Case: Associated Engineering Co Vs. Government Of Andhra Pradesh And Anr

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 its bounds. If he exceeded his jurisdiction by so doing, his award would be liable to be set aside. As stated by Lord Parmoor : (Attorney-General for Manitoba v. Kelly, 1922 (1) AC 268, 276 : 1922 ALLER 69 (AC p. 276) "It would be impossible to allow an umpire to arrogate to himself jurisdiction over a question which, on the true construction of the submission, was not referred to him. An umpire cannot widen the area of his jurisdiction by holding, contrary to the fact, that the matter which he affects to decide is within the submission of the parties." * Evidence of matters not appearing on the face of the award would be admissible to decide whether the arbitrator travelled outside the bounds of the contract and thus exceeded his jurisdiction. In order to see what the jurisdiction of the arbitrator is, it is open to the court to see what dispute was submitted to him. If that is not clear from the award, it is open to the court to have recourse to outside sources. The court can look at the affidavits and pleadings of parties; the court can look at the agreement itself. Bunge & Co. v. Dewar and Webb (1921 8 L1 L Rep 436) 27. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Such error going to his jurisdiction can be established by looking into material outside the award. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The dispute as to jurisdiction is a matter which is outside the award or outside whatever may be said about it in the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such jurisdictional error needs to be proved by evidence extrinsic to the award. (See Alopi Parshad & Sons, Ltd. v. Union of India 1960 (2) SCR 793 : 1960 AIR(SC) 588); Bunge & Co. v. Dewar & Webb (1921 8 L1 L Rep 436); Christopher Brown Ltd. v. Genossenschaft Oesterreichischer (1954 1 QB 8 : 1953 (3) WLR 689); Rex v. Fulham (1951 2 QB 1 : 1951 (1) ALLER 482; Falkingham v. Victorian Railways Commission 1900 AC 452 : 69 LJPC 89); Rex v. All Saints, Southampton (1828 7 B&C 785 : 1 Man & Rey KB 663); Laing (James), Sons & Co. (M/C) Ltd. v. Eastcheap Dried Fruit Co. (1961 1 L1 L Rep 142, 145); Dalmia Dairy Industries Ltd. v. National Bank of Pakistan (1978 2 L1 L Rep 223); Heyman v. Darwins Ltd. 1942 AC 356 : 1942 (1) ALLER 337; Union of India v. Kishorilal Gupta & Bros. 1959 AIR(SC) 1362 : 1960 (1) SCR 493 ); Renusagar Power Co. Ltd. v. General Electric Company 1984 (4) SCC 679 : 1985 (1) SCR 432 ); Jivarajbhai v. Chintamanrao 1964 (5) SCR 480 : 1965 AIR(SC) 214); Gobardhan Das v. Lachhmi Ram 1954 AIR(SC) 689, 692); Thawardas Pherumal v. Union of India 1955 (2) SCR 48 : 1955 AIR(SC) 468); Omanhene Kobina Foli v. Chief Obeng Akessee 1934 AIR(PC) 185, 188 : 40 MLW 138); F.R. Absalom, Ltd. v. Great Western (London) Garden Village Society, Limited 1933 AC 592 : 1933 ALLER 616 and M. Golodetz v. Schrier (1947 80 L1 L Rep 647).) 28. In the instant case, the umpire decided matters strikingly outside his jurisdiction. He outstepped the confines of the contract. He wandered far outside the designated area. He digressed far away from the allotted task. His error arose not by misreading or misconstruing or misunderstanding the contract, but by acting in excess of what was agreed. It was an error going to the root of his jurisdiction because he asked himself the wrong question, disregarded the contract and awarded in excess of his authority. In many respects, the award flew in the face of provisions of the contract to the contrary. (See the principles stated in Anisminic Ltd. v. Foreign Compensation Commission 1969 (2) AC 147 : 1969 (1) ALLER 208; Pearlman v. Keepers and Governors of Harrow School (1979 1 QB 56 : 1979 (1) ALLER 365; Lee v. Showmens Guild of Great Britain (1952 2 QB 239 : 1952 (1) ALLER 1175; M.L. Sethi v. R.P. Kapur 1972 (2) SCC 427 : 1973 (1) SCR 697 : 1972 AIR(SC) 2379); Managing Director, J. & K. Handicrafts v. Good Luck Carpets 1990 (4) SCC 740 : 1990 AIR(SC) 864); State of A.P. v. R.V. Rayanim 1990 (1) SCC 433 : 1990 AIR(SC) 626). See also Mustill and Boyds Commercial Arbitration, 2nd edn., Halsburys Laws of England, Vol. II, 4th edn.) 29. The umpire, in our view, acted unreasonably, irrationally and capriciously in ignoring the limits and the clear provisions of the contract. In awarding claims which are totally opposed top the provisions of the contract to which he made specific reference in allowing them, he has misdirected and misconducted himself by manifestly disregarding the limits of his jurisdiction and the bounds of the contract from which the derived his authority thereby acting ultra fines compromissi30. In the circumstances, we affirm the judgment of the High Court under appeals except in respect of claim No. II.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]As regards this claim, Mr Dewan reiterates his contention that the award is silent as to the reasons and, therefore, the court should not interfere. Mr Madhava Reddy on the other hand submits that the award speaks as to the reasons for allowing the claim for extra amount towards additional lead for water i.e. for 3 kms. over and above the specified lead of 2 kms. But, counsel says, the agreement provides for no payment at all for any lead and much less for any additional lead. He refers to the specific provision of the agreement regarding water. He says that the Contractor had to make its own arrangements for supply of water at work site for all purposes including quarry. There is no provision in the contract for making any payment to the Contractor for the water brought by it to the site. In the absence of any such provision, counsel says, it is preposterous that the arbitrator should have awarded extra amount for additional lead for water. The contract specifically stated that it was the responsibility of the Contractor to make its own arrangements for the supply of water. The government gave no assurance to the Contractor regarding the availability of water or the prices payable therefor. The umpire, therefore, had no jurisdiction to allow claim No.It is not disputed on behalf of the Contractor that the formula followed by the arbitrator, as seen from the award under claim No. II, is different from the formula prescribed under the contract. But Mr K.R. Chowdhury, one of the counsel appearing for the Contractor, points out that the contract provided for payment of all wages according to the current rates, and, therefore, the arbitrator was well within his jurisdiction to make an award by adopting a formula in keeping with the enhanced rates of wages, and the High Court, he contends, rightly decreed the amounts under that claim in terms of theIn the instant case, the umpire decided matters strikingly outside his jurisdiction. He outstepped the confines of the contract. He wandered far outside the designated area. He digressed far away from the allotted task. His error arose not by misreading or misconstruing or misunderstanding the contract, but by acting in excess of what was agreed. It was an error going to the root of his jurisdiction because he asked himself the wrong question, disregarded the contract and awarded in excess of his authority. In many respects, the award flew in the face of provisions of the contract to the contrary.The umpire, in our view, acted unreasonably, irrationally and capriciously in ignoring the limits and the clear provisions of the contract. In awarding claims which are totally opposed top the provisions of the contract to which he made specific reference in allowing them, he has misdirected and misconducted himself by manifestly disregarding the limits of his jurisdiction and the bounds of the contract from which the derived his authority thereby acting ultra fines compromissi30. In the circumstances, we affirm the judgment of the High Court under appeals except in respect of claim No. II.