2009 Supreme(SC) 1811

2009(8) Supreme 159
SUPREME COURT OF INDIA
Markandey Katju and Asok Kumar Ganguly, JJ.
M/s. Madnani Construction Corporation (P) Ltd. — Appellant
versus
Union of India & Others — Respondents
Civil Appeal No. 8385 of 2004
Decided on : 7-12-2009

IMPORTANT POINT
In order to deny the claims of the contractor as covered under excepted matters, the procedure prescribed for bringing those claims under excepted matters must be scrupulously followed.

Headnote:Arbitration Act, 1940 – Section 20 – Agreement entered into between appellant and North Eastern Railway for the construction of bridge island nos. 13 and 14 over Kosi river – Disputes arose between parties – Application filed by appellant for appointment of an arbitrator to settle disputes – General Manager of respondent – Railways rejected appellant’s prayer for appointment of an arbitrator on the ground that the disputes were not arbitrable, as they fell under ‘expected matter’ in the contract-On application by appellant an arbitrator was appointed – Arbitrator gave his award holding that Railways should pay an amount of Rs.4,48,873.22 along with compoundable bank interest prevalent at that time from 16.11.1983 to 21.3.1992 – Award was made rule of court – Appeal – Partly allowed by High Court holding that Item Nos. 1 to 3 and 5 to 8 were excepted matters and were non – arbitrable and Arbitrator committed an illegality in allowing them-Appeal- The arbitrator in his award after perusal of level Book No.1, Graph – Sheets, Logbook No. 1A and Logbook No.4 came to a clear finding that there were manipulations/alterations/over writings by railways and as a result of which volume of work done by the contactor had been reduced-Arbitrator is the master of facts – When the arbitrator on the basis of record and materials which were placed before him by railways came to such specific findings and which had not been stigmatized as perverse by High Court, High Court in reaching its conclusions could not ignore those findings – But in the instant case, High Court had come to said finding that items were excepted matters and non –arbitrable by completely ignoring the factual finding by arbitrator and without holding that those findings were perverse – In order to deny the claims of the contractor as covered under excepted matters, the procedure prescribed for bringing those claims under excepted matters must be scrupulously followed – The clear finding of arbitrator was that it had not been followed and High Court had not expressed any dis – agreement on that –Hence , the finding of High Court that those items were non – arbitrable could not be sustained – No interference called for with award passed by arbitrator- Impugned judgment of High Court set aside and award upheld – Appeal allowed. (Paras 21 to 24)

        Arbitration Act, 1940 – Interest Act, 1978 – Grant of interest – Validity of – Agreement entered into between appellant and North Eastern Railway for the construction of bridge island nos. 13 and 14 over Kosi river – Disputes arose between parties – Application filed by appellant for appointment of an arbitrator to settle disputes – Arbitrator gave his award holding that Railways should pay an amount of Rs.4,48,873.22 along with compoundable bank interest prevalent at that time from 16.11.1983 to 21.3.1992 – Award was made rule of court – Appeal – Partly allowed by High Court holding that Clause 16(2) of the GCC contains a provision against grant of interest. – High Court also relied on Clause 30 of SCC and Clause 52 of the GCC to hold that payment of interest had been barred – In the instant case relevant clauses, Clause 16(2) of GCC and Clause 30 of SCC not contained any prohibition on the arbitrator to grant interest- Hence, High Court was not right in interfering with the arbitrator’s award on matter of interest on basis of said clauses – On a strict construction of said clauses held that said clauses did not impose any bar on the arbitrator in granting interest – No interference called for with award passed by arbitrator – Impugned judgment of High Court set aside and award upheld – Appeal allowed. (Paras 53 to 59)

       Facts of the Case :

        An Agreement was entered into between appellant and North Eastern Railway for the construction of bridge island nos. 13 and 14 over Kosi river . Disputes arose between parties .An Application was filed by appellant for appointment of an arbitrator to settle disputes. General Manager of respondent Railways rejected appellant’s prayer for appointment of an arbitrator on the ground that the disputes were not arbitrable, as they fell under ‘expected matter’ in the contract.On application by appellant an arbitrator was appointed . Arbitrator gave his award holding that Railways should pay an amount of Rs.4,48,873.22 along with compoundable bank interest prevalent at that time from 16.11.1983 to 21.3.1992.Award was made rule of court. Appeal thereagainst was Partly allowed by High Court holding that Item Nos. 1 to 3 and 5 to 8 were excepted matters and were non-arbitrable and Arbitrator committed an illegality in allowing them.

        2. Present appeal has been filed against said order of High Court.

       Findings of the Court :

        The arbitrator in his award after perusal of level Book No.1, Graph-Sheets, Logbook No. 1A and Logbook No.4 came to a clear finding that there were manipulations/alterations/over writings by railways and as a result of which volume of work done by the contactor had been reduced. Arbitrator is the master of facts. When the arbitrator on the basis of record and materials which were placed before him by railways came to such specific findings and which had not been stigmatized as perverse by High Court, High Court in reaching its conclusions could not ignore those findings. But in the instant case, High Court had come to said finding that items were excepted matters and non-arbitrable by completely ignoring the factual finding by arbitrator and without holding that those findings were perverse. In order to deny the claims of the contractor as covered under excepted matters, the procedure prescribed for bringing those claims under excepted matters must be scrupulously followed. The clear finding of arbitrator was that it had not been followed and High Court had not expressed any dis-agreement on that .Hence , the finding of High Court that those items were non-arbitrable could not be sustained.