the agreement would be within the jurisdiction of the Arbitrator. One of the interpretations of the work order is with regard to payment of amount in respect of excavation of rocks. The expenditure to be incurred for excavation of rocks and the hard rock would be varied and not the same. Therefore, fixing of the rate for cutting of hard rock work is exclusively within the jurisdiction of the Arbitrator. 14. (a) The learned counsel for the Department relied on a decision in M/s.P.K. Ramaiah & Company v. Chairman & Managing director, National Thermal Power Corporation[5], wherein it is held thus: “…Accordingly, we hold that the appellant having acknowledged the settlement and also accepted measurements and having received the amount in