Case: Hindustan Construction Vs. Governor Of Orissa

2. The award given by the Special Arbitration Tribunal (hereinafter referred to as the Special Tribunal) has been set aside by the High Court and the proceeding has been remitted to the Arbitration Tribunal for fresh adjudication. That order is under challenge in the present appeal.3. On 16-7-1979, tenders were invited by the respondents for construction work of concrete-cum-masonry dam of Upper Kolab, Multi Purpose River Project, in the State of Orissa. The tender of the appellant having been accepted, an agreement was executed between the appellant and the respondent State for the execution of the said project. The work order was issued to the appellant on 2-1-1981. The work was to be completed by 30-9-1982. In terms of the agreement, escalation charges were to be paid to the contractor. The respondents granted extension for the completion of the project by end of the December, 1985. There is no dispute that work was completed before that date. However, escalation charges were paid by the Executive Engineer in the running bills only till 31-3-1985 after which no payment in this respect was made. Some other amounts also remained to be paid including the refund of security deposits, which led to the reference of the dispute to the Arbitration Tribunal, constituted under Section 41 A of the Arbitration Act, as introduced by Arbitration (Orissa Amendment) Act, 1982. A counter-claim was also filed before the Arbitration Tribunal, on behalf of the State. The Arbitration Tribunal having found that the dispute involved a claim for more that Rs. one crore, directed the State Government to exercise power under proviso to Section 41A(1) of the Arbitration Act (hereinafter referred to as the Act) as amended by the Arbitration (Orissa Amendment) Act, 1982 and to refer the dispute to the Special Tribunal. We do not express any view on the question whether the initial jurisdiction exercisable by the Arbitration Tribunal got lost on the opposite party laying a counter-claim exceeding Rs. one crore. That may have to be answered in an appropriate case. The State Government referred the dispute aforesaid by a Notification dated 6-5-1988 to the Special Tribunal, which had been constituted with a retired Judge of the High Court. The Special Tribunal issued notices to the parties on 14-5-1988 and had its first sitting on 28-5-1988. No party raised any dispute on the question whether or not the Special Tribunal had any jurisdiction. On 28-8-1988, the Special Tribunal extended the time for making the award by four months from the date of expiry of time i.e. from 27-9-1988, pursuant to a memorandum put in by both sides for such extension. On 27-9-1988, the four months statutory time calculated from 28-5-1988 expired. But in view of the aforesaid extension on 28-8-1988 on basis of the memorandum put in by both sides for such extension, the Special Tribunal proceeded with the dispute. However, the award could not be given. On 18-1-1988, another joint memorandum was filed on behalf of both the parties before the Special Tribunal for extension of time for submission of the award by four months from 27-1-1989. With the consent of both the parties, the period for making the award was extended. On 10-2-1989, the Special Tribunal made and signed its award. Objection was filed on behalf of the respondents to the award. On 26-9-1989 the Subordinate Judge rejected the said objection and made the award Rule of the Court granting 6% pendente lite interest and 4% future interest. An appeal was filed on behalf of the respondent-State before the High Court. That appeal has been allowed by the High Court and the award of the Special Tribunal has been set aside. A direction has been given to the Arbitration Tribunal to proceed with the adjudication of the disputes afresh.

Court's reasoning:
The High Court was in error in proceeding on the assumption that the State Government had exercised the power of transfer from the Arbitration Tribunal to the Special Tribunal in exercise of the power under proviso to sub-section (7) of Section 41A of the Act. In the Notification dated 6-5-1988, it has been clearly stated that a dispute had arisen between the appellant and the State Government involving rupees more than one crore and the Arbitration Tribunal has also given a direction to appoint Special Tribunal; because of which "in exercise of the powers conferred by the proviso to sub-section (1) of Section 41A of the Arbitration Act, 1948 (X of 1948) as amended by the Arbitration (Orissa Amendment) Act, 1984 (Orissa Act 17 of 1984), the State Government do hereby constitute a Special Arbitration Tribunal comprising Mr. Justice B. Behra, retired Justice, Orissa High Court to settle the said disputes.............". It may be mentioned that the Arbitration Act was further amended by Arbitration (Orissa Amendment) Act, 1984 (Orissa Act 17 of 1984) which has been referred to in the aforesaid Notification of the State Government. But we are not concerned in the present appeal in respect of the said amendment and as such details thereof need not be mentioned.7. According to us, the Notification dated 6-5-1988 constituting the Special Tribunal and referring the dispute to such Special Tribunal cannot be held to be one in exercise of power under proviso to sub-section (7) of Section 41A. The said notification of reference to Special Tribunal is within the scope of proviso to sub-section (1) of Section 41A. The State Government exercised the said power taking into consideration all the facts and circumstances of the case including the direction of the Arbitration Tribunal because it involved a claim of Rs. one crore and above. It is an admitted position that the State Government had not at any stage questioned before the Special Tribunal the jurisdiction thereof to adjudicate the said dispute. The State Government itself by a statutory notification having constituted the Special Tribunal and referred the dispute to said Special Tribunal, we fail to appreciate as to how for the first time this stand was taken before the High Court by the State Government that the Special Tribunal had no jurisdiction to adjudicate the dispute or to make the award. According to us, in the facts and circumstances of the case, the High Court ought not to have permitted the State Government to raise such a contention after it had submitted to the jurisdiction of the Special Tribunal merely because the award went against it. It hardly behoves the State Government to question the jurisdiction of the Special Tribunal at such a belated stage merely because the award was not to its liking. The State Government cannot be permitted to behave like an ordinary dishonest litigant who takes an off chance hoping to succeed and if the outcome is not to his liking to turn back and question the Special Tribunals jurisdiction. The High Court should not have permitted such a somersault. We, therefore, set aside the High Courts finding on this issue for the above reasons.8. So far the question of extension of time for making the award is concerned, it is an admitted position that a memorandum was filed on behalf of both the parties including the State Government of 28-8-1988 for extension of the period for making the award by four months from the date of the expiry of the time onto us, the High Court over-looked the provision of sub-section (2) of Section 28. After the Special Tribunal had entered into reference, by consent of the parties, the time for making the award could have been extended. In the present case it is not in dispute that the appellant and the respondent-State both had agreed for extension of the period for making the award after the Special Tribunal had entered into reference. As such the award cannot be held to be invalid on that ground.10. The third ground for declaring the award invalid by the High Court is that the Special Tribunal had not considered important documents which were on the record of the arbitration proceeding. In this connection our attention was drawn to a letter dated 28-8-1982 addressed by the appellant Company to the Executive Engineer saying that they were applying for extension of time for completion of works up to 30-6-1984 because of valid reasons given in the prescribed pro forma. In that letter, it was also mentioned that during the discussion between the Dy. General Manager of the Company with the Government Officials at Bhubaneshwar on 20-2-1982, it had been agreed to consider the extension of time up to 30-6-1984. In the pro forma attached to the said letter, again the same thing was reiterated. It was said in the said pro forma on behalf of the appellant-Company that they had undertaken that they shall not claim any compensation or extra rate for executing the work beyond the stipulated date except whatever was permissible as per the contract. It was urged that the letter and the pro forma aforesaid was not considered by the Special Tribunal while making order in respect of escalations. According to the respondent-State as the extension was given at the request of the appellant, they were not entitled for any escalation charges. Reference was also make on behalf of the respondents to the supplementary agreement, especially clauses VI and VII thereof. In Clause VI, it has been stated that any extra arrangement if required to be made by the Company to complete the work as per the above agreed schedule "shall be done by them without liability to the Government of Orissa". In Clause VII of the said supplementary agreement, it has been said that Government of Orissa shall consider to extend the date of completion of the work up to 30-6-1984 "without liability to the both contracting parties". On basis of the aforesaid clauses, it was urged on behalf of the respondents, which has been accepted by the High Court, that the State Government was not bound to pay any charges under the head escalation. On behalf of the appellant, it was demonstrated that the aforesaid no liability clause in the supplementary agreement related to Clause 13 of the original agreement under the heading Compensation for delay in works. It says that the contractors rates are based on the assumption that the contract will be completed by 30th September, 1982 and the contractor shall not claim "any compensation or revision of rates if the work gets delayed up to 6 months beyond the contract completion time i.e. 30-9-1982". It further says that if the contract completion date gets delayed beyond 31-3-1983 for the reasons not attributable to the contractor, the rates shall be revised for the unfinished work as on 31-3-1983 by Engineer-in-charge in consultation with the contractor, subject to the approval of the Government. When in the supplementary agreement in clauses VI and VII it was said that extra arrangement for completion of the work as per the agreed schedule shall be done by the Contractor without liability to the Government of Orissa or without liability to both contracting parties, it was with reference to the aforesaid clause 13 which stipulated compensation for delay in works. According to the appellant, the Special Tribunal has awarded extra amount in respect of escalations of labour charges which had been stipulated in Para 12.1 of the agreement saying that for the increase in the cost of labour the Contractor shall be paid extra as per the formula given in the said clause. In other words, the escalation charges allowed to the appellant by the Special Tribunal is in respect of escalation of the labour charges and that was not regulated by Clauses VI and VII of the supplementary agreement. The learned counsel for the appellant pointed out from the award that the Special Tribunal was conscious of Clause 13 relating to compensation for delay in works and labour escalations under Clause 12.1 of the agreement. It has been said in the award that the competent authority by a letter dated 16-10-1984, addressed to the appellant, had categorically assured that the appellant shall be paid the escalation charges under Clauses 12.1, 12.2 and 12.3 of the special conditions. The Tribunal has also held that the said authority was competent to give such assurance on behalf of the State apart from the fact that under Clauses 12.1, 12.2 and 12.3 of the special conditions, the appellant was entitled to the escalation charges. In this background, it cannot be said that there is any error apparent on the face of the award which required an interference by the High Court. It is well known that the Court while considering the question whether the award should be set aside, does not examine that question as an Appellate Court. While exercising the said power, the Court cannot reappreciate all the materials on the record for the purpose of recording a finding whether in the facts and circumstances of a particular case the award in question could have been made. Such award can be set aside on any of the grounds specified in Section 30 of the Act. According to us, no ground has been made out on behalf of respondents to set aside the award holding it to be invalid.