CONTINENTAL CONSTRUCTION CO. LTD. versus STATE OF MADHYA PRADESH

Citation: [1988] 3 S.C.R. 103 · Decided: 07-03-1988 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Dismissed

Cited by 1 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

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CONTINENTAL CONSTRUCTION CO. LTD. 
A 
v. 
STAIB OF MAIJHYA PRADESH 
MARCH 7, 1988 
[SABYASACHI MUKHARJI AND S. RANGANATHAN, JJ.] 
B 
Arbitration Act, 1940--Whether a contractor can claim extra cost 
and compensation towards rise in prices of material and labour on 
account of delay on the part of other party to contract in discharge of its 
obligations and allotment of work under the contract and irivoke arbi-
tration clause in contract and ask for a reference to arbitrator under C 
section 20--0f 
The petitioner in this application under Article 136 of the Con-
stitution entered into a contract with the respondent State for construc-
tion work. The contract could not be completed within the stipulated 
time because of alleged gross delay on the part of the State in allotment D 
of work and discharge· of its obligations under the contract. The 
petitioner incurred unforeseen expenditure and approached the 
Superintending Engineer for payment. Upon refusal of the Superin-
tending Engineer to pay and also to refer the matter to arbitration, the 
petitioner moved the District Judge under Section 20 of the Arbitration 
Act, ('the Act') for the filing of the arbitration. agreement and for 
E 
reference of the dispute to arbitration. The District Judge directed the 
respondent State to file the agreement, and made a reference for 
specific question to the arbitration. The High Court dismissed the 
State's appeal against the Order of the District Judge. Thereafter, an 
arbitrator was appointed, who made an award partly allowing the 
petitioner's claim. The award was filed in the Court of the District F 
Judge, who made the award a rule of the court. The respondent 
.appealed to the High Court. The High Court remanded the matter to the 
District Judge for a fresh decision. The District Judge accepted the 
respondent's objections and set aside the award. The High Court dis-
missed the appeal of the petitioner. The petitioner then moved this 
Court for relief by this petition for special leave. 
G 
Dismissing the petition, the Court, 
HELD: The District Judge rightly found that the question 
regarding extra-.:ost was a general question and not a specific legal 
question and the decision of the arbitrator was not final. The arbitrator H 
103 
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c 
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-104 
SUPREME COURT REPORTS 
[1988] 3 S.C.R. 
misconduCted himself in allowing the claim without deciding the objec-
tion of the State. In view of the specific clauses, the petitioner was not 
legally entitled to claim for extra-cost. The decision of this Court in 
Seth Thawardas v. Union of India, I 1955] 2 SCR 48-was of no avail on 
this point. If no specific question of law is referred, the decision of the 
arbitrator on that question is not final however much it may be within 
his jurisdiction and indeed essential for him to decide the question 
incidentally. The arbitrator is not a conciliator and cannot ignore the 
law or mis-apply it in order to do what he thinks is just and reasonable. 
The arbitrator is a Tribunal selected by the parties to decide their 
disputes according to law and so he is hound to foJlow and apply the 
law, and if he does not, he can be set right by the Court provided his 
error appears on the face of the award. In this case, the contractor 
having contracted, could not go back to the agreement simply because it 
did not suit him to abide by it. [IllC-F] 
The petitioner had argued that since specific issues had been 
framed and referred by the District Judge to the arbitrator, the same 
had been answered by a non-speaking award and there was no mistake 
of law apparent on the face of the record, and the District Judge had 
erred in setting aside the award by looking into the terms of the contract 
which neither formed part of the award nor were appended to it. The 
Court did not agree. This being a general question, the District Judge 
rightly examined the question and found that the petitioner was not 
entitled to claim for extra cost in view of the terms of the contract, and 
the arbitrator misdirected himself by not considering this objection of 
the State before giving the award. [112B·C] 
The limits of the jurisdiction of the Court to challenge the award 
are well-settled. While considering the objection under section 30 of the 
Act, the Court does not act as an appellate Court; it can only interfere 
with the award if the arbitrator misconducts himself or the proceedings 
or if the award has been made after the issue of an 

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