IN THE HIGH COURT OF UTTARAKHAND AT NAINITAL A.O. No. 457 of 2006 1. State of U.P. through Secretary Irrigation Civil Secretariat, U.P. Lucknow. 2. Superintending Engineer, Upper Ganga Canal, Modernization Circle-I, (World Bank) Roorkee, 3. Executive Engineer, Upper Ganga Canal, Modernization Circle-I, (World Bank) Roorkee, District Haridwar ..… Appellants. Versus M/s Sayeed Ahmad and Co., Bharat Dharam Kanta, Rampur Road, Roorkee, District Haridwar ….. Respondent. Mr. S.P.S. Panwar, learned Addl. C.S.C. for the State of U.P. Mr. S.K. Jain, learned counsel for the respondent. Dated: 27-02-2008 Hon’ble B.C. Kandpal, J. This appeal under Section 37 of Arbitration and Conciliation Act, 1996, has been preferred by the State of U.P. and others against the award dated 31.7.2001 and the judgment and order dated 7-12-2005, passed by District Judge Haridwar in Misc. Case No. 29 of 2001, whereby by objections of the appellant filed U/S 34 of the Arbitration and Conciliation Act, 1996 (for short ‘The Act’) filed against the award were rejected. 2- Brief facts giving rise to this appeal are that agreement No. R-2-08 (E)-060 dated 30-3-1990 was executed between the parties for construction of ghats at Km. 22.850 near Piran Kaliyar Bridge. There arose dispute between the parties and the matter was referred for arbitration. Sri P.C. Jain, Chief Engineer gave his award dated 31-7-2001. The appellant department was directed to pay a total sum of Rs. 24,18,586-00 towards the different claims to the contractor. Simple interest @18% per annum from different dates was also awarded on the award money. 3- Against the award the department filed objections U/S 34 of the Act. It has been alleged that the claim for loss due to delay in handing over site is against the specific term of the contract, therefore, award of Rs. 6,30,130/- has been given by he Arbitrator against specific provisions of clause G- 1.04 of the contract agreement. It has also been alleged in the objection that payment for loss of machinery, payment of Rs. 50,000/- for safety during Mela, payment of Rs. 3,00,000/- for construction of ramp and maintenance of the same was nowhere provided in the contract. The contractor never furnished details to establish the quantity of earth work. The award of claim for non- availability of drawings is against the provision of G.C. Clause 10, 11 and 1(3) of the contract. It has further been alleged that the Arbitrator has allowed the different claims against the specific clauses of the contract agreement. The objection raised by the Department with respect to interest awarded by the Arbitrator was that 18% interest on the awarded money has been given against the provision of Clause G- 1.09 of the contract agreement. 4- On the other hand the contractor supported the impugned award by filing his objection before the Reference Court. He has alleged that the Arbitrator has given the award according to the terms and conditions agreed between the parties. The Arbitrator has got the right to award interest of the award money. 5- The Reference Court after hearing after considering the objections of the parties and perusing the impugned award and hearing the parties, rejected the objections of the Department and confirmed the impugned award vide impugned judgment and order dated 7-12-2005. 6- Feeling aggrieved the State of U.P. and others have preferred this appeal before this Court. 7- Heard learned counsel for the parties and perused the record. 8- The learned counsel for the appellants firstly has argued that the Arbitrator has misconducted himself by allowing the claims of the contractor under different heads against the specific provisions of agreement clauses. The Reference Court also ignored those provisions and wrongly rejected the objections of the Department filed against the impugned award. 9- Learned counsel for the respondent opposed the submission raised on behalf of the appellants and contended that reappraisal of evidence by the Court under Section 34 of the Act is not permissible. The award cannot be set aside on the ground that the Arbitrator reached wrong conclusion or he failed to appreciate the facts. The jurisdiction of the Court is limited and it has no jurisdiction to sit in appeal and determine the correctness of the award on merit. 10- In order to appreciate the submissions raised by the learned counsel for the parties, it will be expedient to go through the findings arrived at by the Court below while dealing with the objection of the department filed U/S 34 of the Act. From perusal of impugned award it reveals that the Arbitrator in order to settle the dispute between the parties has framed the following issues:- 1- Did the respondents failed to provide site? If so to what reliefs the claimant is entitled from the respondents?. 2- Respondent did not pay for 20000 Cum of earthwork done by claimant? If so to what reliefs the claimant is entitled from the respondents? 3- Did the respondents had to provide the drawings for the agreed work? If respondents did not provide these drawings to what reliefs the claimant is entitled from the respondents?. 4- Did the quantity of various item of work done by the claimants/contractor? If so to what reliefs the claimants is entitled from the respondent?. 5- Did not respondents got extra items of work done by the claimant? If so its effect and to what reliefs the claimant is entitled from the respondents? 6- Did the respondents deducted more security than as per agreement? If so to what reliefs the claimant is entitled from the respondents? 7- Did the respondents delayed the payments of claimant? If so, to what reliefs the claimant is entitled from the respondents? 8. Did the work was affected due to strike of the Junior Engineers? If so to what reliefs the claimants is entitled from the respondents? 9. Did the respondents ordered the coaimant to stop the work? If yes, its effect and to what reliefs the claimant is entitled from the respondents?. 10. Respondents were to provide cement. If yes, did the respondents provided the cement to claimant? If yes, its effect, If not, to what reliefs the claimant is entitled from the respondents? 11. Was the work delayed for completion due to respondent? If yes, its effect and to what relifs the claimant is entitled from the respondents. 12. Have the past bill of claimant not been paid? If yes, if effect and to what reliefs the claimant is entitled from the respondents? 13. Was the arbitration proceedings in accordance with the clause 52 of the agreement? 14. Are the claims barred as per terms and conditions of the agreement? If yes, its effect?. 15. Are the claims time barred? 16. Are the claims barred from law of estoppel? 11- On issue No. 1 and 2 the Arbitrator has given the findings that the department failed to hand over the site to the claimant and on account of this the claimant did suffer. It was also held that 10000 Cum earth work was done in maintaining the safe slopes and for the same the claimant was not paid. The Reference Court while deciding the above two issues has supported the finding recorded by the Arbitrator and has held that the Department did not make available the site to the contractor and hence provision of clause 1.06 of agreement did not apply to the case. It also held that the contractor has done earthwork fro 10000 Cum for which he was not paid. I do not find any jurisdictional error in the above findings. 12- On issue No.3 the Arbitrator has given his verdict that the department did not provide the drawing to the contractor as and when they were required. For this reason extension was not denied by the department and due to this the contractor had to suffer. The objection on the point was rejected by the Reference Court and held that clause 10, 11 and 1(e) of the contract agreement did not apply on the point. 13- On issues no.4 the Arbitrator has given the finding that the contractor had to work more than the agreement work and there was variation of 30% in some items and the highest variation was upto 70%. The Reference Court has rejected the objection of the department on the point holding that as per the terms of clause 31 of Schedule of contract agreement the increase in the work upto 30% should have been done as extra work and it was held that the Arbitrator has not misconducted by allowing the claim. I find that this claim has been considered within the provision of the agreement clause and there appears to be no illegality in the award. 14- Under issue No.5 the Arbitrator has allowed the claim on the ground that boulder and RMB were not available at Haridwar queries and the same have to be arranged from Shyampur or Rishikesh and it involved extra expenditure. The department did not take action on the request of the contractor and after a period of about two years the sanction was given at low rate, hence the contractor was entitled to get the payment at enhanced rates. The Reference Court has recorded the finding that the conclusion drawn by the Arbitrator is based on evidence and the Court has no jurisdiction to interfere on the point. 15- Issue No.6 pertains to deduction of more amount of security than as per the agreement. The point was settled between the parties. On issue No.7 the claim was not allowed. Claim No.8 was also rejected. 16- Under issue No.9 the Arbitrator allowed damages in part and some part of the claim was rejected. Against the finding of Arbitrator no objection was raised before the Reference Court. 17- On issue No.10 the Arbitrator awarded compensation to the contractor due to the reason that the department did not supply cement to the contractor for a considerable period and the contractor had to suffer loss as the labour and machinery had to remain idle for about 40 days. 18- Under issue No.11 the Arbitrator awarded loss of profit. According to the agreement the work had to be completed in 15 months but the same was completed in 71 months due to the faults of the department. The Arbitrator allowed some claims and some were disallowed. As many as 26 reasons were shown to the Arbitrator by the contractor for not completing the work within stipulated period. The reasoning of the Arbitrator on the point appears to be quite reasonable. The Reference Court has rightly rejected the objection of the Department on the issue. 19- Claim No. 12 pertains to payment of final bill, refund of security etc. 20- Issue Nos. 14, to 16 relate to bar of claims. These issues have been decided against the department and in favour of the contractor. The finding given on these issues do not require interference as the same have been decided in accordance with the provision of law after taking into consideration the clauses referred in the work agreement. The Reference Court as well as the Arbitrator have recorded the finding that when the claims were referred to the arbitration even when the work was in progress but the department did not settle the same and the final bill was not settled and therefore the claims were fully within time and they are not time barred in any manner whatsoever. The law of estoppel also does not apply in the arbitration proceeding in the work agreement; the claims were referred timely and the claims were made out in detail. 21- For the above discussion, I do not find any force in the submission raised by the learned counsel for the appellants challenging the finding recorded by the Arbitrator on different claims as well as the impugned judgment and order passed by the Court below rejecting the objections of the appellants/department filed U/S 34 of the Act against the claims. 22- The learned counsel for the appellants secondly challenged the impugned award by submitting that the arbitration proceedings have not commenced in accordance with the provision of clause 52 of the work agreement and hence the entire award is vitiated and is not maintainable in the eyes of law. 23- Learned counsel for the respondent has opposed the above submission and contended that the as per the arbitration clause 52 of the contract agreement the Chief Engineer has appointed the Arbitrator in the matter and the department has participated in the arbitration proceeding before the Arbitrator. No objection whatsoever was raised in this regard during the arbitral proceeding, therefore, the matter is not subject to review in appeal before this Court. 24- From perusal of impugned award it appears that the Arbitrator has framed issue No.13 on the point. The Arbitrator has given the finding that the Chief Engineer while sanctioning arbitration under clause 52 of the agreement examined the subject matter fully and appointed the Arbitrator. The department has participated in the arbitration proceeding before the Arbitrator and no objection whatsoever was raised on the point. Now the department cannot agitate the issue. 25- Learned counsel for the appellants lastly submitted that the Arbitrator has committed manifest error in awarding interest on award money @ 18% per annum which is against the specific provision of clause G 1-09 of the contract agreement. 26- On the other hand learned counsel for the respondent has supported the finding of the Arbitrator and submitted that as per the provisions of Section 31(7) (a) and (b) of the Act the interest @18% has rightly been awarded by the Arbitrator. In support of his contention the learned counsel has cited before me the decisions of Hon’ble Apex Court in the matters of State of U.P. Vs. Harish Chandra & Co. reported in 1982 (2) Arb. LR 716 and The Board of Trustees for the port of Calcutta Vs Engineers-De-Space-Age, reported in AIR 1996 Supreme Court 2853. 27- For proper consideration of the above submission of the learned counsel for the parties it is relevant to quote clause G 1.09 of the contract agreement, which runs as follows:- “G 1.09 No claim for interest or damages will be entertained by the Government with respect to any money or balance which may be lying with the Government or any become due owing to any dispute, difference or misunderstanding between the Engineer-in-charge on the one hand and the contractor on the other hand or with respect to any delay on the part of the Engineer-in-charge in making periodical or final payment or in any other respect whatsoever”. 28- A bare perusal of the agreement shows that the aforesaid clause of the agreement has made the picture very clear that the interest on the claim by the Government is not to be paid to the contractor, therefore, the Arbitrator while travelling beyond the terms of the agreement of the contract has fell in error. It is sitting law that on the factual aspect this Court is not sitting as a court of appeal and the finding of the Arbitrator is not to be disturbed but in case if the Court comes to the conclusion that the Arbitrator has travelled beyond its jurisdiction by ignoring the agreement clause then certainly this Court has power to interfere in the arbitral award. 29- After having considered the aforesaid terms of agreement and on a careful consideration of the decisions cited by the learned counsel for the respondent, I come to the conclusion that the Arbitrator has travelled beyond the terms of the agreement by ignoring the relevant agreement clause. The rulings cited by the learned counsel for the respondent do not apply to the facts and circumstances of the present case. 30- As the Arbitrator has travelled beyond the terms of the agreement by awarding interest on the claim of Rs. 24,18,586/- from different dates, I think that the same is liable to be set aside. The Court below while making the award as rule of the court and rejecting the objection filed by the appellants, has also fell in error in confirming the interest part of the award. The Court below has wrongly interpreted the provision of Section 31 of the Arbitration and Conciliation Act, 1996. The provision of Section 31 (7)(a) and (b) of the Act would have applied when there would have been no arbitral agreement with regard to the interest or there has been agreement specifying the interest, but in the instant case the specific condition in the work agreement is that no interest or damages shall be paid by the Government, therefore, in view of the specific terms of the agreement, the Arbitrator had no power to grant the interest to the contractor. I, therefore, do not agree with the finding recorded by the court below with regard to the interest part of the arbitral award and I am of the view that this part of the impugned award is liable to be set aside. 31- For the reasons recorded above the impugned award dated 31-7-2001 is modified up-to the extent that the contractor/respondent shall not be entitled to get any interest on the awarded money of Rs. 24,18,586.00 from different dates as indicated in the award. However, the contractor/respondent shall be entitled to get an interest @ 6% per annum from the date of passing the award till the date of actual payment. 32- With the aforesaid observation the impugned judgment and order passed by the Reference Court stands modified accordingly and the appeal is party allowed. No order as to costs. 33- The amount deposited by the appellants at the time of filing the appeal before this court be released in favour of the contractor. 34- All the pending applications also stand disposed of. (B.C. Kandpal, J.) ISB