Per Dr. Anand, J.:-
(1) This is an appeal under section 59 of the Jammu and Kashmir Arbitration Act 1940 against the judgment of the learned Judge in Chamber dated 25th July, 1973, whereby he partly allowed the application of the respondent, the State of Jammu and Kashmir, and made the award given by the Arbitrator in respect of claims 1, 4, 6 and 8 {details whereof are given here under) Rule of the Court and set aside the award in respect of claims 2 and 5. The respondent State of Jammu and Kashmir, has also filed cross objections under order 41 Rule 22 C. P. C. to the appeal of the appellant and has contended that the claim in respect of item No. 6 should have also been set aside.
(;) It appears that on 19-9-1964, lumpsum tenders were invited by the Chief Engineer Jammu, for construction of bridge on river Chenab at "Bara-dari" near Reasi. After the invitation of tenders the dates of submission of tenders were extended from time to time. The time for completing the work was set down as two years from 16th day of allotment of the work. The appellant firm was the successful tendered and the work was allotted to it. At the time of settlement of the bill after the completion of the work certain disputes arose between the appellant and the respondent. Pursuant to clause 32 of the, agreement dated 1st September, 1965, entered into between the parties, the disputes arising out of the contract, were referred to joint arbitration of M/s N. D. Daftary of Bombay (retired Chief Engineer of Gujrat State) nominee of the appellant and Shri B. N. Mengi (Ex Chief Engineer of Jammu and Kashmir State), nominee of the respondent i. e. State of Jammu and Kashmir, The disputes were formulated by the learned arbitrators on the basis of the statement of claims made by the appellant. The description of the claims as finally formulated by the arbitrators were as follows :
S. No. Description Amount claimed
1. Sinking by excavation in hard rock for pier No. 16. The difference in rate
(Rs. 24.75 Rs. 15. 50 per cft). ...Rs. 44, 393. 25
2. Dewatering by more than one pump for
piers 1, 3, 4, 5, 6, 7 and 8. ...Rs. 1, 26, 376. 62
3. Idle premeumatic shifts for pier No. 15. ...Rs. 12, 500. 00
4. Refund of excess sales tax on cement. ...Rs. 15, ?83. 74
5. Refund of Toll Tax payment ...Rs. 2, 42, 5%. 39
6. Extra cost due to non-use of Akhnoor
Pouni Road. ...Rs. 76, 478. 00
7. Rebate for less sinking (claim
for lesser diameter of well). ...Rs. 18, 144. 00
8. Interest on the total amount of claims comprised in the above items remaining unpaid till date 9% per annum....9% per annum.
(3) The arbitrators entered upon the reference on 3rd Feb. 1970, and gave a unanimous award on 24th October, 1972. In their award the learned arbitrators allowed the entire claim of the appellant with regard to items Nos 1 and 2. Claim with respect to item Nos 3 and 7 were totally rejected while claim in respect- of items Nos 4. 5. 6 and 8 were partially allowed. After the filing of the award in the court, the respondent made an application under sections 30/33 of the Jammu and Kashmir Arbitration Act, for setting aside the award on various grounds mentioned therein. The award was assailed in respect of claims relating to item Nos 1. 2, 5, 6 and 8. No objection was, however, raised in regard to the award relating to claim No. 4 i. e. refund of excess Sales Tax on cement amounting to Rs. 15583--74. In the application for setting aside the award, the respondent maintained that the arbitrators had grossly erred in construing the terms and conditions of the agreement thereby vitiating the award. It was also averred in the aforesaid application that there had been legal misconduct on the part of the arbitrators and that there was an error of law apparent on the face of the record since the arbitrators had based their award on improper and inadmissible evidence. The application of the respondent State of Jammu and Kashmir for setting aside the award was final and binding on the parties and there were no grounds to set aside the same. The appellant also prayed that the award be made a rule of the Court.
(4) The learned Judge in Chamber after perusing the record and hearing the arguments of the learned counsel for the parties partly allowed the application of the respondent (State of Jammu and Kashmir) and made the award given in respect to items Nos 1, 4, 6 and 8 (as given above) a rule of the court and set aside the award in respect of items 2 and 5. The arbitrators had themselves, as already stated rejected the claim of the appellant relating to items 3 and 7. Aggrieved by the order of the learned Judge in Chambers, the appellant firm has filed this appeal under section 39 of the Jammu and Kashmir Arbitration Act, 1940.
(5) In the appeal, it has been prayed that the Judgment and order of the learned Judge in Chamber with regard to the setting aside the award pertaining to the items *2, 5 and 8 be reversed and justice be done to the appellant by granting a decree in terms of the award. Respondent State of Jammu and Kashmir has filed cross objection? under O 41 R 22. C. P. C. to the appeal. The objections are supported by an affidavit by Shri Gurdeep Singh, Chief Engineer Public Works Department (R & B) Jammu. In the objections it is prayed that the order of the learned Judge in Chamber relating to claim No. 6 pertaining to payment of Rs. 49, 162 50 for extra costs due to inability to use Akhnoor-Pouni road be also set aside and after setting aside the same the award be made a rule of the court.
(6) M/s S. P. Gupta and M. C. Pathik, have appeared for the appellant and Mr. R. N. Vaishnavi has appeared for the respondents. The learned counsel for the parties are agreed that the dispute between the parties, for the purpose of the present appeal an J cross objections relates only to items 2, 5. 6 and 8 and in the circumstances we are confirming ourselves to these items only,
(7) The learned counsel for the appellant has argued that the learned Judge in Chamber has erred in disallowing the claim with respect to item No. 2 i. e. dewatering by more than one pump for piers 1, 3, 4, 5, 6, 7 and 8. The arbitrators bad, it may be mentioned awarded a sum of Rs. 125376. 62 with inspect to this item. The precise argument of the learned counsel for the appellant is that since the award is ordinarily final and conclusive between the parties, the learned Judge in Chamber ought not have gone into the evidence which had been led before the arbitrators for the purpose of determining whether the award deserved to be set aside with respect to this particular item. The learned counsel has submitted that since the award itself is a non-speaking award, and the arbitrators had not assigned any reasons while allowing or disallowing various claims, the court was precluded from going into the evidence with a view to determine the correctness of the award. Reliance has been placed on certain authorities in support of this proposition which we shall presently discuss. The contention of the learned counsel for the respondent on the other hand is that the learned Judge in Chamber was perfectly justifies in looking into the evidence documentary and oral accompanying and forming part of the award with a view to determine the correctness of the award.
(8) To appreciate the rival contentions of the parties it will be necessary to refer to clause 19 of the agreement between the parties :
"The foundation wells will be sunk by open dredging methods only. If the grabs persistently careless than half full (i. e. not less than half a yd) dewatering of wells and removing the stratum by putting men inside will be resorted to only if the wells can be dewatered by 1 No. 6"X4" pump without blowing. For sinking well in this manner the contractor will be paid extra rupees three per cft. of sinking done. If complete dewatering by 1 No. 6"X4" pump without blowing of sand is not possible, pneumatic sinking will be permitted for further sinking of the wells for which the contractors will be paid extra at rates quoted by them.
(9) A perusal of the aforesaid clause shows that it was agreed between the parties that if the foundation wells could not be sunk by the open dredging methods, the appellant-would put in manual labour after dewatering the wells by one pump 6"X4” dimensions and if complete dewatering by 1 No. 6"X4" pump without blowing of sand was not possible, then pneumatic sinking would be permitted for further sinking of wells for which the appellant was to be paid extra rate quoted by the appellant-firm. The case of the appellant is that the Chief Engineer during his visit to the site, authorised and instructed the appellant-firm to use two or even three pumps for dewatering the wells instead of one pump. Clause 19 of the agreement to which reference has been made above, did not, it may be mentioned, permit the use of more than one pump for dewatering of the wells, Mr. Afzal, the then Chief Engineer, appeared as a witness before the arbitrators and he categorically denied to have ever permitted or authorised the appellant-firm to use more then one pump for dewatering. He asserted that he had never permitted the appellant-firm to use more then one pump either orally or in written. The arbitrators, therefore, it seems awarded the amount given above with respect to item No. 2 without there being any positive evidence before them abut so called authorization. Moreover, the award with respect to claim of item No. 2 is also in violation of the express terms of the contract i. e. clause 19 which permitted the use of one pump only for dewatering the wells. Their lordships of the Supreme Court in M/s Alopi Parshad and Sons Vs. Union of India, AIR 1930 S. C. 538, have laid down that an award which is in violation of the express terms of the contract cannot be upheld and that the arbitrators cannot travel beyond the express terms of the contract. Thus this part of the award being in-violation of the express terms of the contract was clearly erroneous. The submission made by the learned counsel for the appellant that the learned Judge in Chamber should not have looked to the evidence led before the arbitrators since in the award itself no such evidence was mentioned or discussed is in our opinion, devoid of any merit In AIR 1947 Calcutta 75, a Division Bench of the Calcutta High Court held as follows :
"Where the motion is to set aside the award for the matter appearing on its face the Court is debarred from considering any matter which does not appear in the award itself or in documents incorporated in it. Where as award has referred to certain documents and after constructing them has arrived at certain conclusions, the documents can be said to have been incorporated in the award."
The learned Judge had placed reliance on the following observations of Lord Wright in Absalom's case 1933 AC. 592 at p 612.
"As the motion is to set aside the award for matter appearing on its face the Court is debarred from considering any matter which does not appear in the award itself or in documents incorporated in it. The award recited the contract between the parties and referred in terms to certain conditions of the contract-namely Cls 26, 30 and 32; though these clauses are not set out in full, they must, I think, be taken to be incorporated."
(10) Also, in AIR 1971 S. C. 696, their Lordships of the Supreme Court enunciated certain principles in regard to the arbitration matters. Their Lordships laid down that where the parties had agreed on an arbitrator, they must accept the award as final for good or ill. They also observed that jurisdiction for setting aside the award would not be legally exercised unless the grounds fell strictly within the relevant provisions of the Arbitration Act. Their Lordships also 1 aid-down that the court while examining an award given by the arbitrators will also have the jurisdiction to look into the documents etc accompanying and forming a part of the award.
(11) A perusal of the award shows in its operative part as follows :
"And whereas we have perused the various documents produced by the parties and studied the correspondence entered into between them on the subject. We have also considered very carefully the evidence tendered by the witnesses produced by the parties and examined before us. We have also heard counsels on both the sides and given due consideration to the arguments put forth by them in support of the stand taken up by their respective clients."
The above cited passage from the award clearly shows that the determination of dispute between the parties by the arbitrators was based on consideration of documentary and oral evidence Although that evidence has not been specifically discussed in the award yet, that evidence which has been perused and considered by the learned arbitrators for giving the award would, in our opinion, form part of the award and the learned Judge in Chamber could, therefore, look into all that evidence. The submission of the learned counsel therefore deserves to be repelled, as we do not find that the learned Judge committed any error in looking into the record accompanying the award while setting aside the award in respect of the claim relating to item No. 2.
(12) While arguing with respect to item No. 5, the learned counsel for the appellant submitted that there was no mistake or error apparent on the face of the award and the learned Judge in Chamber should not have set aside the award under those circumstances in the absence of any such error or mistake apparent on the face of the award.
(13) Item No 5 relates to refund of toll tax payment. The arbitrators awarded a sum of Rs. 239204, 67 with respect to this item. The appellant-firm had originally claimed a sum of Rs. 232763. 32 in their statement H: claim. By means of an application dated 4-10-19V1, the appellant-firm sought permission to raise figures to Rs. 242592. 30. There is no record to show that this amendment was at any time allowed by the arbitrators. As a matter of fact, from a perusal of the interim orders passed by the arbitrators, transpires that certain amendments were allowed in respect of items other than item No. 5. Inspite of the fact, that the amendment had not been allowed, the arbitrators awarded a sum of Rs. 239204. 67, presumably relying on clauses 1, 28 and 32 of the agreement which provided as follows :
"]. 28. t Tender amount shall exclude all quarry fees, royalties, terminal taxes and octroi duty if any payable for materials to be consumed on the work. No sales tax is payable by the contractor on constructional works. Any payments made by the contractor on this account shall be re-imbrued by the department on production of proper original vouchers."
"Condition 32. Tender amount will exclude all quarry fees royalties, terminal taxes and octroi duty if any. No sales tax is payable by the contractor on the constructional works. Any payments made by the contractor on such account shall be re-imbursed by the department on production of proper original vouchers,"
The appellant-firm construed toll tax in the aforesaid clauses to mean the same thing as terminal tax, and the arbitrators apparently accepted that contention and awarded the refund of Rs. 239204. 67 by treating toll tax to be the same thing as terminal
(14) The terms, toll tax and terminal tax have different connotation in law and both these terms are not synonymous. Strictly speaking terminal tax is a tax collected at the terminal or outskirts of a local area in respect of imports into or exports from that area. This is a tax on goods on passengers. On the other hand toll tax is in respect of vehicles etc for the use of roads. A vehicle would . be liable for toll tax even if no goods are carried by that vehicle. There was no basis for the appellant-firm to construe toll tax to mean terminal tax. According to the statements of Mr. Afzal' Chief Engineer, recorded by the arbitrators, toll tax was purposely kept out of clause 32 of the agreement. The witness has further categorically stated that in case of other contractors the position was that they had to pay the toll tax themselves and the same was not refundable. This evidence remains unrequited. Since in clauses 1.28 and 32 of the agreement, toll tax had not been included that shows that the arbitrators travelled beyond the express terms of the contract in a awarding the refund of toll tax. The reliance placed by the respondents on some correspondence exchanged between the parties to show that there was some, doubt about the refund of toll tax and that the respondent construed toll tax to mean the same thing as terminal tax is wholly misplaced. The correspondence does not suggest even remotely that the appellant gave any assurance to the respondents that even the toll tax would be refunded or that clause 32 of the agreement should be construed to include toll tax also. Refund of toll tax was not included in the agreement or the contract between the parties and since the arbitrators travelled beyond the express term of the contract in awarding the refund of toll tax, that part of the award is erroneous one stands vitiated on that short ground. Apart from that the arbitrators have committed a legal mistake apparent on the face of the award and the record accompanying the award by equating toll tax with terminal tax.
(15) Reliance has been placed by the learned counsel for the appellant on AIR 1965 J & K 28, in support of his contention that since there is no error apparent on the face of the award, the learned Judge in Chamber should not have looked to the other record to determine whether the arbitrators had committed any error and whether there was any error of law apparent on the face of the award. In our opinion, that authority cannot-advance the case of the appellant at all. In this authority it has been held that an award should be set aside when an error of law is apparent on the face of the award and it has also been held in the same authority that an error of law would be apparent on the face of award when the arbitrators have given necessary reasons, which reasons are either opposed to any statutory requirements or which are legally erroneous. There cannot be any quarrel with that proposition. The reasons need not be given in the award itself. They can be deduced from the record accompanying the award. In the instant case the error of law is apparent on 'the face of the award as well as the record accompanying the award. Since the basis for making this part of the award is by equating toll tax with terminal tax and reading toll tax into clause 32 of the agreement that basis is clearly erroneous. Reference in this connection may be made with advantage to AIR 1975 S. C. 230 wherein it has been held that where an erroneous proposition of law is stated in the award or which is made the basis of the award, the award deserves to be set aside or remitted on the ground of error of law being apparent on the face of the record. To the same effect is the law laid-down in AIR 1963 S. C. i6S^ wherein it has been laid down that an award is bad on the ground of error of law on the face of it, when in the award itself or in a document actually incorporated in it, there is found some legal proposition which is the basis of the award and which is erroneous. In the instant case the error of law was apparent on the face of the record when construing clause 32 toll tax and terminal tax were equated b y the arbitrators and, therefore, that portion of the award deserved to be set aside.
(16) In view of the discussion above we are not impressed with the challenge made by the appellant to the finding of the learned Judge with respect to item No. 5.
(17) The arbitrators awarded a sum of Rs. 49162. 50 as extra cost payable to appellant-firm due to non-availability of Akhnoor Pouni road against the claim of the appellant of Rs 76471/- with regard to item No. 6. This part of the award has been upheld by the learned Judge in Ghamber and he has held that the arbitrators were well within their right to award the claim. The respondent State of Jammu and Kashmir has in their cross objections to the Letters Patent Appeal, submitted that the learned arbitrators were wrong in awarding this amount and also that the learned Judge in Chamber was not Justified in upholding the award with respect to this item. The case of the appellant is that due to Indo Pak hostilities which had broken out in the year 1965, when the work of the construction of the bridge was in progress the appellant-firm was precluded from using this particular road and they had to incur extra cost by using a longer route. The appellant while submitting their revised tender offer on 9-9-1965 had made it clear to the department that all extra expenses incurred by the firm on account of non user of Akhnoor-Poani Road would have to be reimbursed to them by the department. Moreover, the contract for the construction of the bridge was also governed by special risk clause. Para 4 of that clause clearly indicated that all increase in costs arising from a special risk shall be paid by the employees of the contractor. The learned arbitrators taking all these factors into consideration awarded a sum of Rs. 49162. 50 to the appellant and 4 that award was upheld by the learned Judge in Chamber and, in our opinion, rightly so. The cross object! ins of the respondent with respect to this item, therefore, have no merit and have to be dismissed and order of the learned Judge in Chamber upheld.
(18) The last attack made by the learned counsel for the appellant is with regard to partly setting aside the award relating to item No. 8 by the learned Judge in Chamber. This item No. 8 relates to payment of interest on the total amount of claim at the rate of 9% per annum till the date of payment. The arbitrators in the operative part of the award laid down that the appellant-firm was entitled to 6% of the interest (as against 9% claim by the appellant) from the date of the reference (6-12-68) to the date of payment of the money awarded. The learned counsel for the appellant, while challenging the finding of the learned Judge in chamber with respect to this item has argued that under section 29 of the Arbitration Act the arbitrators were justified in awarding interest, from the date of the reference till the date of the payment was made and the learned Judge in Chamber should not have restricted the payment of interest from the date of the reference to the1 date of the award only. Reliance was placed in this respect oh'AIR'1972 S. C. 1507.
(19) The power to award future interest i. e. interest from the dale of the award, till the date of payment under section 29 of the Arbitration Act is vested only in a court. The arbitrators cannot be equated with the court, arid therefore section 29 of the Arbitration Act would not apply to the case where arbitrators award interest. In AIR 1972, S. C. 1507, on Which reliance has been placed by the learned counsel for the appellant, it has been specifically laid-down that where all the disputes including a claim for payment of the amount with interest is referred to the arbitrator the arbitrator can award interest pendente lite. This authority, therefore, instead of helping the appellant firm goes against it. The award of interest pendente lite implies that it ; can be awarded only during , the pendency of the arbitration proceeding. The Jurisdiction of the arbitrators to award interest is, therefore, confined only to 'the duration of pendency of proceeding before them which come to an end with the making an award. They have, therefore, no jurisdiction to award future interest. Since the payment of interest was one of the 'items which had been referred to the arbitrator, they were competent to award interest but their competence extended only to awarding interest pendente-lite and not future interest. By awarding future interest the arbitrators committed a legal mistake and exceeded their jurisdiction and that part of the award, therefore, which awarded future interest from the date of the award till the date of payment was clearly erroneous and had-to be set asMe7 The 'learned Judge in Chamber, 'therefore, rightly set aside the same.. The submission of the learned counsel noted above has, therefore, no merit and -has to be rejected.
(20) After giving our1 careful consideration -.ltd the submission made and in view of the discussion , above; we find1 that both the appeal and cross objections are without any merits and they deserve to be: dismissed. We order accordingly. In view of the circumstances of the ease there will be no order as to costs.
Sd/- Adarsh Sein Anand J.
I agree Sd/- (Thief Justice