Full Judgment
Nirmal Singh, J.
1. The Director Stores Procurement Department, Jammu invited tenders from the approved carriage contractors/registered transporters for the carriage of Asphalt/Bitumen packed in drum from Mathura/Delhi/Koyali (Gujarat) to Jammu/ Pampore Stores. The tender was to be received on or before 26-12-1986 up to 3 p.m. In response to this tender notice, the appellants submitted their tender and same was accepted by the Department. As per tender notice, it is provided that the successful tenderer shall have to execute a formal agreement with the Department immediately after his tender is accepted embodying therein all these conditions in elaborate form besides other necessary terms and bind himself/itself to carrying out the work smoothly and regularly.
2. A work order dated 12-5-1987 was issued in favour of the appellants. As per work order, the appellants have to execute an agreement within two weeks from the date of issuance of said work order. The appellants executed the agreement and submitted the same to the respondents on 26-5-1987.
3. The State Government, issued a Notification No. 4/MVD of 1987 dated 11-6-1987 wherein the freight rates have been re-fixed. In view of the said Notification, the appellants represented the Chief Engineer-cum-Director Stores Procurement Department, Jammu that freight rates be also enhanced in its favour by an appropriate margin, enabling the appellants to meet up the higher demands prevailing in the market. The Chief Engineer-cum-Director Sotres Procurement Department, Jammu on the representation of the appellants recommended for escalation charges to be paid to the appellants. The Commissioner/Secretary to Government, Public Works Department, Jammu did not agree with the recommendation of the Chief Engineer.
4 A dispute between the parties arose for not making the payment to the appellants as per enhanced rates. The same was referred for arbitration in terms of Section 20 of the Arbitration Act (hereinafter called as 'the Act'). Mr. M.S. Bhat, District and Sessions Judge, (retired) was appointed as sole arbitrator for the settlement of the dispute between the parties pertaining to enhancement of the freight rates.
5. The arbitrator passed an award in favour of the claimants for a sum of Rs. 2,63,312/-. The appellants filed a petition for making the award as a rule of the Court before District Judge, Jammu. The District Judge, Jammu issued notice to the State. State filed objections that the award cannot be made as a rule of the Court as it has not been passed in accordance with the provisions of Act and the Arbitrator has acceded his jurisdiction.
6. From the pleadings of the parties, the following issues were framed :--
1. Whether the arbitrator has misconducted himself and the proceedings and as such, the award is liable to be set aside? PP
2. Whether the award is otherwise invalid and non-sustainable in the law. and liable to be set aside? OPP
3 Relief.
7. Learned District Judge after recording evidence of the parties, set aside the award by holding that the arbitrator has misconducted in awarding the amount for escalation in the freight charges when there was no clause in the agreement, aggrieved by which the appellants preferred this appeal.
8. After hearing learned Counsel for the parties and perusing the record, I am of the considered opinion that the learned District Judge has not committed any legal error in
9. The Director, Stores Procurement Department, Jammu on behalf of the Government of J&K; State invited tenders for the carriage of the bitumen in drums from various refineries. In response to this tender notice, the appellants' tender was accepted and work order in favour of the appellants was issued on 12-5-1987. There was a clause in the work order with regard to agreement which reads as under :
AGREEMENT :
A formal agreement shall be drawn with the department by the contractor within two weeks from the date of issue of this order. Six copies of the blank agreement forms which shall be supplied by the Director, Stores Procurement Department, may please be returned to this office duly completed and signed in all respects along with six (6) attested copies of the supply order one set of which will form a part of agreement.
10. In response to above clause in the work order, the appellants executed the agreement in favour of the State. Admittedly, there was no escalation clause in the agreement and the Government has issued Notification No. 4/MVD of 1987 dated 11-6-1987 by which the freight rates were re-fixed, The appellants in response to this Notification approached the Chief Engineer, Stores Procurement Department. The Chief Engineer recommended the freight rates as per Notification by observing in its letter written to the Commisioner/Secretary to Government that the enhancement of freight rates was not anticipated by contractor and the Government and in some cases the Government has agreed to pay escalation charges in response of the contract even when there was no stipulation in the agreement.
11. The Commissioner/Secretary to Government, Public Works Department, Jammu did not agree with the recommendation of. the Chief Engineer, Stores Procurement Department. The matter was referred to the Arbitrator. The arbitrator was impressed upon by the recommendation of the Chief Engineer. The Arbitrator is not to be impressed upon by the recommendation rather he is to pass an award as per agreement entered between the parties. If agreement prescribes escalation clause then the arbitrator was justified in giving escalation but when agreement do not provide any clause of escalation then the arbitrator is exceeding his jurisdiction and misconducting the proceedings. Learnd District Judge, Jammu has rightly observed so.
12. In : [2000]1SCR1136 , titled State of Orissa v. Sudhakar Dass, the Apex Court held as under :--
2. It is not disputed that the arbitration agreement contained no escalation clause. In the absence of any escalation clause, an Arbitrator cannot assume any jurisdiction to award any amount towards escalation. That part of the Award which grants escalation charges is clearly not sustainable and suffers from a patent error. The decree, insofar, as the award of escalation charges is concerned, cannot, therefore, be sustained.
13. For the reasons mentioned above, I do not find any merit in this appeal, same is, accordingly, dismissed. However, the parties are left free to bear their own costs.
14. Record be sent back to the Court concerned.