STATE OF RAJASTHANversusM/S. NAV BHARAT CONSTRUCTION COMPANY

                        [2010] 1 S.C.R. 312


A                     STATE OF RAJASTHAN
                                  V.
         M/S. NAV BHARAT CONSTRUCTION COMPANY
                (Civil Appeal No. 2500 of 2001}

                         JANUARY 8, 2010
B
         [TARUN CHATTERJEE AND R.M. LODHA, JJ.)

       Arbitration Act, 1940: s.30 - Jurisdiction of Court to set
  aside the award - Held: The jurisdiction of the Court under
C s.30 is not appellate in nature - Court is not empowered to
  re-appreciate the evidence and examine the correctness of
  conclusions arrived at by the Umpire in considering an
  application for setting aside the award - It is also not open to
  the court to interfere with the award merely if in its opinion,
D another view was possible - On facts, no reason to differ from
  aw<~rd of Umpire as he rightly considered the entire evidence.

        Jurisdiction: Supreme Court appointing new arbitrator and
   dimcted him to file award before it - New arbitrator filing award
E in Supreme Court - Jurisdiction of Supreme Court to entertain ·
   the application for making the award a rule of the cowt as well
   as the objections, challenged - Held: Supreme Court has the
  jurisdiction.

      Dispute arose between the parties and the matter
F was referred to arbitration. There was difference of
  opinion between the arbitrators and matter was referred
  to an Umpire. The Umpire entered into reference and
  passed an award. The appellant filed objections under
  Sections 30 and 33 of the Arbitration Act, 1940 which
G wine dismissed. In appeal, respondent also filed cross
  appeals claiming compound interest. High Court
  dismissed both the appeals.

        Both the parties came up before this Court. This

H                                312
   STATE OF RAJASTHAN v. NAV BHARAT CONST.                  313
                  COMPANY

 Court by judgment dated 4.10.2005 set aside the award             A
 of the Umpire and the judgment of High Court, and
 appointed new Umpire and also clarified that it was not
 a new reference but continuation of the earlier
 proceeding and the Arbitration Act, 1940 would continue
 to apply. The new arbitrator passed an award. Before this         B
 Court, appellant filed an application for making the award
 a rule of Court and at the same time the respondent filed
 an objection under Sections 30 and 33 of the Act. An
 Interlocutory Application was also filed by the respondent
 challenging the jurisdiction of this Court to make the            C
 award absolute and also to consider the objections raised
 by the respondent.

    Dismissing the IA and objections filed under
 Sections 30 and 33 and allowing the application for
 making the award a rule of the Court, the Court                   D

      HELD: 1. The judgment of this Court dated 4.10. 2005
 made it clear in its operative part, that the award that
 would be passed by the Umpire must be filed in this
 Court. It was also clarified in the judgment itself that it was   E
 not a case of a new reference but a continuation of the
 earlier proceeding and thus the Act would continue to
 apply. Therefore, this Court had the jurisdiction to
 entertain the application of the appellant and also the
-objectfons filed by the respondent. [Para 4] [319-F-H]
                                                                   F
     Garwal Manda/ Vikas Nigam Ltd. vs. Krishna Travel
Agency 2008 (6) SCC 741; Bharat Coking Coal Ltd. vs.
Annapurna Construction 2008 (6) SCC 732; Mcdermott
International Inc. vs. Burn Standard Co. Ltd and Others 2005
(10) sec 353, referred to.                                         G

     2. Under Section 30 of the Arbitration Act, 1940, the
Court is not empowered to re-appreciate the evidence
and examine the correctness of the conclusions arrived
at by the Umpire in considering an application for setting         H
    314    SUPREME COURT REPORTS              [201 O] 1 S.C.R.

A aside the award. The jurisdiction of the court under
  Section 30 of the Act is not appellate in nature and the
  award passed by the Umpire cannot be set aside on the
  ground that it was erroneous. It is also not open to the
  court to interfere with the award merely because in the
B opinion of the court, another view is equally possible.
  [Paras 6 and 7) (322-E-F; 323-D-E]

       3.1. Perusal of judgment dated 4.10. 2005 shows that
  the claim Nos. 2 and 26 were elaborately considered and
  this Court in the said judgment came to a clear finding
C with regard to Claim No.2 and 26 that the respondent
  would not be entitled to such claims. In this view of the
  matter, the Umpire was fully justified in not reconsidering
  the same while passing an award. [Para 5] (322-8-C]

D       Bhagwati Oxygen Ltd. vs. Hindustan Cooper Ltd. 2005
    (6) SCC 462; Food Corporation of India vs. Chandu
    Construction 2007 (4) SCC 697, relied on.

       3.2. Since Claim Nos.4, 6, 9, 13, 23, 32, 33, 36 and 38
E of the respondent were accepted by the Umpire and the
  Award has been passed in respect of the said claims in
  favour of the respondent, it is held not necessary to deal
  with this part of the award any further. So far as Claim
  Nos. 1,3,5, 7,8,10, 11, 12, 14-22,24,25,27,28, 29,30,31,
  34, 35, 37 and 39 are concerned, the Umpire after going
F through the objections of the respondent and after
  hearing the parties in respect of these claims rightly
  rejected the same and there is no reason to set aside the
  said award on the ground that the jurisdiction of the court
  is not appellate in nature nor such an award could be
G found to be erroneous. Accordingly, the objections are
  overruled. [Para 8] [323-F-H; 324-A-B]

      4. The respondent had claimed compound rate of
  interest which was not granted by the Umpire. The
H claimant had claimed compound interest with quarterly
  STATE OF RAJASTHAN v. NAV BHARAT CONST.                   315
                 COMPANY

rest while the respondent had opposed the said rate of A
interest. While rejecting the said claim of the claimant, the
Umpire had rightly observed that there was no necessity
for him to fix any other rate of interest because on the
basis of the award passed by the Umpire, the claimant
had to return the substantial amount received by him. In B
view of that, the Umpire in his award directed that
difference of amount which has now become refundable
by virtue of the award would be returned back to the
State of Rajasthan with interest from the date of recovery
by the claimant and the same was allowed by the c
previous Umpire till the date of repayment/recovery.
There is no reason to differ from the award of the Umpire
on this score, because the Umpire rightly considered the
entire aspect of interest and passed an award. [Paras 9
and 10) [324-B-F]
                                                              D
                   Case Law Reference :
     2008 (6) sec 741          referred to            Para 4
     2008 (6) sec 732          referred to            Para 4
                                                                    E
     2005 (10) sec 353         referred to            Para 4
     2005 (6J sec 462          relied on              Para 6
    ,12001 (4) sec 697         relied on              Para 7

    CIVIL APPELLATE JURISDICTION : Civil Appeal No.
                                                                    F
2500 of 2001.

      From the Judgment & Order dated 10.12.1999 of the High
Court of Judicature for Rajasthan at Jaipur Bench, Jaipur in S.B.
Civil Misc. Petition No. 1091 of 1996.                              G

                             WITH

C.A. No. 2501 of 2001.

     Pallav Shishodia, ~ ,.. :! Kumar, Mool Chand Luhadia-in-       H
    316      SUPREME COURT REPORTS                   (2010] 1 S.C.R.


A   person, for the appearing parties.

          The Judgment of the Court was delivered by

       TARUN CHATTERJEE, J. 1. The appellant, State of
  Rajasthan, invited tenders for construction of Bhimsagar Dam
B in which one of the tenderer was the respondent. The tender
  of the respondent was accepted. Accordingly, a contract was
  awarded to the respondent and under the contract the work was
  to be started on 16th of November, 1978 and the date of
  completion was fixed on 15th of May, 1981. One of the terms
C of the contract was that if any difference or dispute arises
  between the parties, such dispute or difference shall be referred
  to arbitration. However, the work was not completed within the
  time allotted and time was thereafter extended. lnspite of
  extension of time, the work was not completed. For that reason,
D the State of Rajasthan terminated the contract and got the
  remaining work done from some other contractor.

          2. The respondent raised various claims which were
     rejected by the State of Rajasthan. The respondent, therefore,
E   moved an application under Section 20 of the Arbitration Act,
     1940 (in short the 'Act') for referring the claims mentioned
    therein to arbitration. The District Judge, Jhalawar by an order
    dated 11th of November, 1982 held that only one claim was
    referable to arbitration and refused to refer the other three
F   claims to arbitration. The respondent filed an appeal before the
    High Court of Rajasthan at Jaipur and the High Court by its
    order dated 7th of June, 1984 held that it was for the Arbitrator
    to de~cide whether the claims were to be awarded or not and
    accordingly directed that all the four claims be referre0 to
    arbitration. The disputes were referred to two Arbitrators. The
G   respondent, however, filed 39 claims amounting to
    Rs.42,59, 155.56 before the /1.rbitrators. The parties led oral and
    documentary evidence. There was a difference of opinion
    between the two Arbitrators. Therefore, the Arbitrators referred
    the dispute to an Umpire. The State of Rajasthan. the appellant
H   herein, thereafter filed an application under Section 11 of the
  STATE OF RAJASTHAN v. NAV BHARAT CONST.                  317
       COMPANY [TARUN CHATTERJEE, J.]
Act for removal of the Umpire on the ground of bias. This A
application was dismissed on 16th of November, 1993. The
appellants filed a revision case which also came to be
dismissed by the High Court in January, 1995. The Umpire
entered into the reference and passed an award on 29th of
May, 1995.                                                B

      3. The State of Rajasthan, the appel!ant herein, filed
objections under Sections 30 and 33 of the Act which were
dismissed by the trial court and in appeal the respondent filed
a cross appeal claiming compound interest. The High Court by
a judgment dismissed both the appeals. Feeling aggrieved, C
both the parties approached this Court and two Civil Appeals
were registered. C.A.No.2500 of 2001 was by the State of
Rajasthan which was aggrieved by the dismissal of their
objection filed under Sections 30 and 33 of the Act and
C.A.No.2501 of 2001 was by the respondent against the D
dismissal of their claim for compound interest. By a judgment
and order dated 4th of October, 2005 passed in the aforesaid
two appeals, this Court had set aside the award of the Umpire
and the judgment of the High Court by the following directions:
                                                                   E
           "Under the circumstances and .for reasons set out
     hereinabove, we set aside the award and appoint Justice
     N.Santosh Hegde, a retired Judge of this Court as the
     Umpire. The Umpire, Mr.V.K.Gupta st1all forthwith forward
     all papers and documents to Justice N.Santosh Hegde at F
     his residence i.e. 9, Krishna Menon Marg, New Delhi. The
     parties shall appear before Justice N.Santosh Hegde on
     6.10.2005 at 5.p.m. at 9, Krishna Menon Marg, New Delhi.
     Justice N.Santosh Hegde shall fix his fees which shall be
    borne by both the parties equally. Justice N.Santosh Hegde G
     is requested to fix the schedule and give his award with a
     period of 4 months from the date of receipt of all the papers
     and documents from the outgoing Umpire Mr.V.K.Gupta.
     The award to be filed in this Court. We leave the question
     of grant of interest open to be decided by the Umpire in
    accordance with law.                                           H
    318      SUPREME COURT REPORTS                  (2010] 1 S.C.R.


A        Lastly, it is clarified that this is not a new reference but a
    continuation of the earlier proceeding and thus the Arbitration
    Act, 1940 shall continue to apply.

         4. Accordingly, in compliance with the judgment of this
8 Court as aforesaid, Mr.Justice N.Santosh Hegde, (as His
   Lordship then was), entered into reference and passed his
   award on 9th of September, 2006. Now the State of Rajasthan
   has filed an application for making the award a rule of the Court
   and at the same time the respondent filed an objection under
   Sections 30 and 33 of the Act. An Interlocutory Application was
C also filed by the respondent challenging the jurisdiction of this
   Court to make the award absolute and also to consider the
   objections raised by the respondent against the award passed
   by the Umpire in pursuance of the order passed on 4th of
   October, 2005. According to the respondent, who appeared in
D person, the application and objections filed by the parties must
  be sent back to the court of competent jurisdiction for deciding
  the same in accordance with law, because after the judgment
  was passed and the earlier award was set aside by the
  impugned judgment, this Court had become functus officio to
E entertain such applications. Therefore, before we go into the
  question regarding the objections raised by the respondent
  under Sections 30 and 33 of the Act and the application for
  making the award a rule of the Court, we must first deal with
  the Interlocutory application, that is to say, whether this Court
F still retains the jurisdiction to entertain the award passed by the
  Umpire or to consider the objections to the same or the matter
  should go back to the court of competent jurisdiction for
  considering the said application and objections in accordance
  with law. According to Mr. Mool Chand Luhadia, appearing in
G person, this Court is ceased to have jurisdiction after the appeal
  was disposed of and a new Umpire was appointed who passed
  an award on 9th of September, 2006. In support of this
  contention that this Court cannot have the jurisdiction to entertain
  the application filed by the appellant to make the award a rule
H of the court and also the objection filed under Sections 30 and
   STATE OF RAJASTHAN v. NAV BHARAT CONST.                     319
        COMPANY [TARUN CHATTERJEE, J.]
  33 of the Act, he had relied on certain decisions of this Court      A
  out of which strong reliance was placed on the decision in
  Garwal Manda/ Vikas Nigam Ltd. vs. Krishna Travel Agency
 (2008 (6) SCC 741) and also the decision in Bharat Coking
  Coal Ltd. vs Annapurna Construction (2008 (6) SCC 732).
 This submission of Mr.Luhadia, who appeared in person was             B
 contested by Mr.Pallav Shishodia, learned senior counsel
 appearing on behalf of the State of Rajasthan. According to
 Mr.Shishodia, in view of the decision of a three-Judge Bench
 of this Court in Mcdermott International Inc. vs. Burn Standard
 Co. Ltd and Others [2005 (10) SCC 353), this question is no           C
 longer res integra. In our view, the submission of Mr.Shishodia
 must be accepted. From the judgment of this Court dated 4th
 of October, 2005, it has been made clear by this Court in the
 operative part of the same, as noted herein earlier, that the
 award that would be passed by the Umpire must be filed in this
                                                                       0
 Court and secondly it was clarified in the judgment itself that
this was not a case of a new reference but a continuation of
the earlier proceeding and thus the Act shall continue to apply.
 In Mcdermott International Inc. (supra), a three-Judge Bench
decision of this Court clearly observed that since the Arbitrator      E
was directed to file his award in this Court, the objections as
well as the entertainability of the application of the appellant for
making the award a rule of the Court must be filed in this Court
alone and, therefore, this Court has the jurisdiction to entertain
the application of the appeflant and also the objections filed by
the respondent. In view of the discussions made herein above           F
and in view of the three-Judge Bench decision of this Court,
namely, Mcdermott International (supra), it would not be
necessary for us to deal with the other two decisions as referred
to herein earlier. That apart, in the judgment dated 4th of
October, 2005, it has been made clear that the award was to            G
be filed in this Court and that this was not to be taken as a new
reference but a continuation of the earlier proceeding, thus the
Act shall continue to apply. Accordingly, the question regarding
entertainability of the aforesaid two applications namely, the
application for making the award a rule of the court and the           H
    320       SUPREME COURT REPORTS                 [2010] 1 S.C.R.


A   objections under Sections 30 and 33 of the Act filed in this
    Court could not arise at all.

           5. Let us now consider the objections filed by the
     respondent against the award passed by the Umpire under
     Sections 30 and 33 of the Act. Since we have already overruled
8
    the objections raised by the respondent about the
    entertainability of the two applications by this Court, we now
    deal with the objections filed by the respondent in respect of
    thE~ various claims made by them for passing an award in their
C   favour. According to Mr.Luhadia, since the first award of the
     Umpire Mr.V.K.Gupta was set aside, and a new Umpire was
    appointed after setting aside the said award it would be evident
    from the judgment of this Court that the intention of this Court
    was to permit the respondent to raise all their objections to the
    clc:1ims put forward by it including the claim No.2 and 26. We
D   am unable to accept this contention of Mr.Luhadia. So far as
    Claim No.2 and 26 are concerned, on a perusal of the
    judgment of this court, it is difficult to accept the argument of
    Mr.Luhadia as we find from the said judgment that the claim
    Nos. 2 and 26 were elaborately considered in the judgment and
E   this Court in the said judgment came to a clear finding with
    regard to Claim No.2 and 26 that the respondent would not be
    entitled to such claims. While rejecting Claim Nos. 2 and 26,
    this Court categorically made the following observations which
    we reproduce herein below :
F
                "As regards claim No. 2 Mr. Luhadia fairly admitted
          that Clause 5.11 (iii) of the Contract requires chiseling of
          stones on all sides. He however submitted that the rates
          given in Schedule G were only for chiseling of stones on
          one side. He submitted that this was clear from Note 1
G
          under Schedule G which stated that Schedule G was
          based on B.S.R. 1975. He submitted that B.S.R. 1975
          showed that such rates were only for chiseling stones on
          one side. He submitted that when the stone has to be
          chiseled on all sides the rates given in B.S.R. 1975 were
H
STATE OF RAJASTHAN v. NAV BHARAT CONST.                 321
     COMPANY [TARUN CHATTERJEE, J.]
  to be applied. He submitted that claim No. 2 was based        A .
 on those rates. We are unable to accept this submission
 of Mr. Luhadia. The Contract is very specific. The work
 specified in the Contract has to be done at the rates
 specified in Schedule 'G'. Even though Schedule G may
 be based on B.S.R. 1975 it is not exactly as B.S.R. 1975.      B
 Where in respect of a work specified in the contract the
 rate has been given in Schedule G that work could only
 be done at that rate. Works specified in the Contract does
 not become extra work. It is. only in respect of extra work
 that rates specified in B.S.R. 1975 can be applied. To us      c
 it is clear that the claim No. 2 is contrary to the terms of
 the Contract. It is barred by Clauses 57, 60 and 61 of the
 Contract. As regards claim No. 26, Mr. Luhadia relied
 upon the case of Tarapore & Co. v. State of M.P. [1994
 [3] sec 521]. In this case, the question was whether the
                                                                0
 contractor was entitled to claim extra amounts because he
 had to pay increased wages to his workers. This Court has
 held that the contractor would have tendered on the basis
of the then prevailing wages and as the contract required
the contractor to pay the minimum wages if the minimum
wages increased it was an implied term of the contract that     E
he would not be entitled to claim the additional amount.
However, it must be noted that, in this case, there was no
term in the contract which prohibited any extra claims
being made because of the increase in WC1ges. Clause 31
of the Special Conditions of the Contract, which has been       F
reproduced hereinabove, specifically bars the contractor
from claiming any compensation or an increase in rate
under such circumstances. Not only that but the
Respondent had with their initial tender put in a term which
provided that if there was any increase in the minimum          G
wages by the Government the rates quoted by him would
be increased by the same percentage: At the time of
negotiation this clause was dropped. Thus, the
Respondent had themselves specifically agreed not to
claim any compensation or increase by reason of                 H
    322      SUPREME COURT REPORTS                     [201 OJ 1 S.C.R.


A         increase in wages. This claim could therefore not have
          been granted."

          From a reading of this paragraph 30 of the judgment of
    this Court, it is clear that this Court in the judgment has, in detail,
B   considered Claim Nos.2 and 26 and on consideration of the
    materials on record and the terms of the contract between the
    parties rejected the aforesaid two claims. In this view of the
    matter, we must accept the finding of the Umpire that since
    these two claims were clearly and elaborately considered and
C   thereafter rejected by this Court in the said judgment, it was not
    open for him to reconsider the same while passing the award.
    In view of this conclusion arrived at by this Court in the aforesaid
    judgment, the Umpire was fully justified in not reconsidering the
    same while passing an award.

D        6. The jurisdiction of the court to set aside an award under
    Section 30 of the Act has now been settled by catena of
    decisions of this Court as well as by the different High Courts
    in India. Taking those principles into consideration, it would thus
    be clear that under Section 30 of the Act it must be said that
E   the court is not empowered to re-appreciate the evidence and
    examine the correctness of the conclusions arrived at by the
    Umpire in considering an application for setting aside the
    award. In this connection, we may refer to a decision of this
    Court in the case of Bhagwati .Oxygen Ltd. vs. Hindustan
F   Cooper Ltd. [2005 (6) SCC 462]. In that decision, this Court
    observed in paragraph 25 .as follows :-

                "This Court has considered the provisions of Section
          30 of the Act in several cases and has held that the court
          while exercising the power under Section 30, cannot re-
G
          appreciate the evidence or examine correctness of the
          conclusions arrived at by the Arbitrator. The jurisdiction is
          not appellate in nature and an award passed by an
          Arbitrator cannot be set aside on the ground that it was
          erroneous. It is not open to the court to interfere with the
H
   STATE OF RAJASTHAN v. NAV BHARAT CONST.                     323
        COMPANY [TARUN CHATTERJEE, J.]
      award merely because in the opinion of the court, another A
      view is equally possible. It is only when the court is satisfied
      that the Arbitrator had mis-conducted himself or the
      proceedings or the award had been improperly procured
      or is "otherwise" invalid that the court may set aside such
      award."                                                          B

        7. Similarly in the case of Food Corporation of India vs.
    Chandu Construction [2007 (4) SCC 697) in which one of us
    (Chatterjee,J.) was also a party, it was held that when the
   Arbitrator or the Umpire as the case may be, had ignored the C
   specific terms or had acted beyond the four corners of the
   contract, it was open for the court in the exercise of its power
   under Section 30 of the Act to set aside the award on the
   ground that the Arbitrator could not ignore the law or misapply
   the terms of the contract in order to do what he thought was
  just and reasonable. That apart, the law is also settled as D
   referred to herein earlier that the jurisdiction of the court under
. Section 30 of the Act is not appellate in nature and the award
   passed by the Umpire cannot be set aside on the ground that
   it was erroneous. It is also not open to the court to interfere with
   the award merely because in the opinion of the court, another E
  view is equally possible. Keeping these principles as lait:I down
  by this Court in the aforesaid two decisions, let us now consider
  the award passed by the Umpire in respect of the claims of the
  respondent excluding Claim Nos. 2 and 26.
                                                                        F
        8. Since Claim Nos.4, 6, 9, 13, 23, 32, 33, 36 and 38 of
  the respondent were accepted by the Umpire and the Award
  has been passed in respect of the said claims in favour of the
  respondent, it would not be necessary for us to deal with this
  part of the award any further. So far as Claim Nos. 1, 3, 5, 7, G
  8, 10, 11, 12, 14-22, 24, 25, 27, 28, 29,30, 31, 34, 35, 37 and
  39 are concerned, we find that the Umpire after going through
  the objections of the respondent and after hearing the parties
  in respect of these claims rejected the same and we do not
  find any reason to set aside the said award on the ground that H
    324     SUPREME COURT REPORTS                  [2010] 1 S.C.R.


A   the jurisdiction of the court is not appellate in nature nor such
    an award could be found to be erroneous. Accordingly, we do
    not find any reason to accept the objections of the respondent
    in this regard. The objections are overruled.

         9. Before parting with this judgment, there is another
8
    aspect to be considered at this stage. As noted herein earlier,
    the respondent has claimed compound rate of interest which
    was not granted t:iy the Umpire. The claimant had claimed
    compound interest with quarterly rest while the respondent had
C   opposed the said rate of interest. While rejecting the said claim
    of the claimant, the Umpire had rightly observed that there was
    no necessity for him to fix any other rate of interest because
    on the basis of the award passed by the Umpire, the claimant
    had to return the substantial amount received by him. In view
    of that, the Umpire in his award directed that difference of
D   amount which has now become refundable by virtue of the
    award would be returned back to the State of Rajasthan with
    interest from the date of recovery by the claimant and the same
    was allowed by the previous Umpire till the date of repayment/
    recovery.
E
        10. We do not find any reason to differ from the award of
    the Umpire on this score, because the Umpire has rightly
    considered the entire aspect of interest and passed an award
    which can never be said to be erroneously rejected by him.
F         11. For the reasons aforesaid, we allow the application for
    making the award a rule of the court and reject the objections
    filed under Sections 30 and 33 of the Act by the respondent.
    There will be no order as to costs.

G   D.G.                                      Matters disposed of.