Judgment:
ORDER
Lingaraja Rath, J.
1. All these cases arise out of a common order passed by Subordinate Judge, Tadepalligudem relating to an award passed by the arbitrator on the claims preferred by the appellant in C.M.A. No. 1854 of 1989. The appellant and the respondent State in that appeal are referred to, for the sake of convenience, in the present judgment as the appellant and the respondent.
2. The appellant undertook the contract of widening and strengthening the carriage way K.M. 79.50 to K.M. 111.50 of V.V. Road. In the execution of the work dispute arose between the parties which was referred to an arbitrator who submitted his award on 3-10-1987. The appellant had preferred nine items of claims and interest on each item. The arbitrator allowed claim items 1, 2, 3, 4 and 6 for various sums but rejected claim items 5, 7, 8 and 9. He also awarded interest at the rate of 15% per annum from the date of entering upon the reference i.e., 28-4-1985 till the date of decree or payment. The appellant filed O.S. No. 5 of 1988 in the Court of Subordinate Judge, Tadepalligudem seeking the award to be made the rule of the Court. The respondent filed O.P. No. 35 of 1987 under Sections 30 and 33 of the Arbitration Act to set aside the award so far as it had allowed the claims in favour of the appellant. The learned Subordinate Judge in his common judgment on 27-4-1989 partly allowed O.S. No. 5 of 1988 by confirming the award so far as claim items 1, 2 and 3 were concerned but refused to confirm the award in respect of claim items 4 and 6. Similarly, O.P. No. 35 of 1987 was also partly allowed in refusing to confirm the claim items 4 and 6 but confirming the award in respect of claim items 1, 2 and 3. The learned Judge also reduced the interest as awarded by the arbitrator from 15 to 12 per cent per annum from the date of the award to the date of the suit and thereafter directed the interest to be at the rate of 6% per annum till the date of payment.
3. C.M.A. No. 1854 of 1989 has been preferred as relating to O.P. No. 35 of 1987 and C.R.P. No. 3895 of 1989 has also been filed by the appellant as relating to the judgment in O.S. No. 5 of 1988. Similarly, the respondent filed C.M.A. No. 634 of 1990 as relating to O.P. No. 35 of 1987 and C.R.P. No. 3484 of 1990 has been filed by them against the judgment in O.S. No. 5 of 1988. C.M.A. No. 634 of 1990 has already been dismissed by this Court on 1-3-1996 for default.
4. Mr. K. Prabhaker, learned counsel for the appellant has submitted of his challenge being confined only to the judgment as passed by the learned Subordinate Judge and candidly submitted that no claim which had not been allowed by the arbitrator is being pressed. It is his submission mainly that the learned Subordinate Judge refused to confirm the award in respect of claim items 4 and 6 only because in support of the award no reason had been assigned. The A.P. Amendment to the Arbitration Act was introduced by Act 1 of 1990 and prior to it, there was no requirement for the arbitrator to pass reasoned awards. The award having been made on 3-10-1987, there was no necessity for the arbitrator to give reasons. It is in this context the submission is made that the reasons which weighed with the learned Subordinate Judge to set aside the award were misconceived as non-speaking awards are perfectly enforceable awards and are not to be set aside merely because for not assigning any reasons. The exception taken by Mr. Prabhaker to the Judgment on that count is wholly justified as it was not open to the learned Subordinate Judge, as he appears to have done, to set aside the award only because of the absence of reasons in support of it. But even so, an award is available to be not confirmed or set aside for error apparent on the face of it which consideration would include the fact of there having been no arbitration clause in the agreement in respect of the dispute concerned or the arbitrator as otherwise having no jurisdiction or even that there was absolutely no material before the arbitrator to pass the award. A Division Bench of this Court in a recent decision in Prasad and Company v. Superintending Engineer (I.C.), : 1995(3)ALT537 held the award as liable to be set aside for legal patent error apparent on the face of the award and observed that the Court can look into material not appearing on the face of the award if jurisdiction of arbitrator is in dispute, and that the arbitrator would be acting without jurisdiction if he disregards provisions of the contract. We fully endorse the view taken and proceed to examine the submission of the learned counsel in that background of the law.
5. The arbitrator allowed a sum of Rs. 3,13,000/- as against the claim item No. 4. The appellant had claimed as against the item Rs. 30,39,627-66 on account of extra expenditure incurred due to increase in market rates on material, labour, oils etc. In the claim statement filed claim No. 4 was on account of extra expenditure incurred by the claimant on account of labour, machinery, vehicles, transport, for providing facilities etc., as the rate of progress as stipulated in the agreement could not be maintained in spite of his efforts because of delays caused by the respondent due to non-supply of rollers, handing over of the site in the midst of rainy season, strike by departmental staff due to Andhra agitation, power-cut, restrictions imposed for opening trenches for widening carriage-way in small lengths and the delay committed in giving clarifications during the course of execution of work as also for delayed payments. Besides the claim, it was also stated that the appellant closed the work because of non-availability of funds for which he suffered loss of profit. The claim was thus on account of delay in completion of the work the cause of which was attributed by the appellant to the respondent. It was the case that due to such prolongation of the period of work he suffered losses on the various counts as stated, because of which the extra payments to the extent of the damage was claimed for. It is also brought to our notice that the site was handed over on 16-8-1971 and the work had to be completed within two years, but was actually completed by 15-7-1974. It is not necessary to go into the replies of the respondent as we do not intend to enter into a decision on facts as to whether the cause of delay was attributable to the respondent or to the appellant. It is the submission of the learned counsel for the respondent that the claim of the appellant being only on account of the purported delay caused to the execution of the work, the claim of compensation on account of such delay or hindrance to the work is barred under P.S. 59 of the A.P. Standard specifications and preliminary specifications. It is his submission that since any claim on account of such delay or any hindrance to the work for any cause whatever is not eligible to be entertained, the award of Rs. 3,13,000/- by the arbitrator was without jurisdiction being contrary to the prohibition in P.S. 59 and hence was rightly rejected by the learned subordinate Judge. P.S. 59, to appreciate the contention of the respective parties, needs to be extracted:
'Delays and extension of time: No claim for compensation on account of delays or hindrances to the work from any cause whatever shall lie, except, as hereinafter defined. Reasonable extension of time will be allowed by the Executive Engineer or by the officer competent to sanction the extension for unavoidable delays, such as may result from causes, which, in the opinion of the Executive Engineer, are undoubtedly beyond the control of the contractor. The Executive Engineer shall assess the period of delay or hindrance caused by any written instructions issued by him, at twenty five per cent in excess of the actual working period so lost.
In the event of the Executive Engineer failing to issue necessary instructions and thereby causing delay and hindrance to the contractor, the latter shall have the right to claim an assessment of such delay by the Superintending Engineer of the Circle whose decision will be final and binding. The contractor shall lodge in writing with the Executive Engineer a statement of claim for any delay or hindrance referred to above, within fourteen days from its commencement, otherwise no extension of time will be allowed.
Whenever authorized alterations or additions made during the progress of the work are of such a nature in the opinion of the Executive Engineer as to justify an extension of time in consequence thereof, such extension will be granted in writing by the Executive Engineer or other competent authority when ordering such alterations or additions.'
A plain reading of the provision ex facie bars any claim of compensation on account of delay in execution of work or because of any hindrance to the work and the only relief available to the contractor on that count is reasonable extension of time which shall be assessed by the Executive Engineer as is necessary to suit the occasion, but the extension so granted shall not be in excess of 25% of the actual contract period. The claim for extension of work under the provision is available only when such claim is made in writing within 14 days of the commencement of the delay or the hindrance, to the Executive Engineer. If no such application is made, no claim in that regard is entertainable. When the claim is so lodged but the Executive Engineer does not respond and communicate any order, the contractor has the right to claim the assessment of delay before the Superintending Engineer of the Circle whose decision is final and binding in the matter. In a recent decision delivered in C.M. A. Nos. 770 and 907 of 1988 and C.R.P. No. 3716 of 1988 and C.R.P. No. 1129 of 1993 dated 30-8-1996, : 1996(4)ALT879 (R. Dwarakanath Reddy v. Govt. of A.P.) to which one of us i.e., Lingaraja Rath, J., was a party, it was explained that P.S. 59 forms an independent arbitration clause as between the contractor and the Department with an inbuilt mechanism wherein the event of a dispute raised regarding the assessment of the extension to be granted on account of the delay caused, the Superintending Engineer is to act as the arbitrator between the parties. The contract agreement does not encompass the dispute contemplated to be resolved under P.S. 59. P.S. 59 has to be considered as an independent agreement in that regard between the parties, for which the arbitration agreement and P.S. 59 are exclusive of each other. That being so, the arbitrator, in entertaining the claim assumes jurisdiction without it being vested in him as the dispute is one which is not referable to him at all. Hence, when it is shown that the very claim of the contractor is on account of delay supposed to have been occasioned by the respondent and money compensation is claimed in respect of the losses caused by the delay, the facts in themselves would oust the jurisdiction of the arbitrator to enter into the dispute and make an award in that regard. If an award has in fact been made in the matter, it has to be treated as non-est in law and the Court, be it the Civil Court or the High Court, have no difficulty in striking it down. The authority of the arbitrator arises within the arbitration agreement. He has no plenary jurisdiction to decide all disputes between the parties. His authority is confined only to the disputes which the parties ad idem refer to him. Any dispute in respect of which the parties were not ad idem to refer, is beyond his reach. In that view of the matter, it is, prima facie, correct that the award in respect of claim No. 4 is bad in law and could not be entertained.
6. Mr. K. Prabhaker, the learned counsel for the appellant placed reliance on the decisions reported in Government of A.P. v. V. Satyam Rao, 1996 (1) ALT 279 and M. Gangareddy v. State of A.P., : 1996(3)ALT53 to submit that while primacy of P.S. 59 cannot be denied, yet, on the facts and in the circumstances of the present case it has to be taken that the applicability of that clause had been waived for which reason the arbitrator must be taken to have the jurisdiction to decide. The learned Government Pleader for Arbitration has brought to our notice the decisions in Government of A.P. v. G. Kondala Pal, : 1995(3)ALT591 and Durgaram Prasad v. Government of A.P., : 1996(3)ALT199 to show that P.S. 59 is mandatory in nature. The mandatory character of P.S. 59 was considered by the Supreme Court in Ch. Ramlinga Reddy v. Superintending Engineer, 1994 (5) SCALE 67, 1995(1) ALT 25 (D.N.) where the Court distinguished an earlier decision of that Court in P.M. Paul v. Union of India, : [1989]1SCR115 and held that when P.S. 59 applied, and when the respondent had also made it clear at the time of grant of extension of time that it would not involve any financial commitment, an award granting compensation on account of delays cannot be sustained. In P.M. Paul's case, : [1989]1SCR115 the Court was not considering an agreement with a clause providing lack of liability on the part of the respondents to pay compensation on account of delay in the work for any cause whatsoever. Thus, in effect, the Court held that when the contract is one to which P.S. 59 was applied, its applicability is without limitation and any award rendered contrary to its provisions is not enforceable.
7. Before the cases cited on both sides are referred to, it will be worthwhile to examine the applicability of P.S. 59 and the question of its waiver in the background of the A.P. Standard Specifications and Preliminary Specifications. Admittedly, the Preliminary Specifications are those issued by the Government as general conditions of contract applicable to all contracts entered into on behalf of the Government by the competent authorities specified for the purpose of Article 229 of the Constitution of India in G.O.Ms. No. 1632 dated 24-10-1958 as amended from time to time. The persons so authorised to enter into contract on behalf of the Government are bound by the orders of the Government. P.S.2 of the Preliminary Specifications makes the provision that the Preliminary Specifications shall apply to all agreements entered into by contractors with the Public Works Department and shall form inseparable condition of contract and it shall not be necessary to append a copy of the same to the agreement. There is, at any rate, no dispute and indeed the learned counsel for the appellant concedes that P.S. 59 applies to the contract in question. P.S. 6 is in the following terms:
'Addition and alterations to the standard specifications in the A.P. S.S.:- Which do not involve legal implications will be approved by the Chief Engineer (General) in consultation with the other Chief Engineers, additions and alterations to the preliminary specifications and standard form in the A.P.S.S. will be approved by the Government.'
The Preliminary Specifications hence ipso facto apply to the contracts and govern the same without any change, addition, alteration or modification unless they are approved by the Government. It is not within the power of the competent authority under G.O.Ms. No. 1632 or the Executive Engineer to make any alteration or modification or addition to the applicability of P.S. 59 to the agreement. That is understandable since the preliminary specifications are fundamental facets of the contract, the additions or alterations to which are more likely to lead to added financial commitments of the Government and hence it might have been rightly and appropriately decided by the Government that no alteration in that regard be made unless it is sanctioned by the Government itself. In juxta-position to P.S. 6, P.S. 7 states about the power of the Superintending Engineers and the Executive engineers to supplement or alter the A.P. Standard Specifications and provides that when an alteration to the standard specification is necessary, it can only be done by a correction sheet attached to the contract form bearing the standard specification number, the corrections and the signature of the Superintending or the Executive Engineer, as the case may be, together with the signature of the contractor. Additional specifications are also to be done in the same manner. It hence stands to reason to hold that apart from the fact that modifications or alterations etc., of preliminary specifications is not permissible without the approval of the Government, no such modifications or alterations etc., are also contemplated to be made unless it is done by written orders as it is unthinkable that while the standard specifications cannot be changed without written note being attached to the contract form, the preliminary specifications can be allowed to be so done. Viewed a little differently, the preliminary specifications are executive instructions issued by the Government as governing all contracts between the State and the Contractors. The executive instructions are issued under Article 162 of the Constitution of India under which the Government has authority to issue such instructions covering the entire legislative field except to the extent the field is already occupied by a legislation in existence. These executive instructions are not only binding on the department as well as the contractor but also are not liable to be changed unless it is done by the Government themselves. Impelled by such considerations, we hold that to a contract to which P.S. 59 applies, it is not within the competence of the Superintending Engineer or Executive Engineer or any other authority to waive its application.
8. There are also similar other clauses in the preliminary specifications which are independent clauses of arbitration in regard to matters dealt thereunder and are excluded from the Agreement. P.S. 29 is such a clause where a deemed provision is made of it being an inseparable part of the contract that in matters relating to materials, workmanship, removal of improper work, interpretation of the contract drawings and contract specifications, mode of procedure and the carrying out of the work, the decision of the Executive Engineer is final and binding on the contractor and in any technical question which may arise touching the contract, the Executive Engineer's decision is also final and conclusive. A right of appeal is provided against the decision of the Executive Engineer, where there is dispute between the Executive Engineer and the contractor on the matters stated therein, to the Superintending Engineer whose decision is final and binding. Such matters hence are not within the scope of arbitration agreement, a conclusion which is also conceded to by the learned counsel for the appellant.
9. So far as the citations relied upon by the learned counsel for the appellant are concerned, we have to observe that even though in those cases it was held that in the facts of those cases P.S. 59 had been waived, yet, we are to emphasise that the Court in those cases was not considering as to whether preliminary specifications are available to be waived. The Court in those cases proceeded on the assumption that the recourse to the clause had been waived by the conduct of the parties. The question of the provision being not available to be waived unless it is approved by the Government was never urged before the Court and the attention was not drawn to that aspect. The Court was also not considering whether P.S. 59 constituted an independent arbitration clause in itself and also the question of jurisdiction of the arbitrator to enter into a dispute which is coverred by P.S. 59. These decisions hence are of no avail to the appellant.
10. In view of the conclusions reached, we uphold the view of the learned Subordinate Judge in refusing to make the award in respect of claim No. 4 rule of the Court.
11. Claim No. 6 was on account of the extra expenditure incurred by the appellant in execution of the seal coat by adoption of the hot-mix process instead of the method of dry seal coat which he said he was entitled to adopt under the agreement. The case urged before the arbitrator was that hot-mix process was an expensive one and that the agreement did not specify that he was to execute the seal coat by hot-mix process instead of dry seal coat. The arbitrator passed a non-speaking award of Rs. 3,00,000/- but the award was set aside and not made the rule of the Court by the learned Subordinate Judge as no reason had been given by the arbitrator in support of the award.
12. The learned Government Pleader for arbitration urges that the claim of the appellant was resisted by the department contending that the work had been done as per the agreement conditions and the payment had been made accordingly which had been accepted by the contractor. We are not able to agree that there was no dispute in existence and that the work had been carried out according with the terms of the agreement, because of the correspondence between the contractor and the department on 7-8-1972, 5-9-1972 and 6-9-1972 which show it to have been raised by the appellant throughout of having been compelled to adopt hit-mix process though he was never so liable. The dispute as raised by the appellant was within the cognizance of the arbitrator and he having given an award for the same, it is not liable to be questioned only because reasons have not been assigned, when the enactment requiring the arbitrator to give reasons came much later. In that view of the matter, that part of the judgment of the learned Subordinate Judge refusing to make the award in respect of claim No. 6 the rule of the Court has to be set aside and the appeal and the revision preferred by the appellant are allowed to that extent.
13. Next, we come to the question of interest. Admittedly, the arbitrator directed the grant of interest at 15% per annum from the date of entering upon the reference till the date of decree or payment as a part of the award. There is now no dispute in view of the decisions of the Supreme Court in Secretary, Irrigation Department, Government of Orissa and others, : [1991]3SCR417 ; Board of Trustees, Port of Calcutta v. Engineers-De-Space-Age, : AIR1996SC2853 ; and Sudhir Brothers v. Delhi Development Authority, 1996 (1) ALT 11 (SC) that the arbitrator has power to grant interest before entering upon the reference, during, after entering upon the reference and pendente lite till the decree is passed though he cannot direct interest to be paid after the decree which is within the domain of the Court. In Superintending Engineer v. Kher Singh, : 1994(1)ALT293 a Division Bench of this Court held that where interest has been awarded as part of the award, it is not available to be changed or modified by the Court. That being so, it was not within the competence of the learned Subordinate Judge, Tadepallegudem to reduce the interest from 15% to 12% and 6% for two different periods and hence it must be said that the award of the arbitrator regarding interest is to be effective from the date of entering upon the reference till the date of the decree. We are also of the view that there is no reason why the rate of interest from the date of decree till the date of payment should be confined to 6%. Such direction, in the context of the present day, is absolutely unrelated to realities. We, for the reason, direct that interest from the date of the decree till the date of payment shall be at 12%.
14. In the result, C.M.A. No. 1854 of 1989 and C.R.P. No. 3895 of 1989 are allowed only to the extent of the award of the arbitrator in respect of claim No. 6 and in respect of the interest being rule of the Court subject to the order that the amount shall carry interest at the rate of 12% from the date of the decree till the date of payment. C.R.P. No. 3484 of 1990 is dismissed. No costs.