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2001 Supreme(SC) 216

SUPREME COURT OF INDIA
S. RAJENDRA BABU AND S.N. V ARIAVA, JJ
T.P. GEORGE -Appellant
Versus
STATE OF KERALA AND ANOTHER -Respondents
Civil Appeal No. 5281 of 1996
Decided on February 6, 2001

The arbitrator's decision on claims and interest is binding, and the court should not substitute its views unless the arbitrator's decision is unreasonable.

Headnote:

arbitration - construction contract - supplemental agreement - Claims under Items 12(i), 12(j), 12(k) - Interest from the date of award - Arbitrator's authority to award interest - [Arbitration] - [Arbitration Act, 1940, Section 34] - The court discussed the arbitrator's authority to award claims under the supplemental agreement and the award of interest from the date of the award. It highlighted the arbitrator's binding view and the court's duty not to substitute its views unless the arbitrator's decision is unreasonable.

Fact of the Case:

The appellant was awarded a construction contract, and disputes arose regarding claims and interest, which were referred to arbitration. The arbitrator awarded claims under certain items and interest from the date of the award. The respondents filed objections, and the High Court partly allowed the appeal, setting aside some claims and interest.

Finding of the Court:

The court found that the arbitrator's decision on claims under the supplemental agreement was binding and reasonable, and the High Court erred in setting it aside. The court also held that the arbitrator had the authority to award interest from the date of the award, contrary to the High Court's decision.

Issues: The issues included the arbitrator's authority to award claims under the supplemental agreement and interest from the date of the award, and the High Court's review of the arbitrator's decision.

Ratio Decidendi: The arbitrator's decision on claims and interest was binding and reasonable, and the High Court erred in substituting its views. The court also clarified the arbitrator's authority to award interest from the date of the award.

Final Decision: The court set aside the High Court's decision regarding claims under the supplemental agreement and interest from the date of the award, and upheld the award under Item 12(j). The appeal was disposed of accordingly, with no order as to costs.

JUDGMENT

S.N. VARIAVA, J,- This appeal is against a judgment dated 15-2-1989 wherein the appeal filed by the respondents was partly allowed.

2. Briefly stated the facts are as follows:

The appellant was awarded a contract for construction of a main canal drivIng tunnel of the Kaliada Irrigation Project. The work was to be completed by 4-3-1983. A supplemental agreement dated 20- 10-1983 extending the period of completion was entered into. As disputes arose between the parties the same were referred to a sole arbitrator, who gave a reasoned award dated 12-8-1985.

3. The respondents filed objections to the award, which were rejected by a judgment dated 31-3-1986 and the award was made a rule of court.

4. In the appeal, before the High Court, challenge was restricted to award of claims under Items 12(i), 12(j), 12(k) and award of interest from the date of award. The appeal filed by the respondents was partly allowed by the impugned judgment dated 15-2-1989. By this judgment the award of claims under Items 12(i) and 12(k) were set aside. A ward of claim under Item 12(j) was upheld. Further the award of interest was also set aside. The only ground on which the claims under Items 12(i) and 12(k) have been set aside is that

the arbitrator could not overlook the terms of the contract or agreement. It is held that the arbitrator could not have awarded these claims as they were contrary to the supplemental agreement dated 20-10-1983.

5. Mr Tripurari Ray, pointed out that Claim 12(i) was for loss in connection with the price escalation and that it was under clause 32 of the original agreement. He pointed out that Claim 12(k) was for revision of rates.

He submitted that under the original contract the time for completion was fixed as 4-3-1983. He submitted that due to fault of the respondents the work could not be completed by that time. He submitted that the appellant was forced to execute the supplemental agreement in a form as dictated by the respondents as otherwise the respondents were not clearing the pending bills of the appellant. He drew attention of this Court to a letter dated 6-10-1983 addressed by the appellant to the Superintending Engineer wherein the appellant, before execution of the supplemental agreement, has recorded that he was protesting execution of the supplemental agreement and that he would be executing the supplemental agreement without prejudice to his claims. He submitted that even before writing of this letter the appellant had already, by a letter dated 5-10-1983, made his claims. He pointed out that after the supplemental agreement dated 20-10-1983 was executed the appellant, It addressed another letter dated 24-11-1983 to the Chief Engineer, stating that the supplemental agreement was got executed under coercion and undue influence and that the same was executed without prejudice to his claims.

6. Mr Tripurari Ray submitted that one of the questions before the arbitrator was whether this supplemental agreement was binding on the appellant and/or whether he had been forced to sign the agreement and/or whether the appellant was entitled to maintain his claims in view of the supplemental agreement. He pointed out that after hearing parties and considering the submissions of the respondents the arbitrator had by a reasoned award sanctioned the claims. He pointed out that in the award the arbitrator had held that the delay was not due to the fault of the appellant and that the supplemental agreement was got executed from the appellant. He pointed out that the arbitrator had held that the supplemental agreement was without prejudice to the claims which had already been made. The arbitrator held that the supplemental agreement did not debar the appellant from making or maintaining his claims. Mr Tripurari Ray submitted that this was a possible view of the matter. He submitted that the Court should be slow to interfere merely because another view was possible.

7. Mr G. Prakash supported the impugned judgment o





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