Deciding Authority: The Supreme Court of India
Name of the Judges: G.B. Pattanaik & Y.K. Sabharwal
Date of Judgement: 25/01/2002
Facts: The dispute and differences between the contractor – appellant and respondent – Calcutta Improvement Trust (CIT) were determined by award dated 30th September, 1999. The arbitrator held that the contract was wrongly terminated by CIT and awarded in favour of the contractor a sum of Rs.24,80,000/- besides interest. The award was challenged by the CIT by filing an application under Sections 30 and 33 of the Arbitration Act, 1940. That application was rejected by a learned Single Judge of the High Court. The appeal of the CIT was, however, allowed by the Division Bench and the award was set aside. The contractor has challenged the correctness of the decision of the Division Bench.
Judgement: The main grounds on which the award has been set aside by the impugned judgment are two. First, that the question of the wrongful termination of the contract was an excepted matter and, thus, not arbitrable. Second, the arbitrator has not considered the counter claim of the CIT and thereby has failed to exercise jurisdiction vested in him by law.
Regarding the ground of arbitrability, clause 1.9 of the Information and Instructions to Tenders stipulates that the disputes between the parties to the contract shall be referable to an arbitrator, other than those for which the decision of the Engineer is by contract expressed to be final, binding and conclusive. Clause 15 of the contract provides that the certificate of the Engineer as to the happening of any of the events referred to in the said clause shall be conclusive proof as between the contractor and the CIT of the statements contained in such certificate. According to the CIT, in view of Engineer’s certificate dated 3rd November, 1995 certifying that the contractor has miserably failed to complete the work and with a view to effecting completion of the work and remedying the breech, it is a fit case for taking action under clause 16 of the works contract for termination, the question of the validity of termination is an excepted matter and, therefore, not arbitrable.
According to the contractor, however, the Engineer’s certificate could only certify as to the quality or measurement of the work done and it could not give a binding statement as to who caused the breach or was responsible for delay and these matters are essentially within the jurisdiction of the arbitrator to be adjudicated upon and to hold otherwise would render arbitration clause nugatory. Further the case of the contractor is that the issue as to whether the termination is wrongful was initially framed by the first arbitrator who was the officer on special duty of the CIT on 3rd March, 1997 at the instance of the CIT itself. In place of the said arbitrator, the Court appointed the arbitrator who has made and published the award in question. The arbitrator adopted the said issue on 24th June, 1998 with consent of both the parties. The issue of termination of the contract in question, on the facts under consideration before this Court, does not relate to the jurisdiction of the arbitrator.
Without going into the scope of clause 1.9 of the Information and Instructions to Tenders or that of clause 15 of the contract and assuming that issue of termination of contract can be brought within the scope of the said clauses and, thus, made an excepted matter but that would depend upon the fact whether Engineer’s certificate under clause 1.9 has been issued or not. Therefore, specific plea had to be taken that such a certificate was issued and, therefore, the aspect of termination was not arbitrable. As already noticed, no such fact was pleaded or contention urged in the counter statement of facts. In this view, it is not necessary to decide whether the issue of termination of the contract could be brought within the ambit of the excepted matter or not or that the Engineer’s certificate could be conclusive only as to the quality or measurement of the work done. The Division Bench was, thus, not correct in coming to the conclusion that the fundamental terms of the agreement between the parties prohibited the arbitrability of the excepted matters. The first ground on the basis of which the judgment of the learned Single Judge was reversed is, thus, not sustainable.
Regarding the second ground on which decision of learned Single Judge was reversed by the impugned judgment, the Court is concerned in this case with a nonspeaking award. Perusal of the award shows that the arbitrator has considered the claims and counter claims of the parties. The arbitrator says that “and whereas I have considered the claim and counter claim amounts as per statement of facts and the counter statement of facts.” Again while formulating the award, the arbitrator awards the amount in full and final settlement of the claim of the claimant as set out in the statement of facts and the counter claims of the respondent. In this view, the conclusion of the Division Bench that the arbitrator has not considered the counter claim of the CIT is contrary to the record. Therefore, the second ground is also not sustainable.
Decision:
The appeal is allowed.
Sudipta Bhowmick, 4th Year, B.A. LL.B., KIIT School of Law.
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