Sanjib Banerjee, J.
1. The petitioner challenges four several heads of claim that have been entertained and allowed in the impugned arbitral award. The petitioner says that the sums awarded on account of overrun charges, crane-hire charges and interest are in derogation of the agreement between the parties. The petitioner assails the reduction in the quantum of deduction allowed by the arbitral tribunal on account of the respondent-claimant failing to complete the painting work.
2. The petitioner obtained an order for setting up some plant or boiler units and was desirous of engaging a sub-contractor for discharging a part of the work. Pursuant to a notice inviting tender issued by the petitioner, the respondent offered to erect, test and commission two 120 MW boilers (Unit II and Unit III) on behalf of the petitioner. The value of the contract awarded in favour of the respondent was Rs. 6,99,40,000/-. Following disputes and differences having arisen between the parties, either party nominated its arbitrator and the two arbitrators chose the third. The arbitral tribunal awarded Rs. 69.22 lakh on various heads and a sum of Rs. 25.39 lakh on account of interest.
3. In the present proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, the petitioner says that the arbitral tribunal which derived its authority under the agreement between the parties could not have overridden the specific Clauses in the contract to give relief to the respondent. The petitioner says that the arbitral tribunal had no power to consider the claims on account of overrun charges, crane-hire expenses and interest. On the fourth count of challenge, the petitioner suggests that the arbitral tribunal misdirected itself and disallowed the deduction made by the petitioner on irrelevant and extraneous considerations. In substance, it is the petitioner's case that the arbitral tribunal failed to decide the reference in accordance with the terms of the contract, in respect of the matters which have been challenged at the hearing.
4. The matter was heard at length on February 17, 2010. Upon the petitioner's submission being concluded, substantial time was wasted by the respondent on account of the obvious unpreparedness. The matter was adjourned and costs reserved. Even at the second call in a continuing part-heard matter, the respondent has not been represented at the hearing on February 18, 2010.
5. Clause 9 of the agreement clearly stipulated that no overrun charge would be applicable for the contract. Clause 10 provided for revision on accepted contract rate and envisaged rate revision at the rate of 10 per cent per annum in the event the contractual completion period was extended by the petitioner for reasons not attributable to the respondent. In addition, Clause 11 of the agreement permitted payments to be made for extra work.
6. The petitioner demonstrates that in the written submission filed before the arbitral tribunal on behalf of the petitioner under cover of a letter dated October 8, 2004, the petitioner had categorically referred to Clause 9 of the agreement and had submitted that overrun charges could neither be claimed nor awarded. Notwithstanding such objection, the tribunal addressed issue No. 4 pertaining to the claim on account of overrun charges and did not consider the objection that a claim on such head was prohibited under the agreement. It is evident that there was an express bar on any claim being made on account of cost overrun charges and the arbitral tribunal's award of Rs. 15 lakh under such head is in derogation of the agreement under which the tribunal derived its authority. The arbitral tribunal clearly erred in entertaining such head of claim and the award in respect of such claim cannot be sustained.
7. Clause 12.2 of the agreement provided for the petitioner to arrange a 250 MT capacity crane and operator and consumables therefor for the second unit. The sub-contractor was, under such clause, obliged to provide for the fuel for the operation of the crane. It would appear from the arbitral tribunal's discussion on issue No. 8 pertaining to such matter, that the claim on account of crane-hire charges for 19 days had been made in respect of the third unit. The discussion in the award reveals that the claimant had submitted a final bill including an amount of Rs. 60.25 lakh for crane-hire charges. The claimant had suggested that there was an understanding between the parties 'regarding swapping of crane usage days between Units II & III .' The tribunal held that the claimant had failed to substantiate such understanding. Notwithstanding such finding, the tribunal proceeded to opine that the use of the crane for the third unit could not come without charge since there was no specific provision in respect thereof. The tribunal noticed that there was 'some ambiguity' in such regard but ruled that the claimant was entitled to a part of the amount claimed. There was no express bar in the agreement to crane-hire charges being paid for the third unit. But the specific reference in the agreement to crane-hire facilities being made available by the petitioner to the sub-contractor in respect of the second unit only, such facilities being extended in respect of the third unit was ruled out by necessary implication. Again, the petitioner brought this to the notice of the tribunal but the tribunal did not specifically address such legal issue while justifying a part of the respondent's claim under such head.
8. On the arbitral tribunal's award of interest, the petitioner says that there was a complete embargo on payment of interest and the arbitral tribunal misconducted itself in disregarding the relevant provision. Clause 1.15.5 of the agreement recorded as follows:
No interest shall be payable on earnest money/security deposit or any money due to the contractor by BHEL.
9. There is no discussion as to the claimant's entitlement on account of interest. Indeed, issue No. 7 covered by the tribunal related to claim No. 11 on account of interest for delayed payments. The arbitral tribunal's conclusion on the issue was that the claimant was not entitled to interest on account of delayed payments but it would be entitled to interest on other heads. There is no subsequent discussion in the award in respect of the claimant's entitlement to interest 'on other heads.'
10. On the point of interest, the petitioner has referred to a Division Bench judgment of this Court reported at : 2008 (3) CHN 661 (Union of India v. Budhlani Engineering Pvt. Ltd.). The relevant Clause in the matter before the Division Bench contained a similar condition that no interest would be payable to the contractor under the contract. The Division Bench concluded that in view of the specific bar, the arbitral tribunal had no authority to grant interest. The relevant Clause is quoted at paragraph 26 of the report and the Division Bench opinion thereon appears at paragraph 29 thereof:
26....
2. Interest on amounts.- No interest will be payable upon the earnest money or the security deposit or amounts payable to the contractor under the contract.
29. In the case before us, Clause 16(2) of the agreement specifically prohibits grant of interest on the amounts payable to the contractor under the contract and in such a situation, in our view, there was no scope of grant of any pendente lite interest.
11. In challenging the arbitral tribunal disallowing a deduction of Rs. 4 lakh made by the petitioner from the bills raised by the claimant for the claimant having failed to complete the painting work, the petitioner suggests that there is no basis to the arbitrators' reasoning on such aspect of the matter. The arbitrators recorded that the petitioner's principal had not levied any penalty (or deduction) on the petitioner's bills on account of the painting work not having been completed and, consequently, the petitioner was not entitled to make the deduction except to the extent of Rs. 1 lakh as voluntarily offered by way of rebate by the claimant.
12. The petitioner does not suggest that the arbitral tribunal exceeded its authority in reaching the conclusion on the painting issue. The petitioner does not cast doubt on the finding as being in derogation of the agreement. The petitioner merely questions the rationale thereof. Since it was a matter which had been referred to the tribunal and the tribunal considered relevant material in arriving at a decision, the fact that the reasoning does not appeal to the petitioner would not permit it to carry a challenge in proceedings under Section 34 of the Act. Such decision of the tribunal is based on cogent considerations and though the fact that the petitioner's principal did not make a claim on the petitioner for the unfinished painting work would not necessary imply that the petitioner would not be entitled to claim the amount from its sub-contractor, the fact that the arbitral tribunal took such matter into consideration would not amount to legal misconduct or an aberration that would be required to be corrected in this jurisdiction.
13. On the general principles that the arbitral tribunal would not be permitted to act in derogation of the specific terms of the agreement that prohibited certain claims, the petitioner has referred to the judgments reported at : (1991) 4 SCC 93 (Associated Engineering Co. v. Government of A.P.) and : (1999) 8 SCC 122 (Steel Authority of India Ltd. v. Budhiraja, Govt. & Mining Contractor). The principle enunciated in the cases cannot be questioned and the respondents have not shown anything to detract from the application of such principle to the facts of the case.
14. The respondent has referred to a judgment reported at : (2008) 1 SCC 422 (Ghulam Mohammad Dar v. State of J&K;) to support the arbitral tribunal's award on account of interest. The judgment is inapposite in the present context since it did not consider a Clause in the relevant agreement that prohibited any amount being awarded by way of interest.
15. An arbitral tribunal which acts in manifest disregard of the contract acts without jurisdiction. The tribunal's authority is obtained from the contract and is governed by the statute which embodies principles derived from a specialised branch of the law of agency. The tribunal commits misconduct if by its award it decides matters excluded by the agreement. A deliberate departure from the contract amounts to not only manifest disregard of its authority or misconduct on its part, but it may tantamount to a mala fide act. A conscious disregard of the law or the provisions of the contract from which the arbitral tribunal has derived its authority vitiates the award to the extent of the award deviating from the contract.
16. The challenge on the three counts relating to overrun charges, crane-hire charges and interest succeeds. The sums awarded or permitted to be deducted or adjusted on such counts are set aside and the amount awarded will stand reduced accordingly. The challenge on the last count fails since it was within the domain of the arbitral tribunal to adjudicate upon such dispute and arrive at a finding thereon.
17. AP No. 213 of 2006 succeeds in part. The petitioner will also be entitled to costs assessed at 500 GM.
18. Urgent certified photocopies of this judgment, if applied for, be supplied to the parties subject to compliance with all requisite formalities.