P. M. PAUL versus UNION OF INDIA

Citation: [1989] 1 S.C.R. 115 · Decided: 16-01-1989 · Supreme Court of India · Bench: SABYASACHI MUKHERJI · Disposal: Disposed off

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

Judgment (excerpt)

P.M. PAUL 
A 
v. 
UNION OF INDIA 
JANUARY 16, 1989 
• 
-)'., 
[SABYASACHI MUKHARJI AND S, RANGANATHAN, JJ.] 
B 
-{ 
Arbitration Act 1940: Sections 14, 17, 30 and 33-Award-
Setting aside of-Whether arbitrator has misconducted himself or 
proceedings-Adjudicating upon matter not subject matter of adjudica-
tion-Legal misconduct. 
The appellant, a contractor entered into a contract with the 
respondent for the construction of a building. The contract consisted of 
two phases. The date of commencement of both the phases was March 
10, 1979, the date of completion of Phase I was June 9, 1980 and that of 
Phase II was November 9, 1980. Dispute arose about the handing over 
of the site. The appellant's case was that the site was not handed over as 
stipulated and consequently the work could not either be commenced or 
completed as stipulated. The respondent asserted that the appellant had 
X abandoned the work and committed a breach of contract. This was 
negated by the appellant. 
l 
/ 
As the contract provided for settlement of disputes by an arbitrator, 
the appellant filed a suit for the appointment of an arbitrator. 
The matter came up in appeal to this Court, and one of its former 
Judges was appointed as an arbitrator. The Arbitrator entered upon 
the reference, examined the documents, heard the parties, considered 
the evidence, and made an award after inspecting the sites. 
The respondent aggrieved by the award filed a petition and con-
tested the same. It was contended that the arbitrator had travelled 
beyond his jurisdiction in awarding a sum of Rs.2 lakhs as escalation 
cost and charges in respect of claim I. 
·,/ 
Disposing of the Civil Miscellaneous Petition the Court, 
HELD: I. It is well-settled that an award can only be set aside 
under section 30 of the Arbitration Act, if the Arbitrator has miscon-
ducted himself or the proceeding. [ 121 C-D I 
115 
c 
D 
E 
F 
G 
H 
A 
B 
c 
D 
116 
SUPREME COURT REPORTS 
[1989] 1 S.C.R. 
2. Adjudicating upon a matter which is not the subject-matter of -t 
adjudication, is a legal misconduct for the Arbitrator. [ 121D I 
3. Escalation is a normal ineident arising out of gap of time in this 
inflationary age in performing any contract. [12IF] 
In the instant case, the dispute that was referred to the arbitrator :¥-
was, as to who was responsible for the delay, what are the repercussions 
of the delay in completion of the building, and how to apportion the 
consequences of the responsibility. Aller discussing the evidence and 
the submission of the parties to the contract, the arbitrator, found ihat 
it was evident that there was escalation and, therefore, he came to 
the conclusion that it was reasonable to allow 20% of the compen-
sation under claim I, he accordingly allowed the same. This was a 
matter which was within the jurisdiction of the arbitrator, and the 
arbitrator had not misconducted himself in awarding the amount as he 
has done. [121D-E, G-H; 122A] 
4. Once it was found that the arbitrator had jurisdiction to find 
that there was delay in execution of the contract due to the conduct of 
the respondent, the respondent was liable for the consequences of the 
delay, namely, increase in prices. [122C-DJ 
CIVIL APPELLATE JURISDICTION:: Civil Miscellaneous )(. 
E ·Petition No. 26519 of 1988. 
F 
IN 
Civil Appeal No. 2632 of 1987. 
' 
From the Judgment and Order dated 10.6.1985 of the Kerala ,\ 
High Courtin W.P. No. 210 of 1985 in O.P. No. 897 of 1984. 
. \ 
Mrs. Baby Krishnan for the Appellant. 
• 
A.K. Srivastava and C. V.S. Rao for the Respondent. 
G 
The Judgment of the Court was delivered by 
SABY ASACHI MUKHARJI, J. This is an application for 
)<'
making the award dated 17th February, 1988 passed by Mr V. Khalid, 
a former Judge of this Court, in a dispute referred to hini by thiS 
Court's order dated 6th October, 1987, final and to give consequen-
H 
tial directions thereupon. 
' 
P.M. PAUL v. U.0.1. [MUKHARJI, J.) 
117 
On 7th April, 1979 there was a contract for construction of the 
building in question. The contract consisted of two phases. The date of 
commencement of both the phases was 10th March, 1979: the date of 
completion of phase-I was 9th .June, 1980 and for phase-II 9th 
November, 1980. The dispute arose about the handing over of the 
site. According to the appellant, the site was not handed over to him as 
agreed upon and therefore, the work could not either be commenced 
or completed as stipulated. He, therefore, accused the respondent of 

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