Important Point
When the arbitrator is required to construe a contract then merely because another view may be possible the court would not be justified in construing the contract in a different manner and then to set aside the award by observing that the arbitrator has exceeded the jurisdiction in making the award; by purporting to construe the contract the court could not take upon itself the burden of saying that the award was contrary to the contract and as such the arbitrators had acted beyond their jurisdiction.

Headnote:Arbitration Act, 1940-Section 30-Grounds to set aside award-Arbitrator acting in excess of jurisdiction-Test-In order to determine whether arbitrator has acted in excess of jurisdiction what has to be seen is whether claimant could raise dispute or claim before an arbitrator-Possibility of another view on different manner of interpretation of terms of contract cannot be ground to set aside award.
       Held : By purporting to construe the contract the court could not take upon itself the burden of saying that the award was contrary to the contract and as such the arbitrators had acted beyond their jurisdiction. When the arbitrator is required to construe a contract then merely because another view may be possible the court would not be justified in construing the contract in a different manner and then to set aside the award by observing that the arbitrator has exceeded the jurisdiction in making the award. (Paras 19 & 23)
       In order to determine whether the arbitrator has acted inexcess of jurisdiction what has to be seen is whether the claimant could raise a particular dispute or claim before an arbitrator. If the answer is in the affirmative then it is clear that the arbitrator would have the jurisdiction to deal with such a claim. On the other hand if the arbitration clause or a specific term in the contract or the law does not permit or give the arbitrator the power to decide or to adjudicate on a dispute raised by the claimant or there is a specific bar to the raising of a particular dispute or claim then any decision given by the arbitrator in respect thereof would clearly be in excess of jurisdiction. In order to find whether the arbitrator has acted in excess of jurisdiction the Court may have to look into some documents including the contract as well as the reference of the dispute made to the arbitrators limited for the purpose of seeing whether the arbitrator has the jurisdiction to decide the claim made in the arbitration proceedings. (Para 24)
       In this case the arbitration clause is widely worded. The dispute which was referred to the arbitrators, inter alia, related to the construction of the contract. The contract did visualise the contractor raising a claim for revision of rates. The dispute was as to when such a claim could be raised. According to the appellant herein this being an item rate contract the revision of rates could take place only in accordance with Clause 12A when there was a deviation of more than 20 per cent with regard to individual items. On the other hand the terms of the contract, according to the claimant, permitted a claim being made of revision in rates if there was an increase of 20 per cent of the total value of the contract. The dispute before the arbitrators, therefore, clearly related to the interpretation of the terms of the contract. The said contract was being read by the parties differently. The arbitrators were, therefore, clearly called upon to construe or interpret the terms of the contract. The decision thereon, even if it be erroneous, cannot be said to be without jurisdiction. It cannot be said that the award showed that there was an error of jurisdiction even though there may have been an error in the exercise of jurisdiction by the arbitrators. Correspondence exchanged between the parties prior to the making of the reference shows that the arbitrators were called upon to construe the contract in order to determine whether the contractor was entitled to claim revision of rates and if so what should be the revised rates. The construction placed on the contract by the contractor cannot be said to an implausible one. Even if the arbitrators construed the terms of the contract incorrectly it cannot be said that the award was in excess of their jurisdiction. Their jurisdiction clearly was to construe the terms of the contract and their decision thereon is final and binding on the parties. (Paras 25 & 26)

Judgment

Kirpal, J.-Having failed before the High Court in getting the non-speaking award of the arbitrators set aside the appellant has filed the present appeal by special leave with the expectation that it will be successful in its aforesaid endeavour.

2. With regard to the construction of Giri Hydel Electric Project, in the State of Himachal Pradesh, item rate tenders were invited for certain works connected with the said project. On 2nd December, 1967 respondent’s tender was accepted and it was given an order to commence work.

3. The formal contract between the parties for the execution of the said work was entered into on 2nd February, 1968. The said contract was awarded to the respondent for a sum of Rs. 5,04,15,107/- and terms and conditions, which were binding on the parties, were incorporated in the aforesaid contract. Even though the work was stipulated to be completed within three years, i.e., by 16th December, 1970, the same was, however, completed on 26th February, 1978.

4. The claim of the respondent, which gave rise to the arbitration proceedings with which we are, concerned, was made in its letter dated 30th April, 1974 when it informed the Superintending Engineer that work in excess of Rs. 540 lacs had been undertaken which was about Rs. 36 lacs in excess of the contract value. According to the respondent as the total work as provided in the contract had increased beyond the deviation limit of 20 per cent it was entitled to revision of rates in respect of the works which it had carried out beyond this deviation limit. According to the respondent the contract envisaged rates for extra items as consisting of two categories; (a) item not included in the original tender; and (b) quantities in excess of the deviation limit for items included in the tender. For these items the rates had to be fixed by mutual agreement between the parties failing which they were to be fixed by reference to arbitration. According to the claimant it was entitled to revision of rates as the contract value had exceeded by 20 per cent and the claim was based on its interpretation of Clause 3.2 (e) of the contract.

5. The aforesaid claim was refuted by the Superintending Engineer vide his letter dated 6th June, 1974 wherein he informed the respondent that as per Clause 12 of the contract the deviation limit of 20 per cent was applicable to individual items only and not to the total value of the contract. The Superintending Engineer further informed the respondent that its claim was untenable and that the rates based on Clause 12A were being paid for certain items which had crossed the deviation limit.

6. The essence of the dispute which had thus arisen between the parties was as to whether the revised rates based on market rates would be payable to the respondent when the total value of the work exceeded the deviation limit, i.e., the total contract value plus 20 per cent, as was contended by the respondent herein, or whether the revised rates/market rates would be payable against each item as and when the work performed against any item exceeded the deviation limit of 20 per cent, which is the case of the appellant herein. As agreement between the parties with regard to the aforesaid dispute could not be arrived at reference was made to arbitration in June, 1975.

7. Vide its letter dated 24th April, 1975 the respondent had written to the Chief Engineer of the appellant submitting a list of disputes for arbitration.

8. After the reference was made the respondent filed its claim before the arbitrators and wrote a letter dated 4th June, 1975 to them in which it was, inter alia, stated that the aforesaid letter of 24th April, 1975 contained the items under disputes which were being referred to arbitration. Copy of the letter dated 24th April, 1975 was annexed to the letter dated 4th June, 1975 addressed to the arbitrators.

9. After the arbitrators entered upon the reference they considered the following items of dispute:

“Dispute No. 1.-Revision

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1999 Supreme(SC) 507

Cases Referred (13)