Andhra Pradesh High Court
Judges : PANDURANGA RAO
Superintending Engineer, Somasila Project - Appellant
Versus
R.Ramana Reddy - Respondent
Decided On : 02-16-90
ARBITRATION - AWARD - SETTING ASIDE - GROUNDS - ERROR OF LAW - JURISDICTION OF COURT - SCOPE - AWARD PASSED BEYOND FOUR MONTHS - CONSENT OF PARTIES - INTEREST - AWARD OF INTEREST DURING PENDENTE LITE - NOT PERMISSIBLE - INTEREST ACT, 1978, S. 2(A), (C).
Fact of the Case:
In a dispute between the petitioner (contractor) and the first respondent (Government) regarding the construction of a road, the arbitrator appointed by the court passed an award in favor of the contractor. The Government filed a petition to set aside the award on the grounds of misconduct, while the contractor filed a petition to make the award a rule of the court.
Finding of the Court:
The court held that the arbitrator's decision on the question of awarding compensation during the extended period of the contract, even if erroneous, did not amount to misconduct or misconduct of the proceedings. The court also held that the award was not a nullity as it was passed within the extended time granted by the arbitrator with the consent of both parties. However, the court upheld the Government's objection to the arbitrator's award of interest for the period from 19-4-1988 to 12-11-1988, as it was during the pendente lite period.
Issues: 1. Whether the arbitrator's decision on the question of awarding compensation during the extended period of the contract amounted to misconduct or misconduct of the proceedings? 2. Whether the award was a nullity as it was passed beyond four months? 3. Whether the arbitrator could award interest during the pendente lite period?
Ratio Decidendi: 1. The court held that the arbitrator's decision on the question of awarding compensation during the extended period of the contract, even if erroneous, did not amount to misconduct or misconduct of the proceedings, as it was not an error apparent on the face of the record. 2. The court held that the award was not a nullity as it was passed within the extended time granted by the arbitrator with the consent of both parties, as per Section 28(2) of the Arbitration Act. 3. The court held that the arbitrator could not award interest during the pendente lite period, as per the decision of the Supreme Court in Gujarat Water Supply and Sewerage Board v. Unique Erectors (Gujarat) (P) Ltd.
Final Decision: The court dismissed the Government's petition to set aside the award, except to the extent of the award of interest for the period from 19-4-1988 to 12-11-1988. The court allowed the contractor's petition and made the award a rule of the court, awarding Rs. 91,606/- with simple interest at 12% per annum for the period from 4-8-1981 to 18-4-1988 and from 13-11-1988 till the date of payment.
( 1 ) IN C. R. P. No. 1056 of 1986, by an order dated 14-7-1987 (reported in 1987-2 APLJ (HC) 447), I have appointed Shri Justice Challa Kondaiah, retired Chief Justice of High Court of Andhra Pradesh as the sole arbitrator to adjudicate upon the disputes between the petitioner and the first respondent in respect of the words "special Repairs to the existing W. B. M. Road and providing B. T. Surface to Atmakur-Somasila Road Kms. 15/0 to 21/0". In pursuance of that order, the arbitrator has entered upon reference and after considering the oral and documentary evidence adduced before him, passed an award dated 12-11-1988 allowing the claim of the petitioner in C. R. P. No. 1056 of 1986 (hereinafter referred to as the Contractor ) for a total sum of Rs. 91,606/with simple interest at 12% per annum from 4-8-1981.
( 2 ) THE Government filed C. M. P. No. 4428 of 1989 under Section 30 of the Arbitration Act (hereinafter referred to as the Act ) to set aside the award on the ground of misconduct. The contractor on the other hand filed C. M. P. No. 1134 of 1989 under Ss. 14 and 17 of the Act to make the award, a rule of the court. As common questions of fact and law arise in both the petitions, they were heard and are being disposed of together.
( 3 ) THE learned Government Pleader attacked the award on three grounds viz. , (1) the finding regarding the delay in execution of work is not based upon any evidence and as such the enhanced rate awarded by the arbitrator is not warranted. (2) the arbitrator has not passed the award within four months as provided in Schedule I of the Act and hence the award passed beyond the period of four months is a nullity. (3) the awarding of interest from 4-8-1981 is not permissible as the contractor is not entitled to interest during the period covered by the arbitration proceedings.
( 4 ) I shall deal with these objections seriatim.
( 5 ) THE arbitrator in the award has allowed some of the claims and disallowed some of the claims put forth by the contractor. The arbitrator relying upon the statement given by the contractor on oath before him that he mentioned in the applications seeking extension of time that he would not make any claim for the increase in the price at the instance of the officers as they threatened him that otherwise he would not be given extension of time (which fact was not contradicted by any positive evidence), upheld the claim of the contractor to claim the increase in the value of the cost of the work. The arbitrator however held that the amount of Rs. 1,10,000/- claimed by the contractor is excessive and exorbitant and fixed the same at Rs. 25,000/- on that account.
( 6 ) THE learned Government Pleader submitted that the site was handed over to the contractor on 16-6-1977; that he has not completed the work within the stipulated period of four months; that the time was extended from time to time till 30-4-1979; that the contractor made an endorsement that he has no further claims; that all the claims made by the contractor pertain to the extended period; that as per the agreement, the contractor has to work out at the agreed rates and that the delay in execution of the work is due to the laches of the contractor and hence he is not entitled to claim any amount towards the increase in the value of the cost of the work.
( 7 ) IT is necessary at this stage to consider the scope of the application filed under S. 30 of the Act. A Division Bench of this court of which I happened to be a party, held in State of Andhra Pradesh v. R. V. Rajaram, (1988) 1 APLJ (HC) 536, that an award passed by the arbitrator can be interfered with by the Civil Court only if the award is vitiated by an error apparent on the face of the record. It is further held that the error must be one of law and not one of fact and that the Civil Court has no jurisdiction to re-appreciate the evidence and interfere with the award on the ground that its conclusions are erroneous. The learned counsel
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