1989 PLP 1209 (MLD)

Quantities shown in the tender are approximate and no claim shall be entertained for work executed being either more or less than those entered in the tender estimate."

3. The learned single Judge as mentioned hereinbefore of the High Court after exhaustive discussion dismissed the appeal and upheld the order. Being aggrieved the petitioner went up in appeal before the Division Bench and the Division Bench on consideration of the matter dismissed the appeal. The Division Bench considered the following issues raised before the' District Judge. (1) Whether the contractor had incurred extra costs towards wetting and washing of stones used in masonry of Group-II Tawa Masonry Dam? (2) Was the petitioner entitled to payment of this extra costs of Rs.1,20,355?, (3) Whether the petitioner contractor had to incur extra cost of material and labour to the tune of Rs.14,72,456 within the contract period for executing work assigned to it? (4) Whether the contractor had incurred extra cost of Rs.8,84,336 for the work beyond the contract period due to unforeseen circumstances? (5) Whether the petitioner's claim on both the counts was in whole or in part of it barred by time in terms of clause 3.3.15? (6) Whether the contract was rendered ineffective in terms of section 56 of the Contract Act due to unexpected change in the market rat& of material and labour charges? (7) Was the claim not entertainable in accordance with the terms of the contract under clauses 3.3.32, 3.3.33 and 3.3.34 during the extended period of contract? (8) Was the work delayed because of the presence, of shell-zone in the foundation which factor was not made known to the contractor? (9) Whether the contractor was entitled to extra costs of damages for the delay caused on account of shell-zone?

4. The Division Bench came to the findings as follows: (1) The contractor did incur expenditure on wetting and washing of stones in Masonry Group-II, Tawa Masonry Dam but this was according to agreement. (2) The petitioner is not entitled to the payment of, the extra costs of Rs.1,20,355. (3) The petitioner/contractor did incur an extra cost of Rs.14,72,456 within the contract period for executing the assigned work. (4) The petitioner/contractor did incur an extra cost of Rs.6:81,796 for the work done beyond the contract period due to unforeseen circumstances. (5) The petitioner is entitled to the claim to the extent of Rs.2,65,000-against Issue No.3 and Rs.6,81,790 against Issue No.4 above and the same is not barred by time in terms of clause 3.3.15. (6) The contract was not rendered ineffective in terms of section 56 of the Contract Act due to abnormal rise in the market rates of materials and labour. (7) The claim under reference cannot be ruled out merely because of the provisions of clauses 3.3.32, 3.3.33 and 3.3.34. (8) Yes, the work was delayed due to the presence of shell-zone in the foundations, a factor which was unforeseen and was not made known to the contractor. (9) The contractor is entitled to claim extra cost due to the delay caused on account of the shell-zone in foundations.

5. The Division Bench felt that the four factual issues decided by the District Judge were more or less by the agreement and therefore, the Division Bench did not deal with these. So far as three legal issues which were referred to him, namely, whether the claim was barred under clause 3.3.15, the contract was rendered ineffective in terms of section 56 of the Contract Act due to abnormal rise in the market rate of material and labour and the 1`laim was not entertainable under clauses 3.3.32, 3.3.33 and 3.3.34. The High Court considered whether the appellant was entitled to extra cost towards rise in prices of materials and labour within and beyond the contract period. The Division Bench noted that the learned District Judge held that since three legal issues were specifically referred to the arbitrator and therefore his decision had become final and binding on the parties and cannot be reagitated before the Court. Regarding the remaining issues, the State had taken objection while opposing the application under section 20 that the appellant was not entitled to extra cost for material and labour in terms of the contract but the Court directed that this matter had to be agitated before the arbitrator and the application under :section 20 could not be dismissed on the ground that the claim would not ultimately succeed. The District Judge found and m our opinion rightly that the question regarding extra cost was a general question and not a specific legal question and the decision of the arbitrator was not final one. The arbitrator misconducted himself in allowing claim without deciding the objection of the State. In view of the specific clauses, the appellant was not legally entitled to claim for extra cost. The decision of this Court in Seth Thawardas v. Union of India. (1955) 2 SCR 48; (A I R 1955 S C 468) is of no avail on this point. If no specific question of law is referred, the decision of the arbitrator on that question is not final however much it may be within his jurisdiction and indeed essential for him to decide the question incidentally. The arbitrator is not a conciliat6r and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. The arbitrator is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not he can be set right by the Court provided his error appears on the face of the award. In this case, the contractor having contracted, he cannot go back to the agreement simply because it does not suit him to abide by it. The decision of this Court in M/s. Alopi Parshad v. Union of India, (1960) 2 SCR 793 may be examined. There it was observed that a contract is not frustrated merely because the circumstances in which the contract was made, altered. The Contract Act does not enable a party to a contract to ignore the express covenants thereof, and to claim payment of consideration for performance of the contract at rates different from the stipulated rates, on some vague plea of equity. The parties to an executory contract are often faced, in the course of carrying it out, with a turn of event which they did not at all anticipate, a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. There is no general liberty reserved to the Courts to absolve a party from liability to perform his part of the contract merely because on account of an uncontemplated turn of events, the performance of the contract may become onerous.

6. It was argued on behalf of the appellant that since specific issues were framed and referred by the District Judge to the arbitrator, the same had been answered by a non-speaking award, there is no mistake of law apparent on the face of record and the District Judge erred in setting aside the award by looking into the terms of the contract which it was submitted, neither formed part of the award nor appended to it. We are unable to agree. This being a general question, in our opinion, the District Judge rightly examined the question and found that the appellant was not entitled to claim for extra cost in view of the terms of the contract and the arbitrator misdirected himself by not considering this objection of the State before giving the award.

7. In Kapoor Nilokhcri Co-operative Dairy Farm Socy. Ltd. v. Union of India, A I R 1973 S C 1338 it was held that where an arbitrator is called upon to decide the effect of the agreement, he has really to decide a question of law, i.e. of interpreting the agreement, and hence, his decision is not open to challenge. This was also a decision against a reasoned award but since the reference was to a specific question of law, the decision of the arbitrator, it was held, was not open to challenge. The limits of the jurisdiction of the Court to challenge the award are well-settled. While considering objection under section 30 of the Act, the Court does not act as an appellate Court, it can only interfere with the award if the arbitrator misconducts himself or the proceedings or if the award has been mad;, after the issue of an order by the Court superseding the arbitration or if the arbitration proceedings have become invalid under section 35(c) of the Act or the award has been improperly procured or is otherwise invalid. The Judicial Committee in Champsey Bhara and Co. v. Jivraj Balloo Spg and Wvg. Co. Ltd., A I R 1923 P C 66 has laid down the extent of the jurisdiction of the Court to set aside an award on the ground of an error in making the award. It has been reiterated that the award of the arbitrator may be set aside on the ground of any error on the face thereof only when in the award or in any document incorporated with it as for instance, a note appended liy the arbitrator, stating the reasons for his decision, there is found some legal proposition which is the basis of the award and which is erroneous. See also in this connection Re. King and Duveen, (1913) 2 KB 32 and Government of Kelantan v. Duff Development Co. Ltd., 1923 AC 395, if however, a specific question is submitted to the arbitrator and he answers it, the fact that the answer involves an erroneous decision in point of law, does not' make the award bad on its face so as to permit of it being set aside. See also the observations of this Court in Bungo Steel Furniture v. Union of India, (1967) 1 SCR 633: (A I R 1976 SC 378). It is well settled that the contract remained part of the award. The Judicial Committee in Saleh Muhammad v. Nathoo Mal, (1927) 54 Ind App 427: (A I R 1927 PC 164) considered an award in which the arbitrator recited a contract made between the parties and the dispute arising under it. It was contended that the contract was incorporated in the award by its reference and so the award disclosed an error of law in construing the terms of the contract. But that contention was negatived. It was held that the reference to the contract in the award was to earmark the dispute between the parties and was not incorporated into the award. In Abosalom Ltd. v. Great Western, 1933 AC 592, it was held that if an award referred to the terms of a clause in the contract, the clause though not set out in full must be taken to be incorporated in it. This Court has reiterated in Allen Berry and Co. v. Union of India, (1971) 3 SCR 282: (A I R 1971 S C 696) that mere reference to the contract in the award is not to be held as incorporating it.

8. In the aforesaid light, we are of, the opinion, the High Court was right that the District Judge was entitled to examine the contract in order to find out the legality of the claim of the appellant regarding extra costs towards rise in prices of material and labour. As was pointed out by the learned District Judge clauses 2.16 and 2.4 stipulated that the contractor had to complete the work in spite of rise in prices of materials and also rise in labour charges at the rates stipulated in the contract. There was a clear finding of the arbitrator that the contract was not rendered ineffective in terms of section 56 of the Act due to abnormal rise in prices of material and labour. This being so and the contractor having completed the work, it was not open to him to claim extra cost towards rise in prices of material and labour. The arbitrator misconducted himself in not deciding this specific objection raised by the State regarding the legality 6f extra claim of the appellant.

9. In that view of the matter, the award, in our opinion, was properly set aside by the learned District Judge and the High Court was right in not interfering with it.

10. The question about specific reference on a question of law was examined by this Court recently in the case of Tarapore and Co. v. Cochin Shipyard Ltd., Cochin, (1984) 2 SCC 680: (A I R 1984 S C 1072). There it was observed that if the agreed fact situation, on the basis of which agreement was entered into, ceases to exist, the agreement to that extent would become otiose. If rate initially quoted by the contractor became irrelevant due to subsequent price escalation, it was held in that case that contractor's claim for compensation for the excess expenditure incurred due to the price rise could not be turned down on ground of absence of price escalation clause in that regard in the contract. Agreement as a whole 'has to be read. Reliance was placed very heavily on this decision on behalf of the appellant before us. It has to be borne in mind that in the instant case there are specific clauses referred to hereinbefore which barred consideration of extra claims in the event of price escalation. That was not so in Tarapore and Company's case. That made all the differences. The basis of bargain between the parties in both these two cases were entirely different. 11. 1n the aforesaid view of the matter we are of the opinion that the High Court was right in the view it took and there is no ground to interfere. The petition for special leave fails and is accordingly dismissed. M.B.A./116/F.C. Petition dismissed.