IMPORTANT POINTS
1. When claims are inflated out of all proportions not only that heavy cost should be awarded to the other party but the party making such inflated claim should be deprived of the cost.
2. Court has certain limitations while examining a non-speaking award but there is no complete bar in examining if the award is in terms of the reference or the terms of the contract.

Headnote:(i) Arbitration Act, 1940-Sections 30 and 33 r/w Section 20 -Objections to award-Measurable item rate contract-Payment to contractor in terms of contract would be for work executed-Termination of contract when 50 of work executed-Petition u/s 20 by contractor setting out claim amount-Local Commissioner appointed by Court who took measurement of work done - Higher claim, on basis of local Commissioner s measurement, made before Arbitrator - Non-speaking award entertaining additional claim-Plea that Arbitrator committed misconduct in entertaining new claims which were not stated in petition u/s 20-Not tenable-Claim made on basis of measurement of local Commissioner cannot be said to be new claims or outside terms of contract-However claim made on account of additional work/deviation/ alteration without written permission could not be awarded. (Paras 14 to 19)
       (ii) Arbitration Act, 1940-Sections 30 and 33-Non-speaking award-Scope of powers of Court to examine-There is no complete bar in examining if award is in terms of reference or terms of contract.
       Held : Court has certain limitations while examining a non-speaking award but there is no complete bar in examining if the award is in terms of the reference or the terms of the contract. (Para 18)
       (iii) Arbitration Act, 1940-Sections 13 and 29-Interest Act, 1978-Section 5-Interest-Power of Arbitrator to award-Under Interest Act Court would include Arbitrator-Section 34 of C.P.C. would apply to Arbitrator-Arbitrator can award interest pendente lite and future interest.
       Held : Under the Interest Act, 1978, which came into force on August, 19, 1981, court includes arbitrator. Under Section 5 of the Interest Act Section 34 of Code of Civil Procedure would, therefore, apply to the arbitrator as well. Arbitrator is thus entitled to award interest pendente lite and future interest at the rate not exceeding the current rate of interest which has also been defined in clause (b) of Section 2 of the Interest Act. (Para 20)
       (iv) Arbitration Act, 1940-Courts duty while making award rule of Court-When claims are inflated out of proportion heavy cost should be awarded to other party-Party making inflated claim should be deprived of cost.
       Held : Arbitration is considered to be an important Alternative Disputes Redressal process which is to be encouraged because of high pendency of cases in the courts and cost of litigation. Arbitration has to be looked up to with all earnest so that litigant public has faith in the speedy process of resolving their disputes by this process. What happened in the present case is certainly a paradoxical situation which should be avoided. Total contract is for Rs. 12,23,500/-. When the contractor has done less than 50 of the work the contract is terminated. He has been paid Rs. 5,71,900/-. In Section 20 petition he makes a claim of Rs. 39,47,000/- and before the arbitrator the claim is inflated to Rs. 63,61,000/-. He gets away with Rs. 20,08,000/- with interest at the rate of 10 per annum and penal interest at the rate of 18 per annum. Such type of arbitration become subject of witticism and do not help the institution of arbitration. Rather it brings bad name to the arbitration process as a whole. When claims are inflated out of all proportions not only that heavy cost should be awarded to the other party but the party making such inflated claim should be deprived of the cost. (Para 23)

JUDGMENT

D.P. Wadhwa, J.-Both the parties are aggrieved by judgment dated February 6, 1989 of the Division Bench of the High Court of Jammu and Kashmir passed in an appeal against judgment dated May 10, 1986 by the learned single Judge of that High Court. While the learned single Judge made the award given under the Arbitration Act, 1940 a rule of the court and also granted interest, the Division Bench in appeal deleted two claims from the award and also reduced the rate of interest. The award was in favour of Dev Dutt Pandit, the Contractor. He is aggrieved by deletion of two claims and also lowering the rate of interest and the State is aggrieved against the award itself. Thus two separate appeals.

2. Tender of the contractor for earth work, excavation, minor drainage crossing, overhead crossing, road bridges and cement concrete lining of Ravi Canal Project was accepted by the State Government and by order dated May 6, 1976 work was allotted to him. The work was to be completed within 18 months, time being the essence of the contract. On May 22, 1976 contractor commenced work. He could not complete the work within the stipulated time. The contract was partially terminated in the structural portion of the work on January 12, 1980. On June 6, 1980 the whole of the contract was terminated because of default committed by the contractor. The contractor filed a petition under Section 20 of the Arbitration Act as the contract stipulated arbitration agreement between the parties. Some of the terms of the contract containing the arbitration agreement, we may reproduce as under :

"5. Contract Rates :

The contractor shall be paid for the works executed by him under this agreement at the rates specified in Annexure I annexed hereto subject to other terms and conditions embodied in this agreement.

8. Variation in Quantities and Extra Items

The quantities shown in the Annexure III to this agreement shall not be taken as final. The Engineer in-charge shall be authorised to direct the contractor to execute extra items not shown in the aforesaid annexure III or increase/decrease the quantities beyond these described in the said annexures as may be required to be executed and for such increase/decrease quantities the contractor shall be paid at the rates specified in the annexure I.

The quantities shown in the Annexure III may be decreased in detailed drawings to be furnished to the contractor during execution and the contractor shall be paid only for the work done or executed and shall have no claim for any compensation on account of any profit or advantage that might have accrued or that may accrue to him otherwise.

14. Force Majoure

A. The completion schedule is subject to the operation of the force Majour Clause which for the purpose of this contract is defined as acts of God, Civil, commotion, sabotage, fires, floods, earthquakes explosions or other catastrophes, epidemics, quarantines, restrictions, strikes, and other labour troubles, embargoes, or other transportation delays beyond the control of the contractor for which only extension in time considered reasonable by the department shall be granted and the contractor shall have no claim for compensation or increase in rates etc. or charges for restoring damages to the works plant or material.

17. Damage to Works

From the commencement to the taking over of the works by the Department the contractor shall be responsible for any damage or loss to the works or part thereof caused due to any reason whatsoever. The contractor shall at his own cost repair and make good the loss or damage in every respect to the satisfaction of the Engineer whose certificate in this behalf shall be conclusive proof of the defects etc. having been removed.

19. Setting Out.

The contractor shall be responsible for the true and proper setting out of the works and for the correctness of the positions, levels, bench marks alignments and dimensions in works and for the provisions and maintenance of all necessary instru

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