REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.73797380 OF 2021
State of Haryana ..Appellant (S)
VERSUS
M/s. Shiv Shankar Construction Co. & Anr. ..Respondent (S)
J U D G M E N T
M. R. Shah, J.
1. Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 03.11.2015 passed by the High
Court of Punjab and Haryana at Chandigarh in FAO No.
4482 of 2011 (O&M), by which the High Court has dismissed
the appeal preferred by the appellant herein under Section
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37 of the Arbitration and Conciliation Act, 1996, the State of
Haryana has preferred the present appeals.
2. At the outset it is required to be noted that while issuing
notice in the present appeals, this Court has stayed the
award exceeding Rs.1,03,50,263/ insofar as claim Nos.1
and 8 are concerned.
3. The facts leading to the present appeals in a nutshell are as
under:
3.1 That the appellant herein awarded the contract to respondent
No.1 herein – contractor for strengthening, upgradation and
maintenance of road from Palwal to Hasanpur, Haryana for a
length of 31.17 kilometres on certain terms and conditions as
per the contract entered into between the parties. The
contract was for Rs.5,26,59,688/. That as per the design
calculation data, the specifications as prepared by the
appellant department were meant for 3364 traffic intensity
PCU (Passenger Car Unit)/day. The contract was up to
31.05.2010. That on 05.03.2005 due to the closing of the
Palwal Aligarh Road on account of the construction of the
railway bridge, the entire traffic was diverted from Palwal
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Aligarh Road to the present road. That due to this diversion
of traffic from Palwal Aligarh Road, heavy traffic of 24418
PCUS per day was plying on the road as against the design of
3364 PCUS per day, which damaged the road. That according
to the contractor – respondent No.1 herein, he was required
to do heavy repair by incurring additional expenditure.
Disputes arose between the parties. A legal notice was served
upon the appellant making the claims. Disputes were not
resolved and therefore respondent No.1 – contractor invoked
the arbitration clause as per clauses 24 & 25 and
approached the High Court for appointment of an arbitrator
in exercise of power conferred under Section 11 (6) of the
Arbitration and Conciliation Act, 1996.
3.2 Vide order dated 23.04.2007, the High Court appointed Shri
R.S. Jindal, retired Chief Engineer, Delhi Development
Authority as the sole Arbitrator to adjudicate upon all the
disputes between the parties. That the contractor submitted
various claims including claim Nos. 1 and 8. For the purpose
of deciding the present appeals, claim Nos.1 and 8 are
relevant. The sole Arbitrator awarded a total sum of
Rs.1,51,95,400/ with respect to claim Nos.1 and 8.
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4. Feeling aggrieved and dissatisfied with the award declared by
the learned Arbitrator, the appellant preferred an application
before the Court under Section 34 of the Arbitration and
Conciliation Act, 1996, which came to be dismissed against
which the appellant – State preferred an appeal under
Section 37 of the Arbitration and Conciliation Act, 1996
before the High Court. By the impugned judgment and order
the High Court has dismissed the said appeal. Hence, the
State of Haryana has preferred the present appeals.
5. Shri Shyam Divan, learned Senior Advocate has appeared on
behalf of the State – appellant and Shri Ranjit Kumar,
learned Senior Advocate has appeared on behalf of the
respondent No.1 – contractor.
5.1 Shri Shyam Divan, learned Senior Advocate appearing on
behalf of the appellant submitted that the appellant has
already paid to respondent No.1 – contractor an amount of
Rs.1,03,50,263/ pursuant to the interim order dated
26.08.2016 passed by this Court.
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5.2 Shri Shyam Divan, learned Senior Advocate appearing on
behalf of the appellant has submitted that the arbitral award
is liable to be set aside on the following grounds:
(i) The award is in excess of claim;
(ii) The Arbitrator exceeded the scope of reference;
(iii) The Arbitrator has rewritten the contract with respect to
the amount payable which was specified in the contract.
5.3 Now, so far as ground No.1 that the award is in excess of
claim, it is vehemently submitted by Shri Shyam Divan,
learned Senior Advocate appearing on behalf of the appellant
that the contractor in its statement of claim had claimed an
amount of Rs. 1,03,50,263/ only under the claim Nos.1 and
8. It is submitted that despite the above the Arbitrator has
awarded a total sum of Rs.1,51,95,400/, which is in far
excess of amount claimed. It is submitted that the statement
of claim was never modified by the contractor and therefore,
the Arbitrator ought not to have awarded the sum/amount in
excess of the amount claimed.
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5.3.1 It is submitted that the differential amount of
Rs.48,45,137/ is in excess of claim and to that extent the
arbitral award is invalid and liable to be set aside. Reliance
is placed on the decision of this Court in the case of ONGC
Ltd. v. OffShore Enterprises Inc., (2011) 14 SCC 147
(para 16).
5.3.2 It is submitted that as held by this Court in the cases of
Associate Builders v. Delhi Development Authority,
(2015) 3 SCC 49 (para 36) and J.C. Budhraja v.
Chairman, Orissa Mining Corpn. Ltd. & Anr., (2008) 2
SCC 444 (para 3132), making an award in excess of claim
is clear cut an act exceeding the jurisdiction and amounts
to a misconduct of the Arbitrator.
5.4 Now, so far as ground No.2 namely, that the Arbitrator
exceeded the scope of reference, it is contended that the
Arbitrator cannot exceed the scope of reference.
5.4.1 It is submitted that the contractor invoked the arbitration
clause on 06.03.2006. The High Court appointed the sole
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Arbitrator on 23.04.2007 and the Arbitrator entered upon
reference on 19.05.2007. It is urged that by allowing the
claims for a period beyond 19.05.2007, the Arbitrator
exceeded the scope of reference.
5.4.2 It is submitted that an amount of Rs.57,96,000/ (approx.)
has been awarded for claims arising between 19.05.2007 to
31.07.2008 (calculated as amount for maintenance of road
@ Rs. 45,000/ per kilometre (km) per month). It is
submitted that it was not permissible for the Arbitrator to
exceed the scope of the reference beyond the date upon
entering reference and as a consequence the award is liable
to be set aside.
5.4.3 Learned senior counsel appearing on behalf of the
appellant has relied upon the decisions of this Court in the
cases of Indian Aluminium Cables Ltd. v. Haryana State
Electricity Board, 1996 (5) SCALE 708 (para 2) and MSK
Projects India (JV) Ltd. v. State of Rajasthan & Anr.
(2011) 10 SCC 573 (para 15), in support of his above
submissions that as the Arbitrator exceeded the scope of
reference and hence the award is liable to be set aside.
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5.5 In so far as the ground No.3 is concerned namely, the
Arbitrator has rewritten the contract with respect to the
amount payable which was specified in the contract, it is
submitted that the Arbitrator has rewritten the terms of the
contract by directing the appellant to pay the compensation
to respondent No.1 – contractor at the rate of Rs.45,000/
per km per month instead of mutually agreed contractual
rate of Rs.1,000/ per km per month. It is contended that it
was not open to the Arbitrator to rewrite the terms of the
contract and award the contractor a higher rate for the work
than the rate which was already fixed in the contract. It is
submitted that such an exercise is beyond the competence
and authority of the Arbitrator. Reliance is placed on the
decision of this Court in the case of Satyanarayana
Construction Company v. Union of India and Others
(2011) 15 SCC 101 (para 11).
5.6 It is further contended by Shri Divan, learned Senior
Advocate appearing on behalf of the appellant that even
otherwise, the amount awarded by the Arbitrator at
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Rs.45,000/ per km per month beyond the time period of
additional traffic i.e. from 31.07.2008 to 31.05.2010 i.e. till
the end of contract is wholly impermissible. It is submitted
that diversion of traffic on 9.2 km stretch of the road which
gave rise to the cause of action ceased to exist w.e.f. January
2008. It is submitted that however, the Arbitrator has
directed the appellant to make payment at Rs. 45,000/ per
km per month even beyond the time period of additional
traffic. It is contended that the aforesaid is wholly
impermissible.
6. Making the above submissions, it is prayed to allow the
present appeals.
7. Shri Ranjit Kumar, learned Senior Advocate appearing on
behalf of respondent No.1 – contractor, has vehemently
contended that the award passed by the Arbitrator cannot be
said to be (i) in excess of claim; (ii) exceeding the scope of
reference and (iii) rewriting the contract with respect to the
amount payable which was specified in the contract, as
submitted on behalf of the appellant. It is submitted that in
the statement of claim the contractor specifically stated that
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the amount has been worked out up to the month of May,
2007 and the details of expenditure beyond May, 2007 will be
submitted during the course of hearing. It is therefore
submitted that it cannot be said that claim Nos.1 and 8 were
restricted to Rs. 1,03,50,263/ only. It is urged that on
appreciation of the evidence on record the Arbitrator has
awarded Rs. 1,51,95,400/ for claim Nos.1 and 8, which in
any case cannot be said to be beyond the amount claimed in
the statement of claim.
7.1 It is next contended that it also cannot be said that the
award passed by the Arbitrator was beyond the scope of
reference. It is submitted that as such cause of action to
claim the additional amount arose due to overexpenditure
owing to maintenance of road due to diversion of traffic from
Palwal Aligarh Road to the present road which continued
even beyond 06.03.2006 and/or 23.04.2007 and 19.05.2007.
It is submitted that the amount awarded by the Arbitrator
under claim Nos.1 and 8 cannot be said to be exceeding the
scope of reference.
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7.2 It is further submitted that even the award passed by the
Arbitrator to make payment at Rs.45,000/ per km per
month cannot be said to be rewriting of the contract with
respect to the amount payable which was specified in the
contract. It is urged that at the time when the contract was
written/entered into between the parties the contract rate of
Rs.1,000/ per km per month was agreed against the design
of 3364 PCUS per day. However, after the contract was
entered into and the contractor acted as per the contract
there was diversion of traffic from Palwal Aligarh Road to the
present road and the heavy traffic of 24418 PCUS per day
was plying on the road as against the design of 3364 PCUS
per day and therefore the contractor was required to incur
additional expenditure at Rs.45,000/ per km per month. It
is submitted that the amount awarded by the Arbitrator at
Rs.45,000/ per km per month cannot be said to be rewriting
the contract with respect to the amount payable than what
was specified in the contract i.e. Rs.1,000/ per km per
month.
7.3 However, Shri Ranjit Kumar, learned Senior Advocate
appearing on behalf of the contractor is not in a position to
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justify the award by which the Arbitrator has awarded the
payment at Rs.45,000/ per km per month even beyond the
time period of additional traffic i.e. up to 31.05.2010 i.e. till
the end of the contract.
8. We have heard the learned senior counsel appearing on
behalf of the respective parties at length and given our
thoughtful consideration.
9. That the contractor was awarded the contract for
maintenance, etc. The contract amount was for
Rs.5,26,59,688/. The rate of maintenance of the road as
accepted was Rs.12,000/ per km per annum or Rs.1,000/
per km per month. The maintenance contract was valid up to
31.07.2010. When the contract was entered into, the
contract was meant for only 3364 PCUS per day. However,
due to diversion of traffic from Palwal Aligarh Road to the
present road, the contractor was required to incur additional
expenditure on the maintenance due to increase in the traffic
and plying the additional commercial vehicles. Therefore the
contractor claimed the amount towards additional
expenditure for maintenance which was due to increase in
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the traffic and plying more commercial vehicles. On
appreciation of evidence the Arbitrator has determined the
loss at Rs.45,000/ per km per month (claim Nos.1 and 8).
9.1 The case on behalf of the appellant that as in the statement
of claim, the claimant claimed an amount of
Rs.1,03,50,263/ under the claim Nos. 1 and 8 and the
Arbitrator has awarded Rs.1,51,95,400/, the same is in far
excess of amount claimed and therefore the award is in
excess of amount claimed has no substance. When the
statement of claim submitted by the contractor is seen, it is
specifically stated by the claimant that the amount of
Rs.1,03,50,263/ has been worked out up to May, 2007 and
the details of expenditure beyond May, 2007 will be
submitted during the course of hearing. It is specifically
stated that expenditure incurred up to May, 2007 works out
to Rs.1,03,50,263/. Therefore, the amount awarded by the
Arbitrator cannot be said to be in excess of the claim.
9.2 Now so far as the submission on behalf of the appellant that
the Arbitrator exceeded the scope of reference while awarding
an amount beyond 19.05.2007 – the date on which the High
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Court appointed the sole Arbitrator is concerned, the same
has no substance. The case on behalf of the appellant that
the Arbitrator ought to have restricted the claim either up to
06.03.2006 – the date on which the contractor invoked the
arbitration clause or 23.04.2007, the date on which the High
Court appointed the sole Arbitrator or at least up to
19.05.2007 – the date on which the Arbitrator entered into
reference, is concerned, it is required to be noted that the
claim made by the Arbitrator was till the traffic was diverted
which was up to January, 2008. Therefore, the Arbitrator
was justified in awarding the amount beyond the aforesaid
periods and till the additional traffic was diverted due to the
closure of Palwal Aligarh Road.
9.3 Now the submission on behalf of the appellant is that by
awarding Rs.45,000/ per km per month the Arbitrator has
rewritten the contract with respect to the amount payable
than what was specified in the contract. It is urged that
under the contract mutually agreed contractual rate was
Rs.1,000/ per km per month and therefore any amount
higher than Rs.1,000/ per km per month is beyond the
terms and conditions of the contract, is also without
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substance. It is noted that at the time when the contract was
entered into the mutually agreed, the rate fixed was
Rs.1,000/ per km per month and the estimated traffic was
3364 PCUS per day. The cause of action arose subsequently
due to diversion of traffic from Palwal Aligarh Road and
plying of more heavy vehicles due to which the contractor
was required to incur additional expenditure for maintenance
of the road. Therefore, the contractor was entitled to the loss
on account of the additional expenditure incurred for
maintenance of the road due to increase in the traffic
because of the closure of the Palwal Aligarh Road and
diversion of the traffic to the present road. Therefore, by no
stretch of imagination it can be said that there was rewriting
the terms of the contract as submitted on behalf of the
appellant.
9.4 In view of the above findings, none of the decisions of this
Court relied upon by the learned senior counsel appearing on
behalf of the appellant are applicable to the facts of the case
on hand as the same are not of any assistance to the
appellant.
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9.5 However, at the same time Shri Divan, learned Senior
Advocate, appearing on behalf of the appellant is justified in
submitting that the Arbitrator ought not to have awarded an
amount of Rs.45,000/ per km per month beyond the time
period of additional traffic. The Arbitrator has awarded the
loss/amount at Rs.45,000/ per km per month up to
31.05.2010 i.e. till the end of the contract which is wholly
impermissible diversion of the additional traffic ceased to
exist w.e.f. January, 2008. Therefore, the Arbitrator ought
not to have awarded any amount beyond the above time
period beyond January, 2008. To that extent the award
passed by the Arbitrator can be said to be perverse and to
that extent the present appeals are required to be allowed.
10. In view of the above and for the reasons stated above, the
present appeals are allowed in part. The award passed by the
Arbitrator awarding the amount/compensation at
Rs.45,000/ per km per month up to January, 2008 under
claim Nos.1 and 8 is hereby confirmed. The award passed by
the Arbitrator awarding the amount/compensation at
Rs.45,000/ per km per month from February, 2008 to
31.05.2010 i.e. till the end of the contract is hereby quashed
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and set aside. The amount due and payable has to be worked
out accordingly. The present appeals are partly allowed to the
aforesaid extent. In the facts and circumstances of the case
there shall be no order as to costs.
…………………………………J.
(M. R. SHAH)
…………………………………J.
(B.V. NAGARATHNA)
New Delhi,
December 14, 2021.
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