ORDER
P. Ramakrishnam Raju, J
1. These Civil Miscellaneous Appeals and Civil Revision petitions arise out of a common judgment, whereunder, three suits viz., O.S.Nos.1181, 1183 and 1184 of 1998 and three original petitions viz., O.P.Nos.371, 372 and 374 of 1988 were disposed of by the lower Court.
2. Three works covering three parts were awarded to the appellant-Contractor by the Respondent-Deputy Manager of National Thermal Power Corporation Limited, Ramgundam, hereinafter called 'NTPC' for brevity. The work under Part-I covering a length of 944 metres was awarded to the Contractor by the NTPC vide award No.09/ CS/NIT/48/3 LOA - 320/1105 dated 27-1-1981/29-1-1981. The cost of the work is Rs.9,97,137.37 ps and it was agreed to be completed within four months from the day of issue of the letter of award. Similarly, the work under Part-II covering a length of 688 metres was awarded to the Contractor under letter of award No.09/CS/NIT/48-5/4/ LOA-321-1106 dated 27-1-81/29-1-81 27-1-81/29-1-81 . The cost of the work is Rs.8,91,379-20 ps. and it was agreed to be completed within four months from the date of issue of letter of award.
3. Part-III work covers a length of 868 metres for which underground pipes have to be laid as per the letter of award No.09/CS/ N17/48/5/322/1107 dated 5/7-2-81. The cost of the work is Rs. 10,88,836-30 ps. and it was also agreed to be completed within the same period as that of the other two contracts. In pursuance of the said award work site was handed over to the contractor in respect of the three phases or reaches and separate written agreements were also executed accordingly for each part of the work.
4. The contractor commenced the work under, all the three phases and completed the work under Parts-I and III, but gave up a part of the work under Part-n covering a length of 210 metres, of course after obtaining two or three extensions of time from NTPC. All the three agreements contained arbitration clauses for settlement of disputes between the parties. After the works are completed, as stated above, the Contractor raised certain additional claims in respect of each phase or part of the work and as NTPC refused those claims the Contractor filed O.P.Nos.66 of 1986; 67 of 1986 and 70 of 1986 in the lower Court for appointment of sole arbitrator for adjudication of those disputes in respect of the works under Parts-I, II and III respectively. The said O.Ps were finally allowed by the lower Court on 244-1987 and Sri Justice K. Punnaiah, a retired Judge of the High Court ofA.P. was appointed as the sole arbitrator to adjudicate the disputes. Accordingly the Contractor filed separate statement of claims before the learned Arbitrator in respect of each part or phase of the work and the NTPC filed its rebuttal statements in respect of each part of the work resisting the claims of the contractor. The contractor raised 13 claims in respect of works under Part-I and III and 15 claims in respect of the work under Part-II. In other words except two additional claims under Part-II, the claim of the contractor in respect of the three parts of the work is almost similar. By separate awards dated 6-5-1988, the learned Arbitrator upheld some of the claims of the contractor and rejected some and filed three awards. The Contractor filed O.S.No.1184 of 1988 to make the award dated 6-5-1988 in respect of Part-I of the work, rule of the Court and the NTPC filed O.P.No.374 of 1988 for setting aside the same. Likewise the Contractor filed O.S.No. 1183 of 1988 and 1181 of 1988 to make the awards in respect of Parts-II and III of the works, rule of the Court and the NTPC filed O.P.Nos.372 of 1988 and 371 of 1988 respectively to set aside the said awards. Although the Arbitrator did not give reasons for his awards at the time of passing them, later all the three awards were remitted back to the learned Arbitrator with a direction to give reasons in view of A.P. amendment (A.P. Act 1/90) amending the Arbitrator Act, 1940, and accordingly, the arbitrator gave reasons for his conclusions in all the three awards.
5. No oral evidence was adduced by either of the parties before the learned Arbitrator. The contractor marked 85 documents before the arbitrator as Exs.Cl to C85; while NTPC filed 58 documents and marked them as Exs.Rl to R58.
6. Before the trial Court the contractor got marked three awards filed by the arbitrator in respect of reaches I, II and III as Exs.C86 to C88 respectively. The reasons submitted by the Arbitrator in accordance with the provisions of A.P. Act I of 1990, is separately marked as Ex.C89. NTPC is its turn filed three agreements in respect of each part or reach of the work and they were marked as Exs.R59 to R61.
7. The trial Court framed the following points for consideration :
(1) Whether the findings of the arbitrator that the NTPC was responsible for the delay in execution of the works in all the three reaches is sustainable and whether it can be or ought to be reversed under Section 30 of the Arbitration Act ?
(2) Whether the claims which have been allowed by the arbitrator are tenable and losses thereunder have been proved by the contractor as required by Section 73 of the Contract Act even if the NTPC is held responsible for the delay ?
(3) Whether the claims based on increase in the invert level from 149 metres to 147 metres should be treated as independent claims unconnected with any delay in the execution of the works and if so whether they have to upheld ?
(4) Whether the interest awarded by the arbitrator is correct and whether the rate of interest claimed by him is reasonable ?
(5) Whether the awards should be set aside or not and if they are to be set aside to what manner
8. The lower Court on points 1 and 2 came to the conclusion that NTPC was not responsible for the delay in execution of works in all the three reaches; that the claims which have been allowed by the arbitrator could not be proved by the contractor as required by Section 73 of the Indian Contract Act. On point No.3 the lower Court while agreeing with the learned Arbitrator that the change in the depth i.e., invert level from 149 metres to 147 metres has altered the nature of the work and resulted in extra expenditure to the contractor, and as such, he is entitled to recover the same, however confirmed the award for reach 'No.I, but reduced the award in respect of reaches II and III. On point No.4, regarding interest, the lower Court modified the award by deleting interest pendents lite but only confirmed the award of interest from the date of award till realisation. In the result, three awards so far as they relate to claims 1 to 5 and 11, in all the three reaches, are set aside, and an award for a sum of Rs.2,30,000/- with future interest at 18 per cent per annum from 6-5-1988, the date of award, till realisation was granted.
9. Aggrieved by the said decree and judgment, the contractor filed C.R.P.Nos.2826 to 2828 of 1992 and C.M.A.Nos.835 of 1992; 1234 of 1992 and 1236 of 1992; while NTPC filed C.M.A.Nos.1509; 1555 and 1556 of 1992 and C.R.P.Nos.3041; 3047 and 3048 of 1992.
10. As common questions of law and fact arise in all these matters, they are being disposed of by this common judgment.
11. The Contractor urged before the learned Arbitrator as well as before the lower Court that it is NTPC that committed default in handing over the sites to him as also non supply of pipes for carrying out the work and on account of the direction issued by NTPC not to go ahead with the work in Part-I, but take up the work in Parts-II and III initially, the expenditure incurred by him has increased enormously resulting in huge loss. Apart from that, as per the original agreements and the drawing supplied to him, he has to lay the pipes at the invert level of 149 metres and as this level was subsequently changed to 147 metres resulting in increase in depth by two metres at which the pipes were to be laid and this change in the depth also resulted in heavy expenditure and thereby he suffered huge losses. NTPC however resisted all the claims of the Contractor in respect of all the three works. It denied that it was ever responsible for the delay in the execution of the works under the three reaches or parts. It threw the blame at the door of the Contractor and stated that it is the contractor who started the work without proper preparation on his part in gathering men, material or machinery, and therefore, he himself is to be squarely blamed for the delay and at the request of the contractor himself, extension of time by two or three times was granted liberally by NTPC with a view to see that the work is executed smoothly, although the Contractor committed breach and failed to comply with the time schedule. Regarding change of invert level, it is the case of NTPC that the Contractor is estopped from claiming any extra charges as the increase of depth by two metres is covered by clause 10(vi)(b) which provides for cent percent variation as shown in the letters of award and the agreements for which the contractor agreed, and therefore, any claim under this head cannot be upheld.
12. The learned Arbitrator agreed with the contention of the Contractor that NTPC directed him to divert his men and material from reach-I and concentrate on reachcs-II and III on the. ground that there is urgency in those reaches; and that NTPC further directed the contractor^ excavate earth in a length of 400.mctres in reach-III and later directed him not to proceed with the said work, but changed the alignment of the drain, and directed him to excavate earth afresh to carry out the work in reach-Ill and that the site in reach-II was also not handed over by NTPC in time to the contractor which contributed for the delay. The learned Arbitrator further found that NTPC did not supply the pipes i.e., 1800 mm diametre which were to be laid in drain in time, and this also resulted in the delay. Change in the invert level from 149 metres to 147 metres resulted in increase of depth by 2 metres at which pipes were to be laid resulted in extra work requiring more time, and this factor also contributed for the delay. The other circumstance which appealed to the Arbitrator is that labour strike, setting of monsoon hampered the progress of work which also contributed for the delay in execution. These factors, according to the arbitrator, are beyond the control of the contractor, and therefore, he is entitled to claim extra expenditure.
13. Sri T- Anantha Babu, learned seniorAdvocate appearing for the Contractor submitsthat in view of the material placed before theArbitrator, he reached the conclusion whichhe arrived at and it is not open to the lowerCourt under Section 30 of the Arbitration Actto sit in judgment over the awards in. questionas a Court of appeal. He further pointed, outthat reasonableness of reasons assigned by theArbitrator cannot be gone into by-the. CivilCourt. Evert if a different view is possible onthe evidence available on record .than the viewtaken by the Arbitrator, it is not oper to theCivil Court under Section 30 of the ArbitrationAct to interfere with the Award with its limitedjurisdiction, except incases where the arbitratorhas committed an error apparent on the faceof the award or where he has acted in; excessof his jurisdiction in passing the award. Inother words, he submits .that it is not open tothe Civil Court to interfere unless there isproven misconduct on the part of theArbitrator.
14. Under Section 30 of the ArbitrationAct, 1940 an award cannot be set aside, excepton the ground:
(a) that the arbitrator has misconducted himself or the proceedings,
(b) that the award has been passed after the issue of an order by the Court superseding the arbitratipn.
(c) that the award has been-improperly procured or is otherwise invalid.
The Apex Court has time and again pointed out the scope and ambit of Section 30 of the Act with special reference to the word 'misconduct' occurring in the section by explaining and elaborating the true meaning and content of the said expression. Arbitrator is a Judge at the choice of the parties. In a bid to reduce the docket explosion of regular civil redressal forum the Legislature in its wisdom has enacted Arbitration Act and restricted the scope and ambit of challenge to an award in the Arbitration Act. It is often said that arbitration has a tradition and also a purpose to fulfil. It has also the advantage of not only quickness of decision, but also simplicity of procedure. As the parties have chosen their own forum in deciding the dispute, the forum must be conceded die power of appraisal of evidence and none else. The Arbiter is the sole Judge of the quality as well as quantity of evidence and it is not for the Court to embark upon the task of adjudicating on the evidence placed before the Arbitrator. As long as the Arbitrator acts within his jurisdiction, his decision would be beyond the realm of attack. An error within the jurisdiction of the Arbitrator as distinguished from an error in excess of his jurisdiction, though the distinguishing feature is thin, still makes all the difference. In other words, if the Arbitrator has jurisdiction under the terms of reference to go into a particular dispute, his finding on the said issue cannot be interfered by the Civil Court unless it is shown that the subject-matter of dispute was not one of the items referred to him for his adjudication. It is well settled that the decision of the Arbitrator on a point of law specifically referred to him is final and is not subject-matter of judicial review by the Court. When a specific question is submitted to the arbitrator for his decision, and he decides it, the fact that the decision is erroneous does not make the award bad nor give scope for interference by the Civil Court. What is to be borne in mind is the distinction between a dispute as to jurisdiction of the arbitrator and a dispute as to exercise of jurisdiction. When the arbitrator has power or jurisdiction to award, it is not a case of jurisdictional error, but an error within his jurisdiction, It is not misconduct on the part of the arbitrator to come to an erroneous decision whether the error is one of fact or law, and whether or not his findings of fact arc supported by evidence, (see Russet's Law of Arbitration (20th Edition) page 422). No doubt the arbitrator is a creature of the agreement itself, and so is duty bound to interpret terms of the agreement and cannot adjudicate a matter beyond the agreement itself He has to confine himself within limits assigned to him under the contract. It is therefore evident that one of the misconducts enumerated, is the decision by the arbitrator on a matter which is not included in the agreement or reference. Therefore, he commits misconduct if he decides the matters excluded by the agreement. A conscious disregard of law or the provisions of the contract from which he derived his authority vitiates the award. If he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. The arbitrator would be committing an error by exceeding his jurisdiction if he arrogates himself the jurisdiction over a question which on the true construction of the subject-matter was not referred to him, as he cannot widen his jurisdiction. If on the other hand, he commits an error either on the question of law or fact referred to him for his decision it is an error within his jurisdiction and the Court cannot re-appraise the evidence on record for purpose of finding out whether or not the arbitrator has committed an error of law or fact. However in adjudicating upon an issue which is not the subject-matter of adjudication is a legal misconduct of the arbitrator. The arbitrator is the final arbiter for the dispute between the parties, and therefore, it is not open to challenge his award on the ground that he has drawn his own conclusions or failed to appreciate the relevant facts. In M/s Sitdarshan Trading Co. v. Govt. of Ketala, AIR 1989 SC 890, the Apex Court has pointed out the distinction between a dispute as to jurisdiction of the arbitrator and the dispute as to, to what way that jurisdiction should be exercised. In State of Rajasthan v. Puri Construction Co. Ltd., : (1994)6SCC485 : the Apex Court observed as follows :
'Judicial decisions over the decades have indicated that an error of law or fact committed by an arbitrator by itself does not constitute misconduct warranting interference with the award. It does not appear to us that the findings made by the arbitrators arc without any basis whatsoever and are not referable to documents relied upon and such findings are so patently unjust or perverse that no reasonable man could have arrived at such findings. Hence, on the score of alleged misreading, misconstruction, misappreciation of the materials on record or failure to consider some of the materials in their proper perspective, the impugned award is not liable to be set aside.'
15. Before we answer the question, it is necessary to bear in mind the amendment to Section 14(1) of the Act in the light of the newly added proviso to that section as per A.P. (Amendment) Act 1/90, according to which no award shall be valid unless reasons thereof are given. Therefore, does the A.P. (Amendment) Act bring out any change in the law is the next question.
16. Recently, a Division Bench of this Court had an occasion to consider the scope of the proviso in State Bank of India v. Ram Das and others, : 1998(2)ALD548 , and after elaborate survey of cases on the subject, observed as follows :
'But can it be said that giving of reasons is a mere formality Docs it mean that the Court should accept any and every observation of the Arbitrator as the reason given by the arbitrator or Umpire, as the case may be The requirement of giving reasons for any award is a legislative mandate as provided in the proviso to Section 14 of the Act. In our considered opinion any and every observation in the Award by the arbitrator cannot be construed as the reason for Award. The Arbitrator's ipsi dixit assertion cannot be equated to that of reason. If the requirement of giving reasons means anything compelling the arbitrator to articulate the basis of finding showing a rational connection between the facts found and the conclusions reached. Vague and general observations cannot be concluded to that of reasons in the Award.'
.....
'Analysis of judicial precedents would lead to an irresistible conclusion that the arbitrator/Umpire is duty bound and under statutory obligation to give reasons for the award and failure to give adequate and sufficient reasons would constitute an error of law on the face of the award requiring the Court's intervention.''
As such, it is necessary for the Court to see whether the reasons assigned by the arbitrator complied with the mandatory provisions under Section 14(1) proviso of the Act.
17. It may not be out of place to mention here that the lower Court has not interfered with the award of the arbitrator on the ground that the arbitrator did not give reasons as required under law.
18. After dealing with the question of law as discussed above, we will now rum to the factual side of the dispute between the parties that has given rise for the reference before the arbitrator.
19. The dispute relates to the work laying of pipe drains, catch drains and cross pipe drains which is of a total length of 2.5 K.Ms in three different reaches or parts. In Part-I reach, the length of the site is 944 metres, while the length of Part-II and Part-Ill reaches are 688 and 868 metres respectively. The arbitrator found that out of 688 metres of site in Part-II reach, NTPC made available only 178 metres of site in length. It also issued a direction to the contractor not to proceed with the excavation work in Part-I but concentrate on Part-II and HI reaches as there is urgency. He also found that 1075 pipes were required for all the three reaches and out of the said quantity only 280 pipes were alone supplied during the agreement period, out of which 266 pipes were already laid in position by the contractor and the delay in supply of pipes also contributed for the delay in completion of the work. In addition to the delay in supply of pipes, there is change of invert levels in the construction drawings at the instance of NTPC and the non-availability of fronts in Part-II reach are all causes for which the NTPC alone is responsible which contributed for the delay in execution of the works. Added to this after completion of works in Parts II and III, the contractor had started excavation of Part-I stretch, and as it happened to be rainy season the whole area was inundated with water and all efforts to dewater and continue the excavation work failed due to high water table and the inflow of water from the adjoining areas increased and as such, he cannot be blamed if he was unable to adhere to the target fixed. On this basis, the learned arbitrator proceeded to assess the liability to NTPC by way of damages or compensation payable to the contractor. He allowed a sum of Rs. 1-00 lakh claimed towards compensation under claim No.1 for the loss sustained by the contractor due to the delay caused by the Corporation in realisation of profits. Similarly he allowed a sum of Rs. 1-00 lakhs towards compensation for extra overhead expenses incurred by the claimant under claim No.2 and a sum of Rs.75,000/- under claim No.3 towards compensation for loss of use of machinery, tools and equipment etc. A sum of Rs.50,000/- was allowed under claim No.4 towards compensation for the loss for advances paid to the labour gangs etc., Under claim No.5, the arbitrator allowed a sum of Rs.3,58,000/- by way of compensation towards extra expenditure incurred by the contractor due to increase in the cost of material and labour etc. Claim No.6 was also partly allowed to an extent of Rs.2,30,000/- which represents compensation for the loss suffered by him on account of change of invert level by two more metres. Claim Nos.7 to 10 were disallowed and claim No. 11 was partly allowed to the extent of Rs.2-00 lakhs representing the loss suffered by him on account of extra work executed in excess of agreement quantity. Claims 12 and 13 were already released and paid, and therefore, they are satisfied.
20. Civil Court reversed all these findings, except the loss alleged to have been suffered by the contractor on account of extra work in quantities in excess of the agreement quantity in view of change in invert level from 149 metres to 147 metres. The contractor clainted a sum of Rs.4,60,000/-; Rs.3,00,000/- and Rs.3,64,563/- for the three reaches respectively. The Civil Court confirmed the award of Rs.2,30,000/- for reach No. 1, but reduced the award for reach Nos.2 and 3 by 50 per cent. Of course, interest at 18 per cent was awarded from 6-5-1988 till the date of realisation. Subject to the above, in other respects, the award was set aside.
21. The learned Judge observed that the arbitrator failed to take note of Exs.R7, R22 and R53, and therefore, the finding that NTPC directed the contractor to stop the work in reach No.l cannot be sustained. Likewise, he held that the finding of the arbitrator that out ofthe total length of 688 metres in reach No.II, only 178 metres was released to the contractor and the remaining 510 metres was under the occupation of another contractor viz.. Bridge and Roof Company up to December, 1981 is also not supported by evidence. It was also found that it is the contractor who sought for extension of time on the ground that he could not complete the work due to monsoon, change in invert level and labour strikes, and he further mentioned that during February and July, 1981, work could not be taken up since the material required for the work as well as pipes were stocked on either side of the site, and as such, NTPC cannot be held responsible for the above circumstance. So also the finding of the arbitrator even with regard to reach No. 1 was not accepted. Even with regard to reach No.3, the finding of the arbitrator that NTPC is responsible for the delay is baseless and cannot get support from the record. Even the finding that NTPC did not supply pipes in time to the contractor is not based on evidence as per the lower Court. Thus, it is seen that the lower Court has taken a different view on the main question of delay that resulted in execution of the work from that of the arbitrator. Consequently, several findings recorded by the arbitrator have been set aside.
22. After going through the award, the order of the lower Court and the evidence placed on record, we are of the opinion that the lower Court examined the evidence adduced before the arbitrator, considered the probabilities and even assuming that it adopted one plausible view. We are afraid, under Section 30 of the Act, the jurisdiction of the lower Court is limited, and as such, it cannot sit in appeal over the award of me arbitrator. No doubt, after A.P. (Amendment) Act 1/90 to the Arbitration Act as mentioned above, the Court is entitled to insist on reasons by the arbitrator in respect of his award. In this case, the lower Court has not come to the conclusion that the award docs not contain reasons. In the absence of a finding that the award cannot stand in view of the mandatory requirement of giving reasons under A.P. (Amendment) Act 1/90 it is not proper for the lower Court to sit in appeal over the award of the arbitrator. That apart, the lower Court having found that the proposition laid down in the decisions of the Supreme Court cited by the learned Counsel for the contractor cannot be doubted, ignored them on the simple ground that the proposition of law laid down therein in those cases was in the particular circumstance of those citations. This view is unintelligible. The ratio decidendi enunciated by the Supreme Court cannot be overlooked by Subordinate Courts.
23. It is also note worthy that while accepting the award of Rs.2,30,000/- in respect of reach No.II and also 50 per cent of the award made by the arbitrator in respect of reach Nos. 1 and 3, the lower Court curiously observed that NTPC is not responsible for the delay when the contractor was attributing the causes for the delay due to monsoon, change in the invert level, labour strikes etc. Whatever be the effect of other reasons, certainly change of invert level by a depth of two feet more is a circumstance which is the handi work of NTPC, and therefore, it cannot absolve itself of the consequences, and if it caused any delay NTPC has to own it and redress it. We are not elaborating such inconsistent or untenable findings of the lower Court in this judgment, in the view we have taken that the matter has to go back for fresh consideration by the lower Court, lest our findings may prejudice the parties at the time of fresh disposal. Therefore, advisedly we have refrained ourselves from making further comments on the judgment as it would not be proper on our part when we are directing the lower Court to dispose of the matter afresh and in accordance with law.
24. For all the above reasons, we are constrained to allow all the Civil Miscellaneous Appeals and Civil Revision Petitions and set aside the common judgment in its entirety, and remit back all these Original Petitions and Suits to the lower Court for fresh disposal in accordance with law. The lower Court may dispose of the matters as expeditiously as possible. Preferably within 6 months from the date of receipt of this order.