Case: M/S. Build India Construction System Vs. Union Of India

2. In response to a Notice Inviting Tenders (NIT) issued by the respondent on 12.9.1984, the appellant submitted the tender based on the tender document issued by the respondents. The tender submitted by the appellant was accepted. On 22.2.1985, the appellant signed a letter to the following effect:- CA No (GE) B-10 of 85 86 SERIAL PAGE No.23 (GENERAL CONDITIONS OF CONTRACT-IAFW-2249) (1976 PRINT)LUMP SUM CONTRACT FOR IAFW-2159 TERM CONTRACT FOR ARTIFICERS WORK (IAFW-1821) MEASUREMENT CONTRACT - IAFW-1779 & 1779A 1. A copy of GENERAL CONDITIONS OF CONTRACTS (IAFW-2249 1976 PRINT) with Errata No.1 to 27 and Amendment No. 1 to 27 has been supplied to me/us and is in my/our possession. I/We have read and understood the provisions contained in the aforesaid GENERAL CONDITIONS OF CONTRACTS before submission of this tender and I/We agree that I/We shall abide by the terms and conditions thereof, as modified, if any elsewhere in these tender documents2. It is hereby further agreed and declared by me/us, that the GENERAL CONDITIONS OF CONTRACTS-IAFW-2249 (1976 PRINT) including Conditions 70 there pertaining to settlement of disputes by arbitration containing 30 pages (Serial Page Number 1 to 30) with Errata Numbers 1 to 27 and amendment Numbers 1 to 27 from Part of these Tender documents. Sd/- Sd/- SIGNATURE OF ACCEPTING CONTRACTOR OFFICER Dated:___________3. The respondents accepted the tender and a contract was entered into between the parties on 29.5.1985. It is not in dispute that the contract contains an arbitration clause requiring all disputes, between the parties to the contract (other than those for which the decision of the CWE or any other person is by the contract expressed to be final and binding) shall, after written notice by either party to the contract to the other of them, be referred to the sole arbitration of an Engineer Officer to be appointed by the authority mentioned in the tender documents. There are other recitals contained in the arbitration clause which are not relevant for our purpose. What is relevant to mention is that the clause does not provide for a reasoned award or a speaking award being given by the arbitrator. There is nothing in the arbitration clause spelling out an obligation on the part of the arbitration to give reasons for the findings arrived at by him4. On 4.9.1986, the Government of India, Ministry of Defence, New Delhi sanctioned an amendment in the general conditions of the contract which reads as under:- Amendment No. Page No. Particulars 48 1978 24 Condition 70 Print Sub Para 9. Add the following at the end of the sub paras: If the value of the claims or counter claims in an arbitration reference exceeds Rs.1 lakh the arbitration shall given reasons for the award. 2. Sanction of the Government is also accorded for incorporation of the above mentioned amendment at the appropriate place in the earlier prints of IAFW 2249. 3. This amendment shall come into effect from 3.10.19865. Disputes arose between the parties leading to cancellation of contract by the respondents on 3.11.1987 and again on 4.4.1990. On 31.5.1991, the respondents appointed a Senior Engineer Officer as the sole arbitrator in accordance with the arbitration agreement. On 28.9.1995, the arbitrator published his award allowing the appellants claim to the extent of Rs.80,000/- only and rejecting the respondents counter claim. The award was made a rule of the court by the learned Single Judge of the High Court. In an appeal preferred by the respondents, the decree passed by the learned Single Judge has been set aside by the Division Bench of the High Court which has also directed the award to be set aside and remitted back to the arbitrator for proceeding afresh and making a reasoned award. For doing so the Division Bench has relied on the amendment dated 4th September, 1986 and held it to be applicable to the contract between the parties. Feeling aggrieved by the judgment of the Division Bench, the appellant has preferred this appeal by special leave.

Court's reasoning:
10. The abovesaid analysis of Benode Behary Roy case (supra), clearly points out that reliance thereon by learned counsel for the respondents is entirely misconceived so far as the facts of the present case are concerned. Shri Jalan also invited our attention to a few passages from Ansons Law of Contract (27th Edition, 1998, at p.494), Treitals Law of Contract (10th Edition, 1999, at p.55) and speech of Staughton LJ in Court of Appeal in Lombard Tricity Finance Ltd. Vs. Paton, (1989) 1 All ER 919, taking the view that a contract may also give one of the parties the power unilaterally to vary the obligations and if such power can be spelled out from the terms of the contract and is held to be lawful then a unilateral variation of obligation by one party shall be binding on the other party to the contract. On principle, there may not be a dispute with the legal proposition so forcefully advanced by the learned counsel. However, the question is of its applicability to the case at hand. As we have already pointed out, the letter of acceptance dated 22.2.1985 cannot be so read as to spell out the appellant having conferred any authority on the respondents to modify or alter the terms of the contract except by mutual agreement and to bind itself by such variations. The arbitration clause is contained in the contract entered into between the parties. Its terms could not have been varied except by mutual agreement. Moreover the amendment dated 4.9.1986 itself provides for its coming into effect from 3.10.1986, i.e. on 30th day after the date of the amendment. That amendment clearly cannot have any relevance for interpreting the arbitration clause contained in the contract entered into between the parties much before the date of amendment coming into effect11. There are several other factors which preclude the respondents from urging such a plea. The reference to arbitrator does not suggest an obligation having been cast on the arbitrator to give reasons for the award. Such a plea, as has been urged in this Court, was not taken by the respondents before the arbitrator. Even in the objections filed in the court, the validity of the award has not been specifically questioned on the ground of its having been given in breach of any obligation of arbitrator to give reasons as spelled out by the arbitration clause. The judgment of the learned single Judge does not show such a plea having been urged before him. In the objection petition there is a vague and general plea raised that rejecting the claims forming subject matter of cross objection and allowing the claim of the appellant without assigning any reason was bad. Such an omnibus and general plea cannot be read as submitting that the amendment dated 4.9.1986 applied to the contract between the parties and that in view of the amended arbitration clause the unreasoned award was bad. It appears that the plea was for the first time raised at the appellate stage before the Division Bench of the High Court. Unwittingly the Division Bench fell into the error of entertaining such a plea and disposing of the appeal by upholding the same though the plea was not even available to the respondents to be raised at that stage12. At the end, the learned counsel for the respondents made an alternative submission that assuming the ground which prevailed with the Division Bench for setting aside the award does not appeal to this court, then the matter should be sent back to the Division Bench for dealing with such other objections to the validity of the award as may be available to the respondents. Reliance was placed on Food Corporation of India Vs. Jagdish Chandra Saha (1995) Suppl (4) SCC 521 . In the facts and circumstances of this case, we are not inclined to accept that submission. The judgment of the Division Bench does not show any plea, other than the one on which the decision of the Division Bench is based, having been taken before the Division Bench yet not having been dealt with by the Division Bench as unnecessary in view of its opinion formed on one of the pleas raised by the appellants. The learned single Judge has noted in his judgment - the entire arguments of the learned counsel were on the facts of the case. He has not pointed out any legal flaw or error in the award of the arbitrator. Thus, there is no substance in the objection raised. We do not also find any other plea deserving consideration having been taken up either in the objection petition before the learned single Judge or before the Division Bench which may call for a remand by this Court for further hearing