K. S. Madhusoodanan Pillai Ambiyilara v. State of Kerala Represented By Its Secretary
2026-05-18
Syam Kumar V M
body2026
DailyLaw.ai
JUDGMENT : SYAM KUMAR V.M., J. This Arbitration Appeal No.29 of 2007 is filed challenging the order in O.P.(Arb.) No.99 of 1994 dated 23.01.2006 on the files of the Principal Sub Court, Thiruvananthapuram. The appellant herein was the claimant before the Sub Court. 2. The appellant, being a contractor, had undertaken the KIP and MCS work involving construction of spouts, laying of PVC pipeline, and other allied works at chainages 3200 m and 3225 m of Paravoor Distributory pursuant to Agreement No.54/EE/88-89 dated 03.11.1988. In terms of Clauses 51 and 52 of the LCB conditions, disputes arising between the parties were liable to be referred to arbitration. Accordingly, upon disputes having arisen, the Superintending Engineer was appointed as the sole Arbitrator, and he entered upon the reference on 07.08.1991. Upon consideration of the materials on record, the learned Arbitrator passed an award in favour of the appellant, awarding a sum of Rs.61,228/- together with future interest at the rate of 18% per annum from 07.08.1991 till the date of decree or payment, whichever occurred earlier. The said award rendered under the Arbitration Act, 1940 was presented before the learned Principal Sub Judge, Thiruvananthapuram. In the said proceeding, the Principal Sub Court set aside the claims raised as (b) and (e), which related to compensation for enhanced payments and towards idling charges respectively. The Sub Court had reasoned that there was no provision in the contract for payment of amounts under such heads, and that the Arbitrator, in awarding such compensation/damages, had travelled beyond the terms of the contract and thus misconducted himself. Aggrieved by the said finding, to the extent it set aside claim (b) and (e), the appellant has preferred the present Arbitration Appeal. 3. Heard the learned counsel appearing on both sides. 4. The learned counsel for the appellant submitted that the court below erred in disallowing claims (b) and (e). According to the learned counsel, the Arbitrator, being the final fact-finding authority chosen by the parties themselves, had considered the rival contentions in detail and, after evaluating the oral and documentary evidence available on record, arrived at a valid and legally tenable conclusion granting the said claims.
According to the learned counsel, the Arbitrator, being the final fact-finding authority chosen by the parties themselves, had considered the rival contentions in detail and, after evaluating the oral and documentary evidence available on record, arrived at a valid and legally tenable conclusion granting the said claims. The said findings of the Arbitrator, which were founded on evidence and supported by the materials on record, ought not to have been lightly interfered with by the court below in the absence of any legally sustainable ground warranting such interference. 5. It is further contended by the learned counsel that the court below, while setting aside the award insofar as it relates to claims (b) and (e), has failed to assign any cogent, convincing, or valid reason justifying the disallowance of the said claims. According to the learned counsel, the said finding is wholly erroneous, both on facts and in law. It was also argued that the finding of the court below that the Arbitrator exceeded his jurisdiction is not supported by any discussion as to which specific clause of the agreement was allegedly violated. According to the learned counsel, it is also not discernible in what manner the Arbitrator exceeded the contractual framework, or how the award of claims (b) and (e) could be said to fall outside the scope of the reference. Accordingly, the appellant prays that the impugned order passed by the learned Sub Judge be set aside to the extent it interferes with the award in respect of claims (b) and (e). Reliance is placed on the dictum in Coimbatore District Podu Thozillar Samgam and others v. Balasubramania Foundry and others : AIR 1987 SC 2045 ; M/s.Sudarsan Trading Co. v. The Govt. of Kerala and another : AIR 1989 SC 890 . 6. The learned Special Government Pleader, on the other hand, submitted that the setting aside of claims (b) and (e) by the court below was proper and does not warrant any interference in appeal. It is contended that the claims under heads (b) and (e) were not contemplated under the terms of the agreement entered into between the parties and had no sustainability.
It is contended that the claims under heads (b) and (e) were not contemplated under the terms of the agreement entered into between the parties and had no sustainability. According to the learned Special Government Pleader, the Arbitrator had exceeded the limits of the reference by adjudicating upon and granting the relevant claims which were not traceable to the contractual stipulations and which fell outside the scope of the agreement governing the rights and liabilities of the parties. It was further submitted that the jurisdiction of the Arbitrator is circumscribed by the terms of the contract as well as the matters specifically referred for adjudication, and that any award rendered beyond such limits would amount to a clear excess of jurisdiction. According to the learned Special Government Pleader, the order setting aside the award insofar as it relates to those claims is therefore perfectly valid and calls for no interference. The learned Special Government Pleader prayed that the appeal to the extent it challenges the disallowance of claims (b) and (e) is liable to be dismissed. Reliance is placed on the dictum in State of Kerala and another v. M.A Mathai : [(2007) 10 SC 195]; Oil and Natural Gas Corporation v. Wig Brothers Builders and Engineers Private Ltd. : [ (2010) 13 SCC 377 ]; General Manager, Northern Railway and another v. Sarvesh Chopra : [ (2002) 4 SCC 45 ] ; Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises and another : [ (1999) 9 SCC 283 ] ; Ramnath International Construction (P) Ltd. v. Union Of India : [(2007) 2 SCC 453]. 7. Before proceeding to consider the inter se merit of the contentions put forth by the parties, it would be relevant to examine the scope and ambit of Section 30 of the Arbitration Act, 1940 which lays down the grounds on which an award could be set aside. It reads as follows: "Section 30: Grounds for setting aside award. An award shall not be set aside except on one or more of the following grounds, namely:- (a) that an arbitrator or umpire has misconducted himself or the proceedings; (b) that an award has been made after the issue of an order by the Court superseding the arbitration or after arbitration proceedings have become invalid under section 35; (c) that an award has been improperly procured or is otherwise invalid." 8.
It is trite as affirmed by the Hon’ble Supreme Court in Associated Engineering Co. v. Govt. of Andhra Pradesh and another : [ (1991) 4 SCC 93 ] that an Arbitrator cannot act "arbitrarily, irrationally, or independently of the contract." If the Arbitrator ignores a specific bar in the contract or grants compensation on a ground the contract does not recognize, he commits legal misconduct. it has been laid down by the Hon’ble Supreme Court in para 25 that ; “25. An arbitrator who acts in manifest disregard of the contract acts without jurisdiction. His authority is derived from the contract and is governed by the Arbitration Act which embodies principles derived from a specialised branch of the law of agency (see Mustill and Boyd's Commercial Arbitration, 2nd edn., p. 641). He commits misconduct if by his award he decides matters excluded by the agreement (see Halsbury's Laws of England, Volume II, 4th edn., para 622). A deliberate departure from contract amounts to not only manifest disregard of his authority or a misconduct on his part, but it may tantamount to a mala fide action. A conscious disregard of the law or the provisions of the contract from which he has derived his authority vitiates the award.” 9. The scope of the Arbitrators power being so circumscribed in law, it would be relevant to consider whether in the case at hand, the learned Sub Judge erred in arriving at the conclusions as seen arrived at in the order under challenge. 10. In the instant case, the learned Sub Judge had noted that claim (b) was awarded towards enhanced rates for the work executed beyond the original period of completion, even though the claimant himself had sought extension of time for completion of the work. It was concluded by the learned Sub Judge that the claimant was unable to point out any provision either in the original agreement or in the supplemental agreement entitling him to claim enhanced rates for the work carried out during the extended period. Likewise, under claim (e), the claimant/appellant sought compensation towards idling charges for labour and machinery; however, the learned Sub Judge noted that neither the original agreement nor the supplemental agreement contained any provision enabling the claimant to recover compensation on that count.
Likewise, under claim (e), the claimant/appellant sought compensation towards idling charges for labour and machinery; however, the learned Sub Judge noted that neither the original agreement nor the supplemental agreement contained any provision enabling the claimant to recover compensation on that count. The learned Sub Judge thus concluded that in the absence of any specific contractual stipulation authorising such claims, the Arbitrator could not have awarded the claims under said heads. Consequently the learned Sub Judge reasoned that in awarding claims (b) and (e), which were not traceable to any term of the contract, the Arbitrator had clearly travelled beyond the scope of the agreement and thereby exceeded the jurisdiction vested in him under the reference. 11. In Bharat Coking Coal Ltd. v. Annapurna Construction: [ (2003) 8 SCC 154 ], the Hon’ble Supreme Court has held that where an Arbitrator grants a contractor’s claim for compensation towards escalation in the cost of materials during the extended period of contract, without considering whether the work could not have been completed within the original period, whether the extension of time was sought or granted subject to any conditions, whether the claim was otherwise legally justifiable, and without adverting to the relevant provisions of the agreement and the correspondence exchanged between the parties, the award would suffer from misdirection in law and would consequently be open to judicial interference. 12. Similarly, in Rajasthan State Mines & Minerals Ltd. v. Eastern Engineering Enterprises and another : [ (1999) 9 SCC 283 ], it has been held by the Hon’ble Supreme Court that where the reference to the Arbitrator arises solely out of the agreement between the parties, and there is no separate or specific issue referred which confers jurisdiction beyond the contractual framework, the Arbitrator is necessarily bound by the terms of the contract. It has been further held that if the Arbitrator ignores or acts contrary to the fundamental stipulations of the agreement, he thereby exceeds the jurisdiction vested in him, even if the arbitration clause is widely worded. 13. It is trite as laid down in Rajasthan State Mines & Minerals Ltd. (supra) even though the court cannot speculate as to reasons or probe the mental process of the Arbitrator, court can set aside the award if the Arbitrator acts beyond his jurisdiction.
13. It is trite as laid down in Rajasthan State Mines & Minerals Ltd. (supra) even though the court cannot speculate as to reasons or probe the mental process of the Arbitrator, court can set aside the award if the Arbitrator acts beyond his jurisdiction. Therefore, it is clear that even in case of a non speaking award, the court can interfere when the Arbitrator act beyond his jurisdiction. 14. Likewise in State of Kerala and another v. M.A.Mathai [ (2007) 10 SCC 195 )], the Hon’ble Supreme Court had held that if, instead of avoiding the contract, the contractor accepts the belated performance of reciprocal obligation on the part of the employer, the innocent party that is the contractor, cannot claim compensation for any loss occasioned by the non performance of the reciprocal promise by the employer at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so. 15. I find merit in the contention of the learned Special Government Pleader that the learned Sub Judge while disallowing claims (b) and (e) found in favour of the appellant by the Arbitrator was acting squarely within the above dictum as laid down by the Hon’ble Supreme Court. It is discernible that in the instant case, the claimant himself had sought extension of time for completion of the work and thereafter executed the work during the extended period. Once the claimant accepted the extension of time and proceeded with the performance of the contract, he could not subsequently claim enhanced rates for the work executed during the extended period or compensation towards idling of labour and machinery, unless he had, at the time of seeking or accepting such extension, specifically reserved his right to claim such compensation. No material has been placed on record before the Arbitrator to show that the claimant had issued any notice reserving his right to claim enhanced rates or idling charges at the time of accepting the delayed performance or extension of time. In the absence of such reservation, and in the absence of any contractual provision either in the original agreement or in the supplemental agreement entitling the claimant to such claims, as rightly concluded by the learned Sub Judge, the Arbitrator could not have granted claims (b) and (e).
In the absence of such reservation, and in the absence of any contractual provision either in the original agreement or in the supplemental agreement entitling the claimant to such claims, as rightly concluded by the learned Sub Judge, the Arbitrator could not have granted claims (b) and (e). In the light of the above, I am of the considered view that the learned Sub Judge had correctly concluded that in awarding claims (b) and (e), the Arbitrator had clearly travelled beyond the scope and ambit of the agreement and thereby exceeded the jurisdiction vested in him under the reference. The ensuing finding of the learned Sub Judge setting aside the award insofar as it relates to the said claims is therefore valid and justified. No interference is warranted. Accordingly, this Arbitration Appeal is dismissed.