M/S HARISH CHANDRA & COMPANY versus STATE OF U.P. THR. SUPERINTENDING ENGINEER
[2016] 8 S.C.R. 773, Supreme Court of India, 2016
Outcome: Disposed off
Segment: Ratio
[2016] 8 S.C.R. 773 
M/S HARISH CHANDRA & COMPANY 
v. 
STATE OF U.P. THR. SUPERINTENDING ENGINEER 
(Civil Appeal No. 8829of2016) 
SEPTEMBER 08, 2016 
[J, CHELAMESWAR AND ABHAY MANOHAR SAPRE, JJ,] 
Arbitration Act, 1940 - s.30- Grounds for setting aside award 
- Jurisdiction of Court - High Court set aside the award u/s.30 on 
ground of legal misconduct by arbitrator in passing the award, 
holding that he travelled beyond the terms of the agreement - Held: 
A 
B 
c 
An award can be set aside only on the grounds specified in sub-
clause (a), (b) and (c) of s.30 and on no other ground - High Courts 
finding that since the arbitrator passed an award contrary to clause -
26 of the agreement and hence travelled beyond the terms of 
agreement, untenable in law - This factual objection was raised · D 
for the first time in appeal in the High Court and hence could not 
have been gone into by High Court - Award being a reasoned one 
;ms neither perverse nor any finding of the arbitrator was against 
· any provision of law or in contravention of any clause of the 
agreement so as to constitute a case of legal misconduct on part of E 
arbitrator within meaning of s.30. 
Allowing the appeal, the Court 
HELD: 1. An award can be set aside only on the grounds 
specified in sub-clause (a), (b) and (c) of Section 30 of the 
Arbitration Act, 1940 and on no other ground. Indeed this is clear F 
from the opening words of Section 30 itself which starts with the 
words "An award shall not be set
aside except on one or more of 
the following grounds." Afortiori, a reasoned award cannot be set 
aside unless it falls in any of the three sub-clauses (a), (b) and (c) 
of Section 30 of the Act 1940. [Para 31)(783-G-H] 
2. The High Court while setting aside the award virtually 
sat as an appellate Court as if it was hearing the appeal arising 
out of the award. It went into the factual question by referring to 
clause 26 of the agreement for holding that the arbitrator passed 
an award contrary to clause 26 and thereby travelled beyond the 
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SUPREME COURT REPORTS 
[2016) 8 S.C.R. 
terms of agreement which constituted a legal misconduct on his 
part. This finding on the face of it was untenable in law for the 
reason, inter alia, that this objection was neither raised before 
the arbitrator nor before the Trial Court but was raised for the 
first time in the High Court. In absence of any finding recorded 
by the arbitrator and the Trial Court, such issue could not have 
been gone into for the first time in appeal by the High Court. The 
High Court failed to sec that clause 26 only prohibited the 
appellant from assigning the agreement to any third person. 
Clause 26, therefore, had nothing to do with the claims filed by 
the appellants. It was an admitted fact that the appellant did not 
assign the agreement to any third person. If some work was got 
done by the appellant by employing some small contractor then 
it did not constitute a case of assignment of a whole agreement in 
favour of small contractors within the meaning of clause 26 so as 
to empower the State to cancel the agreement on such ground. 
The High Court further failed to see that there was no error 
apparent on the face of the record in the findings recorded by the 
arbitrator. Award being a reasoned one, the reasoning of the 
arbitrator was neither perverse nor any finding of the arbitrator 
was against any provision of law or in contravention of any of the 
clauses of the agreement so as to constitute a case of
legal 
misconduct on the part of the arbitrator within the meaning of 
Section 30 of the Act for setting aside an award. [Paras 34, 37] [784-
D; 787-C-H; 788-A-B] 
3.1 The main claim of the appellant-claimant against the 
State was in relation to work done by the appellant of breaking of 
large pieces of hard rock from 9.00 Km to 9.80 Km distance. 
Since the respondent-State disputed the appellant's claim on 
various factnal grounds hence the issue centered around to the 
•i '-'"it ions as to whether the appellant did the work. The arbitrator 
in the ;,ward examined this issue on tl!e basis of evidence adduced 
by parties and held that the appellant did the work in question 
and therefore was entitled to claim its price for the work done. 
[Paras 38, 39)[788-B-D] 
3.2 The claims made by the appellant were essentially base(! 
on facts and were accordingly probed on oral and documentary 
evidence adduced by the parties, which resulted in partial success
M/SHARlSHCHANDRA&COMPANYv. STATEOFU.P. THR. 
775 
SUPERINTENDING ENGINEER 
of 3 claims in appellant's favour. No perversity in the arbitrator's A 
reasoning nor any apparent error, legal or otherwise is noticed in 
the award to constitute a case of any legal misconduct on the part 
of the arbitrator empowering the Court to set aside the award by 
taking recourse to Section 30 of the Act. Hence, no legal ground 
to set aside the same. [Paras 41, 42](788-G-H; 789-A-B] 
State of U.P. v. Allied Constructions (2003) 7 SCC 
396 : 2003 (2) Suppl. SCR SS; Mis Sudarsan Trading 
Co. v. Government of Kera/a (1989) 2 SCC 38 : 1989 
(1) SCR 66S - relied on. 
8 
State of U.P. v. Harish Chandra & Co. (1999) 1 SCC 
C 
63 : 1998 (2) Suppl. SCR 660; State qf Andhra Pradesh 
& Ors. v. R. V. Rayanim & Ors. (1990) 1 SCC 433 : 
1990 (1) SCR S4; Ravindra Kumar Gupta & Co. v. 
Union of India (2010) 1 SCC 4(19 : 2009 (16) SCR 
142 - referred to. 
Case Law Reference 
1998 (2) Suppl. SCR 660 
referred to 
Para 9 
2003 (2) Suppl. SCR SS 
relied on 
Para 28 
1989 (1) SCR 665 
relied on 
Para 29 
1990 (1) SCR S4 
referred to 
Para30 
2009 (16) SCR 142 
referred to 
Para 30 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8829 
of2016. 
From the Judgment and Order dated 17 .08.2007 of the High Court 
ofUttarakhand-Nainital in A. 0. No. 1097 of200 I. 
WITH 
SLP (C) No. 23950 of2007. 
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Vijay Hansaria, Sr. Adv., Brij Bhusan, Avnish Pandey, Advs. for 
the Appellant. 
S. R. Singh, Sr. Adv.,
Ardhendumauli Kumar Prasad, Adv. for the 
Respondent. 
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SUPREME COURT REPORTS 
[2016) 8 S.C.R. 
The Judgment of the Court was delivered by 
ABHAY MANOHAR SAPRE, J. In Special Leave Petition 
(c) No. 24443 of 2007 1. Leave granted. 
2. This appeal is filed against the final judgment and order dated 
17 .08.2007 of the High Court of Uttarakhand at Nainital in 0.A. No. 
I 097 of 200 I whereby the High Court allowed the appeal filed by the 
respondent herein and set aside the judgment and order dated 30.05 .1996 
passed by the Civil Judge, Dehradun and, in consequence, allowed the 
objections of the State ofU.P. filed under Section 30/33 of the Arbitration 
Act, 1940 (hereinafter referred to as "the Act 1940") against the award 
dated 27 .11.1995 which, in tum, als() resulted in its setting aside. 
3. Facts of the case need mention, in brief, infra to appreciate the 
controversy involved in the appeal. 
4. The appellant herein is a civil contractor whereas the respondent 
is the State of U.P. represented through Superintending Engineer 
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Irrigation Construction Circle, Yamuna Colony, Dehradun. 
5. In the year 1979, the respondent (State) invited tender being 
Number 6/1979-80 for doing "Earthwork in power channels on different 
routes of various distances and also construction of drainage crossing in 
Chhoti Lui falling in 6 stretches and divided in two sections called "serial 
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4" and "serial 6" in a scheme called - KHARA HYDEL SCHEME". 
6. The appellant submitted their tender for serial 4 and serial 6. 
The
respondent accepted the appellant's tender. Accordingly, two 
agreements bearing nos. 5/SE/79-80 and 6/SE/79-80 were executed 
between the appellant and the respondent for execution of the work in 
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questionon30.10.1979. 
7. So far as agreement No. 5/SE/79-80 is concerned, it was in . 
relation to work of section bearing serial 4 whereas agreement No. 61 
SE/79-80 was in relation to work of section bearing serial 6. The work, 
pursuant to these agreements, was to start from 01.12.1979 and had to 
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be completed on or before 31.05.1982. 
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8. Disputes of various nature arose between the parties in 
execution of both the agreements. The disputes were related to the 
completion of works, its nature, manner of its completion, non-payment 
and withholding of appellant's bills, ded.uction of amount from the bills
M/S HARJSH CHANDRA & COMPANY v. STATE OF U.P. THR. 
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SUPERINTENDING ENGINEER [AB HAY MANO HAR SAPRE, J.] 
etc .. Since the disputes could not be settled amicably, the parties invoked 
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the arbitration clause (I .47) contained in the agreements and approached 
the Civil Court for appointment of arbitrator and for making references 
to him for adjudication of the disputes which had arisen between them in 
relation to 2 agreements. The request was acceded to and accordingly 
some disputes were referred to the sole arbitrator. 
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9. So far as this appeal is concerned, it arises out of disputes, 
which relates to agreement No. 6/SE/79-80, i.e., (serial 6). So far as 
disputes relating to agreement No. 5/SE/79-80 i.e.(serial 4) and some 
disputes relating to agreement No. 6/SE/79-80 are concerned, they were 
also referred to the arbitrator for his decision. One reference, however, 
attained finality by the orders of this Court in State ofU.P. vs. Harish C 
Chandra & Co., (1999) 1 SCC 63, 
whereas another reference is 
pending in this Court. 
I 0. Consequent upon the reference made to the arbitrator insofar 
as the present appeal is concerned, the appellant (claimant) filed 6 claims 
(claim Nos. 12 to 17) before the sole arbitrator (Mr. Harish Chandra -
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retired Chief Engineer). The details of the 6 claims made by the appellant 
against the respondent (State) are as under: -
Claim No. ~ 
Amouut 
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12. 
Claim due on account Rs. l,OS,00,000.00 
of breaking ofla11e 
along
with interest @ 
pieces of hard rock in 24% per annum from 
the filling done from 
31.5.86 to the date the 
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9.00 to 9.80 KM. 
amount is actually 
paid. 
13. 
Claims due as 
Rs.11,62,650.00 along 
payment on account ol with interest at 24% 
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non-payment after 
per annum from 1.6.86 
30.9.85. 
to the date the amount 
is actually paid. 
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SUPREME COURT REPORTS 
[2016] 8 S.C.R. 
14. 
Payment due as claim Rs. 1,04,426.00 aJon1 
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account 
or with interest at 24% 
wron1ful 
deduction per annum from 1.5.85 
of Security. 
to the date the amount 
is actually paid. 
15. 
Payment due as claim Rs. 5,51,250.00 alon1 
on account of extra with interest @24% 
exca·..-ation. 
per annum from 1.6.86 
to the date the amount 
actually paid. 
,..,. 
16. 
Payment due as claim Rs. 4,59,200.00 alon1 
OD 
account 
of with interest @ 24% 
dressin1 
done 
OD per annum from 1.6.86 
slopu of filled earth to the date of amount 
in 
embankments actually paid. 
from Km. 9.00 to 
KM. 9.80 
17. 
Stoppin1 
the Order respondents to 
respondents 
from accept our 
deductin1 
any measurement for 
quantity 
of excaYation on 31.5.86. 
excavation done by 
petitioner because of 
sittin1 
in 
the 
monsoon year 1986 
and onwards, if any. 
11. The respondent (State) contested the aforementioned claims 
by filing their reply. The State also filed their counter claims against the 
appellant claiming damages. The appellant contested the counter claims
MIS HARISH CHANDRA & COMPANYv. STATE OF U.P. THR. 
779 
SUPERINTENDING ENGINEER [AB HAY MANO HAR SAPRE, J.] 
by filing their reply. The parties adduced evidence and examined several 
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witnesses in support of their respective claims. 
12. On 27 .11.1995, the arbitrator passed a reasoned award. Out 
of 6 claims, the arbitrator allowed appellant's 3 claims, i.e., claim Nos. 
12, 13 and 17 and rejected the claims Nos. 14, 15 and 16. The arbitrator 
also rejected the counter claims of the respondent (State) in toto. The 
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details of the claims awarded and rejected are as under: 
Claim No. 
Amount demanded Rs. 
Amount Awarded Rs. 
12. 
Rs. l,OS,00,000.00 24% 
Rs. 44,98,995.00 
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interest from 31.5.86 
13. 
Rs.11,62,650 with 24% 
Rs.10,61,450/- with 
interest upto 31.5.86 
interest 18% from 
1.6.86 to 27.11.95 
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14. 
Rs.1,04,426 with interest 
Rejected 
froml.5.85 
15. 
Rs. 5,Sli250/- with 
Rejected 
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interest @ 24% from 
1.6.86 
16. 
Rs. 4,59,200/- with 
Rejected 
interest @ 24% from 
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1.6.86 
17. 
Order respondent to 
No deduction in 
accept measurement for 
quantity :already paid 
excavation on 31.S.86 
ville 27& Runnina bill 
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are justified 
13. The respondent, felt aggrieved, filed objections under Section 
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[2016] 8 S.C.R. 
30 of the Act 1940 before the Civil Judge(S.D.), Dehradun against the 
award. The appellant contested the objections and prayed for passing a 
decree in term of the award. By order dated 30.05.1996, the civil Judge 
rejected the objections and passed a decree in term of the award along 
with simple interest payable at the rate of 18% p.a. on the awarded sum 
ofRs.55,60,445/- from the date of decree till payment ofamount. 
14. The respondent, felt aggrieved, filed appeal being O.A. No. 
1097 of 2001 before the High Court. By impugned judgment dated 
17 .08.2007, the High Court allowed the appeal, set aside the orderof the 
Trial Court and while allowing the objections filed by the State set aside 
the award. The High Court held that the arbitrator misconducted himself 
in passing the award inasmuch as he travelled beyond the terms of the 
agreement. 
15. Felt aggrieved, the appellant (contractor/claimant) has filed 
this appeal by way of special leave against the judgment of the High 
Court. 
16. Heard Mr. Vijay Hansaria, learned senior counsel for the 
appellant and Mr. S.R. Singh, learned senior counsel for the respondent. 
17. Mr. Vijay Hansaria, learned senior counsel appearing for the 
appellant (claimant/contractor) while assailing the legality and correctness 
of the impugned order contended that the High Court was clearly in 
error in allowing the appeal of the State (respondent) which resulted in
allowing the objections filed by the State before the Civil judge which, in 
turn, resulted in setting aside of the said award which was rightly upheld 
by the Civil Judge. 
18. Learned counsel urged that there was no case made out by 
the State in their objections of any legal misconduct committed by the 
arbitrator and nor there was any factual or/and legal foundation laid so 
as to constitute a case of any legal misconduct within the meaning of 
Section 30 of the Act 1940. for setting aside the award. 
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19. Learned counsel pointed out that even cursory reading of the 
order of the High Court would indicate that the apparent legal error was 
committed by the High Court while allowing the appeal. It was his 
submission that the High Court virtually acted as a first appellate Court 
as ifthe appeal before the High Court arose directly against the award. 
Learned counsel pointed out that the High Court then proceeded to 
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MIS HARISH CHANDRA & COMPANYv. STATE OF U.P. THR. 
78 I 
SUPERINTENDING ENGINEER [ ABHA Y MANO HAR SAPRE, J.] 
examine the legality and correctness of al I factual findings of the arbitrator A 
by appreciating the evidence and then finding fault in the approach of 
the arbitrator so also finding error in the findings set aside the award as 
being bad in law. 
20. Learned counsel urged that such approach of the High Court 
was wholly without jurisdiction being against the law laid down by this 
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Court in series of decisions wherein this Court has, inter alia, ruled that 
the Court while hearing the objections under Section 30 of the Act 1940 
against the award, cannot sit as an appellate Court over the decision of 
the arbitrator. 
21. Learned counsel then contended that even otherwise on the c 
merits, the award and the judgment of the Trial Court do not suffer from 
any illegality and nor any case oflegal misconduct is made out against 
the arbitrator so as to empower the Court to set aside the award under 
Section 30 of the Act 1940. It was his submission that the arbitrator did 
not travel beyond the agreement and on the other hand discussed each 
and every issue by appreciating the evidence on record with reference D 
to each claim and then recorded a finding in favour of the appellant in 
relationto three claims and rejected the remaining claims of the appellant. 
22. Learned counsel lastly contended that this Court should, 
therefore, restore the order of the Trial
Court and, in consequence, 
uphold the award, which is partly in favour of the appellant and partly 
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against them, as being just and legal by setting aside of the impugned 
order of the High Court. 
23. In reply, Mr. S.R. Singh, learned counsel for the respondent 
supported the impugned order and contended that it does not call for any 
interference. It was his submission that the reasoning and the conclusion 
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arrived at by the High Court for setting aside the award is legal and 
proper and hence it deserves to be upheld calling no interference. 
24. Having heard the learned counsel for the parties and on perusal 
of the record of the case, we are inclined to accept the submissions of 
the learned counsel for the appellant as, in our opinion, it has substance. 
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25. The question which arises for consideration in this appeal is 
whether the High Court was justified in allowing the objections filed by 
the respondent (State) under Section 30 of the Act 1940 and thereby 
was justified in setting aside of the award passed by the sole arbitrator 
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SUPREME COURT REPORTS 
[2016) 8 S.C.R. 
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on the ground of "legal misconduct"? In other words, the question that 
arises for consideration in this appeal is whether on facts any case of 
legal misconduct on the part of the arbitrator is made out by the State 
under Section 30 of the Act 1940 for setting aside of the award dated 
27.11.1995? 
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26. This question, in our opinion, is required to be decided in the 
context of Section 30 of Act 1940 since repealed. 
27. What is the jurisdiction of the Court under Section 30 when it 
examines the question as to whether any case of legal misconduct on 
the part of an arbitrator in passing an award is made out or not has been 
c the subject matter of several decisions of this Court and remains no 
more res integra? 
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28. A three-Judge Bench of this Court in State ofU.P. vs. Allied 
Constructions, (2003) 7 SCC 396 while examining the scope of Section 
30 held as under: 
"The award is a speaking one. The arbitrator has 
assigned sufficient and cogent reasons in support 
thereof. Interp1·etation of a contract, it is trite, is a 
matter for the arbitrator to determine. 
Sudars/1a11 Trading Co. vs. Govt. of Kera/a (1989) 2 
sec 38: REFERRED TO: 
Section 30 of the Arbitration Act, 1940 providing for 
setting aside an award is' restl'ictive in its operation. 
Unless one or the other condition contained in Section 
30 is satisfied, an award cannot be set aside. The 
arbitrator is a Judge chosen by the parties and his
decision is final. The court is precluded from 
reappraising the evidence. Even in a case where the 
award contains 1·easons, the interference herewith 
would still be' not available within the jurisdiction of 
the court unless, of course, the reasons are totally 
perverse or the judgment is based on a wrong 
proposition of law. An ~rror apparent on the fact of 
the records would not imply closer scrutiny of the 
merits of documents and materials on record. Once 
it is found that the view of the arbitrator is a plausible 
one, the com1 will refrain itself from interfering."
M/SHARISHCHANDRA&COMPANYv. STATEOFU.P. THR. 
783 
SUPERINTENDINGENGINEER[ABHAYMANOHARSAPRE,J.] 
29. Justice S. Mukharji, as His Lordship then was, speaking for 
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the Bench in Mis Sudarsan Trading Co. vs. Government of Kerala, 
(1989) 2 SCC 38 while examining the jurisdiction of Court under Section 
30 held as under: 
"However, th.ere is a distinction between disputes as 
to the jurisdiction of the arbitrator and the disputes 
as to in what way that jurisdiction should be exercised. 
There may be a conflict as to the power of the 
arbitrator to grant a particular remedy. One has to 
determine the distinction between an error within the 
jurisdiction and an error in excess of the jurisdiction. 
Court cannot substitute its own evaluation of the 
conclusion of law or fact to come to the conclusion 
that the arbitrator had acted contrary to the bargain 
between the parties. Whether a particular amount 
was liable to be paid or damages liable to be sustained, 
was a decision within the competency of the arbitrator 
in this. By purporting to construe the contract the 
court could not take upon itself the burden of saying 
that this was contrary to the contract and, as such, 
beyond jurisdiction. If on a view taken of a contract, 
the decision of the arbitrator on certain amounts 
awarded, is a possible view through perhaps not the 
only correct view, the award cannot be examined by 
the court." 
30. The aforesaid view was consistently followed in later decisions 
by this Court in
State of Andhra Pradesh & Ors. Vs. R.V. Rayanim 
& Ors., (1990) 1 SCC 433 and Ravindra Kumar Gupta & Co. vs. 
Union oflndia (2010) 1 SCC 409. 
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31. One cannot, therefore, dispute the legal proposition, which is 
now fairly settled keeping in view the aforementioned law laid down by 
this Court that an award can be set aside only on the grounds specified 
in sub-clause (a) (b) and ( c) of Section 30 of 1940 Act and on no other 
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grounds. Indeed this is clear from the opening words of Section 30 itself 
which starts with the words "An award shall not be set aside except 
on one or more of the following grounds." A fortiori, a reasoned 
award cannot be.set aside unless it falls in any of the three sub-clauses 
(a) (b) and ( c) of Section 30 of the Act 1940. 
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SUPREME COURT REPORTS 
[2016] 8 S.C.R. 
32. The grounds such as inadequacy ofreasons in support of an 
award, error committed by the arbitrator on facts, alternate or/and more 
plausible view could be taken then what is taken by the arbitrator, improper 
appreciation of evidence done by the arbitrator in recording any finding 
etc. are not the grounds on which any award much less a reasoned 
award can be set aside. In other words, none of these grounds can be 
made the foundation for setting aside the award because they do not fall 
within the four corners ofany of the thtee sub- clauses of Section 30 of 
the Act 1940. 
33. Coming now to the facts of this case, on perusal of the 
impugned judgment, we find that the High Court while setting aside of 
C the award did not take into consideration the aforesaid view of this <;:ourt 
and thus, in our view, committed a legal error. 
34. We are constrained to observe that the High Court virtually 
sat as an appellate Court as if it was hearing the appeal arising out of the 
award little realizing rather ignoring its well defined jurisdiction in such 
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It seems to have gone to the extent of permitting the State's counsel to 
file some documents in appeal as would be clear from para 12 of the 
judgment. This would also be clear from the observations of the High 
Court made in Paras 12, 13, 18 and 19 which read as under:· 
"12 The
learned standing counsel has supplied the 
list of petty contractors in whose names the bills were 
submitted before the Arbitrator. The details of those 
bills is as below:-
S.:Xo. 
Xames 
of Petty 
Amount 
Contractors 
I 
Harish Chandra & 
Rs. 3,11,965.80 
Sons 
2 
Vijay 
Gupta 
& 
Rs. 3,04,828.00 
Sons 
3 
Phool 
Chand 
Rs.17,95,346.00 
Gupta & Sons
MIS HARISH CHANDRA& COMPANYv. STATE OF U.P. THR. 
785 
SUPERINTENDINGENGINEER[ABHAYMANOHARSAPRE,J.] 
4 
Ashok Gupta & Sons 
Rs. 178,84,942.00 
5 
Vijay Gupta & Sons 
Rs. 17 '78,664.00 
6 
Phool Chand & Sons 
Rs. 2;97,583.50 
7 
Ashok Gupta & Sons 
Rs. 3,10,258.60 
8 
Barish Chaudra & 
Rs. 17 ,84,468.00 
Sons 
9 
Ajay Gupta & Sons 
Rs. 3,00,196.90 
10 
Ajay Gupta & Sons 
Rs. 17, 73,903.98 
13. The department made enquiries upon which it was 
revealed that in the concerned area there exist no 
Firms in the aforesaid names and addresses. The 
correspondence made in this regard is filed as 
Annexure No.2 (Collectively) to the Stay Application 
in the appeal before this Court. The endorsement 
made by the postal department about non-existence 
of the said Firms is also Arbitrator has not considered 
the above facts and allowed the claims 12, 13 and 17 
filed by the contractor. The Department's allegation 
is that the contractor for the first time raised claim 
Nos. 12 to 16 before it vide his letter No. 102/S.C.C./ 
87 dated 20.9.87 and the department vide its letter 
No. 3911/-2/case/647/86, dated 28.11.87 has rejected 
the claims. Claim No. 17 was never raised before the 
Department and it was placed before the Arbitrator 
directly. 
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SUPREME COURT REPORTS 
[2016] 8 S.C.R. 
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18. Now we proceed to scrutinize the claims awarded 
by the Arbitrator to the contractor. 
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19. Claim No. 12 pertains to breaking of large pieces 
of hard rock in the filling work done from Km. No. 
9.00 to 9.80. The Arbitrator has allowed this claim on 
the ground that the site is located in the upper Shivalik 
ranges of the Himalayan mountains. These ranges are 
mostly built of the sedimentary rocks compressed of 
the material flown down the rivers since millions of 
years which got compressed under their own pressure 
and weights and got very hard due to the ageing 
process. This material could not be dugged out 
manually by pick axes or Phawaras. The possible 
means of excavation were only by mechanical means 
either by mechanical shovels, back hows, rippers or 
by blasting. The objections of the Department is that 
the Arbitrator has allowed the claim on imagination. 
As per the contract clause 8.05 boulders of 150 mm 
dimensions were to be used in the filling reach and of 
more than 150 mm were to be staked at the site. The 
stones of dimensions of above 150 mm were not to 
be broken and then filled in the filling reach. The 
relevant clause 8.05 clearly indicates "the boulders 
of more than 150 mm in dimension shall not be 
permitted in the embankments unless specifically 
approved by the Engineer lncharge and shall be 
stacked by the contractor 10 meters away from the 
toe of the bank and nothing extra
shall be paid to the 
contractor for this work". There is no mention of 
breaking of the stones in the agreement clause. The 
Arbitrator has acted beyond the provision of the 
agreement in allowing this claim." 
35. The High Court then went on to examine the case on facts 
and eventually held that the arbitrator has travelled beyond clauses 26, 3 
(I )(a) and 1.46 of the agreement and hence committed legal misconduct 
requiring the High Court to set aside the award. 
36. With respect, we can neither agree and nor can uphold the 
H approach and the reasoning of the High Court. In our considered view,
M/SHARISHtHANDRA&COMPANYv. STATEOFU.P. THR. 
787 
SUPERINTENDING ENGINEER [ABHAY MANO HAR SAPRE, J.] 
such approach is wholly against the law laid down by this Court in the 
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decisions quoted supra. 
37. In the first place, the High Court did not apply the law laid 
down by this Court while deciding the appeal and hence committed a 
jurisdictional error; Secondly, the High Court acted like an appellate Court 
and virtually treated as if the appeal arose directly against the award 
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and then proceeded to examine all factual findings of the arbitrator by 
appreciating the evidence. It was not permissible in law; Thirdly, the 
High Court should have confined its inquiry to find out as to whether any 
legal misconduct was committed by the arbitrator and, if so, how and in 
what manner. It was, however, not done; Fourthly, the High Court went 
into the factual question by referring to clause 26 of the agreement for 
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holding that the arbitrator passed an award contrary to clause 26 and 
thereby traveled beyond the terms of agreement which constituted a 
legal misconduct on his part. This finding, in our view, is, on the face of 
it, untenable in law for the reason, inter alia, that this objection was 
neither raised before the arbitrator and nor before the Trial Court in the 
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manner in which it was raised for the first time in the High Court. In any 
event, in the absence of any finding recorded by the arbitrator and the 
Trial Court, such issue could not have been gone
into for the first time in 
appeal by the High Court. That apart, it has otherwise no substance on 
facts for the simple reason that it being a question of fact, the same 
could not be examined in appeal; Fifthly, the High Court failed to see 
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that clause 26 only prohibits the appellant from assigning the agreement 
to any third person. Clause 26, therefore, had nothing to do with the 
claims filed by the appellants. It was an admitted fact that the appellant 
did not assign the agreement to any third person. If some work was got 
done by the appellant by employing some small contractor then it did not 
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constitute a case of assignment of a whole agreement in favour of small 
contractors within the meaning of clause 26 so as to empower the State 
to cancel the agreement on such ground. The finding of the High Court 
that the award is rendered bad because it was passed in contravention 
of clause 26 of the agreement is, therefore, not legally sustainable in 
law; Sixthly, the High Court further failed to see that there was no error G 
apparent on the face of the record in the findings recorded by the 
arbitrator; Seventhly, the High Court also failed to see that the Trial 
Court had elaborately gone into all the factual issues and rightly did not 
find any substance in the objections raised by the respondent; and lastly, 
the award being a reasoned one (running into 36 pages-Annexure PS 
H
788 
SUPREME COURT REPORTS 
[2016] 8 S.C.R. 
A 
pages 127-163 of the SLP paper book), the reasoning of the arbitrator 
could not be said to be perverse to the extent that no man with ordinary 
prudence could take such view and nor any finding of the arbitrator was 
against any provision oflaw or in contravention ofany of the clauses of 
the agreement so as to constitute a case of legal misconduct on the part 
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c 
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of the arbitrator within the meaning of Section 30 of the Act for setting 
aside an award. 
38. We, on perusal of the award, find that the main claim of the 
appellant (claimant) against the State was "claim No. 12" which was in 
relation to the work done by the appellant of breaking oflarge pieces of 
hard rock from 9.00 Km to 9.80 Km distance. Since the respondent 
(State) disputed the appellant's claim on various factual grounds and 
hence the issue centered around to the questions as to whether the 
appellant did this work and, if so, how and in what manner and to what 
extent and lastly, what should be the rate at which the appellant should 
be paid, if it is held that the appellant has done the work. 
39. The arbitrator in Paras 19 to 36 of the award examined these 
issues on the basis of the evidence adduced by the parties and held that 
the appellant has done the work in question and, therefore, they were 
entitled to claim its price for the work done. Though the appellant, in 
their claim petition, claimed the money at the rate ofRs.30 per Cu M
but 
the arbitrator did not accept the rates claimed by the appellant and instead 
awarded the amount to the appellant at the rate of Rs.12.97 per Cu.M. 
40. So far as claim No. 13 was concerned, it pertained to interest 
claimed by the appellant on their some amount whereas the claim No. 
17 was in relation to so'me deductions already made by the respondent in 
the appellant's bills for certain work done under the agreement. 
41. In our considered view, it is clear from the facts of the case 
that the claims made by the appellant were essentially based on facts. 
They were accordingly probed on oral and documentary evidence 
adduced by the parties, which resulted in partial success of3 claims in 
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appellant's favour and rejection of 3 claims. So far as the State is 
concerned, they did not pursue their counter claim consequent upon its 
rejection by the arbitrator. 
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42. We have not been able to notice any kind of perversity in the 
arbitrator's reasoning and nor are we able to notice any kind of apparent 
error whether legal or otherwise in the award which may constitute a
MIS HARISH CHANDRA & COMPANYv. STATE OF U.P. THR. 
789 
SUPERINTENDING ENGINEER [ ABHAYMANOHAR SAPRE, J.] 
case of any legal misconduct on the part of the arbitrator empowering 
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the Court to set aside the award by taking recourse to Section 30 of the 
Act. The reasoning and the conclusion arrived at by the arbitrator is one 
of the possible view which is capable of being taken by the arbitrator on 
the material brought on record and we find no legal ground to set it aside 
the same. 
43. Learned counsel for the respondent made sincere attempt 
to support the reasoning and the conclusion reached by the High Court 
but in the light of what we have discussed above, we can not accept any 
ofhis submissions. 
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44. In the light of foregoing discussion, we are unable to concur 
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with the reasoning and the conclusion arrived at by the High Court. 
45. As a result, the appeal succeeds and is accordingly allowed. 
Impugned order is set aside and that of the Trial Court restored. 
In Special Leave Petition (c) No. 23950 of 2007 
46. As prayed for, the petitioner is permitted to withdraw this 
special leave petition with a liberty granted to the petitioner to file review 
petition before the High Court. In the event of review petition being 
dismissed, the petitioner would be at liberty to challenge the impugned 
order including the order in the review petition. 
4 7. With the aforesaid liberty, the special leave petition is dismissed 
as withdrawn. 
Divya Pandey 
Matters
disposed of. 
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