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2025 Supreme(Jhk) 1275
IN THE HIGH COURT OF JHARKHAND AT RANCHI
GAUTAM KUMAR CHOUDHARY, J.
State of Jharkhand, through Chief Engineer, Subarnrekha Multipurpose Project, Icha-Galudih Complex, P.O. Mahulia and Anr. – Appellants
Versus
Texmaco Rail & Engineering Ltd. (TREL), earlier known as Texmaco Ltd. - Respondent
Miscellaneous Appeal No.105 of 2003 With Miscellaneous Appeal No.106 of 2003 With Miscellaneous Appeal No.107 of 2003
Decided On : 28-01-2025
For the Appellants : Mr. Praveen Akhouri, S.C. (Mines)-I
For the Respondents:Mr. Vishal Kumar Tiwari, Advocate, Mr. Mahesh Pd. Sinha, Advocate, Mr. Sunil Kumar Mahto, Advocate, Mr. Ranjeet Kumar Choudhary, Advocate
An arbitrator cannot adjudicate claims not properly raised in initial proceedings, and awards that exceed the arbitrator's jurisdiction are liable to be set aside.
Headnote:(A) Arbitration Act, 1940 - Section 30 - Objection to arbitral award - Misconduct of arbitrators in allowing claims barred by the contract terms - Claims related to price adjustments and other financial consequences of project delay were addressed by the arbitrators - The court found that the arbitrators acted beyond their jurisdiction in allowing claims not asserted in initial discussions with the Superintending Engineer as per contract conditions, leading to issues regarding the boundaries of arbitral authority. (Paras 6, 13, and 17)
(B) Jurisdiction of Arbitrator - The arbitrator must adhere to the terms of the contract and cannot adjudicate claims that were not presented at the dispute's initial stages, reaffirming that objections to jurisdiction come too late once arbitral proceedings have commenced. (Paras 10 and 12)
(C) Limitations of awards - Arbitrators may only make awards within the jurisdiction conferred by the contract or law. If an award exceeds that jurisdiction, it can be set aside.
Result: The award concerning Claim No.5 is set aside, and the appeals are partly allowed.
| Table of Content |
|---|
| 1. appellate court's jurisdiction in arbitration. (Para 1 , 2 , 3) |
| 2. claims filed by the contractor. (Para 4 , 5 , 6) |
| 3. jurisdictional objections in arbitration. (Para 7 , 10 , 12) |
| 4. limits of arbitrator's authority. (Para 8 , 9 , 11 , 13) |
| 5. enforcement of contractual terms in arbitration. (Para 14 , 15 , 16 , 17) |
JUDGMENT :
(Gautam Kumar Choudhary, J.)
All these three miscellaneous appeals have been preferred against the arbitral awards which were made Rule of Court in Misc. Case No.1/2001 corresponding to Misc. Case no.40/2000.
In Misc. Case Nos.2/2001, 3/2001 and 4/2001, objection raised by the State/present appellants against the arbitral award under Section 30 of ARBITRATION ACT , 1940. Learned Court below by the impugned order dismissed the Misc. Case preferred by the State and made the award Rule of Court, aggrieved by the order, the instant Miscellaneous Appeals have been filed.
2. For better appreciation list of dates not in dispute is set out as under: -
| I | 31.01.1986 | Global Tender was issued by the State for design construction of Galudih Barrage gate. |
| II | 22.12.1987 | Pre-bid conference with pre-qualified bidders held in office of Chief Engineer. |
| III | 28.01.1988 | Minutes of meeting were issued vide Letter No.SMP/IGC/4074/85 which formed part of agreement. |
| IV | 13.05.1988 | Corrigendum and addendum to pre-bid meeting minutes regarding Galudih Barrage gate price to pre-qualified bidders including Texmaco Ltd. (the present respondent), was issued. |
| V | 01.06.1988 | Texmaco Ltd. submitted bid vide letter no.SP/PKR/PH- 4055/297 dated 01.06.1988. |
| V | 29.07.1988 | Bid letter dated 01.06.1988 submitted by the respondents was accepted and agreement was entered. |
| VI | 10.09.1992 | Vide Letter No.1045 dated 10.09.1992 of Executive Engineer was intimated that bills regarding price adjustment on fabrication item is not tenable in view of corrigendum and addendum of pre-bid meeting of letter dated 13.05.1988. It was also intimated that bills pertaining to price adjustment already paid on fabricated materials and labour are also being recovered along with interest as per the terms of agreement. |
| VII | 19.11.1992 | Vide Letter No.RCC/AV/Cal/Arbn/1992, contractor demanded price adjustment from Superintending Engineer and requested to notify his decision within 30 days as envisaged under Clause 56. |
| VIII | 01.12.1992 | Appeal was preferred on 26.12.1992 to Chief Engineer against the decision of Superintending Engineer, which was dismissed. |
| IX | 13.03.1993 | Contractor nominated Sri P.L. Agrawal, Advocate as their Arbitrator and requested Chief Engineer to nominate his Arbitrator for deciding claims noted in Schedule of the letter. |
3. Three members Board of Arbitrators was constituted by the order no.696 dated 30th May 1994 issued by the Joint Secretary, State of Bihar.
4. It is submitted by the learned counsel that appointment of Arbitrator was in derogation of Clause 5, 6 and 7 of the General Conditions of Contract which specifically provides that if any dispute is referred to Superintending Engineer and the Contractor is aggrieved by order of the Superintending Engineer, appeal is to be preferred before the Chief Engineer, only thereafter, the Arbitrator can be appointed. If the matter has not been agitated before the Superintending Engineer and Chief Engineer these issues cannot be raised before the Arbitrator.
5. The second ground on which the present appeal is preferred is that as per the addendum dated 13.05.1988 pursuant to pre-bid minutes regarding Galudih Barrage Gate price bid to pre-qualified bidders, debarred the escalation of fabrication cost and it formed part of the main agreement. Despite the express bar in the terms of agreement claim no.V has been allowed by the Board of arbitrators and affirmed by the learned Court below.
6. The Contractor raised altogether nine claims which are as under: -
I. The claim on account of escalation as per the formula given in the contract for Rs.1,05,28,223/-.
II. The claim on account of bank commission and charges for furnishing the b
