2010 Supreme(SC) 537

Supreme Court of India
THE HONOURABLE MR. JUSTICE AFTAB ALAM & THE HONOURABLE MR. JUSTICE T.S. THAKUR
M/s. Rashtriya Chemicals & Fertilizers Ltd.
Versus
M/s Chowgule Brothers & Others
CIVIL APPEAL NO.5286 OF 2006
Decided on : 07-07-2010

Headnote:(a) Legal Interpretation – Interpretation of contracts – Clause 2.03 of instant contract – In two parts – First year – Rates to remain firm – No escalation on any ground permissible – Extended period – Use of word ‘similarly’ – Drawing analogy to first year – Intending to keep the rates firm even during extended period – Rates for extended period to take into account statutory increases – Subsequent increases after commencement of extended period, even if given retrospective effect – To be of no consequence – Award made by the Arbitrators directing payment of additional amount claimed by respondent – Not unsustainable. (Para 10 to 12, 15)

       (b) Arbitration law – Arbitrators cannot travel beyond specific terms of contract. (Para 16)

       (1999) 8 SCC 122; (2002) 5 SCC 679; (2003) 8 SCC 154; (2004) 9 SCC 619; AIR 1992 SC 232; AIR 2005 SC 4430; (2003) 4 SCC 80 232 – Relied upon

       (c) Arbitration law – Respondent making three claims – Claim of Rs.27,91,984.29 on account of escalation of the rates consequent upon statutory increases in the wages of M.D.L.B. and a further claim of Rs.9,88,713.20 on account of escalation in the wages of other categories of workers such as Tally Clerks, Stichers, Foreman, Asst. Foremen, Supervisors etc. during the extended period of contract – In addition, a claim for the recovery of Rs.8,63,953/- towards the final payment due and payable with interest @ 18% p.a. – Entitlement of the respondent to claim any amount on account of escalation consequent upon the increase in the wages of M.D.L.B. workers not established – The first two claims on account of escalation could not have been allowed by the Arbitrators nor could the incidental claim for payment of interest on that claim be granted – Claim of Rs.8,63,953/- with the interest @ 9% p.a. from 1st April, 1985 till the date of actual payment thereof held payable to respondent. (Para 23, 24)

       Facts of the case:

       In response to an advertisement issued by the appellant inviting tenders for allotment of clearing, forwarding, handling and stevedoring jobs at Mormugao Port initially for a period of one year commencing from 15th January 1983 upto 14th January 1984 but extendable at the option of the appellant for a further period of one year on the same terms and conditions except statutory increases in the wages of Dock labourers referred to in Clause 2.03 of tender notice, the respondent’s tender was accepted and work order dated 10th January 1983 was issued in its favour. The contract was extended in terms of Clause 2.03 of the NIT for a further period of one year ending 14th January 1985.

       The respondent alleged that pursuant to a settlement between the M.D.L.B. and the Dock workers the respondent had incurred an additional amount of Rs.24.74 lakhs towards the increase in the wages payable to such workers. A claim for reimbursement of the said amount was made by the respondent-company, which was refuted by the appellant on the strength of Clause 2.03 of Schedule II to the NIT.

       Denial of the claim made by the respondent thus gave rise to a dispute which was referred to a panel of three Arbitrators for adjudication. The Arbitrators examined rival contentions urged before them but failed to arrive at a unanimous decision on the true and correct interpretation of Clause 2.03. Two awards, therefore, came to be made, one by Shri R.P. Bhatt who dismissed the claim and the other by M/s R.C. Cooper and N.A. Modi who held the respondents entitled to recover from the appellant a lump sum amount of Rs.61,73,067.90.

       Aggrieved by the majority Award, the appellant filed Arbitration Petition before the High Court for setting aside the same. A Single Judge of the High Court allowed that prayer and set aside the award holding that the same was contrary to clause 2.03 of the NIT forming part of the contract executed between the parties. Even the plea of limitation succeeded before the learned Single Judge.

       Undeterred, the respondents assailed the said order before a Division Bench of the High Court which allowed the appeal, set aside the order passed by the Single Judge and restored the majority Award made by the two Arbitrators.

       Finding of the Court:

       Respondent is entitled to part of the claim.

       Result:

       Appeal partly allowed.