State of U.P. Vs. Allied Constructions
EmailAppeal: Civil Appeal No. 14152 of 1996
(From the Judgment and Order dated 18.12.95 of the Allahabad High Court in F.A.O. No. 715 of 1994)
(From the Judgment and Order dated 18.12.95 of the Allahabad High Court in F.A.O. No. 715 of 1994)
Petitioner: State of U.P.
Respondent: Allied Constructions
Apeal: Civil Appeal No. 14152 of 1996
(From the Judgment and Order dated 18.12.95 of the Allahabad High Court in F.A.O. No. 715 of 1994)
(From the Judgment and Order dated 18.12.95 of the Allahabad High Court in F.A.O. No. 715 of 1994)
Judges: V.N. Khare, CJI, K.G. Balakrishanan & S.B. Sinha JJ.
Date of Judgment: Jul 31, 2003
Appearances:
Mr. Ravi Prakash Mehrotra and Mr. Garvesh Kabra, Advocates for the Appellant.
Mr. Uday Umesh Lalit, Advocate for the Respondent.
Mr. Uday Umesh Lalit, Advocate for the Respondent.
Head Note:
ARBITRATION LAWS
Arbitration Act, 1940
Section 33 – Arbitration award – Grounds for setting aside an award – Respondent entering into a contract with U.P. State for construction of a bridge. Contract containing an arbitration clause. Clause 47 of the agreement protecting the State from liability and damage occasioned by unprecedented flood which could not have been foreseen or avoided as a prudent person – Respondent suffering loss due to flooding of the work area – Arbitrator awarding compensation – State challenging the award on the ground that the loss was occasioned by an Act of God and therefore the force majeure clause applied – High Court rejecting the contention and making the award a rule of the court – High Court also dismissing the appeal preferred by the State. Dismissing the appeal held that in the absence of any evidence before the Arbitrator that the rain as a result of which the loss was sustained was unprecedented and in fact it was an Act of God, the Arbitrator as well as the High Court rightly ruled that Clause 47 of the agreement was not attracted. Unless one of the other condition stipulated in section 30 was satisfied, an award made by an Arbitrator cannot be set aside. Arbitrator being a judge chosen by the parties, his decision is final. Once it is found that the view taken by the Arbitrator is plausible, the court will refrain itself from interfering with the award. (Paras 4 and 5)
Cases Reffered:
1. U.P. State Electricity Board v. Searsole Chemicals Ltd. (JT 2001 (3) SC 150) (Para 4)
2. ISPAT Engineering & Foundry Works, B.S. City, Bokaro v. Steel Authority of India Ltd., B.S. City, Bokaro (JT 2001 (6) SC 1) (Para 4)
3. M/s Sudarsan Trading Co. v. The Government of Kerala (JT 1989 (1) SC 339) (Para 3)
2. ISPAT Engineering & Foundry Works, B.S. City, Bokaro v. Steel Authority of India Ltd., B.S. City, Bokaro (JT 2001 (6) SC 1) (Para 4)
3. M/s Sudarsan Trading Co. v. The Government of Kerala (JT 1989 (1) SC 339) (Para 3)
JUDGEMENT:
Order
1. Under a contract entered into by and between the appellant and the respondent, the respondent undertook construction of bridge-cum-fall at Munda Khere Scape at the estimated cost of Rs. 37.2 lacs. while the work was in progress, the work area was flooded in the night of August 25 and 26, 1991.
2. The respondent-contractor herein filed a claim on account of loss sustained by him due to flooding of the work area. Ultimately, the matter was referred to an arbitrator. The arbitrator gave an award for payment of a sum of Rs. 12,55,365/- together with interest at the rate of 18 per cent from 1.11.1991 till the date of the award and 6 per cent thereafter. The respondent filed the award for being made rule of the court. The appellant herein filed a petition, inter alia, on the ground that the arbitrator has misconducted the proceedings, inasmuch as the force majeure contained in clause 47 disentitled the respondent from making any claim which was on account of unprecedented rain. The said objection was rejected and the award was made rule of the court. The appellant thereafter filed a first appeal from order before the High Court and the same was dismissed. It is against the said judgment, the appellant is in appeal before us.
3. Learned counsel appearing for the appellant reiterated his argument raised before the High Court. In fact, his argument based on force majeure is that because of unprecedented rain the liability of loss cannot be thrust upon the appellant. We do not find any merit in this contention. Clause 47 of the agreement runs as under :
“Neither party shall be liable to the other for any loss or damage occasioned by or arising out of Act of God, such as unprecedented flood, volcanic eruption, earthquake or other convulsion of nature and other acts such as but not restricted to general strikes, invasion, the act of foreign countries; hostilities or warlike operations before or after declaration of war, rebellion, military or usurped power which prevent performance of the contract and which could not have been foreseen or avoided by a prudent person.”
A perusal of clause 47 reproduced above shows that it protected the State from liability and damage occasioned by unprecedented flood which could not have been foreseen or avoided as a prudent person. The appellant herein did not lead any evidence before the arbitrator that the rain as a result of which the loss was sustained by the respondent was unprecedented and in fact it was an Act of God. In absence of such as evidence, the arbitrator as well as the High Court has recorded a finding of fact that the flood which has caused loss to the respondent was not due to the unprecedented rain and, therefore, clauses 47 of the agreement was not attracted.
4. Any award made by an arbitrator can be set aside only if one or the other term specified in sections 30 and 33 of the Arbitration Act, 1940 is attracted. It is not a case where it can be said that the arbitrator has misconducted the proceedings. It was within his jurisdiction to interpret clause 47 of the agreement having regard to the fact-situation obtaining therein. It is submitted that an award made by an arbitrator may be wrong either on law or on fact and error of law on the face of it could not nullify an award. The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for arbitrator to determine (see M/s Sudarsan Trading Co. v. The Government of Kerala1). Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in section 30 is satisfied, an award cannot be set aside. The arbitrator is a judge chosen by the parties and his decision is final. The court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once it is found that the view of the arbitrator is a plausible one, the court will refrain it self from interfering (see U.P. State Electricity Board v. Searsole Chemicals Ltd.1 and ISPAT Engineering & Foundry Works, B.S. City, Bokaro v. Steel Authority of India Ltd.2, B.S. City, Bokaro)
5. For that reason, we are of the view that the appeal has no merit and must fail. However, the parties are agreed that from the date of filing of the claim till the date of award the interest chargeable would be at the rate of 12 per cent in place of 18 per cent. For that reason, the award and judgment under challenge stand modified to that extent.
6. The appeal is disposed of in the aforesaid terms. There shall be no order as to costs.
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1. Under a contract entered into by and between the appellant and the respondent, the respondent undertook construction of bridge-cum-fall at Munda Khere Scape at the estimated cost of Rs. 37.2 lacs. while the work was in progress, the work area was flooded in the night of August 25 and 26, 1991.
2. The respondent-contractor herein filed a claim on account of loss sustained by him due to flooding of the work area. Ultimately, the matter was referred to an arbitrator. The arbitrator gave an award for payment of a sum of Rs. 12,55,365/- together with interest at the rate of 18 per cent from 1.11.1991 till the date of the award and 6 per cent thereafter. The respondent filed the award for being made rule of the court. The appellant herein filed a petition, inter alia, on the ground that the arbitrator has misconducted the proceedings, inasmuch as the force majeure contained in clause 47 disentitled the respondent from making any claim which was on account of unprecedented rain. The said objection was rejected and the award was made rule of the court. The appellant thereafter filed a first appeal from order before the High Court and the same was dismissed. It is against the said judgment, the appellant is in appeal before us.
3. Learned counsel appearing for the appellant reiterated his argument raised before the High Court. In fact, his argument based on force majeure is that because of unprecedented rain the liability of loss cannot be thrust upon the appellant. We do not find any merit in this contention. Clause 47 of the agreement runs as under :
“Neither party shall be liable to the other for any loss or damage occasioned by or arising out of Act of God, such as unprecedented flood, volcanic eruption, earthquake or other convulsion of nature and other acts such as but not restricted to general strikes, invasion, the act of foreign countries; hostilities or warlike operations before or after declaration of war, rebellion, military or usurped power which prevent performance of the contract and which could not have been foreseen or avoided by a prudent person.”
A perusal of clause 47 reproduced above shows that it protected the State from liability and damage occasioned by unprecedented flood which could not have been foreseen or avoided as a prudent person. The appellant herein did not lead any evidence before the arbitrator that the rain as a result of which the loss was sustained by the respondent was unprecedented and in fact it was an Act of God. In absence of such as evidence, the arbitrator as well as the High Court has recorded a finding of fact that the flood which has caused loss to the respondent was not due to the unprecedented rain and, therefore, clauses 47 of the agreement was not attracted.
4. Any award made by an arbitrator can be set aside only if one or the other term specified in sections 30 and 33 of the Arbitration Act, 1940 is attracted. It is not a case where it can be said that the arbitrator has misconducted the proceedings. It was within his jurisdiction to interpret clause 47 of the agreement having regard to the fact-situation obtaining therein. It is submitted that an award made by an arbitrator may be wrong either on law or on fact and error of law on the face of it could not nullify an award. The award is a speaking one. The arbitrator has assigned sufficient and cogent reasons in support thereof. Interpretation of a contract, it is trite, is a matter for arbitrator to determine (see M/s Sudarsan Trading Co. v. The Government of Kerala1). Section 30 of the Arbitration Act, 1940 providing for setting aside an award is restrictive in its operation. Unless one or the other condition contained in section 30 is satisfied, an award cannot be set aside. The arbitrator is a judge chosen by the parties and his decision is final. The court is precluded from reappraising the evidence. Even in a case where the award contains reasons, the interference therewith would still be not available within the jurisdiction of the court unless, of course, the reasons are totally perverse or the judgment is based on a wrong proposition of law. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once it is found that the view of the arbitrator is a plausible one, the court will refrain it self from interfering (see U.P. State Electricity Board v. Searsole Chemicals Ltd.1 and ISPAT Engineering & Foundry Works, B.S. City, Bokaro v. Steel Authority of India Ltd.2, B.S. City, Bokaro)
5. For that reason, we are of the view that the appeal has no merit and must fail. However, the parties are agreed that from the date of filing of the claim till the date of award the interest chargeable would be at the rate of 12 per cent in place of 18 per cent. For that reason, the award and judgment under challenge stand modified to that extent.
6. The appeal is disposed of in the aforesaid terms. There shall be no order as to costs.
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