IN THE HIGH COURT OF JUDICATURE OF ANDHRA PRADESH: HYDERABAD THURSDAY, THE TWENTY SECOND (22nd) DAY OF APRIL, TWO THOUSAND AND TEN Present: THE HON’BLE SRI JUSTICE A.GOPAL REDDY & THE HON’BLE SRI JUSTICE G.V.SEETHAPATHY CMA No.1523 of 1995 & CRP No.621 of 2002 CMA No.1523 of 1995: Between: The Superintending Engineer (R&B) NH Circle, Nellore & another …Appellants And: K. Venkateswarlu & 3 others … Respondents CRP No.621 of 2002: Between: The Superintending Engineer (R&B) NH Circle, Nellore & others …Appellants And: K. Venkateswarlu … Respondent HON’BLE SRI JUSTICE A.GOPAL REDDY AND HON’BLE SRI JUSTICE G.V.SEETHAPATHY CMA No.1523 of 1995 & CRP No.621 of 2002 COMMON JUDGMENT: [Per GVS, J] (i) CMA No.1523 of 1995 is directed against the decree and common order dated 28.10.1994 in OP No.13 of 1992 on the file of the Additional Subordinate Judge, Ongole, wherein, the claim petition filed by the appellants herein under Section 30 of the Arbitration Act, 1940 (for short ‘the Act’) for setting aside the award dated 26.09.1991, was dismissed. (ii) CRP No.621 of 2002 is filed by the same petitioners i.e., Superintending Engineer, R & B, NH Division, Nellore and the Executive Engineer, R & B, N H Division, Ongole, impugning the decree and common judgment dated 28.10.1994 in OS No.108 of 1991, wherein, the suit filed by the respondent-Contractor for making the award dated 26.09.1991 as a rule of Court, was allowed. 2. As both the matters arise out of the same common order and between the same parties and they are heard together and are being disposed of by this common judgment. 3. Arguments of the learned Government Pleader for Arbitration, representing R&B, NH Division and the learned counsel for the respondent herein, are heard. Perused the record. 4. The brief facts of the case may be stated thus: The contractor entered into an agreement bearing No.CR66/79-80 dated 14.03.1980 with the Superintending Engineer [hereinafter referred to as ‘employer’] for the work of ‘raising the embankment’ in KM 301.330 to 303.030 on Madras-Calcutta road NH-5. As disputes arose, the contractor approached the panel of Arbitration under Clause 73 PS to A.P. Detailed Standard Specifications (APDSS). The Arbitrator passed an award dated 26.09.1991, which was communicated to the plaintiff on 14.10.1991, and it was received by the Employer on 18.12.1991. According to the employer, the contractor, instead of starting the work entered into, made unnecessary correspondence with the employer, though there is no obstruction for the work and the same was intimated to the contractor by letter dated 04.07.1980. The Employer complained that ignoring the said contention and the documentary evidence, the arbitrator unnecessarily allowed the claim Nos.1 to 3, 7 and 8 and awarded total amount of Rs.1,84,202.21, contrary to the terms of the agreement, even though, there was delay on the part of the contractor in executing the work. The Arbitrators have also erred in awarding refund of penalty amount in a sum of Rs.2,000/-. The Contractor satisfied with the supplemental rates, executed supplemental agreement and payment was made accordingly. The employer further contends that in the absence of any stipulation to pay interest, the arbitrators, ought not to have allowed the claim for interest at the rate of 15% per annum. 5. The contractor contended that his tender dated 05.03.1980 being lowest one, was accepted at 1.77% less than the estimated rates and agreement was signed on 14.03.1980. Though a certificate was appended to the agreement to the effect that the site was handed over on the same day, physical handing over of the site took place subsequently. He further contends that he started collection of gravel and sought permission to take up spreading, but the department officials were undecided regarding use of gravel for berms instead of side earth, which is expensive nature and pending decision in that regard, the employer did not allow him to do any work for over two years and it was only in July 1982 the employer decided to use the gravel for berms instead of side earth and forced the contractor to sign supplement agreement on 14.07.1982 adopting the SSR for 1979-80. The contractor further contends that apart from inordinate delay of two years in permitting him to take up the work, the employer worked out rates arbitrarily for several new items, which were subsequently introduced beyond the scope of the agreement, but not incidental to or contingent on the main work. The contractor would further contend that the employer resorted to unjust recoveries from bills on account of seigniorage charges, stacking charges for gravel and hire charges. He would therefore contend that the responsibility for the delay in execution of the work rests clearly with the employer and he sustained loss due to idle labour and increase in prices and prolonged overheads, but however, the employer has unjustly imposed penalty and recovered a sum of Rs.2,000/- from him. 6. The Contractor filed claim statements before the Arbitrator raising in all 14 claims. The employer filed rebuttal statements opposing the claims made by the contractor and the contractor thereafter filed a rejoinder. The Arbitrators, who are respondents 2 to 4 in CMA No.1523 of 1995, by award dated 26.09.1991 allowed the claim Nos.1,2,3, 7 and 8 and rejected the other claims. 7. The trial Court framed the following points for consideration in OP No.13 of 1992. 1. Whether the Arbitrators exceeded their power and misconducted themselves to set aside the award dated 26.09.1991? 8. In OS No.108 of 1991 the trial Court framed the following issues for trial: 1. Whether the plaintiff is not entitled to get the award made by the Arbitrators a rule of Court? 2. To what relief? 9. No oral evidence was adduced before the trial Court either by the plaintiff or by the defendants. Ex.A.1 award was marked on behalf of the Contractor and Ex.B.1 agreement was marked on behalf of the employer. 10. By impugned common judgment, the learned Additional Senior Civil Judge, Ongole held that there are no tenable grounds for setting aside the award and therefore, the plaintiff is entitled to make the award as a rule of Court. Accordingly, OS No.108 of 1991 filed by the Contractor was allowed and OP No.13 of 1992 filed by the Employer, was dismissed. Aggrieved by the same, the employer filed the present appeal and revision. 11. Learned Government Pleader for Arbitration would contend that the trial Court erred in ignoring the fact that arbitrators misconducted proceedings while making the award without considering the documentary evidence, particularly, the letter dated 04.07.1980 written by the Superintending Engineer to the Contractor. He would further contend that the trial Court erred in ignoring the fact that the contractor was paid as per the terms of the original agreement dated 14.3.1980 and supplemental agreement dated 14.7.1982 and hence, the award passed by the Arbitrators is contrary to the terms of the agreement and without jurisdiction. 12. Learned counsel for the contractor, on the other hand, would contend that the delay of more than two years was squarely on the part of the employer in handing over the site and, therefore, the claims allowed by the Arbitrators are justified. 13. The question, which arises for consideration is, whether the arbitrators traveled beyond the agreement, which amounts to misconduct and therefore, the award is liable to be set aside? 14. The Contractor claimed under Claim No.1 a sum of Rs.1.82 lakhs towards difference in cost of gravel including excess quantity utilized and also claimed interest thereon at 18% per annum. He also claimed Rs.1.53 lakhs under claim No.2 for the loss sustained on account of increase in diesel fuel and interest thereon at 18% per annum. He further claimed under Claim No.3 a sum of Rs.1.07 lakhs towards difference in cost of gravel on account of delay of two years in taking decision by the employer to use the gravel, instead of side earth and also claimed interest thereon at 18% per annum. The said claims were allowed by the Arbitrator awarding a total sum of Rs.1,84,202.21, which was spread over for the period from 1981-85 as detailed in the award. The claim of the contractor under Claim No.7 for refund of Rs.2927/- towards fuel cost was also allowed by the Arbitrator on the ground that fuel cost has to be borne by the employer. Similarly claim No.8 pertaining to refund of Rs.5,000/- towards difference in rate of gravel and sand mix executed for berm treatment was also allowed by the Arbitrators, but however, rejected the claim of interest thereon. The other claims made by the contractor were disallowed by the arbitrators. 15. The amount of Rs.1,84,202.21 covered by the claim Nos.1,2 and 3 was allowed by the Arbitrators, mainly on the ground that by letter dated 02.04.1980 the Contractor requested the employer for permission to use the side earth for berms and there was no reply from the employer and ultimately, the work was got executed in July 1982 by revising the specifications to gravel and hence the delay in taking the said decision for change of specifications was on the part of the employer, which resulted in escalation of cost of gravel and also the conveyance charges forcing the contractor to incur additional expenditure. 16. According to the employer, the site was handed over on the same day of execution of the agreement on 14.03.1980, wherein, the time for completion of the work was stipulated as 12 months and the contractor failed to complete the work within the prescribed time. The trial Court rejected the said contention and held that the delay in execution of the work was on account of the delay on the part of the employer in taking the decision regarding change of specifications of gravel and it was only in July 1982, the contractor was allowed to use gravel for the berms instead of side earth and then only, a supplemental agreement was executed on 14.07.1982. The trial Court further held that the finding of the Arbitrators that there were no latches on the part of the contractor for the delay in completion of the work was proper and there is no misconduct on the part of the arbitrators, while passing the award. The trial Court, however, noted that the award can be set aside, if there was any error of law apparent on the face of the record, but not error of fact and there was no such mistake or error committed by the arbitrators apparent on the face of the record. 17. The main contention of the appellants/employer is that the trial Court erred in ignoring the letter dated 04.07.1980 written by the Superintending Engineer to the Contractor, where under, the contractor was asked to start the work as per the agreement and informing that there was no obstruction for the work. In their rebuttal statement before the arbitrators in response to the claim statement of the contractor, the employer has specifically pleaded about the said letter and it was further averred that the contractor was again requested by the Executive Engineer by letter dated 22.10.1980 to start the work immediately and a reminder was also issued to him by the Superintending Engineer on 08.12.1980 to start the work and therefore, the employer is not responsible for the delay as can be seen from the rebuttal statement. While applying for extension of time beyond 13.08.1981, the contractor in his representation dated 28.02.1981 has stated that he could not complete the work due to traffic dislocation in rainy season. The arbitrators while discussing the claim Nos.1 to 3 in the award, have not referred to the above said correspondence at all and on the other hand, observed that there was no response from the employer to the request made by the contractor seeking permission to use the side earth. 18. The agreement was executed admittedly on 14.03.1980. As per the recitals in the said agreement, site was also hand over on the same day. The contention of the contractor that the site was not hand over on that day and that it was done subsequently, is vague and also untenable in view of the specific recitals contained in the agreement Ex.B.1. It is not disputed that the employer has addressed a letter dated 04.07.1980 urging the contractor to start the work as per the agreement informing that there was no obstruction for the work and reminders were also issued subsequently as stated supra. In spite of it, the contractor has not commenced the work and delayed the same till July 1982. His plea that the delay was occasioned on account of the delay in taking the decision by the employer as to whether the side earth is to be used or gravel has to be used for berms, remains totally unsubstantiated and cannot be accepted in view of the letter dated 04.7.1980 and subsequent reminders urging the contractor to commence the work as per the agreement. The arbitrators have completely ignored the said correspondence from the employer addressed to the contractor and recorded a laconic finding that there was delay in taking decision by the employer for change of specifications. In the absence of any instructions from the employer to stop the work or postpone the same, pending decision regarding the nature of the material to be used for berms is taken, the contractor ought to have commenced and executed the work in accordance with the terms of the agreement, especially, in the light of the letter dated 04.07.1980 and subsequent reminders addressed by the employer urging him to go ahead with the work. By not referring to the material correspondence that emanated from the employer referred to above and not discussing the impact of the said correspondence on the rival contentions of the parties, which amounts to error apparent on the face of the record, the arbitrators have clearly committed legal misconduct in recording a finding to the effect that the delay was on the part of the employer without there being any basis. The said finding of the arbitrators is based on no evidence and is vitiated by error apparent on the face of record and when that is so, the award passed pursuant to such finding is clearly unsustainable. 19. It is not disputed that the contractor was paid amounts as per the terms of the original agreement dated 14.03.1980 and supplemental agreement dated 14.07.1982. The Arbitrators allowed the claim No.7 in a sum of Rs.2,972/- towards refund of fuel charges of the mixer and claim No.8 in a sum of Rs.5,000/- towards refund of the difference in the rate of gravel, which are not in accordance with the terms of the agreement. 20. In ‘Chief Engineer, Panchayatraj Employer vs. B.Balaiah[1]’, Division Bench of this Court held that ‘where the contract does not provide for payment of escalation charges, no claim can be put forward on account of such escalation, and that any award on that account will be in excess of the arbitrator’s jurisdiction and accordingly void. In such a case, it was held the award would be “otherwise invalid” within the meaning of clause (c) in Section 30 of the Act’. It was further held that ‘where it is not possible to separate the void part of the award from the valid part of it, the Court has no option but to declare the entire award as void and unsustainable. When the agreement does not permit for payment of any such expenditure, arbitrator has no jurisdiction to pass an award in that regard’. 21. Following the above decision, in an unreported judgment in CMA No.786 of 1986 and CRP No.2080 of 1986 dated 01.12.1988, a Division bench of this Court headed by Justice Jeevan Reddy, [as His Lordship then was] dealing with the question whether a contractor is entitled to lay a claim on account of escalation in the prices of materials, or on account of rise in wages, when it is not provided by the contract, held as follows: “In the case of a formally drafted and extremely elaborate contract, running into hundreds of pages as the one in the present case, there is no room for any such claim, nor can it be held that it is an implied term. On the contract, it must be presumed that the parties did not agree upon any such stipulation and therefore did not choose to incorporate it in the agreement. Since the arbitrator is the creature of the agreement/contract between the parties, he must operate within the confines of the agreement. No doubt, he can also go into the questions of breach and award of compensation/ damages on account of breach or termination, as the case may be. But that does not mean that he can award amounts on account of items or claims not provided for by the contract. He is not the monarch of what all he surveys.” 22. In the present case also the award is vitiated, having been passed without there being any evidence and also due to error apparent on the face of record, amounting to a legal misconduct on the part of the arbitrators and claims allowed are not covered by the agreement. 23. Learned counsel for the respondent-contractor invited attention to a decision in ‘M/s Ravindra Kumar Gupta & Company vs. Union of India[2], wherein, the apex Court held that ‘it is not permissible to the Court while examining the objections to the award under Section 30 of the Arbitration Act 1940 to substitute its own opinion on appreciation of the evidence’. 24. In the above case, it was found that the evidence adduced by the parties was duly scrutinized and evaluated by the arbitrator. With regard to the disputed claim, the arbitrator has given elaborate reasoning. Under those circumstances, it was held that the finding recorded by the Arbitrator cannot be said either perverse or based on no evidence. The above decision is not applicable to the facts of the present case, for the simple reason that the crucial documentary evidence having a direct bearing on the disputed question pertaining to the delay has not been taken note of or considered by the arbitrators and the same has adversely impacted on the finding recorded by the arbitrators without any supporting evidence to arrive at such a finding and in fact, the said finding is not preceded by any elaborate reasoning. The principle laid down in the above decision cannot therefore be made applicable to a case where the finding recorded by the Arbitrator is either perverse or based on no evidence. 25. Learned counsel for the respondent also invited attention to another decision in ‘K.V.Mohammed Zakir vs. Regional Sports Centre[3]’ wherein the Apex Court held as follows: “We find that the arbitrator in this case has reached a finding of fact on the materials on record about the delay on the part of the respondent and it has also been held by the arbitrator that because of such delay the claimant was put in great difficulty in completing the work in time. It is nobody’s case that by doing so the arbitrator has acted beyond his jurisdiction or committed any legal misconduct”. 26. In the present case, it is the specific contention of the appellants/employer that the Arbitrators have acted beyond the jurisdiction and committed legal misconduct and the said contention is held to be well founded. The principle laid down in the above decision is, therefore, not applicable to the facts of the present case. 27. In the circumstances, it is held that the award passed by the Arbitrators is clearly vitiated by legal misconduct, as the findings therein are based on no evidence and suffers from error apparent on the face of the record owing to non-consideration of the material documents placed before the Arbitrators, by the employer. The impugned award of the Arbitrators and the impugned common judgment of the trial Court are, therefore, unsustainable and are liable to be set aside and they are accordingly set aside. 28. In the result, both CMA No.1523 of 1995 and CRP No.621 of 2002 are allowed. There shall be no order as to costs. __________________ A.GOPAL REDDY, J ____________________ G.V.SEETHAPATHY, J Date: 22.04.2010 bss [1] 1985-(I) APLJ 224 [2] 2010(1) SCJ 135 [3] 2010(1) SCJ 4