Supreme Court of India
S. HARCHARAN SINGHversusUNION OF INDIA
- Citation
- 1990 INSC 258
- Decided
- 28 August 1990
- Disposal
- Disposed off
- Bench
- RANGANATH MISRA
Holding
The arbitrator did not exceed his jurisdiction; the award for additional work at the increased rate is valid and cannot be set aside.
Summary
S. Harcharan Singh was contracted to perform hard‑rock cutting for a bridge project at a fixed rate of Rs 129 per 1,000 cft. The work required far more cutting than anticipated, and the contractor claimed a higher rate of Rs 200 per 1,000 cft for the additional work. The dispute over four claims was referred to arbitration; the arbitrator awarded Rs 52,800 for part of the additional work, applying the higher rate only to a portion. The Delhi High Court Single Judge upheld the award, but the Division Bench set it aside, holding that the arbitrator had exceeded his jurisdiction under clause 12 of the contract by fixing a rate above the agreed one. On appeal, the Supreme Court held that the arbitrator had acted within his jurisdiction, that the award was not vitiated, and that the High Court’s setting aside of the award was erroneous. Consequently, the award was restored and the appellant’s costs were awarded.
Issues considered
- The arbitrator exceeded his jurisdiction by awarding an increased rate for additional work beyond the contract rate.
- Whether an award can be set aside under Sections 30 and 33 of the Arbitration Act, 1940 on the ground of jurisdictional excess.
- Whether the arbitrator was required to give reasons for his award under the arbitration agreement.
- The interpretation of clause 12 of the construction contract regarding the extent of permissible variations and rate adjustments.
Legislation cited
- Arbitration Act, 1940s. 14, s. 17, s. 30, s. 33
- Code of Civil Procedure, 1908s. 151
Subjects
ArbitrationArbitration award jurisdictionContract variationAdditional work remunerationSection 30 Arbitration ActClause 12 construction contractDeviation limitConstruction law
Judgment
S. HARCHARAN SINGH
A
v.
UNION OF INDIA
AUGUST 28, 1990
B [RANGANATH MISRA, M.M. PUNCHHI AND
S.C. AGRAWAL, JJ.)
Arbitration Act, 1940: Sections 14, 17, 30 and 33-Contract for
specified work-Claim for entire additional work at increased rate-
Arbitrator awarding increased rate for part of the additional work-
Whether Arbitrator exceeded his jurisdiction-Award-Whether vitiated.
c
The appellant was· awarded a contract for constructing approa-
ches to certain Bridge structure. As per the agreement, he was required
to do hard rock cutting to the extent of 7,54,530 cft. and the rate rixed
was Rs.129 per thousand cft. plus 2%. Actually the appellant was
D required to perform hard rock cutting to the extent of 18,18,704 cft.
For the additional work, the appellant claimed payment at the rate of
Rs.200 per thousand cft. He also claimed certain other sums under
other heads. Dispute in respect of 4 heads was referred to arbitration.
The arbitrator in his award disallowed two claims and allowed the other
two claims, one of which was in respect of the additional work of hard
E rock cutting, and awarded a sum of Rs.52,800 under this head. The
arbitrator filed the award in the High Court. After considering the
objections filed by the respondent a Single Judge of the High Court
ordered that the award be made a rule of the Court. The respondent
filed an appeal against the said order and the Division Bench set aside,
ex-parte, the claim for higher remuneration at the rate of Rs.200 per
F thousand cft. Aggrieved, the appellant has preferred an appeal, by'
special leave.
The other appeal, also by special leave, is against the High
Court's rejection of the prayer for setting aside the ex-parte judgment.
G Allowing the former appeal and disposing of the latter one,
HELD: 1. As regards the award of an arbitrator under the Act,
the law is well settled that the arbitrator's adjudication is generally
considered binding between the parties for he is a tribunal selected by
the parties and the power of the court to set aside the award is restricted
H to cases set otit In secttonc30 of the Act; It is, however, 11ot.11pen to the
'
76
HARCHARAN v. U.0.1. 77
Court to speculate, where no reasons are given by the arbitrator, as to
what Impelled the arbitrator to arrive at his conclusion. But the juris·
diction of the arbitrator is limited by the reference aitd if the arbitrator
has assumed jurisdiction not possessed by him, the award to the extent
to which it is beyond the arbitrator's jurisdiction would be invalid and
liabl~ to be set aside. An arbitrator or umpire is under no obligation to
give reasons In support of the decision reached by him unless under the B
arbitration agreement or the deed of submission he is required to give
such reasons. If the arbitrator or umpire chooses to give reasons in
support of his decision it Is open to the Court to set aside the award if it
finds that an error of law has been committed by him on the face of the
record. An award can neither he permitted nor set aside merely on the
ground that it does not contain reasons in support of the conclusion or
decisions reached in it except where the arbitration agreement or the c
deed of submission requires him to give reasons. [82H; 83A~E]
Jivarajbhai Ujamshi Sheth and Others v. Chintamanrao Balaji
and Others, [1964] 5 SCR 480; Raipur Development Authority and
Others v. M/s Chokhamal Contractor and Others, [1989] 2 SCC 721, D
relied on.
2.1 In the instant case the arbitration agreement or the deed of
submission did nut require the arbitrator to give reasons and,· there..
fore, the award cannot be questioned on the ground of an error on the
face of the award. The Dhision Bench of the High Court set aside the E
award in respect of the claim relating to payment for additional work of
hard rock cutting on the ground that in making the award the
arbitrator exceeded his jurisdiction by allowing a rate to the contractor
in excess of the agreed rate for the job of hard rock cutting against the
terms and conditions in clause 12 of the agreement.'[83F-G]
F
2.2 Under clause 12 of the agreement, the Engineer-in-charge
was empowered to make any additions to the original specifications that
may appear to him to be necessary or advisable during the progress of
the work and the contractor was bound to carry out the work in accor· ·
dance with any instructions given to him in writing signed by the
Engineer-in-charge. [85B-C] G
2.3 It has to be inferred from the terms of the contract whether
this power to order extras, although apparently unlimited, is in fact
.... limited to ordering extras upto a certain value and·in such a case, extras
,
ordered in excess of that amount may be outside the terms of the
contract. H
I
78 SUPREME COURT REPORTS [1990] Supp. 1 S.C.R.
Parkinson (Sir Lindsay) & Co. Ltd. v. Commissioners of His
A
Majest_v's Works and Public Buildings, [J949i 2 K.B. 632, referred to.
Hudson's Building and Engineering Contracts, 8th Edn. pp. 294,
296, referred to.
B 3. In some awards given by the arbitrators in the Central Public
Works Department of the Government of India the variation of the
tendered quantities under the variation clause in the contract has been
restricted to 10% beyond which the contractor was entitled to claim as
extras and awards have been accepted and implemented by the Govern-
ment. It appears that the standard form of contract of the Central
Public Works Department has been amended and now it specifically
c permits for a limit of variation called "deviation limit" upto a
maximum of 20% and upto such limit the contractor has to carry out the
work stipulated in the contract and for the work in excess of that limit
at the rates to be determined in accordance with clause 12-A under
which the Engineer-in-Char~e can revise the rates having regard to the
D prevailing market rates. [88D-F]
,-
Gajaria's Law relating to Building and Engineering Contracts in
India, 3rd Edn., pages 410-412, referred to.
4. In the instant case, the Executive Engineer, the Superintend-
E ing Engineer and the Additional Chief Engineer h~ve expressed the
view that the· additional work under the terms of the contract may be
confined to 20% and the appellant may be paid at the rates prescribe!' in
the contract for 20% of the additional work and for the extra quantity of
additional work he may be paid remuneration at the increased rate
taking into account the increased costs in execution of the said work on
F account of the peculiar nature of the work while considering the claim
of the appellant the arbitrator was required to consider the terms of the
contract and to construe the same. It was, therefore, permissible for the
arbitrator to consider whether clause 12 of the contract enables the
Engineer-in-charge to require the appellant to execute additional work
without any limit, or a reasonable limit should be placed on the quantity
G of the additioni.l work, which the appellant may be required to execute
at the rate stipulated for the main work under the contract. For that
purpose the arbitrator could take into consideration the practice preva-
lent in the Central Public Works Department in this regard as well as
the correspondence between the appellant and the authorities recom-
mending payment of remuneration at the increased rate for the addi-
H tional work h1 excess of 20% of the quantity stipulated in the contract.
HARCHARAN v. U.0.1. (AGRAWAL, J.] 79
Tbe appellant was claiming increased rate of Rs.200 per 1000 cft. for
the entire quantity of additional work. The arbitrator did not accept the A
said claim of the appellant in full and has partly allowed the said claim
by awarding Rs.52,800 which means that the arbitrator has awarded
the increased rate only for a part of the additional work of hard rock
cutting which the appellant was required to execute. The arbiirator was
entitled to do so on the construction placed by him on clause 12 B
of the contract and, therefore, it cannot be said that in awarding
the sum of Rs.52,800 for the additional work the arbitrator has
exceeded his jurisdiction and the award. is vitiated by an error of
jurisdiction. [88G-H; 89A·EJ
5. The judgment of the Division Bench of the High Court setting
aside the award of the arbitrator with regard to the claim relating to C
payment for additional work of hard rock cutting is set aside and the
order passed by the Single Judge upholding the award oftbe arbitrator .
in this regard is restored. [89F]
6. Since the judgment of the Division Bench of the High Court is o
set aside the appeal against the order rejecting the prayer for setting
aside the ex-parte judgment, does not survive. [908]
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 322
& 323 of 1976.
E
From the Judgment and Order dated 27.3.1973 and 23.5.75 of
the Delhi High Court in F.A.0. (O.S.)No. 35 of 1969 and C.M. No.
1300 of 1974 in F.A.O. (O.S.) 35 of 1969.
P.P. Juneja for the Appellant.
F
B.B. Barna. Ms. A. Subhashini (N.P.) and Ms. Indira Sawhney
(N. P.) for the Respondent.
The Judgment of the Court was delivered by
S,C. AGRA WAL, J. Civil Appeal No. 322 of 1976 G
This appeal by special leave has been filed against the judgment
dated March 27. 1973 of the High Court of Delhi in F.A.O. (O.S.) No.
- 35 of 1968.
The appellant, S. Harcharan Singh, was awarded a contract for H
80 SUPREME COURT REPORTS [1999] Supp. 1 S.C.R.
constructing approaches to the Bridge Structure B-2 on the North
A Sikkim Road in 1959-60. Under the agreement the appellant was
required to do hard rock cutting to the extent of 7 ,54 ,530 cft. The rate
fixed for the said work in the contract was Rs. 129 per thousand cft.
plus 2%. The appellant was required to perform hard rock cutting to
the extent of 18, 18,704 cft. The appellant claimed payment at the rate
B of Rs.200 per thousand cft. for the additi0 nal work of hard rock cut-
ting. He also claimed certain other sums under other heads. The dis-
pute in respect of four heads was referred to arbitration in accordance
with the clause 25 of the agreement. The arbitrator gave his award
dated February 5, 1965 wherein he disallowed the claim of the appel-
lant in respect of-two items but made an award in favour of the appel-
lant in respect of two items of claim. In this appeal we are only con-
c cerned with the-claim of the appellant in respect of the additional work
of hard rock cutting which the appellant was required to execute. The
arbitrator awarded a sum of Rs.52,800 against the said item. The
award was filed in the High Court by the arbitrator alongwith his lettei:_
dated June 6, 1968. Objections were filed by the respondent under
D Sections 30 and 33 of the Arbitration Act, 1940 {hereinafter referred
to as 'the Act'). The said objections were considered by the learned ,.
single Judge of the Delhi High Court and by order dated April 23,
1969, the said objections of the respondent were rejected and it was
ordered that the award be made a rule of the Court. The respondent
filed an appeal against the said order and decree passed by the !_earned
E single Judge. The appeal was partly allowed by the Division Bench of
the High Court by judgment dated March 27, 1973, whereby the award
as regards the claim for higher remuneration at the rate of Rs.200 per
thousand cft. for the additional work of hard rock cutting was set
aside. The award in respect of other item of the claim relating to
expenditure incurred by tlte appellant in reconstructing the retaining
F walls after damage, was maintained. Aggdeved by the said decision of
the Division Bench of the High Court the appellant has filed this
appeal after obtaining special leave.
As indicated earlier, this appeal is confined to the claim ofthe
appellant for payment for the additional work of hard rock cutting
G which the appellant was required to execute. The appellant has
claimed a higher rate of Rs .200 per thousand cft. for this additional
work .. Under the agreement the appellant was required to execute
.hard rock cutting to the extent of 7 ,54,_530 cft. but actually he was
required to execu.te such cutting to the extent of 18.15 lacs cft. The
extent of the_ additional w.orkwas about 10.60 lacs cft., i.e. about 140%.
..
H While undertaking the execution of the additional work of hard rock
HARCHARAN v. U.0.1. [AGRAWAL, J.) 81
cutting the appellant in his letter dates August 24, 1960 addressed to A
the Executive Engineer, Central Division No. II, Gangtok, had
requested for revision of the rate for hard rock cutting and stated that
the minimum working rates for this item are 52% above the tendered
rales. The Executive Engineer by his letter dated September 2, 1960,
r·equested the appellant to submit an analysis of rate for hard rock
cutting. The appellant submitted his analysis of rates on September 14, B
1960 wherein after analysing the rates of materials and labour the
workable rate _worked out to Rs.200 per thousand cft. The Executive
Engineer also got an analysis of rates done on the basis of the data
collected on actual observation and h"e arrived at a figure of Rs.237 per
thousand cft. By his letter dated November 9, 1961 :addressed to the
Superintending Engineer, Calcutta Central Circle No. III, CPWD,
Calcutta, the Executive Engineer recommended the extra rate of c
Rs.200 per thousand cft. for work in excess of 20% of the stipulated
quantity. The Superintending Engineer, in his letter dated February
23, 1962 addressed to the Additional Chief Engineer III, Central
P.W.D:, New Delhi, made a similar recommendation and the Addi-
tional Chief Engineer made a similar recommendation in his letter D
dated July 16, 1962 addressed to the Secretary to the Government of
Iildia, Ministry of Works and Housing. It appears that the Govern-
ment did not agree to pay at a rate in excess of the rate of Rs .129 per
thqusand cft. plus 2% stipulated under the agreement. The dispute
was, therefore, referred to arbitration.
E
The arbitrator in his award has considaed this item of claim as
under:
Claim Dispute Award
F
"The contractor The arbitrator is to The claim of the cont-
claims that for Item determine whether ractor is partly justified.
No. 3 of the agree- under the terms and He should be paid an
ment he should be conditions of the amount ofRs.52,800
paid at the rate of contract, the claim (Rupees fifty two thous-
Rs.200 per 1000 cft. is justified and if so, and Eight hundred only) G
for the quantities to what extent. in addition to the payment
beyond what is io be made to him at re-
- stipulated in the
agreement.
levant agreement rate for
the total quantity of work
executed by him under
this item." Ii
82
,_
SUPREME €0URT REPOR'FS {1990] Supp. l S.C.R.
Before the learned single fodge it was submitted on behalf of the
A
respondent that the award is a speaking award and from the award it is
apparent that the arbitrator has fixed rates for additional work done by
the contractor which the arbitrator has no jurisdiction to do by reason
of clause 12 of the agreement between the parties which provides that
additions to the contract work shall be carried out by the contractor on
B the same conditions in all respects on which he agreed to do the main
work and at the same rates as specified in the tender for,the mainwork.
The learned single Juc!ge rejected the said contentitm and held that the
arbitrator was determining only the value ,of the additional work at the
rate of Rs.200 which had been agreed by the Engineer-in-charge and •f
the Superintending Engineer of the Circle as contemplated by clause
12 and the scope of the inquiry before the arbitrator was only the
c quantity of work which was additional to the quantities specified in.the
agreement. The learned Judges of the Division Bench of the High
Court have disagreed with the said view arid have observed that it is
clear from the statement of claim as incorporated in the award, and the
affidavit of the contractor that there was no dispute with regatd to the
D quantity of work and the only dispute was with regard to the rate and
that the arbitrator had. allowed a sum of Rs.52,800 to the contractor in
respect of the total quantity of work executed by him under item No. 3
in addition to the agreed rate and that there was no escape from the
conclusion that the arbitrator had awarded the above 'amount by
.applying ~rate higher than the agreed rate. The learned Judges of the
E Division Bench were of the view that under clause 12 of the agreement
the provision with regard to the fixing of the rate by the Engineer-in-
charge and the Superintending Engineer of the Circle comes into play
only when the additional item of work does not form part of the main
work and the rates for such work are not specified in the schedule of
rates. The learned Judges of the Division Bench have held that since
F the additional hard rock cutting job done by the appellant was part of
the main work ~nd the agreement provided the rate· for the said item,
there was no occasion for the Engineer-in-charge or the Suprerintend-
ing Engineer to fix the rate for the extra quantity of hard rock cutting
and that the action of the arbitrator in allowing the rate to the con-
tractor in excess of the agreed rate for the job of hard rock cutting was
G against clause 12 of the agreement and thereby the arbitrator had
exceeded his jurisdiction.
As regards the award of an arbitrator under the Act, the law is
well settled that the arbitrator's adjudication is generally considered
binding between the parties for he is a tribuqal selected by the parties
..-
H and the power of the court to set aside the award is restrkted to cases
.__, HARCHARAN v. U.0.I. [AGRAWAL, J.] 83
set out in section 30 of the Act, viz. (a) if the arbitrator has miscon-
A
ducted himself or the proceedings; or (b) when the award has been
made after the issue of an order by the Court superseding the arbitra-
tion or after arbitration proceedings have become invalid under Sec-
tion 35; or (c) when the award has been improperly procured or is
otherwise invalid. Under clause (c) of Section 30 the Court can ;et
aside an award which suffers from an error on the face of the award. It B
is. however. not open to the Court to speculate, where no reasons are
given by the arbitrator, as to what impelled the arbitrator to arrive at
his conclusion. But the jurisdiction of the arbitrator is limited by the
·~ reference and if the arbitrator has assumed jurisdiction not possessed
by him, the award to the extent to which it is beyond the arbitrator's
jurisdiction would be invalid and liable to be set aside (See: Jivarajbhai
Ujamshi Sheth and Others v. Chintamanrao Balaji and Others, [1964] 5 c
SCR 480). This position at law has been reiterated by the Constitution
Bench of this Court in its recent decision in Raipur Development
Authority and Others v. M/s Chokhamal Contractors and Others,
[1989] 2 S.C.C. 721. It has been held that an arbitrator or umpire is
under no obligation to give reasons in support of the decision reached D
by him unless underthe arbitration agreement or the deed of submis-
~- sion he is required to give such reasons and if the arbitrator or umpire
chooses to give reasons in support of his decision it is open to the
Court to set aside the award if it finds that an error of law has been
committed by the arbitrator or umpire on the face of the record on
going through such reasons and that an award can neither be remitted E
nor set aside merely on the ground that it does not contain reasons in
support of the conclusion or decisions reached in it except where the
.
arbitration agreement or the deed of submission requires him to give
reasons .
In the instant case the arbitration agreement or the deed of sub- F
missions did not require the arbitrator to give reasons and, therefore,
the award cannot be questioned on the ground of an error on the face
of the award. The learned Judges of the Division Bench of the High
Court have set aside the award in relation to claim No. l relating
payment for additional work of hard rock cutting on the ground that in
making the award the arbitrator exceeded his jurisdiction by allowing G
a rate to the contractor in excess of the agreed rate for the job of hard
rock cutting against the terms and conditions contained in clause 12 of
-. the agreement.
The question which needs to be considered here is as to whether
in awarding the sum of Rs.52,800 to the appellant for the additional H
~
84 SUPREME COURT REPORTS [1990] Supp. 1 S.-C.R.
A work of hard rock cutting executed by him the arbitrator has disre-
garded clause 12 of the agreement. The said clause reads as under:
"The Engineer'in-charge shall have power to make any
alterations in. comissions from, additions to or substituting
for, the original specifications, drawings, designs and
B instructions, that may appear to him to be necessary or
advisable during the progress of the work, and the con-
tractor shall be bound to carry out the work in accordance
with any instructions which may be given to him in writing
signed by the Engineer-in-charge, and such alterations, .('
omissions, additions or substitutions shall not invalidate
the contract: and any altered, additional or substituted
c work which the contractor may be directed to do in the
manner above specified as part of the work shall be carried
out by the contractor on the same conditions in all respects
on which he agreed to do the main work and at the same
rates as are specified in the tender for the main work. The
D time for the completion of the work shall be extended in
the proportion that the additional or substituted work
bears to the original work, and the certificate of the
Engineer-in-charge shall be conclusive as to such propor-
tion. And if the altered, additional or substituted work
included any class of work for which no rate is specified in
E this contract, then such class of work shall be carried out at
the rates entered in the schedule of rates of the C.P.W.D.
Schedule of Rates 53-54 on which the estimated cost shown
on page 1 of tender is based provided that when the tender
for the original work is a percentage above the schdule
rates the altered, additional or substituted work required as 4I
F aforesaid shall be chargeable at the said schedule rate plus
the same percentage deduction addition and if such class of
work is not entered in the said schedule of rates, then the
contractor shall within seven days of the date of the receipt
of the order to carry out the work inform 'the Engineer-in-
charge of the rate which it is his intention to charge for such
G class of work, and if the Engineer-in-charge does not agree
to this rate he shall by notice in writing be at liberty to
cancel his order to carry out such class of work and arrange
to carry it out in such manner as he may consider advisable
provided always that if the contractor "shall commence
work or incur any expenditure in regard therto before the ""
rates shall have been determined as _lastly hereinbefore
HARCHARAN v. U.0.1. [AGRAWAL, J.] 85
mentioned, then and in such case he shall only be entitled
to be paid in respect of the work carried out or expenditure A
incurred by him prior to the date of the determination of
the rate as aforesaid according to such rate or rates as shall
be fixed by the Engineer-in-charge. In the event of a dis-
pute the decision of the Superintending Engineer of the
Circle shall be final." B
Under this cluase the Engineer-in-charge was empowered to
make any additions to the original specifications that may appear to
... him to be necessary or advisable during the progress of the work and
the contractor was bound to carry out the work in accordance with any
instructions given to him in writing signed by the Engineer-in-charge.
As regards payment for the additional work which the contractor was c
directed to do it was provided that:
(i) The contractor shall be paid at the same rates as are specified
in the tender for the main work;
D
(ii) If the additional work included any class of work for which
no rate was specified in the contract then the contractor shall be
paid at the rates entered into the schedule of rates of the
C.P.W.D. Schedule of Rates 53-54 on which the estimated cost
shown on page I of tender is based and if the tender for the
original work is a percentage above the schedule rates the addi- E
tional work shall be chargeable at the said schedule rates plus the
same percentage deductions/addition; and
(iii) If such class of work is not entered in the said Schedule of
Rates then the contractor should inform the Engineer-in-charge
within seven days of the receipt of the order the rate he wants to F
charge for such class of work and the Engineer-in-charge, if he
does not agree to the said rate,. may cancel the order for such
additional work and if the contractor has commenced the work
or incurred expenditure in regard thereto before the determina-
tion of the rates the contractor shall be paid in respect of work
carried out or expenditure incurred by him prior to the determi- 0
nation of the rates according to such rates or rates as shall be
fixed by the E·ngineer-in-charge and in the event of a dispute the
decision of the Superintending Engineer of the Circle would be
final.
The case of the appellant is that clause 12 envisages alterations or H
86 I-
SUPREME COURT REPORTS [1990] Supp. 1 S.C.R.
additions within reasonable limits and an addition to the extent of
A
140% in respect of one particular item alone is not covered by this
clause and that in awarding Rs.52,800 as extra payment for the addi-
tional work the arbitrator has not acted in disregard of clause 12 and
he cannot be said to have exceeded his jurisdiction.
B A cfause making provision for additions and variations is gener-
ally found in building and construction contracts. In Hudson's Build-
ing and Engineering Contracts 8th Edn. it has been observed:
"It may be that it can be inferred from the terms of the ..
contract that the power to order extras, although apparen-
tly unlimited, is in fact limiied to ordering extras up to a
c certain value and, in such a case, extras ordered in excess
of that amount, although work of a kind contemplated by
the contract, 111ay yet be quite outside the terms of the
contract." (p. 294)
D "If the extra work ordered is outside the contract the terms
of the contract have no application." (p. 296)
•.
In this context it would be relevant to take note of the decision of
the Court of Appeal in England in Parkinson (Sir Lindsay) & Co. Ltd.
v. Commissioners of His Majesty's Works and Public Buildings, [1949]
E 2 K.B. 632. In that case the contractors had· agreed with His Majesty's
Commissioners of Works and Public Buildings to erect an ordnance
factory according to the general conditions and specifications and bills
of quantities and drawings annexed for the contract sum of £3,500,000
and under the general conditions of contract the Commissioners had
power, at their absolute discretion, to modify the extent and character'
F of the work or to order alterations of or additions to the works and it
was the duty of the contractor to comply with the architect's instruc-
tions in this respect. In the contract it was also provided that it is
probable that further work to the value of approximately, £500,000
would be ordered on a measured basis under the terms of the contract.
The contract was amended by a deed of variation and it was provided
G that exceptional methods should be used to hasten the work and that a
system of uneconomic working should be introduced to bring about
the completion of the factory by the date fixed by the contract. The
Commissioners ordered work to be executed greatly in excess of the
amount contemplated although not different in character from that
covered by the varied contract, so that the works could not be comp- !"
H leted until a year beyond the time anticipated and the actual cost of the
HARCHARAN v. U.O.l. [AGRAWAL, J.l 87
contracts was £6,683,056 which amount had been paid to them along- A
with £300,000 the maximum profit under the deed of variation. During
the progress of the work the contractors haosomplained to the Com-
missioners that they were being called on to ex~te more work than
was contemplated by the varied contract and claimed that they were
entitled to extra remuneration for the work in excess of that contemp-
lated but they proceeded with the work at the request of the Commis- B
sioners leaving the issue to be subsequently decided by arbitration.
The arbitrator found that the estimated cost of the work under the
varied contract was £500,000 and awarded £90,298 as proportionate or
reasonable profit or remuneration to the contractors for the additional
work. The said award was upheld by the Court of Appeal on the view
that a term must be. implied in the varied contract that the Commis- C
sioners should not be entitled to require work materially in excess of
the sum of £5,000,000 and that such excess work having been done by
the contractors, the Commissioners were liable to pay the contractors
reasonable remuneration therefor. On behalf of the Commissioners
reliance was palced on Condition 33 of the original contract which
gave the Commissioners an unlimited power of ordering extras even to D
the extent of altering the character of the work. The contractors, on
the other hand, placed reliance on the follwing observations of Mc
Cardie, J. in Naylor, Benzon & Co. v. Krainische lndustrie Gesel/s-
chaft, [1918] 1K.B.331:
"It is essential to remember, however, that words, even El
though general, must be limited to circumstances within
the contemplation of the parties."
Accepting the contention urged on behalf of the contractors
Asquith L, J. observed:
F
"If the original contract plus the deed are read without any
implied limitation on their literal meaning, the result, as
indicated above, is that after £300,000 profit has been
earned by the contractor, he can be compelled to Jabour
like the Danaids without reward or limit, or any further
"extras" which the commissioners may elect to exact from G
him, 'till the last syllable of recorded time.' Only the most
compelling language would induce a court to construe the
combined instruments as placing one party so completely at
the mercy of the other. Where the language of the contract
is capable of a literal and a more restricted meaning, all
relevant circumstances can be taken into account in decid- H
88 SUPREME COURT REPORTS [1990) Supp. I S.C.R.
ing whether the literal or a more limited meaning should be
A
ascribed to it". (p. 662)
Similarly Singleton L, J. has observed:
"I find myself unable to agree with the submission of Mr.
B Rewcastle that, under the contract as varied by the deed of
'ariation, the contractors would have been bound to con-
tinue making alterations and additions, if ordered, for
years and years, without any extra payment by way of
profit. That would have led to manifest absurdity and
injustice, as Mathew, J. said in Bush v. Whitehaven
Trustees, (I). There must be a limit." (p. 673)
c
Here also the. question has often arisen whether the contractor
under. the variation clause is liable to execute the extra or additional
quantities of the tendered items at the tendered rates to an unlimited
extent. In some awards given by the arbitrators in the Central Public
D Works Department of the Government of India the variation of the
tendered quantities under the variation clause in the contract has been
restricted to 10% beyond which the contractor was entitled to claim as
extras and these awards have been accepted and implemented by the
Government. It appears that the standard form of contract of the
Central Public Works Department has been amended and now it speci-
E fically permits for a limit of variation called "deviation limit" upto a
maximum of 20% and upto such limit the contractor has to carry out
the work at the rates stipulated in the contract and for the work in
excess of that limit at the rates to be determined in accordance with
clause 12-A l!nder which the Engineer-in-charge can revise the rates
having regard to the prevailing market rates (See: Gajaria's Law relat-
F ing to Building and Engineering Contracts in India, 3rd Edn., pages
410-412).
In the instant case, it appears that the Executive Engineer, the
Superintending Engineer and the Additional Chief Engineer in their
letters dated November 9, 1961, February 23, 1962 and July 16, 1962
G respectively have expressed the view that the additional work under
the terms of the contract may be confined to 20% and the appellant
may be paid at the rates prescribed in the contract for 20% of the
additional work and for the extra quantity of additional work he may
be paid remuneration at the increased rate taking into account the
increased costs in execution of the said work on account of the peculiar
H nature of the work. While considering the claim of the appellant the
HARCHARAN v. U.0.1. [AGRAWAL, J.J 89
arbitrator was required to consider the tenns of the contract and to
construe the same. It was, therefore, permissible for the arbitrator to A
consider whether clause 12 of the contract enables the Engineer-in-
charge to require the appellant to execute additional work without any
limit or a reasonable limit should be placed on the quantity of the
additional work, which the appellant may be required to execute at the
rate stipulated for the main work under the contract. For that purpose B
the arbitrator could take into consideration the practice prevalent in
the Central Public Works Department in this regard as well as the
correspondence between the appellant and the authorities including
°o-•
the letters dated November 9, 1961, February 23, 1962 and July 16,
1962 of the Executive Engineer, the Superintending Engineer and the
Additional Chief Engineer recommending payment of remuneration
at the increased rate for the additional work in excess of 20% of the c
quantity stipulated in the contract. The appellant was claiming
increased rate of Rs.200 per 1000 cft. for the entire quantity of addi-
tional work. The arbitrator did not accept the said claim of the appel-
!ant in full and has partly allowed the said claim by awarding Rs.52,800
- which means that the arbitrator has awarded the increased rate only
for a part of the additional work of hard rock cutting which the appel-
!ant was required to execute. The arbitrator was entitled to do so on
the construction placed by him on clause 12 of the contract and, there-
for~, it cannot be said that in awarding the sum of Rs.52,800 for the
D
additional work the arbitrator has exceeded his jurisdiction and the
award is vitiated by an error of jurisdiction. In the circumstances, we E
are unable to agree with the judgment of the learned Judges of the
Division Bench of the High Court on this part of the claim.
The appeal is, therefore, allowed and the judgment of the Divi-
~ sion Bench of the High Court setting aside the award of the arbitrator
with regard to item No. 1 of the claim relating to payment for addi- F
tional work of hard rock cutting is set aside and the order passed by the
learned Single Judge upholding the award of the arbitrator in this
regard is restored. The appellant will be entitled to his costs.
Civil Appeal No. 323 of 1976
G
This appeal is directed against the order dated May 23, 1975 of
the High Court of Delhi whereby the High Court rejected C.M. No.
1300 of 1974 filed by the appellant under Order 41, rule 21 read with
-....... Section 151 C .P .C., praying that the ex-parte judgment dated March
27, 1973 in F.A.O. (O.S.) No. 35 of 1969 may be set aside and the
appeal be re-admitted to its original number and the appeal be heard H
[1990] Supp. 1 S.C.R. -!
90 SUPREME COURT REPORTS
A and decided on merits. The appellant has filed C.A. No. 322 of 1976
against the said judgment of the High Court dated March 27, 1973·in
F.A.O, (O.S.) No. 35 of 1968. The said appeal has been allowed by
the judgment given today. Since the judgment of the High Court dated
March 27, 1973 has been set aside by this Court in C.A. No. 322 of
1976 this appeal does not survive and it is disposed of accordingly. No
B costs.
G.N. Appeal disposed of.
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