Case: State of Orissa Vs. Dandasi Sahu

1. This is an appeal by special leave from the judgment and order of the High Court of Orissa, dated 6th July, 1987. It arises out of a contract entered into between the State and the Respondent for the construction of certain projects for irrigation. During 1973-74 the Respondent was entrusted with the job of Construction of Ramaguda Minor Irrigation Project in Kukudkhandi Block vide agreement No. 4-F-2. The value of the work was Rs. 9,99.510/-. The work pursuant to the contract commenced on 4th May, 1973 and the 4th November, 1974 was the stipulated date for completion of the work. However, on 30th December, 1975 the work was actually completed. It is asserted by the Appellant that the Respondent contractor accepted the final payment and was duly paid a sum of Rs. 23,74,001 for the work done by him including the extra work. Thereafter, no amount was due to the Respondent, according to the Appellant, and he did not raise any claim whatsoever before the Department. On 28th September, 1976 the last payment was alleged to have been made by the Respondent. On 30th October, 1976 the last bill was prepared which was nil one. The Respondent, thereafter, raised a claim and gave notice for appointment of an arbitrator. Consequently, the Chief Engineer appointed one Shri A.N. Nanda as the arbitrator in terms of the arbitration clause. However, on the application of the Respondent the learned Subordinate Judge removed Shri. A.N. Nanda and appointed one Sh. S. Patnaik as the arbitrator. It may be mentioned that the application was made for removal of the arbitrator Shri B. Patnaik but the same was ultimately dismissed Before the arbitrator, the Respondent filed the claim raising some claims which, according to the Appellant, were fictitious and baseless. These claims were for the alleged extra work in respect of which the decision of the Superintending Engineer under Clause 11 of the contract was final and the same was excluded from the purview of the arbitration clause.2. It was contended on behalf of the Appellant that the arbitrator had no jurisdiction to deal with such claims. The Appellant filed a counter claim for Rs. 2, 11, 400/-. denying all the claims of the Respondent. All the documents and relevant papers were produced before the arbitrator. It is stated that as the application for removal of Shri S. Patnaik as arbitrator was pending, an application had been made before Shri S. Patnaik to adjourn the proceedings which was refused and the award was made. This award was claimed to have been made virtually ex parte This however was not so and it appeared that the arbitrator on hearing the parties and considering the evidence produced before him made the award. The arbitrator made the said award on 18th March, 1983 but the same was a non-speaking and non-reasoned award for a lump sum of Rs. 15, 23, 657/- plus interest @ 10% from 9-9-1975 till the date of payment or decree. Objections to the said award were filed in the Court. The learned subordinate judge upheld the objection to the award and set aside the award on 15th September, 1984. There was an appeal to the High Court and the High Court set aside the judgment of the learned Subordinate Judge and made the award of the arbitrator, rule of the Court. It also directed payment of future interest at 6%.3. Being aggrieved thereby the State of Orissa has preferred this appeal.

Court's reasoning:
In the facts and circumstances of the case, we are of the opinion that we would not be justified in acceding to this request on the part of the Appellant. In this case the submission that the award was bad being an unreasoned one, was neither mooted before the learned Subordinate Judge nor before the High Court. This contention was also not raised in the objection to the award, filed originally. It is only in the special leave petition that such a plea has been raised for the first time. Arbitration is resorted to as a speedy method of adjudication of disputes. Stale and old adjudication should not be set at naught or examination of that question kept at bay on the plea that the point is pending determination by a larger Bench of this Court. Even if it is held ultimately that the unreasoned award per se is bad, it is not sure whether such a decision would upset all the award in this country which have not been challenged so far. Certainly, in the exercise of our discretion under Article 136 of the Constitution and in view of the facts and circumstances of this case, we would not be justified is allowing the party to further prolong or upset adjudication of old and stale dispute.4. In that view of the matter, we think that the pendency of this point before the larger Bench should not postpone the adjudication and disposal of this appeal in the facts of this case. The law as it stands today is that award without reasons are not bad par se. Indeed, an award can be set aside only on the ground of misconduct or on an error of law apparent on the face of the award. This is the state of law as it is today and in that context the contention that the award being an unreasoned one is per se bad, has no place on this aspect as the law is now. This contention is rejected.8. The learned subordinate judge was inclined to hold that the arbitrator had no jurisdiction to arbitrate on disputes which he has purported to do but in view of the Bench decision of the High Court of Orissa in State of Orissa v. Gokulchandra Kunungo (1981 52 CLT 416) he held that he was not free to decide that the dispute was not arbitrable and rejected this plea. The High Court also did not entertain this objection. It was canvassed before us and submitted that in view of Clause 11, the matters in dispute and the amount due for the alleged additional work, were- not arbitrable at all. We have noticed Clause 11 which makes the decision of the Engineer-in charge final in respect of some issues. In this connection, it is important to refer to the proviso of Clause 11 which states that in case of dispute about the rates and time for completion of the work and any dispute as to proportion that the additional work bears to the original contract work, the decision of the Superintending Engineer of the Circle would be final. The points upon which the arbitrator in the instant case has adjudicated are not those which are excepted or covered by Clause 11 of the agreement In that view of the matter, this clause has no application in the instant controversy.In the instant case it is not the rate which is in dispute. The Madhya Pradesh High Court referred to several decisions of this type and came to the conclusion on the construction of Clause 13A in that case that the dispute that had arisen between the parties in arbitration, was excluded by Clause 13A of the agreement. In view of the Clause in the instant case and the nature of the dispute which had arisen, we are of the opinion that such decisions also cannot give much assistance to the Appellant. Reliance was also placed on certain observations of the Delhi High Court in the case of Food Corpn. of India v. P.L. Juneja (AIR 1981 Delhi 43). There the Division Bench of the High Court was concerned with the questions which were to be decided by the Court and not by the arbitration. There also the Clause was very much dissimilar to the present one which is set out hereinbefore. Clause 15 (c) provided that the question whether a particular service is cannot to be covered by any of the services specifically described and provided for the contract or is or is not material to any such services shall be decided by the Regional Manager whose decision shall be final and binding. It was not the case whether any additional work was done and if so, the extent of such work. In the aforesaid view of the matter it is not possible to hold that in view of nature of instant dispute, the matters at issue were not excluded and the arbitrator did not commit any wrong in proceeding with the arbitration.It is well-settled that when the parties choose their own arbitrator to be the judge in dispute between them, they cannot, when the award is good on the fact of it, object to the decision either upon law or on facts. Therefore, when arbitrator commits a mistake either in law or in fact in determining the matters referred to him, where such mistake does not appear on the face of the award and the documents appended to or incorporated so as to form part of it, the award will neither be remitted nor set aside. The law on this point is well-settled. See in this connection the observations of this Court in Union of India v. Bungo Steel Furniture P Ltd. (1967 1 SCR 324 ) and Allen Berry & Co (P) Ltd. v. Union of India (1971 1 SCR 282). It was however contended that the amount of the award was shockingly high that it shocked the conscience of the Court and the award must be set aside. The fact that merely the award amount is quite high as commented by the High Court or that a large amount has been awarded, does not vitiate the award as such. In the instant case the original award was for Rs. 9,99, 510/-. Admittedly, additional work was done and payment for such work was done and payment for such work was determined at Rs. 23,74,001- and claim for further additional work was made for Rs. 15,23,657/-. One has to judge whether the amount of the award was so disproportionately high to make it per se bad in the facts and circumstances of a particular case. It is clear from the facts that the arbitrator is a highly qualified person having several Indian and foreign Degrees and at the relevant time was acting as Chief-Engineer-in-charge of the State Government. Having regard to the nature of claims involved and the fact that the additional work has been done for which large amounts have been paid and in this case it is evident that all due opportunities were given to the parties to adduce all evidence. We are unable to accept the submission that the award was so-disproportionate as to shock the conscience of the Court and such, it cannot be held that the award was bad per se. In our opinion, the High Court was right in dismissing the challenge to the award on this ground.12. In our opinion, the evidence of such state of affairs should make this Court scrutinise the award carefully in each particular case but that does not make the court declare that all high amounts of award would be bad per se. As mentioned hereinbefore, it cannot be said that the amount of award was disproportionately high to hurt the conscience of the Court in this case.13. It is now well-settled that the interest pendente lite is not a matter within the jurisdiction of the arbitrator. In this connection reference may be made to the observations of this Court in Executive Engineer (Irrigation) Balimela and Ors. v. Abhaduta Jena and Ors. (1988 1 SCC 418 ) where this Court held that the arbitrator could not grant interest pendente lite. In the aforesaid view of the matter this direction in the award for the payment of such interest must be deleted from the award.