IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION APPEAL NO.884 OF 1997 IN ARBITRATION PETITION NO.19 OF 1993 IN AWARD NO.127 OF 1992 M/s.Chowgule Brothers & Ors. ..Appellants (Orig.Respdt.No.1) Vs. M/s.Rashtriya Chemicals & Fertilizers Ltd. & Ors. ..Respondents. (Orig.Petnr. & Orig. Respt. Nos.2 to 4) Dr.V.V.Tulzapurkar, Senior Advocate with Ms.Alpana Ghone i/b.M/s.Kanga & Co. for the Appellants. Mr.Nitin Thakkar, Senior Advocate with Mr.S. John i/b.M/s.M.P.Savla & Co. for the Respondents. CORAM: DR.S.RADHAKRISHNAN AND CORAM: DR.S.RADHAKRISHNAN AND CORAM: DR.S.RADHAKRISHNAN AND S.J.VAZIFDAR, JJ. S.J.VAZIFDAR, JJ. S.J.VAZIFDAR, JJ. DATED: 5TH APRIL, 2006 DATED: 5TH APRIL, 2006 DATED: 5TH APRIL, 2006 ORAL JUDGMENT : ORAL JUDGMENT : ORAL JUDGMENT : (Per S.J.Vazifdar, J.) This is an Appeal against the order of the learned Single Judge allowing the Respondent’s Petition under section 30 of the Arbitration Act, 1940 setting aside the majority award made by Respondent Nos.2 and 3. 2. Respondent Nos.2 and 3 awarded a sum of : 2 : Rs.61,73,067.90 and dismissed the counter claim of Respondent No.1. Respondent No.4, who made a minority award, dismissed the claim of the Appellant and the counter claim of Respondent No.1. Respondent No.4 dismissed the Appellant’s claim only on the ground of limitation. Respondent No.4 did not consider the merits of the rival contentions regarding the maintainability of the claim for statutory increase in wages. Thus, in view of the majority award, the Appellant was entitled to the sum of Rs.61,73,067.90. 3. The learned Single Judge set aside the award on the ground that the same was contrary to a term of the contract and on the ground that the claims were barred by limitation. 4. Pursuant to the tender submitted by the Appellant, Respondent No.1 issued a work order dated 10.1.1983. The contract involved clearing, forwarding and handling jobs of bulk bagged fertilizers to be imported by Respondent No.1 at Mormugao Port. The contract was initially for the period 15.1.1983 to 14.1.1984. Respondent No.1 in exercise of the option conferred upon it, extended the same for the period 15.1.1984 to 14.1.1985. : 3 : Clause 32 of the terms and conditions of contract pertaining to arbitration reads as under : "32. SETTLEMENT OF DISPUTES - All disputes or differences whatsoever arising between the parties out of or relating to the construction, meaning and operation or effect of the contract or the breach thereof shall be settled by arbitration in accordance with the Rules of Arbitration of the Indian Council of Arbitration and the Award made in pursuance thereof shall be binding on the parties". Clauses 2.01 and 2.03 of the contract which falls for consideration reads as under : "2.01 Period of contract is one year from the date of award of work. 15.1.83/14.1.84" 2.03 It is hereby agreed that if the Company gives one month’s notice to extend the Contract for a further period of one year from the expiry or the period mentioned in Clause 2.01, the Contractor shall be bound to continue to do the work and render services on the same terms and conditions, as contained herein, during such extended period, except for the statutory increase in the wages of Dock Labour allowed by the Mortgagor Dock Labour Board, for which documentary evidence shall have to be furnished by the Contractor. The manner in which such : 4 : statutory increase in the wages of Dock Labour will be allowed for the extended period of one year, if any, is indicated below; Example showing method of calculating escalation for extended period of one year, in case of statutory increase in wages of Dock Labour allowed by the MDLB: First year 2nd year of of Contract Contract 1. Wages per gang ) (for 3 gangs) ) 1st year Rs.695.91 x 3 ) 2nd year Rs.889.72 x 3 ) Rs. 2087.73 Rs. 2669.16 2. Night Weightage Rs. 47.70 Rs. 47.70 3. Winch set Rs. 498.70 Rs. 633.33 4. Night Weightage Rs. 11.76 Rs. 11.76 ------------ ------------ Charges for 3 gangs (out of 210 MTs.) Rs. 2645.26 Rs. 3350.35 ------------ ------------ Charges per MT. Rs. 12.59 Rs. 15.95 ------------ ------------ Increase in wages of labour for 2nd year per MT. Rs.15.95 - Rs.12.59=Rs. 3.36 + (Y) Assuming the quoted rate for the work in 1st year is (‘X’) and the escalation works out to (‘Y’) for the 2nd year, the revised rate for the 2nd year, if the Contract is extended, will be Y - X. NOTE : The rates, indicated against first and second year above, have been taken from MDLB’s circulars from time to time. But the rates at which the Contract is initially : 5 : awarded shall remain firm through out the period of one year from the date of award and shall not be subject to any escalation whatsoever. Similarly the rates allowed for the extended period of the year, if any, after considering the statutory increase, if any, in the wages of Dock Labour will also remain firm through out the extended period of one year and shall not be subject to any escalation whatsoever, even irrespective any subsequent increase in the wages of Dock Labour allowed retrospectively by the Mormugaon Dock Labour Board." (Emphasis provided)" 5. It is clause 2.03 which fell for the consideration of the learned Single Judge. The learned Judge held that the clause was capable of only one interpretation which barred the first Respondent’s claim for statutory increase in wages of the dock labour. We will deal with the question of construction after completing the narration of the facts. 6. In exercise of their right under clause 2.03, Respondent No.1 by a letter dated 13.10.1983 extended the contract for one year for the period 15.1.1984 to 14.1.1985 on the same rates, terms and conditions. The other contractual stipulations remained the same. By a letter dated 7.12.1983 Respondent No.1 : 6 : confirmed the extension and stated that there were a lot of statutory revisions in the wages of dock workers of the Mormugao Dock Labour Board (hereinafter referred to as "MDLB") during the previous year and that Respondent No.1 would have to consider the same while extending the contractual period. Respondent No.1 by a letter dated 27.1.1984 referred to clause 2.03 and stated that the increase allowed by MDLB upto 15.1.1984 only would be considered for the purpose of quantifying the amounts due on account of escalation and not any increases in wages which were under negotiation and, in respect of which MDLB Circulars would be issued after 15.1.1984 with retrospective effect. 7. During the extended period MDLB by a circular dated 6.6.1984 (Exhibit "G" to the petition) stated that the dock workers should be paid wages according to the terms of a settlement dated 11.4.1984 by their respective employers with retrospective effect from 1.1.1984. The minimum rate payable to such workers was specified therein. 8. The Appellant admittedly discharged its : 7 : contractual obligations during the original as well as the extended period of the contract. 9. By a letter dated 11.6.1985, the Appellant stated some of the above facts and contended that Respondent No.1 was bound and liable to pay the wage increase as per the wage scales fixed for the extended period. The Appellant accordingly called upon Respondent No.1 to pay an amount of Rs.31,87,437.95, less an amount of Rs.4,23,312.11 being the amount already paid to the Appellant on account of increase in wages for the extended period. Respondent No.1 however, by a letter dated 21.8.1985 disputed the Appellant’s entitlement to the same. We will deal with the contentions raised by the parties in the correspondence while considering the submissions of counsel. 10. Ultimately, the Appellant by a letter dated 28.10.1987 informed Respondent No.1 that they were going ahead in appointing an arbitrator in accordance with the arbitration clause and called upon Respondent No.1 to do the same. In response to the said letter, Respondent No.1 by their letter dated 19.11.1987 suggested that the parties should discuss the matter further before appointing the arbitrators. : 8 : 11. We will set out the facts regarding invocation of the arbitration clause with the Indian Council of Arbitration, while dealing with the question of limitation. 12. Before going further, it is necessary only to mention that, in addition to the claim on account of statutory increases during the extended period, the Appellant also claimed certain other amounts. The majority arbitrators however awarded a consolidated amount. If the award is to be set aside, it must be set aside as a whole as it is not possible to ascertain in respect of which of the claims the amounts had been awarded and considering the amount awarded it is clear that a part thereof atleast was in respect of the claim for increase in statutory wages. 13. Mr.N.G.Thakkar, the learned Senior Counsel contended on behalf of Respondent No.1 that the majority arbitrators have made a speaking award. The Court, he submitted, is therefore entitled to read and construe clause 2.03 to decide whether the Appellant’s claim is barred thereunder. As far as the question of construction of clause 2.03 is : 9 : concerned, it is not necessary to decide whether the majority award is a speaking award or a non-speaking award. We permitted the parties to read clause 2.03 and construed the clause ourselves. This is necessary as the first ground of challenge to the award is that clause 2.03 is capable of only one interpretation and based on that interpretation, the Appellant’s claim for escalation of rates consequent upon statutory increase in the wages of M.D.L.B. workers during the extended period from 15.1.1984 to 14.1.1985 is barred. If clause 2.03 is capable only of the interpretation placed upon it by Mr.Thakkar and accepted by the learned Judge, the majority award would have to be set aside on the ground that the arbitrators would then have to be held to have travelled outside the boundaries of the contract and acted without jurisdiction in awarding the said claim. In determining whether the arbitrators have travelled beyond their jurisdiction it would be necessary to consider the agreement which is their mandate. (see Continental Construction Co. Ltd. v. State of Madhya Pradesh, AIR 1988 SC 1166, Associated Engineering Co. v. Government of Andhra Pradesh and another, AIR 1992 SC 232 and Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering, AIR 1999 SC, 3627). : 10 : 14. Two inter-related questions fall for consideration. Firstly, what is the correct interpretation of clause 2.03. Secondly, assuming the construction suggested by Mr.Thakkar and accepted by the learned Judge is correct, whether the interpretations suggested by Mr.Tulzapurkar are possible or plausible. In other words, whether clause 2.03 is capable of being interpreted only in the manner contended by Respondent No.1 and is incapable of being construed in the manner contended by the Appellant. 15. In our opinion, the interpretation placed on the clause by Mr.Tulzapurkar is not only correct but is the only possible one. In fact, we even prefer the alternative interpretation of the clause suggested by Mr.Tulzapurkar to the one suggested by Mr.Thakkar and accepted by the learned Judge. In view of the learned Judges’ interpretation, we spent considerable time analysing clause 2.03 with the assistance of both the counsel. With respect, we are unable to read the clause in the manner in which the larned Judge did and, Mr.Thakkar invites us to do. 16. As we shall demonstrate, to accept Mr.Thakkar’s : 11 : interpretation would render most of clause 2.03 meaningless. Further, the least that must be said is that Mr.Tulzapurkar’s interpretations are in any event plausible and cannot by any process of reasoning be termed irrational or absurd. In that event, the Arbitrators’ interpretation being a possible one, the award would not be liable to be set aside though the Court may not consider it to be the correct one. 17. It would be convenient to summarise the relevant facts relevant to the interpretation of clause 2.03. The original contractual period was from 15.1.1983 till 14.1.1984. The extended contractual period was from 15.1.1984 to 14.1.1985. On 31.12.1983 there was a Wage Agreement between M.D.L.B. and the Dock workers. In 1984 negotiations took place between M.D.L.B. and the Dock workers pursuant to which a fresh settlement was arrived at on 6.6.1984. The fresh settlement was given retrospective effect from 1.1.1984. 18. Mr.Thakkar submitted that in view of the last sentence in clause 2.03, the Appellant was not entitled to an increase in wages on account of a : 12 : fresh settlement after 15.1.1984 which was given retrospective effect. 19. At the outset we must mention that the matter was argued both before the learned single Judge and before us on the basis that the amount claimed by Respondent No.1 was on account of statutory increase in the wages of dock labour and not on account of any other increase in wages of the dock labour. 20. The example given in clause 2.03 to illustrate the method of calculating escalation for the extended period of one year, in case of statutory increase in wages of dock labour allowed by the M.D.L.B. really concludes the matter in favour of Mr.Tulzapurkar’s interpretation. Various components of statutory dues are mentioned in two separate columns one pertaining to the "First year of Contract" and other pertaining to the "2nd year of Contract". There is a total at the foot of each column - Rs.12.59 in respect of the first year of the contract and Rs.15.95 in respect of the second year of the contract. The clause then goes on to compute the difference between the first year and the second year. The example concludes by clarifying what is quite obvious, viz. that the revised rate would be the difference between the : 13 : rates of the first year and the second year. The clause does not specify any particular time when the statutory dues/increases of the dock labour for the second year of the contract is to be taken into consideration. This clearly establishes that whatever may be the statutory dues for the second year must be the amounts to be taken into consideration while computing the statutory increases without reference to the point of time when such increases were permitted or sanctioned. The example in clause 2.03 militates against Mr.Thakkar’s constructions thereof. 21. If Mr.Thakkar’s contention viz. that the dues for the second year must be only those fixed on the date of the commencement of the second year of the contract commenced i.e. 15.1.1984 is correct, all that was necessary was a simple statement to that effect in clause 2.03. There would have been no necessity of furnishing the example and a rather involved clause. 22. The heading of the second column in the example in clause 2.03 reads "2nd year of contract". To accept Mr.Thakkar’s submission would require : 14 : rewriting the heading of the second column to read : "Rates at the commencement of the 2nd year of contract". This would involve rewriting the clause contrary to the plain meaning thereof. This approach is totally impermissible. 23. The aforesaid conclusion makes the last sentence in clause 2.03 not only intelligible but perfectly clear. To our mind, it is perfectly clear that the last sentence in clause 2.03, disentitled Respondent No.1 to increases in wages which may be allowed by MDLB and not to statutory increases in such wages. The sentence nowhere disentitles in any manner the Appellant to statutory increases applicable during the second year of the contract. The last sentence even read in isolation, pertains to increases other than statutory increases in wages. The error in Mr.Thakkar’s submission arises on account of equating statutory increases in wages with increase in wages for other reasons and in other circumstances such as by negotiation and agreement. The plain language of the last sentence indicates this distinction inasmuch as it contains the words "....... after considering the statutory increase, if any, ..........". It is not without significance that these words are absent in the previous sentence which pertains to the first : 15 : year of the contract. The embargo upon the Appellant being entitled to any increases for the second year, is in respect of the increases other than the statutory increases. This is the only logical explanation for the plain language of the clause. 24. This is further clear from the word "allowed". The word "allowed" indicates increases which may have been arrived at by M.D.L.B. either on its own or pursuant to negotiations with the dock labour. In the case of a statutory increase, there would be no question of M.D.L.B. "allowing" the same. It would be a statutory entitlement. 25. To sum up therefore, the true interpretation of clause 2.03 is that the Appellant is entitled to statutory increases in the wages of the dock labour during the second year of the contract irrespective of when they were finalised/decided. In other words, the Appellants entitlement to such statutory increases is not limited to those obtaining on 15.1.1984 i.e. at the commencement of the second year. 26. This interpretation to our mind is the correct interpretation. As suggested by Mr.Tulzapurkar, : 16 : there may be yet another way of reading clause 2.03. Even if the clause is so read, the Appellant would be entitled to the claims awarded for statutory increase in the wages of dock labour for the second year of the contract. 27. To appreciate this alternative interpretation, it is necessary to note that it is nobody’s case that there was a statutory increase for the second year which was decided on or before 15.1.1984 i.e. the date of commencement of the second year and that there was thereafter a further statutory increase for the second year itself. Therefore this is not a case where the Appellant was claiming not merely an initial statutory increase but also a further statutory increase pertaining to the extended period. Of course, on the first interpretation placed on clause 2.03 by us, the Appellant would be entitled to the same. However, even assuming that this was not so, the least that must be said in favour of the Appellant is that they cannot be denied the first statutory increase that may have been arrived at for the extended period and that all that they may have been disentitled to is any, to use the words in the last sentence of clause 2.03, "subsequent increase". Thus even on this interpretation, the award cannot be : 17 : set aside. 28. The error, if we may say with great respect, in Mr.Thakkar’s submission, which was accepted by the learned Judge, arises on two counts. Firstly, the submission fails to read the clause and even the "NOTE" therein as a whole. Secondly, it fails to note the distinction in the language used in the first and the second sentences of the "NOTE" in clause 2.03. 29. Even assuming that the interpretations placed on clause 2.03 by Mr.Tulzapurkar are wrong, we have little, if any, hesitation in concluding that they are, to say the least, possible interpretations. If that be so, it is settled law that the Court will not substitute its interpretation for that of the arbitrators even if the Court thought it not to be the correct view. 30. In U.P.Hotels v. U.P.State Electricity Board (1989) 1 SCC, 359, the Umpire at length construed the provisions of section 49 of the Electricity (Supply) Act, 1948, in the light of the judgment of the Supreme Court in the Indian Aluminium Companies case in Indian Aluminium Co. Ltd. v. Kerala State : 18 : Electricity Board, (1975) 2 SCC, 414. The Supreme Court rejected the challenge to the award in the following manner : "27. In the instant case, the view taken by the Umpire on the interpretation of the agreement between the parties in the light of the observations of this Court in Indian Aluminium Co. case was at best a possible view to take, if not the correct view. If that was the position then such a view, even if wrong, cannot be corrected by this Court on the basis of long line of decisions of this Court. In the aforesaid view of the matter it is necessary to examine the aforesaid decision in the Indian Aluminium Co. case. ................................. ................................. The Umpire was right. In our opinion, the Umpire committed no error in arriving at such conclusion. Furthermore, such a conclusion is certainly a possible view of the interpretation of the decision of this Court in Indian Aluminium Co. case, if not the only view. We need go no further than that." "28. We are, therefore, of the opinion that the view taken by the Umpire on Section 49 was a possible view in the light of the decision of this Court in Indian Aluminium case. In the premises, a question of law arose certainly during the course of the proceedings. Such a question has been decided by the Umpire on a view which is a possible one to take. Even if there was no specific reference of a question : 19 : of law referred to the Umpire, there was a question of law involved. Even on the assumption that such a view is not right, the award is not amenable to interference or correction by the courts of law as there is no proposition of law which could be said to be the basis of the award of the Umpire, and which is erroneous." 31. In Sudarshan Trading Co. versus Government of Kerala, (1989) 2 SCC 38, it was held as under :- "What is the interpretation of the contract is a matter for the arbitrator and on which the Court cannot substitute its own decision" 32. In Hindustan Construction Company Ltd. versus State of J. & K., (1992) 4 SCC 217, it was held as under :- "Even if in fact the arbitrators had interpreted the relevant clauses of the contract in making their award on the impugned items and even if the interpretation is erroneous, the court cannot touch the award as it is within the jurisdiction of the arbitrators to interpret the contract". 33. In M/s.Hind Builders v. Union of India, (1990) 3 SCC, 338, the Supreme Court held : : 20 : "11. ........................... It is difficult to say, by merely reading the terms of contract that the arbitrators have erroneously interpreted the terms of the contract. It is not without significance that the departmental officers did not dispute the rate of the claim. Equally, the arbitrators were experienced engineers and would not have passed, what is now said to be, an astounding claim without thought. It is difficult to assume that all these persons have overlooked that the contractor had already been paid at Rs 18 under Item 4.09(a) especially when it is so stated on the face of the claim. This, therefore, is not a case where the arbitrators can be said to have ignored or overlooked a term of the contract; on the contrary, they have acted upon a particular interpretation of certain clauses of the contract on which two views are possible. This case certainly cannot be brought under the principle that the arbitrators have ex facie exceeded the authority or jurisdiction conferred on them by the contract. At worst, what can be said is that they may have committed an error in deciding the issue referred to them but the error is not apparent on the face of the award even if the contract is read as part of it both because the arbitrators have not given their reasoning and because the view taken by them of the relevant terms of the contract cannot be said to be clearly erroneous. In a matter on which the contract is open to two equally plausible interpretations, it is legitimate : 21 : for the arbitrators to accept one or the other of the available interpretations and, even if the court may think that the other view is preferable, the court