IMPORTANT POINT
The appellant, on the evidence on record, is entitled to the price of hard coke supplied by it to the respondent at the enhanced rate as held by arbitrator. The Single Judge rightly made the award Rule of the Court u/s 30 of Arbitration Act, 1940. The D.B. of High Court exceeded the limit of its appellate Jurisdiction u/s 39 of Arbitration Act by entering into facts of the case and evidence to reverse Single Judge s decision to make it Rule of the Court.

Headnote:Arbitration Act, 1940-Sections 17, 30 and 39-Contract through Tender-Supply of hard coke and pig iron-Subject to escalation clause for statutory increase in price-Dispute whether appellant, on the evidence on record, is entitled to the price of hard coke supplied by it to the respondent at the enhanced rate referred to arbitrator-Arbitrator gave award in favour of appellant-Made rule of Court by High Court Single Judge under Section 30-In appeal under Section 39, DB reversed on ground that there was no evidence-Appeal to Supreme Court-Whether D.B. was right? (No)-Scope of Sections 30 and 39 explained-Case law referred-Appeal allowed. (Paras 5 to 8)
       Held : This Court, while dealing with the power of courts to interfere with an award passed by arbitrator, had consistently laid stress on the position that an arbitrator is a Judge appointed by the parties and as such the award passed by him is not to be lightly interfered with. In the case on hand the only question that arose for consideration was whether the appellant was entitled to claim the enhanced price of hard coke for the quantity supplied by it to the respondent. Under the contract a specific quantity of the material was to be supplied during the period fixed under the agreement. Right from the beginning while submitting the tender the appellant had included a price escalation clause in which it was stipulated that any escalation of the price after submission of the tender will entitle the supplier to claim higher price from the other party. This clause was subsequently revised only to the effect that the price escalation will be applicable when there is statutory enhancement in the price of the commodity. No dispute was raised before the arbitrator or the court that the escalated price claimed by the appellant was not the statutorily enhanced price of hard coke. It was also not in dispute that even accepting the appellant s claim for escalated price of the commodity, it was entitled to the claim only in respect of a part of the quantity supplied and not the entire quantity. In these circumstances, the arbitrator had not attached importance to the non-mention of the enhanced price of hard coke in course of negotiations between the parties. The view taken by the arbitrator, in the circumstances of the case, was a plausible one and the same could not be said to be suffering from any manifest error on the face of the award or wholly improbable or perverse one. As such it was not open to the court to interfere with the award within the statutory limitations laid down in Section 30 of the Act. The single Judge, therefore, rightly declined to interfere with the award passed by the arbitrator and made it rule of the court. (Para 7)
       As noted earlier, the Division Bench in appeal filed under Section 39 of the Act, reversed the order passed by the single Judge and set aside the award holding that there was no material before the arbitrator for accepting the claim of the appellant. The Division Bench exceeded the limits of its jurisdiction in entering into the facts of the case and in interpreting the agreement between the parties and correspondence which was a part of the said agreement. What was the price of the commodity to be paid by the respondent to the appellant was essentially a question of fact. Even assuming that the arbitrator had committed an error in coming to the conclusion that the appellant was entitled to the claim of the escalated price of the commodity (hard coke) under the terms of the agreement and the Division Bench felt that the conclusion should have been otherwise, it was not open to it to interfere with the award on that score. Another fallacy committed by the Division Bench in the judgment is recording the finding that the escalation clause in the agreement had prospective operation with effect from 14-5-1981 i.e. the date on which the agreement was entered into by the parties. As noted earlier, under the agreement a specified quantity of the commodity was to be supplied by the appellant to the respondent within the period specified in the agreement and the appellant, while submitting its tender, had made it clear that any subsequent upward change in price of the commodity will entitle it to claim at such rate and subsequently the price escalation clause was modified in a manner not relevant for deciding the dispute referred to the arbitrator, the question of the price escalation clause having prospective effect was of no consequence. If the claimant was entitled to the enhanced price the respondent was liable to pay the same for the entire stock supplied. If the position was otherwise, the claim of the appellant was to be rejected in toto. (Para 8)
       Held finally : On the discussions in the foregoing paragraphs, we are clearly of the view that the Division Bench of the High Court erred in setting aside the award passed by the arbitrator which was made rule of the court by the single Judge. In the result, the appeal is allowed. The judgment dated 15.5.1996 in FAO (OS) 219/95 is set aside and the order of the single Judge dated 20-2-1995 in Suit No. 944 of 1985 is confirmed. No costs. (Para 9)

JUDGMENT

D.P. Mohapatra, J.-Whether the appellant, on the evidence on record, is entitled to the price of hard coke supplied by it to the respondent at the enhanced rate, is the controversy raised in this case. The dispute was referred to an arbitrator pursuant to the arbitration clause in the agreement entered by the parties. The arbitrator held in favour of the appellant and accepted its claim of Rs. 234097.41. A single Judge of the Deihi High Court rejecting the objections raised by the respondent against the award, made it rule of the court. On appeal, the Division Bench of the High Court reversed the order of the single Judge and set aside the award passed by the arbitrator As such the claimant is in appeal before this court challenging the judgment of the Division Bench of the High Court.

2. The factual matrix of the case leading to the present proceeding may be shortly stated thus: The Delhi Development Authority (for short DDA ), respondent herein, floated a tender enquiry on 30th January, 1981 for supply of hard coke. M/s. Indu Engineering & Textiles Ltd., appellant herein, submitted its offer for supply of the material in response to the said notice on 12th February, 1981. The offer letter contained a price escalation clause to the following effect:

"Our prices are based on the prevailing prices of pig iron, premium hard coke and ferro-silicon as announced by the Joini Plant Committee, Bharat Coking Coal Ltd., or any other agency authorised for this purpose, plus sales tax, cost of transportation and handling from main producers to our works at Agra. Any upward revision in the prices of pig iron, hard coke and ferro-silicon shall have corresponding effect on our prices as per formula given below.

Such revision in prices shall be effective from all material in transit, or tendered for inspection immediately from the date of announcement of revised prices by J.P.C., Bharat Coking Coal Ltd., etc."

The tenders were opened by the respondent on 20th February, 1981. On 14th February, 1981 there was an escalation of the price of hard coke notified by Coal India Ltd. (a subsidiary of Bharat Coking Coal Ltd.). The price escalation was published in the newspapers on 1st March 1981. On 16th April, 1981 negotiations were held with the parties who submitted offers, pursuant to which rates in respect of supply of ferro-silicon and the price escalation in respect of the same were reduced/dropped. However, the escalation clause with regard to premium hard coke and pig iron (no dispute in this proceeding) was maintained with certain modification. Regarding price escalation it was stated as follows:

"Price Escalation: We agree to modify this clause to the same form as accepted by the Department in the previous tender with Indo- Swedish Pipes from whom this factory was bought by us. Under that escalation clause, escalation is payable only on statutory increase in prices of pig iron and premium hard coke."

On 6th May, 1981 the respondent communicated its acceptance with the following clause regarding price escalation :

"Enhancement and deduction in pipes to be regulated on the basis of the pig iron and hard coke price of JPC and Bharat Coking Coal Ltd."

This was followed by a confirmation letter by the appellant in which it was specifically stated that the escalation clause shall be effective for any increase/decrease after the date of the tender i.e. 12th February 1981. The agreement incorporating the price escalation clause was signed between the parties on 14th May, 1981. When the appellant submitted bills for the hard coke and pig iron supplied to the respondent at the escalated price with effect from 14th February, 1981 the respondent denied its liability to pay the enhanced price for hard coke while admitting the liability for the escalated price in respect of pig iron. A dispute therefore, arose between the parties.

3. The dispute was referred to the arbitrator-Shri Banarasi Dass, Superintendent Engineer by Engineer Member, DDA. T

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2001 Supreme(SC) 919

Cases Referred (1)