Holding

The Supreme Court held that the High Court correctly set aside the arbitrator’s award for claims 2 and 3 but should not have interfered with the future portion of claim 1, as the arbitration clause encompassed all such disputes.

Summary

The contractors Mis. Shyama Charan Agarwala & Sons entered into construction contracts with the Union of India and, after disputes arose, referred the matters to arbitration. The arbitrator awarded reimbursement for additional costs relating to stone aggregate, excavation of rock, and work in a restricted area. The Union of India challenged the award under Section 39 of the Arbitration Act, 1940, and the High Court set aside the award for the future portion of the stone‑aggregate claim and for claims 2 and 3, while upholding the award for the quantity already delivered. The contractors appealed, arguing that the High Court exceeded its jurisdiction and that the arbitrator’s interpretation of the contract was within his remit. The Supreme Court held that the High Court was correct in setting aside claims 2 and 3 but was wrong to interfere with the future portion of claim 1, as the arbitration clause covered all disputes. Consequently, the contractors' appeals were partly allowed and the Union of India's appeals were dismissed, with no order for costs.

Issues considered

The scope of jurisdiction of the High Court under Section 39 of the Arbitration Act, 1940 to set aside an arbitrator’s award.
Whether the arbitrator acted beyond his jurisdiction or committed an error apparent on the face of the award in claims 1 (future period), 2 and 3.
Whether the court may interfere with the arbitrator’s interpretation of contract clauses.
Whether the award for future stone‑aggregate supply fell within the terms of reference under the arbitration clause.

Legislation cited

Arbitration Act, 1940s. 14, s. 30, s. 33, s. 39

Subjects

ArbitrationSection 39Award interferenceContract interpretationJurisdictionConstruction contractStone aggregateFuture claim

Judgment

A MIS. SHYAMA CHARAN AGARWALA AND SONS
'v.
UNION OF INDIA

JULY 15, 2002

B [D.P. MOHAPATRA AND P. VENKATARAMA REDDI, JJ.]

ArbitNtitJn Act, 1940-Section 39-Arbitration award-:-Scope of
interfere»~ by Court-Parties entering into contract for construction work-
C Disputes referred to arbitrator-Arbitrator accepting the claim and passing
t~ t:iWord-Award made rule ofthe court-High Court partly allowing claims-
Justification of.
(
Appellant-contractors and respondents entered into contract for
tertain construction work. Before the work was completed disputes arose
D between the parties. The disputes were referred for arbitration. Appellant-
contractors claimed reimbursement of additional cost on account Of the
procurement of stone aggregate from crushers of outside sources in lieu
of local sources; excavation encountering rock other than soft/disintegrated
rock/laterite rock and reimbursement of additional costs for working in
restricted area. Arbitrator accepted the claims and passed an award. Civil
E Judge made award Rule of the Court. Aggrieved, respondent filed appeals
under Section 39 of the Arbitration Act, 1940. High Court partly allowed
the appeals. Hence the present appeals.

Appellants-contractors contended that High Court exceeded the
limits of the jurisdiction vested under Section 39 of the Act in deciding
F the appeals filed by respondent and in setting aside the award of the
arbitrator in respect of claim nos. 2 and 3. It further contended that even
assuming that the High Court found that the arbitrator had mis-
interpreted the relevant clauses of the agreement, it was not open to it to
interfere with the award since there was no error of law apparent on the ·
G face of the award and the matter relating to interpretation of the
conditions in the agreement was within the jurisdiction of the arbitrator.

Respondent contended that the award of the arbitrator relating to
part of claim nos. 1 and claim nos. 2 and 3, was contrary to the specific
conditions provided in the agreement, and, therefore, was patently
H 148
SHYAMA CHARAN AGAR WALA v. U.0.1. 149
erroneous and uncalled for.. It w~~ also contended that the arbitrator being A
a creature of the agreemeut cuuld not Ignore the relevant stipulatim1s in
the contract and travel beyond the terms of the contract.

Disposing of the appeals, the Court

HELD: 1.1, High Court did not exceed its jurisdiction in interfering B
with the award nor failed to exercise the jurisdiction vested in it to set
aside the award. The approach of the High Court cannot be said to be
contrary to the well settled prlnclples governing the scope of interference
with the award of the arbitrator under the old Act. Regarding the question
whether the contract contemplates the use of stone aggregate and stone C
metal from the local sources only, the source of supply being silent in the
relevant clause, the arbitrator can be said to have taken a reasonably
possible view and, therefore, High Court has rightly declined to set aside
, the award in so far as the quantity of stone aggregate/stone metal brought
to site up to the date of filing of claim is concerned. (172-D, E; 173-F, G]
D
1.2. The award in so far as the future period is concerned, that is
subsequent to the date of filing of claim statement, High Court set aside
the award since such a claim did not form part of terms of reference, and
that the future claim In respect of stone aggregate would be subject to
various factors including market conditions and whether the shortage E
continued. It is clear from the arbitration clause that all disputes between
the parties to the contract (other than excepted matters) can be referred
to arbitration. The eon tractor did make a claim in respect of future period
also. The document appointing the arbitrator would show that the
arbitrator was required to decide the disputes arising between the parties.
It is not possible to hold that claim No.1 in so far as it relates to future F
period during which the contract work continued is beyond the scope of
reference or outside the ambit of arbitration clause. The aim of arbitration
is to settle all the disputes between the parties and to avoid further
litigation. There is no legal justification in restricting the scope of
arbitration in the manner in which the High Court did. The observations G
of High Court that conditions may not be the same for the future and,
therefore, the arbitrator was incompetent to make an award for the future
period cannot be supported for the simple reason that the extra rate will
become applicable only in respect of quantities brought from sources other
than local. It has never been the case of respondent either before the
arbitrator or the High Court or even this Court that the situation had H
150 SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A changed after the date of filing of claim statement and that the stone
aggregate could be secured at lesser rates from local sources or otherwise.
Therefore, High Court ought not to have interfered with the award in so
far as claim No.1 is concerned in any respect.
1172-H; 173-A-D, G, H; 174-Al

B 1.3. Regarding the other two claims, on a perusal of the judgment
of High Court and on consideration of the relevant clauses, the judgment
does not suffer from any serious error in the approach to the matter. In
regard to claim No. 2, though the High Court may not be j~stified in
observing that the arbitrator took undue interest in trying to ascertain
C the classification of strata, High Court is well justified in holding that the
view taken by the arbitrator is not at all a reasonably possible view and
in fad he ignored one of the relevant clauses. The arbitrator was carried
away by the fact that chiselling had to be done in view of the hardness of
rock and did not choose to give a finding that what was encountered by l
D the contractor was something other than laterite rock which is mentioned
in the agreement. As regards the other claim, arbitrator again ignored
the relevant clauses in the agreement and came to the perverse conclusion
that the site became restricted on account of certain security measures
enforced in the area. The award of sum vis-a-vis this claim is clearly
outside the terms of contract. Thus, High Court rightly set aside the award
E on this aspect. (174-B-El

State of Orissa v. B.N. Agarwal/a, (1997] 2 SCC 469; Coimbatore
District Podu Thozil/ar Samgam represented by its Secretary v. Ba/asubramania
Foundry and Ors., (1987] 3 SCC 723; Municipal Corporation of Delhi v.
F Mis. Jagan Nath Ashok Kumar and Anr., (1987) 4 SCC 497; Mis. Sudarsan
Trading Co. v. Government of Kera/a and Anr., (1989) 2 SCC 38; Steel
Authority of India Ltd v. J.C. Budharaja, Government and Mining Contractor
(1999) 8 SCC 122; Grid Corporation of Orissa Ltd and Anr. v. Ba/asore
Technical School, (2000) 9 SCC 552; N. Chellappan v. Secy., Kera/a SEB,
(1975) 1SCC289 and [nd_1.1.E,_ngineering and Textiles Ltd v. Delhi Development
G Authority, (2001) 5 sec 69i, referred to.

CIVIL ORIGINAL JURISDICTION : Civil Appeal Nos. 4040-41 of
2002.

From the Judgment and Order dated 29.2.2000 of the High Court of
H Bombay at Goa in Arbitration Act Nos. 2/96 and 3196.
SHYAMACHARAN AGAR WALA v. U.0.1. [D.P. MOHAPATRA,J.) 151
WIT!i A
C.A. Nos. 4043-44 of 2002.

V.A. Mohta, Pr~hant Kumar, Ms. Triveni Potekar, Aruneshwar Gupta
for the Appellants.
B
Anoop G. Chaudhary, Ms. Kiran Bhardwaj, C. Radhakrishnan, Ajay
Sharma and B. V. Bairam Das for the Respondent.

The Judgment of the Court was delivered by

D.P. MOHAPA TRA, J. Leave is granted in all the SLPs. c
These appeals are directed against the judgment of the High Court of
Bombay at Goa, dated 29th February, 2000. Indeed both the parties to the
dispute have filed appeals assailing the judgment of the High Court.

Mis. Shyama Charana Agarwala & Sons (hereinafter referred to as 'the D
Contractor') were entrusted with the work of construction of married
accommodation for 80MCPOs/CPOs/80Pos and 16 sailors at Goa Naval Area,
Varunapuri, Mangor Hill, Vasco-da-Gama, by the Union of India (for short
'the UOI') through the Chief Engineer (Navy), Cochin Naval Base under the
agreement No. CECZ/GOA-12of1990-91. The work order was placed vide
letter no. 8319/43/E-8, dated 20-7-1990 for Rs. 2,62,44,057-94. The date of E
commencement of the work was 16-8-1990 and the work was to be completed
by 15-11-1991.

The same contractor by another agreement no. CECZ/GOA/40 of 1991-
92 was entrusted with the work of construction of married accommodation
for MCOs/CPOs and JCOs at Goa. The work order was placed vide letter no. F
8305/88E·8, dated 5-2-1992. The date of commencement of the work was
24-2-1992 and the work was to be completed by 23-2-1994.

Before the work could be completed certain differences/disputes arose
between the parties. Under Clause 70 of the General Conditions of the Contract G
all disputes [(other than those for which the decision of the CWE (Commander
Works Engineer) or any other person is by the contract expressed to be final
and binding)] shall, after written notice by either party to the contract to the
other of them, be referred to sole arbitration of an Engineer Officer to be
appointed by the Authority mentioned in the tender document. In the said
clause it was further provided that unless both the parties agree in writing, H
152 SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A suc.h reference shall not take place un.til and unless after completion or alleged
completion of the work or terminatjon or determination of the contract under
Conditions S, 56 and 57 thereof. The contractor gave notice for appointment
of arbitrator specifying the items of dispute for a~judication. The UOI agreed
for appointment of arbitrator. Accordingly Shri M.V.S. Rao, Chief Engineer
B (Air Force), Bangalore was appointed as the Sole Arbitrator vide the Engineer-
in-Chief letter dated 30th December, 1993. The nature of disputes raised in
both the cases are similar though the amounts claimed against them differ.
The disputes referred for arbitration were enumerated at Appendix 'A' to the
said letter. In the contract agreement No. CECZ/GOA-12/1990-91 the items
of claim were as follows:
c
Sr. No. Brief description of Claims/Items Amount in
Rupees
(Approx.)
1. Reimbursement of additional costs in 8,00,000-00
D the procurement of stone aggregate from
crushers of Belgaum, Hubli, etc in lieu of
local sources of Goa

2. Reimbursement of additional costs in 14,00,000-00
excavation encountering rock other
E
than soft/disintegrated rock/laterite
rock
-

3. Reimbursement of additional costs · 25,00,000-00
due to working in restricted area in lieu
F of unrestricted area

4. Interest on Serial Nos. I, 2, 3 above . Not indicated

5. Costs of reference 50,000-00
G
In respect of the contract agreement No. CECZ/GOA/40/1991~92 the
following claims were made by the contractor :

H
SHYAMACHARANAGARWALAv. U.0.1. (D.P.MOHAPATRA,J.) 153

Sr. No. Brief description of CJa1ms/Items Amount m A
Rupees
(Approx.)
I. Reimbursement of additional costs in 36,00,000-00
the procurement of stone aggregate from
crushers of Belgaum, Hubli, etc in lieu of B
local sources of Goa

2. Reimbursement of additional costs in I2,00,000-00
excavation encountering rock other
than soft/disintegrated rock/laterite
rock. c
3. Reimbursement of additional costs 30,00,000-00
due to working in restricted area in lieu
of unrestricted area
D
4. Interest on Serial Nos. I, 2, 3 above Not indicated

5. Costs of reference 50,000-00

The arbitrator by his Award dated 28th February, 1994 accepted the E
claims raised by the contractor. In respect of CECZ/GOA-12/1990-91 the
award reads as follows :

Reference made to the Arbitrator Award given by the Arbitrator

CLAIM NO. I F
Reimbursement of additional cost 13.10 Union of India shall
in procurement of stone aggregate reimburse for the increase in rate!
from crushers of Belgaum, Hubli to the contractor Mis. Shyama
etc. in Lieu of Local sources of. Charan Agarwala & Sons as under
Goa Rs. 8,00,000 (i) For the quantity of ston< G
aggregate already brought aftet
Aug. 92 and upto 24-01-94.
20 mm/12.Smm-2268 cm @ Rs

H
154 SUPREME COURT REPORTS [2002) SUPP. I S.C.R.

A 250 per cm Rs. 5,67,000

40 mm 100 cm@
Rs. 230 per cm Rs. 23,000
Rs. 5,90,000
B (ii) For the quantities of stone
aggregate brought after 24-01-94,
reimbursement for increase in rates
shall be made at the rate of Rs.
250 per cm for 20 mm 12.5 mm,
c Rs. 230 per cm for 40 mm, and
Rs. 225 per cm for 63-40 mm.
This reimbursement shall be made
in each RAR for the actual
quantity brought at site.
(iii) Reimbursement/refund on
D
variation in prices of material/fuel
and labour wages, as per
conditions 18 and 19 of special
condition on pages 111 to 116 of
the contract shall also be paid in
E RARs for ·the stone aggregates
stone metal stone chipping brought
after 24-01-94 as per the said
conditions, excepting that the
value of WO as in condition l 8(a)
for stone aggregate stone metal/
F stone chipping shall be taken as
on 24-01-94 or any date
immediately after 24-01-94 as
published by the Economic ,_
Adviser, Govt. of India.
G 14.7 Union of India shall pay to
the contractor

CLAIM NO. 2 Mis. Shyama Charan Agarwala &
Sons as per details given below:

H
SHYAMACHARANAGARWALAv. U.0.1. [D.P.MOHAPATRA,J.) 155

Reimbursement of additional costs in (i) Additional payment. A
excavation encountering rock other than For works already executed using
soft/disintegrated rock/laterite rock, Chisels.
Rs. 14,00,000 (a) Excavation (Schedule A Part
I) 3940 cm@ Rs. 118.70 per cm
Rs. 3,83,594.80 B
(b) Surface excavation (as in item
I Schedule A Part V)
50 SM @ 12.41 per SM
Rs. 620.50

Total Rs. 3,84,215.30 c
(ii) For excavation works yet to
be executed using Chisels:
(a) Additional payment for
Schedule A Part I for excavation D
@Rs. 118.76 per cm.
(b) Net payment for item I
Schedule A Part V @ Rs. 18.33
per SM.
(c) Net payment for item 2
Schedule A Part VI@ Rs. 165.69 E
per cm.
(d) Net payment for item 1
Schedule A Part VII @ Rs. 18.33
per SM.
(e) Net payment for item 2 p
Schedule A Part VII@ Rs. 120.12
per Cm.
(f) Net payment for item 3
Schedule A Part VII@Rs. 129.15
per cm.
(g) Net payment for item 6 G
Schedule A Part VII@ Rs. 165.69
per cm.
(h) Net payment for item 2(a)
Schedule A Part VIII @ Rs.
189.36 per cm. H
156 SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A (i) Net payment for item 2(b)
Schedule A Part VI@ Rs. 199.68
per cm.
0) Extra over rata for item 26
Schedule A Part IX @ Rs. 294.03
each.
B
(k) Extra over rate for item 27
Schedule A Part IX @ Rs. 441.05
each.
(iii} Reimbursement on variation
c of prices as per conditions 18 and
19 of special condition of CA shall
be paid as under :
(a) Rs. 38,635 shall be paid on
Rs. 3,84,215.30 as in (i) above for
D works ·already executed.
(b) Further, reimbursement/refund
for works done in future as in (ii)
above shall be worked out as per
conditions 18 and l 9 .of special
condition of CA and shall be paid
E
in the RARs as per CA.
CLAIM NO. 3
Reimbursement of additional costs 15.5 AWARD
due to working in restricted area in (i) It has been brought out that the
F lieu of unrestricted area Rs. 25,00,000 amount of work done including
material collected upto 24-01-94
is Rs. 2,03,00,000 Considering 9%
on Rs. 2,03,00,000 a sum of Rs.
18,27 ,000 is allowed on this
account, which should be paid to
G the contractor by the Union of
India.
(ii) The Respondent, Union of
India shall also pay 9% extra on
this account for the works carried
H L-~~~~~~~~~_,_~~=.;;.;==~==----~---_,
out includine: material collected
SHYAMA CHARAN AGARWALAv. U.0.1. [D.P. MOHAPATRA,J.] 157.

beyond Rs. 2,03,00,000 to the A
contractor in each RAR, till such
time the work is completed.
(iii) As regards contractor claim
of reimbursement/refund on
variation of prices, as per
conditions 18 and I 9 of special B
conditions of CA, this should also
be paid, as the value of work done
is increased on account of this
factor, I award as under :
(a) A sum of Rs. 1,83,718 towards C
reimbursement on variation of
prices as per conditions 18 and 19
of special condition of CA for the
works done upto 24-01-94 which
is Rs. 2,03,00,000 as above ~hould D
be paid to the contractor by the
Union of India.
(b) Reimbursement/refund on
variation of prices for works done
beyond 24-01-94 shall also be
made on the principle that the E
value of work done including
material collected, as assessed in
the normal manner, shall be
increased by 9% to cater for the
restriction and reimbursement/
refund shall be worked out on F
this increased value of work done
including material collected as per
conditions 18 and 19 of the special
conditions of CA and paid to the
contractor by the Union of India G
in RAR as per conditions 18 and
19 ibid.
CLAIM NO. 4
Interest in SL 1 to 3 above. Interest on claim no. 1 to 3 (Past,
Amount not indicated Pendente lite and future)
158 SUPREME COURT REPORTS [2002) SUPP. I S.C.R.

A (i) Past interest -I allow a sum of
Rs. 7, 75,920 for past interest on
claim Nos. J(i), 2(i) and 3(i).
(ii) Pendente lite interest-
There is ·no delay. I have been
B appointed Arbitrator on 30-12-93
and had entered upon the reference
on 21-01-94 and the award has
also been finalized. Therefore,
claim of pendente lite interest is
rejected .
.c (iii) Future interest-This is
allowed. The Union of India shall
pay interest @ 18% per annum if
the amount of award as in item (i)
of claim no. I, item (i) and (iii)
D (a) of claim no. 2 and item (i) and
(iii) (a) of claim no. 3 is not paid
within 30 days from the date of
Award, till payment of the award
or decree from the Court,
whichever is earlier. If the award
E is not paid within 30 days as
above, interest will be calcl!.lated
from the date of award to the date
of payment or decree from the
Court whichever is earlier.
p CLAIM NO. 5
Cost of reference. Rs. 50,000 This claim is rejected.

In respe.c;t of CECZ/GOA/40/1990-91 the award reads as follows:

Reference made to the Arbitrator Award given by the Arbitrator
Claim No. I
Reimbursement of additional ·cost Union of India shall reimburse
in procurement of stone aggregate for the increase in rates to the
from crushers of Belgaum, Hubli contractor Mis. Shyama Charan
etc. in Lieu of Local sources of Agarwala, & Sons as under:
Goa. Rs. 36,00,000 (i) For the quantity of stone
SHYAMA CHARAN AGARWALAv. U.0.1. (D.P. MOHAPATRA,l.) 159

aggregate already brought after A
Aug. 92 and upto 24-01-94.
20 mm/3934 cm @ Rs. 250
per cm Rs. 9,83,500
40 mm-662 cm @

Rs. 230 per cm Rs. I ,52,260 B
Rs. 11,35,760

(ii) For the quantities of stone
aggregate brought after 24-01~94, C
reimbursement for increase in rates
shall be made at the rate of Rs.
250 per cm for 20 mm/Rs. 230
per cm for 40 mm.
This reimbursement shall be made D
in each RAR for the actual
quantity brought at site.
(iii) Reimbursement/refund on
variation in prices of material/fuel
and labour wages, as per E
conditions I 8 and I 9 of special
condition on pages 95A, 96 to 99
of the contract shall also be paid
in RARs for the stone aggregates
stone metal stone chipping brought
after 24-01-94 as per the said F
conditions, excepting that the
value of WO as in condition IS(a)
for stone aggregate stone metal/
stone chipping shall be taken as
on 24-01-94 or any date
immediately after 24-01-94 as G
published by the Economic
Adviser, Govt. of India.

CLAIM NO. 2 14.7 Union of India shall pay to
the contractor Mis. Shyama H
160 SUPREME COURT REPORTS (2002) SUPP. I S.C.R.
''::.
A Charan Agarwala & Sons as per
details given below:
Reimbursement of additional costs in (i) Addjtjonal payment
excavation encountering rock other For works already executed using
than soft/disintegrated rock/laterite rock, chisels.
B Rs. 12,00,000 (a) Excavation (Schedule A Part
I) 3870 cm@ Rs. 138.41 per cm
Rs. 5,35,646. 70
(b) Excavation in column pits
640 cm @ Rs. 138.41 per cm
Rs. 88,582.40
c (c) Excavation over areas
(Schedule A Part V item I)
150 cm@ Rs. 260 14 per cm
Rs. 39,021.00

D Total Rs. 6,63,250.10

(ii) For excavation works yet to
be executed using Chisels:
(a) Additional payment for
Schedule A Part I for excavation
E at applicable rates as in item (i)
above.
(b) Net payment (extra over) for
item 7 Schedule A Part III @ Rs.
197. l 2 each earthing over and
F above the rate given in item 7 of
Schedule A Part III,
(c) Net payment for item l
Schedule A Part V@ Rs. 260.14
per cm.
G
Reimbursement on variation of
prices as per conditions 18 and 19
of special condition of CA shall
be paid as under :
(d) Rs. 41367.51 shall be paid on
H '--~~~~~~-------~---...___~~~~~~~----'
__,
SHYAMACHARANAGARWALAv. U.0.1. [D.P.MOHAPATRA,J.) 161
Rs. 6,63,250.10 as in (i) above for A
works already executed.
(e) Further, reimbursement/refund
for works done in future as in (ii)
above shall be worked out as per
conditions 18 and 19 of special B
conditions of CA and shall be paid
in the RARs as per CA.
CLAIM NO. 3

Reimbursement of additional costs 15.5 AWARD
due to working in restricted area in (i) It has been brought out that the C
lieu of unrestricted area Rs. 30,00,000 amount of work done including
material collected upto 24-01-94
is Rs. 1,25,00,000 Considering 9%
on Rs. 1,25,00,000 a sum of Rs.
11,25,000 is allowed on this D
account, which should be paid to
the contractor by the Union of
India.
(ii) The Respondent, Union of
India shall also pay 9% extra on
this account for the works carried E
out including material collected
beyond Rs. 1,25,,00,000 to the
contractor in each RAR, till such
time the work is completed.
(iii) As regards contractor claim F
of reimbursement/refund on
variation of prices, as per
conditions 18 and 19 of special
conditions of CA, this should also
be paid, as the value of work done
is increased on account of this G
factor, I award as under :
(a) A sum of Rs. 70,167 towards
reimbursement on variation of
prices as per conditions 18 and 19
of special condition of CA for the H
162 SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A works done upto 24-01-94 which
is Rs. l,25,00,000 as above should
be paid to the contractor by the
Union of India.
{b) Reimbursement/refund on
variation of prices for ·:vorks done
B beyond 24-01-94 shall also be
made on the principle that the
value of work done including
material collected, as assessed in
the normal manner, shall be
c increased by 9% to cater for the
restriction and reimbursement/
refund shall be worked out on this
increased value of work done
including material collected as per
conditions 18 and 19 of the special
D condition of CA and paid to the
contractor by the Union of India
in RAR as per p~nditions 18 and
19 ibid. .,
CLAIM NO. 4
E Interest in SL 1 to 3 above. {i) Interest on claim no. 1 to 3
Amount not indicated (Past, Pendente lite and future) r
(ii) Past interest-I allow a sum of
Rs. 4,14,761 for past interest on
claim No. 1(i), 2(i) and 3(i). vide
F pages 13, 19 & 21 respectively
herein before.
{iii) Pendente lite interest-
There is .no delay. I have been
appointed Arbitrator on 30-12-93
G and had entered upon the reference
on 21-01-94 and the award has
also been finalized. Therefore,
claim of pendente lite interest is
rejected.

H (iv) Future ii'lterest-This is
SHYAMA CHARAN AGARWALAv. U.0.1. [D.P.MOHAPATRA,J.) 163

allowed. rne Union of Inaaa sha1 A
pay interest @ 18% per annum i
the amount of award as in item (i)
of claim no. 1, item (i) and (iii)
(a) of claim no. 2 and item (i) and
(iii) (a) of claim no. 3 is not paid B
within 30 days from the date ol
Award, till payment of the award
or decree from the Court,
whichever is earlier. If the award
is not paid within 30 days as
above, interest will be calculated C
from the date of award to the date
of payment or decree from the
Court whichever is earlier.
The contractor filed a petition under Section 14 of the Arbitration Act,
1940 (for short 'the Act') seeking a direction to the arbitrator to file the final D
Award dated 28th February, 1994 with all records in the Court so that the
Award could be made Rule of the Court with interest @ 24% p.a. from the
date of decree till payment. Notice of the said petition was given to the UOI
who filed an application under Sections 30 and 33 of the Act raising certain
objection against the Award. The objections filed by the UOI were rejected
by the Civil Judge, Senior Division, Vasco-da-Gama vide judgment. dated 8th E
April, 1996 and the Award dated 28th February, 1994 of the Arbitrator was
made Rule of the Court with a further direction to the UOI to pay the contractor
simple interest @ 18% p.a. on the principal amount adjudged in the Award
from the date of the decree till the date of actual payment. Against the said
order the UOI filed appeals before the High Court under Section 39 of the F
Act. The High Court by the judgment rendered on 29th February, 2000
allowed the appeals in part. The operative portion of the judgment reads as
follows:

"For the aforesaid reasons, the appeals are partly allowed. The claim
for quantity of stone aggregate already brought after August, 1992 G
upto 20-4-1994 in Arbitration Appeal No. 2 of 1996 and Arbitration
Appeal No. 3 of 1996 to the tune of Rs. 11,35,760 and Rs. 5,90,000,
respectively, is sustained. The interest awarded on the said claim by
the Arbitrator is also sustained. Except for this, the remaining claims
granted by the Arbitrator are set aside. In the facts and circumstances,
we shall leave the parties to bear their costs." H
164 SUPREME COURT REPORTS [2002) SUPP. I S.C.R.

A The High Court declined to interfere with the Award of the Arbitrator relating
to claim Item No. 1 upto 24.1.1994 when the statement of claims was filed
before him by the parties. The High Court held that the Award in respect of
claim no. I beyond 24-1-94 did not form part of the terms of reference and
further that the future claim in respect of stone aggregate would be subject
B to various factors including market conditions anC11 whether the shortage
· continued. The High Court further held that under the circumstances, the
Arbitrator could not have granted relief relating to future claim of the contractor
with reference to stone aggregate. The High Court recorded the following
finding in this regard,

~'therefore, while sustaining claim no. I in both the appeals for the
c quantity of stone aggregate already brought after August 1992 upto
24-1-1994, and Award of Rs. ll,35,760 in Arbitration Appeal No. 2
of 1996 and Rs. 5,90,000 in Arbitration Appeal No. 3 of 1996, the
remaining part of Order on claim no. 1 is set aside." [See page 31
para 21 last portion]
D
On claim no. 2 the High Court interpreted clauses 3.3.2, 3.3.3. and 3.3.4 of
the contract and held that excav~tion in any type of laterite rock, that is to
say, soft or hard shall be treated as excavation in soft/disintegrated rock. The
High Court further held that the Arbitrator had totally overlooked Clause
3.3.4 while coming to the conclusion on the basis of Clauses 3.3.2 and 3.3.3
E alone. The High Court was of the view that the Arbitrator had not only
misinterpreted the relevant clauses totally ignoring the Clause 3.3.4, but had
also taken 'undue' interest in the matter in order to find out the classification
of the strata which in fact, in view of Clause 3.3.4 would not have much
relevance. The High Court held that the Arbitrator had misconducted himself
F and therefore, the Award against claim no. 2 was totally unwarranted and
invalid. According to the High Court, the view taken by the Arbitrator could
not be said to be a possible view on the interpretation of Clauses 3.3.2, 3.3.3
and 3.3.4 and together. The High Court summed up its finding as follows:

'~For the aforesaid reasons, we are of the opinion that the Award
G under claim no. 2 in both the Appeals cannot be sustained and is
liable to be set aside." [see para 25 at page 36]

In respect of claim no. 3, the High Court took not of Clauses 2, 3, 3.1,
3.2 and 3.3.3 of the Special Conditions in which provisions were made for
inspection of the site prior to the filing of tender so that the tenderer was
H familiar with the working conditions, accessibility to site of works, etc.
SHYAMA CHARAN AGAR WALA v. U.O.l. (D.P. MOHAPATRA, J.) 165

Regarding the security and passes to the persons who were required to enter A
the area in connection with the work in Special Condition 3.3. It was clearly
stated that nothing extra shall be admissible for any man hours etc. lost on
this account of the restrictions referred to under Special Condition no. 3. The
High Court held that the contractor had filed the tender knowing fully well
the relevant provisions of the Special Conditions in the contract and as such B
he could not later on complain about such restrictions leading to reduced
output of labourers, restricted working hours etc. The High Court opined that
the conclusions arrived at by the Arbitrator were contrary to relevant Special
Conditions which were part of the contract and as such, the Award of the
claim under the said Award could not be sustained. Regarding claim no. 4
which relates to interest the High Court relying on the decision of the Supreme C
Court in State of Orissa v. B.N. Agarwal/a, (1997) 2 SCC 469, held that :
"the Arbitrator has jurisdiction to award pre-reference interest in cases which
arose after the Interest Act, 1978 and the power of the arbitrator to award
interest for the post-award period also exists, besides power to grant pendente
lite interest". The High Court found that the interest awarded by the arbitrator
in relation to the claim for quantity of stone aggregate already brought after D
August, I 992 to 20-4-1994 could not be interfered with and that the pre-
reference interest in respect of other items falls on account of rejection of
claim nos. 2 and 3. On such findings the High Court allowed the appeal in
part and to the extent noted earlier.
E
Shri V .A. Mohta, learned senior counsel appearing for the contractor
i.e. the appellants in Appeals arising out of SLP (C) Nos. 10526-527/2000
and respondents in Appeals arising out of SLP (C) Nos. 880-881 cif 200 l,
strenuously contended that the High Court exceeded the limits of the
jurisdiction vested under Section 39 of the Act in deciding the appeals filed
by the UOI, and in setting aside the Award of the Arbitrator in respect of F
claim nos. 2 and 3. Shri Mohta further contended that even assuming that the
High Court found that the arbitrator had mis-interpreted the relevant clauses
of the agreement, then it was not open to it to interfere with the Award since
there was no error of law apparent on the face of the award and the matter
relating to interpretation of the conditions in the agreement was within the G
jurisdiction of the arbitrator.

Shri Anoop G. Chaudhary, learned senior counsel appearing for the
UOI contended that the award of the arbitrator so far as part of the claim no
I and claim nos. 2 and 3 are concerned was contrary to the specific conditions
provided in the agreement, and therefore, was patently erroneous and uncalled H
'166 SUPREME COURT REPORTS (2002] SUPP. I S.C.R.

A for. Shri Chaudhary further contended that the arbitrator being a creature of
the agreement could not ignore the relevant stipulations in the contract nor"
could he travel beyond the terms of the contract. In the circumstances, Shri
Chaudhary submitted, the judgment of the High Court does not call for
interference by this Court in the appeal filed by the contractor under Article
B 136 of the Constitution of India.

The provision for appeals against the orders passed under the Act is
contained in Section 39 of the Act. The said Section is quoted hereunder :

"Appealable orders.-(a) An appeal shall lie from the following orders
passed under this Act (and from no others) to the Court authorised by
c law to hear appeals from original decrees of the Court passing the
order:

An order-

(i) superseding an arbitration;
D
(ii) on an award stated in the form of a special case;

(iii) modifying or correcting an award;

(iv) filing or refusing to file an arbitration agreement;
(v) staying or refusing to stay legal proceedings where there is an
E arbitration agreement.
(vi) setting aside or refusing to set aside an award;
P~ovided that the provisions of this section shall not apply to any
order passed by a Small Cause Court.
F (2) No second appeal shall lie from an order passed in appeal under ...
this section, but nothing in this section shall affect or take away any
right to appeal to the Supreme Court."

On a plain reading of the section it is manifest that the section is restricted
G in its application. Only certain types of orders are made appealable under the
provision. Being a special statute no appeal can be entertained except under
Section 39. The principles on which the Court can interfere with an award or
order passed under the Act are fairly well settled. The question has engaged
the attention of this Court and different High Courts from time to time.

H In the case of Coimbatore District Podu Thozillar Samgam represented
SHY AMA CHARAN AGARWALAv. U.0.1. (D.P.MOHAPATRA,J.] 167

by its Secretary v. Balasubramania Foundry and Ors., (1987) 3 SCC 723, A
this Court, construing Section 30 of the Act, observed :

"The law on this aspect is, however, settled. In Union of India v. A.L.
Ral/ia Ram, [1964) 3 SCR 164, this Court reiterated that in order to
make arbitration effective and towards enforceable, machinery was
devised by the Arbitration Act for lending the assistance of the ordinary B
courts. The court was also entrusted with the power to modify or
correct the award on the ground imperfect form or clerical errors, or
decision on questions not referred, which were severable from those
referred. The Court had also power to remit the award when it had
left some matters referred undetermined, or when the award was C
indefmite, where the objection to the legality of the award was apparent
on the face of the award. The court might also set aside an award on ·
the ground of corruption or misconduct of the arbitrator, or that a
party had been guilty of fraudulent concealment or willful deception.
But the court could not interfere with the award if otherwise proper
on the ground that the decision appeared to it to be erroneous. The D
award of the arbitrator was ordinarily final and conclusive, unless a
contrary intention was disclosed by the agreement. The award was
the decision of a domestic tribunal chosen by the parties, and the civil
courts which were entrusted with the power to facilitate arbitration
and to effectuate the awards, could not exercise appellate powers E
over the decision. Wrong or right the decision was binding, if it be
reached fairly after giving adequate opportunity to the parties to place
their grievances in the manner provided by the arbitration agreement.
This Court reiterated in the said decision that it was now firmly
established that an award was bad on the ground of error of law on
the face of it, when in the award itself or in a document actually F
incorporated in it, there was found some legal proposition which was
the basis of the award and which was erroneous."

This Court in the case of Municipal Corporation ofDelhi v. Mis. Jagan
Nath Ashok Kumar and Anr., [1987) 4 SCC 497, considered the reasons
given in a speaking award and scope for the interference with such award. G
This Court in that connection made. the following observations:

"In this case the reasons given by the arbitrator are cogent and based
on materials on record. In Stroud's Judicial Dictionary, Fourth Edition,
page 2258 states that it would be unreasonable to expect an exact
definition of the word "reasonable''. Reason varies in its conclusions H
168 SUPREME COURT REPORTS [2002) SUPP. I S.C.R.

A according to the idiosyncrasy of the individual, and the times and
circumstances in which he thinks. The reasoning which built up the
old scholastic logic sounds now like the jingling of a child's toy. But
mankind must be satisfied with the reasonableness within reach; and
in cases not covered by authority, the verdict of a jury or the decision
of a judge sitting as a jury usually determines what is "reasonable"
B in each particular case. The word "reasonable" has in law the prima
facie meaning of reasonable in regard to those circumstances of which
the actor, called on to act reasonably, knows or ought to know. See
the observations, in Re a Solicitor (1945) KB 368 at 371.

After all an arbitrator as a judge in the words of Benjamin N.
c Cardozo, has to exercise a discretion informed by tradition, methodized
by analogy, disciplined by system, and subordinated to "the primordial
necessity of order in the social life".

In the case of Mis. Sudarsan Trading Co. v. Government ofKera/a and
D Anr., (1989) 2 SCC 38, construing Section 30 of the Act, this Court observed
that the award can be set aside if the arbitrator had mis-conducted himself or
the proceedings and had proceeded beyond his jurisdiction; that these are
separate and distinct grounds for challenging an award; that where there are
errors apparent on the face of the award it can only be set aside if in the
award there is any proposition of law which is apparent on the face of the
E award, namely, in the award itself or any document incorporated in the award.
Reference was made to the decision of the Judicial Committee in Champsey
Bhara and Co. v. Jivraj Ba/loo Spinning and Weaving Co. Ltd., AIR (1923)
PC 660. Considering the point that only in a speaking award a Court can look
into the reasoning of the award, this Court observed: " ... .It is not open to the
F court to probe the mental process of the arbitrator and speculate, where no
reasons are given by the arbitrator, as to what impelled the arbitrator to arrive
at his conclusion'. In this connection reference was made to the observations
in Hindustan Steel Works Construction Ltd. v. C. Rajasekhar Rao, (1987) 4
SCC 93. Drawing a distinction between the disputes as to the jurisdiction of
the arbitrator and the disputes as to in what way that jurisdiction should be
G exercised, this Court observed:

"An award may be remitted or set aside on the ground that the
arbitrator in making it, had exceeded his jurisdiction and evidence of
matters not appearing on the face of it, will be admitted in -order to
establish whether the jurisdiction had been exceeded or not, because
H the nature of the dispute is something which has to be determined
SHYAMACHARANAGARWALAv. U.0.1. [D.P.MOHAPATRA,J.) 169

outside the award-whatever might be said about it in the award or by A
the arbitration. See in this connection, the observations of Russel on
The Law of Arbitration, 20th edn., p. 427. Also see the observations
of Christopher Brown Ltd v. Genossenchaft Oesterreichischer, (1954)
I QB 8, I 0 and Dalmia Dairy Industries Ltd. v. National Bank of
Pakistan, (178) 2 Lloyd's Rep. 223. It has to be reiterated that an
arbitrator acting beyond his jurisdiction - is a different ground from B
the error apparent on the face of the award. In Hals bury 's Laws of
England II. 4th Edn., Vol. 2, para 622 one of the misconducts
enumerated, is the decision by the arbitrator on a matter which is not
included in the agreement or reference. But in such a case one has to
determine the distinction between an error within the jurisdiction and C
an error in excess of the jurisdiction. See the observations in Anisminic
Ltd v. Foreign Compensation Commission, (1969) 2 AC 147, and
Regina v. Noseda, Field, Knight & Fitzpatrick, (1958) !WLR 793.
But, in the instant case the court had examined the different claims
not to find out whether these claims were within the disputes referable
to the arbitrator, but to find out whether in arriving at the decision, D
the arbitrator had acted correctly or incorrectly. This, in our opinion,
the court had no jurisdiction to .do, namely, substitution of its own
evaluation of the conclusion of law or fact to come to the conclusion
that the arbitrator had acted contrary to the bargain between the parties.
Whether a particular amount was liable to be paid or damages liable E
to be sustained, was a decision within the competency of the arbitrator
in this case. By purporting to construe the contract the court could
not take upon itself the burden of saying that this was contrary to the
contract and, as such, beyond jurisdiction. It has to be determined
that there is a distinction between disputes as to the jurisdiction of the
arbitrator and the disputes as to in what way that power of the arbitrator F
to grant a particular remedy.
xxx xxx xxx
In the instant case, the High Court seems to have fallen into an error
of deciding the question on interpretation of the contract. In the G
aforesaid view of the matter, we are of the opinion that the High
Court was in error. It may be stated that if on a view taken of a
contract, the decision of the arbitrator on certain amounts awarded, is
a possible view though perhaps not the only correct view, the award
cannot be examined by the court in the manner done by the High
Court in the instant case. H
170 SUPREME COURT REPORTS [2002] SUPP. I S.C.R.

A In light of the above, the High Court, in our opinion, had no
jurisdiction to examine the different items awarded clause by clause
by the arbitrator and to hold that under the contract these were not
sustainable in the facts found by the arbitrator."

In the case of Steel Authority of India Ltd. v. JC Budharaja,
B Government and Mining Contractor, [1999) 8 SCC 122, this Court
considering the point on lack of jurisdiction of the arbitrator held that
when t~e conditions in the agreement specifically prohibited granting
claim or damages for the breaches mentioned therein it was not open
to the arbitrator to ignore the said conditions which were binding on
c the contracting parties; that by ignoring the same he has acted beyond
the jurisdiction upon him; that it is settled law that the arbitrator
derives authority from the contract and ifhe acts in manifest disregard
of the contract, the award given by him would be an arbitrary one;
that this deliberate departure from the contract amounts not only to
manifest disregard of the authority or misconduct on his part, but it
D may tantamount to ma/a fide action. This Court further observed that
the Arbitration Act does not give any power to the arbitrator to act
arbitrarily or capriciously; that his existence depends upon the
agreement and his function is to act within the limits of the, said
agreement. In para 17 of the judgment this Court made the following
observations:
E
"It is to be reiterated that to find out whether the arbitrator has traveled
beyond his jurisdiction and acted beyond the terms of the agreement
between the parties, the agreement is required to be looked into. It is
true that interpretation of a particular condition in the agreement
F would be within the jurisdiction of the arbitrator. However, in cases
where there is no question of interpretation of any term of the contract,
but of solely reading the same as it is and still the arbitrator ignores
it and awards the amount despite the prohibition in the agreement, ~e
award would be arbitrary, capricious and without jurisdiction. Whether
the arbitrator has acted beyond the terms of the contract or has traveled
G beyond his jurisdiction would depend upon facts, which however
would be jurisdictional facts, and are required to be gone into by. the
court. The arbitrator may have jurisdiction to entertain claim and yet
he .may not have jurisdiction to pass award for particular items in
view of the prohibition contained in the contract and, in such cases,
it would be a jurisdictional error. For this limited purpose reference
H
SHYAMACHARANAGARWALAv. U.O.l. (D.P. MOHAPATRA,J.) 171

to the terms of the contract is a must. Dealing with a similar question A
this Court in New India Civil Erectors (P) Ltd. v. Oil and Natural
Gas Corpn. [1997) 11 SCC 75, held thus : (SCC p. 79 para 9)

"It is axiomatic that the arbitrator being a creature of the agreement,
must operate within the four corners of the agreement and cannot travel
beyond it. More particularly, he cannot award any amount which is ruled out B
or prohibited by the terms of the agreement. In this case, the agreement
between the parties clearly says that in measuring the build-up area, the
balcony areas should be excluded. The arbitrators could not have acted contrary
to the said stipulation and awarded any amount to the appellant on that
account."
c
In the case of Grid. Corporation of Orissa Ltd and Anr., v. Balasore
Technical School, [2000) 9 SCC 552, this Court considered the question of
Courts interference in case of a non-speaking award. This Court referred to
the decision in New India Civil Erectors (P.) Ltd (supra) in which it was
held that the arbitrator being a creature of the contract must operate within D
the four corners of the contract cannot travel beyond it and he cannot award
any amount which is ruled out or prohibited by the terms of the agreement
and the decision in Associated Engg. Co. v. Govt. of A.P., [1991) 4 SCC
93, in which it was held that if the arbitrator commits an error in the
construction of the contract, that is an error within his jurisdiction; but if he
wanders outside the contract and deals with matter not allotted to him he E
commits a jurisdictional error and an umpire or arbitrator cannot· widen his
jurisdiction by deciding a question not referred to him by the parties or by
deciding a question otherwise than in accordance with the contract. This
Court referring to N Chellappan v. Secy., Kera/a SEB. [1975) I SCC 289,
held that the principle was unexceptionable. Summing up its decision, this F
Court observed :

" .... However, from a reading of the decisions of this Court referred
to earlier it is clear that when an award is made plainly contrary to
the terms of the contract not by misinterpretation but which is plainly
contrary to the terms of the contract it would certainly lead to an G
inference that there is an error apparent on the face of the award
which results in jurisdictional error in the award. In such a case the
courts can certainly interfere with the award made by the arbitrator."

Considering the scope of Section 30 of the Act, this Court in the case of Indu
Engineering & Textiles Ltd v. Delhi Development Authority, [2001) 5 SCC H
172 SUPREME COURT REPORTS [2002] SUPP. I S.C.R.

A 691, enumerated some of the well recognized grounds on which interference
in award is permissible, observed :

"Interpreting the statutory provision courts have laid stress on the
limitations on exercise of jurisdiction by the court for setting aside or
interfering with an award in umpteen cases. Some of the well-
B recognised grounds on which interference is permissible are:

(I) violation of the principle of natural justice in passing the award;
(2) error apparent on the face of the award;
(3) the arbitrator has ignored or deliberately violated a clause in the
C agreement prohibiting dispute of the nature entertained;
(4) the award on the fact of it is based on a proposition of law which
is erroneous etc."

Testing the case on hand on the touchstone of well settled principles
D laid down by Courts, we are unable to hold that the High Court exceeded its
jurisdiction in interfering with the award or failed to exercise the jurisdiction
vested in it to set aside the award. The approach of the High Court cannot
be said to be contrary to the well settled principles governing the scope of
interference with an award of the Arbitrator under the old Act. As regards the
first item, the question was whether the contract contemplates the use of
E stone aggregate and stone metal from the local sources only, the source of
supply being silent in the relevant clause. The Arbitrator was of the view that
the unprecedented situation of the ·contractor being put to the necessity of
procuring the stone material from far off places was not visualized and the
parties proceeded on the basis that such material was available locally. He
further noted that the sample kept in the office of the concerned Engineer
F admittedly pertained to the material procured from local sources. A letter
addressed by the Chief Engineer in support of contractor's claim was also
relied on in this context. Hence, in these circum.stances, the Arbitrator can be
said to have taken a reasonably possible view and therefore the High Court
rightly declined to set aside the award in so far as the quantity of stone
G aggregate/stone metal brought to site up to 24.1.1994 is concerned. The.
Arbitrator acted within the confines of his jurisdiction in making the award
on this part of the claim.

As already noted, the award in so far as the future period is concerned,
i.e. subsequent to 24.1.1994 which is the date of filing of claim statement, the
H High Court set aside the award on two grounds : (i) Such a claim did not
SHYAMA CHARAN AGARWALAv. U.0.1. [D.P. MOHAPATRA,J.] 173

form part of terms of reference, though the contractor had filed claim in A
respect of stone aggregate to be brought in future and (ii) the future claim in
respect of stone aggregate would be subject to various factors including
market conditions and whether the shortage continued.

In our view the view taken by the High Court cannot be sustained. It
is clear from the arbitration clause viz. clause 70 that all disputes between the B
parties to the contract (other than excepted matters) can be referred to
arbitration. The contractor did make a claim in respect of future period also.
The document appointing the Arbitrator would show that the Arbitrator was
required to decide the disputes arising between the parties. It is not possible
to hold that the claim No. I in so far as it relates to future period during C
which the contract work continued is beyond the scope of reference or outside
the ambit of arbitrations clause. The aim of arbitration is to settle all the
disputes between the parties and to avoid further litigation. There is no legal
justification in restricting the scope of arbitration in the manner in which the
High Court did. In the list of disputes which is annexed to the letter of
appointment of the Arbitrator, it is mentioned without any qualification or D
restriction as follows:

"Reimbursement of additional cost in procurement of stone aggregate
from crusher of Belgaum, Hubli, etc. in lieu of local sources of
Goa."
E
The claim amount is mentioned as 36 lakhs and 8 lakhs. This figure is
over and above the amount claimed upto 24.1.1994 and is based on an
estimate. It is also relevant to mention that Union of India did not take the
stand before the Arbitrator that the claim in respect of future was beyond the
scope of reference. However, in order to obviate any controversy, it is made F
clear that the payment at the rates specified in the award should be made only
in respect of stone aggregate actually brought to the site from Begaum, Hubli
and other distant places. It is open to the Engineer concerned to be satisfied
on this aspect before satisfying the award. Obviously, if any part of the stone
aggregate was brought subsequent to 24.1.1994 from local sources the
directions in the award will be ineffective. The observations of the High G
Court that conditions may not be the same for the future and therefore the
Arbitrator was incompetent to make an award for the future period cannot be
supported for the simple reason that the extra rate will become applicable
only in respect of quantities brought from sources other than local. It has
never been the case of Union of India either before the Arbitrator or the High H
174 SUPREME COURT REPORTS (2002) SUPP. I S.C.R.

A Court or even this Court that the situation had changed after 24.1.1994 and
that the stone aggregate could be secured at lesser rates from local sources
or otherwise. For all these reasons, we are of the view that the High Court
ought not .to have interfered with the award in so far as claim No. I is
concerned in any respect. To this extent, the appeals filed by the Contractor
B i.e. arising out of SLP © Nos. I 0526-10527 of 2000 are partly allowed.

As regards the other two items viz. 2 and 3, on a perusal of the judgment
of the High Court and on consideration of the relevant clauses, we are of the
view that the judgment does not suffer from any serious error in the approach
to the matter. In regard to item No.. 2, though the High Court may not be
C justified in observing that the Arbitrator took undue interest in trying to
ascertain the classification of strata, the High Court is well justified in holding
that the view taken by the Arbitrator is not at an ·a reasonably possible view
and in fact·he ignored one of the relevant clauses, namely, 3.3.4. The Arbitrator
was carried away by the fact that chiselling had to be done in view of the
hardness of rock. The Arbitrator at the same time did not choose to. give a
D finding that what was encountered by the contractor was something other
than laterite rock which is mentioned in the Agreement. As regards the 3rd
item, the Arbitrator again ignored the relevant clauses in the agreement and
came to the perverse conclusion that the site became restricted on account of
certain security measures enforced in the area. The award of sum vis-a-vis
E this item is clearly outside the terms of <:ontract. The High Court, therefore,
rightly set aside the award on this aspec:t.

On the discussions in the foregoing paragraphs the appeals arising from
S.L.P. © Nos. 10526-27 of 2000 filed by the contractor are allowed in part
to the extent noted earlier and the appeals arising from S.L.P. ©Nos. 880-
F 881 of 2001 filed by Union of India & another are dismissed. There will,
however, be no order for costs.

N.J. Appeals disposed of.