Full Judgment
Surjit Singh, J.
1. We are disposing of two appeals by a common judgment, i.e. Appeal No. 99 of 1996 and 102 of 1996, both titled Executive Engineer and Anr. v. H.K. Sareen and J.L. Nayyar, because common questions of law and facts have been raised therein. This judgment shall be placed on the record of FAO No. 99 of 1996 and its authenticated copy on the record of Appeal No. 102 of 1996.
2. First, the factual matrix required to be noticed for the disposal of the two appeals maybe stated. Executive Engineer of Regional Engineering College, Hamirpur, which is a registered society, invited tender for execution of two works. Respondent M/s H.K. Sareen and J.L. Nayyar was one of the tenderers. His tenders in respect of both the works were accepted. Two agreements, one bearing No. 11 and the other No. 12 were executed between the Executive Engineer, appellant herein in both the appeals, and respondent M/s H.K. Sareen. It was agreed that the work would commence on a particular specified date and would be completed on or before a specified date. Work commenced on the stipulated date in both the cases, but before the completion of the work, the men and the material for execution of the work brought at the sites by the respondent, had been taken away.
3. Executive Engineer invoked Clause (2) of the agreement and approached the Superintending Engineer for levy of compensation on account of delay in execution of the works. The Superintending Engineer levied an amount of Rs. 4,36,389 as compensation in one case (appeal No. 99 of 1996) and Rs. 6,69,549 in the other (appeal No. 102 of 1996). After the levy of compensation, as aforesaid, the Executive Engineer did not release the security money deposited by the respondent in both the cases. After giving discount for the security money and the value of the work executed, the Executive Engineer raised the claims in respect of both the works. In respect of one work, the amount of claim was Rs. 5,16,942, inclusive of the amount of compensation levied by the Superintending Engineer. In respect of the other work, the amount was Rs. 7,66,861, inclusive of amount of compensation.
4. Separate claims were preferred before the Arbitrator in respect of each agreement. Respondent filed counter claims and opposed the claim of the Executive Engineer, particularly with respect to the amounts of compensation. Arbitrator held that since the compensation had been levied under Clause (2) of the agreement and the matter regarding levy of compensation did not fall within his domain, because arbitration clause of the agreement specifically excluded Clause (2) of the agreement, pertaining to levy of compensation, from being adjudicated by the Arbitrator, he had no jurisdiction to award anything on account of compensation.
5. Aggrieved by the said order, appellant-Executive Engineer filed objections under Sections 30 and 33 of the Arbitration Act, 1940. Learned Single Judge of this Court dismissed the objections holding that the order of the Superintending Engineer regarding levy of compensation, under Clause (2) of the agreement, had not been passed by application of mind and, therefore, the appellant could not retain or adjust the amounts of security against the aforesaid amounts of compensation, levied under the orders of the Superintending Engineer. It is by this part of the order of learned Single Judge that the appellant is aggrieved or at least, during the course of hearing of the matters, learned Counsel representing the appellant has confined his submissions only to this part of the order of the learned Single Judge.
6. It has been held both by the Arbitrator as also the learned Single Judge that order of levy of compensation under Clause (2) of the agreement, is not subject to adjudication by the Arbitrator, to be appointed under the arbitration clause. For taking this view, both the Arbitrator and the learned Single Judge have placed reliance upon a judgment of the Hon'ble Supreme Court in Vishwanath Sood v. Union of India and Anr. AIR 1989 SC 952.
7. Before us it has been conceded that the matter regarding levy of compensation was beyond the scope of Arbitration. Now if the Arbitrator could not have gone into the validity, legality or the correctness of the order regarding levy of compensation, as held by the Arbitrator as also by the learned Single Judge, he and also the learned Single Judge had no jurisdiction even to make any comment about its legality or otherwise. However, we find from the judgment of the learned Single Judge that he has observed that the order is illegal having been passed without application of mind, as the Superintending Engineer did not write a speaking order, but simply approved the proposal submitted to him by the appellant. Learned Single Judge did not have the jurisdiction to make the aforesaid observation or to say like that, for the simple reason that the learned Single Judge was hearing only objections against the award of the Arbitrator and since the order of the Superintending Engineer was not subject to arbitration, as rightly held both by the Arbitrator and the learned Single Judge, the learned Single Judge could not have made any comment, leave alone holding that the order was illegal having been passed without application of mind. Whether the order of the Superintending Engineer, regarding levy of compensation, is good or bad is required to be decided not by the Arbitrator or the Court hearing objections against the award of the Arbitrator, but by some other forum, which may be approached by the aggrieved party. Until the aggrieved party, i.e. the respondent in this case, challenges the order of the Superintending Engineer, levying compensation, before appropriate forum, it is an enforceable order and the appellant can retain/adjust the security amount towards part satisfaction of the aforesaid order.
8. In view of the above stated position, both the appeals are partly accepted and the order of the learned Single Judge to the extent that the order of levy of compensation passed by the Superintending Engineer is illegal and, therefore, security amounts cannot be retained by the appellant towards part satisfaction/adjustment of the order of compensation is set aside.
Both the appeals are disposed of in the aforesaid terms.