caselaws
Supreme Court of India
Atlanta Limited Thr. Its Managing … vs Union Of India Represented By … on 18 January, 2022Author: Hon’Ble Ms. Kohli
Bench: Hon’Ble The Justice, A.S. Bopanna, Hon’Ble Ms. Kohli
CIVIL APPEAL NO. 1533 OF 2017
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 1533 OF 2017
ATLANTA LIMITED THR. ITS MANAGING ….. APPELLANT
DIRECTOR
VERSUS
UNION OF INDIA REPRESENTED BY CHIEF ….. RESPONDENT
ENGINEER MILITARY ENGINEERING SERVICE
JUDGMENT
Hima Kohli J.
1. The appellant-claimant has preferred this appeal against the
judgment and order dated 20th July, 2010 passed by the Division Bench
of the High Court of Madras partly allowing the appeal preferred by the
respondent-Union of India under Section 39 of the Arbitration Act 1, 1940
and interfering with the order dated 19 th January, 2009 passed by the
learned Single Judge in O.P No. 663 of 1999, a petition filed by the
respondent-Union of India under Sections 30 and 33 of the 1940 Act
against the arbitral Award dated 24th June, 1999. Vide judgment dated
Signature Not Verified
19th January, 2009, the learned Single Judge had dismissed the said
Digitally signed by
Vishal Anand
Date: 2022.01.18
16:21:32 IST
Reason:
1 In short ‘1940 Act’
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petition filed by the respondent-Union of India and had upheld the
Award. The Division Bench of the High Court has, however, set aside
the amount awarded by the learned Sole Arbitrator in favour of the
appellant herein towards idle hire charges and value of the tools and
machineries. Further, the findings returned in the Award relating to
extension of time and illegal termination of the contract by the
respondent-Union of India in favour of the appellant-claimant were also
set aside. On the remaining issues, the order of the learned Single
Judge was duly confirmed and the decree upheld.
2. A conspectus of the facts of the case, relevant for disposing of the
present appeal, are as follows:
On 16th November, 1988, the appellant-claimant, a construction
company, entered into a contract with the respondent-Union of India for
construction of a runway and allied works at the Naval Air Station,
Arakonam for a total contract price of ₹19,58,94,190/-[Rupees Nineteen
Crores fifty eight lakhs ninety four thousand one hundred and ninety].
As per the contract, the work was to be completed within a period of 21
months from the date of the commencement, ending on 23 rd August,
1990. It is the stand of the respondent-Union of India that the site was
handed over to the appellant-claimant on 24 th November, 1988 and
reckoned from the said date, the date of completion of the contract
would have expired on 23rd August, 1990. On the contrary, the
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appellant’s stand is that it could commence the work only on 1 st January,
1989, since the site was heavily waterlogged due to the rainy season.
During the course of execution of the work, the appellant-claimant
sought extension of time for completion of the project for 45 fortnights
w.e.f. 15th July, 1992 as the probable target date. The respondent-Union
of India granted extension of time thrice, firstly upto 31 st December,
1990, then upto 30th June, 1991 and lastly upto 31 st March, 1992. By
Mid-March, 1992, the appellant-claimant claims to have completed the
substantial work of construction of the runway and taxi track to the extent
of 72%. Since the respondent-Union of India proposed to have the
runway inaugurated by the then President of India on 11 th March, 1992,
the appellant-claimant had to hand back the site on 9 th March, 1992
whereafter, for security reasons, the station became a restricted area.
As a result, the appellant-claimant had to request the respondent-Union
of India to issue passes for its staff, operators and labourers to complete
the balance work. But no entry passes were issued. Instead, vide letter
dated 2nd April, 1992 the contract was terminated with immediate effect
by the Chief Engineer, who declined to extend the time any further for
completion of the work which was otherwise to expire on 31 st March,
1992.
3. Aggrieved by the aforesaid termination order, the appellant-
claimant invoked the Arbitration Clause in the contract executed by the
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parties and a Sole Arbitrator was appointed to adjudicate the disputes
between them. Several claims were raised by the appellant-claimant
before the learned Sole Arbitrator. The respondent-Union of India also
raised counter claims. The learned Sole Arbitrator framed as many as
33 issues and on evaluating the evidence and hearing the parties
pronounced a detailed Award dated 24 th June, 1999, running into 506
pages, wherein a sum of ₹25,96,87,442.89p[Rupees Twenty five crores
ninety six lakhs eighty seven thousand four hundred forty two and eighty
nine paise] was awarded in favour of the appellant-claimant, inclusive of
interest upto 31st May, 1999. Further, future interest was directed to be
paid by the respondent-Union of India from 1 st June, 1999 at the rate of
18% per annum on the principal amount of ₹14,12,50,907.55p.[Rupees
Fourteen crores twelve lakhs fifty thousand nine hundred and seven and
fifty paise], till realization. As regards the counter-claim of the
respondent-Union of India, the learned Sole Arbitrator awarded a sum of
₹1,42,255/-[Rupees One lakh forty two thousand two hundred and fifty
five] in its favour in respect of Claim No. 6 along with future interest.
4. Aggrieved by the Award dated 24 th June, 1999, the respondent-
Union of India moved a petition under Section 30 read with Section 33 of
the 1940 Act, which was dismissed by the learned Single Judge vide
order dated 19th January, 2009 and a decree was passed in terms of the
Award holding that the appellant-claimant herein would be entitled to
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interest at the rate of 12% per annum on the principal amount from the
date of the decree, i.e., 19 th January, 2009, till the date of payment. The
judgment dated 19th January, 2009 was challenged in an intra-court
appeal filed by the respondent-Union of India. By the impugned
judgment, the Division Bench has set aside the amount awarded in
favour of the appellant-claimant towards idle hire charges and the value
of the tools and machineries. Further, the findings returned in the Award
in respect of the extension of time and illegal termination of the contract
on the part of the respondent-Union of India, were also set aside.
Hence, the present appeal.
5. We may note that arguments have been addressed in the present
appeal only on two issues, viz. (i) reasonableness of the extension of
time and validity of the termination of the contract on the part of the
respondent-Union of India; and (ii) the claim granted in favour of the
appellant-claimant in respect of idle hire charges at the site from 02 nd
April, 1992 to 23rd December,1995, with interest from 24 th December,
1995 to 31st December,1999 and the value of the tools and machineries.
6. Ms. Meenakshi Arora, learned Senior Advocate appearing for the
appellant-claimant assailed the impugned judgment and submitted that it
was for cogent reasons that the learned Sole Arbitrator had ruled in
favour of the appellant-claimant in respect of the claim relating to
reasonableness of the extension of time granted by the respondent-
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CIVIL APPEAL NO. 1533 OF 2017
Union of India for completing the project and a related claim pertaining to
the validity of the decision taken by the respondent-Union of India to
terminate the contract.
The claim of the appellant-claimant in respect of idle hire charges and
the value of the machinery and its equipment lying at the site was also
awarded in its favour for justified reasons and has been erroneously
turned down by the Division Bench. It was canvassed that the Appellate
Court has erred in re-appreciating the evidence led by the parties which
was duly scrutinized and evaluated by the learned Sole Arbitrator and
upheld by the learned Single Judge. Learned senior counsel contended
that the scope of interference by courts in arbitral Awards made under
the old Act, viz., the Arbitration Act, 1940, is fairly limited. Courts do not
sit in appeal over an Award passed by the learned Arbitrator, nor do
courts interfere with the Award only on the ground that the Arbitrator has
taken a possible view, though a different view could have been taken on
the very same evidence. Stating that the present case is not one where
the Award suffers from any patent perversity or an error of law; nor has
the learned Sole Arbitrator mis-conducted himself on the proceedings,
learned senior counsel submitted that the Appellate Court has exceeded
its jurisdiction by substituting its own opinion in place of the conclusions
arrived at by the learned Sole Arbitrator. To buttress the argument on the
scope of interference by courts in an arbitral Award passed under the
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1940 Act, reliance has been placed on NTPC Ltd. v. Deconar Services
Pvt. Ltd.2 .
7. Per contra, Mr. Sanjay Jain, learned Additional Solicitor General
appearing for the respondent-Union of India, supported the impugned
judgment and submitted that the Appellate Court had every reason to set
aside the Award in respect of the findings returned by the learned Sole
Arbitrator on the aspect of reasonableness of extension of time, validity
of the termination of the contract by the respondent-Union of India as
also the claim of idle cost of the machinery and plant awarded in favour
of the appellant-claimant. He submitted that the issues relating to
reasonableness of extension of time and validity of termination of the
contract were “excepted matters” in terms of Clauses 7, 11, 54 and 70 of
the contract governing the parties, which aspects were completely
overlooked by the Sole Arbitrator; that the issue relating to the validity of
termination of the contract on the part of the respondent-Union of India
was also covered under “excepted matters” by virtue of Clauses 54 and
70 of the contract and that the Sole Arbitrator had travelled beyond the
terms of the contract by allowing the claim for idling cost of plant and
machinery in favour of the appellant-claimant.
8. It was submitted on behalf of the respondent-Union of India that
allowing idling charges in favour of the appellant-claimant amounted to a
2 (2021) SCC Online SC 498
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patent illegality in the Award for the reason that in a separate proceeding
initiated by the appellant-claimant, the High Court had permitted it to lift
its material from the site, post termination of the contract, an option
which it elected not to exercise, for reasons best known to it. To buttress
his argument that an “excepted matter” cannot be adjudicated by an
Arbitrator, the decisions in Food Corporation of India v. Sreekanth
Transport3, Grid Corporation of Orissa Ltd. And Another v. Balasore
Technical School4 and General Manager, Northern Railway and
Another v. Sarvesh Chopra5 have been cited. On the scope of
Sections 30 and 33 of the Arbitration Act, 1940, reliance has been
placed on the decision of this Court in Rajasthan State Mines and
Minerals Ltd. v. Eastern Engineering Entereprises and Another 6 and
on the aspect of the Sole Arbitrator mis-conducting himself or the
proceedings, reference has been made to in K.P. Poulose v. State of
Kerala and Another7.
9. We have heard the arguments advanced by learned counsel for
the parties and carefully perused the records. Before dealing with the
submissions made on behalf of the parties, it is considered apposite to
3 (1999) 4 SCC 491
4 (2000) 9 SCC 552
5 (2002) 4 SCC 45
6 (1999) 9 SCC 283
7 (1975) 2 SCC 236
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examine the scope of interference by courts in arbitral Awards passed
under the Arbitration Act, 1940.
10. The consistent view taken in several judicial pronouncements is
that the Court does not sit in appeal over an Award passed by an
Arbitrator and the only grounds on which it can be challenged are those
that have been specified in Sections 30 and 33 of the Arbitration Act,
namely, when there is an error on the face of the Award or when the
learned Arbitrator has mis-conducted himself or the proceedings. In this
context, we may usefully refer to Kwality Manufacturing Corporation
v. Central Warehousing Corporation8, where it has been observed as
follows:
“10. At the outset, it should be noted that the scope of
interference by courts in regard to arbitral Awards is
limited. A court considering an application under Section
30 or 33 of the Act, does not sit in appeal over the findings
and decision of the arbitrator. Nor can it reassess or
reappreciate evidence or examine the sufficiency or
otherwise of the evidence. The award of the arbitrator is final
and the only grounds on which it can be challenged are those
mentioned in Sections 30 and 33 of the Act. Therefore, on the
contentions urged, the only question that arose for
consideration before the High Court was, whether there was
any error apparent on the face of the award and whether the
arbitrator misconducted himself or the proceedings.”
[emphasis
added]
11. In Assam State Electricity Board and Others v. Buildworth
Private Limited9, where the learned Arbitrator has taken a particular
8 (2009) 5 SCC 142
9 (2017) 8 SCC 146
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view on the construction of the provisions of the contract, the Court had
held as below:
“13. The arbitrator has taken the view that the provision for
price escalation would not bind the claimant beyond the
scheduled date of completion. This view of the arbitrator is
based on a construction of the provisions of the contract, the
correspondence between the parties and the conduct of the
Board in allowing the completion of the contract even beyond
the formal extended date of 6-9-1983 up to 31-1-1986. Matters
relating to the construction of a contract lie within the
province of the Arbitral Tribunal. Moreover, in the present
case, the view which has been adopted by the arbitrator is
based on evidentiary material which was relevant to the
decision. There is no error apparent on the face of the record
which could have warranted the interference of the court within
the parameters available under the Arbitration Act, 1940. The
arbitrator has neither misconducted himself in the proceedings
nor is the awarded otherwise invalid.”
[emphasis added]
12. It is also a well-settled principle of law that challenge cannot be
laid to the Award only on the ground that the Arbitrator has drawn his
own conclusion or failed to appreciate the relevant facts. Nor can the
Court substitute its own view on the conclusion of law or facts as against
those drawn by the Arbitrator, as if it is sitting in appeal. This aspect has
been highlighted in State of Rajasthan v. Puri Construction Co. Ltd.
And Another 10, where it has been observed thus:
“26. The arbitrator is the final arbiter for the dispute between the
parties and it is not open to challenge the award on the ground that
the arbitrator has drawn his own conclusion or has failed to
appreciate the facts. In Sudarsan Trading Co. v. State of
Kerala [Sudarsan Trading Co. v. State of Kerala, (1989) 2 SCC 38] it
has been held by this Court that there 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
10 (1994) 6 SCC 485
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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 is a decision within the
competency of the arbitrator. By purporting to construe the contract
the court cannot 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 though perhaps not the only correct
view, the award cannot be examined by the court. Where the reasons
have been given by the arbitrator in making the award the court
cannot examine the reasonableness of the reasons. If the parties have
selected their own forum, the deciding forum must be conceded the power
of appraisement of evidence. The arbitrator is the sole judge of the quality
as well as the quantity of evidence and it will not be for the court to take
upon itself the task of being a Judge on the evidence before the
arbitrator.”
[emphasis added]
13. As long as the Arbitrator has taken a possible view, which may be
a plausible view, simply because a different view from that taken in the
Award, is possible based on the same evidence, would also not be a
ground to interfere in the Award. In Arosan Enterprises Ltd. v. Union
of India and Another 11, this Court has held as follows:
“36. Be it noted that by reason of a long catena of cases, it is
now a well-settled principle of law that reappraisal of evidence
by the court is not permissible and as a matter of fact exercise
of power by the court to reappraise the evidence is unknown to
proceedings under Section 30 of the Arbitration Act. In the event
of there being no reasons in the award, question of interference
of the court would not arise at all. In the event, however, there
are reasons, the interference would still be not available within
the jurisdiction of the court unless of course, there exist a total
perversity in the award or the judgment is based on a wrong
proposition of law. In the event however two views are possible
on a question of law as well, the court would not be justified in
interfering with the award.”
(Also refer Municipal Corporation of Delhi v. Jagan Nath
Ashok Kumar and Another12)
11 (1999) 9 SCC 449
12 (1987) 4 SCC 497
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14. In Rajasthan State Mines & Minerals Ltd. (supra), relied on by
the respondent – Union of India, on a conspectus of the case law
relating to an Award made under the Arbitration Act, 1940 and the scope
of interference by courts in such an arbitral Award, the legal position was
summarized by the court in the following words :
“44. From the resume of the aforesaid decisions, it can be
stated that:
(a) it is not open to the court to speculate, where no reasons
are given by the arbitrator, as to what impelled arbitrator to
arrive at his conclusion.
(b) It is not open to the court to admit to probe the mental
process by which the arbitrator has reached his conclusion
where it is not disclosed by the terms of the Award.
(c) If the arbitrator has committed a mere error of fact or law
in reaching his conclusion on the disputed question submitted
for his adjudication then the Court cannot interfere.
(d) If no specific question of law is referred, the decision of
the arbitrator on that question is not final, however much it may
be within his jurisdiction and indeed essential for him to decide
the question incidentally. In a case where specific question of
law touching upon the jurisdiction of the arbitrator was referred
for the decision of the arbitrator by the parties, then the finding
of the arbitrator on the said question between the parties may
be binding.
(e) In a case of non-speaking Award, the jurisdiction of the
court is limited. The Award can be set aside if the arbitrator acts
beyond his jurisdiction.
(f) To find out whether the arbitrator has travelled beyond his
jurisdiction, it would be necessary to consider the agreement
between the parties containing the arbitration clause. The
arbitrator acting beyond his jurisdiction is a different ground
from the error apparent on the face of the Award.
(g) In order to determine whether arbitrator has acted in
excess of his jurisdiction what has to be seen is whether the
claimant could raise a particular claim before the arbitrator. If
there is a specific term in the contract or the law which does not
permit or give the arbitrator the power to decide the dispute
raised by the claimant or there is a specific bar in the contract to
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the raising of the particular claim then the Award passed by the
arbitrator in respect thereof would be in excess of jurisdiction.
(h) The Award made by the Arbitrator disregarding the terms
of the reference or the arbitration agreement or the terms of the
contract would be a jurisdictional error which requires ultimately
to be decided by the Court. He cannot Award an amount which
is ruled out or prohibited by the terms of the agreement.
Because of specific bar stipulated by the parties in the
agreement, that claim could not be raised. Even if it is raised
and referred to arbitration because of wider arbitration clause
such claim amount cannot be awarded as agreement is binding
between the parties and the arbitrator has to adjudicate as per
the agreement………….
(i) The arbitrator could not act arbitrarily, irrationally,
capriciously or independently of the contract. A deliberate
departure or conscious disregard of the contract not only
manifests the disregard of his authority or misconduct on his
part but it may tantamount to mala fide action.
(j) The arbitrator is not a conciliator and cannot ignore the
law or misapply it in order to do what he thinks just and
reasonable; the arbitrator is a tribunal selected by the parties to
decide the disputes according to law.”
15. In a recent ruling in NTPC (supra), decided by a three Judge
Bench of this Court, drawing strength from the decision in Kwality
Manufacturing Corporation (supra), it has been held thus:
“13. From the above pronouncements, and from a catena of
other judgments of this Court, it is clear that for the
objector/appellant in order to succeed in their challenge against
an arbitral award, they must show that the award of the
arbitrator suffered from perversity or an error of law or that the
arbitrator has otherwise misconducted himself. Merely
showing that there is another reasonable interpretation or
possible view on the basis of the material on the record is
insufficient to allow for the interference by the Court
[See State of U.P. v. Allied Constructions, (2003) 7 SCC
396; Ravindra Kumar Gupta and Company v. Union of
India, (2010) 1 SCC 409; Oswal Woollen Mills
Limited v. Oswal Agro Mills Limited, (2018) 16 SCC 219].”
[emphasis added]
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16. Keeping in mind the above parameters, we may now proceed to
examine the pleas taken by the learned counsel for the appellant-
claimant on the aspect of reasonableness of the extension of time
granted by the respondent-Union of India to complete the work, coupled
with the validity of the decision of the Union of India to terminate the
contract between the parties held in its favour and turned down by the
Appellate Court and whether the Appellate Court erred in setting aside
the amount awarded to the appellant-claimant on account of idle hire
charges and the value of its machinery and equipment lying at the site.
17. The first limb of the arguments advanced by learned counsel for
the appellant-claimant to assail the impugned judgment, whereby the
findings returned by the learned Sole Arbitrator to the effect that the
appellant-claimant was entitled to extension of time for completing the
work and the Union of India ought not to have terminated the contract,
the learned Arbitrator had framed the following three issues :
“1. What were the causes and which party was responsible for
non-completion of the work within the time stipulated for its
completion including the extended time ?
2. Whether the extension of time granted upto 31.3.1992 was
adequate and commensurate with the delay caused by the
factor considered in issue No.1 above?
3. Whether the termination of the contract by the respondent
was wrongful and illegal as stated by the claimant?”
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18. After painstakingly sifting through the voluminous documents
brought on record with a toothcomb, the aforesaid three issues being
intertwined, were answered in favour of the appellant-claimant.
Accepting as many as twenty reasons cited by the counsel for the
appellant-claimant that had caused a delay in completing the work that
necessitated extension of time, ranging from water logged conditions at
the site due to which, the work could not commence till 31 st
December,1988, increase in the quantity of the work required to be
executed, changes ordered by the respondent-Union of India from time
to time without granting any extension of time or fixing proper rates for
extra work, orders issued by the respondent-Union of India for procuring
and deploying of sophisticated machinery and equipment that were not
originally contemplated, non-availability of petroleum products due to the
Gulf crisis, piecemeal extensions granted by the respondent-Union of
India, stoppage of work for inauguration of the runway, non-issue of
entry passes to labourers and removal of operators and staff of the
operators, etc., it was held in the Award that the appellant-claimant could
not be blamed for non-completion of the work within the stipulated time,
including the extended time and that the respondent-Union of India
ought to have extended the date of completion of the contract upto 31 st
May, 1993. The learned Sole Arbitrator also returned a finding that the
extension of time granted by the respondent-Union of India upto 31 st
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March, 1992, was inadequate and not commensurate with the delays
caused for the factors referred to hereinabove.
19. Declaring that termination of the contract by the respondent-Union
of India was wrongful and illegal, issues No.1 to 3 were answered in
favour of the appellant-claimant. Agreeing with the aforesaid
conclusions arrived at in the Award, the learned Single Judge declined to
interfere therein. However, the Appellate Court differed with the
concurrent findings given in the Award and the judgment impugned
before it. Even though the Appellate Court was conscious of the
limitations that are imposed on a Court when deciding a challenge laid to
the arbitral Award made under the 1940 Act, and despite acknowledging
the same in the impugned judgment, it did not show any restrain and not
only did it proceed to reappreciate the terms and conditions of the
contract as also the evidence adduced by the parties before the learned
Sole Arbitrator. Instead, the Award was faulted on the ground that the
learned Sole Arbitrator had gone on the basis what he felt reasonable.
The Appellate Court went on to hold that the Sole Arbitrator had rewritten
the contract only because, in his opinion, extension of time ought to
have been granted by the respondent-Union of India upto 31 st May,
1993. After holding so, the Appellate Court went into minute details to
justify the order of the Accepting Authority of the respondent-Union of
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CIVIL APPEAL NO. 1533 OF 2017
India to grant an extension of 596 days for completion of the contract
and observed that the said Officer’s decision was final and binding.
20. We are of the opinion that once the learned Sole Arbitrator had
interpreted the clauses of the contract by taking a particular view and
had gone to great length to analyse several reasons offered by the
appellant-claimant to justify its plea that it was entitled for extension of
time to execute the contract, the Division Bench of the High Court ought
not to have sat over the said decision as an Appellate Court and seek to
substitute its view for that of the learned Arbitrator.
21. In the instant case, having gone through the Award, we find that
the learned Sole Arbitrator was lucid in his reasoning for taking a
particular view on the interpretation of the terms and conditions of the
contract between the parties. It was for this very reason that the learned
Single Judge had forbore from interfering with the arbitral Award and
dismissed the petition filed by the respondent-Union of India under
Sections 30 and 33 of the 1940 Act. By going into the minute details of
the evidence led before the learned Sole Arbitrator with a magnifying
glass and the findings returned thereon, the Appellate Court has clearly
transgressed the limitations placed on it. In any case, we are of the
opinion that the reasons offered for taking such a view, are neither
justified nor called for for interfering with the arbitral Award.
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22. We accept the findings returned by the learned Sole Arbitrator
endorsed by the learned Single Judge that there was sufficient
justification for the appellant-claimant to have sought extension of time
for completing the work and that the decision of the respondent-Union of
India to terminate the contract, was not for legitimate reasons.
23. The second argument concerns the amount that was awarded in
favour of the appellant-claimant on account of idle hire charges and the
value of its machinery and equipment lying at the site, that has been set
aside in the impugned judgment. This point was covered in Issue No.17
framed by the learned Sole Arbitrator, as below :
“17. Is the claimant entitled to Rs.25,45,88,460.00 for the loss of
his overhead and profit, loss of idle hire charges of
machinery and equipment, loss on account of missing parts,
loss suffered due to wrongful and illegal encashment of Bank
Guarantee and for compensation of extra expenditure
incurred due to price rise during the extended period as
claimed in his claim No.3 ?”
24. Though the appellant-claimant had sought compensation under
several heads, the learned Sole Arbitrator granted it an amount of
₹15,35,40,785/-[Rupees Fifteen Crores thirty five lakhs forty thousand
seven hundred and eighty five] towards idle hire charges and for the
value of the machinery, inclusive of interest upto 31 st May, 1999. For
arriving at the above figure, reliance was placed on the report of an
Engineer appointed by the Division Bench of the High Court of Madras in
a separate proceeding filed by the appellant-claimant praying inter alia
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CIVIL APPEAL NO. 1533 OF 2017
that it be permitted to take back the machinery, tools and equipment
lying at the site of the Naval Air Station, Arakonam after the value was
assessed by an approved valuer. The High Court appointed an
Engineer to ascertain the availability of the different items and
machineries and their value. The Engineer and Insurance Surveyor
submitted a report, just after a year from the date of termination of the
contract, stating inter alia that there were 21 items of machinery
available at the site and their collective market value was
₹.2,72,95,000/-[Rupees Two Crores seventy two lakhs ninety five
thousand] and that the condition of most of the machineries had
deteriorated and they were no longer usable. Vide order dated 21 st July,
1993, the High Court allowed the appellant-claimant to remove 21 items
of the machinery lying at the site, subject to it furnishing a bank
guarantee for a sum of ₹2.73 crores within three weeks. Though
permission was granted to the appellant-claimant to take delivery of the
said machineries after furnishing a bank guarantee, it did not do so on
taking a plea that when the respondent-Union of India was approached
for inspection of the machineries and to verify tampering/missing parts,
the latter had refused to prepare any inventory and had stated that the
machineries and equipments will be released on a “as is where is basis”.
The learned Sole Arbitrator observed that after termination of the
contract of the appellant-claimant, the balance contract work was got
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CIVIL APPEAL NO. 1533 OF 2017
completed by the respondent-Union of India through the Border Road
Organization [BRO] on 23rd December, 1995 and till that time, the tools
and machinery had remained with the respondent-Union of India.
25. Finding fault with the respondent-Union of India of having failed to
mitigate the damages by handing back the tools and machineries to the
appellant-claimant at least immediately after 23 rd December, 1995, in the
arbitral Award held that the appellant-claimant was entitled to idle hire
charges from 2nd April, 1992, the date of termination of the contract, till
23rd December, 1995, the date of completion of the balance contract
work by the BRO. Relying on the report of the Valuer appointed by the
Court to give a Report relating to the machineries at the site and their
condition and valuation and further, noting that both sides had accepted
the said Report, the learned Sole Arbitrator held that it was fairly
considered it safe to rely on the said Report for purposes of assigning
valuation to the tools and machinery. It is noteworthy that even for
purposes of computing the idle hire charges of the machineries for the
period between 2nd April, 1992 to 23rd December, 1995, the calculation
given by the appellant-claimant based on a particular formula, was not
objected to by the respondent-Union of India. Premised on the said
formula, a sum of ₹6,77,41,386/- [Rupees Six Crores seventy seven
lakhs forty one thousand three hundred and eighty six] was awarded in
favour of the appellant-claimant towards idle hire charges of machineries
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and equipment with interest payable @ 18% p.a. and a sum of
₹2,72,95,000/-[Rupees Two Crores Seventy two lakhs ninety five
thousand] was granted to the appellant-claimant towards the value of the
tools and machineries totalling to a sum of ₹15,35,40,785/-[Rupees
Fifteen Crores thirty five lakhs forty thousand seven hundred eighty five],
inclusive of interest.
26. The Appellate Court has set aside the aforesaid claim by taking a
view that the learned Sole Arbitrator lost sight of the fact that once the
High Court had passed an order granting permission to the appellant-
claimant to remove the equipment and machineries from the site in the
proceedings initiated by it and still they were not removed, then it has
none else to blame but itself for the situation. Holding that the learned
Sole Arbitrator had misconducted himself by observing that the claimant
“may be correct” in not taking the machineries without an inventory when
they were available at the site, the Appellate Court held that the
appellant-claimant was not entitled to any amount towards the value of
the tools and machineries, having been awarded idle hire charges for the
very same equipments.
27. The aforesaid conclusion drawn by the Appellate Court is
manifestly erroneous and flies in the face of the settled legal position
that the Arbitrator is the final arbiter of the disputes between the parties
and it is not open to a party to challenge the Award on the ground that he
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has drawn his own conclusions or has failed to appreciate certain facts.
It is beyond the jurisdiction of the Appellate Court to assign to itself, the
task of construing the terms and conditions of the contract and its
provisions and take a view on certain amounts awarded in favour of a
party. It is reiterated that the learned Sole Arbitrator had given certain
cogent reasons for awarding the amount in favour of the appellant-
claimant towards idle hire charges of the parts of the machineries and
equipments and loss of machinery. It was beyond the domain of the
Appellate Court to have examined the reasonableness of the said
reasons by reappreciating the evidence to arrive at a different
conclusion. Having regard to the fact that amounts have been awarded
in favour of the appellant-claimant on the above heads, based on the
Report submitted to the Court by the Court Commissioner for valuing the
tools and machinery and premised on the formula offered by the
appellant-claimant for arriving at the idle hire charges, both being
undisputed, we see no good reason for the Appellate Court to have
interfered in the manner it did.
28. The submission made on behalf of the respondent-Union of India
that the learned Sole Arbitrator had misconducted himself, is also
unmerited. On the contrary, the conclusions are consistent with his
findings and the records reveal that material documents were thoroughly
examined by the learned Sole Arbitrator in the correct perspective. Nor
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are we persuaded by the plea that the learned Sole Arbitrator acted in
excess of his jurisdiction by taking upon himself, the task to decide some
of the disputes raised, when purportedly, they were specifically barred in
the contract, described as “excepted matters”.
29. Having carefully perused the Award, we find that the terms and
conditions of the contract referred to by learned ASG appearing for the
respondent-Union of India, namely, Clauses 7, 11, 54 and 70 have been
duly noted, discussed and declared as inapplicable to the fact situation
by the learned Sole Arbitrator, by relying on the facts of the case, the
conduct of the parties and some other material terms and conditions of
the contract, which in his view disentitled the respondent-Union of India
from claiming that it was justified in refusing to extend the time as prayed
for by the appellant-claimant, to complete the project. We therefore
reject the submission made on behalf of the respondent-Union of India
that the learned Sole Arbitrator had misconducted himself. Having held
so, none of the decisions cited on the aspect of “excepted matters”
would be of any assistance to the respondent-Union of India. Nor will the
reliance placed by learned ASG on Para 44(g) of the decision in
Rajasthan State Mines and Minerals Ltd. (supra) be of any benefit to
the respondent-Union of India.
30. In view of the discussion above, the impugned judgment dated 20 th
July, 2010 passed by the Division Bench of the High Court cannot be
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sustained and is quashed and set aside, while restoring the judgment
dated 19th June, 2009 passed by the learned Single Judge and
upholding the decree granted in favour of the appellant-claimant in terms
of the Award along with interest.
31. The appeal is disposed of alongwith pending applications, if any,
while leaving the parties to bear their own costs.
……………………………CJI.
[N. V. RAMANA]
……………………………..J.
[A. S. BOPANNA]
……………………………..J.
[HIMA KOHLI]
New Delhi,
January 18, 2022
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