BHARAT COKING COAL LTD. versus M/S. ANNAPURNA CONSTRUCTIONS

Citation: [2003] SUPP. 3 S.C.R. 122 · Decided: 29-08-2003 · Supreme Court of India · Bench: V.N. KHARE · Disposal: Case Partly allowed

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Judgment (excerpt)

A 
BHARAT COKING COAL LTD. 
V. 
MIS. ANNAPURNA CONSTRUCTIONS 
AUGUST 29, 2003 
B 
[V.N. KHARE, CJ. AND S.B. SINHA, J.) 
Arbitration Act, 1940; Ss. 14, 15, 16, 29 and 30: 
Contract of construction-Arbitration clause-Disputes-Arbitrator 
C made award with interest thereon inf avour of contractor-Court while 
making award a rule did not grant interest-Appeal of the company and 
application for interest of the contractor dismissed by the trial Court-Appeal 
dismissed but application for interest allowed by the High Court-Held: 
Since interest was not allowed by the trial Court in terms of provision of 
D law, High Court could not grant the same in exercise of its revisional power. 
Jurisdiction of the Arbitrator: 
Jurisdiction-Extent of-Held: Confines to the terms of the contract-
Since the Arbitrator failed to take into consideration relevant material while 
E making the award, his order would amount to misdirection in law-Hence, 
disputes on certain issues referred to a retired Judge of the High Court for 
making award afresh-Civil Procedure Code, 1908-Section 152. 
F 
'An error within the jurisdiction' and 'an error in excess of 
jurisdiction '-Distinction between-Discussed. 
Appellant Company and the respondent-Contractor entered into 
a contract for construction of hutments. The contract contained an 
arbitration clause. Since the work was not completed in time and 
disputes arose between the parties, the arbitration clause of the 
G contract was invoked. The Arbitrator made an award in favour of the 
Contractor, awarding certain sum with interest thereon. 
The 
subordinate judge Court made award Rule of the Court but did not 
allow interest. Appeal against the award and petition as well as review 
petition for grant of interest were dismissed by the trial Court. High 
H Court, however, allowed the revision petition and granted interest but 
122 
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BHARAT COKING COAL LTD. v. ANNAPURNA CONSTRUCTIONS 
123 
dismissed the appeal of the company. Hence the present appeal. 
A 
It was contended for the appellant that since the respondent had 
accepted the final bill, he could not file further claim; that the running 
bills were required to be adjusted out of the advance granted to 
respondent; that the respondent could not claim against escalation in B 
the price of the material; and that the arbitrator committed illegality 
in entertaining certain claims ignoring the terms of the contract/ 
relevant material. 
On behalf of the respondent, it was submitted that since the 
appellant did not challenge the legality of the award, Supreme Court C 
could not interfere in exercise of its jurisdiction under Section 30 of 
the Act. 
Partly allowing the appeals, the Court 
HELD: 1.1. Only because the respondent has accepted the final D 
bill, the same would not mean that it was not entitled to raise any claim. 
In absence of a declaration that the respondent would not raise any 
further claim, he cannot be held to be estopped or precluded from 
raising any claim. The Court did not grant any interest in terms of 
Section 29 of the Act. The same was not by way of a clerical or E 
arithmetical mistakP. which could be corrected by the Court in exercise 
of its power under Section 152 of the Code of Civil Procedure. Under 
the circumstances, the respondent was either to prefer an appeal 
thereagainst or file a review petition. As the Court could not have 
exercised its jurisdiction under Section 152 of the Code of Civil F 
Procedure, the High Court in exercise of its revisional jurisdiction 
could not have interfered therewith. [127-H, 128-B-C] 
1.2. The jurisdiction of the arbitrator must be held to be confined 
to the four-corners of the contract. He could not have ignored an G 
important clause in the agreement. [129-C-D) 
1.3. In the instant case, the amount which was deducted by way 
of penalty and found not justifiable, be refunded. While considering 
the claim relating to material escalation, the arbitrator should have 
taken into consideration the relevant provisions as well as relevant H 
124 
SUPREME COURT REPORTS (2003] SUPP. 3 S.C.R. 
A facts contained in the agreement and also the correspondence made 
between the parties. It is well settled that the arbitrator cannot act 
arbitrarily, irrationally, capriciously or independent of the contract. 
(129-E, 130-D-EI 
Associated Engineering v. Govt. of A.P., [19911 4 SCC 93 and 
B Mis. Sudarsan Trading Co. v. The Govt. of Kera/a, [198912 SCC 38, relied 
on. 
1.4. There lies a cle

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