M/S HARISH CHANDRA & COMPANYversusSTATE OF U.P. THR. SUPERINTENDING ENGINEER

                        [2016] 8 S.C.R. 773


              M/S HARISH CHANDRA & COMPANY                                A
                                   v.
      STATE OF U.P. THR. SUPERINTENDING ENGINEER
                    (Civil Appeal No. 8829of2016)
                        SEPTEMBER 08, 2016                                B

 [J, CHELAMESWAR AND ABHAY MANOHAR SAPRE, JJ,]
        Arbitration Act, 1940 - s.30- Grounds for setting aside award
  - Jurisdiction of Court - High Court set aside the award u/s.30 on
  ground of legal misconduct by arbitrator in passing the award,
  holding that he travelled beyond the terms of the agreement - Held:
                                                                         c
  An award can be set aside only on the grounds specified in sub-
  clause (a), (b) and (c) of s.30 and on no other ground - High Courts
  finding that since the arbitrator passed an award contrary to clause -
  26 of the agreement and hence travelled beyond the terms of
  agreement, untenable in law - This factual objection was raised · D
  for the first time in appeal in the High Court and hence could not
  have been gone into by High Court - Award being a reasoned one
 ;ms neither perverse nor any finding of the arbitrator was against
· any provision of law or in contravention of any clause of the
  agreement so as to constitute a case of legal misconduct on part of E
  arbitrator within meaning of s.30.
       Allowing the appeal, the Court
       HELD: 1. An award can be set aside only on the grounds
 specified in sub-clause (a), (b) and (c) of Section 30 of the
 Arbitration Act, 1940 and on no other ground. Indeed this is clear       F
 from the opening words of Section 30 itself which starts with the
 words "An award shall not be set aside except on one or more of
 the following grounds." Afortiori, a reasoned award cannot be set
 aside unless it falls in any of the three sub-clauses (a), (b) and (c)
 of Section 30 of the Act 1940. [Para 31)(783-G-H]
                                                                          G
       2. The High Court while setting aside the award virtually
 sat as an appellate Court as if it was hearing the appeal arising
 out of the award. It went into the factual question by referring to
 clause 26 of the agreement for holding that the arbitrator passed
 an award contrary to clause 26 and thereby travelled beyond the
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                                  773
774           SUPREME COURT REPORTS                        [2016) 8 S.C.R.


A terms of agreement which constituted a legal misconduct on his
  part. This finding on the face of it was untenable in law for the
  reason, inter alia, that this objection was neither raised before
  the arbitrator nor before the Trial Court but was raised for the
  first time in the High Court. In absence of any finding recorded
  by the arbitrator and the Trial Court, such issue could not have
B
  been gone into for the first time in appeal by the High Court. The
  High Court failed to sec that clause 26 only prohibited the
  appellant from assigning the agreement to any third person.
  Clause 26, therefore, had nothing to do with the claims filed by
  the appellants. It was an admitted fact that the appellant did not
c assign the agreement to any third person. If some work was got
  done by the appellant by employing some small contractor then
  it did not constitute a case of assignment of a whole agreement in
  favour of small contractors within the meaning of clause 26 so as
  to empower the State to cancel the agreement on such ground.
  The High Court further failed to see that there was no error
D
  apparent on the face of the record in the findings recorded by the
  arbitrator. Award being a reasoned one, the reasoning of the
  arbitrator was neither perverse nor any finding of the arbitrator
  was against any provision of law or in contravention of any of the
  clauses of the agreement so as to constitute a case of legal
E misconduct on the part of the arbitrator within the meaning of
   Section 30 of the Act for setting aside an award. [Paras 34, 37] [784-
  D; 787-C-H; 788-A-B]
                 3.1 The main claim of the appellant-claimant against the
      State was in relation to work done by the appellant of breaking of
 F    large pieces of hard rock from 9.00 Km to 9.80 Km distance.
      Since the respondent-State disputed the appellant's claim on
      various factnal grounds hence the issue centered around to the
      •i '-'"it ions as to whether the appellant did the work. The arbitrator
      in the ;,ward examined this issue on tl!e basis of evidence adduced
      by parties and held that the appellant did the work in question
 G    and therefore was entitled to claim its price for the work done.
      [Paras 38, 39)[788-B-D]
            3.2 The claims made by the appellant were essentially base(!
      on facts and were accordingly probed on oral and documentary
      evidence adduced by the parties, which resulted in partial success
 H
   M/SHARlSHCHANDRA&COMPANYv. STATEOFU.P. THR.                          775
             SUPERINTENDING ENGINEER

of 3 claims in appellant's favour. No perversity in the arbitrator's A
reasoning nor any apparent error, legal or otherwise is noticed in
the award to constitute a case of any legal misconduct on the part
of the arbitrator empowering the Court to set aside the award by
taking recourse to Section 30 of the Act. Hence, no legal ground
to set aside the same. [Paras 41, 42](788-G-H; 789-A-B]
                                                                     8
       State of U.P. v. Allied Constructions (2003) 7 SCC
       396 : 2003 (2) Suppl. SCR SS; Mis Sudarsan Trading
       Co. v. Government of Kera/a (1989) 2 SCC 38 : 1989
       (1) SCR 66S - relied on.
      State of U.P. v. Harish Chandra & Co. (1999) 1 SCC                C
      63 : 1998 (2) Suppl. SCR 660; State qf Andhra Pradesh
      & Ors. v. R. V. Rayanim & Ors. (1990) 1 SCC 433 :
      1990 (1) SCR S4; Ravindra Kumar Gupta & Co. v.
      Union of India (2010) 1 SCC 4(19 : 2009 (16) SCR
      142 - referred to.
                                                                        D
                       Case Law Reference
      1998 (2) Suppl. SCR 660           referred to       Para 9
      2003 (2) Suppl. SCR SS            relied on         Para 28
      1989 (1) SCR 665                  relied on         Para 29
                                                                         E
      1990 (1) SCR S4                   referred to       Para30
      2009 (16) SCR 142                 referred to       Para 30
     CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8829
of2016.
                                                                         F
      From the Judgment and Order dated 17 .08.2007 of the High Court
ofUttarakhand-Nainital in A. 0. No. 1097 of200 I.
                               WITH
      SLP (C) No. 23950 of2007.
                                                                        G
      Vijay Hansaria, Sr. Adv., Brij Bhusan, Avnish Pandey, Advs. for
the Appellant.
     S. R. Singh, Sr. Adv., Ardhendumauli Kumar Prasad, Adv. for the
Respondent.
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776            SUPREME COURT REPORTS                            [2016) 8 S.C.R.



A           The Judgment of the Court was delivered by
            ABHAY MANOHAR SAPRE, J. In Special Leave Petition
      (c) No. 24443 of 2007 1. Leave granted.

             2. This appeal is filed against the final judgment and order dated
      17 .08.2007 of the High Court of Uttarakhand at Nainital in 0.A. No.
B     I 097 of 200 I whereby the High Court allowed the appeal filed by the
      respondent herein and set aside the judgment and order dated 30.05 .1996
      passed by the Civil Judge, Dehradun and, in consequence, allowed the
      objections of the State ofU.P. filed under Section 30/33 of the Arbitration
      Act, 1940 (hereinafter referred to as "the Act 1940") against the award
 c    dated 27 .11.1995 which, in tum, als() resulted in its setting aside.
            3. Facts of the case need mention, in brief, infra to appreciate the
      controversy involved in the appeal.
             4. The appellant herein is a civil contractor whereas the respondent
      is the State of U.P. represented through Superintending Engineer
D     Irrigation Construction Circle, Yamuna Colony, Dehradun.
             5. In the year 1979, the respondent (State) invited tender being
      Number 6/1979-80 for doing "Earthwork in power channels on different
      routes of various distances and also construction of drainage crossing in
      Chhoti Lui falling in 6 stretches and divided in two sections called "serial
 E    4" and "serial 6" in a scheme called - KHARA HYDEL SCHEME".
            6. The appellant submitted their tender for serial 4 and serial 6.
      The respondent accepted the appellant's tender. Accordingly, two
      agreements bearing nos. 5/SE/79-80 and 6/SE/79-80 were executed
      between the appellant and the respondent for execution of the work in
 F    questionon30.10.1979.
             7. So far as agreement No. 5/SE/79-80 is concerned, it was in .
      relation to work of section bearing serial 4 whereas agreement No. 61
      SE/79-80 was in relation to work of section bearing serial 6. The work,
      pursuant to these agreements, was to start from 01.12.1979 and had to
 G    be completed on or before 31.05.1982.
            8. Disputes of various nature arose between the parties in
      execution of both the agreements. The disputes were related to the
      completion of works, its nature, manner of its completion, non-payment
      and withholding of appellant's bills, ded.uction of amount from the bills
 H
   M/S HARJSH CHANDRA & COMPANY v. STATE OF U.P. THR.                          777
  SUPERINTENDING ENGINEER [AB HAY MANOHAR SAPRE, J.]

etc .. Since the disputes could not be settled amicably, the parties invoked   A
the arbitration clause (I .47) contained in the agreements and approached
the Civil Court for appointment of arbitrator and for making references
to him for adjudication of the disputes which had arisen between them in
relation to 2 agreements. The request was acceded to and accordingly
some disputes were referred to the sole arbitrator.
                                                                               B
       9. So far as this appeal is concerned, it arises out of disputes,
which relates to agreement No. 6/SE/79-80, i.e., (serial 6). So far as
disputes relating to agreement No. 5/SE/79-80 i.e.(serial 4) and some
disputes relating to agreement No. 6/SE/79-80 are concerned, they were
also referred to the arbitrator for his decision. One reference, however,
attained finality by the orders of this Court in State ofU.P. vs. Harish       C
Chandra & Co., (1999) 1 SCC 63, whereas another reference is
pending in this Court.
       I 0. Consequent upon the reference made to the arbitrator insofar
as the present appeal is concerned, the appellant (claimant) filed 6 claims
(claim Nos. 12 to 17) before the sole arbitrator (Mr. Harish Chandra - D
retired Chief Engineer). The details of the 6 claims made by the appellant
against the respondent (State) are as under: -

        Claim No.   ~                        Amouut
                                                                                E

        12.         Claim due on account     Rs. l,OS,00,000.00
                    of breaking ofla11e      along with interest @
                    pieces of hard rock in   24% per annum from
                    the filling done from    31.5.86 to the date the            F
                    9.00 to 9.80 KM.         amount is actually
                                             paid.

        13.         Claims due as         Rs.11,62,650.00 along
                    payment on account ol with interest at 24%
                                                                                G
                    non-payment after     per annum from 1.6.86
                    30.9.85.              to the date the amount
                                          is actually paid.


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778            SUPREME COURT REPORTS                           [2016] 8 S.C.R.


A
        14.              Payment due as claim      Rs. 1,04,426.00 aJon1
                         OD     account     or     with interest at 24%
                         wron1ful deduction        per annum from 1.5.85
                         of Security.              to the date the amount
B                                                  is actually paid.

         15.             Payment due as claim Rs. 5,51,250.00 alon1
                         on account of extra with interest @24%
                         exca·..-ation.       per annum from 1.6.86
 c                                            to the date the amount
                                              actually paid.
       ,..,.
         16.             Payment due as claim      Rs. 4,59,200.00 alon1
                         OD     account     of     with interest @24%
D                        dressin1 done OD          per annum from 1.6.86
                         slopu of filled earth     to the date of amount
                         in      embankments       actually paid.
                         from Km. 9.00 to
                         KM. 9.80
 E
         17.             Stoppin1           the     Order respondents to
                         respondents      from      accept our
                         deductin1          any     measurement for
                         quantity             of    excaYation on 31.5.86.
 F                       excavation done by
                         petitioner because of
                         sittin1     in      the
                         monsoon year 1986
                         and onwards, if any.
 G


              11. The respondent (State) contested the aforementioned claims
      by filing their reply. The State also filed their counter claims against the
      appellant claiming damages. The appellant contested the counter claims
 H
   MIS HARISH CHANDRA & COMPANYv. STATE OF U.P. THR.                       779
  SUPERINTENDING ENGINEER [AB HAY MANO HAR SAPRE, J.]

by filing their reply. The parties adduced evidence and examined several   A
witnesses in support of their respective claims.
       12. On 27 .11.1995, the arbitrator passed a reasoned award. Out
of 6 claims, the arbitrator allowed appellant's 3 claims, i.e., claim Nos.
12, 13 and 17 and rejected the claims Nos. 14, 15 and 16. The arbitrator
also rejected the counter claims of the respondent (State) in toto. The B
details of the claims awarded and rejected are as under:

    Claim No.    Amount demanded Rs.         Amount Awarded Rs.

    12.          Rs. l,OS,00,000.00 24%      Rs. 44,98,995.00              c
                 interest from 31.5.86

    13.          Rs.11,62,650 with 24%       Rs.10,61,450/- with
                 interest upto 31.5.86       interest 18% from
                                             1.6.86 to 27.11.95            D

    14.          Rs.1,04,426 with interest   Rejected
                 froml.5.85

    15.          Rs. 5,Sli250/- with         Rejected                      E
                 interest @24% from
                 1.6.86

    16.          Rs. 4,59,200/- with         Rejected
                 interest @24% from                             .           F
                 1.6.86

    17.          Order respondent to         No deduction in
                 accept measurement for      quantity :already paid
                 excavation on 31.S.86       ville 27& Runnina bill        G
                                             are justified



      13. The respondent, felt aggrieved, filed objections under Section
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780            SUPREME COURT REPORTS                            [2016] 8 S.C.R.


A     30 of the Act 1940 before the Civil Judge(S.D.), Dehradun against the
      award. The appellant contested the objections and prayed for passing a
      decree in term of the award. By order dated 30.05.1996, the civil Judge
      rejected the objections and passed a decree in term of the award along
      with simple interest payable at the rate of 18% p.a. on the awarded sum
      ofRs.55,60,445/- from the date of decree till payment ofamount.
B
             14. The respondent, felt aggrieved, filed appeal being O.A. No.
      1097 of 2001 before the High Court. By impugned judgment dated
      17 .08.2007, the High Court allowed the appeal, set aside the orderof the
      Trial Court and while allowing the objections filed by the State set aside
      the award. The High Court held that the arbitrator misconducted himself
 c    in passing the award inasmuch as he travelled beyond the terms of the
      agreement.
             15. Felt aggrieved, the appellant (contractor/claimant) has filed
      this appeal by way of special leave against the judgment of the High
      Court.
 D
            16. Heard Mr. Vijay Hansaria, learned senior counsel for the
      appellant and Mr. S.R. Singh, learned senior counsel for the respondent.
              17. Mr. Vijay Hansaria, learned senior counsel appearing for the
      appellant (claimant/contractor) while assailing the legality and correctness
 E    of the impugned order contended that the High Court was clearly in
      error in allowing the appeal of the State (respondent) which resulted in
      allowing the objections filed by the State before the Civil judge which, in
      turn, resulted in setting aside of the said award which was rightly upheld
      by the Civil Judge.
             18. Learned counsel urged that there was no case made out by
 F
      the State in their objections of any legal misconduct committed by the
      arbitrator and nor there was any factual or/and legal foundation laid so
      as to constitute a case of any legal misconduct within the meaning of
      Section 30 of the Act 1940. for setting aside the award.
 G           19. Learned counsel pointed out that even cursory reading of the
      order of the High Court would indicate that the apparent legal error was
      committed by the High Court while allowing the appeal. It was his
      submission that the High Court virtually acted as a first appellate Court
      as ifthe appeal before the High Court arose directly against the award.
      Learned counsel pointed out that the High Court then proceeded to
 H
   MIS HARISH CHANDRA & COMPANYv. STATE OF U.P. THR.                         78 I
  SUPERINTENDING ENGINEER [ABHAY MANOHAR SAPRE, J.]

examine the legality and correctness of al Ifactual findings of the arbitrator A
by appreciating the evidence and then finding fault in the approach of
the arbitrator so also finding error in the findings set aside the award as
being bad in law.
       20. Learned counsel urged that such approach of the High Court
was wholly without jurisdiction being against the law laid down by this B
Court in series of decisions wherein this Court has, inter alia, ruled that
the Court while hearing the objections under Section 30 of the Act 1940
against the award, cannot sit as an appellate Court over the decision of
the arbitrator.
       21. Learned counsel then contended that even otherwise on the c
merits, the award and the judgment of the Trial Court do not suffer from
any illegality and nor any case oflegal misconduct is made out against
the arbitrator so as to empower the Court to set aside the award under
Section 30 of the Act 1940. It was his submission that the arbitrator did
not travel beyond the agreement and on the other hand discussed each
and every issue by appreciating the evidence on record with reference D
to each claim and then recorded a finding in favour of the appellant in
relationto three claims and rejected the remaining claims of the appellant.
      22. Learned counsel lastly contended that this Court should,
therefore, restore the order of the Trial Court and, in consequence,
uphold the award, which is partly in favour of the appellant and partly       E
against them, as being just and legal by setting aside of the impugned
order of the High Court.
       23. In reply, Mr. S.R. Singh, learned counsel for the respondent
supported the impugned order and contended that it does not call for any
interference. It was his submission that the reasoning and the conclusion     F
arrived at by the High Court for setting aside the award is legal and
proper and hence it deserves to be upheld calling no interference.
       24. Having heard the learned counsel for the parties and on perusal
of the record of the case, we are inclined to accept the submissions of
the learned counsel for the appellant as, in our opinion, it has substance. G
       25. The question which arises for consideration in this appeal is
whether the High Court was justified in allowing the objections filed by
the respondent (State) under Section 30 of the Act 1940 and thereby
was justified in setting aside of the award passed by the sole arbitrator
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782            SUPREME COURT REPORTS                          [2016) 8 S.C.R.


A     on the ground of "legal misconduct"? In other words, the question that
      arises for consideration in this appeal is whether on facts any case of
      legal misconduct on the part of the arbitrator is made out by the State
      under Section 30 of the Act 1940 for setting aside of the award dated
      27.11.1995?
B           26. This question, in our opinion, is required to be decided in the
      context of Section 30 of Act 1940 since repealed.
            27. What is the jurisdiction of the Court under Section 30 when it
      examines the question as to whether any case of legal misconduct on
      the part of an arbitrator in passing an award is made out or not has been
 c    the subject matter of several decisions of this Court and remains no
      more res integra?
            28. A three-Judge Bench of this Court in State ofU.P. vs. Allied
      Constructions, (2003) 7 SCC 396 while examining the scope of Section
      30 held as under:
 D          "The award is a speaking one. The arbitrator has
            assigned sufficient and cogent reasons in support
            thereof. Interp1·etation of a contract, it is trite, is a
            matter for the arbitrator to determine.
            Sudars/1a11 Trading Co. vs. Govt. of Kera/a (1989) 2
 E          sec 38: REFERRED TO:
            Section 30 of the Arbitration Act, 1940 providing for
            setting aside an award is' restl'ictive in its operation.
            Unless one or the other condition contained in Section
            30 is satisfied, an award cannot be set aside. The
 F          arbitrator is a Judge chosen by the parties and his
            decision is final. The court is precluded from
            reappraising the evidence. Even in a case where the
            award contains 1·easons, the interference herewith
            would still be' not available within the jurisdiction of
            the court unless, of course, the reasons are totally
 G
            perverse or the judgment is based on a wrong
            proposition of law. An ~rror apparent on the fact of
            the records would not imply closer scrutiny of the
            merits of documents and materials on record. Once
            it is found that the view of the arbitrator is a plausible
 H          one, the com1 will refrain itself from interfering."
   M/SHARISHCHANDRA&COMPANYv. STATEOFU.P. THR.                               783
  SUPERINTENDINGENGINEER[ABHAYMANOHARSAPRE,J.]

      29. Justice S. Mukharji, as His Lordship then was, speaking for        A
the Bench in Mis Sudarsan Trading Co. vs. Government of Kerala,
(1989) 2 SCC 38 while examining the jurisdiction of Court under Section
30 held as under:
      "However, th.ere is a distinction between disputes as
      to the jurisdiction of the arbitrator and the disputes                 B
      as to in what way that jurisdiction should be exercised.
      There may be a conflict as to the power of the
      arbitrator to grant a particular remedy. One has to
      determine the distinction between an error within the
      jurisdiction and an error in excess of the jurisdiction.
      Court cannot substitute its own evaluation of the                      c
      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 to be sustained,
      was a decision within the competency of the arbitrator                  D
      in this. 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. If on a view taken of a contract,
      the decision of the arbitrator on certain amounts
      awarded, is a possible view through perhaps not the                     E
      only correct view, the award cannot be examined by
      the court."
       30. The aforesaid view was consistently followed in later decisions
by this Court in State of Andhra Pradesh & Ors. Vs. R.V. Rayanim
& Ors., (1990) 1 SCC 433 and Ravindra Kumar Gupta & Co. vs.                   F
Union oflndia (2010) 1 SCC 409.
       31. One cannot, therefore, dispute the legal proposition, which is
now fairly settled keeping in view the aforementioned law laid down by
this Court that an award can be set aside only on the grounds specified
in sub-clause (a) (b) and (c) of Section 30 of 1940 Act and on no other G
grounds. Indeed this is clear from the opening words of Section 30 itself
which starts with the words "An award shall not be set aside except
on one or more of the following grounds." A fortiori, a reasoned
award cannot be.set aside unless it falls in any of the three sub-clauses
(a) (b) and (c) of Section 30 of the Act 1940.                            H
784                SUPREME COURT REPORTS                       [2016] 8 S.C.R.


A            32. The grounds such as inadequacy ofreasons in support of an
      award, error committed by the arbitrator on facts, alternate or/and more
      plausible view could be taken then what is taken by the arbitrator, improper
      appreciation of evidence done by the arbitrator in recording any finding
      etc. are not the grounds on which any award much less a reasoned
      award can be set aside. In other words, none of these grounds can be
B
      made the foundation for setting aside the award because they do not fall
      within the four corners ofany of the thtee sub- clauses of Section 30 of
      the Act 1940.
            33. Coming now to the facts of this case, on perusal of the
      impugned judgment, we find that the High Court while setting aside of
 C    the award did not take into consideration the aforesaid view of this <;:ourt
      and thus, in our view, committed a legal error.
          34. We are constrained to observe that the High Court virtually
  sat as an appellate Court as if it was hearing the appeal arising out of the
  award little realizing rather ignoring its well defined jurisdiction in such
D matter and proceeded to probe into all factual issues arising in the case.
  It seems to have gone to the extent of permitting the State's counsel to
  file some documents in appeal as would be clear from para 12 of the
  judgment. This would also be clear from the observations of the High
  Court made in Paras 12, 13, 18 and 19 which read as under:·
E         "12 The learned standing counsel has supplied the
          list of petty contractors in whose names the bills were
          submitted before the Arbitrator. The details of those
          bills is as below:-

 F             S.:Xo.   Xames of Petty           Amount
                        Contractors

               I        Harish Chandra &         Rs. 3,11,965.80
                        Sons

 G             2        Vijay     Gupta     &     Rs. 3,04,828.00
                        Sons

               3        Phool      Chand          Rs.17,95,346.00
                        Gupta & Sons
 H
 MIS HARISH CHANDRA& COMPANYv. STATE OF U.P. THR.           785
SUPERINTENDINGENGINEER[ABHAYMANOHARSAPRE,J.]

                                                            A
  4       Ashok Gupta & Sons      Rs. 178,84,942.00


  5       Vijay Gupta & Sons       Rs. 17 '78,664.00

                                                            B
  6       Phool Chand & Sons       Rs. 2;97,583.50


  7       Ashok Gupta & Sons       Rs. 3,10,258.60


  8       Barish Chaudra &         Rs. 17 ,84,468.00        c
          Sons

  9       Ajay Gupta & Sons        Rs. 3,00,196.90

                                                            D
  10      Ajay Gupta & Sons        Rs. 17, 73,903.98




  13. The department made enquiries upon which it was
  revealed that in the concerned area there exist no         E
  Firms in the aforesaid names and addresses. The
  correspondence made in this regard is filed as
  Annexure No.2 (Collectively) to the Stay Application
  in the appeal before this Court. The endorsement
  made by the postal department about non-existence          F
  of the said Firms is also Arbitrator has not considered
  the above facts and allowed the claims 12, 13 and 17
  filed by the contractor. The Department's allegation
  is that the contractor for the first time raised claim
  Nos. 12 to 16 before it vide his letter No. 102/S.C.C./
  87 dated 20.9.87 and the department vide its letter       G
  No. 3911/-2/case/647/86, dated 28.11.87 has rejected
  the claims. Claim No. 17 was never raised before the
  Department and it was placed before the Arbitrator
  directly.
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786            SUPREME COURT REPORTS                          [2016] 8 S.C.R.


A           18. Now we proceed to scrutinize the claims awarded
            by the Arbitrator to the contractor.
            19. Claim No. 12 pertains to breaking of large pieces
            of hard rock in the filling work done from Km. No.
            9.00 to 9.80. The Arbitrator has allowed this claim on
B           the ground that the site is located in the upper Shivalik
            ranges of the Himalayan mountains. These ranges are
            mostly built of the sedimentary rocks compressed of
            the material flown down the rivers since millions of
            years which got compressed under their own pressure
            and weights and got very hard due to the ageing
 c          process. This material could not be dugged out
            manually by pick axes or Phawaras. The possible
            means of excavation were only by mechanical means
            either by mechanical shovels, back hows, rippers or
            by blasting. The objections of the Department is that
D           the Arbitrator has allowed the claim on imagination.
            As per the contract clause 8.05 boulders of 150 mm
            dimensions were to be used in the filling reach and of
            more than 150 mm were to be staked at the site. The
            stones of dimensions of above 150 mm were not to
            be broken and then filled in the filling reach. The
 E          relevant clause 8.05 clearly indicates "the boulders
            of more than 150 mm in dimension shall not be
            permitted in the embankments unless specifically
            approved by the Engineer lncharge and shall be
            stacked by the contractor 10 meters away from the
 F          toe of the bank and nothing extra shall be paid to the
            contractor for this work". There is no mention of
            breaking of the stones in the agreement clause. The
            Arbitrator has acted beyond the provision of the
            agreement in allowing this claim."
 G            35. The High Court then went on to examine the case on facts
      and eventually held that the arbitrator has travelled beyond clauses 26, 3
      (I )(a) and 1.46 of the agreement and hence committed legal misconduct
      requiring the High Court to set aside the award.
            36. With respect, we can neither agree and nor can uphold the
 H    approach and the reasoning of the High Court. In our considered view,
   M/SHARISHtHANDRA&COMPANYv. STATEOFU.P. THR.                                 787
  SUPERINTENDING ENGINEER [ABHAY MANO HAR SAPRE, J.]

such approach is wholly against the law laid down by this Court in the         A
decisions quoted supra.
       37. In the first place, the High Court did not apply the law laid
down by this Court while deciding the appeal and hence committed a
jurisdictional error; Secondly, the High Court acted like an appellate Court
and virtually treated as if the appeal arose directly against the award        B
and then proceeded to examine all factual findings of the arbitrator by
appreciating the evidence. It was not permissible in law; Thirdly, the
High Court should have confined its inquiry to find out as to whether any
legal misconduct was committed by the arbitrator and, if so, how and in
what manner. It was, however, not done; Fourthly, the High Court went
into the factual question by referring to clause 26 of the agreement for       C
holding that the arbitrator passed an award contrary to clause 26 and
thereby traveled beyond the terms of agreement which constituted a
legal misconduct on his part. This finding, in our view, is, on the face of
it, untenable in law for the reason, inter alia, that this objection was
neither raised before the arbitrator and nor before the Trial Court in the     D
manner in which it was raised for the first time in the High Court. In any
event, in the absence of any finding recorded by the arbitrator and the
Trial Court, such issue could not have been gone into for the first time in
appeal by the High Court. That apart, it has otherwise no substance on
facts for the simple reason that it being a question of fact, the same
could not be examined in appeal; Fifthly, the High Court failed to see         E
that clause 26 only prohibits the appellant from assigning the agreement
to any third person. Clause 26, therefore, had nothing to do with the
claims filed by the appellants. It was an admitted fact that the appellant
did not assign the agreement to any third person. If some work was got
done by the appellant by employing some small contractor then it did not       F
constitute a case of assignment of a whole agreement in favour of small
contractors within the meaning of clause 26 so as to empower the State
to cancel the agreement on such ground. The finding of the High Court
that the award is rendered bad because it was passed in contravention
of clause 26 of the agreement is, therefore, not legally sustainable in
law; Sixthly, the High Court further failed to see that there was no error     G
apparent on the face of the record in the findings recorded by the
arbitrator; Seventhly, the High Court also failed to see that the Trial
Court had elaborately gone into all the factual issues and rightly did not
find any substance in the objections raised by the respondent; and lastly,
the award being a reasoned one (running into 36 pages-Annexure PS              H
788            SUPREME COURT REPORTS                            [2016] 8 S.C.R.



A     pages 127-163 of the SLP paper book), the reasoning of the arbitrator
      could not be said to be perverse to the extent that no man with ordinary
      prudence could take such view and nor any finding of the arbitrator was
      against any provision oflaw or in contravention ofany of the clauses of
      the agreement so as to constitute a case of legal misconduct on the part
      of the arbitrator within the meaning of Section 30 of the Act for setting
 B
      aside an award.
             38. We, on perusal of the award, find that the main claim of the
      appellant (claimant) against the State was "claim No. 12" which was in
      relation to the work done by the appellant of breaking oflarge pieces of
      hard rock from 9.00 Km to 9.80 Km distance. Since the respondent
 c    (State) disputed the appellant's claim on various factual grounds and
      hence the issue centered around to the questions as to whether the
      appellant did this work and, if so, how and in what manner and to what
      extent and lastly, what should be the rate at which the appellant should
      be paid, if it is held that the appellant has done the work.
D            39. The arbitrator in Paras 19 to 36 of the award examined these
      issues on the basis of the evidence adduced by the parties and held that
      the appellant has done the work in question and, therefore, they were
      entitled to claim its price for the work done. Though the appellant, in
      their claim petition, claimed the money at the rate ofRs.30 per Cu M but
 E    the arbitrator did not accept the rates claimed by the appellant and instead
      awarded the amount to the appellant at the rate of Rs.12.97 per Cu.M.
            40. So far as claim No. 13 was concerned, it pertained to interest
      claimed by the appellant on their some amount whereas the claim No.
      17 was in relation to so'me deductions already made by the respondent in
 F    the appellant's bills for certain work done under the agreement.
             41. In our considered view, it is clear from the facts of the case
      that the claims made by the appellant were essentially based on facts.
      They were accordingly probed on oral and documentary evidence
      adduced by the parties, which resulted in partial success of3 claims in
 G    appellant's favour and rejection of 3 claims. So far as the State is
      concerned, they did not pursue their counter claim consequent upon its
      rejection by the arbitrator.
             42. We have not been able to notice any kind of perversity in the
      arbitrator's reasoning and nor are we able to notice any kind of apparent
      error whether legal or otherwise in the award which may constitute a
 H
   MIS HARISH CHANDRA & COMPANYv. STATE OF U.P. THR.                              789
  SUPERINTENDING ENGINEER [ABHAYMANOHAR SAPRE, J.]

case of any legal misconduct on the part of the arbitrator empowering             A
the Court to set aside the award by taking recourse to Section 30 of the
Act. The reasoning and the conclusion arrived at by the arbitrator is one
of the possible view which is capable of being taken by the arbitrator on
the material brought on record and we find no legal ground to set it aside
the same.
                                                                                  .B
         43. Learned counsel for the respondent made sincere attempt
to support the reasoning and the conclusion reached by the High Court
but in the light of what we have discussed above, we can not accept any
ofhis submissions.
        44. In the light of foregoing discussion, we are unable to concur         C
with the reasoning and the conclusion arrived at by the High Court.
      45. As a result, the appeal succeeds and is accordingly allowed.
Impugned order is set aside and that of the Trial Court restored.
         In Special Leave Petition (c) No. 23950 of 2007
                                                                                  D
       46. As prayed for, the petitioner is permitted to withdraw this
special leave petition with a liberty granted to the petitioner to file review
petition before the High Court. In the event of review petition being
dismissed, the petitioner would be at liberty to challenge the impugned
order including the order in the review petition.
                                                                                  E
      4 7. With the aforesaid liberty, the special leave petition is dismissed
as withdrawn.


Divya Pandey                                               Matters disposed of.