THE HON’BLE SRI JUSTICE GHULAM MOHAMMED AND THE HON’BLE SRI JUSTICE P. SWAROOP REDDY CMA No.860 of 1996 and C.R.P.Nos.3974 and 3977 of 1996 Between and THE HON’BLE SRI JUSTICE GHULAM MOHAMMED AND THE HON’BLE SRI JUSTICE P. SWAROOP REDDY CMA No.860 of 1996 and C.R.P.Nos.3974 and 3977 of 1996 COMMON JUDGMENT:(Per Hon’ble Sri Justice Ghulam Mohammed) This appeal is directed against the judgment and decree dated 29-2-1996 in O.S.No. 144 of 1993 on the file of the Court of Additional Subordinate Judge, Gudur, Nellore district, while the C.R.P.Nos.3974 and 3977 of 1996 are directed against the judgment and decree dated 29-2-1996 in O.S.Nos.115 of 1993 and O.S.No.112 of 1993 respectively, on the file of the said Court. 2. The details necessary for deciding these cases are that on 7-10-1986, Union of India, Department of Space represented by its Construction Engineer, Civil Engineering Division, Sriharikota (for short ‘the Department’) had entrusted the work of construction of 50 quarters of type ‘BCDE’ Phase-I (A) to the appellant/petitioner-contractor. As per the Agreement, the work has to be completed within 10 months, but the work could not be completed due to various reasons and the department has extended the time for completion of work and finally, work was completed on 15-6-1988, instead of 21-8-1987. Since the disputes arose between the parties, the matter was referred to Arbitrator. The Arbitrator was appointed on 05-3-1992. The contractor has made 13 claims before the Arbitrator and the department has laid 4 claims. The Arbitrator has passed award in favour of the contractor, but disallowed claim Nos.3 to 6, 10,10(a) and 13 made by the appellant contractor. The Arbitrator has disallowed all the four claims made by the Department. Thereafter, the Arbitrator filed O.S.No.112 of 1993 under Section 14(2) of Arbitration Act, 1940 and the contractor filed O.S.No.115 of 1993 under Section 17 of the said Act, seeking to make the award as Rule of the Court, while the Department instituted O.S.No.144 of 1993 under Sections 30 and 33 of the Act seeking to set aside the award insofar as it went against the Department. 3. Learned counsel for the appellant-Contractor contended that the court below has wrongly exercised jurisdiction of an appellate court while setting aside the award of the Arbitrator in respect of Claim Nos.2, 7 and 12. He further contended that it is not open to the court below to re-appreciate the facts and evidence and it can interfere only when the grounds stated in Section 30 of the Arbitration Act, 1940 are made out. Learned counsel further contended that the court below erred in rejecting claim No.2 (escalation cost) on the ground it is not covered by arbitration clause. In support of his contention, he relied on the decisions in MUNICIPAL CORPORATION OF DELHI v. JAGAN NATH ASHOK KUMAR[1] and CENTRAL WAREHOUSING CORPORATION CONSTUCTION CELL v. P. DEVENDRA RAJU [2]. Learned counsel also relied upon the decisions of the Supreme Court in HINDUSTAN CONSTUCTION COMPANY LTD Vs. STATE OF J & K [3], PURI CONSTRUCTION PVT LTD Vs. UNION OF INDIA [4] and SANTA SILA DEVI Vs. DHIRENDRA NATH [5] and contended that the award of an arbitrator cannot be interfered with even though the court might have arrived at a different conclusion than the one arrived at by the arbitrator. There is no dispute with regard to the proposition laid down in these judgments. 4. Learned Assistant Solicitor General of India has taken us through the judgment of the Supreme Court in RAMNATH INTERNATIONAL CONSTRUCTION PVT LTD Vs. UNION OF INDIA [6] and contended that granting of compensation on account of delay in completion of work as per terms of contract is not permissible. He also contended that the reasons given for the delay are not at all attributable to the Department and hence the appellant is not entitled to any relief under claims No.1, 8, 9 and 11 and the trial Court has rightly set aside the award of the Arbitrator by disallowing the said claims. 5. Having heard the counsel on either side and upon perusing the judgment, it is seen that the claim petition is basically filed on the ground that there was delay in completion of work by the appellant/contractor. In fact, the period of completion of work was extended without invoking penal clauses of the agreement. The reasons assigned by the appellant-contractor for the delay viz., delay in procuring sand, delaying in getting timber from the Government saw mill from Rajahmundry etc., makes it clear that the department is nowhere concerned with the delay. The terms of agreement are very clear that the contractor is not entitled for any escalation of any amount and he is not entitled for any extra amounts, in case of delay in completion of work. So, the Award passed by Arbitrator to that extent is bad and the Court below has rightly set aside the same. 6. In order to appreciate the contention that the court below can not interfere with the award of the Arbitrator except in the grounds mentioned in Section 30 of Arbitration Act, 1940, it is pertinent to extract Section 30 of the Arbitration Act, 1940, which reads: “30. Grounds for setting aside award: An award shall not be set aside except on one or more of the following grounds, namely: a) that an arbitrator or umpire has misconducted himself or the proceedings; b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under Section 35; c) that an award has been improperly procured or is otherwise invalid.” 7. As far as the claim no.1 is concerned, Rs.65,428/- was claimed by the contractor towards extra sum for height variation of the construction. The Arbitrator has awarded the said amount. As far as the claim no.2 is concerned, Rs.3,65,900/- was claimed towards escalation of amount, the Arbitrator has awarded an amount of Rs.2,74,425/-. In respect of Claim No.7, Rs.32,500/- was claimed by the contractor towards welding copper, oxidized hinges etc., the Arbitrator has awarded the entire amount. As regards Claim No.8, an amount of Rs.50,158/- was claimed by the appellant towards extra amount for plastering, and the arbitrator has allowed the entire amount. Claim No.9 is concerned, Rs.22,750/- was claimed by the appellant for extra concreting sloped roof, which was allowed. Claim No.11 being interest, the Arbitrator has allowed the same. Claim No.12 is for reimbursement of sales Tax claimed by the appellant and the Arbitrator has allowed the same. Thus, the Arbitrator has allowed the aforesaid claims of the contractor and rest of the claims was dismissed. 8. O.S.No.144 of 1993 was filed by the Department challenging the Award passed by the Arbitrator insofar as it went against it. The Court below has passed common judgment by clubbing all the suits and passed the judgment and decree on 29- 2-1996. 9. The case depends upon the delay of completion of the work by the appellant. The reasons given for the delay are not attributable to the department and hence the appellant is not entitled for any relief under claim No.2 and 7 and the trial Court has rightly set aside the Award of the Arbitrator by disallowing the said claims. The Arbitrator gave wrong findings on the ground of delay and attributed the same to the Department, which itself is not correct. The reasons assigned by the appellant viz non- availability of Labour, delay in procuring sand, delaying in getting timber from Government saw mill from Rajahmundry etc., clearly show that the Contractor has to complete the work in time and thus execute the contract as time is the essence of the contract. The Terms of Agreement are very clear that the Contractor is not entitled for any escalation of any amount or he is not entitled for any extra amounts, in case of delay in completion of the work. So, the Award passed by the Arbitrator to that extent is bad and the trial Court has rightly set aside the same. The Supreme Court made it clear in RAMNATH INTERNATIONAL CONSTRUCTIONS PVT. LTD v. UNION OF INDIA [7] that granting compensation in respect of work against the terms of agreement is not permissible. 10. The counsel for the appellant also relied upon the decisions of the Supreme Court in GUJARAT WATER SUPPLY AND SEWERAGE BOARD Vs. UNIQUE ERECTORS (GUJARAT) P. LTD [8] wherein it was observed that the Arbitrator is not obliged to give reasons for his decision and even if it is obligatory for the Arbitrator to give reasons, it is not obligatory for the Arbitrator to give detailed judgment and further observed as under: “ Reasonableness as such of an award unless the award is per se preposterous or absurd is not a matter for the court to consider. Appraisement of evidence by the arbitrator is ordinarily not a matter for the court. It is difficult to give an exact definition of the word 'reasonable'. Reason varies in its conclusions according to the idiosyncrasy of the individual and the times and the circumstances in which he thinks. The word 'reasonable' has in law prima facie meaning of reasonable in regard to those circumstances of which the actor, called upon the act reasonably, knows or ought to know.” Learned counsel further relied upon another decision of the Supreme court in SMT. SANTA SILA DEVI Vs. DHIRENDRA NATH SEN [9] wherein it was held: “ Where an award given by the arbitrator is filed in Court and it is challenged on the ground of its incompleteness, the Court has to bear in mind certain basic positions. These are (1) a Court should approach an award with a desire to support it, if that is reasonably possible, rather than to destroy it by calling it illegal; (2) unless the reference to arbitration specifically so requires the arbitrator is not bound to deal with each claim or matter separately, but can deliver a consolidated award. The legal position is clear that unless so specifically required an award need not formally express the decision of the arbitrator on each matter of difference, (3) unless the contrary appears the court will presume that the award disposes finally of all the matters in difference; and (4) where an award is made de praemissis (that is, of and concerning all the matters in dispute referred to the arbitrator), the presumption is, that the arbitrator intended to dispose finally of all the matters in difference and his award will be held final, if by any intendment it can be made so.” He has drawn our attention to another decision of the Supreme Court in S.HARCHARAN SINGH Vs. UNION OF INDIA[10] wherein it was observed that where the arbitration agreement or deed of submission not requiring arbitrator to give reasons, the award of the Arbitrator cannot be questioned on the ground of error on face of award as it contained no reasons. The Supreme Court in MUNICIPAL CORPORATION OF DELHI Vs. JAGAN NATH ASHOK KUMAR (1supra) held as follows: “ ...there was no evidence of violation of any principle of natural justice. The arbitrator is the sole judge of the quality as well as quantity of evidence and it will not be for the Supreme Court to take upon itself the task of being a judge of the evidence before the arbitrator. It may be possible that on the same evidence the Court might have arrived at a different conclusion that the one arrived at by the arbitrator but that by itself is no ground for setting aside the award of an arbitrator.” Another decision of the Supreme Court relied upon by the appellant's counsel is HINDUSTAN CONSTRUCTION CO LTD Vs. STATE OF JAMMU AND KASHMIR [11] wherein it was observed that where it was shown that the award was non-speaking one and Arbitrator has not exceeded his jurisdiction or travelled beyond the contract, in such situation the setting aside of award on the ground of error apparent on face of award is not proper. The aforestated decisions relied upon by the learned counsel for the contractor cannot be made applicable to the case on hand as the facts therein are different and in the case on hand, the Arbitrator appeared to have exceeded his jurisdiction. 11. In the instant case, the work had commenced on 22- 10-1986 and it has to be completed by 31-5-1987, as per the Agreement. But the work could not be completed due to various reasons and the Department has extended the time for completion of work. Some disputes arose between the parties and the mater was referred to the arbitrator, who was appointed on 06-2-1992. The appellant claimed in all 15 claims before the Arbitrator and the department has claimed 5 claims. 12. The Arbitrator passed award on 30-4-1993 in favour of contractor by paying Rs.4,38,711-05 ps along with interest @ 18% per annum from 15-6-1988. The Arbitrator disallowed claim No.3 to 6, 10,11 12 and 13 made by the appellant contractor, and also disallowed all the four claims made by the Department. 13. While dealing with the grounds as enumerated in Section 30 of the Arbitration Act, it would be proper to refer to the award of the Arbitrator. The Arbitrator did not award the amount stated in Claim Nos.3 to 6, 10 to 12, 12-A and 15. It is to be seen that the claims have arisen mainly on account of the delay in completion of the work within the stipulated time. In the instant case, the Arbitrator has merely stated that the Department has granted time for extension of time for completing the work, without invoking penal clauses. But, it is seen from the letter dated 26-11- 1987 that the Department had extended the period without prejudice to the right of the Government to recover the liquidated damages in accordance with provisions of Clause-2 of the contract. This itself shows that the Arbitrator erred in coming to the conclusion that the Department had accepted the extension without any reservation, which is contrary to the contents of the letter dated 26-11-1987. The agreement does not provide for escalation, but the Arbitrator allowed the said claim on different grounds. Thus, the Arbitrator has not recorded findings based on the terms of contract and evidence. Further, the Arbitrator has awarded Rs.65,875/- for welding cooper oxidized hinges for doors and cupboard. The court below rejected the claim on the ground that the Contractor had resorted to his own method of work for convenience and it cannot be said to be additional work. Coming to the Claim No.9 – concreting the sloped roof, the drawings were given in advance before commencing the work, and as such, the stand of the Contractor that he came to know of the slope later on was not accepted. Thus, the court below had given cogent reasons for interfering with the award of the Arbitrator and narrated as to how the Arbitrator exceeded the jurisdiction. Further, Claim No.14 was awarded by the Arbitrator by stating that the Department has to reimburse the sales tax if the A.P. State Government demands with retrospectively. In case the rates quoted by the contractor are inclusive of all taxes, the question of reimbursement of sales tax at this stage does not arise. Thus, the court below had given reasons as to how the Arbitrator has misdirected himself in respect of the disallowed claims Nos.2, 7 and 14. 14. Apart from the above, the Supreme Court in RAMNATH INTERNATIONAL CONSTRUCTION PVT LTD Vs. UNION OF INDIA [12] observed that the Arbitrator cannot grant compensation on account of delay in completion of work even though specifically barred by the contract clause and the relevant portion reads as under: “( 12 ) We are fortified in this view by several decision of this Court. We may refer to two of them. In Associated Engineering Co. vs. Government of Andhra Pradesh [1991 (4) SCC 93], this Court was concerned with an appeal, which related to similar claims based on delays in execution. The High Court had held (reported in AIR 1990 AP 294) thus: applying the principle of the above decision to the facts of the case before us, it must be held that clause 59 bars a claim for compensation on account of any delays or hindrances caused by the department. In such a case, the contractor is entitled only to extension of the period of contract. Indeed, such an extension was asked for, and granted on more than one occasion. (The penalty levied for completing the work beyond the extended period of contract has been waived in this case ). The contract was not avoided by the contractor, but he chose to complete the work within the extended time. In such a case, the claim for compensation is clearly barred by clause 59 of the APDSS which is admittedly, a term of the agreement between the parties. This Court noticed that the claims were set aside by the High Court on the ground that those claims were not supported by any agreement between the parties, and that the arbitrator had travelled outside the contract in awarding those claims. This Court held that the said claims were not payable under the contract and that the contract does not postulate, in fact prohibits, payment of any escalation under those heads. It affirmed the decision of the High Court setting aside the award of those claims. In Ch. Ramalinga Reddy vs. Superintending Engineer [1999 (9) SCC 610], while considering the similar claim, this Court observed thus: "claim 8 was for 'payment of extra rates for work done beyond agreement time at schedule of rate prevailing at the time of execution'. The arbitrator awarded the sum of Rs. 39,540. Clause 59 of the A. P. Standard Specifications, which applied to the contract between the parties, stated that no claim for compensation on account of delays or hindrances to the work from any cause would lie except as therein defined. The claim falls outside the defined exceptions. When extensions of time, were granted to the appellant to complete the work, the respondents made it clear that no claim for compensation would lie. On both counts, therefore, claim 8 was impermissible and the High Court was right in so holding. " We, therefore, answer the first question in the affirmative. (13) THE arbitrator in his two speaking Awards recorded the following finding regarding delay: "from the facts and evidence placed before me, I find that the department cannot absolve itself of partial breaches committed which are of fundamental nature and had snow-ball effect. The department alone is not fully responsible, the contractor also has contributed to certain delays. " (in the Hangar Contract ). "the documents, the evidence and the arguments clearly indicate that the delay for completing has been a joint responsibility of both the Department and Contractor" (in Road Contract ). In spite of having held that both were responsible for the delay and having noticed the arguments based on clause 11 (C) of the General Conditions of contract, the Arbitrator proceeded to award damages on the ground of delay on the reasoning that the contractor is entitled to compensation, unless the employer establishes that the contractor has consented to accept the extension of time alone in satisfaction of his claim for delay. As rightly held by the High Court, which decision we have affirmed while considering questions no. (i), clause 11 (C) of the General Conditions of Contract is a clear bar to any claim for compensation for delays, in respect of which extensions have been sought and obtained. Clause 11 (C) amounts to a specific consent by the contractor to accept extension of time alone in satisfaction of his claims for delay and not claim any compensation. In view of the clear bar against award of damages on account of delay, the arbitrator clearly exceeded his jurisdiction, in awarding damages, ignoring clause 11 (C ). In Associated Engineering Co. (supra) this Court held: "the arbitrator cannot act arbitrarily, irrationally, capriciously or independently of the contract. His sole function is to arbitrate in terms of the contract. He has no power apart from what the parties have given him under the contract. If he has travelled outside the bounds of the contract, he has acted without jurisdiction. A dispute as to the jurisdiction of the arbitrator is not a dispute within the award, but one which has to be decided outside the award. An umpire or arbitrator cannot widen his jurisdiction by deciding a question not referred to him by the parties or by deciding a question otherwise than in accordance with the contract. He cannot say that he does not care what the contract says. He is bound by it. It must bear his decision. He cannot travel outside it. Thus, the Arbitrator in the instant case has exceeded the jurisdiction vested in him, apart from committing error apparent on the face of the record, and the court below rightly interfered with the award of the Arbitrator to the extent of Claims No.2, 7 and 14 and set aside the claim to that extent.” 15. It is not in dispute that the Arbitrator is a creature of the contract. Both the parties agree for appointment of Arbitrator whenever dispute arises in pursuance of the contract. The terms of contract are binding on the parties and they have to claim their rights as per the terms of the contract. The Arbitrator also, while deciding the dispute has to interpret the terms of the contract to come to a correct conclusion. Wherever there is misinterpretation or wrong interpretation or the Arbitrator travels beyond the terms of contract, it has to be held that the same amounts to error apparent on the face of record and the award shall be set aside. Having regard to the above, we are of the considered view that the court below has rightly exercised the jurisdiction vested in it and we do not see any ground to interfere with the judgment passed by the Court below and the same is accordingly confirmed. 16. Hence, we do not see any ground to interfere with the award passed by the trial Court and the same is accordingly confirmed. The appeal and civil revision petitions preferred by the Contractor stands dismissed. No costs. __________________________ GHULAM MOHAMMED, J. ________________________ P.SWAROOP REDDY, J. Kk/ 26 -8-2010 THE HON’BLE SRI JUSTICE GHULAM MOHAMMED AND THE HON’BLE SRI JUSTICE P. SWAROOP REDDY CMA No.860 of 1996 and C.R.P.Nos.3974 and 3977 of 1996 26-8-2010 [1] AIR 1987 SC 2316 [2] 1994 (1) APLJ 368 [3] AIR 1992 SC 2192 [4] AIR 1989 SC 777 [5] AIR 1963 SC 1677 [6] AIR 2007 SC 509 [7] AIR 2007 SC 509 [8] AIR 1989 SC 973 [9] AIR 1963 SC 1677 [10] AIR 1991 SC 945 [11] AIR 1992 SC 2192 [12] AIR 2007 SC 509