ASSOCIATED ENGINEERING CO. versus GOVERNMENT OF ANDHRA PRADESH AND ANR.

Citation: [1991] 2 S.C.R. 924 · Decided: 15-07-1991 · Supreme Court of India · Bench: T.K. THOMMEN · Disposal: Dismissed

Cited by 1 judgment(s) · cites 1 · see the full citation network in Lexace

Judgment (excerpt)

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ASSOCIATED ENGINEERING CO. 
v. 
GOVERNMENT OF ANDHRA PRADESH AND ANR. 
JULY 15, 1991 
[T. KOCHU THOMMEN AND R.M. SAHA!, JJ.] 
Arbitration Act, 1948: Sections 10, 14, 17, 33-Arbitrator-
Jurisdiction-dispute of-Not within the award-To be decided outside 
the award-Ambiguity of such award-To be resolved by admitting 
extrinsic evidence-Jurisdiction cannot be widened by Arbitrator-He 
is bound by the recital in the contract-Conscious disregard of law or 
provisions of contract-Whether amounts to ma/a fide action and 
vitiates the award. 
Some disputes arose between the Respondent State and the Con-
tractor in respect of the Cement concrete lining under an agreement in 
connection with the construction of Nagarjunasagar Dam. Arbitrator 
Umpire was appointed and the parties med their pleading and docu-
ments before him. There were 15 claims apart from the general claim for 
cost and interest. The award made by the Umpire was med before the 
Civil Court. The Civil Court made the award a rule of Court and passed 
a decree in terms of the award together with interest at 12% per annum 
from the date of the decree. 
On appeal, the High court set aside the decree in respect of three 
claims on the ground that the claims were not supported hy the agree-
ment between the parties and that the arbitrator bad gone beyond the 
contract in awarding the claims, and confirmed the decree in respect of 
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three other claims. 
Aggrieved by the High Court's judgment, both the Contractor 
and the State Government preferred appeals by special leave. 
On behalf of the Contractor it was contended that since the 
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Ump ire made a non-speaking award and did not incorporate any docu-
ment as part of the award except his reference to the contract, law did 
not permit interference by the Court with the award, and that the High 
Court exceeded its jurisdiction in interfering with a non-speaking 
award. 
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On behalf of the State Government it was contended that notwith-
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ASSOCIATED ENGG. v. GOVT. OF A.P. 
925 
standing the brevity of his reasoning, the arbitrator had given a speak-
ing award, but with errors of Jaw and fact apparent on the face of it; 
and that he acted contrary to the contract, thereby exceeding his 
jurisdiction. 
Dismissing the appeal of the Contractbr and partly allowing the 
appeal of the State Government, this Court, 
HELD: I. The arbitrator cannot act arbitrarily, irrationally 
capriciously or independently of the contract. His sole function is to 
arbitrate in terms of the contract. He has no power apart from what the 
parties have given him under the contract. If he has travelled outside 
the bo.~mds of the contract, he has acted without jurisdiction. But if he 
has remained inside the parameters of the contraet and has construed 
the provisions of the contract, his award cannot be interfered with 
unless he has given reasons for the award disclosing an error apparent 
on the face of it. ·[938A-B] 
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2. An arbitrator who acts in manifest disregard of the contract 
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acts without jurisdiction. His authority is derived from the contract and 
is governed by the Arbitration Act which embodies principles derived 
from a specialised branch of the law of agency. He commits miscondnct 
if by his award he decides matters excluded by the agreement. A 
deliberate departure from contract amounts to not only manifest dis-
regard of his authority or a misconduct on his part, but it may taut-
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amount to a ma/a fide action. A conscious disregard of the law or the 
provisions of the contract from which he has derived his authority 
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vitiates the award. [938C-E] 
Mustill & Boyd's Commercial Arbitration, Second Edition, p. 64; 
Halsbury's Laws of England, Volume II, 4th Edn., para 622, referred 
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to .. 
3. A dispute as to the jurisdiction of the arbitrator is not a dispute 
within the award, but one which has to be decided outside the award. 
An Umpire or arbitrator cannot widen his jurisdiction by deciding a 
question not referred to him by the parties or by deciding a question 
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otherwise than in accordance with the contract. He cannot say that he 
does not care what the contract says. He is bound by it. It must bear his 
decision. He cannot travel outside its bounds. If he exceeded his juris-
diction by doing so, his award would be liable to be set aside. [938E-F] 
Attorney General for Manitoba v. Kelly & Others, [1922] 1 AC 
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268, referred to. 
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926 
SUPREME COURT REPORTS 
[ 1991] 2 S.C.R. 
4.1.

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