IMPORTANT POINT
Ordinarily a Court may be justified in remitting the matter if the arbitrator leaves any of the matters undetermined or a part of the matter which had not been referred to and answered and that part cannot be separated from the remaining part, without affecting the decision on the matter, which was referred to arbitration or the award is so indefinite as to incapable of execution or that the award is erroneous on the face of it. Discretion having been conferred on the Court, to remit an award, the said discretion has to be judicially exercised and an appellate Court would not be justified in interfering with the exercise of discretion unless the discretion has been misused.

Headnote:Arbitration Act, 1940-Section 16-Remission of award-Is discretion of Court-Discretion has to be judicially exercised-Court may be justified in remitting matter if arbitrator leaves any matters undetermined or a part of matter which had not been referred to and answered and that part cannot be separated from remaining part or award is erroneous on face of it-Appellate Court would not be justified in interfering with exercise of discretion unless discretion has been misused.
       Under the Arbitration Act, Section 16 is the provision under which the Court may remit the award for reconsideration of an arbitration and necessity for remitting the award arises when there are omissions and defects in the award, which cannot be modified or corrected. Remission of an award is in the discretion of the Court and the powers of the Court are circumscribed by the provisions of Section 16 itself. Ordinarily, therefore, a Court may be justified in remitting the matter if the arbitrator leaves any of the matters undetermined or a part of the matter which had not been referred to and answered and that part cannot be separated from the remaining part, without affecting the decision on the matter, which was referred to arbitration or the award is so indefinite as to incapable of execution or that the award is erroneous on the face of it. Discretion having been conferred on the Court, to remit an award, the said discretion has to be judicially exercised and an appellate Court would not be justified in interfering with the exercise of discretion unless the discretion has been misused. What is an error apparent on the face of an award which requires to be corrected has always been a subject matter of discussion. An error of law on the face of the award would mean that one can find in the award or a document actually incorporated thereto stating the reasons for a judgment some legal propositions which is the basis of the award and which can be said to be erroneous. Documents not incorporated directly or indirectly into the award cannot be looked into for the purpose of finding out any alleged error. The courts are not to investigate beyond the award of the arbitrators and the documents actually incorporated therein and, therefore, when there would be no patent error on the face of the award, it would not be open for the court to go into the proceedings of the award. (Para 5)
       In the instant case the claimants claim under item No. 1 relating to increase in quantity of hard rock was rejected by the arbitrator. The city civil court remitted the claim item to the arbitrator for reconsideration. The High Court referring to Clause 59 of the agreement which dealt with delay and extention of time and in view of the letters of the Superintending Engineer held that the contractor claimant would not be entitled to be paid at any higher rate for such additional excavation work and according the set aside the order of the city civil court remitting the claim item No. 1 for being re-disposed of by the arbitrator.
       Held : Arbitrator being a creature of the agreement, unless agreement either specifically or inferentially provides for a higher rate to be awarded for any additional or excess work done by the contractor, it would not be permissible for the arbitrator to award for the so-called additional work at a higher rate. In the case in hand, not only there is no letter from the competent authority, namely the Superintending Engineer that the contractor would be paid at any higher rate for the additional excavation of rock, though the Executive Engineer had indicated that he has recommended to the Superintending Engineer. But such recommendation of the Executive Engineer, who was not competent to decide the question of awarding a higher rate for the excess quantity of excavation will not clothe any jurisdiction on the arbitrator to award the contractor at a higher rate nor would it entitle the contractor to get a higher rate for the claim in question on the basis of agreement. Now coming to the very clause, upon which Mr. Rao relied upon, we find that the said clause relates to supplemental item, which have been found essential, incidental and inevitable during the execution of the work. The excavation of hard rock cannot be held to be a supplemental item and on the other hand, is an item of work tendered and accepted, and as such clause 63 will have no application to the claim item No.1. Then again the question of granting a higher rate for any extra quantity of work executed by the contractor would at all arise only when the contract provides for such escalated rate either expressly or by implication as in the case of S. Harcharan Singh 1990(4) SCC 647, where the competent authority had agreed for the same by correspondence. But in the case in hand, when there is no such acceptance by the competent authority, and there is no provision in the contract, permitting such escalated rate for the additional quantity of excavation made and in view of our rejecting the contention raised on the basis of clause 63, the conclusion is irresistible that the contractor will not be entitled to a higher rate for the additional excavation work and as such the High Court was fully justified in setting aside the direction of the trial judge, remitting the claim item No. 1 for reconsideration and we see no infirmity with the said direction of the High Court to be interfered with. (Para 7)

JUDGMENT

Pattanaik, J.-Claimants are the appellants against the judgment of the Andhra Pradesh High Court, arising out of an arbitration proceeding. The North work excavation of approach channel of Srisailam Project had been awarded to the claimants for different amounts indicated in the contract. The contract itself contained an arbitration clause. Dispute being raised on different items of claim, those disputes had been referred to a panel of arbitrators and the panel of arbitrators, ultimately passed an award where-under claim Items 1, 2 and 3 stood rejected. So far as claim item No. 4 is concerned, the same was allowed in part. Claim Item No. 5 was claim of interest and the arbitrators allowed the interest @ 12 per cent per annum over the amount awarded. Claim Item No. 6 was the claim of cost and the arbitrators directed that each party will bear its own cost. Against the award of the arbitrators, rejecting claim item Nos. 1, 2 and 3, the claimants filed an objection in the Civil Court and sought for remittance under Section 16 on the ground that the arbitrators have left undetermined the claims of the claimants on item No.1, 2 & 3 on an erroneous view of the relevant clauses of the agreement. Claimants also filed an application under Section 14 to make the award in relation to claim allowed by the arbitrators as a rule of Court. The State of Andhra Pradesh also filed a petition under Section 30 of the Arbitration Act to set aside that part of the award which allowed the claim of the contractor to the extent of Rs.57,000/-. All these applications which were registered as O.S. No. 1094/86, O.P. 104/87 and O.P. 424/87 were disposed of by a common judgment of the learned Vth Additional Judge, City Civil Court, Hyderabad. The said learned Judge made the award in relation to claim item No.4 a rule of Court. But he set aside the award in relation to claim item Nos. 1, 2, 3 and 5 and remitted the same for reconsideration to the panel of arbitrators. Against the aforesaid Judgment of the Additional Judge, City Civil Court, remitting the disputes/claims in relation to claim items 1, 2, 3 and 5 to the panel of arbitrators, the State of Andhra Pradesh preferred appeals under Section 39 of the Arbitration Act. The High Court by the impugned judgment set aside the order of the Additional Judge, so far it relates to remitting the claim item No. 1 to the panel of arbitrators for reconsideration. So far as claim item Nos. 2 and 3 are concerned, the High Court upheld the direction of the Additional Judge, but, appointed a retired Chief Justice of the Court as arbitrator to arbitrate the claim items 2 and 3 and a part of claim item No. 5 relating to interest. In this appeal filed by the claimants, we are concerned only with claim item No.1. The legality of the award in relation to claim items 2 and 3 are the subject matter of an appeal, which is pending in this Court.

2. Claim Item No. 1 relates to increase in quantity of hard rock abnormally and on this head, the claimants had claimed Rs. 93,76,990/-. The claimants statement that was filed before the arbitrator, makes out a vague claim on this score without indicating the basis for the claim in question. In respect of the aforesaid quantity of extra excavation on hard rock, the State of Andhra Pradesh had made the payment in terms of Clause 25 of Schedule C of Section 2 of the agreement as per its letter dated 21st October, 1981. Notwithstanding the said payment, the claimants had made the extra claim on the ground that the quantity of excavation of hard rock being abnormally high and much beyond the anticipated quantity indicated in the agreement and even much in excess of the so-called 25 per cent of the work as per the GOMS No. 2289 dated 12.6.1968, the claimants are entitled to a separate rate for such extra excavation and the arbitrators failed to exercise their jurisdiction in not granting the claim and on the other hand, rejecting the same. The High Court in the impugned judgment

Click Here to Read the rest of this document

2001 Supreme(SC) 391

Cases Referred (3)