[1] IN THE HI IN THE HI IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.840 OF 1999 APPEAL NO.840 OF 1999 APPEAL NO.840 OF 1999 IN IN IN ARBITRATION PETITION NO.106 OF 1997 ARBITRATION PETITION NO.106 OF 1997 ARBITRATION PETITION NO.106 OF 1997 AND AND AND APPEAL NO.1455 OF 1999 APPEAL NO.1455 OF 1999 APPEAL NO.1455 OF 1999 IN IN IN ARBITRATION PETITION NO.108 OF 1997 ARBITRATION PETITION NO.108 OF 1997 ARBITRATION PETITION NO.108 OF 1997 Pawan Hans Helicopter Ltd., formerly known as Pawan Hans Pvt. Ltd., a Government of India undertaking registered under the provisions of the Companies Act, 1956, having its office at New Delhi and Regional Office at Juhu Aerodrome, Swami Vivekananda Road, Vile Parle, .... Appellants Bombay-400 056. (Ori.Petitioners) - Versus - Messers Associated Construction, a Partnership firm having its registered office at 3-B, Bharati Bhavan, Khar, Bombay-400 052. .... Respondents Shri S.U. Kamdar with Ms Chhaya Shah & Shri Sudeep Dasgupta i/b M/s. Bhasin & & Co. for the Appellants in both the Appeals. Sarvasri Pradip Sancheti with Karthik Somasundaram i/b M/s. Paras Kuhad & Associates for the Respondents in both the Appeals. CORAM: CORAM: CORAM: R.M.S. KHANDEPARKAR & D.G. KARNIK, JJ. DATED: DATED: DATED: JUNE 07, 2007 JUDGMENT (Per R.M.S.Khandeparkar, J.): JUDGMENT (Per R.M.S.Khandeparkar, J.): JUDGMENT (Per R.M.S.Khandeparkar, J.): 1. Since common questions of law and facts arise in [2] both these appeals, they were heard together and are being disposed of by this common judgment. 2. Pursuant to the allotment of work for construction of compound wall and for construction of a bridge over a nullah to the respondents, respective work contracts were entered into between the parties. The work in both the cases was required to be completed within a specified time. However, since it could not be completed within the said period, the time for completion of the work was extended. Consequent to the dispute arising between the parties, same was referred to arbitration in terms of the arbitration clause in the agreements. The learned arbitrator had held that the respondents would be entitled to claim 15% escalation charges as against the 30% escalation charges claimed by the respondents for the period beyond the expiry of the contractual period. As the appellants herein were not satisfied with the awards, they preferred petition under Sections 30 and 33 of the Arbitration Act, 1940, herein after referred to as "the said Act", for setting aside of the award. Consequently, the awards were partially modified to the benefit of the respondents. Being dissatisfied, the appellants have preferred these appeals. 3. The challenge to the impugned judgments and [3] consequently to the awards is three-fold: firstly, that the learned arbitrator could not have granted the claim for escalation of rates made by the respondents and, secondly, that the contract between the parties does not provide for second final bill and therefore no claim based on the second final bill could have been allowed by the learned arbitrator and thirdly that the arbitrator could not have entertained the dispute having been raised beyond the period of limitation. The challenge to the awards regarding grant of the claim for escalation of rates is on two grounds: firstly, that the claim could not have been granted in view of Clauses 18 and 34 of the agreement between the parties and secondly, that the respondents had already issued "No Due Certificate" and, therefore, any claim made after the issuance of such certificate could not have been granted. 4. As regards the first ground of challenge to the grant of escalation charges to the respondents, it is the case of the appellants that the escalation charges granted are for the period subsequent to the contractual period which is contrary to the terms of the contract in view of Clause Nos.18 and 34. The said clauses clearly indicate that the contract price was not subject to rise or fall in prices and therefore the appellants were not liable to pay any escalation charges. Reliance is [4] sought to be placed in the decision in the matter of New New New India Civil Erectors (P.) Ltd. v. Oil and Natural Gas India Civil Erectors (P.) Ltd. v. Oil and Natural Gas India Civil Erectors (P.) Ltd. v. Oil and Natural Gas Corporation, Corporation, Corporation, reported in AIR 1997 SC 980, and in the matter of Steel Authority of India Ltd. v. J.C. Steel Authority of India Ltd. v. J.C. Steel Authority of India Ltd. v. J.C. Budharaja, Government and Mining Contractor, Budharaja, Government and Mining Contractor, Budharaja, Government and Mining Contractor, reported in AIR 1999 SC 3275 as well as State of Orissa v. Sri S.C. State of Orissa v. Sri S.C. State of Orissa v. Sri S.C. Roy (dead) by LRs., Roy (dead) by LRs., Roy (dead) by LRs., reported in JT 2001 (5) SC 267. Secondly, it is the contention of the appellants that the terms of the contract between the parties nowhere provide for any second final bill as such and this is also very clear from the Clauses 31 and 32 of the agreement and once the respondents had submitted the final bill, and further had issued the no claim certificate, it was not open for the arbitrator to grant any claim based on the second final bill. It is their case that the contractor was obliged to incorporate all his claims under the final bill which was duly confirmed by him on issuance of the no claim certificate. In that regard, reliance is sought to be placed in the decision in the matter of Bharat Coking Coal Ltd. v. M/s. Bharat Coking Coal Ltd. v. M/s. Bharat Coking Coal Ltd. v. M/s. Annapurna Construction, Annapurna Construction, Annapurna Construction, reported in AIR 2003 SC 3660. In any case, it is the contention on behalf of the appellants that the arbitrator misconducted himself in ignoring the no claim certificate and assuming the same to have been obtained under duress and further to assume about a trade practice, in the absence of any plea or evidence in that regard. As regards the second ground [5] of challenge, it is the contention on behalf of the appellants that in terms of Clause 56 of the contract, the respondents were required to raise the dispute within a period of 28 days from the issuance of the final certificate and the dispute was not raised within the said period. 5. On the other hand, it is the case of the respondents that in the proceedings under Sections 30 and 33 of the said Act the scope for interference by the Court is very limited and the Court cannot sit in appeal over the award. Reliance is placed in the decisions in the matters of State of Rajasthan v. Puri Construction Co. State of Rajasthan v. Puri Construction Co. State of Rajasthan v. Puri Construction Co. Ltd. and another, Ltd. and another, Ltd. and another, reported in (1994) 6 SCC 485 and M/s. M/s. M/s. Sudarsan Trading Co. v. Government of Kerala and Sudarsan Trading Co. v. Government of Kerala and Sudarsan Trading Co. v. Government of Kerala and Another, Another, Another, reported in (1989) 2 SCC 38. It is further contention on behalf of the respondents that the arbitrator was not required to give reasons and in the absence of reasons, merely because two views are possible, Court’s interference would not be justified and, in any case, the grant of escalation is within the scope of the agreement and it relates to the matter of interpretation of the agreement and therefore merely because two views are possible, it would not warrant interference in the proceedings under Sections 30 or 33 of the said Act and in that regard reliance is sought to be placed in the decisions in the matters of P.M. Paul P.M. Paul P.M. Paul [6] v. Union of India, v. Union of India, v. Union of India, reported in AIR 1989 SC 1034 and K.N. Sathyapalan (Dead) By Lrs. v. State of Kerala & K.N. Sathyapalan (Dead) By Lrs. v. State of Kerala & K.N. Sathyapalan (Dead) By Lrs. v. State of Kerala & Anr., Anr., Anr., reported in JT 2006 (10) SC 615. It is further contention on behalf of the respondents that the restrictions imposed under Clause 34 of the agreement are confined to the period, the duration of which was fixed under the contract and not for the extended or the delayed period and in that connection, reliance is placed in the decisions in the matters of Hyderabad Hyderabad Hyderabad Municipal Corporation v. M. Krishnaswami Mudaliar and Municipal Corporation v. M. Krishnaswami Mudaliar and Municipal Corporation v. M. Krishnaswami Mudaliar and Mudaliar and another, Mudaliar and another, Mudaliar and another, reported in (1985) 2 SCC 9 and M/s. Metro Electric Co., New Delhi v. Delhi M/s. Metro Electric Co., New Delhi v. Delhi M/s. Metro Electric Co., New Delhi v. Delhi Development Authority, New Delhi, Development Authority, New Delhi, Development Authority, New Delhi, reported in AIR 1980 Delhi 266. In relation to the No Due Certificate, it is the contention on behalf of the respondents that the evidence on record, as analysed by the arbitrator, clearly supports and justifies the respondents’ plea of duress. Since the arbitrator is the final Judge of the quality and the quantity of evidence, no exception should be taken to the finding in that regard arrived at by the learned arbitrator. Once the No Due Certificate document was proved to have been obtained under duress, same cannot form the basis for any defence to the appellants. According to the learned Advocate for the respondents, the decision in Nathani Steels Ltd. v. Nathani Steels Ltd. v. Nathani Steels Ltd. v. Associated Constructions, Associated Constructions, Associated Constructions, reported in 1995 Supp (3) SCC 324, sought to be relied upon by the appellants, has [7] been considered and interpreted by the Apex Court in its judgment delivered in Chairman & M.D., N.T.P.C. Ltd. Chairman & M.D., N.T.P.C. Ltd. Chairman & M.D., N.T.P.C. Ltd. v. M/s. Reshmi Constructions, Builders & Contractors, v. M/s. Reshmi Constructions, Builders & Contractors, v. M/s. Reshmi Constructions, Builders & Contractors, reported in JT 2004 (1) SC 1. According to the respondents, the final bill which was issued and in relation to which the No Due Certificate is stated to have been issued, related only to the quantities for the work, etc., under the contract but did not include the claim for compensation in respect of which the ultimate final bill was issued, and which has been termed as the second final bill. The Clause 31.5(A) of the agreement deals with the measurement and valuation of the work including the final measurement and valuation, and therefore, it obviously refers to the bill raised on the quantity of work and the other claims. It is thus clear that there is direct or express provision in the contract providing for such other claims to be included in the final bill, besides the Clause 43(1) expressly deals with the loss and expenses which are not covered under the other provisions of the contract and which requires the Architect to ascertain the amount of such loss and expenses and therefore nothing prevented the respondents from raising the second final bill. It is also sought to be contended that while claiming damages, the parties can enlarge the scope of reference by inclusion of fresh dispute provided they have done so while putting forward their claims in reference and in [8] that regard reliance is sought to be placed in the decision in the matter of McDermott International Inc. McDermott International Inc. McDermott International Inc. v. Burn Standard Co. Ltd & Ors., v. Burn Standard Co. Ltd & Ors., v. Burn Standard Co. Ltd & Ors., reported in JT 2006 (11) SC 376. As regards the issue pertaining to the trade practice, it is the contention on behalf of the respondents that no issue in that regard was raised or argued before the learned single Judge and there is no reference to the same in the impugned order and therefore they are not entitled to raise the same, for the first time, in the appeal. In any case, Clause 56 of the agreement clearly provided that the arbitrators would be the Fellows of the Indian Institute of Architects, meaning thereby that the arbitrators would be specialised people in their field having vast experience and knowledge of the various trade practices being followed in the business and they are required to apply their knowledge of the field while adjudicating the claims and that is what exactly the learned arbitrator has done in the matter in hand and therefore it would not be a justification for interference therein. Reliance is placed in the decision in Daulatsing Bapusing Raut v. Ratna Anadsing and others, Daulatsing Bapusing Raut v. Ratna Anadsing and others, Daulatsing Bapusing Raut v. Ratna Anadsing and others, reported in AIR 1926 Bombay 527. 6. It cannot be disputed that the scope of interference under Section 30 or 33 of the said Act is very limited. The law on this point is well-settled. The Apex Court [9] in Puri Construction Company’s Puri Construction Company’s Puri Construction Company’s case (supra) and the paras 27 and 28 thereof, to which attention was sought to be drawn, has held that appraisement of evidence is essentially the function of the arbitrator in arbitration proceedings and the Court does not sit in appeal in that regard nor the conclusions arrived at by the arbitrator on the question of law referred to arbitrator are open to challenge on the ground that an alternative view of law is possible. In para 27, the Apex Court had referred to its earlier decision in Municipal Corporation of Delhi v. Jagan Nath Ashok Municipal Corporation of Delhi v. Jagan Nath Ashok Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar Kumar Kumar {(1987) 4 SCC 497} = AIR 1987 SC 2316 and observed that it was held therein that appraisement of evidence by the arbitrator is ordinarily never a matter which the Court questions and considers though it may be possible that on the same evidence the Court may arrive at a different conclusion than the one arrived at by the arbitrator but that by itself would not be a ground for setting aside the award. In para 28, referring to its earlier decisions in Alopi Parshad & Sons Ltd. v. Alopi Parshad & Sons Ltd. v. Alopi Parshad & Sons Ltd. v. Union of India Union of India Union of India {AIR 1960 SC 588}, Kapoor Nilokheri Coop. Kapoor Nilokheri Coop. Kapoor Nilokheri Coop. Dairy Farm Society v. Union of India Dairy Farm Society v. Union of India Dairy Farm Society v. Union of India {(1973) 1 SCC 708} = AIR 1973 SC 1338 and Indian Oil Corpn. Ltd. v. Indian Oil Corpn. Ltd. v. Indian Oil Corpn. Ltd. v. Indian Carbon Ltd. Indian Carbon Ltd. Indian Carbon Ltd. {(1988) 3 SCC 36} = AIR 1988 SC 1340 the Apex Court reiterated its earlier decision that the Court does not sit in appeal over the award and review the reasons and the Court can set aside the award only [10] if it is apparent from the award that there is no evidence to support the conclusions or if the award is based upon any legal proposition which is erroneous. 7. In M/s. Sudarsan Trading Company’s M/s. Sudarsan Trading Company’s M/s. Sudarsan Trading Company’s case (supra), and in para 29 of the judgment to which attention was drawn, the Apex Court while observing that in a speaking award the Court can look into the reasonings disclosed in the award, held that where no reasons are given by the arbitrator, it is not open to the Court to probe into the mental process of the arbitrator and speculate as to what impelled the arbitrator to arrive at his conclusions and in that regard reference was made to its earlier decision in Hindustan Steel Works Construction Hindustan Steel Works Construction Hindustan Steel Works Construction Ltd. v. C. Rajasekhar Rao Ltd. v. C. Rajasekhar Rao Ltd. v. C. Rajasekhar Rao {(1987) 4 SCC 93}. 8. While the decision of the Apex Court in Puri Puri Puri Construction Company’s Construction Company’s Construction Company’s case is on the point that reappraisal of the evidence is not the function of the Court while dealing with the matters under Section 30 or 33 of the said Act, and that the Court does not sit in appeal over the award and review the reasons, the decision in M/s. Sudarsan Trading Company’s M/s. Sudarsan Trading Company’s M/s. Sudarsan Trading Company’s case is on the point that in the absence of reasons given by the arbitrator, it would not be appropriate for the Court to probe into the mental process of the arbitrator and speculate about the reasons which could have impelled [11] the arbitrator to arrive at a particular finding. We fail to understand how both these decisions are of any help to the respondents in the case in hand. It is nobody’s case that in order to consider the contentions raised by the appellants, we are either required to re-appreciate the evidence or that we have to speculate about the reasons for arriving at the conclusions which have been arrived at in the award. In the absence of any such exercise being required to be done by this Court in these appeals, the decisions sought to be relied upon and the arguments advanced based on these decisions are of no help to the respondents in the case in hand. 9. The Clause Nos.18 and 34 of the contract to which attention was drawn in support of the contention that the appellants are not liable to pay any escalation in the rates read thus: "18. The term "Clerk of Works" shall mean the person approved by the Architect and appointed and paid by the Owner and acting under the orders of the Architect to inspect the works in the absence of the Architect; the Contractor shall afford the Clerk of Works every facility and assistance for [12] inspecting the works and materials and for checking and measuring time and materials. Neither the Clerk of Works nor any representative of the Architect shall have power to set out works or to revoke, alter, enlarge or relax any requirements of the Contract or to sanction any day work, additions, alterations, deviations or omissions, or any extra work whatever except in so far as such authority may be specially conferred by a written order of the Architect. The Clerk of Works or any representative of the Architect, shall have power to give notice to the Contractor or to his representative of non-approval of any work or materials and such work shall be suspended or the use of such materials shall be discontinued until the decision of the Architect, is obtained. The works will from time to time be examined by the Architect, the Clerk of Works or the Architect’s representative but such examination shall not in any way exonerate the Contractor from the [13] obligation to remedy any defects which may be found to exist at any stage of the works or after the same is completed. Subject to the limitation of this clause the Contractor shall take instructions only from the Architect." "34. The Contractor shall not claim any extras for fluctuation of price and the Contract Price shall not be subject to any rise or fall of prices." 10. Plain reading of the above clauses of the agreement would reveal that the contractor cannot claim any extra amount for fluctuation of price and the contract price was not subject to any rise or fall in the prices. In other words, irrespective of fluctuation of prices in the market in relation to the commodities to be used for compliance of obligations under the work contract, the contractor was to complete the construction and submit the bills adhering to the prices specified under the contract. Neither any rise in the price nor any fall in the price could be the basis either to claim escalation or reduction in the liability by the appellants to pay the amount to be paid to the respondents for completion of the work under the said contract. [14] 11. The decision of the Apex Court in New India Civil New India Civil New India Civil Erector’s Erector’s Erector’s case (supra) is squarely on the subject relating to the claim of the contractor for escalation in the cost of construction. In the said case, the contractor under the contract with the ONGC had undertaken to construct 304 pre-fabricated housing units at Panvel, Phase-I. The construction was not completed even within the extended period and the respondents thereupon terminated the contract and got the work done through another agency. Dispute arose between the parties and the matter was referred to arbitrators. In the arbitration proceedings, the contractor claimed an amount of Rs.32,21,099.89 paise as escalation charges against which the arbitrators awarded a sum of Rs.16,31,425/-. The claim was made on account of escalation in the cost of construction during the period subsequent to the expiry of the original contract period. The contractor’s claim on the said amount was resisted by the ONGC on the basis of the ONGC’s acceptance letter dated 10-1-1985 which stated clearly that "the above price is firm and is not subject to any escalation under whatsoever ground till the completion of the work". When the matter came up before this Court, it was held that in the face of the said express stipulation between the parties, the contractor could not have claimed any amount on account of escalation in the cost of construction carried out by him after the [15] expiry of the original contract period. While approving the said decision of this Court, the Apex Court ruled that "The aforesaid stipulation provides clearly that there shall be no escalation on any ground whatsoever and the said prohibition is effective till the completion of the work". It was further held that in view of the said clause, the arbitrators could not have awarded any amount on the ground that the contractor must have incurred extra expense in carrying out the construction after the expiry of the original contract period and the aforesaid stipulation between the parties was binding upon both of them as well as the arbitrators. It was further ruled that: "We are of the opinion that the learned single Judge was not right in holding that the said prohibition is confined to the original contract period and does not operate thereafter. Merely because the time was made the essence of the contract and the work was contemplated to be completed within 15 months, it does not follow that the aforesaid stipulation was confined to the original contract period. This is not the case This is not the case This is not the case of the arbitrators construing the of the arbitrators construing the of the arbitrators construing the agreement. It is a clear case of the agreement. It is a clear case of the agreement. It is a clear case of the [16] arbitrators acting contrary to the arbitrators acting contrary to the arbitrators acting contrary to the specific stipulation/condition contained specific stipulation/condition contained specific stipulation/condition contained in the agreement between the parties in the agreement between the parties in the agreement between the parties." (Emphasis supplied) The decision of the Apex Court is very clear to the effect that: (i) When the contract between the parties stipulates that the contractor would not be entitled for increase in prices of the commodities to be used for completion of the contract, he would not be entitled for escalation in the costs. (ii) Such a term would not only bind the parties to the contract, but it would also bind the arbitrator while deciding the disputes between the parties. (iii) Such a case does not fall in the