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

2. These appeals are brought against the common judgment of the Andhra Pradesh High Court in C.M.A. No. 456 of 1984 and C.R.P. No. 2743 of 1984. The High Court set aside in part the common judgment of the First Additional Chief Judge, Civil Court at Hyderabad, in Original Suit No. 174 of 1983 and O.P. No. 49 of 1983 whereby he made the award of the umpire (hereinafter referred to as the umpire or arbitrator) a rule of court and passed a decree in terms of the award together with interest on the principal amount awarded at the rate of 12 per cent per annum from the date of decree. The High Court set aside the decree in respect of claim Nos. III, VI and IX and affirmed the decree for the other claims. The main Appeal Nos. 338 and 339 of 1991 arising from SLP (C) Nos. 1573 and 1574 of 1986 are by the Associated Engineering Co. (hereinafter referred to as the Contractor). It challenges the judgment of the High Court setting aside the decree of the civil court in respect of claim Nos. III, VI and IX. The other appeals arising from SLP (C) Nos. 7071 and 7072 of 1986 are by the Government of Andhra Pradesh and they are against the judgment of the High Court confirming the decree of the civil court in respect of claim Nos. II, IV and VII(4)3. The High Court set aside claim Nos. III, IV and IX on the ground that those claims were not supported by the agreement between parties and that the arbitrator travelled outside the contract in awarding those claims. While that portion of the judgment of the High Court is supported by the government, the Contractor submits that the High Court exceeded its jurisdiction in interfering with a non-speaking award. The government challenges the judgment of the High Court insofar as it affirmed the findings of the civil court in respect of claim Nos. II, IV and VII(4) on the ground that the arbitrator awarded those claims totally unsupported by the contract

Reasoning:
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.