Chief Engineer Panchayat Raj Dept. v. B. Balaiah .

K.Ramaswamy, J.:-

(1) The twin cases have converged questions of importance, the elaboration thereof needs the essential facts touching them to be caged in a short compass. C m a. 768/84 arose against 0p. 141/83 to set aside the award under section 30 of the arbitration act, 1940, (for short, "the act',) and c. R. P. No. 2062/84 arose from 0 p no. 151 /83 to pass a decree under section 17 of the act in terms of the award dated october 7, 1983, in which the sole arbitrator awarded a 'consolidated sum of rs. 19, 76,000/ -. The court below dismissed the 0 p. And decreed the suit, making the award, the rule of the court. The dissatisfied state, through its organ, is the appellant and petitioner respectively.

(2) One, ch. Ramalinga reddy, entered into an agreement dated january 4, 1980, with the governor of andhra pradesh through his subordinate, for the construction of an earthen dam and summer storage tank near darsi in prakasam district, pursuant to the tenders called for. Though the initial contract was for a sum of rs. 60, 41, 868 - 80 ps. It was increased to rs. 70,70,000/ -. The execution of the work was to be completed by july 31, 1981, but spread beyond the contracted period. By letter dated june 22, 1982, the respondent requested the concerned to relieve him from contractual obligations under the state so as to enable him to contest the elections as a member of the legislative council. By letter dated july 12, 1982, he undertook to bear the cost of unfinished work and also not to lay any future claims in respect of the contract, pursuant to which final payment was made on september 4,1982. The total sum paid to him was rs. 70,00,000/ -. It is not clear from the record as to what was the extent of and the amount expended towards the unfinished work and whether the respondent abode by the undertaking. But the contractor, through his general power of attorneythe respondent, subsequently initiated action claiming rs, 53. 51 lakhs due and was entitled to be paid and issued notice under section 8 of the act for adjudication in terms of clause73of the m d s s. (madras detailed standard specifications) , by a sole arbitrator. The appellant resists the claim as well as the action, but ultimately, in c r p no. 1945/83, by judgment dated august 10, 1983, this court upheld the action appointing the sole arbitrator, leaving open the question for the arbitrator to decide whether the respondent having given up the contract and agreed not to lay any future claim; could claim the amounts.

(3) The arbitrator entered upon the reference and the respondent put forth as many as 13 claims totalling to rs. 53. 51 lakhs, the details of which are unnecessary to adumbrate. The arbitrator, despite the resistence by the appellant, as stated above, awarded a consolidated sum of rs. 19. 76,0007 - towards claims nos. 1 to 12. He disallowed claim no. 13 and awarded interest at 12% with effect from 30 days after the date of award till date of decree whichever is earfier. The court below, by a common judgment dated april 11, 1984, dismissed the 0 p and passed the decree with interest at 12% from the date of the decree. Thus the appeal and the revision.

(4) The learned advocate general raised three - fold contentions. It is a consolidated award comprising of 12 claims; claim no. 9 pertains to refilling of cut off trenches and formation of bund on the right bank in a sum of rs. 8,450/ - and claim no. 11 pertains to escalation charges in the cost of construction in a sum of rs. 21,88. 000/ - though the respondent laid claim no. 9, ultimately expressly withdrew the same in his written arguments. There is no covenant in the contract to pay the escalation charges. This was resisted by the state. He has no jurisdiction to pass an award in respect of those two claims nor to take them into consideration but awarded consolidated sum in respect of all the twelve claims. Therefore the arbitrator committed legal misconduct in awarding those two claims. Since the award is inseparable the entire award is to be set aside. He relied on m/s. Basant lal v. Bansilal (1) air 1961 sc 823 union of india v. J n misra (2) air 1970 sc 753 and m. Chelam - mayya v. Venkataratnam (3) air 1972 sc1121 russel on arbitration, 20th edition, page 349 and law of arbitration, by r. S. Bachawat, 1983 edition, page 87. He alternatively contended that with regard to the escalation charges, in the counter statement of the government, it is expressly pleaded to call for the income - tax returns of the respondent to establish as to what is the actual amount he incurred towards the escalation charges. The arbitrator did not summon those documents though expressly requested; therefore he committed misconduct. He relied on government of a. P. Vs. M/s. Durga rama prasad engineers and contractors (4) 1975 (1) aplj 45 (nrc) union of india v. M/s. Mehta teja singh and co. (5) air 1983 delhi 297. And k. P. Poulose v. State of kerala (6) air 1875 sc 1259 he further contended that the payment of interest at 12% from the date of award is clearly illegal in view of section 34 of the code of civil procedure which provides that interest shall be decreed only at the rate of 6%. He also further contended that the cross - objections of the respondent are beyond thirty days from the date of receipt of the notice. The respondent filed a caveat under sec. 148 - a c p c. The court gave notice thereof and the respondent appeared through counsel at the time of admission on july 11, 1984 and opposed for stay. Therefore, the cross - objections have to be filed within 30 days from that date, but they were filed beyond limitation i. E. After 65 days. Therefore the cross - objections are not maintainable and the delay cannot be condoned. Though the right of the respondent to lay claim after giving an unconditional undertaking not to lay any claim was pursued unsuccessfully in the lower court, it is not argued before us. The need to go into that question though there is some substance in it, is obviated.

(5) Sri n. V. B. Shankar res learned counsel for the respondent res ted the contentions. He stated that award is not vitiated by any error apparent on its face. He contended that despite the claim no, 9 was expressly given up and though the arbitrator made the award taking this into account, it could be severed from the rest of the award. He also admitted that there was no covenant in the contract to pay escalation charges, yet he contends that the payment of escalation charges is implied part of the contract. When prices have gone up and when the government ' increased the minimum wages to the employees which the contractor is bound to pay fair wages in terms thereof, the contractor is entitled to reimbursement of the additional expenditure or the escalation of prices incurred during the process of execution of the work. Though the contract is for 18 months, it was extended from time to time during which the prices have arisen and the contractor has incurred additional expenditure. Therefore he is entitled to reimbursement. This aspect entrenches into the domain of appreciation of evidence to which the court is precluded to project into. He placed reliance on the policy of the government to pay the escalation charges, adumbrated under g. 0. Ms. No. 1007/ transport, r and b department, dated november 5, 1978. He also illustrated with reference to two instances whereunder the escalation charges were claimed to have been paid to those contractors. He contended that the appellant did not seek an opportunity before the arbitrator to call for the records from the income - tax department. The recitals in the preamble portion of the award support his contention. Therefore it is too late in the day to claim that the failure to afford an opportunity is vitiated by error of law on the face of the award. He further contended that the award of interest from the date of the decree is the discretion of the court; it is a commercial transaction; the rate of interest payable on commercial transactions by the nationalised banks is more than 18%; there - fore, the lower court has rightly awarded interest at 12%. To adumbrate that, the respondent filed cross - objections within imitation. There is no delay in filing the coss - objections from the date of receipt of the notice in the c m a. Even if there is any delay, an explanation has been offered explaining the delay. Therefore it may be condoned. He cited certain decisions in support of his contentions and we refer them at appropriate places.

(6) From the diverse contentions, the prime question that claim adjudication is whether the award is vitiated by error apparent on the face of the record or otherwise became invalid within section 30 (a) or (c) of the act respectively. The court should approach the award with a desire to support rather than to destroy it. The parties have chosen to refer their dispute by bijateral contract for adjudication to an arbitrator and it is not an action at law or a suit in equity. The arbitration clause is but part of the contract. Therefore, the "existence of the contract" is a necessary condition for its operation vide union of india vs. Kishorilal (7) air 1959sc 1362 at 1370 per majority, subba rao, j (as he then was) the main dispute, now, centres round claims nos. 9 and 11. Claim no. 9 was abandoned in the written arguments, and yet the arbitrator had taken it well into consideration and the award is a consolidated one. A claim made and abandoned before the arbitrator or withdrawn is not a matter in difference. (vide russel on arbitration, 20th edition, page 85). A claim admitted before the arbitrators is a matter in difference as between the parties, but an abandoned claim "is not". (vide halsbury's laws of england ivth edition, para 533, page 272). The necessary conclusion, therefore, is that when the respondent had abandoned claim no. 9, it is not a matter in difference between the parties. Yet the arbitrator took the abandoned claim into consideration while awarding the consolidated amount and thereby crept in an illegality apparent on the face of the record.

(7) The second area of controversy is with respect to escalation charges, under claim no. 11. As stated earlier, sri shankar rao, learned counsel for the respondent attempted to sustain the award in this regard on two - fold contentions; firstly on the ground that payment of escalation charges is an implied term of the contract towards fair wages, etc. , and secondly on the policy decision of the government. The crucial question therefore, is whether claim no. 11 is a dispute corning within the ambit of the arbitration clause or not. It primarily depends on the terms of the clause itself. If two parties purports to enter into a contract and a dispute arises, whether they have done so or not, is to be gauged from the language of the contract to which the parties to an arbitration agreement agree to refer. It must consist of a justiciable issue triable civilly. A fair test of this is whether a difference can be compromised by way of accord and satisfaction. (see halsbury's laws of england, ivth edition, paragraph 503, page 256). There is no dispute within the meaning of the agreement to refer disputes where there is no controversy in being as when a party admits liability (vide same paragraph 503, page 256).

(8) In produce brokers company limited v olympia oil and cake company limited (8) 1916 a c 314 at 323 - 324 (hl) lord atkinson has held :

"it would appear to me to be impossible for any judge or arbitrator to determine whetherany particular dispute arose out of a cont ract unless and until he knows what that contract is. This involves that the arbitrator must in such a case construe the contract which the parties entered into, and thus determine what they meant to express by the language they have used"

Lord parker of waddington in the same judgment, at page 237 has held thus :

"the arbitrator cannot make his award binding by holding contrary to the true facts that the question which he affects to determine is within the submission. For example; if disputes arise under any particular contract and the parties thereupon agree to refer all disputes arising under that contract, the arbitrator cannot give himself jurisdiction by deciding that, any particular dispute arises under the con 'ract in question when it does not, in fact, so arise."

(emphasis supplied) lord summer, in the same judgment at page 329, has held that

"if the dispute does not arise out of the contract but out of the contract plus something else to wit, the custom. One asks ''what is meant by the contract"

according to this argument ? if it is the terms written and printed on the piece of paper, the argument might be good. If thecontract in the arbitration clause means the real bargain between the parties expressed in the written and printed forms, the jurisdiction is complete' therefore, let us turn to the arbitration clause to find whether the claims for escalation charges would come within its sweep. Before endeavouring this attempt, at the cost of repetition, it is fo recapitulate that it is fairly admitted that the contract does not provide for payment of escalation charges. Clause 73 of the m d s s provides:'

"in case of any dispute or difference between the parties to the contract either during the progress or after the completion of the works or after the determination, abandonment, or breach of the contract ''as to the interpretation of the contract", or as to ''any matter or thing arising thereunder" except as to the matters left to the sole discretion of the executive engineer, under clauses. Then, either party shall forthwith give to the other notice of such dispute or difference, and such dispute or difference shall be and is hereby referred to the arbitration. And the award of such arbitrator shall be final and binding on the parties unless contested by either party in a court of law. " (the irrelevant portions are omitted) a reading thereof contemplates of adjudication as to (1) the interpretation of the contract; or (2) as to any matter or thing arising thereunder". With regard to the first limb as to the interpretation of the contract, since admittedly the contract does not provide for payment of escalation charges, the question of interpretation of the contract within the first limb of the clause does not arise. The question therefore is, whether the dispute for payment of escalation charges would encompass within the ambit of "any matter or thing arising thereunder'", what is the meaning ascribable to this house of lords was accepted by the supreme court in catena of decisions. In union of india vs salween timber and onstruction co. (10) a i r 1969 sc 488 at 491 while approving the above view, ramaswami, j. Speaking for the court emphasized that: the test for determining the question is whether recourse to the contract by which both the parties are bound is necessary for the purpose of determining whether the claim of the respondent firm is justified or otherwise. If it is necessary to take recourse to the terms of the contract for the purpose of deciding the matter in dispute, it must be held that the matter is within the scope of the arbitration clause and the arbitrators have jurisdiction to decide this case. "

(emphasis supplied).

(9) The result of the above discussion leads to the following conclusions: the dispute or difference must arise under the contract. The parties must have power to enter into a compromise by way of accord and satisfaction in that regard. The arbitrator or the judge must construe the contract which the parties entered into and determine what they meant by express language couched in the contract; and agreed to refer all disputes arising under that contract, the arbitrator acquires jurisdiction on reference; otherwise he cannot give himself jurisdiction by deciding that any particular dispute arose under the contract. If the arbitration agreement is part and parcel of the contract itself, by denying the factum of contract, the party is denying the submission clause and denying the jurisdiction of the arbitrator. The agreement to arbitrate depends on there being a dispute or difference in respect of the substantive stipulation in the contract. If the question whether the contract has ever been entered into at all with regard to the subject matter of the dispute, it is not within the usual form of submission of difference arising out of the contract. If there has never been a contract at all, there could never be a dispute arising out of it, exnihilo nil fit. Thereby it is implicit that the dispute does not arise under the contract. The te,it to datermine is, whether the parties can take recourse to the contract to which they are bound by, to determine whether the claim is justified.

(10) In the light of the above principles, the question is whether the respondent is entitled to escalation charges? it is true, as contended by sri shankar rao, learned counsel for the respondent that this court cannot embark upon appreciation of evidence nor can come to its own conclusions on re - examination or reapprisal of evidence, as a court of appeal, as held in union of india v. Kalinga construction co. (11) air 1971 s c 1446 relied upon by him. It is unnecessary to refer to the catena of decisions of other high courts touching the subject as well as the statement of law in this regard culled out in das's arbitration act, vth edition, and gt. Gazari's law relating to buildings and engineering contracts, second edition, page 906. The question at issue is not appreciation of evidence but one of construction of arbitration clause to find whether the escalation charges would come within its ambit and whether the arbitrator had jurisdiction to adjudicate upon and award the claim. The respondent himself is not reiying upon the contract to claim escalation charges. So, by no stretch of imagination it can be said that the claim for escalation charges is a "matter or thing arising" under clause 73 of the m d s s the reference in this regard becomes non est. The contention then is based on implied contract for payment.

(11) The execution of the work was to be completed by july 31, 1981. The respondent placed no material either from the statement of the case before the arbitrator or any documents to establish that any assurance in writting has been given by any competent officer extending the period of contract, to arise an obligation flowing therefrom enforceable at law. The question then is whether the respondent can relv upon the implied term of the contract for payment of escalation charges for executing the work afterjuly31, 1981. Article 299 (1) of the constitution enjoins execution of a contract on behalf of the state in the manner prescribed thereunder and non - compliance thereof renders the contract void. (vide mulamchand v. State of m p. (12) air 1968 sc 1218 and state of u p v. Murari lal (13) air 1971 sc 2210. The question of ratification or estoppel or waiver,does not arise for the reason that art. 299 (1) has not been enacted for the sake of mere form but to safeguard against the unauthorised contract. Art. 299 (1) was designed on the ground of public policy to protect general public. (vide bihar e g f. Co - op. Society v. Sipahi singh (14) air 1977 sc 2148 at 2153. The reason is obvious, the state is not bound by any oral assurance or undertakings unless the officer is expressly authorised and given in writing; lest the state would be saddled with liability for unauthorised contract; the exchequer would be at peril for diverse reasons and art. 299 (1) would be rendered ineffective. The founding fathers of the constitution thus couched in mandatory language of the need to execute the contract on behalf of the state in conformity with the constitutional requirement under article 299 (1). Therefore every contract, to bind the government, must comply with this requirement. In a given case such a contract may be inferred from facts and circumstances. But on the facts of this case, no such inference is possible to be drawn. Ink p. Chowdhry v. State of m p (15) a i r 1967 s c 203 it was held that no implied contract could be spelled out. In this view, the pla of implied contract has been smacked of its base. Moreover, the contract act does not enable a party to a contract to ignore the express covenants thereof and to claim payment of consideration for the performance of the contract at rates different from the stipulated rates, on some vague plea of equity, (vide m/s. Alopi prashad v. Union of india (16) a i r 1960 s c 588. The facts therein are that the appellant entered into a contract to supply ghee at a specified rate. Subsequently the rates were revised at mutal discussion. Consequent on the outbreak of the second world war, the prices have been mounted up and the appellant claimed for enhanced rate of establishment charges, etc. It was found favour with the arbitrator and he awarded certain amounts. In'that context, while negating the claim their lordships of the supreme court speaking through shah, j have held that:

"the parties to an executory contract are often faced, in the course of carrying it out, with a turn of events which they did not at all anticipate - a wholly abnormal rise or fall in prices, a sudden depreciation of currency, an unexpected obstacle to execution, or the like. Yet this does not in itself affect the bargain they have made. In the absence of express covenant modifying the contract which govern the relations of the parties with the government of india, vague assurances would not modify the contract"

.

It was further held that the arbitrators cannot ignore the express covenants and award amounts in excess, amounts not agreed upon. The contract is binding so long as it was not abandoned or altered by mutual agreement and the arbitrators had no authority to grant any amount in excess of the amount expressly stipulated to be paid. It was also held on facts that the award was vitiated by error apparent on the face of the record. Thus it must be held that the claim of the respondent based on implied contract for payment of escalation charges is unsustainable in law and accordingly it is rejected. 11. Yet another contention is the reliance on g 0 ms no. 1007 dated november 5, 1978, as part of policy of the government to pay escalation charges. It appears that the government were considering to delegate more powers to field officers of the public works department and to rationalise the procedure involved in that regard. They appointed a committee headed by the chief secretary to the government to review four items mentioned therein including administrative, financial and technical powers of the state engineers at various levels and to suggest appropriate recommendations thereon. The government haved accepte the recommendations made by the committee including the revision of methods and procedures. One of the recommendations made by the committee was reflected in annexure ii to the g o which reads thus : si. No. Recommendation of the committee. Decision of the govt.

(12) For works costing over rs. 50 - 00 lakhs each and taking more than 18 months for completion, a price escalation clause may be incorporated in the tender schedule and thereby in agreements providing for both increases and decreases in the price of materials and labour. In case of prices come down the department will be entitled for a rebate from contractor. The clause may be on the pattern prescribe in the report of the working group setup by the planning commission to prepare a standard contract form. The committee of the chief engineers may be entrusted with the work of suggesting the nature, of scope and working of the price escalation clause. The recommendation is accepted. The chief engineers (minor irrigation and general) should place the matter before the committee of chief engineers to evolve a suitable form and submit it to the government for approval. (emphasis supplied) a reading of the decision taken by the government as reflected in column (3) thereof is to make suitable amendments by a committee of chief engineers for its approval and the chief engineer (minor irrigation and general) was requested to suggest suitable draft amendments to the codes wherever necessary. It reached no finality. To a question put by us, the learned advocate general has sought time and later stated and was not controverted by sri shankar rao that so far no recommendations have been received from the committee of chief engineers and the government did not issue any other g 0 pursuant to the above decision. Therefore, no right in presente nas been created on the basis of the above g o in any contractor in the state. The reliance on the g 0 thereby became misconceived and the respondent acquires no right to payment of escalation charges on the basis thereof. The alleged two instances cited by the respondent thereby became redundant. Even if any payment is said to have been made, they are per se illegal and the government is not bound thereby nor an estoppel be available against the state in this regard. Thus construed, the claim of the respondent for payment of escalation charges must be held to have no legal basis. The'award to pay escalation charges, thereby, is in excess of the arbitrator's jurisdiction and is void.

(13) In union of india v. Om pra - kash (17) air 1976 s c 1745 the supreme court interpreted the words 'or is otherwise invalid' within the meaning of sec. 30 (c) of the act and held that "the words "or is otherwise invalid" in clause (c) of section 30 are wide enough to cover all forms of invalidity including invalidity of the reference. We do not find any reason why the general and unqualified language of clause (c) should not include an award on an invalid reference which is a nullity. " for the reasons stated supra we hold that the invalidity of the award with regard to claim nos. 9 and 11 comes within the sweep of the words "or is otherwise invalid", under section 30 (c) of the act.

(14) The next question is whether the award in respect of these two claims is severable from the rest of the claims. It is true, as contended by sri shankar rao, learned counsel for the respondent, relying upon a passage from russell on arbitration, 20th edition, page 304 that

"it has often been said that the courts are always inclined to support the validity of an award, and will make every reasonable intendment and presumption in favour of its being a final, certain, and sufficient termination of the matters in dispute. No such preemption, however, extends to the question of the arbitrator's jurisdiction; and in that connection it has been said that the principle omnia praesumuntur rite esse acta does not apply to proceedings of arbitration tribunals, or, indeed, to the proceedings of inferior tribunals of any sort,"

(15) A division bench of this court in government of a. P. V. The gammon india ltd. , bombay (18) air 1984 a. P. 230 copiously relied on by both parties, to which one of us (seetha - ram reddi, j) is a party, has held that it must be presumed that the arbitrator has taken all the claims into consideration and then made the award. It must, therefore, be held that the arbitrator must be presumed to have applied his mind, when he took into consideration all the claims nos. 1 to 12 and awarded the consolidated sum in respect of all the twelve claims. It is seen that claim no. 9 was for a sum of rs. 8. 450/ - and towards claim no. 11, a sum of rs. 21,88,000/ - was put forward. The question is to what extent and how much amount has bean awarded in respect of claim no. 11 and admittedly claim no. 9 was withdrawn. It is not open to the court to attempt to probe the mental process by which the arbitrator reached his conclusion where it is not disclosed by the terms of the award. (see jivarajbhai v. Chintamanrao (19) air 1965 sc 214.

(16) It is equally true, as contended by sri shankar rao relying on santa sila v. Dhirendra nath (20) air 1963 sc 1677 that the arbitrator need not assign any reasons. His conclusions are final provided they are definite and certain. When the arbitrator awarded a consolidated sum taking into consideration all the 12 claims,it is impermissible to probe into the mental process of the arbitrator when he did not cleasly express himself and when the award is not supported by reasons. In a given case where private parties enter into an arbitration agreement and also nominated their arbitrator and refer all their disputes for adjudication agreeing to abide by the same, unless so specifically required, an award need not formally express the decision of the arbitrator on each matter of differences. The court will presume that the award disposes finally all the matters in difference and the award will be held final. (vide santa sila v. Dhirendra nath (20) (supra). It is equally true that even in respect of the claims arising inter se between a citizen and the state where a body of arbitrators with an umpire in case of difference are chosen to decide the dispute, it is presumptive that they arrived at the decision after confabulations and consultations among themselves and therefore it could be presumed that they have applied their mind and arrived at the decision, though no reasons were given. But in the case of a sole arbitratornot inter se between two private individuals but between a a citizen and the state, when an award is not expressed with reasons, a different complexion would likely to emerge. The award of the arbitrator is final and binding unless its legality is assailed as contemplated under sec. 30. Sec. 32 precludes the maintainability of the suit, in a civil court to assail its correctness or legality. A writ petition is also not maintainable. (vide rukmani - bai v. Collector, jabalpur (21) air 1981 sc 479. Equally, in halsbury's laws of england, volume 2, ivth edition at page 615, para 325, it is stated that the court has no power to make orders of certiorari or prohibition addressed to an arbitrator unless he is acting under the statutory powers. Thereby, exclusivity and con - clusiveness have been ascribed to the award. Arbitration proceedings part - take of a nature of quasi judicial proceedings (corpus juris secundum, volume vi, page 153). State, in implementation of the directive principles, enjoined under part iv of the constitution and with a view to bring about an egalitarian socety in its socialist staie, has undertaken severl i projects and welfare schemes and the execution thereof is being done through contractors; the expenditure runs to thousands of crores of rupees. It is common knowledge that difference or disputes in execution thereof are subject of arbitration and the results inflicts deep incursion on the planned economy and undue burden on the tax payer. The construction of the submission with respect to matters submitted to them (arbitrators) are concerning their authority over matters of procedure in not conclusive, but may be reviewed by the court (vide american jurisprudence, volume iii, section 106, page 932). In the same volume, it has been adumbrated that an exception to the common - law rule requiring a unanimous award is recognised in cas33 where the matters being arbitrated is a subject of public concern the authorities are practically unanimous in holding that a majority award is good in such cases. The power conferred on the arbitrators in such cases is said to be joint and several and the reason for the rule probably lies in the fact that public affairs are controlled by majority and thus by analogy, a majority should control when the submission is of a matter which concerns the public. (sec. 120, page 944).

(17) Even in the field of administrative law, it is now well settled that failure to assign reasons renders the decision void. H. W. R. Wade in his administrative law, 4th edition, page 772, has adumbrated that reasoned decisions are not only vital for the purpose of showing the citizen that he is receiving justice, they are also a valuable discipline for the tribunal itself. A statement pf reasons is one of the essentials of justice.

(18) In deena v. Union of india (22) air 1983 sc1155 chandrachud, chief justice, speaking for himself and on behalf of pathak, j. Has held in paragraph 4 thus :

"no one of course can question that law is a dynamic science, the social utility of which consists in its ability to keep abreast of the emerging trends in "social and scientific advance and its willingness to readjust its postulates in order to accommodate those trends. Life is not static. The purpose of law is to serve the needs of life. Therefore law cannot be static. "

This view was followed by a division bench of this court, in m. J. Syamala rao v. Sri radhakanthaswami varu (23) 1984 (1) a. P. L. J. 113 to which one of us (k. Ramaswamy. J.) is a party and held thus :

"the dynamics of the interpretative functioning of the court is to reflect contemporary needs and the prevailing values consistent with the constitutional and legislative declarations of the policy. The law would respond to the clarian call of social imperatives evolve in that process functional approach as means to subserve 'social premises' set out in part iv of the constitution and the act to render economic justice to ryots. The creative role of the judiciary is in the forefront, as is the need for a new functional approach to law based on sound theorising as to its purpose in our present age."

In constitutional theory by geoffrey arshall, 1971 edition, under the caption 'judicial attitude and the social justice, pages 81 to 90, it is propounded that a judge should approach his job with something of the archticts attitude and adopt creative role where precedents conflict, where clearly legislative directives is absent or where they work injustice even clear precedents or established reles ought to yield to bold views based on moral conviction and furtherance of justice or freedom. Law responds various ways too. The speed and manner of its response is usually proportionate to the degree of social pressure. (law in a changing society, by firedmann, page 34). Indeed it is almost certain that common law would no longer exist if great judges had not from time to time accept the challenge and boldly laid down new principles to meet, new social problems (page 38).

(19) Broached from the above perspective, though hitherto it was not compulsive to assign reasons in support of the award, its efficiency stemmed from social imperatives and the march of law as cm inbuilt indiscipline and neces - sitated in the public interest that he arbitrator is to assign reasons in a is - pute between the state and a pers in so that when its legality is impugl. Ed the court would test it on the anvil of law. Under article 141, the law laid down by the supreme court is the law of the land. Therefore, to have binding precedent in this regard, we deem it expedient that their lordships may lay down the law in this regard. Such need for reasons is acutely felt in this case for the reason that though the appellant did not assail the correctness of the award in respect of claims nos. 1 to 8, 10 and 12, in view of the award being a non - reasoned one, we are precluded to proba into the mental process of the arbitrator to judge as to what extent his award is severable and the respondent is deprived of the benefit of the rest of the claims. It is true, under section 15 of the act, in a given case, where it is possible to separate the void part of the award, the court could, on its own facts and circumstances, separate the chaff from the grain and confirm the valid part thereof. As rightly relied on by the learned advocate general on the passage of russell's and justice r. S. Bachawat's in their treatises on the law of arbitration that the court has no power to alter or amend the award but can only set aside or remand to the arbitrator. Justice r. S. Bachawat in his law of arbitration, at page 295, further pointed out that

"effect may be given to a portion of the award if it can be separated without affecting the decision on it from the remaining portion of the award, but if the two parts are inextricably mixed up and cannot be separated, effect cannot be given to any part."

In m/s. Basant lal vs. Bansi lal (1) (supra) where the award was in respect of disputes under several contracts one of such contracts was found to be void but the award being one not severable in respect of different disputes covered by it, the whole award was set aside. If a void portion is so connected as to affect the justice of the case between the parties, the whole is void. (vide american jurisprudunce volume iii, sec. 123, page 946). Wher the void portion of the award is so newerwoven with the balance as to make cearation impossible without injustecs , the invalidity of those portions renders the whole award void. (same volume. Sec. 134, pages 957 - 958). The decision in union of india vs. J. N. Misra (2) supra relied on by sri shankar rao, learned counsel for the respondent is distinguishable. In that case the award comprised of three items and a total sum of rs. 1,07,631 - 05 ps. Was awarded the three items were separately mentioned in the 'award. On those facts it was held that the award is not uncertain nor intelligible. An amount of rs. 6,0001 - deposited towards security was a separate item and that part was clearly separable and it was struck off though that cannot be awarded. Moreover, that part was to the advantage of the respondent. The ratio therein has no application to the facts in this case. Sri shankar rao, further contended that these points were not expressly argued before the lower court and therefore the appellant cannot be permitted to raise these points. We are unable to agree with the learned counsel. With regard to claim no. 11, a plea was admittedly expressly raised and it was reiterated before the lower court. The issue was raised in a spectrum and therefore, though the lower court did not consider the case from the proper perspective, the appellant is not precluded to raise this point, particularly when it goes to the very jurisdiction of the arbitrator. We are unable to find as to what extent out of rs. 21,88,000/~ the arbitrator has awarded in the consolidated award of rs 19,76,000/ - towards claim no. 11. Equally so of claim no. 9. The award in respect of claim nos. 9 and 11 became inextricably interwoven with the rest of the claims and became inseparable and the aware! thereby became void and unsustainable in toto. Justice of the case does not demand to remand to the arbitrator. In view of this conclusion, the questions relating to maintainability of the cross objections regarding interest ; the absence to give opportunity to call for the income - tax returns from the income - tax department vitiates the award etc. Became academic. Therefore we leave open those questions.

(20) Yet another glaring illegality crept in the case is with regard to' taxing the advocate's fee and government pleader's fee by the lower court, under the advocates, fee rules treating the suit under the act as a regular suit. Under the act, though there is no express provision regarding procedure to be followed, under rule 5 made thereunder, an application to set aside the award is directed to ba numbered as an 0. P. And the application to make the award as rule of the court as suit. But they are only applications arising under the act. Under rule 7 (b) of the advocates' fee rules, for any application under secs. 14 and 20 of the act, the fee shall be one half of the fee leviable under rule 4 (ii) subject to a minimum of rs. 5/ - and a maximum of rs. 100/ - and in any other application, the fee shall be in the discretion of the court subject to a minimum of rs. 501 - and a maximum of rs. 150/ -. A division bench of this court in ramakishtam v. Somalin - gam (24) 1962 - 11 an. W. R. 469 has held that the suit under the act should be regarded as such only for the purpose of procedure but for the purpose of legal practitioner's fee, only legal prac - tioners' fee rules shall be looked into and the rule makes specific provision in regard to the applications under sec. 14 and consequently, it is those rules that should be applied. Consequently the fixation of rs. 28,000/ - towards advocate's fee and rs. 21,910/ - towards government pleader's fee, is ex fads illegal and cannot be sustained. However, it is to be pointed out that the advocate's fee rules are observed more in breach and the value of rupee is 17 paise and it is desirable to amend the rules suitably so as to be realistic and conformable to the changing circumstances.

(21) Before parting with the case, it is necessary to mention that the arbitration clause has become a feeding centre for an ineradicable corruption and an instrument of abuse for unjust enrichment. This is an open talk in private conversation in responsible circles. The decision by the arbitrators involve public exchequer to the tune of crores of rupees annually making deep dent on the planned economy of the country casting heavy undue burden on the tax - payer. Art. 33 (2) of the constitution enjoins the state to minimise the inequalities in income. But the arbitration clause renders the exercise thereof a futility or keeps the result in ambivalence. It also became a shield for an arbitrator to take refuge thereunder refraining to assign reasons, depriving the court thereby to go into the evidence as well as the real questons. Thereby, it stripped itself off its efficacy and what remained is by far discredited edifice with stinking putri - fication. The deletion of the clause not merely a panacea to purge these pugnacious problems but also enables the civil court and the appellate forms - high court and supreme court to review the evidence legally admissible with sustained reesoning rendering substantial justice to the citizen and the state alike. Therefore, it is high time for the state and its instrumentalities to delete the arbitration clause from the contract relegating the parties to the civil court to establish their just claims or else to make suitable amendments to the act.

(22) In the result, we hold, thatj the award in respect of claim. Nos, 9 and 11 has become inseparable from the rest of the award and thereby the award became invalid and void in toto. The court below committed error of law and material irregularity in exercise of its jurisdiction warranting interference. Accordingly, the c. M. A. And the c. R. P. Arcs allowed and the 0. P. Is decreed and the award is setsaide and suit is dismissed. In the circumstances of the case, the parties are directed to bear their own costs throughout. The respondent is to bear the arbitrator's costs.