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High Court Of Delhi
AMAR NATH SATYA - Appellant
Versus
AMAR NATH SATYA - Respondent
Suit 2642 of 1989
Decided On : 09/01/1994
ARBITRATION - AWARD - SETTING ASIDE - ERROR APPARENT ON THE FACE OF THE AWARD - JURISDICTION OF ARBITRATOR - INCREASE IN WAGES OF LABOUR - CLAIM BY CONTRACTOR - ARBITRATOR AWARDING CLAIM THOUGH INCREASE TOOK PLACE BEFORE DATE OF TENDER - AWARD HELD WITHOUT JURISDICTION AND SET ASIDE.
Fact of the Case:
The petitioner, a contractor, entered into a works contract with the respondent, Union of India. Disputes arose between the parties and were referred to arbitration. The arbitrator awarded the petitioner Rs. 20,000 under Claim No. 4 for an increase in labor rates. The respondent objected to the award, arguing that the increase in wages had occurred before the acceptance of the tender and not during the progress of the work, and therefore the arbitrator could not have awarded any claim on that account.
Finding of the Court:
The court found that the increase in labor rates had indeed taken place before the date of the tender, and therefore the arbitrator could not have awarded the claim under Clause 10-C of the contract, which applied only to increases in wages during the progress of the work. The court held that the arbitrator had exceeded his jurisdiction by awarding the claim and that the award was therefore without jurisdiction and liable to be set aside.
Issues: 1. Whether the arbitrator had jurisdiction to award the claim for increase in labor rates under Clause 10-C of the contract, given that the increase had occurred before the date of the tender? 2. Whether the award was without jurisdiction and liable to be set aside due to the arbitrator's error in applying the contract?
Ratio Decidendi: The court held that the arbitrator had exceeded his jurisdiction by awarding the claim under Clause 10-C of the contract, which applied only to increases in wages during the progress of the work. The court relied on the principle that an arbitrator cannot act arbitrarily, irrationally, capriciously, or independently of the contract, and that an award outside the terms of the contract would be an award without jurisdiction disclosing an error apparent on its face.
Final Decision: The court allowed the objection petition filed by the respondent and set aside the award given by the arbitrator under Claim No. 4. The rest of the award was made the rule of the court, and the respondent was directed to pay the petitioner an amount of Rs. 5,183.12p. with interest @ 12% p.a. from the date of the award till the date of payment.
( 1 ) THE petitioner had entered into a works contract with therespondent. Disputes having arisen between the parties, the same were referred toadjudication by arbitration. The Arbitrator has given his award dated 30. 6. 1989. On the award having been filed in the Court, proceedings for making it a rule of thecourt were initiated. The parties were noticed. The respondent Union of India hasfiled its objections to the award. The controversy raised is confined to the awardmade by the Arbitrator under claim No. 4.
( 2 ) THE petitioner had claimed an amount of Rs. 40,000. 00 under Clause 10-C ofthe Contract on account of increase in labour rates. The Arbitrator has given areasoned award. The gist of his finding is summarised in the next para.
( 3 ) ACCORDING to the Arbitrator, the document Exhibit C-30, which is anotification dated 25. 4. 73, proves the statutory increase in wages. Tender wasaccepted on 23. 6. 1973. The increase had taken place prior to acceptance of thetender but after the submission of the tender. Clause 19-B of the contract referredto a fair wage schedule, wherein the labour rates, were quoted. If increase in wageshad taken place, the claimant was entitled to reimbursement. The Arbitrator hasassessed the claimant entitled to an award of Rs. 20,000. 00 and not Rs. 40,000. 00 asclaimed. Accordingly, Rs. 20,000. 00 have been awarded under Claim No. 4.
( 4 ) THE objection of the respondent-Union of India is that the increase in ratesof wages had taken place prior to the acceptance of the tender and certainly notduring the progress of the work and so the Arbitrator could not have awarded anyclaim on account of increase in labour rates. The award made by the Arbitratorruns contrary to the terms of the contract.
IT is not only an error apparent on the face of the award but also misconducton the part of the Arbitrator. It is also submitted by the learned Counsel that if onlythe Arbitrator would have applied his mind to the documents available on record,he could not have allowed the impugned claim to the petitioner.
( 5 ) IN reply, the contractor-petitioner has submitted that the provisions ofclause 10-C of the contract were applicable to the case and the claim of thepetitioner was justly upheld by the Arbitrator.
( 6 ) CLAUSE 10-C of the contract provides as under:
"if during the progress of the work, the price of any materials incorporated inthe works (not being a materials supplied from the Engineer-in-charge sstores in accordance Clause 10 hereof) and / or wages of labour increases as adirect result of the coming into for of any fresh law, or statutory rule or order (but not due to any changes in sales tax) and such increase exceeds ten per centof the price and/or wages prevailing at the time of receipt of the tender for thework, and the contractor thereupon necessarily and properly pays in respectof that material (incorporated in the works) such increased price and/or inrespect of labour engaged on the execution of the work such increased wages,then the amount of the contract shall accordingly bevaried, provided alwaysthat any increase so payable is not, in the opinion of the Superintendingengineer (whose decision shall be final and binding) attributable to delay inexecution of the contract within the control of the contractor. " (underlining by me)
( 7 ) THE letter dated 22. 6. 76 issued by the petitioner himself to the respondentconstitutes a part of the contract. Therein itself, the petitioner has mentioned thedate of tender as 18. 5. 93.
( 8 ) EXHIBITS C-30 filed before the Arbitrator is the notification dated 25. 4. 1973issued by the Government of India, Ministry of Labour and published in thegazette of India (Extra-ordinary) which has entailed revision in labour rates.
( 9 ) A bare perusal of the contract and the notification dated 25. 4. 73 puts itbeyond any shadow of doubt that revision in labour rates, the benefit whereof wasclaimed by the petitioner had taken place before the date of tender. The
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