fl'mupulrdg:3

MANU/SC/0210/1991
Equivalent/Neutral Citation:AIR1991$C945, 1990(2)ARBLR243(SC), 1990 INSC 258, JT1990(3)SC692, 1990(2)SCALE413, (1990)4SCC647,
[1990]Supp15CR76, 1990(2)ShimLC336, 1990(2)UJ673

IN THE SUPREME COURT OF I N D I A

Civil Appeal Nos. 3 2 2 a n d 3 2 3 o f 1 9 7 6

Decided O n : 28.08.1990
Appellants: S. Harcharan S i n g h V s . Respondent: U n i o n o f I n d i a ( U O I )

Hon'ble Judges/Coram:
Ranganath Misra, M.M. Punchhi a n d S. C. Agrawal, JJ.

Counsels:
For Appellant/Petitioner/Plaintiff: A.K. Ganguli, A . Sharan, Advs

For Respondents/Defendant: Bed Brat Barua, A. Subhashini (N.P.) and Indira Sawhney
(N.P.), Advs.

Case Note:
Arbitration - award - whether in awarding sum to appellant for additional
w o r k of h a r d rock c u t t i n g e x e c u t e d by h i m , a r b i t r a t o r h a d d i s r e g a r d e d
agreement and exceeded his jurisdiction - as per contract additional work and
for extra q u a n t i t y o f a d d i t i o n a l w o r k a p p e l l a n t m a y b e p a i d r e m u n e r a t i o n a t
i n c r e a s e d rate - i t w a s t h e r e f o r e permissible for arbitrator to consider
whether contract enables engineer-in-charge to require appellant to execute
a d d i t i o n a l w o r k - a p p e l l a n t w a s c l a i m i n g i n c r e a s e d r a t e for e n t i r e q u a n t i t y o f
a d d i t i o n a l w o r k - a r b i t r a t o r d i d n o t a c c e p t s a i d c l a i m of a p p e l l a n t i n f u l l a n d
h a s p a r t l y a l l o w e d s a i d c l a i m - i t c a n n o t be s a i d t h a t by p a r t l y a l l o w i n g c l a i m
of a d d i t i o n a l w o r k a r b i t r a t o r e x c e e d e d h i s j u r i s d i c t i o n a n d a w a r d i s V i t i a t e d by
e r r o r of j u r i s d i c t i o n .

ORDER

S.C. Agrawal, J.

1. Civil Appeal No. 3 2 2 o f 1 9 7 6

2 . T h i s appeal b y special leave has been f i l e d against t h e j u d g m e n t dated March 2 7 ,

1 9 7 3 o f t h e H i g h C o u r t o f Delhi i n F.A.O. ( 0 . 8 . ) No. 3 5 o f 1 9 6 8 .

3 . T h e appellant, S. Harcharan S i n g h , w a s awarded a contract f o r constructing

approaches to t h e B r i d g e Structure B - 2 o n t h e N o r t h S i k k i m Road i n 1 9 5 9 - 6 0 . U n d e r t h e
agreement t h e appellant was required to d o hard r o c k c u t t i n g to t h e extent o f 7 , 5 4 , 5 3 0
cft. T h e rate f i x e d f o r t h e said w o r k i n t h e contract w a s Rs. 1 2 9 p e r thousand cft. p l u s
2 % . T h e appellant w a s required to perform h a r d r o c k c u t t i n g to t h e extent o f 1 8 , 1 8 , 7 0 4
cft. T h e appellant claimed p a y m e n t a t t h e rate o f Rs. 2 0 0 p e r thousand cft. f o r t h e
additional w o r k o f h a r d r o c k c u t t i n g . H e also claimed certain o t h e r s u m s u n d e r o t h e r
heads. The dispute i n respect o f four heads was referred to arbitration i n accordance
w i t h t h e Clause 2 5 o f t h e agreement. T h e a r b i t r a t o r gave h i s a w a r d dated February 5 ,
1 9 6 5 w h e r e i n h e disallowed t h e c l a i m o f t h e appellant i n respect o f two i t e m s b u t m a d e
a n a w a r d i n f a v o u r o f t h e appellant i n respect o f two i t e m s o f c l a i m . I n t h i s appeal w e
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a r e o n l y concerned w i t h t h e c l a i m o f t h e appellant i n respect o f t h e additional w o r k o f
h a r d r o c k c u t t i n g w h i c h t h e appellant w a s required to execute. T h e a r b i t r a t o r awarded a
s u m o f Rs. 5 2 , 8 0 0 against t h e said i t e m . T h e a w a r d was f i l e d i n t h e H i g h C o u r t b y t h e
a r b i t r a t o r a l o n g w i t h h i s letter, dated J u n e 6 , 1 9 6 8 . Objections w e r e f i l e d b y t h e
respondent U n d e r Sections 3 0 a n d 3 3 o f t h e A r b i t r a t i o n Act, 1 9 4 0 (hereinafter referred
to as ' t h e A c t ' ) . T h e said objections w e r e considered b y t h e learned single J u d g e o f t h e
D e l h i H i g h C o u r t a n d b y o r d e r dated A p r i l 2 3 , 1 9 6 9 , t h e said objections o f t h e
respondent w e r e rejected and i t w a s ordered t h a t t h e a w a r d b e m a d e a r u l e o f t h e
Court. T h e respondent f i l e d a n appeal against t h e said o r d e r a n d decree passed b y t h e
learned single Judge. The appeal was partly allowed by the Division Bench of the High
C o u r t b y j u d g m e n t dated March 2 7 , 1 9 7 3 , w h e r e b y t h e a w a r d as regards t h e c l a i m f o r
higher remuneration at the rate o f Rs. 200 per thousand cft. for the additional work of
h a r d r o c k c u t t i n g w a s set aside, T h e a w a r d i n respect o f o t h e r i t e m o f t h e c l a i m relating
to expenditure incurred b y t h e appellant i n reconstructing t h e retaining w a l l s after
damage, w a s maintained. Aggrieved b y t h e said decision o f t h e D i v i s i o n Bench o f t h e
H i g h C o u r t t h e appellant has f i l e d t h i s appeal after o b t a i n i n g special leave.

4 . A s indicated earlier, t h i s appeal i s confined to t h e c l a i m o f t h e appellant f o r p a y m e n t

f o r t h e additional w o r k o f h a r d r o c k c u t t i n g w h i c h t h e appellant w a s required to
execute. T h e appellant has claimed a h i g h e r rate o f Rs. 2 0 0 p e r thousand cft f o r t h i s
additional w o r k . U n d e r t h e agreement t h e appellant w a s required to execute hard r o c k
c u t t i n g to t h e e x t e n t o f 7 , 5 4 , 5 3 0 cft. b u t actually h e w a s required to execute such
c u t t i n g to t h e e x t e n t o f 1 8 . 1 5 lacs cft. T h e e x t e n t o f t h e additional w o r k w a s a b o u t
1 0 . 6 0 lacs cft., i . e . a b o u t 1 4 0 % . W h i l e undertaking t h e execution o f t h e additional w o r k
o f h a r d r o c k c u t t i n g t h e appellant i n h i s letter dates A u g u s t 2 4 , 1 9 6 0 addressed to t h e
Executive Engineer, Central D i v i s i o n N o . I I , G a n g t o k , had requested f o r revision o f t h e
rate f o r h a r d r o c k c u t t i n g a n d stated t h a t t h e m i n i m u m w o r k i n g rates f o r t h i s i t e m a r e
5 2 % above t h e tendered rates. T h e Executive Engineer b y h i s letter dated September 2 ,
1 9 6 0 , requested t h e appellant to s u b m i t a n analysis o f rate f o r hard r o c k c u t t i n g . T h e
appellant s u b m i t t e d h i s analysis o f rates o n September 14, 1 9 6 0 w h e r e i n after analysing
t h e rates o f materials a n d l a b o u r t h e w o r k a b l e rate w o r k e d o u t to Rs. 2 0 0 p e r thousand
cft. T h e Executive Engineer also g o t a n analysis o f rates d o n e o n t h e basis o f t h e data
collected o n actual observation a n d h e arrived a t a f i g u r e o f Rs. 2 3 7 p e r thousand c f t .
B y h i s letter dated N o v e m b e r 9 , 1 9 6 1 addressed to t h e Superintending Engineer,
Calcutta Central Circle N o . I I I , CPWD, Calcutta, t h e Executive Engineer recommendec
t h e extra rate o f Rs. 2 0 0 p e r thousand o f f o r w o r k i n excess o f 2 0 % o f t h e stipulated
quantity. T h e Superintending Engineer, I n h i s letter dated February 2 3 , 1 9 6 2 addressed
to t h e Additional Chief Engineer I I I , Central P.W.D., N e w D e l h i , m a d e a s i m i l a r
recommendation a n d t h e Additional Chief Engineer m a d e a s i m i l a r recommendation i n
h i s letter dated J u l y 16, 1 9 6 2 addressed to t h e Secretary to t h e G o v e r n m e n t o f I n d i a ,
M i n i s t r y o f W o r k s a n d Housing. I t appears t h a t t h e G o v e r n m e n t d i d n o t agree to p a y a t
a rate i n excess o f t h e rate o f Rs. 1 2 9 p e r thousand cft. p l u s 2 % stipulated u n d e r t h e
agreement. T h e d i s p u t e w a s , therefore, referred to arbitration.

5. The arbitrator in his award has considered this item of claim as under:

Claim Dispute. Award

" T h e c o n t r a c t o r claims t h a t The a r b i t r a t o r is t o T h e claim o f t h e c o n t r a c t o r is p a r t l y

for Item No.3 of the determine whether justified. He should be paid an amount of
agreement he should be underthe terms and Rs. 5 2 , 8 0 0 / - ( R u p e e s fifty t w o t h o u s a n d
p a i d a t t h e r a t e o f Rs. conditions o f t h e eight hundred only) in addition to the
2 0 0 / - p e r 1 0 0 eft. f o r t h e c o n t r a c t , t h e claim payment to be made to him at relevant
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q u a n t i t i e s b e y o n d w h a t is is j u s t i f i e d a n d i f s o , agreement rate for the total quantity of
s t i p u l a t e d in t h e to what extent. work executed by him under this item.
agreement.

6 . Before t h e learned s i n g l e J u d g e i t w a s s u b m i t t e d o n behalf o f t h e respondent t h a t t h e

a w a r d i s a speaking a w a r d a n d f r o m t h e award i t i s apparent t h a t t h e a r b i t r a t o r has
f i x e d rates f o r additional w o r k d o n e b y t h e contractor w h i c h t h e a r b i t r a t o r has n o
j u r i s d i c t i o n to d o b y reason o f clause 1 2 o f t h e agreement between t h e parties w h i c h
provides t h a t a d d i t i o n s to t h e contract w o r k shall b e carried o u t b y t h e contractor o n t h e
same conditions in all respects on which he agreed to do the main work and at the
same rates as specified i n t h e tender f o r t h e m a i n w o r k . T h e learned single J u d g e
rejected the said contention and held that the arbitrator was determining only the value
o f t h e additional w o r k a t t h e rate o f Rs. 2 0 0 w h i c h had been agreed b y t h e Engineer-in-
charge a n d t h e Superintending Engineer o f t h e Circle as contemplated b y Clause 1 2 and
t h e scope o f t h e i n q u i r y before t h e a r b i t r a t o r w a s o n l y t h e q u a n t i t y o f w o r k w h i c h w a s
additional to t h e quantities specified i n t h e agreement. T h e learned Judges o f t h e
Division Bench of the High Court have disagreed with the said view and have observed
t h a t i t i s clear f r o m t h e statement o f c l a i m as incorporated i n t h e a w a r d , a n d t h e
affidavit of the contractor that there was no dispute with regard to the quantity o f work
a n d t h e o n l y d i s p u t e w a s w i t h regard to t h e rate a n d t h a t t h e a r b i t r a t o r had a l l o w e d a
s u m o f Rs. 5 2 , 8 0 0 to t h e contractor i n respect o f t h e total q u a n t i t y o f w o r k executed b y
h i m u n d e r i t e m N o . 3 i n a d d i t i o n to t h e agreed rate a n d t h a t there w a s n o escape f r o m
t h e conclusion t h a t t h e a r b i t r a t o r had awarded t h e above a m o u n t b y a p p l y i n g a rate
h i g h e r t h a n t h e agreed rate. T h e learned Judges o f t h e D i v i s i o n Bench w e r e o f t h e v i e w
t h a t u n d e r Clause 1 2 o f t h e agreement t h e p r o v i s i o n w i t h regard to t h e f i x i n g o f t h e rate
b y t h e Engineer-in-charge a n d t h e Superintending Engineer o f t h e Circle comes i n t o
p l a y o n l y w h e n t h e additional i t e m o f w o r k does n o t f o r m part o f t h e m a i n w o r k a n d t h e
rates f o r such w o r k a r e n o t specified i n t h e schedule o f rates. T h e learned Judges o f t h e
D i v i s i o n Bench have h e l d t h a t since t h e additional hard r o c k c u t t i n g j o b d o n e b y t h e
appellant w a s p a r t o f t h e m a i n w o r k a n d t h e agreement p r o v i d e d t h e rate f o r t h e said
item, there was no occasion for the Engineer-in-charge or the Superintending Engineer
to f i x t h e rate f o r t h e extra q u a n t i t y o f h a r d r o c k c u t t i n g a n d t h a t t h e action o f t h e
a r b i t r a t o r i n a l l o w i n g t h e rate to t h e contractor i n excess o f t h e agreed rate f o r t h e j o b
o f h a r d r o c k c u t t i n g w a s against Clause 12 o f t h e agreement a n d thereby t h e a r b i t r a t o r
had exceeded his jurisdiction.
7 . A s regards t h e a w a r d o f a n a r b i t r a t o r u n d e r t h e A c t , t h e l a w i s w e l l settled t h a t t h e
arbitrator's adjudication i s generally considered b i n d i n g between t h e parties f o r h e i s a
t r i b u n a l selected b y t h e parties a n d t h e p o w e r o f t h e c o u r t to set aside t h e a w a r d i s
restricted to cases set o u t i n Section 3 0 o f t h e A c t , v i z , ( a ) i f t h e a r b i t r a t o r has
misconducted h i m s e l f o r t h e proceedings; o r ( b ) w h e n t h e a w a r d has been m a d e after
t h e issue o f a n o r d e r b y t h e C o u r t superseding t h e arbitration o r after arbitration
proceedings have become i n v a l i d U n d e r Section 3 5 ; o r ( c ) w h e n t h e a w a r d has been
improperly procured o r is otherwise invalid. Under clause (c) of Section 30 the Court
can set aside a n award w h i c h suffers f r o m a n e r r o r o n t h e face o f t h e a w a r d . I t i s .
however, n o t o p e n to t h e C o u r t to speculate, w h e r e n o reasons a r e g i v e n b y t h e
arbitrator, as to w h a t i m p e l l e d t h e a r b i t r a t o r to a r r i v e a t h i s conclusion. B u t t h e
j u r i s d i c t i o n o f t h e a r b i t r a t o r i s l i m i t e d b y t h e reference a n d i f t h e a r b i t r a t o r has assumed
j u r i s d i c t i o n n o t possessed b y h i m , t h e a w a r d to t h e e x t e n t to w h i c h i t i s b e y o n d t h e
arbitrator's j u r i s d i c t i o n w o u l d b e i n v a l i d a n d liable to b e set aside ( S e e : Jiyarajbhai
U j a m s h i S h e t h a n d Ors. v. Chintamanrao Balaji a n d Ors. M A N U / S C / 0 2 3 9 / 1 9 6 3
[ 1 9 6 4 ] S S C R 4 8 0 . T h i s p o s i t i o n a t l a w has been reiterated b y t h e Constitution Bench o f
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this Court i n its recent decision i n Raipur Development Authority and Ors. v. Chokhamal
Contractors a n d Ors. [ 1 9 8 9 ] 2 S.C.C. 7 2 1 . I t has been held t h a t a n a r b i t r a t o r o r u m p i r e
i s u n d e r n o o b l i g a t i o n to g i v e reasons i n s u p p o r t o f t h e decision reached b y h i m unless
u n d e r t h e arbitration agreement o r t h e deed o f submission h e i s required to g i v e such
reasons a n d i f t h e a r b i t r a t o r o r u m p i r e chooses to g i v e reasons i n s u p p o r t o f h i s
decision i t i s o p e n to t h e C o u r t to s e t aside t h e a w a r d i f i t f i n d s t h a t a n e r r o r o f l a w has
been c o m m i t t e d b y t h e a r b i t r a t o r o r u m p i r e o n t h e face o f t h e record o n g o i n g t h r o u g h
such reasons a n d t h a t a n a w a r d can neither b e r e m i t t e d n o r set aside m e r e l y o n t h e
g r o u n d t h a t i t does n o t contain reasons i n s u p p o r t o f t h e conclusion o r decisions
reached i n i t except w h e r e t h e a r b i t r a t i o n agreement o r t h e deed o f submission requires
h i m to g i v e reasons.

8 . I n t h e i n s t a n t case t h e a r b i t r a t i o n agreement o r t h e deed o f submissions d i d n o t

require t h e a r b i t r a t o r to g i v e reasons a n d , therefore, t h e a w a r d c a n n o t b e questioned o n
t h e g r o u n d o f a n e r r o r o n t h e face o f t h e a w a r d . T h e learned Judges o f t h e D i v i s i o n
Bench o f t h e H i g h C o u r t have set aside t h e award i n relation to c l a i m N o . 1 relating
p a y m e n t f o r additional w o r k o f h a r d r o c k c u t t i n g o n t h e g r o u n d t h a t i n m a k i n g t h e
a w a r d t h e a r b i t r a t o r exceeded h i s j u r i s d i c t i o n b y a l l o w i n g a rate to t h e contractor i n
excess o f t h e agreed rate f o r t h e j o b o f hard r o c k c u t t i n g against t h e t e r m s and
conditions contained i n Clause 1 2 o f t h e agreement.

9 . T h e question w h i c h needs to b e considered here i s as to w h e t h e r i n a w a r d i n g t h e

s u m o f Rs. 5 2 , 8 0 0 to t h e appellant f o r t h e additional w o r k o f hard r o c k c u t t i n g executed
b y h i m t h e a r b i t r a t o r has disregarded Clause 1 2 o f t h e agreement. T h e said clause reads
as u n d e r :

T h e Engineer-in-charge shall have p o w e r to m a k e a n y alterations i n ,

commissions f r o m , a d d i t i o n s to o r substituting for, t h e original specifications,
d r a w i n g s , designs a n d instructions, t h a t m a y appear to h i m to b e necessary o r
advisable during the progress o f the work, and the contractor shall be bound to
carry out the work i n accordance with any instructions which may be given to
h i m i n w r i t i n g signed b y t h e Engineer-in-charge, a n d such alterations,
omissions, additions o r substitutions shall n o t invalidate t h e contract: a n d a n y
altered, additional o r substituted w o r k w h i c h t h e contractor m a y b e directed to
d o i n t h e m a n n e r a b o v e specified as part o f t h e w o r k shall b e carried o u t b y t h e
contractor o n t h e same conditions i n all respects o n w h i c h h e agreed to d o t h e
m a i n w o r k a n d a t t h e same rates as a r e specified i n t h e tender f o r t h e m a i n
w o r k . T h e t i m e f o r t h e c o m p l e t i o n o f t h e w o r k shall b e extended i n t h e
p r o p o r t i o n t h a t t h e additional o r substituted w o r k bears to t h e original w o r k ,
a n d t h e certificate o f t h e Engineer-in-charge shall b e conclusive as to such
p r o p o r t i o n . A n d i f t h e altered, additional o r substituted w o r k included a n y class
o f w o r k f o r w h i c h n o rate i s specified i n t h i s contract, t h e n such class o f w o r k
shall b e carried o u t a t t h e rates entered i n t h e schedule o f rates o f t h e C.P.W.D.
Schedule o f Rates 5 3 - 5 4 o n w h i c h t h e estimated c o s t s h o w n o n page 1 o f
t e n d e r i s based p r o v i d e d t h a t w h e n t h e t e n d e r f o r t h e original w o r k i s a
percentage above t h e schedule rates t h e altered, additional o r substituted w o r k
required as aforesaid shall b e chargeable a t t h e said schedule rate p l u s t h e
same percentage deduction a d d i t i o n a n d i f such class o f w o r k i s n o t entered i n
t h e said schedule o f rates, t h e n t h e contractor shall w i t h i n seven days o f t h e
date o f t h e receipt o f t h e o r d e r to carry o u t t h e w o r k i n f o r m t h e Engineer-in-
charge o f t h e rate w h i c h i t i s h i s i n t e n t i o n to charge f o r such class o f w o r k , a n d
i f t h e Engineer-in-charge does n o t agree to t h i s rate h e shall b y notice i n
w r i t i n g b e a t l i b e r t y to cancel h i s o r d e r to c a r w o u t such class o f w o r k a n d
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arrange to carry i t o u t i n such m a n n e r as h e m a y consider advisable p r o v i d e d
always t h a t i f t h e contractor "shall commence w o r k o r i n c u r a n y expenditure i n
regard t h e r e to before t h e rates shall have been determined as lastly
hereinbefore m e n t i o n e d , t h e n a n d i n such case h e shall o n l y b e entitled to b e
p a i d i n respect o f t h e w o r k carried o u t o r expenditure incurred b y h i m p r i o r to
t h e date o f t h e determination o f t h e rate as aforesaid according to such rate o r
rates as shall b e f i x e d b y t h e Engineer-in-charge. I n t h e e v e n t o f a d i s p u t e t h e
decision o f t h e Superintending Engineer o f t h e Circle shall b e f i n a l .

10. Under this clause the Engineer-in-charge was empowered to make any additions to
t h e original specifications t h a t m a y appear to h i m to b e necessary o r advisable d u r i n g
t h e progress o f t h e w o r k a n d t h e contractor w a s b o u n d to carry o u t t h e w o r k i n
accordance w i t h a n y instructions given to h i m i n w r i t i n g signed b y t h e Engineer-in-
charge. A s regards p a y m e n t f o r t h e additional w o r k w h i c h t h e contractor was directed to
d o i t was provided that:

( i ) The contractor shall be paid at the same rates as are specified in the tender
for the main work;

( i i ) I f the additional work included any class o f work for which no rate was
specified i n t h e contract t h e n t h e contractor shall b e paid a t t h e rates entered
i n t o t h e schedule o f rates o f t h e C.P.W.D. Schedule o f Rates 5 3 - 5 4 o n w h i c h t h e
estimated c o s t s h o w n o n page 1 o f t e n d e r i s based a n d i f t h e tender f o r t h e
original w o r k i s a percentage above t h e schedule rates t h e additional w o r k shall
b e chargeable a t t h e said schedule rates p l u s t h e same percentage
d e d u c t i o n s / a d d i t i o n ; and

( i i i ) I f such class o f w o r k i s n o t entered i n t h e said Schedule o f Rates t h e n t h e

contractor should i n f o r m t h e Engineer-in-charge w i t h i n seven days o f t h e
receipt o f t h e o r d e r t h e rate h e wants to charge f o r such class o f w o r k a n d t h e
Engineer-in-charge, i f h e does n o t agree to t h e said rate,, m a y cancel t h e o r d e r
f o r such additional w o r k a n d i f t h e contractor has commenced t h e w o r k o r
incurred expenditure i n regard thereto b e f o r e t h e determination o f t h e rates t h e
contractor shall b e paid i n respect o f w o r k carried o u t o r expenditure incurred
b y h i m p r i o r to t h e determination o f t h e rates according to such rates o r rates
as shall b e fixed b y t h e Engineer-in-charge a n d i n t h e e v e n t o f a d i s p u t e t h e
decision o f t h e Superintending Engineer o f t h e Circle w o u l d b e f i n a l .

T h e case o f t h e appellant i s t h a t Clause 1 2 envisages alterations o r a d d i t i o n s w i t h i n

reasonable l i m i t s a n d a n a d d i t i o n to t h e e x t e n t o f 1 4 0 % i n respect o f o n e particular i t e m
a l o n e i s n o t covered b y t h i s clause a n d t h a t i n awarding Rs. 5 2 , 8 0 0 as extra p a y m e n t
f o r t h e additional w o r k t h e a r b i t r a t o r has n o t acted i n disregard o f Clause 1 2 a n d h e
c a n n o t b e said to have exceeded h i s j u r i s d i c t i o n .

11.A clause m a k i n g p r o v i s i o n f o r additions a n d variations i s generally f o u n d i n

b u i l d i n g a n d construction contracts. I n Hudson's B u i l d i n g a n d Engineering Contracts 8 t h
Edn. i t has been observed:

I t may be that i t can be inferred from the terms o f the contract that the power
to o r d e r extras, a l t h o u g h apparently u n l i m i t e d , i s i n fact l i m i t e d to o r d e r i n g
extras u p to a certain value a n d , i n such a case, extras ordered i n excess o f t h a t
a m o u n t , a l t h o u g h w o r k o f a k i n d contemplated b y t h e contract, m a y yet b e
q u i t e o u t s i d e t h e t e r m s o f t h e contract.(p. 2 9 4 )
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I f t h e extra w o r k o r d e r e d i s o u t s i d e t h e c o n t r a c t t h e t e r m s o f t h e c o n t r a c t h a v e
n o application. ( p . 2 9 6 )

1 2 . I n t h i s c o n t e x t i t w o u l d b e relevant to take n o t e o f t h e decision o f t h e C o u r t o f

Appeal i n England i n Parkinson ( S i r Lindsay) & C o . L t d . v. Commissioners o f H i s
Majesty's W o r k s and Public B u i l d i n g s [ 1 9 4 9 ] 2 K.B. 632. I n t h a t case t h e contractors
h a d agreed w i t h H i s Majesty's Commissioners o f W o r k s and Public B u i l d i n g s to erect a n
ordnance factory according to t h e general conditions and specifications a n d b i l l s o f
quantities a n d d r a w i n g s annexed f o r t h e contract s u m o f A £ 3 , 5 0 0 ,0 0 0 a n d u n d e r t h e
general conditions o f contract the Commissioners had power, at their absolute
discretion, to modify the extent and character of the work o r to order alterations of o r
additions to the works and i t was the duty of the contractor to comply with the
architect's instructions i n t h i s respect. I n t h e contract i t w a s also p r o v i d e d t h a t i t i s
probable t h a t f u r t h e r w o r k to t h e value o f approximately, A £ 5 0 0 ,0 0 0 w o u l d b e ordered
o n a measured basis u n d e r t h e t e r m s o f t h e contract. T h e contract w a s amended b y a
deed o f variation a n d i t w a s p r o v i d e d t h a t exceptional m e t h o d s s h o u l d b e used to
hasten t h e w o r k a n d t h a t a system o f uneconomic w o r k i n g s h o u l d b e introduced to
b r i n g a b o u t t h e c o m p l e t i o n o f t h e factory b y t h e date f i x e d b y t h e contract. T h e
Commissioners ordered w o r k to b e executed greatly i n excess o f t h e a m o u n t
contemplated although not different in character from that covered by the varied
contract, so t h a t t h e w o r k s c o u l d n o t b e completed u n t i l a year b e y o n d t h e t i m e
anticipated a n d t h e actual c o s t o f t h e contracts w a s A £ 6 ,6 8 3 ,0 5 6 w h i c h a m o u n t had
been paid to t h e m a l o n g - w i t h A £ 3 0 0 ,0 0 0 t h e m a x i m u m p r o f i t u n d e r t h e deed o f
variation. D u r i n g t h e progress o f t h e w o r k t h e contractors h a d ; ( c o m p l a i n e d to t h e
Commissioners t h a t t h e y w e r e being called o n to execute m o r e w o r k t h a n was
contemplated b y t h e varied contract a n d claimed t h a t t h e y w e r e entitled to extra
remuneration f o r t h e w o r k i n excess o f t h a t contemplated b u t t h e y proceeded w i t h t h e
w o r k a t t h e request o f t h e Commissioners leaving t h e issue to b e subsequently decided
b y arbitration. T h e a r b i t r a t o r f o u n d t h a t t h e estimated cost o f t h e w o r k u n d e r t h e varied
ocntract was A £ 5 0 0 ,0 0 0 a n d awarded A £ 9 0 , 2 9 8 as p r o p o r t i o n a t e o r reasonable p r o f i t o r
remuneration to t h e contractors f o r t h e additional w o r k . T h e said award w a s u p h e l d b y
t h e C o u r t o f Appeal o n t h e v i e w t h a t a term m u s t b e . i m p l i e d i n t h e varied contract t h a t
t h e ComAmissioners s h o u l d n o t b e entitled to require w o r k m a t e r i a l l y i n excess o f t h e
s u m o f A £ 5 ,0 0 0 ,0 0 0 a n d t h a t such excess w o r k h a v i n g been d o n e b y t h e contractors,
t h e Commissioners w e r e liable to p a y t h e contractors reasonable remuneration therefor.
O n behalf o f t h e Commissioners reliance w a s placed o n C o n d i t i o n 3 3 o f t h e original
contract w h i c h gave t h e Commissioners a n u n l i m i t e d p o w e r o f o r d e r i n g extras even to
t h e e x t e n t o f altering t h e character o f t h e w o r k . T h e contractors, o n t h e o t h e r h a n d ,
placed reliance o n t h e f o l l o w i n g observations o f M e Cardie, J. i n Naylor, Benzon & Co.
v . Krainische I n d u s t r i e s Gesellschart [ 1 9 1 8 ] 1 K . B . 3 3 1 :

I t i s essential to remember, however, t h a t w o r d s , even t h o u g h general, m u s t b e

l i m i t e d to circumstances w i t h i n t h e contemplation o f t h e parties.

1 3 . Accepting t h e contention u r g e d o n behalf o f t h e contractors Asquith L , J. observed:

I f t h e original contract p l u s t h e deed a r e read w i t h o u t a n y i m p l i e d l i m i t a t i o n o n

their literal meaning, the result, as indicated above, is that after A£300,000
p r o f i t has been earned b y t h e contractor, h e can b e compelled to l a b o u r l i k e t h e
Danaids w i t h o u t r e w a r d o r l i m i t , o r a n y f u r t h e r "extras" w h i c h t h e
commissioners may elect to exact from him, 'till the last syllable o f recorded
t i m e . ‘ O n l y t h e m o s t c o m p e l l i n g language w o u l d induce a c o u r t to construe t h e
c o m b i n e d i n s t r u m e n t s as placing o n e party s o completely a t t h e m e r c y o f t h e
 n'mnupulrdfi
other. W h e r e t h e language o f t h e contract i s capable o f a literal a n d a m o r e
restricted m e a n i n g , all relevant circumstances can b e taken i n t o account i n
deciding w h e t h e r t h e literal o r a m o r e l i m i t e d meaning s h o u l d b e ascribed to i t .
662)
(p-
S i m i l a r l y Singleton L , J. has observed:

I f i n d m y s e l f unable to agree w i t h t h e submission o f Mr. Rewcastle t h a t , u n d e r

t h e contract as varied b y t h e deed o f variation, t h e contractors w o u l d have been
b o u n d to c o n t i n u e m a k i n g alterations a n d a d d i t i o n s , i f ordered, f o r years a n d
years, w i t h o u t a n y extra p a y m e n t b y w a y o f p r o f i t . T h a t w o u l d have l e d to
m a n i f e s t absurdity a n d i n j u s t i c e , as Mathew, J. said i n Bush v. Whitehaven
Trustees ( I ) . There m u s t b e a l i m i t . ( p . 6 7 3 )

1 4 . Here also t h e question has often arisen w h e t h e r t h e contractor u n d e r t h e variation

clause i s liable to execute t h e extra o r additional quantities o f t h e tendered i t e m s a t t h e
tendered rates to a n u n l i m i t e d extent. I n s o m e awards g i v e n b y t h e arbitrators i n t h e
Central Public Works D e p a r t m e n t o f t h e G o v e r n m e n t o f I n d i a t h e variation o f t h e
tendered quantities u n d e r t h e variation clause i n t h e contract has been restricted to 1 0 %
b e y o n d w h i c h t h e contractor w a s entitled to c l a i m as extras a n d these awards have been
accepted a n d i m p l e m e n t e d b y t h e Government. I t appears t h a t t h e standard f o r m o f
contract o f t h e Central Public Works D e p a r t m e n t has been amended a n d n o w i t
specifically p e r m i t s f o r a l i m i t o f variation called "deviation l i m i t " u p t o a m a x i m u m o f
2 0 % a n d u p t o such l i m i t t h e contractor has to carry o u t t h e w o r k a t t h e rates stipulated
i n t h e contract a n d f o r t h e w o r k i n excess o f t h a t l i m i t a t t h e rates to b e determined i n
accordance w i t h Clause 1 2 - A u n d e r w h i c h t h e Engineer-in-charge can revise t h e rates
h a v i n g regard to t h e prevailing m a r k e t rates (See: Gajaria's Law relating to B u i l d i n g and
Engineering Contracts i n I n d i a , 3 r d Edn., pages 4 1 0 - 4 1 2 ) .

1 5 . I n the instant case, i t appears that the Executive Engineer, the Superintending
Engineer a n d t h e Additional Chief Engineer i n t h e i r letters dated N o v e m b e r 9 , 1 9 6 1 ,
February 2 3 , 1 9 6 2 a n d J u l y 1 6 , 1 9 6 2 respectively have expressed t h e v i e w t h a t t h e
additional w o r k u n d e r t h e t e r m s o f t h e contract m a y b e confined to 2 0 % a n d t h e
appellant m a y b e paid a t t h e rates prescribed i n t h e contract f o r 2 0 % o f t h e additional
w o r k a n d f o r t h e extra q u a n t i t y o f additional w o r k h e m a y b e paid remuneration a t t h e
increased rate t a k i n g i n t o account t h e increased costs i n execution o f t h e said w o r k o n
account o f t h e peculiar nature o f t h e w o r k . W h i l e considering t h e c l a i m o f t h e appellant
t h e a r b i t r a t o r w a s required to consider t h e t e r m s o f t h e contract a n d to construe t h e
same. I t w a s , therefore, permissible f o r t h e a r b i t r a t o r to consider w h e t h e r Clause 1 2 o f
t h e contract enables t h e Engineer-in-charge to require t h e appellant to execute
additional w o r k w i t h o u t a n y l i m i t o r a reasonable l i m i t s h o u l d b e placed o n t h e q u a n t i t y
o f t h e additional w o r k , w h i c h t h e appellant m a y b e required to execute a t t h e rate
stipulated f o r t h e m a i n w o r k u n d e r t h e contract. For t h a t purpose t h e a r b i t r a t o r c o u l d
t a k e i n t o consideration t h e practice prevalent i n t h e Central Public W o r k s D e p a r t m e n t i n
t h i s regard as w e l l as t h e correspondence between t h e appellant a n d t h e authorities
i n c l u d i n g t h e letters dated N o v e m b e r 9 , 1 9 6 1 , February 2 3 , 1 9 6 2 a n d J u l y 16, 1 9 6 2 o f
t h e Executive Engineer, t h e Superintending Engineer a n d t h e Additional Chief Engineer
r e c o m m e n d i n g p a y m e n t o f remuneration a t t h e increased rate f o r t h e additional w o r k i n
excess o f 20% o f the quantity stipulated i n the contract. The appellant was claiming
increased rate o f Rs. 2 0 0 p e r 1 0 0 0 cft. f o r t h e e n t i r e q u a n t i t y o f additional w o r k . T h e
a r b i t r a t o r d i d n o t accept t h e said c l a i m o f t h e appellant i n f u l l a n d has p a r t l y a l l o w e d
t h e said c l a i m b y a w a r d i n g Rs. 5 2 , 8 0 0 w h i c h means t h a t t h e a r b i t r a t o r has awarded t h e
increased rate o n l y f o r a p a r t o f t h e additional w o r k o f hard r o c k c u t t i n g w h i c h t h e
 n'mnupulrdg:3
appellant w a s required to execute. T h e a r b i t r a t o r w a s entitled to d o s o o n t h e
construction placed b y h i m o n Clause 1 2 o f t h e contract a n d , therefore, i t c a n n o t b e
said t h a t i n awarding t h e s u m o f Rs. 5 2 , 8 0 0 f o r t h e additional w o r k t h e a r b i t r a t o r has
exceeded h i s j u r i s d i c t i o n a n d t h e a w a r d i s vitiated b y a n e r r o r o f j u r i s d i c t i o n . I n t h e
circumstances, w e a r e unable to agree w i t h t h e j u d g m e n t o f t h e learned Judges o f t h e
D i v i s i o n Bench o f t h e H i g h C o u r t o n t h i s part o f t h e c l a i m .

1 6 . T h e appeal i s , therefore, a l l o w e d a n d t h e j u d g m e n t o f t h e D i v i s i o n Bench o f t h e

H i g h C o u r t setting aside t h e a w a r d o f t h e a r b i t r a t o r w i t h regard to i t e m N o . 1 o f t h e
claim relating to payment for additional work o f hard rock cutting is set aside and the
o r d e r passed b y t h e learned S i n g l e J u d g e u p h o l d i n g t h e a w a r d o f t h e a r b i t r a t o r i n t h i s
regard i s restored. T h e appellant w i l l b e entitled to h i s costs.

Civil Appeal No. 323 of 1976

1 7 . T h i s appeal i s directed against t h e o r d e r dated M a y 2 3 , 1 9 7 5 o f t h e H i g h C o u r t o f
D e l h i whereby t h e H i g h C o u r t rejected C.M. N o . 1 3 0 0 o f 1 9 7 4 f i l e d b y t h e appellant
u n d e r O r d e r 41, Rule 2 1 read w i t h Section 1 5 1 C.P.C., p r a y i n g t h a t t h e e x - p a r t e
j u d g m e n t dated March 2 7 , 1 9 7 3 i n F.A.O. ( O . S . ) N o . 3 5 o f 1 9 6 9 m a y b e set aside a n d
t h e appeal b e r e - a d m i t t e d to i t s original n u m b e r a n d t h e appeal b e heard and decided
o n m e r i t s . T h e appellant has f i l e d C.A. No. 3 2 2 o f 1 9 7 6 against t h e said j u d g m e n t o f t h e
H i g h C o u r t dated March 2 7 , 1 9 7 3 i n F.A.O. ( 0 . 5 . ) N o . 3 5 o f 1 9 6 8 . T h e said appeal has
been a l l o w e d b y t h e j u d g m e n t g i v e n today. Since t h e j u d g m e n t o f t h e H i g h C o u r t dated
March 2 7 , 1 9 7 3 has been set aside b y t h i s C o u r t i n C.A. N o . 3 2 2 o f 1 9 7 6 t h i s appeal
does n o t s u r v i v e and i t i s disposed o f accordingly. N o costs.

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