M.D., ARMY WELFARE HOUSING ORGANISATION versus SUMANGAL SERVICES PVT. LTD.

Citation: [2003] SUPP. 4 S.C.R. 385 · Decided: 08-10-2003 · Supreme Court of India · Bench: V.N. KHARE · Disposal: Disposed off

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Judgment (excerpt)

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M.D., ARMY WELFARE HOUSING ORGANISATION 
A 
v. 
SUMANGAL SERVICES PVT. LTD. 
OCTOBER 8, 2003 
[V.N. KHARE, CJ., BRIJESH KUMAR AND S.B. SINHA, JJ.] 
Arbitration : 
Arbitration Act, 1940 : 
Section 4l(b) proviso-Interim order-Passing of-Powers of 
Arbitrator-Held: Arbitrator does not have power to pass an interim order 
in the absence of any specific agreement in relation thereto. 
B 
c 
Section 30-Award-Misconduct by Arbitrator-Setting aside of D 
award-Arbitrator refused to consider provisions of contract dealing with 
rights and liabilities of parties-Held: Such a conduct amounted to legal 
misconduct on the part of the Arbitrator-Hence, award liable to be set 
aside. 
Section 30-Award-Error apparent on the face of award-Setting E 
aside of award-Disputes and differences between the parties were 
required to be determined as on a particular date-But the Arbitrator took 
into consideration subsequent conduct of the parties-Held : Subsequent 
conduct of parties was wholly irrelevant-Hence, there existed an error 
apparent on the face of the award-Therefore, award liable to be set aside. F 
Section 30-Award-Damages-Held : Liability to pay damages 
must arise out of contract and not otherwise-Since the award did not 
specifically say so parties not entitled to award of damages. 
Arbitration and Conciliation Act, 1996 : 
G 
Section 17-Power of Arbitrator-Held: Is a limited one-Arbitrator 
could not issue any direction which would go beyond the reference or 
arbitration agreement-Interim order could only relate to the parties to the 
dispute and not to other parties. 
H 
385 
386 
SUPREME COURT REPORTS [2003] SUPP. 4 S.C.R. 
A 
Contract Act, 1872 : 
Section 73-Damages-Army Welfare Housing Organisation (AWHO) 
entered into a contract with a builder for construction of housing project-
Builder had no legal liability to get the building plans sanctioned-
.... 
B However, builder merely assisted A WHO in getting the plans sanctioned-
Liability of builder-Held: Builder had incurred no liabilities under law. 
Section 56-/mpossibility to fulfil contract-Frustration of contract-
Damages-Army Welfare Housing Organisation (AWHO) awarded contract 
c 
for construction of housing project-Municipality ordered stoppage of 
work in 617 blocks-Contractor complied with such stop.,-work order-
Liability of contractor-Held : Assuming the contractor could carry out 
some job and might be partially liable yet he could not be faulted when 
he refused to undertake any constructional work in violation of stop-work 
order-Moreover, there was no material to prove alleged self-induced 
D frustration on the part of the contractor-There was also no collusion 
between the Municipal authorities and the contractor in getting the work 
stopped-Hence, contractor not liable for any damages. 
Constitution of India, 1950 : 
E 
·Article 136-Plea-New Plea-Award-Appeal against-One of the 
parties to arbitration raised a plea before the Supreme Court that the other 
party had unjustly enriched. itself-Such a plea not raised before the 
arbitrator-Held : A new plea could not be raised for the first time before 
F 
the Supreme Court-Practice and procedure. 
The appellant entered into an agreement with the respondent for 
development of land and construction of a composite housing project 
on a turnkey basis. Considerable progress was made in the construction 
of work in Phase 1. Despite the fact that no building plan was filed or 
G sanctioned for Phases II and III, the respondent, on the instruction of 
the appellant, proceeded with the construction of Phase II. But the 
municipal authorities directed to stop work in 617 blocks. The 
respondent, therefore; stopped further construction activity which 
resulted in the appellant's termination of its contract with the 
H respondent 
, 
" 
M.D., ARMY WELFARE HOUSING ORGANISATION'" SUMANGAL SERVICES P. LTD. 
387 
The respondent filed a civil suit for injunction which was refused. A 
In appeal, the High Court ordered the parties to maintain status quo. 
In appeal, this Court referred the disputes between the appellant and 
the respondent for adjudication by an Arbitrator. 
The appellant and the respondent filed an application before the B 
Arbitrator for passing of an interim award regarding certain matters. 
The Arbitrator passed an interim order of injunction and subsequently 
an award was filed before this Court. Hence the appeal. 
On behalf of the respondent, it was contended that the Arbitrator. C 
had no power to

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