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" This statement in our view represents the correct legal position and has our full concurrence. Ratio |
A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable and the purchaser is not entitled, in exercise of the right conferred upon it under cl. 18, to recover the amount of such claim by appropriating other sums due to the contractor. Ratio |
On this view, it is not necessary for us to consider the other contention raised on behalf of the respondent, namely, that on a proper construction of cl. 18, the purchaser is entitled to exercise the right conferred under that clause only where the claim for payment of a sum of money is either admitted by the contract... |
We must, therefore, hold that the appellant had no right or authority under cl. 18 to appropriate the amounts of other pending bills of the respondent in or towards satisfaction of its claim for damages against the respondent and the learned Judge was justified in issuing an interim Injunction restraining the appellant... |
We accordingly dismiss the appeals. RPC |
The appellant in each appeal will pay the costs of the respondent all throughout, V.P.S. Appeals dismissed. RPC |
Appeal No. 260 of 1953 and connected appeal (C.A. No. 12 of 1954). FAC |
Appeals from the Judgment and Decree dated the 11th day of May 1951 of the High Court of Judicature at Patna in Miscellaneous Appeal No. 253 of 1950 and in appeal from Original Order No. 252 of 1950 arising out of the order dated the 11th day of May 1951 of the Court of Subordinate Judge, Dhanbad in Suit No. 34 of 1949... |
Mahabir Prasad, Advocate General for the State of Bihar (section P. Varma and M. Sinha, with him), for the appellant (In Civil Appeal No. 260 of 1953). FAC |
Mahabir Prasad, Advocate General for the State of Bihar (M. M. Sinha for R. C. Prasad, with him), for the appellant (In Civil Appeal No. 12 of 1954). FAC |
7 50 C. K. Daphtary, Solicitor General for India (Porus A. Mehta and P. G. Gokhale, with him), for the respondent (In both the Appeals). FAC |
March 24. FAC |
The Judgment of the Court was delivered by BOSE J. FAC |
This appeal and Civil Appeal No. 12 of 1954, which will also be governed by this judgment, raise the same points though there are some differences in the facts. FAC |
We will deal with Civil Appeal No. 260 of 1953 first. FAC |
The suit there related to an arbitration matter. FAC |
The appellant before us, whom it will be convenient to call the contractor, entered into a contract with the Dominion of India through an Additional Chief Engineer of the C.P.W.D. on 1 11 1945 for the supply of bricks to the C.P.W.D., a department of the Dominion Government. FAC |
Disputes arose about a number of matters. FAC |
Clause 14 of the agreement provided that all disputes arising out of or relating to the contract should be referred to the Superintending Engineer of the Circle for the time being. FAC |
Accordingly, there was a reference on 21 1 1949 and an award followed on 8 5 1949. FAC |
It was filed in the Court of the Subordinate Judge, Dhanbad, and the contractor prayed that it be accepted and that a decree be passed in terms of it. FAC |
The Dominion of India filed objections under section 30 of the and prayed that the award be set aside and alternatively that it be modified or corrected. FAC |
The contractor 's application was registered as a suit under section 20(2) of the Act and a decree was passed in terms of the award on 18 3 1950. FAC |
By that time the Constitution had come into force and the Union of India replaced the Dominion of India as a defendant. FAC |
The Union of India filed an appeal to the High Court. FAC |
The appeal was allowed in part. RLC |
The contractor thereupon appealed to this Court. FAC |
The dispute that was referred to the arbitrator consisted of 17 heads of claim but only three of them are contested here, namely items 5, 8 and 17. FAC |
51 In the 5th head of claim the contractor claimed Rs. 75,900 as the price of 88 lacs of katcha bricks that were destroyed by rain. FAC |
These bricks were not the subject matter of the contract but the contractor put his claim in this way. FAC |
The contract was for the supply of 2 1/2 crores of pucca bricks which bad to be delivered according to the following schedule 30 lacs by 25 1 46 50 lacs by 25 2 46 55 lacs by 25 3 46 55 lacs by 25 4 46 60 lacs by 25 5 46. FAC |
Delivery was to be at the kiln site. FAC |
In order to keep to this schedule the contractor bad to think ahead and work to a particular time table. FAC |
First, he had to prepare katcha or unbaked bricks and place them in his kilns for baking. FAC |
While this lot was baking be had to prepare and stock another lot of katcha bricks ready to take the place of the baked bricks as soon as they were removed. FAC |
It was the duty of the C.P.W.D. to remove these bricks as soon as they were ready for delivery,that is to say, as soon as they were fully baked. FAC |
At a certain stage of the contract the C.P.W.D. failed to remove the baked bricks which were ready for delivery and removal. FAC |
This caused a jam in the kilns and prevented the contractor from placing a fresh stock of unburnt bricks in the kilns, and in the meanwhile his stock pile of katcha bricks ready for baking kept on mounting up. FAC |
Had everything been done to time the 2 1/2 crores of bricks would have been delivered before the rains set in. FAC |
But owing to the default of the C.P.W.D. in not removing the burnt bricks which were ready for removal, delay occurred in the time table and the rains set in with the result that88 lacs of katcha bricks were destroyed by the rains. FAC |
As this loss was occasioned by the default of the C.P.W.D. the contractor claimed that be should be paid their price. FAC |
The reply of the Union Government was two fold. FAC |
First, it contended that the katcha bricks formed no part of the contract and even if it was at fault in not 52 taking delivery of the burnt bricks in time all that it could be held liable for would be for breach of that contract; and said that the loss that was occasioned by the damage caused to the katcha bricks whic... |
Secondly, that compensation for this loss could not in any event be claimed because this kind of situation was envisaged by the parties when the contract was made and they expressly stipulated that the Dominion Government would not be responsible. FAC |
The Union Government relied on additional clause 6 of the agreement which is in these terms: "The department will not entertain any claim for idle labour or for damage to unburnt bricks due to any cause whatsoever". FAC |
The arbitrator held that this clause was not meant "to absolve the department from carrying out their part of the contract" and so he awarded the contractor Rs. 64,075 under this head. FAC |
We are clear that the arbitrator went wrong in law. Ratio |
Government departments have their difficulties no less than contractors. Ratio |
There is trouble with labour, there is the likelihood of machinery breaking down in out of the way places and so forth; there was also the danger of thunder storms and heavy showers of rain in the month of May: it will be remembered that the last date of delivery was 25 5 46 if, with that in view, Government expressly ... |
If he chose to contract in absolute terms that was his affair. Ratio |
But having contracted he cannot go back on his agreement simply because it does not suit him to abide by it. Ratio |
This is not to say that Government is absolved from all liability, but all it can be held responsible for is for damages occasioned by the breach of its contract to remove the pucca bricks which it had undertaken to remove. Ratio |
But what would such a breach entail? 53 The contractor had a duty under section 73 of the Contract Act to minimise the loss, accordingly he would have had the right to remove the bricks himself and stack them elsewhere and claim compensation for the loss so occasioned; and indeed two of his heads of claim (not in dispu... |
He has been awarded Rs. 11,744 11 0 under claim No. 4 for the extra load in connection with the stacking of I crore 7 lacs of bricks due to the accumulation at the kiln site owing to the department 's failure to work to its part of the time table, and in addition, he has been given Rs. 15,500 under claim 13 for the cos... |
Alternatively, he could have sold the bricks in the market and claimed the difference in price, but ordinarily he could not have claimed compensation for damage done to the katcha bricks unless he could have shown that that kind of damage, ordinarily too remote, was expressly contemplated by the parties when the contra... |
Here it is clear that this was in their express contemplation and they chose to provide against such a contingency by making clause 6 an express clause in their contract. Ratio |
There can therefore be no doubt that the arbitrator was wrong in his law. Ratio |
His construction of the terms of the contract was at fault. Ratio |
The question now arises whether his decision on this point is final despite it being wrong in law. Ratio |
In India this question is governed by section 16(1) (c) of the of 1940 which empowers a Court to remit an award for reconsideration "where an objection to the legality of the award is apparent upon the face of it". STA |
This covers cases in which an error of law appears on the face of the award. Ratio |
But in determining what such an error is, a distinction must be drawn between cases in which a question of law is specifically referred and those in which a decision on a question of law is incidentally material (however necessary) in order to decide the question actually referred. Ratio |
If a question of law is specifically referred and it is evident that the 54 parties desire to have a decision from the arbitrator about that rather than one from the Courts, then the Courts will not interfere, though even there, there is authority for the view that the Courts will interfere if it is apparent that the a... |
See the speech of Viscount Cave in Kelantan Government vs Duff Development Co.(1) at page 409. Ratio |
But that is not a matter which arises in this case. Ratio |
The law about this is, in our opinion, the same in England as here and the principles that govern this class of case have been reviewed at length and set out with clarity by the House of Lords in F. B. Absalom Ltd. vs Great Western (London) Garden Village Society(1) and in Kelantan Government vs Duff Development Co.(1)... |
In Durga Prasad vs Sewkishendas (3) the Privy Council applied the law expounded in Absalom 's case(2) to India: see also Champsey Bhara & Co. vs Jivraj Balloo Spinning and Weaving Co.(4) and Saleh Mahomed Umer Dossal vs Nathoomal kessamal (5). Ratio |
The wider language used by Lord Macnaghten in Ghulam Jilani vs Muhammad Hassan(1) bad reference to the revisional powers of the High Court under the Civil Procedure Code and must be confined to the facts of that case where the question of law involved there, namely limitation, was specifically referred. Ratio |
An arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. Ratio |
He is a tribunal selected by the parties to decide their disputes according to law and so is bound to follow and apply the law, and if he does not, he can be set right by the Courts provided his error appears on the face of the award The single exception to this is when the parties choose specifically to refer a questi... |
(1) (2) (3) , 79. PRE |
(4) 50 I.A. 324, 330 & 331. PRE |
(5) 54 I.A. 427, 430. PRE |
(6) 29 I.A. 51, 60. PRE |
55 Reference was made to a decision of this Court in A. M. Mair & Co. vs Gordhandass Sagarmull(1) where Fazl Ali, J. quoted a passage from Viscount Simon 's speech in Heyman vs Darwins Ltd.") where the learned Lord Chancellor (Viscount Simon) in turn, quoted from Lord Dunedin in another case. PRE |
It was argued on the basis of this that if you have to have recourse to the contract to establish your case, then the dispute must fall within the arbitration clause. PRE |
That is undeniable but it is not enough that the dispute should fall within the clause. Ratio |
It is also necessary that the parties should define what the dispute is and agree to refer the dispute so set out and defined to arbitration, or, if they do not, that the Court should compel them to do so: (see Lord Macmillan in Heyman 's case(1) just cited at pages 369 and 370). PRE |
If, therefore, no specific question of law is referred, either by agreement or by compulsion, the decision of the arbitrator on that is not final however much it may be within his jurisdiction, and indeed essential, for him to decide the question incidentally. Ratio |
Lord Russell of Killowen and Lord Wright were both in the earlier case, F. R. Absalom Ltd. vs Great Western (London) Garden Village Society(1), as well as in Heyman 's case(2) and they would have pointed to any distinction had there been a likelihood of conflict; but in fact there is none and we do not read Fazl Ali J.... |
We have next to see whether the arbitrator was specifically asked to construe clause 6 of the contract or any part of the contract, or whether any question of law was specifically referred. Ratio |
We stress the word "specifically" because parties who make a reference to arbitration have the right to insist that the tribunal of their choice shall decide their dispute according to law, so before the right can be denied to them in any particular matter, the Court must be very sure that both sides wanted the decisio... |
(1) ; at 798. Ratio |
(2) at 368. Ratio |
(3) 56 The clause in the contract that requires disputes about the contract to be referred to arbitration is clause 14 and is in the following terms: "Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specification and instructions here in before mentioned and as ... |
The dispute sprang out of a series of claims made in a number of letters written by the contractor to the Additional Chief Engineer, C.P.W.D. and culminated in a petition, exhibit B(1), in which the contractor summarised his claims. Ratio |
The document is not dated. Ratio |
On receipt of this, someone on behalf of the C.P.W.D. invoked the jurisdiction of the arbitrator. Ratio |
That letter has not been filed. Ratio |
The arbitrator then wrote to the contractor and asked him to submit a statement of claim. Ratio |
That letter has not been filed either but reference is made to it in exhibit C(1), the statement claim which the contractor filed in response to that letter. Ratio |
As the material documents setting out the terms of reference are not here, we were asked by both sides to infer what the terms were from this statement of claim and the recitals in the award. PRE |
The learned counsel for the contractor relied on the following: In the statement of claim "Item 5. ARG |
Loss of katcha bricks. . ARG |
Rs. 75,900. ARG |
The chief reason of the destruction of these bricks was the failure of the department to lift the 57 monthly quota of bricks The argument of the department that they are not liable to compensate us on this account because of clause 6 of the agreement is not correct. ARG |
Clause 6 refers to only such cases over which the department has no control. ARG |
But if the department would have lifted the bricks (this was entirely under their control) then no such loss would have occurred. ARG |
Also be it noted that clause 6 refers only to 'damage ' and not to 'destruction. . ARG |
Damage means only partial loss. . .it cannot mean total destruction. ARG |
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