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1996 Supreme(Mad) 476

High Court of Judicature at Madras
THE HONOURABLE MR. JUSTICE ABDUL HADI AND THE HONOURABLE MR. JUSTICE SATHASIVAM
State of T.N. - Appellant
Versus
M/s. Rao Constructions, Bangalore and Another - Respondents
A.A.O. Nos. 1230 to 1232 of 1994
Decided On : 09 April 1996

Appearing Advocates:R. Swaminathan Addl. Govt. Pleader, T. Raghavan (For No.I), A. Thirumoorthy (For No.2), Advocates.

An arbitrator commits a jurisdictional error by ignoring the provisions of the agreement between the parties and by failing to consider the applicability of relevant clauses in determining the amounts awarded.

Headnote:

ARBITRATION - AWARD - SETTING ASIDE - JURISDICTIONAL ERROR - ARBITRATOR IGNORING THE PROVISIONS OF THE AGREEMENT - AWARD SET ASIDE AND REMITTED BACK TO THE ARBITRATOR FOR FRESH DISPOSAL.

Fact of the Case:

The appellant, the State of Tamil Nadu, filed three civil miscellaneous appeals under the Arbitration Act against three separate orders passed by the Court below, which received and passed decrees in terms of three different awards passed by the arbitrator appointed under Section 14 of the Act. The disputes related to three different works executed by the respondent pursuant to the agreement entered into between the appellant and the respondent for the construction of a link canal. The main common claim was whether the respondent was eligible for the payment of revised workable rates during the extended period of contract beyond 3-5-1992. The other common claim was for interest on the amounts claimed under the main common claim. The third claim, peculiar to one of the appeals, related to the rates for excess quantity of work done.

Finding of the Court:

The Court held that the arbitrator had committed a jurisdictional error by ignoring the provisions of clause 52 of the agreement, which required him to give reasons for the amounts awarded, and by failing to consider the applicability of the price adjustment clause 54 in determining the revised rates for the work done during the extended period. The Court also held that the arbitrator had erred in ignoring the fourth sentence in clause 31 of the agreement, which provided that the revised rate for the extra quantity of work could not exceed the item rate quoted, subject to adjustment in accordance with the price adjustment clauses.

Issues: 1. Whether the arbitrator had committed a jurisdictional error by ignoring the provisions of clause 52 of the agreement and by failing to consider the applicability of the price adjustment clause 54? 2. Whether the arbitrator had erred in ignoring the fourth sentence in clause 31 of the agreement?

Ratio Decidendi: 1. The Court held that the arbitrator had committed a jurisdictional error by ignoring the provisions of clause 52 of the agreement, which required him to give reasons for the amounts awarded, and by failing to consider the applicability of the price adjustment clause 54 in determining the revised rates for the work done during the extended period. The Court relied on the decision in Associated Engineering Co. v. Govt. of A. P., 1992 AIR(SC) 232, which held that the arbitrator had committed a jurisdictional error by failing to give reasons for his award. 2. The Court held that the arbitrator had erred in ignoring the fourth sentence in clause 31 of the agreement, which provided that the revised rate for the extra quantity of work could not exceed the item rate quoted, subject to adjustment in accordance with the price adjustment clauses. The Court held that this provision could not be ignored and that the arbitrator should have considered it in determining the revised rates for the extra quantity of work.

Final Decision: The Court allowed the appeals, set aside the judgments and decrees of the Court below and the awards of the arbitrator, and remitted the matter back to the arbitrator for fresh disposal in the light of the observations made in the judgment.

Judgment :-

ABDUL HADI, J.

These three civil miscellaneous appeals under the Arbitration Act are by the State of Tamil Nadu and they are respectively against three separate orders all dated 4-10-1993 in O. P. Nos. 40, 41 and 42 of 1993 on the file of Principal Sub-Court, Madurai, filed by the Arbitrator (Mr. K. Thirunavukkarasu, Superintending Engineer, Public Works Department, now Chief Engineer posted as Director of Irrigation Management Training Institute on deputation) appointed under Section 14 of the Arbitration Act (hereinafter referred to as 'the Act'). He is the sole arbitrator to arbitrate in the three disputes between the respondent contractor (the claimant before the arbitrator) and the appellate State, represented by the Superintending Engineer, Periyar Improvement Circle. Pursuant to the said Section 14 in the said O.Ps. the said arbitrator sought for the Court below to receive his three different awards all dated 31-3-1983, and pass necessary decrees thereof.

2. The Court below has passed three different judgments and decrees in terms of the three different awards holding that the respondent could submit the relevant account details in accordance with the awards, to the appellant and receive the amounts due to it. It also held that the appellant is liable to pay 15% interest on the relevant amounts due from the date of the awards till realisation.

3. The abovesaid three different disputes related to three different works executed by the respondent pursuant to the agreement entered into between the appellant and the respondent which came into effect on 4-2-1991 for construction of link canal in the main scheme of modcrnisation of Periyar Vagai Irrigation System. The first dispute relates to the link canal from Km. 4 to Km. 8. The second dispute relates to the link canal from Km. 8 to Km. 11. The third dispute relates to the link canal from Km. 18 to Km. 22. As per the agreement between the parties the abovesaid work in each case, has to be completed by the contractor within 15 months, that is, by 3-5-1992. However, admittedly extensions were granted by the appellant to the contractor, due to causes which are attributable only to the appellant. In the case of first and third of three works to be executed, pursuant to the extensions granted, the works were completed on 31-10-83 and in the case of second of the abovesaid three works, pursuant to the extensions granted, the work was completed on 30-6-1993. In relation to the abovesaid three works, we are concerned in C.M.A. Nos. 1230 and 1231 of 1994, only with claim No. 1(a) and 1(b) in each of the said appeals and in C.M.A. No. 1232 of 1994 only with claim Nos. I, 2(a) and (b) 4(a) and 4(b) since the said claims alone were allowed by the arbitrator in favour of the respondent-claimant and the other claims were disallowed. We must also state that claim Nos. 1 (a) and 1(b) in each of the abovesaid first two appeals and claim Nos. 4(a) and 4(b) in the last appeal are of the same nature, while the abovesaid claim Nos.1 and the 2(a) and (b) in the last appeal are different.

4. In other words, one main common claim running through all the appeals is

"whether the claimant is eligible for the payment of revised workable rates during the extended period of contract beyond 3-5-1992? If so, at what rate and amount?" *

(This is the claim figuring as c1aim No. 1(a) in the first two appeals and claim No. 4(a) in the last appeal). The amounts claimed under this category in all the three appeals are respectively Rs. 69,08,820/- Rs. 7,62,516/- and Rupees 52,88,352.60. In relation to this main common claim, the arbitrator holds that the contractor is entitled to revised rates for the execution of the works during the extended period and fixes those rates for the different works so executed.

4A. The other common claim running through all the three appeals is only a consequential claim pursuant to the above referred to main common claim and relates to the interest on the abovesaid amounts.


























































































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