HIGH COURT OF ANDHRA PRADESH, HYDERABAD THE HONOURABLE SRI JUSTICE B.PRAKASH RAO AND THE HONOURABLE SRI JUSTICE B.SESHASAYANA REDDY DATED 28TH APRIL 2010 C.R.P.No.317 of 1995 and C.M.A.No.1338 of 1997 Between: C.R.P.No.317 of 1995 M/s. Associated Engineering Contractors, Vijayawada … Petitioner And Central Warehousing Corporation … Respondent C.M.A.No.1338 of 1997 M/s. Associated Engineering Contractors, Vijayawada … Appellant And Central Warehousing Corporation … Respondent THE HONOURABLE SRI JUSTICE B.PRAKASH RAO AND THE HONOURABLE SRI JUSTICE B.SESHASAYANA REDDY C.R.P.No.317 of 1995 and C.M.A.No.1338 of 1997 JUDGMENT: (Per the Ho’nble Sri Justice B.Prakash Rao) Since both these proceedings arise out of a common judgment in the Court below, hence as requested by the counsel from both sides, are taken up together for disposal. Heard Sri Gudapati Venkateshwar Rao, learned counsel appearing for the appellant/petitioner and Sri Satyanarayana appearing on behalf of the respondent corporation. Briefly, the facts, which emerge out of the proceedings, are that a contractual agreement was entered in between the petitioner and the respondent in agreement No.24/CWC/C.C.IV/78 at Hyderabad for construction of 25,000 M.T.C Godowns buildings at Pedakakahi village, Guntur District. The cost of the construction was estimated at Rs.58,02,086- 17 ps and the tender value was fixed at Rs.8,74,27,183-30 ps. The work was commenced and the entire work was completed by 15-8-1980, and accordingly, after construction was completed the petitioner/appellant sent the final bill for payment. However, certain disputes arose in regard to the said bill and the claim set forth by the petitioner-appellant, hence the matter was referred to the arbitrator. Accordingly, 1st respondent as per Clause 25 of the agreement providing for arbitration by proceedings dated 26/28-10-1983 appointed the Chief Engineer as the arbitrator. Thereupon, parties entered into appearance on 6-12-1983 before the arbitrator. During the course of the enquiry, the petitioner/appellant set in all18 claims, whereas the respondent corporation came up with 18 counter claims. During the course of the enquiry, the documents relied on by both the sides were marked as Exs.A.1 to A.37 and Exs.B.1 to B.4. However, no oral evidence has been produced by either side. It was stated that written arguments in respect of claim No.11 was to be filed within 15 days and in spite of subsequent extension no such written arguments were filed. Therefore, the arbitrator passed a reasoned award on 26-9-1984, after taking into consideration the claims of both the sides. It has been pointed out that in respect of such claim No.11, the respondent corporation had in fact filed written arguments on 1-10-1984. Thus, taking into consideration his later written submissions the arbitrator passed a supplementary page to the main award. Ultimately the arbitrator allowed the claim Nos.1, 2, 3, 8, 10 to 15 partly and claims Nos.4 and 5 in full, whereas the claim Nos.6 and 7 and 9 are disallowed. Amongst the counter claims claim Nos.1, 2, 14, 15, 17 and 18 are allowed, whereas counter claims 3 to 11 are rejected. However, the respondent corporation has withdrawn its counter claim No.12. Thereupon, both the parties approached the Court below by filing these two different proceedings, one in O.P.No.293 of 1996 at the instance of the respondent Corporation under Section 30 of the Arbitration Act seeking to set aside the said award, whereas the appellant/petitioner has filed suit in O.S.No.1238 of 1984 purportedly under section 14 (2) of the Arbitration Act to direct the arbitrator to file the award and make the same rule of the Court. Along with these two proceedings, there have been two other proceedings in O.P.No.112 of 1984 filed by the respondent Corporation seeking for removal of the arbitrator and O.P.No.147 of 1985 purportedly under sections 5, 11 and 12 of the Arbitration Act seeking for removal of the arbitrator by the respondent Corporation. All these matters were taken up together for disposal. During the course of the enquiry, both sides marked very same documents as Exs.A.1 to A.37 and Exs.B.1 to B4, yet, neither side has led any oral evidence in support of their case or in rebuttal. Taking into consideration of the same, the Court below dismissed the OP.No.112 of 1984 and O.P.No.147 of 1984, whereas allowed O.P.No.293 of 1986 and set aside the award, and consequently dismissed the suit in O.S.1233 of 1984 without costs, hence, the appeal and the revision by the Contractor. Even though, the counsel on either side made detailed submissions on merits and in depth, the factual matrix as to how the respective claims are justified and the sustainable, the main attack on behalf of the petitioner/appellant is against the granting of relief in favour of the respondent corporation setting aside the award where certain claims were awarded in his favour. It has been pointed out that having regard to the specific provisions under Section 30 of the Arbitration Act and the restricted power for exercise by the Court when considering the correctness of any award, it has virtually transgressed the same far beyond to treat such an application as if a regular appeal, and making an attempt to exercise the appreciation of the evidence and material and came out with its conclusions afresh, which is not permissible. These submissions were sought to be repelled on behalf of the respondent and supporting the orders. Having regard to the reasons given, the order of the Court below does not warrant any interference and hence there are absolutely no merits in the appeal or in revision. Having thus considering these submissions and perusal of the material, and consciously without going into the merits and detailed factual aspects involved in the case in regard to each claim, what boils down for consideration is, whether on the facts and circumstances, the Court below was right in setting aside the award in exercise of its jurisdiction under Section 30 of the Arbitration Act. We have perused the entire judgment of the Court below, which is a common, while disposing of all the four matters. After taking into consideration, the respective pleadings in detail and in depth and the issues and the points for consideration involved, the Court below has framed the main point for consideration as to whether the award passed by the arbitrator is liable to be set aside or to make the award the rule of the Court. While doing so, after referring to the material aspects in para 16, the Court below has made an in depth analysis of the proceedings before the arbitrator vis-à-vis, the material produced from both sides in spite of referring to each and every reason and the ground, which has been given in support for setting aside the above order. We deem it more appropriate that the same needs to be reiterated hereunder: “On perusal of original award stated to have been passed by the arbitrator on 26-9-1984, with regard to claim No.1 the arbitrator has simply stated that as the respondents have not disputed the analysis worked out by the claimant in statement of facts, awarded the same sum of Rs.84,684/- which represent the costs of 3,528.52 sq meters of sheets but ha snot given reasons as to how he arrived at that amount and what are the documents relied on in support of the claim. As regard claim No.2, the arbitrator while stating that claimant has not been able to prove that quantity of 5195.91 as recorded in the measurement book of the respondent has been re-excavated after one season and while rejecting the claim of the contractor awarded a sum of Rs.12,933/- for leveling the dressing of the earth transported and the arbitrator simply stats that the quantity claimed and rates have not been disputed by the respondents and no specific reasons given for awarding the amount. Of course as regards claim No.3 the award at Rs.41,100/- towards the cost of returned empty cement bags appears to be reasonable and justified but no date and the basis on which the amount is awarded is given. As regards claim No.4, the arbitrator simply states that since the respondents have not disputed the quantity in the claim, he awarded Rs.9,945/- to the claimant towards soling and mettling, claim No.5 also the arbitrator simply stated that the respondents have not disputed the quantity and rates claimed and hence the awarded Rs.41,681/- to the claimant contractor and no reasons are given. As regards claims No.8,10 to 15 which are partly allowed, the reasoning given by the arbitrator is not on sound lines and the arbitrator went on surmises while allowing claims 12 to 15 observing that department would have incurred more expenditure as they would not have got labour and material at a cheaper rate. The arbitrator admittedly ignored the terms of agreement while allowing the claims of the contractor and the arbitrator committed an error on the face of the records. As regards claims 16 and 17 there is nothing to comment and the arbitrator has also not considered the counter claims made by the petitioner Central Ware Housing Corporation and simply rejected most of the counter claims No.3 to 11 except those, which are conceded by the contractor. It is settled law that the sole function of the arbitrator is to arbitrate in terms of the Agreement and disregard the provisions of contract from which he has derived his authority vitiates the Award as reported in AIR 1992 (1992) S.C. 323. and also 1989 (2) A.P.L.J. 362. Further while dealing with claim No.1 of the contractor, the arbitrator has ignored condition No.3 and also condition No.9. No claim barred by terms of contract can be entertained. While partially allowing the claim No.3 the arbitrator ignore the condition No.10- E of the agreement. While allowing claim No.6 the arbitrator over looked R.1 of the General Rules and Directors which provide for inspection of drawings specifications etc., before tendering. If specifications were insufficient, it was open to the claimant to avoid contract under S.55 of the Contract Act. Having accepted such specifications it is not open to contractor to claim compensation on that account. While allowing partially claim No.10, the arbitrator over looked conditions 7,8 and 8A of the agreement which provides for payment of intermediate bills and procedure for that and that final bill could not be prepared as the defects in the work were not rectified by the contractor. The arbitrator grossly erred in holding the department guilty of breach of contract and partly allowing claim No.11 by ignoring the material i.e., letters on record. While allowing claim 12 to 15 also the arbitrator ignored provisions of clause 10 © of agreement which contemplates the contractor to keep books of accounts and other necessary documents and also issue of notice of increase within a reasonable time to the department-Central Ware Housing Corporation so as to be entitled to the benefit of such increase. Further, refusal to summon important documents amounts to misconduct as reported in A.I.R 1987 Delhi 148 at P.150. Further, the arbitrator has mis-conducted himself while passing supplemental award ex.B.3 once the award is published the arbitrator becomes functus officio and cannot add or vary the award exvept to correct clerical mistakes as reported in A.I.R 1962 SC 1123 at page 1127. As already pointed by rejecting of counter claims No.3 to 11 also arbitrator committed an error apparent and if all the clauses in agreement are looked in proper perspective, the finding of the arbitrator would have been different. It is also contended by the petitioner – Central Ware Housing Corporation that none of the disputes were raised by the contractor during the course of execution of work and no demand for extra money, for so called insufficiency of specifications was made and no claim for deviation was made an none of the running bills were accepted by the contractor under protest. The arbitrator ignoring the said facts and clauses of the agreement, misconducted himself in passing award and all the above said circumstances establish a shadow of, doubt of partiality and bias as attributed by petitioner-Central Ware Housing Corporation. However, the findings of the arbitrator as regards counter claims is not relevant as there is no counter claim made by petitioner corporation before this Court for setting aside the rejected counter claims of petitioner-Central Ware Housing Corporation, and there is no such prayer also in O.P.No.293 of 1986, there is no need to give any findings in O.P.No.112/84 and O.P.147/85 which are admittedly filed under S.5,11 and 12 of the Arbitrator Act and it does not arise.” A perusal of the aforesaid para and the ultimate findings as arrived at by the Court below, is nothing but an exercise in a manner like an appeal by a re-appreciation. Therefore, it necessitates for us to see that such exercise as done by the court below is permissible under law. In this connection in M.P.Housing Board v. Progressive Writers & Publishers[1], while considering the scope of the provisions of Sect 30 of the said Act it has been held to the following effect: “It is well settled that the award of the arbitrator is ordinarily final and the courts hearing applications under Section 30 of the Arbitration Act, 1940 do not exercise any appellate jurisdiction. Reappraisal of evidence by the court is impermissible. Interpretation of a contract is a matter for the arbitrator to determine. Even in a case where the award contained reasons, the interference therewith would still be not available within the jurisdiction of the court unless the reasons are totally perverse or award is based on wrong proposition of law. Errors of law as such are not to be presumed.” In view of the aforesaid principles as laid down by the apex Court, we are of the view that the court below has committed a serious error in converting an application under section 30 of the Arbitration Act into that of a regular first appeal and made a venture to re-appreciate the evidence and material on record to come to its own conclusion. The entire approach and the conclusions as arrived at by the Court below are in the teeth of the aforesaid principles of law as laid down by the supreme court, and accordingly the orders of the court below are liable to be set aside. Contrastingly the respective statutory provisions which totally stand far apart needs a reference at this juncture. Section 30 of the Arbitration Act reads as follows: 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. A bare reading of the above provision amply restricts the exercise of powers by a Court in tickling with the award on a narrow compass unlike a first appeal which has got wider and would have powers to go into all the aspects and merits without any such similar restraint. For convenience, it necessitates to refer to the normal appellate provisions as provided for under Sections 96 and 107 of the Code of Civil Procedure, which reads as follows: 96 Appeal from original decree: (1) Save where otherwise expressly provided in the body of this Code or by any other law for the time being in force, an appeal shall lie from every decree passed by any court .exercising original jurisdiction to the Court authorized to hear appeals from the decisions of such Court. (2) An appeal may lie from an original decree passed ex parte. (3) No appeal shall lie from a decree passed by the Court with the consent of parties. (4) No appeal shall lie, except on a question of law, from a decree in any suit of the nature cognizable by courts of small causes, when the amount or value of the subject- matter of the original suit does not exceed ["ten thousand rupees"]. 107 Powers of Appellate Court (1) Subject to such conditions and limitations as may be prescribed, an appellate court shall have power- (a) to determine a case finally; (b) to remand a case; (c) to frame issues and refer them for trial; (d) to take additional evidence or to require such evidence to be taken. (2) Subject as aforesaid, the Appellate Court shall have the same powers and shall perform as nearly as may be the same duties as are conferred and imposed by this Code on courts of original jurisdiction in respect of suits instituted therein. These provisions indicate the entire re-exercise and re-examination not necessarily to be on restricted points of law or otherwise, but also on the merits. The scope in fact gets more enunciated under the various rules as provided under Order 41. Therefore, on a comparative assessment of the scope as contemplated in both the situations, there is a clear cut line and one cannot be mixed up with the other nor one would make any inroads into the other. Therefore, there cannot be any attempt on the part of the Court while exercise of the powers under Section 30 of the said Act to fall in line with the powers under appeal. This distinction as reiterated more succinctly by the apex Court in the above mentioned decision in M.P.Housing Board v. Progressive Writers & Publishers necessarily had to be borne in mind while considering the matters arising under the aforesaid provision viz., Section 30 of the Arbitration Act. Accordingly, the appeal and the revision are allowed. The judgment and decree of the court below is set aside and the matter is remitted back to the court below for consideration afresh, in accordance with law, with all liberties, after giving opportunity of hearing to both sides. No costs. _________________ B.PRAKASH RAO,J _______________________ B.SESHASAYANA REDDY,J Dt: 28-04-2010 Grk LR copy to marked GRK [1] (2009) 5 SCC 678