Case Law Analysis: Puri Construction Pvt. Ltd. v. Union of India

Case Number

Civil Appeal No. 4649 of 1984

Equivalent Citations

AIR 1989 SC 777, 1989 (1) ARBLR 306 SC, JT 1989 (1) SC 132, 1989 (1) SCALE 126, (1989) 1 SCC 411, 1989 (1) UJ 416 SC

Bench

K.N. Singh, L.M. Sharma

Date of Judgment

January 20, 1989

Relevant Act/ Sections

Section 17, 20 of Arbitration Act, 1940

Order 41 Rule 33 – Code of Civil Procedure, 1908

Facts of the Case:

The Government of India decided to hold the Third Asian International Trade Fair, scheduled to be opened in November 1972. Various countries were invited to participate in the Fair and were assured of getting space, by the first week of October 1972, in two huge structures named Hall of Nations and Hall of Industries. Tenders were invited on 9.10.1971 by an open advertisement described by the parties as Notice Inviting Tenders (NIT in short). The appellant, Puri Construction (Pvt.) Ltd. (hereinafter referred to as the contractor), submitted its tender and was allotted the work. The contractor completed the work within the stipulated period and the Fair opened in time. The parties disagreed as to the amount payable for the executed work and even about the terms relating to arbitration. 

Procedural History:

The contractor filed before the Delhi High Court an application under Section 20 of the Arbitration Act on 30/5/1974 which was registered as Suit No. 329-A of 1974. By consent of the parties, the High Court referred the dispute to Sri M.K. Shivasubramaniam, Chief Engineer, Central Public Works Department, to act as the sole arbitrator. The suit was accordingly disposed of. Sri Shivasubramaniam was appointed as the Chief Engineer (Vigilance Cell) and could not thereafter proceed with the arbitration. The Union of India (UOI) then purported to appoint one Sri M.K. Koundinya as the sole arbitrator, whose authority was challenged by the contractor before the High Court by filing a miscellaneous petition. By consent order, Sri D.N. Endlaw retired Chief Engineer, C.P.W.D. was appointed the sole arbitrator to continue with the arbitration proceeding.  The dispute included mainly the claim of the contractor and several counter-claims by the Union of India. Sri Endlaw made a non-speaking award and filed it in court on 29.5.1981. A case being Suit No. 551/A/81 was registered and notices were issued and the Union of India filed objections thereto. The case was disposed of by a judgment dated April 16, 1982, passed by the single judge bench of G.K. Luthra, J. dismissing the objections and accepting the award. The Union of India challenged the judgment in the appeal which was heard and disposed of by a Division Bench consisting of Rajinder Sachar and Jagdish Chandra, JJ on May 21, 1984. The present appeal is directed against their judgment. 

Issues before the Court:

  1. Whether the sole arbitrator is required to give reasons in support of his award. (Part 4) 
  2. The contractor contended that it had to execute many new items of work, as directed from time to time during the course of construction, and these were beyond the awarded contract and were accordingly entitled to an additional payment.
  3. Whether the amount payable to the contractor had to be reduced by the value of the discardable additional steel described by the parties as ‘salvaged steel’.
  4. Whether the court can sit in appeal over the views of the arbitrator by re-examining and re-assessing the materials.
  5. Whether a plea/claim is liable to be entertained if not raised before the lower courts.   

Ratio of the Case

  • The Union of India contended that in view of the special provisions in the NIT, which was binding on the parties requiring the arbitrator to give a speaking award, Sri Endlaw was bound to do so. The learned Single Judge agreed with the appellant contractor that the case was governed by the general rules applicable to arbitration and Sri Endlaw was, therefore, not obliged to support his decision by reasons. The Supreme court upheld the decision of the Single Judge bench.
  • The Union of India after the award of the contract sought the construction of “Space frame structures” for housing the Hall of Nations and the Hall of Industries. It was the first venture to construct a “space frame structure in exposed concrete” in India. The result, therefore, was that till the contract work was allotted to the appellant no detailed drawings were available from the architects, and when the work was actually entrusted to the appellant, they were still struggling for evolving a design for a suitable “space frame structure”, which could be stable with all the various loading and other structural considerations. 
  • At the time the contract work was given to the appellant, it was intended to put up prefabricated structures, but later what was built in accordance with the changed directions has been described as “cast-in-situ”. The Court stated that as a result of this change, it became necessary to use huge quantities of additional steel for a continuous period of about 9 months after which they had to be discarded. The discarded surplus steel was, thus, available to the appellant-contractor for resale and termed salvage.
  • When a court is called upon to decide the objections raised by a party against an arbitration award, the jurisdiction of the court is limited, as expressly indicated in the Arbitration Act, and it has no jurisdiction to sit in appeal and examine the correctness of the award on merits.
  • Some of the objections taken by the UOI before the appellate court were not raised before the lower court and therefore such objections cannot be considered in appeal and are liable to be rejected at the outset. One such example is the plea belatedly taken on behalf of the respondent in regard to Claim No. 16, which also has to be rejected. No such objection to the award was taken before the learned Single Judge.

Final Decision:

It was held that, for the reasons mentioned above, the High Court judgment dated May 21, 1984, passed in by the division bench in F.A.O. (O.S.) 67 of 1982 is set aside, and the judgment dated April 16, 1982, passed by the learned Single Judge in Suit No. 551-A of 1981 is restored. The appeal is allowed with costs.

This case law analysis is written by Prateek Chandgothia, a first-year BA LLB (Hons.) student at the Rajiv Gandhi National University of Law, Punjab.

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