Case: The New India Civil Erectors (P) Ltd Vs. Oil &amp; Natural Gas Corpn

have awarded an amount of Rs. 49,91,327/-. The dispute between the parties is with respect to the method/mode of measuring the constructed area. The case of the respondent is that according to the tender conditions, as well as clause (10) of the aforesaid letter dated 5th March, 1984 (written by the appellant to the corporation), the area covered by balconies is liable to be excluded from the measurements. We may refer to clause (10) of the appellants own letter dated 5th March, 1984 which reads as follows : "Mode of measurement :- We have based our price on the total built-up of one floor [four flats] including stair-case and common corridor but excluding balconies only. Hence work should be measured on the built-up area, excluding balcony areas." The tender condition is to the same effect. 9. The above stipulation clearly says that total built-up area of a floor shall include stair case and common corridor but shall exclude balconies. It expressly provides that "work should be measured on the built-up area excluding balcony area". It is undisputed that in the plan of flats attached to the Tender notice, balconies are provided. Shri Nariman contended that the said plans were modified later and that the flats as finally constructed, did not have any balconies and, hence, no question of excluding the balconies area can arise. Shri Nariman could not, however, bring to our notice any agreed or sanctioned plan modifying the plan attached to the Tender notice. The appellant could not have constructed flats except in accordance with the plans attached to the Tender notice, unless of course there was a later mutually agreed modified plan - and there is none in this case. We cannot, therefore, entertain the contention at this stage that there are no balconies at all in the flats constructed and that, therefore, the aforesaid stipulation has no relevance. We must proceed on the assumption that the plans attached to the Tender notice are the agreed plans and that construction has been made according to them and that in the light of the agreed stipulation referred to above, the areas covered by balconies should be excluded. In this view of the matter we agree with the Division Bench that the arbitrators over-stepped their authority by including the area of the balconies in the measurement of the built-up area. It is axiomatic that the arbitrator being a creature of the agreement, must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount which is ruled out or prohibited by the terms of the agreement. In this case, the agreement between the parties clearly says that in measuring the built-up area, the balcony areas should be excluded. The arbitrators could not have acted contrary to the said stipulation and awarded any amount to the appellant on that account. We, therefore, affirm the decision of the Division Bench on this score [Claim No. 6]. 10. Claim No. 9 : The appellant claimed an amount of Rs. 32,21,099.89 p. under this head, against which the arbitrators have awarded a sum of Rs. 16,31,425/-. The above 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 appellants claim on this account was resisted by the respondent-corporation with reference to and on the basis of the stipulation in the corporations acceptance letter dated 10th January, 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". The Division Bench has held, and in our opinion rightly, that in the face of the said express stipulation between the parties, the appellant could not have claimed any amount on account of escalation in the cost of construction carried on by him after the expiry of the original contract period. 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. The learned arbitrators, could not therefore have awarded any amount on the ground that the appellant must have incurred extra expense in carrying out the construction after the expiry of the original contract period. The aforesaid stipulation between the parties is binding upon them both and the arbitrators. 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 a case of the arbitrators construing the agreement. It is a clear case of the arbitrators acting contrary to the specific stipulation/condition contained in the agreement between the parties. We, therefore, affirm the decision of the Division Bench on this count as well [Claim No. 9.]11. So far as the position of law on the subject is concerned, there is hardly any dispute between the parties. It is sufficient to refer to the well considered decision of this Court in Sudarshan Trading Company v. Govt. of Kerala, AIR 1989 SC 890 , wherein it has been held :".......if the parties set limits to action by the arbitrator, then the arbitrator had to follow the limits set for him and the Court can find that he exceeded his jurisdiction on proof of such excess.....Therefore, it appears to us that there are two different and distinct grounds involved in many of the cases. One is the error apparent on the face of the award, and the other is that the arbitrator exceeded his jurisdiction. In the latter case, the Courts can look into the arbitration agreement but in the former, it cannot, unless the agreement was incorporated or recited in the award."

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

Explanation:
1[ds]6. The appellants case, however, was that though the Schedule to the Tender notice did contain the above stipulation, the appellant had, in its letter dated 5th March, 1984, which was in the nature of a counter-offer, clearly stipulated that "ordinary portland cement; Rs. 8.30 per metric tonne, [each 50 kg. bag]" will be supplied by the corporation "at site". The appellant had stipulated in the said letter that the terms set out by it therein "shall take precedence over....tenderare of the opinion that this appears to be a border-line case. It is possible to take either view. It must be remembered that in this case there is no formal contract and the terms of agreement have to be inferred from the Tender notice and the correspondence between the parties. Since the attempt of the Court should always be to support the award within the letter of law, we are inclined to uphold the award on this count [claim No. 4]. Accordingly, we reverse the judgment of the Division Bench to the above extent. The amount awarded by the arbitrators under this claim is affirmed.The above stipulation clearly says that total built-up area of a floor shall include stair case and common corridor but shall exclude balconies. It expressly provides that "work should be measured on the built-up area excluding balcony area". It is undisputed that in the plan of flats attached to the Tender notice, balconies are provided. Shri Nariman contended that the said plans were modified later and that the flats as finally constructed, did not have any balconies and, hence, no question of excluding the balconies area canNariman could not, however, bring to our notice any agreed or sanctioned plan modifying the plan attached to the Tender notice. The appellant could not have constructed flats except in accordance with the plans attached to the Tender notice, unless of course there was a later mutually agreed modified plan - and there is none in this case. We cannot, therefore, entertain the contention at this stage that there are no balconies at all in the flats constructed and that, therefore, the aforesaid stipulation has no relevance. We must proceed on the assumption that the plans attached to the Tender notice are the agreed plans and that construction has been made according to them and that in the light of the agreed stipulation referred to above, the areas covered by balconies should be excluded. In this view of the matter we agree with the Division Bench that the arbitrators over-stepped their authority by including the area of the balconies in the measurement of the built-up area. It is axiomatic that the arbitrator being a creature of the agreement, must operate within the four corners of the agreement and cannot travel beyond it. More particularly, he cannot award any amount which is ruled out or prohibited by the terms of the agreement. In this case, the agreement between the parties clearly says that in measuring the built-up area, the balcony areas should be excluded. The arbitrators could not have acted contrary to the said stipulation and awarded any amount to the appellant on that account. We, therefore, affirm the decision of the Division Bench on this score [Claim No.Division Bench has held, and in our opinion rightly, that in the face of the said express stipulation between the parties, the appellant could not have claimed any amount on account of escalation in the cost of construction carried on by him after the expiry of the original contract period. 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. The learned arbitrators, could not therefore have awarded any amount on the ground that the appellant must have incurred extra expense in carrying out the construction after the expiry of the original contract period. The aforesaid stipulation between the parties is binding upon them both and the arbitrators. 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 a case of the arbitrators construing the agreement. It is a clear case of the arbitrators acting contrary to the specific stipulation/condition contained in the agreement between the parties. We, therefore, affirm the decision of the Division Bench on this count as well [Claim No. 9.]11. So far as the position of law on the subject is concerned, there is hardly any dispute between the parties. It is sufficient to refer to the well considered decision of this Court in Sudarshan Trading Company v. Govt. of Kerala, AIR 1989 SC 890 , wherein it has been held :".......if the parties set limits to action by the arbitrator, then the arbitrator had to follow the limits set for him and the Court can find that he exceeded his jurisdiction on proof of such excess.....Therefore, it appears to us that there are two different and distinct grounds involved in many of the cases. One is the error apparent on the face of the award, and the other is that the arbitrator exceeded his jurisdiction. In the latter case, the Courts can look into the arbitration agreement but in the former, it cannot, unless the agreement was incorporated or recited in the award."