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2001(2) Supreme 147
SUPREME COURT OF INDIA
(From Patna High Court)
S. Rajendra Babu & S.N. Phukan, JJ.
Bharat Coking Coal Ltd. -Appellant
versus
M/s. L.K. Ahuja & Co. -Respondent
Civil Appeal Nos. 5489-5490 of 1995
Decided on 21-2-2001
Counsel for the Parties :
For the Appellant : M.L. Verma, Sr. Advocate, Ajit Kumar Sinha, Rajendra Kumar Singh, Dhanjay Kumar Singh, Advocates.
For the Respondent : S.B. Upadhyay, Ms. Shweta Verma, Tathagat H. Vardan, Sujeet Kumar, Santosh Mishra, Advocates.
We cannot but describe the arbitrator s awards as hybrid which are neither speaking awards nor non-speaking - partly speaking and partly non-speaking awards. The law is well settled that if the award made by the arbitrator is a non-speaking one the difficulty of showing that there is an error apparent on the face of the award becomes insurmountable and ordinarily such award cannot be challenged at all unless it is shown that the arbitrator has wholly travelled outside the contract which gives him the jurisdiction. The law is equally well settled that in cases of speaking awards the court can interfere if there is an error apparent on the face of the award itself; it could also be shown that the arbitrator has mis-conducted himself in arriving at certain conclusions which are either plainly contrary to law or to the terms of the contract or ignored the provisions of contract or the evidence on record and such other similar matters. When a lumpsum award is made, it is all the more difficult to find out as to what went into the mental process of the arbitrator in fixing the same particularly when a part of the award is a speaking award and determines the portion of the claim in a particular manner and in respect of other claims merely refers to the pleadings but not decided the matter but gives the award. The position of the appellant before the court is unenviable and bristles with too many complexities to get over the awards. It is not clear from the pleadings whether the claim made by the respondent is in respect of escalation in the costs of material such as plant, tools, appliances, implements, ladders, cordage, tackle, scaffolding, and tempers, works, etc. inasmuch as the appellant has the obligation to supply the most essential building materials such as cement, steel and such other building material. It is also not clear either from the pleadings or from the award as to whether the escalation claim is in respect of the materials provided by the respondent or in respect of escalation arising from delay in non-supply of materials which was due to be supplied by the appellant. So far as the plant and other equipments are concerned, they had already been provided for the purpose of the execution of the work and how the delay in non-supply of building materials such as cement, steel, etc. caused escalation so far as the building materials provided by the appellant is concerned is not clear. The arbitrator has not applied his mind to this aspect of the matter at all. Having lost sight of the importance of clause 17 and application of the same to the circumstances of the case will clearly disclose that there is an error apparent on the face of the award. The claim under this head is Rs.40 lacs with reference to the first agreement and Rs.25 lacs with reference to the second agreement which is the major chunk being nearly half the claim made by the respondent. In what manner this aspect has gone into in fixing the lumpsum by the arbitrator is not discernible. Therefore, we have no option but to set aside the entire award in respect of both the agreements made by the arbitrator and remit the matter. We propose that a new arbitrator be appointed in place of the old arbitrator because the arbitrator has dealt with the matter himself as an officer who had correspondence with the contractor at the time when he was an officer of the appellant. Therefore, it is fair neither to the appellant nor to the respondent to continue him as an arbitrator in the proceedings. The new arbitrator shall consider the pleadings and evidence on record already placed by the parties and shall not permit either of the party to raise further or fresh pleas or evidence. It would be appropriate for the arbitrator to make an award within a period of four months from the date of the receipt of this judgment and submit the same to this Court after publishing the same to the parties. (Paras 7, 10 & 16)
(ii) Arbitration Act, 1940-Section 30-Limitation Act-Section 5 and Article 119-Objection to award-Time limit to file-Delay in-Condonation of-Award filed in sealed cover-Objection filed with five days delay after receipt of notice from Court-Objection amounted to an application u/s 30 and an application under Article 119 of Schedule to Limitation Act-Objection should not have been shut out from consideration on ground of delay-Lapse on part of advocate in not making proper application for enlargement of time-Delay condoned-Appellant to pay Rs. 40,000 as cost to other side.
Courts have taken the view that inasmuch as agreement of reference to arbitration is an instrument of solemn character, which is binding on the parties, and so is the award; if, therefore, a party desires to avoid the effect either of the agreement or the award, he must strictly comply with the provisions of the law and an objection to the award must be filed within the time which cannot be extended. In certain circumstances, courts have taken the view that by granting time to file objection the Court had impliedly extended the time even without a formal application under Section 5 of the Limitation Act. An application for condonation of delay is permissible to file objections under Section 30 of the Arbitration Act by resorting to Section 5 of the Limitation Act. Section 5 of the Limitation Act, 1963 provides that any application, other than those contemplated under Order XXI CPC could be admitted after the prescribed period if the applicant satisfies the court that he had sufficient cause for not preferring the appeal or making the application within such period. It is clear that Section 5 of the Limitation Act is applicable to all applications other than those under Order XXI C.P.C. Hence scheme of an enactment cannot be availed of to defeat such a right conferred under the statute of limitation in clear terms. (Para 12)
In the instant case, it is set out in the course of the order made by the Civil Judge that the award was filed in the sealed cover and presented to the court and unless the same was made available to the parties, they could not file the objections. The object of filing the objections is to question the validity of the award on the grounds mentioned in Section 30 of the Arbitration Act. If such a course is not possible for want of copy in respect of award, certainly the circumstances, as arising in the present case, should be taken note of. The objections filed on 18.8.1990 are in the nature of an application under Section 30 of the Arbitration Act to set aside the award and is an application under Article 119 of the Schedule to the Limitation Act. Therefore, Section 5 necessarily would get attracted to such a situation. In this case, the notice of filing of award was served upon the appellant on 13.7.1990 and the appellant filed objections on 18.8.1990 and those objections have been shut out from the consideration on the ground that the same have been filed beyond the period of limitation prescribed under the relevant provisions of the Limitation Act. On the totality of the circumstances, we are satisfied that there was a sufficient cause for delay in making the application and the time should be extended till 18.8.1990 when the application was made. We condone the delay in filing such objections upto that date. There is a clear lapse on the part of the Advocate appearing in the case in neither making a proper application for enlargement of time in the civil court nor pursuing this aspect of the matter in the High Court. In this Court too even, at the time of arguments, no application was forthcoming. However, to meet the ends of justice, we have adopted this course, but this indulgence shown by this Court cannot be taken advantage of by the appellant without paying appropriate costs to the respondent which we quantify to be a sum of Rs. 40,000/- which shall be paid before the new arbitrator commences the arbitration proceedings. (Paras 13 & 14)
JUDGMENT
Rajendra Babu, J.-Two works were assigned by the appellant for construction of 108 and 72 units of B Type quarters at Karmik Nagar, Dhanbad pursuant to a tender notice dated 4/13.7.1981. After certain negotiations between the parties, two work orders were issued by the appellant to the respondent on certain terms and conditions mentioned therein valuing at Rs. 86,49,730/- and Rs. 57,64,368/- for the said two works on 14.3.1982 and two separate agreements were executed by the parties. The schedule dates for completion of the respective works were fixed as 24.3.1983 and 19.3.1983. The respondent sought for extension of time which was granted by the appellant. Disputes having arisen between the parties, the matter was referred to the sole arbitrator, Shri M.P. Sharma, the then Additional Chief Engineer. The arbitrator made two awards in respect of the two contracts on 14.5.1989, which were filed in the court of the Civil Judge on 12.6.1990 in two Title (Arbitration) Suits Nos. 37/86 and 40/86. The learned Civil Judge held that the notice for Title [Arbitration] Suit No. 37/86 had been served upon the appellant on 28.8.1990 and the objections filed on 14.9.1990 could be examined as they had been filed in time. So far as Title [Arbitration) Suit No. 40/86 is concerned it appears that the service of notice on the respondent was made on 13.7.1990 of the filing of the award and the objections in question were filed on 18.8.1990 and thus apparently there being a delay of five days in filing the objections beyond the period of limitation prescribed under Article 119 of the Schedule to the Limitation Act, 1963 were not considered. On decrees being passed in terms of awards appeals filed in the High Court having met with failure, these appeals have been preferred by special leave.
2. The parties filed elaborate pleadings before the arbitrator in respect of both the agreements.
3. The claim made in the first agreement is as follows:
1. Claim for payment of the final bill amount Rs. 3,10,000.00
2. Claim for payment of PLO escalation Rs. 20,000.00
3. Claim for compensation for making late payment of running account bill Rs. 8,00,000.00
4. Claim for payment for labour escalation Rs. 4,12,000.00
5. Claim for refund of sales tax Rs. 60,000.00
6. Claim for payment of extra items Rs. 10,31,350.00
7. Claim for payment of material escalation Rs. 40,00,000.00
8. Keep Back Amount Rs. 8,000.00
9. Claim for payment of compensation to loss arising out of turnover due to prolongation of work Rs. 10,00,000.00
10. Claim for payment on account of loss of reputation etc. Rs. 2,00,000.00
Rs. 78,41,350.00
11. With interest @ 18 per annum from 30.4.84 till date of actual payment of awarded amount or court decree whichever is earlier Rs. 20,000.00
12. Arbitration Cost Rs. 20,000.00"
Claim made in the dispute arising out of second agreement is as follows :
1. Claim for payment of the final bill amount Rs. 2,00,000.00
2. Claim for payment of PLO escalation Rs. 15,000.00
3. Claim
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