Holding

The arbitrator was within his jurisdiction to decide the claim, and the non‑speaking award is restored.

Summary

Asian Techs Ltd. entered a construction contract with the Union of India, but the work was delayed due to material alterations and extensions granted by the respondents. The contractor claimed additional payment and invoked the arbitration clause; the arbitrator issued a non‑speaking award in its favour. The Kerala High Court set aside the award, holding that clauses 11(C) and 62(G) gave finality to the Commander Works Engineer’s (CWE) decision and that the arbitrator had exceeded his jurisdiction. The Supreme Court examined the contract clauses, the pecuniary limits of the CWE under MES Regulation 439, and the limited scope of court interference with non‑speaking awards under the Arbitration Act, 1940. It held that the finality clause applied only to deviations, not to material alterations, and that the CWE’s jurisdiction was limited to disputes not exceeding Rs 20,000, so the arbitrator was within jurisdiction. Consequently, the Court restored the arbitrator’s award and allowed the appeals.

Issues considered

The arbitrator’s jurisdiction to decide the claim despite the contract’s finality clauses (clause 11(C) and 62(G)).
Whether the decision of the Commander Works Engineer was final and binding and within its pecuniary jurisdiction.
Whether a court may interfere with a non‑speaking award under the Arbitration Act, 1940.
The applicability of MES Regulations 1968, Regulation 439, to the CWE’s authority.

Legislation cited

Subjects

ArbitrationJurisdictionNon‑speaking awardFinality clauseContract alterationMES RegulationsPecuniary jurisdictionSupreme CourtAward restoration

Judgment

[2009] 14 (ADDL.) S.C.R. 182

A-- MIS ASIAN TECHS LTD. +
v.
UNION OF INDIA & OTHERS
(Civil Appeal No. 311-312 of 2003)
SEPTEMBER 7, 2009
B
[MARKANDEY KATJU AND ASOK
KUMAR GANGULY, JJ.]
..t.

Arbitration:
c
Jurisdiction of arbitrator - Appellant-contractor entered ·
into works contract with respondents - Material alteration and
addition in work done at the instance of respondents -
Consequent delay in execution of contract - Dispute over
D claim raised by appellant - Arbitration clause in contract ·--r
invoked - Arbitrator passed non-speaking award in favour of
appellant - Decree passed in terms of the award - Set aside
by High Court on ground that the arbitrator travelled beyond
the. terms of reference - Propriety of - Held: Not prQper -
On facts, delay in execution of the contract was solely due to
E
default of the respondents - Relevant clauses of the contract
made it clear that the arbitrator was well within its jurisdiction
-J.
to decide the matter - Award of arbitrator restored - MES
Regulations 1968 - Regulation 439.

F Non-speaking arbitral award - Interference by Court, -
Scope of.

Appellant-contractor entered into a works contract
with the respondents. There was material alteration and
addition in the work done at the instance of the
G
respondents and consequently the execution of the
contract was delayed. Dispute arose over the claim raised -:r
by the appellant. The matter was referred to arbitration in
terms of arbitration clause in the contract. The Arbitrator
H 182
ASIAN TECHS LTD. v. UNION OF INDIA & ORS. 183

passed a non-speaking award in favour of the appellant. A
The Trial court dismissed the application filed for setting
aside the award and passed decree in terms thereof. On
appeal an~evision, the High Court set aside the award
holding that under the finality clause under clauses 11 (C)
and 62(G) of the contract, the decision of the Commander a
Works Engineer (CWE) was final and binding and
exempted from purview of the arbitration clause i.e.
clause 70 of the contract and consequently the arbitrator
had travelled beyond the terms of the reference. Hence
the present appeals. c
Allowing the appeals, the Court
HELD: 1.1. In the present case, it is apparent that the
delay in the execution of the contract was solely due to
)- the default of the respondents. The facts of the case show D
the repeated defaults by the respondents due to which
the contract could not be completed in time. The appellant
was not ready to carry out the work beyond the
contracted period otherwise than on separate work
orders and the subsequent correspondence makes it E
clear that it was on the specific assurance given by the
respondent to the appellant to continue the work and that
>-- the rates would be decided across the table that the
appellant went ahead with the work. Hence it is now not
open to the respondent to contend that no claim for F
further amount can be made due to clause 11 (C) and that
the arbitrator would have no jurisdiction to award the
-< same. Clause 62(G) read with clause 7 of the contract
makes it clear that the finality provided under clause 62(G)
applies only to cases of 'deviation' and not in a case
when there is a material alteration and addition in the work G
, -+- done, as is clear from the correspondence between the
parties in the present case. [Paras 12, 13 and 14] (191-D;
192-H; 193-A-C]
1.2. Moreover, Regulation 439 of the MES H
184 SUPREME COURT REPORTS [2009] 14 (AODL.) S.C.R.

A Regulations 1968 fixes the pecuniary jurisdiction of the ~
ewe at Rs.20,000/- only. It is evident that the CWe has
no jurisdiction to decide the dispute where the valuation
is above Rs;20,000/-, as in the present case. The finality
of the decision of the ewe applies ~nly where the
B dispute is not exceeding Rs.20,000/-. Hence, the arbitrator
was within his jurisdiction to decide the matter in
question. [Para 15] [193-E-F]

1.3. Also,. in the case of non-speaking awards under
C the Arbitration Act, 1940, the Court has very little scope
of interference. [Para 16] [193-G]

State Qf Rajasthan vs. Nav Bharat Construction Co ..
(2006) 1 SCC 86, Rajpur Development Authority vs.
Chokhamal Constructions (1989) 2 SCC 721; Arosan
D Enterprises Ltd. vs. Union of India (1999) 9 SCC 449, /spat
Engineering vs., Steel Authority of India (2001) 6 SCC 347;
D.D. Sharma, vs. Union of India (2004) 5 SCC 325; National
Insurance Company Ltd. vs. Boghara Po/yfab Pvt. Ltd. (2009)
1 SCC 267; Chairman and Managing Director, NTPC Ltd. vs.
E Reshmi Constructions, Builders and Contractors (2004) 2
SCC 663; Board of Trustees, Port of Calcutta vs. Engineers-
De-Space-Age (1996) 1 sec· 516 and Bharat Drilling &
Treatment Pvt. Ltd. vs. State of Jharkhand & Others
_[C.A.No.10216 of 2003; decided by Supreme Court on 20-
F 8-09], relied on.
Essar Constructions vs. N.P. Ramakrishna Reddy (2000)
6 sec 94, referred to.
Case Law Reference:
G referred to Par.a 12
c2000) 6 sec 94
(2006) 1 sec 86 relied on Para 16
(1989) 2 sec 121 relied on Para 16

H
ASIAN TECHS LTD. v. UNION OF INDIA & ORS. 185

_._ (1999) 9 sec 449 relied on Para 16 A

.' (2001) 6 sec 347 relied on Para 16
(2004) 5 sec 325 relied on Para 16
(2009) 1 sec 261 . relied on Para 17 B
(2004) 2 sec 663 relied on Para 17
(1996) 1 sec 516 relied on Para 18
CIVIL APPELLALTE JURISDICTION: Civil Appeal Nos.
311-'312 of 2003. c
From the Judgment & Order dated 21.3.2002 of the High
Court of Kerala at Ernakulam in M.F.A.No. 452 of 1997 and
C.R.P. No. 1906 of 1998.
~ .,._
C.A. Sundaram, Manoj V. George, Rohini Musa, Babu
b
Thomas, Alex Joseph, Abhishek Gupta, Zafar lnayat, Anandh
Kannan, T.V. George for the Appellant.

Mohan Jain, ASG, C.V. Subba Rao, Dinesh Thakur, Anil
Katiyar, B.V. Balaram Das (NP) for the Respondents. E

).. The Judgment of the Court was delivered by
-t'
MARKANDEY KATJU, J. 1. These appeals have been
.., filed by special leave against the impugned judgment and order
dated 21st March, 2002 of the Kerala High Court in MFA No. F
"' 452 of 1997.

2. Heard learned counsel for the parties and perused
record.
G
3. The appellant, Asian Techs Ltd. entered into an
agreement dated 2.9.1986 with the Union of India for
construction of 'Provision of Lab and Administrative Block' etc
for NPOL at Kakkanad, Cochin. The probable amount of
contract was Rs. 3,58,96,665/-, and the construction was to be
H

-
186 SUPREME COURT REPORTS (2009] 14 (ADDL.) S.C.R.

~
A completed before 8.9.1988. The period of the contract was 24
J.--
months. Ext R1 is the agreement and Ext R1(a) is the General
conditions of contract known as IAFW-2249. According to the
appellant, due to the delay caused by the respondent, the
project could not be completed by 30.6.1990. According to the
B appellant, the delay was because the site of the work proposed
was changed by the respondent subsequent to the signing of
the agreement. Also, the design and structural particulars of the
building were fundamentally altered by the respondent by
omitting the basement ·floor itself. The respondent nominated
c the suppliers of prime cost items belatedly. They did not finalize
the design and structural particulars of the work within the
period of the contract which expired on 8.9.1988 and dragged
on the works, resulting in suspension of the ongoing works and
making the labour and machinery items idle. By efflux of time
the cost of labour, fuel, materials etc. increased. The
D -( ._
respondents assured to settle the rates for extra items across
the table and persuaded the petitioner to continue to carry out
and complete the works. The respondent No. 2 allowed
unconditional extension of time at the first instance on
10.11.1988 and then from time to time, without levy of liquidated
E damages. There was no agreement of whatsoever nature in
respect of rates for works carried out between 8.9.1988 and
30.6.1990, or on rates for extra and altered _items. The -4
respondent did not pay even at the agreed rates in the
-·
agreement in respect of certain items and avoided reference
F to rates in the MES schedule of rates for many other items, for
which rates were to be derived. The contract stipulated
settlement of rates for extra items of work involved by
Respondent No. 2, being the accepting officer.

G 4. The respondents prepared the last bill on 27.2.1991 for
works completed on 30.6.1990, which was received under
protest on 7.5.1991. The general condition 7(d) of IAFW 2249 -r·
forming part of the contract reserved rights of the petitioner and
Respondent No. 2, to correct any mistake in fixation of rates
H
~

ASIAN TECHS LTD. v. UNION OF INDIA & ORS. 187
[MARKANDEY KATJU, J.)

~'
at any time, even after receipt of the last payment. It is alleged A
that the respondent No. 2 failed to communicate any decision
on objections to incorrect fixation of rates, duly notified from time
to time by the petitioner. The rates were fixed by a board of
subordinate officials, behind the back of the petitioner, violating
the contract, and thus huge amounts due and payable to the B
petitioner were wrongfully withheld.
' . ..
( 5. The petitioner invoked the arbitration clause in the
agreement for settlement of the disputes and differences which
arose and sent a demand notice dated 10.12.1991 for payment
of Rs. 1,24,58, 108/- together with interest thereon. Respondent
c
No. 2 on 15.6.1992 intimated readiness and willingness to refer
the disputes and differences as specified in the notice dated
10.12.1991 to arbitration. The Chief Engineer Air Force was

- )-
appointed the sole Arbitrator on 15.12.1992 and the
respondents participated in arbitration proceeding without any
demur or protest.
D

6. The Sole Arbitrator, found patent mistakes in fixation of '
rates of extra items and determined unpaid amounts and
passed a non-speaking award dated 30.12.1993 in favour of E
the petitioner for payment of Rs. 39, 75,484/- together with past,
'>.- pendente lite and future interest and rejected the counter claims.
The Subordinate Judge's Court, Ernakulam passed a decree
in terms of the Award, on 8.10.96, while dismissing the
application for setting aside the award by a common judgment. F
The respondents filed M.F.A. No. 452 of 1997 and CRP No.
1906 of 1998 before the High Court of Kerala, Ernakulam,
challenging the decree in terms of the award. The High Court
set aside the non-speaking Award, except in respect of claim
No. 12 for payment of Rs. 1,20,000/- wrongfully withheld by the G
respondents.

7. It is alleged by the appellant that the High Court
erroneously allowed C.R.P. No. 1906 of 1998, contrary to the
. law declared by this Court in Essar Constructions vs. N.P.
Ramakrishna Reddy (2000) 6 SCC 94, 103. In paragraph 33 H
188 SUPREME COURT REPORTS [2009] 14 (ADDL.} S.C.R.

A of the said judgment it was observed that an application under ~-
Section 115 ·of the Code of Civil Procedure, 1908, did not lie
to challenge a decree passed in terms of the Award. · ·'
8. The appellant has further alleged that the High Court
B ignored a long line of decisions of this Court declaring that it
is not open to the Court to examine the correctness of a non-
speaking award on a reappraisal of evidence, nor for that
purpose was it permissible to interpret the con~ract. It is alleged ·>-
that the High Court did not refer t.o the memorandum of appeal
filed by the respondents. It is alleged that the High Court without
c stating any. reason rejected the contention of the petitioner that
the Commander Works Engineer (CWE) was not the competent
authority to fix the rates for extra, deviated and additional items
under the contract entered into with Respondent No. 2. and
beyond the period of contract and that his pecuniary jurisdiction
D was only up to Rs. 20,000/-, stipulated in MES Regul~tioh, 1968
and that no final decision on the objections of the· petitioner
against erroneous fixation of rates was ever communicated by
~
-
the Chief Engineer, who is the accepting officer. It is alleged
that the.High Court erroneously assumed that extensions of time
E granted by Respondent No. 2. from time to time, deprived the
petitioner of its right for due payment at the then prevailing rates
for delayed works at the instance of the respondents. _)_

9. The High Court by the impugned order allowed the
F appeal and revision making the following observations:
......
"We, therefore, hold that the award passed by the arbitrator
. in respect of claim Nos. 1 to 3, 5, 9, 17, 19, 21, 23, 24,
26, 30, 33, 35, 37, 38, 40, 41, 44 and 46 is against the
conditions agreed to by the contracting parties and in
G. conscious disregard of the terms of the contract and also
the arbitration clause from which the arbitrator derives his
authority. We are, however, not interfering with the award
in respect of claim No. 12 alone, which in our view is
binding on the appellants. We hold that the arbitration
H clause 70 was conditional one giving finality to the
ASIAN TECHS LTD. v. UNION OF INDIA & ORS. 189
[MARKANDEY KATJU, J.]
decisions of CWE as per the various provisions, clauses A
62(G) and 11 (C) of the contract. The award of the
arbitrator and the orders of the court below in Arbitration
O.P. Nos. 4 and 18of1994 to the Extent to which they are
covered by clauses 62(G) and 11(C) except claim No. 12
are set aside and the Arbitration O.P. No. 18of1994 filed B
by Union of India is allowed as above. The appeal and the
revision are allowed as above. In the facts and
circumstances of this case, we are not awarding costs."

10. It can be seen that the High Court has set aside the C
arbitrator's award holding that under the finality clause under
clauses 11 (C) and 62(G), the decision of the Commander
Works Engineer (CWE) is final and binding and has been
exempted from the purview of the arbitration clause, which is
clause 70 of the contract. Thus the High Court held that the
arbitrator travelled beyond the terms of reference. D

11. In this connection we may refer to clause 70 of the
contract which is the arbitration clause. The said clause reads
as follows:
E
"70. Arbitration
),.
All disputes, between the parties to the Contract (other than
those for which the decision of the CWE or any other
person is by the Contract expressed to be final and
binding) shall, after written notice by either party to the F
Contract to the other of them, be referred to the sole
arbitration of an Engineer Office to ·be appointed by the
authority mentioned in the tender documents."

Clause 11 of the contract reads as follows: G
"11. Time, delay and Extension

(A) Time is of the essence of the contract and is specified

... in
Order.
contract documents or in each individual Works
H
190 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.

A As soon as possible after the contract is let or any
substantial Works Order is placed and before work under
it has begun, the G.E. And the Contractor shall agree upon
a Time Progress Chart. The Chart shall be prepared in
direct relation to the time stated in the contract documents
B or the Works Order for completion of the individual items
thereof, and/or the Contract or Works order as a whole.

(B) If the works be delayed:

(a) by reason of non-availability of Government
C stores mentioned in Schedule 13; or

(b) by reason of non-availa~ility or breakdown of
Govt. Tools and Plant mentioned in Schedule 'C'
then, in any such event, notwithstanding the
D provisions hereinbefore contained, the G.E. May in
his discretion grant such extension of time as may
appear reasonable to him and the Contractor shall
be bound to complete the works within such
extended time. In the event of the Contractor not
agreeing to the extension granted by the Garrison
E
Engineer, the matter shall be referred to the
Accepting Officer (or CWE in case of contract
accepted by Garrison Engineer) whose decision
shall be final and binding.

F (C) No claim in respect of compensation or otherwise,
hoW5oever arising, as a result of extensions granted under
Conditions (A) and (B) above shall be admitted."

Clause 62(G) of the Contract states as under:
G "(G) For all Contracts -

If any work, the rate for which cannot be obtained by
any of the methods referred to in paras (A) to (E) above,
has been ordered on the contractor, the rate shall be
H decided by the G.E. On the basis of the cost to the
ASIAN TECHS LTD. v. UNION OF INDIA & ORS. 191
[MARKANDEY KATJU, J.]
Contractor at Site of Works plus 10% to cover all A
overheads and profit. Provided that if the contractor is not
satisfied with the decision of the G.E. He shall be entitled
to represent the matter to the C.W.E. Within seven days
of receipt of the G.E.'s decision and the decision of the
C.W.E. Thereon shall be final and binding. a
If any alterations or additions (other than those
authorised to be executed by day work or for an agreed
sum) have been covered up by the Contractor without his
having given notice of his intention to do so, the Engineer- C
in-Charge shall be entitled to appraise the value thereof
and in the event of any dispute the decision of the G.E.
Thereon shall be final and binding.".

12. In the present case it is apparent that the delay in the
execution of the contract was solely due to the default of the D
respondents. In this connection we may refer to the following
facts.

(1) The Assistant Garrison Engineer sent letter dated
21.06.1988 admitting suspension of works of beams & of . E
main roof slab building, due to non-finalization of design.

(2) The user of the building i.e. NPOL directed stoppage
of many items of work pending their final decisions on
them by letter dated 17.09.1988.
F
(3) On 26.9.1987 the appellant notified the respondents
about the idling due to non-finalization of various structural
particulars, and demanded compensation. The appellant
again sent notice dated 9.2.1988 intimating the
respondent about idling at the site and losses due to non- G
finalization of designs and particulars. The Assistant
Garrison Engineer sent a letter on 21.6.1988 admitting
suspension of works of beams and of main roof slab
building due to non-finalization of design.

(4) On 17.9.1988 the user of the building i.e. NPOL H
192 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.

A directed stoppage of many items of works pending their ;....
final decision on them. Also, by letter dated 26.9.1988
respondent No. 3 directed stoppage of construction of )-

many items of work pending their final decision on
structural particulars.
B
(5) On 10.11.1988 respondent No. 3 intimated
unconditional grant of extension of time from 8.9.1988 to
31.1.1989 by respondent No. 2. .A_ .
(6) The appellant by letter dated 24.11·.1988 requested
c respondent Nos. 2 & 3 to settle accounts of the value of
!
the works already carried out, to make payment in terms )
I

of the agreement and to close the agreement due to

D
continued suspension of works and increased cost of
construction due to efflux .of time so as to arrange the
remaining· works through separate work orders

(7) The Assistant Garrison Engineer of respondent No. 3
sent a letter dated 11.10.1989 assuring the petitioner to
·-(
' ,.___
(-

settle rates across the table and directed to carry out such
items, agreeing to take up objections as to rates, for
E
settlement by the appropriate authority.

(8) Respondent No. 3 on 23.11.1990 wrote to the appellant --'.
directing it to forvard paid vouchers for items to take up "'
the objections as to rates before the respondent No. 2, who
F was the Accepting Officer.
.,..
. ~~

(9) The last bill amount of Rs. 7,87, 143/- was paid by
respondent No. 3 which was received by the appellant
under protest.
G (10) The ·appellant issued demand notice for paynient of
Rs.1,24,58, 108/- being the unpaid amount allegedly due Y'
:-
and payable to it. -
All the above facts show the repeated defaults by the
H respondents due to which the contract could not be completed
ASIAN TECHS LTD. v. UNION OF INDIA & ORS. 193
[MARKANDEY KAT JU, J.]

~
J. in time. A

13. The letter dated 24.11.1988 makes it clear that the
appellant was not ready to carry out the work beyon~ the
contracted period otherwise than on separate work orders, and
the subsequent correspondence like the letter dated B
11.10.1989 makes it clear that it was on the specific assurance
given by the respondent to the appellant to continue the work
and that the rates would be decided across the table that the
appellant went ahead with the work. Hence, in our opinion it is
now not open to the respondent to contend that no claim for
further amount can be made due to clause 11 (C) and that the
c
arbitrator would have no jurisdiction to award the same.

14. Clause 62(G) read with clause 7 make it clear that the
y finality provided under clause 62(G) applies only to cases of
'.deviation' and not in a case when there is a material alteration D
and addition in the work done, as is clear from the
correspondence between the parties in the present case.

15. Moreover, Regulation 439 of tne MES Regulations
1968 fixes the pecuniary jurisdiction of the CWE at Rs. 20,000/
iE
- only. It is evident that the CWE has no jurisdiction to decide
';.. the dispute where the valuation is above Rs. 20,000/-, as in the
present case. The finality of the decision of the CWE applies
only where the dispute is not exceeding Rs. 20,000/-. Hence,
in our opinion, the arbitrator was within his jurisdiction to decide
the matter in question.
F

16. It is well-settled that in the case of non-speaking
awards under the Arbitration Act, 1940 the Court has very little
scope of interference vide State of Rajasthan vs. Nav Bharat
Construction Co. (2006) 1 SCC 86, Raipur Development G
y
Authority vs. Chokhamal Constructions (1989) 2 SCC 721,
Arosan Enterprises Ltd. vs. Union of India (1999) 9 SCC 449,
/spat Engineering vs. Steel Authority of India (2001) 6 SCC
347, D.D. Sharma vs. Union of India (2004) 5 SCC 325.
H
194 SUPREME COURT REPORTS [2009] 14 (ADDL.) S.C.R.

A 17. It has been held by this Court in National Insurance ~
Company Ltd. vs. Boghara Polyfab Pvt. Ltd (2009) 1 SCC
267 that even in the case of issuance of full and final discharge/
settlement voucher/no-dues certificate the arbitrator or Court
can go into the question whether the liability has been satisfie~
B or not. This decision has followed the view taken in Chairman·
and Managing Director, NTPC Ltd. vs. Reshmi Constructions,
Builders and Contractors (2004) 2 SCC 663 (vide paragraphs
27 and 28). ~-

c Board18.ofApart from the above, it has been held by this Court in
Trustees, Port of Calcutta vs. Engineers-De-Space-
Age (1996) 1 SCC 516, that a clause like clause 11 only
prohibits the department from entertaining the claim, but it did
not· prohibit the arbitrator from entertaining it. This view has .
been followed by another Bench of this Court in Bharat Drilling
D & Treatment Pvt. Ltd..vs. State of Jharkhand & others in Civil -"(

Appeal No. 10216 of 2003 decided on 20th August, 2009.

19. For the reasons given above we are not in agreement
with the view taken by the High Court that the award of the
E arbitrator was without jurisdiction. In the facts and circumstances
of the case, we allow these appeals and set aside the
impugned order of the High Court and restore the award of the
~
arbitrator. No costs.

B.B.B. Appeals allowed.