Salil Kumar Datta, J.
1. The respondent, M. L. Dalmiya & Co. Ltd., an existing company under the Companies Act, 1956 hereinafter referred to as the Company, was employed by the Union of India, the appellant before us, to construct the New Terminal Building at Dum Dum Air Port Phase 1 Superstructure in terms of contract No. 13/EE/63-64 entered into on May 14, 1963. The Company completed the work including additional works before August 14, 1970. In course of work various disputes and differences arose between the parties in respect of the said contract. The disputes between the parties were referred by the Chief Engineer (Eastern Zone) to the arbitration of M. S. Iyengar Superintending Engineer (Arbitration). The arbitrator after hearing, examining and considering the statements of the parties and oral and documentary evidence, published his award on September 25, 1972 for which extension of time was duly obtained. The award was purported to be corrected by the Arbitrator in respect of certain alleged clerical mistakes on December, 1972.
2. The award was filed in this Court and the appellant filed an application for setting aside the said award or portion of it and or for the award to be declared null and void or for remitting the said award before the Arbitrator if necessary. This application, on hearing the parties, was rejected by Salil K. Roy Chow-dhury. J. by his judgment and order dated March 30, 1973 against which the present appeal has been filed by the Union of India.
3. Clause 25 of the Contract provided as follows :--
"Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, designs, drawings and instruction hereinbefore mentioned and as to the quality of workmanship or materials used on the work in any way arising out or relating to the contract, design, drawings, specifications, estimates, instructions orders or these conditions or otherwise concerning the works, or the execution or failure to execute the same whether arising during the progress of the work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Additional Chief Engineer, Central P.W.D. in charge of the work at the time of dispute if there be no Addl. Chief Engineer, the administrative head of the said Central P. W. D. at the time of such appointment.
Subject as aforesaid, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the rules made thereunder and for the time being in force shall apply to the arbitrator proceeding under this Clause".
4. The Arbitrator was appointed by the Chief Engineer (Eastern Zone) by the following letter--
Subject : In the matter of Arbitration between M/s. M. L. Dalmiya & Co. Ltd., Calcutta Contractor and the Union of India regarding the work of Construction of Terminal Building for International Traffic at Dum Dum Phase I (Agreement No. 13/EE/64-64).
Whereas disputes have arisen between the abovenamed parties in respect of the above noted work; whereas disputes arising between the parties are required under Clause 25 of the agreement to be referred to the sole arbitration of the person to be appointed by the Additional Chief Engineer, CPWD and whereas the post of Additional Chief Engineer (Cal) has now been designated as Chief Engineer (E. Zone), therefore, in pursuance of the powers given to me under Clause 25 of the agreement I. B. Manecksha, Chief Engineer (EZ) CPWD, Calcutta, hereby appoint Shri M. S. Iyengar Superintending Engineer (Arbitration) Ministry of Health & Family Planning and Works, Housing and Urban Development (Deptt. of Works, Housing & Urban Dev.), New Delhi, as an arbitrator to decide and to make his award regarding the claims/disputes given by the contractor on his being asked to do so and also regarding the counterclaims of the Government against the contractor as may follow subsequently, if any, subject always, however, to their admissibility under Clause 25 of the aforesaid agreement. Disputes under the aforesaid agreement, already referred to the arbitrator previously, and decided by him in his award dated 26-8-1969, may be excluded from the present reference.
Chief Engineer (E. Z.)
5. The award of the arbitrator in extracts are as follows :--
In the matter of arbitration between :--M/s. M. L. Dalmiya & Co Ltd., Claimants and The Union of India, Respondent.
In respect of the work of Construction of Terminal Building for International traffic at Dum Dum phase I Ag. No. 13/EE/ 63-64.
Whereas I, M. S. Iyengar, Superintending Engineer (Arbitration) in the Ministry of Works & Housing, Government of India, New Delhi, was appointed by the Chief Engineer (EZ), C. P. W. D.. Calcutta under his letter No. 8/CADI/9/70-W(A), dated 26th May, 1970 as Arbitrator to decide and make award regarding those disputes only, between the above named parties which fall within the purview of Clause 25 of the Agreement.
And whereas I took upon myself the burden of the said reference on 8-1-1971.
And whereas the issues under dispute for adjudication and award were framed in consultation with and agreed upon by the parties at the hearing held on 15-4-1971; and whereas issues Nos. 9 & 10 and Issues Nos. 1 & 7 were amended in consultation with and agreed upon by the parties during the hearings on 21-2-1972 and 17-3-1972 respectively and whereas counter-claims of the respondents were also added during the hearing held on 20-1-1972 and whereas the issues of the counter-claims were also amended in consultation with and agreed upon by the parties during the hearing held on 15-2-1972 and were stated in the summary recorded of the proceedings of the respective hearing are set forth below.
And whereas the time limit for making and publishing award by the Arbitrator has been enlarged upon 15th November, 1972 by the High Court at Calcutta vide its order dated 20-6-1972.
Now therefore after hearing, examining and considering the statements of both the parties and the oral and documentary evidence produced before me by the parties and having heard and duly weighed and considered all facts, documents and other evidence with due care, I. M. S. Iyengar, do hereby make and publish this, my award concerning the matters so referred to me as aforesaid, in the matter following that is to say :
The Arbitrator is to determine whether under the terms and conditions of the contract, the claims of the claimants (M/s. M. L. Dalmiya & Co Ltd.) and the counter-claims of the respondents (Union of India) enumerated below are justified and if so the extent of relief they are entitled to and the amount, if any, payable/recoverable against these claims/counterclaims : __________________________________________________________________
The claimants claim payment for various extra and substituted items of work executed by them under the contract at the rates as listed in annexure 'C' of their statement of facts or at such other rates as may be found correctly due to them.
This claim is partly Justified. It is awarded that extra and substituted items be paid to the claim. ants at the rates shown in Appendix 'A' enclosed with the award. The said Appendix 'A' is made a part of this award.
The claimants claimed interest at 12% P. A. on the total amount of the award pendente lite and future till a decree by the competent court.
Interest pendente lite and future interest @ A% P. A onthe amount of the award from 26.5.70 to the date of obtaining decree on the Arbitrator's award from the competent court or the date of actual payment is awarded in favour of the claimant, whichever is earlier. __________________________________________________________________
1 2 3 4 5
Extra labour for making light boxes as per design and placing them in position in R. C. C. Projected hood and canopy.
Rft. Re. 1/- (Rupee one only).
Making slit opening in shuttering board for placing M. S. hanger for fixing suspender for support or R. C. Duct & false ceiling frame work and reopening the same including making good the damages to shuttering board for further re use.
Rs. 1.80 (Rupee one and paise eighty only).
Encasing of rain water pipe on both faces of R. C. Column (2 Nos.3" dia front side and 1 No.6" dia. pipe on ball side) with cement brick work (1:4) shapad to required size and 1-8 projection as per Architect's drawing plastered complete with cement plaster ( 1:3). Each
Rs. 223/- (Rupees two hundred tewnty three only).
Cement brick work on front and back side of R. C. column on both sides of expansion joint shaped to required size and projection (slightly bigger) matching the brick work encasing R. W. Pipes on both faces of R. C. C column plastered complete all as per Architect's drawing. Each
Rs. 235/- (Rupees two hundered thirty live only).
Labour for making necessary alterations in timber frame for light boxes of different sizes supplied by the agencies and placing in positions :
(a) Size of the Light Box 4'-8" x 4'-8" Sft.
Rs 2.65 (Rupees two and paise sixty five only).
(b) -do- 28'-0" x 1'-6" Sft.
Rs. 2.10 (Rupees two and paise ten only).
(c) -do- 12'-8" x 1'-8" Sft.
Rs. 2.40 (Rupees two and paise forty only).
6. It is clear from the award that after the Arbitrator had entered upon the reference, the parties filed their respective statements and counter statements and issues were framed thereon. Before the learned Judge as also before us, the award was attacked mainly on the following grounds i. e. (a) the arbitrator had no jurisdiction to award interest; (b) the award was vague, indefinite, and merely executory and thus incapable of being given effect to; (c) corrections were made in the award by the arbitrator after its publication; (d) the above are indications of non-application of mind which amounted to legal misconduct on the part of the arbitrator.
7. Elaborating his arguments, Mr. D. K. Sen, counsel for the Union of India, the appellant before us, submitted that the disputes are to be crystallised for reference to arbitration under provisions in the agreement. The claimants detained the disputes for an award and the jurisdiction of the arbitrator was confined to those disputes only and nothing beyond. If a dispute is entertained which is not covered by the reference, the arbitrator has travelled beyond his jurisdiction. Mr. Sen referred to the language of appointment of the arbitrator, which as, appearing from pp. 100 and 103 of the Paper Book was confined to (a) payment for quantities of the items executed beyond the agreement quantities at the prevailing market rate; (b) arbitrary recoveries made by the department; (c) extra expenditure involved for extra work beyond agreement. There were mention of other disputes which should be interpreted ejusdem generis, so that there was no whisper of a claim for interest in the disputes raised. The disputes between parties must be tabulated and specified prior to arbitration and such disputes could not be enlarged subsequently by statement of fact filed by the respondent and denied by the appellant. The arbitrator could only decide about interest if specifically referred to but not otherwise. Moreover the arbitrator unlike the court, had no power to award interest unless the question of interest may specifically be referred to him.
8. Mr. A. C. Bhabra, and later on, Mr. Tibrewal learned counsel for the respondents, submitted on the other hand that parties in the instant case chose a method of formulating the dispute. There was a general reference to arbitration without any specification of disputes which thus could only be ascertained from the pleadings of the parties. There was never any averment in the statement filed by the appellant that there was no dispute for claim of interest. In any event, the claim for interest was there by implication and the arbitrator had always the implied authority to grant interest in favour of the parties whom he found entitled to any principal amount.
9. Learned counsel have referred to and relied on various authorities which we shall now consider. In Bhowanidas Ramgobind v. Harsukhdas Balkishandas, AIR 1924 Cal 524. a Division Bench of this Court consisting of Mookerjee and Rankin, JJ. held relying on some earlier decisions, that the arbitrators have authority to make a decree for such damages as might have been assessed by the Court.
10. In International Rly. Co. v. Niagara Parks Commission, AIR 1937 PC 214 (222) the Privy Council held that the arbitrators whose only duty was "to ascertain the actual value of certain property at a certain time", had no power to include interest in their assessment of value.
11. The Privy Council in Bengal Nag-pur Rly. v. Ruttanji Bamji, AIR 1938 PC 67 held that in law the court could allow interest when there is agreement to pay interest or it is payable by usage or under provision of any law. In equity under proviso to Section 1 of the Interest Act, 1839 the circumstances must exist attracting equitable jurisdiction for award of interest and such power to award interest has been expressly saved by the said proviso.
12. In Re-Arbitration the Bengal Jute Mills v. Jewrai Heeralal, 46 Cal WN 957 : (AIR 1943 Cal 13), Gentle, J. held that when parties set out specifically what disputes have arisen and what relief is sought in consequence of the alleged default by one party, those are the only matters upon which the arbitrator is required to enquire and adjudicate. It was further held that when an arbitrator gives an award which includes matters not submitted to him and reliefs asked for, such award is void in toto.
13. In Mathuradas Goverdhandas v. Khusiram Benarshilal, (1949) 53 Cal WN 873 it was held that existence, of a dispute is an essential condition for the jurisdiction of an arbitrator and if there is no dispute there can be no right to demand arbitration at all.
14. In Thawardas v. Union of India, , the Court
observed that Interest Act, 1839 would apply where interest is not otherwise payable by law. The following among other conditions must be fulfilled before interest can be awarded under the Act.
(1) there must be a debt for a sum certain;
(2) it must be payable at a certain time or otherwise;
(3) these debts or sums must be payable by virtue of some written contract at a certain time;
(4) there must have been a demand in writing stating that interest will be demanded from the date of the demand.
If none of these elements are present, fine arbitrator is not entitled in law to allow interest simply because he thought the demand was reasonable. Moreover the arbitrator not being a court no interest could be awarded by it on analogy of Section 34 of the C. P. C.
15. This decision as laying a broad and unqualified proposition was doubted in Nachiappa v. Subramaniam (para, 44). In Satinder Singh v. Umrao Singh, . the Court recognised that the power of Court to award interest on equitable grounds or under any other provisions of law has been expressly saved by proviso to S 1. The Supreme Court observed in Mahabir Prasad v. Durga Datta, that interest for a period prior to the commencement of suit is payable under an agreement or usage of trade or a statutory provision and also under the Interest Act where notice is given. Further interest is also awarded in some cases by Courts of equity.
16. Again in Union of India v. Rallia Ram, it was held that under the Interest Act, the court may allow interest to the plaintiff if the amount claimed is a sum certain which is payable at certain time by virtue of a written instrument. The Act however contains a proviso that interest shall be payable in all cases in which it is now payable by law. The proviso applies to cases in which the court of equity exercises jurisdiction to allow interest.
17. This Court in Union of India v. Bungo Steel Furniture Pvt. Ltd., held that an umpire acting under the Arbitration agreement has authority to direct payment of interest on the principal sum adjudged from the date of the award up to the date of the decree to be passed by the Court. He. had this power before the passing of the Arbitration Act, 1940 and he continues to retain the power 'after the passing of that Act and there is nothing in Section 29 of the Arbitration Act which takes away this power.
18. In Chandris v. Isbrandtsen Moller Co. Inc. (1951-1 KB 240); (1950-2 All ER 618), on the question of award of interest by the arbitrator, it was held that it was implied term of the submission that the arbitrator should decide the dispute according to the existing law of contract. The provisions of the Law Reform (Miscellaneous Provisions) Act, 1934, Section 3(1) gave Court power to award interest on debt or damages. Though these provisions did not apply to an arbitrator, the power to award interest by the arbitrator was derived from the submission to him which impliedly gave him the power to decide "all matters in difference" according to existing law of contract exercising every right and affording discretionary remedy given to a court of law.
19. In Waverly Jute Mills Co. Ltd. v. Raymon & Co. (India) (P.) Ltd., the court referred to the decisions in National Fire & General Insurance Co. Ltd. v. Union of India, and Pratabmull Rameshwar v. K. C. Sethia, (1944) Ltd.. . It was observed by the Supreme Court :
"In both these cases there was a valid submission on which the arbitrators proceeded to act. Before them the parties filed statements and therein they put forward a claim which was not actually covered by the reference and invited them to give their decision thereon. The party against whom the award had gone contended that the arbitrators had acted without jurisdiction in deciding that claim. In overruling this contention the court held that it was open to the parties to enlarge the scope of a reference by inclusion of a fresh dispute, that they must be held to have done that when they filed their statements putting forward the claims not covered by the original agreement that these statements satisfied the requirements of Section 2(a) of the Arbitration Act and that it was competent to the arbitrators to decide the dispute. The point to be noticed is that in both these cases there was no want of initial jurisdiction but a feeding of existing jurisdiction by an enlargement of the scope of the reference. That this does not involve any questions of jurisdiction in the arbitrators will be clear from the scheme of the Act. If an award deals with a matter not covered by the agreement it could either be modified under Section 15(a) or remitted under Section 16(1)(a). And where the matter is dealt with on the invitation of parties contained in the statement there can be no difficulty in holding that the arbitrators acted within jurisdiction."
20. In Union of India v. Watkins Mayor & Co., the court reaffirmed the position in law to the effect that in regard to interest prior to the date of institution of the suit, interest may be awarded when there is an agreement for payment of interest ,at fixed rate or when interest is payable by the usage of trade having the force of law or under the provisions of any substantive law. Under Interest Act the Court may allow interest to the plaintiff if the amount claimed is a sum certain which is payable at a certain time by virtue of a written instrument. But where the amount claimed is compensation for unliquidated amount and not a bum certain, the Act has no application and no interest can be granted, the proviso applies to cases in which the court of equity exercises jurisdiction to allow interest in appropriate circumstances.
21. The Supreme Court in Vithal Das v. Rup Chand, reiterated the essentials for award of interest prior to suit. They are : (a) an agreement for payment of interest at fixed rate; (b) usage of trade having force of law contemplating payment of such interest; (c) a provision of substantive law like Section 80 Negotiable Instruments Act or Section 23 of Trusts Act; (d) if the sum claimed is certain and payable at a certain time, Court can also grant interest under the rule of equity.
22. In Firm Madanlal Roshanlal v. Hukumchand Mills Ltd., the Supreme Court noticed that in cases already
referred to the court pointed out that observations in Thawardas' case were not intended to lay down such a broad and unqualified proposition. The said case is also silent on the question whether the arbitrator can award interest during the pendency of arbitration proceedings if the claim regarding interest is referred to arbitration. The Court further observed :
"In the present case, all the disputes in the suit were referred to the arbitrator for his decision. One of the disputes in the suit was whether the respondent was entitled to pendente lite interest. The arbitrator could decide the dispute and he could award pendente lite interest just as a court could do so under Section 34 of the C. P. C. Though, in terms Section 34 of the C. P. C. does not apply to arbitrations, it was an implied term of the reference in the suit that the arbitrator would decide the dispute according to law and would give such relief with regard to pendente lite interest as the Court could give if it decided the dispute. This power of the arbitrator was not fettered either bv the arbitration agreement or by the Arbitration Act, 1940. The contention that in an arbitration in a suit the arbitrator had no power to award pendente lite interest must be rejected."
23. Again in Union of India v. Bungo Steel Furniture Pvt. Ltd., , the Court noticed that Thawardas's case did not deal with the question whether the arbitrator can award interest subsequent to the passing of the award if the claim regarding interest was referred to arbitration. The court held that the arbitrator had the jurisdiction to grant interest on the amount of the award from the date of the award till the date of the decree; the reason being "that it is an implied term of reference that the arbitrator will decide the dispute according to existing law and give such relief with regard to interest as a court could give if it decided the dispute. Though in terms, Section 34 of the C. P. C does not apply to arbitration proceedings the principle of that section will be applied by the arbitrator for awarding interest in cases where a court of law in a suit having jurisdiction of the subject-matter covered by Section 34 could grant a decree for interest."
24. In State of Madhya Pradesh v. Saith and Skelton Pvt, Ltd., the court observed--
"In the cases referred to above, it is seen that there was neither any agreement pleaded for payment of interest nor was any provision of law entitling the party to recover interest prior to the period of suit or arbitration proceedings referred to or relied upon. Under such circumstances it was held that the arbitrator or a court had no power to award interest prior to the date of the award ..... From the decision in it is clear that if all the
disputes are referred for arbitration, the arbitrator has power to award interest pendente lite i. e. during the pendency of the arbitration proceedings"
25. In the case before us, the arbitrator was appointed by the Chief Engineer Eastern Zone by the letter we have quoted above. The letter recited that disputes had arisen between the parties and accordingly the arbitrator was appointed to decide and to make his award regarding the claims/disputes given by the contractor on his being asked to do so and also regarding the counter claims of the government against the contractor as may follow subsequently. This letter clearly indicates that the disputes and jclaims generally were referred to the arbitrator subject to the specific claims and disputes as might be made by the contractor as also the counter claims if any to be made by the Government against the contractor "subsequently" in course of the arbitration proceedings. The arbitrator entered into reference on January 8, 1971. It appears from the award that statements were filed by both parties and the issues in dispute for adjudication and award were framed in consultations with and agreed upon by the parties at the hearing and issues on coun-ter-claims were .also amended in consultation with and agreed upon by the parties, It is therefore clear and obvious that the claim for interest pendente lite was made before the arbitrator and no objection at any time was taken by the appellant in the course of arbitration proceeding. In view of the special procedure adopted by the parties on the basis of the order of reference dated May 26, 1970 the question of award of pendente lite interest, it is obvious, was referred to the arbitrator and we have not been shown any contemporaneous evidence to indicate that any objection was taken thereto by the appellant. Issues were framed as stated by the arbitrator, in the presence of parties. It is accordingly too late in the day to suggest that the question of interest pendente lite was no item of dispute. We accordingly held relying on the Bungo Steel Furniture's case as also Saith & Skelton's case referred to above that interest pendente lite if any payable to the contractor was an item of reference to the arbitrator who accordingly had the jurisdiction to award interest from the date of reference.
26. The next contention against the award is that the award is non-executory, vague and indefinite and could not be given effect to. Reference was made to particular Items Nos. 73, 75, 80, 81 and 83. In particular payment as provided in Item 2 of the award for extra and substituted works at rates specified in App. 'A' could not be ascertained with reference to Items 73, 75 and 85 inasmuch as the measurements had neither been recorded nor could be assessed as the works had been completed. Further it was said Items 73 and 88 were identical and award had been made twice in respect of the same work.
27. About the last contention namely about Items 73 and 88 it has been contended that the objection in this form was not taken in the trial court nor in the memorandum of appeal. Even so, the error seems to be patent on the face of it and in absence of any explanation, there is no scope for avoiding or overlooking the same. We accordingly think that the award in Item 88 is not allowable and should be struck down.
28. As to Item 75 we do not find any vagueness, and if it was no longer possible to examine the number of slit openings in view of subsequent constructions, the record maintained by the respondent would have to be relied upon. The same consideration would be applicable for Items 80, 81 and 85 and it appears from the affidavit-in-opposition affirmed on February 20, 1973 by Ramantar Jhunjhun-wala to the petition filed by the appellant challenging the award that a particular procedure was adopted for the purpose with consent of parties and disputes in respect of the rates of the claim were referred to the arbitrator. The arbitrator had followed the procedure so agreed upon and it was never brought to the notice of the arbitrator that the analysis of rates submitted by the contractor suffered from infirmities resulting in any mistake or error in the award. As to measurements of works it was also the duty of the appellant to keep proper account in respect thereof and if they failed to maintain such record, the contractor could not be deprived of their legal dues. Further the arbitrator was required to fix rates of works without reference to measurements and in this state of affairs, it was not possible for the arbitrator to award lump sums in respect of claims and counter-claims which must necessarily have to be calculated on basis of the rates so fixed by the arbitrator. The award in the circumstances had to be executory on the choice of the parties and accordingly there was no vagueness and indefiniteness in the impugned award.
29. The award was made and published on September 25, 1972 but thereafter on December 1, 1972 it is alleged on the ex parte application of the contractor, the award was corrected as follows :--
(i) Appendix 'A'
Serial No. 38 } For unit given as % Cft
read unit " " % Cft.
(ii) Appendix 'A'
Serial No. 62 } For unit given as(SIC) read unit as rft.
30. The appellant submitted that the corrections were impermissible in law and would indicate the non-application of mind on the part of the arbitrator. In Chouthmal v. Ramchandra, AIR 1955 Nag 126. it was held that once an arbitrator has given his decision, he becomes functus officio and he cannot add to or vary it in any way except to correct clerical mistakes or errors arising from any accidental slip or omission. In Juggilal Kamalapat v. General Fibre Dealers Ltd., it was held that generallv speaking an arbitrator is functus officio after he has made the award but this only means that no power is left in the arbitrator to make any change of substance in the award that he has made except in certain circumstances provided in the law. The corrections made by the arbitrator here were in respect of patent errors and did not amount to any change of substance in the award and thus were permissible. We are also not prepared to accept that these corrections indicate non-application of mind on the part of the arbitrator as contended by Mr. Sen on behalf of the appellant.
31. We have seen that the award in respect of Item 88 is unsustainable. That, however, without more will not vitiate the award. In Jivaribhai v. Chintaman-rao, the Court held that the award, to the extent it is beyond the arbitrator's jurisdiction, is invalid and if it is not possible to sever such invalid part from the other part of the award, the award must fail in its entirety. In the case before us, the award, in respect of Item 88 is perfectly severable from the other part of the award. Accordingly though we are unable to sustain the award in respect of Item 88, it cannot be said that the entire award is thereby vitiated.
32. For all these reasons we are unable to accept the various contentions raised by the appellant. The award in respect of Item No. 88 is set aside and the order and decree passed by the learned Judge are varied to that extent. In the result, the appeal succeeds in part and only to the extent indicated above. Save as aforesaid, the order and the decree under appeal are affirmed. The appellant will pay half the costs of the appeal. Certified for two Counsel.
33. After hearing the submissions made by Mr. Tibrewal and Mr. P. K Sen, we release the respondents from the undertaking they have given in re&pect of payment of Rs. 2,00,000/- made by the appellant Union of India to the respondents. The guarantee will accordingly stand discharged. All parties and the Bank of Madura will act on a signed copy of the minutes of Mr. B. M. Bagaria, Attorney for the respondents, undertaking to complete this order.
S.K. Mukherjea, J.