# agan Nat afou any facts or particulars as to ates, persons, p aces v. nature of activities and the assistance given by him The Union of India

- **Citation:** [1960] 2 S.C.R. 793
- **Court:** Supreme Court of India
- **Decided:** 1960
- **Bench:** S. K. Das, K. N. W Anchoo, J. C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/agan-nat-afou-any-facts-or-particulars-as-to-ates-persons-p-aces-v-nature-of-1783
- **Pages:** 18

## Headnote

Arbitration-Award, setting aside of-Error on the face of the
record-Reference of specific questions-Contract-Terms of payment
specified-Change of circumstances-Power of arbitrator to vary
terms-Quantum M eruit payment, when justified.
The appellants were appointed under an agreement in writing
· by the Governor-General as agents for purchasing and supplying
ghee required for the Army personnel with effect from October l,
1937. After the outbreak of the World War II there was an
enormous increase in the demand of ghee by the Government
and the agreement was revised by mutual consent on June 20,
1942, and the original rates of payment were scaled down.
On
December 6, 1943, the appellants made a representation to the
Government for enhancing, the rates as conditions had become
I960
January 20.
•
794
SUPREME COURT REPORTS (1960 (2)]
r960
abnormal. According to the appellants they were given assurances that their claims would be favourably considered by the
M fs. Alopi Pars!lad Government and relying on these assurances they continued to
and Sons. Ltd.
supply ghee in quantities demanded by the Government incurring
v.
heavy extra expenditure. The Government did not enhance the
The Union of India rates and the matter \Vas referred to arbitration under the agreement of 1937·
Before the arbitrators the appellants contended
that the agreement of 1942 was not binding upon them and
claimed payment on the basis of the agreement of r937; and in
the alternative claimed payment on the basis of increased rates
of mandi charges, additional buying remuneration and contingency
charges. These claims were resisted by the Government and it
was denied that any assurances were given by the Government
to enhance the rates.
The arbitrators incorporated the points of
contest in the form of issues.
By an award dated May 2, 1954,
the arbitrators rejected the primary claim of the appellant holding
that the agreement of r942 was binding. On the alternative claim
they awarded a sum of money for loss suffered by the appellants
on account of establishn1ent and contingencies, and another sum
for mandi and fiMncing charges. The award was filled in the
Court of the Commercial Sub-Judge, Delhi, and the Government
applied to have it set aside. The Sub-Judge held that though
there was an error on the face of the award in ordering the
payment of additional remuneration and financing and overhead
charges the award could not set aside as specific questions had
been expressly referred for adjudication to the arbitrators and
the award was binding on the parties. On appeal the High Court
held that no specific questions of law had been referred to the
arbitrators and that the award was vitiated by errors apparent
on the face of the award.
Held, that the award was liable to be set aside because of
an error apparent on the face of the award. An arbitration award
may be set aside on the ground of an error on the face of it when
the reasons given for the decision, either in the award or in any
document incorporated with it, are based upon a legal proposition
\Vhich is erroneous.
But \Vhere a specific question is referred,
the award is not liable to be set aside on the ground of an error
on the face of the award even if the answer to the question
involves an erroneous decision on a point of law.
In the present
case there was a general reference and not a specific reference on
any question of law.
Champsey Bhara and Co. v. ]ivraj Balloo Spinning & Weaving Co., Ltd., L. R. 50 I. A. 324, In the matter of an arbitration
between King and Du.veen. L.R. 1913 2 K.B.D. 32, and Government
of Kelantan v. Duff Development Co., Ltd., L. R. 1923 A. C. 395,
relied on.
The contract provided for payment of charges at rates specified therein and the arbitrators could not ignore the express covenants between the parties and award amounts not agreed to be
-
-
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-
S.C.R.
SUPREME COURT REPORTS
795
paid. A contract is not frustrated merely because the circumI96°
stances in which it was made are alter

## Text

_Characters 0–39,936 of 40,714. This is a partial read: ask again with offset=39936 for what follows._

•
S.C.R.
SUPREME COURT REPORTS
793
clearly stated that the Central Government considered
z960
it against public interest to disclose to the petitioner 1
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.
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l
agan Nat
afou
any facts or particulars as to
ates, persons, p aces,
v.
nature of activities and the assistance given by him The Union of India
other than those which had already been mentioned
in the grounds of detention. Under Art. 22(6) of the
Imam J.
Constitution it is clearly stated that nothing in cl. (5)
of that Article shall require the authority making
an order of detention to disclose facts which such
authority considers to be against public interest to be
disclosed. In the present case the authority concerned
had declined to disclose in the public interest any facts
or particulars as to dates, persons, places, nature of
activities and the assistance given by the petitioner
other than those which had already been mentioned in
the grounds of detention. In such circumstances, it
would have been entirely inappropriate for the
respondent to supply copies of the further materials
placed before the Advisory Board although the
Advisory Board may have required further information in order to satisfy itself.
The petition is accordingly dismissed.
Petition dismissed.
M/s. ALOPI PARSHAD & SONS, LTD.
v.
THE UNION OF INDIA
(S. K. DAS, K. N. W ANCHOO AND J. C. SHAH, JJ.)
Arbitration-Award, setting aside of-Error on the face of the
record-Reference of specific questions-Contract-Terms of payment
specified-Change of circumstances-Power of arbitrator to vary
terms-Quantum M eruit payment, when justified.
The appellants were appointed under an agreement in writing
· by the Governor-General as agents for purchasing and supplying
ghee required for the Army personnel with effect from October l,
1937. After the outbreak of the World War II there was an
enormous increase in the demand of ghee by the Government
and the agreement was revised by mutual consent on June 20,
1942, and the original rates of payment were scaled down.
On
December 6, 1943, the appellants made a representation to the
Government for enhancing, the rates as conditions had become
I960
January 20.
•
794
SUPREME COURT REPORTS (1960 (2)]
r960
abnormal. According to the appellants they were given assurances that their claims would be favourably considered by the
M fs. Alopi Pars!lad Government and relying on these assurances they continued to
and Sons. Ltd.
supply ghee in quantities demanded by the Government incurring
v.
heavy extra expenditure. The Government did not enhance the
The Union of India rates and the matter \Vas referred to arbitration under the agreement of 1937·
Before the arbitrators the appellants contended
that the agreement of 1942 was not binding upon them and
claimed payment on the basis of the agreement of r937; and in
the alternative claimed payment on the basis of increased rates
of mandi charges, additional buying remuneration and contingency
charges. These claims were resisted by the Government and it
was denied that any assurances were given by the Government
to enhance the rates.
The arbitrators incorporated the points of
contest in the form of issues.
By an award dated May 2, 1954,
the arbitrators rejected the primary claim of the appellant holding
that the agreement of r942 was binding. On the alternative claim
they awarded a sum of money for loss suffered by the appellants
on account of establishn1ent and contingencies, and another sum
for mandi and fiMncing charges. The award was filled in the
Court of the Commercial Sub-Judge, Delhi, and the Government
applied to have it set aside. The Sub-Judge held that though
there was an error on the face of the award in ordering the
payment of additional remuneration and financing and overhead
charges the award could not set aside as specific questions had
been expressly referred for adjudication to the arbitrators and
the award was binding on the parties. On appeal the High Court
held that no specific questions of law had been referred to the
arbitrators and that the award was vitiated by errors apparent
on the face of the award.
Held, that the award was liable to be set aside because of
an error apparent on the face of the award. An arbitration award
may be set aside on the ground of an error on the face of it when
the reasons given for the decision, either in the award or in any
document incorporated with it, are based upon a legal proposition
\Vhich is erroneous.
But \Vhere a specific question is referred,
the award is not liable to be set aside on the ground of an error
on the face of the award even if the answer to the question
involves an erroneous decision on a point of law.
In the present
case there was a general reference and not a specific reference on
any question of law.
Champsey Bhara and Co. v. ]ivraj Balloo Spinning & Weaving Co., Ltd., L. R. 50 I. A. 324, In the matter of an arbitration
between King and Du.veen. L.R. 1913 2 K.B.D. 32, and Government
of Kelantan v. Duff Development Co., Ltd., L. R. 1923 A. C. 395,
relied on.
The contract provided for payment of charges at rates specified therein and the arbitrators could not ignore the express covenants between the parties and award amounts not agreed to be
-
-
-
-
S.C.R.
SUPREME COURT REPORTS
795
paid. A contract is not frustrated merely because the circumI96°
stances in which it was made are altered. The courts have no M/ Al
. P
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1
f
h
f
f l ·
s.
opi ars a
general power to abso ve a party rom t e per ormance o i1s
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part of the contract merely because its performance has become
an
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·
onerous on account of an unforseen turn of events.
Th u _v. 11 d'
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H'"Ml"
Ch
Y
e mono
nia
Constantine s case (1942) A. . 154,
irJi.
u Ji v.
eong
ue
.
Steamship Co., Ltd., (1926) A. C. 497, British Movietonews Ltd. v.
London and District Cinemas, L. R. 1952 A. C. 166 and Parkinson &
Co., Ltd. v. Commissioners of Works. (1949) 2 K. B. D. 632,
referred to.
-British Movietonews Ltd. v. London and District Cinemas Ltd.
(1951) l K.B.D. 190, disapproved.
The award which ignored the express terms of the contract
prescribing the remuneration payable could not be justified as
proceeding upon the basis of quantum meruit. Compensation
quantum meruit may be awarded for work done or services
rendered only when the price thereof is not fixed by a contract.
For work done or service rendered pursuant to the terms of a
contract, compensation quantum meruit cannot be awarded where
the contract provides for the consideration payable in that behalf.
CrvIL APPELLATE JURISDICTION:
Civil Appeal
No. 693 of 1957.
Appeal from the judgment and Order dated the
25th May, 1956 of the Punjab High Court in F.A.C.
No. 89/D of 55.
N. 0. Chatterjee, S. K. Kapur, N. H. Hingorani
and Ganpat Rai, for the appellants.
H. J. Umrigar and T. M. Sen, for the respondent.
1960. January 20. The Judgment of the Court was
delivered by
SHAH J.-On May 3, 1937, M/s. Alopi Parshad and
Sons Ltd., who will herinafter be referred to as the
Agents, were, under an agreement in writing, appointed
by the Governor-General for India in Council, as
from October 1, 1937, agents for purchasing ghee
required for the use of the Army personnel. The
Government of India, by cl. 12 of the agreement,
undertook to pay to the Agents the actual expenses
incurred for purchasing ghee, cost of empty tins,
expenses incurred on clearance ;of Government tins
from the railway, export ]and-customs duty levied
on ghee purchased and exported from markets situated
in Indian States, octroi duty, terminal tax or other
local rates on ghee, and certain other charges incurred
Shah].
796
SUPREME COURT REPORTS [1960(2)]
I960
by the Agents. The Government also agreed to pay
to the Agents at rates specified in the agreement:
M /s. Alopi Parshad
and sons. Ltd.
(1) the financing and overhead (mandi) charges
v.
incurred in the buying markets.
The Union of India
(2) the cost of· establishments and contingencies
provided by the Agents on the Government's
account for carrying out the purchase and supply
of ghee, and
Shah].
(3) the buying remuneration.
In consideration of the Government paying to the
Agents a sum of rupee one and anna one only per one
hundred pounds nett weight of finally accepted ghee,
as combined financing and overhead (mandi) charges,
the Agents by cl. 13 undertook to provide the working
capital and also to bear the costs, charges and expenses,
including financing and overhead charges incurred
by them in buying ghee in the market.
The Agents also undertook, by cl. 14, to bear the
establishment and contingency charges for the due
performance by them of the terms of the agreement,
and the Government agreed to pay in consideration
thereof annas 14 and pies 6 per every hundred pounds
of ghee accepted. The Government also agreed to pay
to the Agents remuneration for services · rendered
in purchasing ghee, at the rate of one rupee per
one hundred pounds nett ·Weight of accepted ghee.
Pursuant to the agreement, the Agents supplied
from time to time ghee to the Government of India,
as required. In September, 1939, the World War II
broke out, and there was an enormous increase in the
demand by the Government of ghee. On June 20, 1942,
the original agreement was, by mutual consent,
revised, and in respect of the establishment and
contingencies, the uniform rate of annas 14 and 6 pies
per hundred pounds of accepted ghee, was substituted
by a graded scale : for the first 5 thousand tons, the
Agents were to be paid at the rate of Re. 0-14-6
per hundred pounds, for the next five thousand tons,
at the rate of annas 8 per hundred pounds, and at
the rate of annas 4 per hundred pounds, for supplies
exceeding. ten thousand tons .. :Even in respect of
;.
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S.C.R.
SUPREME COURT. REPORTS
797
remuneration for services, a graded scale was subsr96o
tituted: for the first five thousand tons, remuneration
Al-.
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was to
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per un re
and Sons. Ltd.
pounds, at the rate of annas 8 per hundred pounds,
v.
for the next five thousand, and annas 4 per hundred The Union of I.ndia
pounds, for supplies exceeding ten thousand tons.
This modification in the rates became effective from
Shah J.
September 11, 1940.
By their communication dated December 6, 1943,
the Agents demanded that the remuneration, establishment and contingencies, and mandi and financing
charges, be enhanced. In respect of the buying
remuneration, they proposed a 25 per cent increase ;
in respect of establishment and contingencies, they
proposed an increase of 20 per cent., and in respect
of mandi and financing charges, an increase of 112
per cent. This revision of the rates was claimed on
the plea that the existing rates, fixed in peace time,
were "entirely superseded by the totally altered conditions obtaining in ·war time." To this letter, no
immediate reply wafl given by the Government of
India, and the Agents continued to supply ghee till
May, 1945. On May 17, 1945, the Government of
India, purporting to exercise their option under cl. 9
of the agreement, served the Agents with a notice of
termination of the agreement. On May 22; 1945, the
Chief Director of Purchases, on behalf of the Government of India, replied to the letter dated December 6,
1943, and informed the Agents that normally no claim
for revision of rates could be entertained during the
currency of the agreement an<) especially with retrospective effect, but a claim for ex-gratia compensation
to meet any actual loss suffered by an agent, might
be entertained, if the Agents established circumstances
justifying such a claim. The Chief Director of Purchases called upon the Agents to submit the report of
their auditors on the agency accounts, for the ghee
supplied, as also a statement in detail, showing the
actual expenditure incurred.
The notice dated May 17, 1945, was waived by
mutual consent, and under an arrangement dated
May It), 19461 the Agents agreed to supply five
798
SUPREME COURT REPORTS [1960 (2))
r96o
thousand tons of ghee by October 31, 1946, on which
M
Al--:-P
h ddate, the agreement dated May 3, 1937, was to come
fs.
opi
ars a
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and Sons. Ltd. to an en °
v.
By their letter dated July 1, 1946, the Agents
The Union of India claimed that a dispute had arisen under the contract,
and app0inted one Nigam to be arbitrator on their
Shah .J.
behalf to adjudicate upon the dispute, pursuant to
cl. 20 of the terms of the agreement dated May 3, 1937,
and called upon the Government of India to appoint
their arbitrator. The Government of India, by their
letter dated July 10, 1946, nominated one Rangi Lal
to be arbitrator on their behalf. Before the arbitrators,
the Agents made their claim under four heads :
(1) The Agents claimed that the agreement dated
June 20, 1942, was not binding upon them, and
they were entitled to Rs. 23,08,372-8-0 being
the difference between the buying remuneration,
establishment and contingency charges due under
the agreement dated May 3, 1937, and the amount
actually received. The details of this claim were
set out in Sch. A.
(2) In the event of the arbitrators holding the
agreement dated June 20, 1942, was binding, a
revision of the rates for establishment and contingencies, and an additional amount of Rs. 6,91,600-4-0
at such revised rates as set out in Sch. B.
(3) Revision of the rates fixed under the agreement dated June 20, 1942, ofthemandi charges, and
an additional amount of Rs. 14,47,204-6-3, at the
revised rates as set out in Sch. C.
(4) Damages for wrongful termination of the
agreement in the month of October, 1946, amounting
to Rs. 2,41,235, as set out in Sch. D.
The arbitrators did not arrive at any agreed decision, and the dispute was referred to Lala Achru Ram
who was nominated an umpire. The umpire was of
the view that the agreement dated June 20, 1942, was
valid, and the claim as set out in Sch. A was untenable; that the claims set out in Seh. B and Sch. C,
did not arise out of the agreement, and he had no
jurisdiction to adjudicate upon the same; and that as
the claim set out in Sch. D, was outside the scope of
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S.C.R.
SUPREME COURT REPORTS
799
the Reference, he was inco,mpetent to give any finding
I960
on that claim.
M/s. Alopi Parshad
This Award was filed in the court of the Suborand Sans. Ltd.
dinate Judge, First class, Delhi. The Agents applied
v.
to set aside the Award on the grounds that the The Union of India
umpire was guilty of misconduct in that he failed to
Shah J.
give an adequate opportunity to the Agents to present
and substantiate their case before him, and that in
holding that the claims as described in Schedules B, C
and D, either did not arise out of the agreement or
were outside the scope of the Reference, the umpire
erred. The learned Subordinate Judge held that the
umpire was in error in leaving undetermined claims
described in Sch. B and Sch. D, which were within
the scope of the Referende, and that the claim described in Sch. C was properly left undecided as it was
outside the scope of the Reference. He also held that
the Award was vitiated on account of judicial miscondu~t, because the Agents were not allowed by the
umpire sufficient opportunity to place their case. The
learned Subordinate Judge, in that view, proceeded'
to set aside the Award, but he declined to supersede
the Reference, antl left it to the parties to "appoint
other arbitrators in view of cl. 20 of the agreement,
for settling the dispute."
Against the order of the Subordinate Judge, the
Union of India appealed to the High Court of East
Punjab. Khosla, J., who heard the appeal, confirmed
the order passed by the court of first instance. The
learned Judge agreed with the view of the Subordinate
Judge that the umpire had been guilty of judicial
misconduct. The learned Judge observed in his
judgment that the claim of the Agents, as described
iUr Schedules B and C, was not beyond the arbitration
agreement. In so observing, .presumably, the learned
Judge committed some error. The Subordinate tTudge
had come to the conclusion that the. claim described
in Sch. C, was beyond the arbitration agreement, and
no reasons were given by Khosla, J., for disagreeing
with that view.
Appeal 31 of 1953 under the Letters Patent, against
the judgment of Khosla J., was dismissed by a
J02
800
SUPREME COURT REPORTS [1960(2))
,96o
Division Bench of the High Court of East Punjab,
Ml Al-.
P
h observing that the claim detailed in Sch. JJ arose out
s.
o/n
a>S ad f l
b t h t .
t d 'd
and 5 ,,
Ltd
o tie contract, u t a 1t was unnecessary o em e
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·
whether the claim described in Sch. C for an increase
The Union of India in the financing and overhead mandi charges, was
Shah ].
properly ruled out by the umpire.
In the meantime, by letter dated August 2, l 952, the
Agents called upon the Government of India to
appoint their arbitrator under cl: 20 of the agreement
dated May 3, 1937, for a fresh adjudication of the
dispute, and intimated that they had again appointed
Nigam to be their arbitrator. The Government of
India informed the Agents by their letter dated
August 14, 1952, that they had filed an appeal against
the judgment of the Subordinate Judge, Delhi, and
in the circumstances, the question of appointing an
arbitrator, did not arise until the final disposal of the
appeal. The Government, however, without prejudice
to their rights, including the right to prosecute the
appeal, again appointed Rangi Lal to be arbitrator on
their behalf.
After the Appeal under the LE;tters Patent, was
decided by the East Punjab High Court on December 16, 1953, the arbitrators entered upon the reference.
On March 1, 1954, the Agents submitted their claim,
contending that the supplementary agreement dated
June 20, 1942, was void and not binding upon them,
and that, in any event, on the representations made
on December 6, 1943, and from time to time thereafter, they were assured by the Chief Director of
Purchases that the claim made by them would be
favourably considered by the Government of India,
and relying on these assurances, they continued to
supply ghee in quantities demanded by the Government after incurring "heavy extra expenditure".
They also claimed that they were constantly demanding an increase· in the mandi and financing charges,
but the Chief Director of Purchases, who was duly
authorized in that behalf by the Government, gave
rRpcated verbal assurances that their demands would
be satisfied, and requested them to continue supplies
for the successful prosecution of the war. Contending
{
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•
S.C.R.
SUPREME COURT REPORTS
801
that the Government of India was estopped from
z96u
repudiating their claim set out in Schedules B and C,
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• in view o a
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mrcums ances state in and Sons. Ltd.
the petition, the Agents prayed for a declaration that
v.
the supplementary agreement dated June 20, 1942, The Union of India
was void and not binding upon them, and for a decree
for payment of Rs. 27,48,515 with interest at the rate
Shah J.
of 6 per cent. per annum from March 1, 1954, and, in
the alternative, for a decree for Rs. 25,63,037-7-3,
with interest at the rate of 6 per cent. per annum
from March 1, 1954, till recovery. This claim of the
Agents was resisted by the Government of India.
Inter alia, it was denied that any assurances were
given by the Director of Purchases, or that the Agents
continued to supply ghee relying upon such alleged
assurances. It was asserted that the Agents continued
to supply ghee without insisting upon any modification
of the agreement, because they found, and it must be
presumed that they found, it profitable to do so under
the terms fixed under the supplementary contract
dated June 20, 1942. The claims made for the additional buying remuneration, for mandi charges and
for establishment and contingency charges, were
denied. It was urged that, in any event, the claim
for additional buying remuneration and for mandi
charges and for reimbursement of establishment and
contingencies, was not covered by cl. 20 of the agreement, under which the submission to arbitration was
made, and the arbitrators had no jurisdiction to
adjudicate upon those claims.
.
On the claim made by the Agents, and the denial
thereof, the arbitrators incorporated the points of
contest in the form of certain issues. On May 2, 1954,
the arbitrators made· an award rejecting the primary
claim on the view that the supplementary agreement
dated June 20, 1942, was for consideration and the
same was valid and binding upon the Agents. On the
alternative claim, they awarded, under the head of
establishment and contingencies, Rs. 80,994-12-6, being
the actual loss which, in their view, the Agents had
suffered, and Rs. 11,27,965-11-3, in addition to the
amounts received by the Agents from the Government
802
SUPREME COURT REPORTS [1960(2)]
I96o
for mandi and financing charges. The arbitrators
M
Al-.
P
h daccordingly awarded an amount of Rs. 13,03,676-12-6
:~d ;:;, Z~ a with future interest from November 15, 1949, till the
v. ·
·
date of realization, and costs.
The Union of India
The award was filed in the court of the CommerShah J.
cial Subordinate Judge, Delhi, on June 2, 1954. The
Government of India applied under ss. 30 and 33 of
the Indian Arbitration Act, to set aside the award on
the grounds that it was invalid, that it had been
improperly procured, and that it was vitiated on
account of judicial misconduct of the arbitrators.
The Commercial Subordinate Judge held that the
arbitrators had committed an error apparent on the
face of the award in ordering the Union to pay to
the Agents additional remuneration and financing and
overhead charges, but, in his view, specific questions
having been expressly referred for adjudication to the
arbitrators, the award was binding upon the parties
and could not be set aside on the ground of an error
apparent on the face thereof. The learned Judge,
accordingly, rejected the application for setting aside
the award.
Against the order made by the Subordinate J udgc,
an appeal was preferred by the Union of India to the
High Court of East Punjab at Chandigarh. At the
hearing of the appeal, counsel for the Agents sought
to support the award on the plea that certain questions had been specifically referred to the arbitrators,
and it was open to the arbitrators to make the award
which they. made, on the basis of quantum meruit.
The High Court held that there was no specific
reference of any questions of law to the arbitrators,
and the decision of the arbitrators was not conclusive
and was open to challenge, because it was vitiated by
errors apparent on the face of the award. The High
Court reversed the order passed by the Subordinate
Judge, and set aside the award of the arbitrators,
holding that there was no "legal basis for awarding
any compensation" to the Agents for any loss which
they might have sustained. This appeal has been
filed with leave of the High Court under cl. 133 (l)(a)
of the Constitution.
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.<
-
S.C.R.
SUPREME COURT REPORTS
803
The extent of the jurisdiction of the court to set
.r96o
aside an award on the ground of an error in making M/ Al-p· P
, a
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the award is we - e ne . . ea war o an ar itrator
and sons. Ltd.
may be set aside on the ground of an error on the
v.
face thereof only when in the award or in any docu- The Union of India
ment incorporated with it, as for instance, a note
appended by the arbitrators, stating the reasons for
his decision, there is found some legal proposition
which is the basis· of the award and which is
erroneous-Champsey Bhara and Company v. Jivaraj
Balloo Spinning and Weaving Company, Limited (1 ).
If, however, a specific question is submitted to the
arbitrator and he answers it, the fact that the answer
involves an erroneous decision in point of law, does
not make the award bad on its face so as to permit of
its being set aside-Jn the matter of an arbitration
between King and Duveen and Others (2) and Government
of Kelantan v. Duff Development Company Limited (3).
Was the reference made by the parties to the
arbitrators a specific reference, that is, a reference
inviting the arbitrators to decide certain questions of
law submitted to them? If the reference is of a
specific question of law, even if the award is erroneous,
the decision being of arbitrators selected by the parties
to adjudicate upon those questions, the award will
bind the parties. In the reference originally made
to the arbitrators by the letter of the Agents on July 1,
1946, and the reply of the Government dated July 10,
1946, a general reference of the dispute was made in
terms of cl. 20 of the agreement. Even though the
award made on that· reference, was set aside by the
Subordinate Judge, the arbitration was not superseded,
and the reference was expressly kept alive, reserving
an opportunity to the parties to appoint fresh arbitrators pursuant to the agreement, for settling the
dispute; and by letters respectively dated August 2,
1952, and August 14, 1952, a general reference was
again made to the arbitrators. Paragraph 14 of the
letter written by the Agents on August 2, 1952,
evidences an intention to serve the notice under cl. 2U
(I) L.R. 50 I.A. 324.
(2) L.R. (1913) 2 K.B.D. 32.
(3) L.R. 1923 A.C. 395·
Shah].
804
SUPREME COURT REPORTS [1960 (2)]
z96o
of the agreement. Issues were undoubtedly raised
-.
P
h dby ·the arbitrators, but that was persumably to focus
Mjs. Alop• ars a th
t
t•
f h
·
h
· t
· ·
£
and Sons. Ltd.
e at en ion o t e parties on t e porn s ansmg or
v.
adjudication. The Agents had made their claim
The Union of India before the arbitrators, and the claim and the jurisdiction of the arbitrators to adjudicate upon the claim,
Shah f.
were denied. The arbitrators were by the terms of
reference only authorized to adjudicate upon the disputes raised.
There is no foundation for the view
that a specific reference, submitting a question of law
for the adjudication of the arbitrators, was made.
We agree, therefore, with the view of the High
Court that the reference made, was a general reference
and not a specific reference on any question of law.
The award may, therefore, be set aside if it be
demonstrated to be erroneous on the fac.e of it.
The original agreement dated May 3, 1937, was
modified by the supplementary agreement dated
June 20, 1942, and the arbitrators have held that the
modified agreement was binding upon the Agents.
By the agreement as modified, a graded scale was
fixed for the establishment and the contingencies to
be paid to the Agents, and also for the mandi charges
and overhead expenses. The arbitrators still proceeded
to award an additional amount for establishment and
contingencies and an additional amount for mandi
charges. By cl. 14(a), read with cl. 12(b) (2) of the
agreement, the rate at which establishment and
contingency charges were to be paid, was expressly
stipulated, and there is no dispute that the Government of India have paid to the Agents those charges
at the stipulated rate for ghee actually purchased.
The award of the arbitrators shows that the
amount actually received from the Government,
totalled Rs. 6,04, 700-9-0, whereas, according to the
accounts maintained by the Agents, they had spent
Rs. 6,77,542-0-3. Granting that the Agents had incurred this additional expenditure under the head
'establishment and contingencies', when the contract
expressly stipulated for payment of charges at rates
specified therein, we fail to appreciate on what
ground the arbitrators could ignore the express
-
-
-
•
S.C.R.
SUPREME COURT REPORTS
805
covenants between the parties, and award to the
I960
Agents amounts which the Union of India had not u
Az-p· P
h d
..1.n s.
o i
ars a
agreed to pay to the Agents. The award of the
and Sons. Ltd.
arbitrators, awarding additional expenses under the
~.
head of establishment and •contingencies, together The Union of India
with interest thereon, is on the face of it erroneous.
Before the arbitrators, a number of arhatias, who
supplied ghee to the Agents, appeared and produced
extracts from their books, showing the amounts
actually due to them from the latter. Detailed charts,
showing the total amount due under each head of
expenditure to each arhatia, were produced. The
arbitrators were satisfied that the statements produced,
reflected a general rise in prices and cost of labour.
Taking into consideration the fact that the other
persons were buying ghee at rates considerably in
excess of the stipulated rates, the arbitrators held
that the Agents were entitled to be reimbursed to the
extent of Rs. 11,27,965-11-3. But the terms of the
contract, stipulating the rate at which the financing
and overhead charges were to be paid under cl. 13(a)
read with cl. 12(b ), remained binding so long as the
contract was not abandoned or altered by mutual
agreement, and the arbitrators had no authority to
award any amount in excess of the amount expressly
stipulated to be paid. Mr. Chatterjee, on behalf of
the Agents, submitted that the circumstances existing
at the time when the terms of the contract were
settled, were "entirely displaced" by reason of the
commencement of hostilities in the Second World War,
and the terms of the contract agreed upon in the light
of circumstances existing in May, 1937, could not, in
view of the turn of events which were never in the
contemplation of the parties, rymain binding upon
the Agents.
This argument is untrue in fact and
unsupportable in law.
The contract was modified on
June 20, 1942, by mutual consent, and the modification was made nearly three years after the commencement of the hostilities. The Agents were fully aware
of the altered circumstances at the date when the
modified schedule for payment of overhead charges,
contingencies and buying remuneration, was agreed
Shah ].
806
SUPREME COURT REPORTS [1960(2))
upon.
Again, a contract is not frustrated merely
because the circumstances in which the contract was
M /s. Aiopi Panhad made, are altered.
and So~s. Ltd.
.
.
Ig6o
v.
Section 56 of the Indian Contract Act provides
The Union of India that:
'
Shah].
" A contract to do an act which, after the contract
is made, becomes impossible, or, by reason of some
event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible
or unlawful."
Performance of the contract had not become
impossible or unlawful; the contract was in fact
performed by the Agents, and they have received
remuneration expressly stipulated to be paid therein.
The Indian Contract Act does not enable a party to a
contract to ignore the express covenants thereof, and
to claim payment of consideration for performance of
the contract at rates different from the stipulated
rates, on some vague plea of equity. "The parties
to an executory contract are often faced, in the course
of carrying it out, with a turn of events which they
did not at all anticipate-a wholly abnormal rise or
fall in prices, a sudden depreciation of currency, an
unexpected obstacle to execution, or the like. Yet
this does not in itself affect the bargain they have
made. If, on the other hand, a consideration of the
terms of the contract, in the light of the circumstances
existing when it was made, shows that they never
agreed to be bound in a fundamentally different situation which has now unexpectedly emerged, the
contract ceases to bind at that point-not because the
court in its discretion thinks it just and reasonable to
qualify the terms of the contract, but because on its
true construction it does not apply in that situation.
When it is said that in such circumstances the court
reaches a conclusion which is 'just and reasonable'
(Lord Wright in Constantine's case (1 ) or one' which
justice derriands' (Lord Sumner in H irji M ulji v.
Cheong Yue Steamship Co. Ltd. (2), this result is arrived
at by putting a just construction upon the contract in
accordance with an 'implication ............ from the
(1) (1942) A.C. 154· 186.
(2) (1926) A.C. 497, 510,
-
r
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S.c.R.
SUPREME COURT REPORTS
807
presumed common intention of the parties'-speech
1v6o
of Lord Simon in British Movietonews Ltd. v. London
and District Cinemas Ltd. (1 ).
M /s. Alopi Parskad
There is no general liberty reserved to the c~urts and Sons Ltd.
to absolve a party from liability to perform his part The Uni;;, of India
of the contract, merely because on account of an
--
;...
uncontemplated turn of events, the performance of the
Shah f.
contract may become onerous. That is the law both
in India and in England, and there is, in our opinion,
no general rule to which recourse may be had, as
~ontended by Mr. Chatterjee, relying upon which a·
party may ignore the express covenants on account of
an uncontemplated turn of evel).ts since the date of the
contract. Mr. Chatterjee strenuously contended that
in England, a rule has in recent years been evolved
which did not attach to contracts the same sanctity
which the earlier decisions had attached, and in support
of his contention, he relied upon the observations
made in British M ovietonews Ld. v. London and
District Cinemas Ld. (
2 ~ In that case, Denning, L,J.,
is reported to have observed:
" ............ no matter that a contract is framed in
words which taken literally or absolutely, cover
what has happened, nevertheless, if the ensuing
turn of events _was so completely outside the
contemplation of the parties that the court is
satisfied that the parties, as reasonable people,
cannot have intended that the contract should apply
to the new situation, then the court will read the
words of the. contract in a qualified sense ; it will
restrict them to the circumstances contemplated by
the parties; it will not apply them to the uncontemplated turn of events, but will do therein what is
just and reasonable. "
-
But the observations made by Denning, L.J., upon
which reliance has been placed, proceeded substantially
upon misapprehension of what was decided in
Parkinson &: Go. Ld. v. Commissioner.$ of Works (3),
on which the learned Lord Justice placed considerable
reliance.
The view taken by him, was negatived in
(1) L.R. 1952 A.C. '66 at pp. 185 & 186.
(2) (1951) I KB.D. 190, 201,
\3) (1.~49) 2 I\,B,D, 6~2,
808
SUPREME COURT REPORTS [1960 (2)]
r96o
appeal to the House of Lords in the British Movie-
--
tonew's case-(1952) A.C. 166-already referred to. In
M/o Afopi PanhadI d"
. th
d"fi d 1
f
t
t
th
.
th"
·a 5
ltd
n ra, m
eco 1 e
aw o con rac s,
ere1s no. mg
an °;'· · · which justifies the view that a change of circumThe Union of Tndia stances, " completely outside the contemplation of
parties" at the time when the contract was entered
Shah I
into, will justify a court, while hol.ding the parties
bound by the contract, in departing from the express
terms thereof. Parkinson and Co. Ld. v. Commissioners
of Works (1) was a case in which on the true interpretation of a contract, it was held, though it was not SQ
expressly provided, that the profits of a private
contractor, ·who had entered into a contract with the
Commissioners of Works to make certain building
constructions and such other additional constructions
as may be demanded by the latter, were restricted to
a fixed amount only if the additional quantity of work
did not substantially exceed in value a specified sum.
The Court in that case held that a term must be
implied in the contract that the Commissioners should
not be entitled to require work materially in excess of
the specified sum. In that case, the Court did not
proceed upon any such general principle as was
assumed by Denning, L.J., in the BritishMovietonews
Ld. v. London and District Cinemas Ld. (2).
We are, therefore, unable to agree with the
contention of Mr. Chatterjee that the arbitrators were
justified in ignoring the express terms of the contract
prescribing remuneration payable to the Agents, and
in proceeding upon the basis of quantum meruit.
Relying upon s. 222 of the Indian Contract Act,
by which duty to indemnify the agent against the
consequences of all lawful acts done in exercise of the
authority conferred, is imposed upon the employer,
the arbitrators could not award compensation to the
agents in excess of the expressly stipulated consideration. The claim made by the Agents was not for
indemnity for consequences of acts lawfully done by
them on behalf of the Government of India; it was a
claim for charges incurred by them in excess of those
stipulated. Such a claim was not a
claim for
(') ('949) 2 KP.D. 632.
(2) (19.!)I) I ICB.D. 190, 201,
.,
r
~ ...... -
•
-
,.
-
S.C.R.
SUPREME COUH,T REPORTS
809
indemnity, but a claim for enhancement of the rate of
z96o
the agreed consideration .. Assuming that the Agents M/ Al-. P
h ,
re~ied upon assurances alleged . to be given by the
1
:~a ;:~s. ";,;/"'
Director in-charge of Purcha.ses, m the absence of an
v.
express covenant modifying the contract which The Union of India
governed the relations of the Agents with the
Government of India, vague assurances could not
Shah J.
modify the contract. Ghee having been supplied by
the Agents under the terms of the contract, the right
of the Agents was to receive remuneration un~er the
terms of that contract. It is. difficult to appreciate
the argument advanced by Mr. Chatterjee that the
Agents were entitled to claim remuneration at rates
substantially different from the terms stipulated, on
the basis of quantum meruit. Compensation quantum
meruit is awarded for work done or services rendered,.
when the price thereof is not fixed by a contract. For
work done or services rendered pursuant to the terms
of a contract, compensation quantum meruit cannot
be awarded where the contract provides for the
consideration payable in that behalf. Quantum meruit
is but reasonable compensation awarded on implication
of a contract to remunerate, and an express stipulation governing the relations between the parties under
a contract, cannot be displaced by assuming that the
stipulation is not reasonable. It is, therefore, unnecessary to consider the argument advanced by Mr.
Chatterjee that a claim for compensation on the basis
of quantum meruit, is one which arises out of the
agreement within the meaning of cl. 20. Granting
that a claim for compensation on the basis of quantum
meruit, may be adjudicated upon by the arbitrators in
a reference made under cl. 20 of the agreement, in the
circumstances of the case before us, compensation on
that basis could not be claimed.
The plea that there was a bar of res judicata by
reason of the decision in the Letters Patent Appeal
No. 31of1953, has, in our judgment, no force.
The
Subordinate Judge set aside the award on the ground
that there had been judicial misconduct committed by
the umpire and also on the view that the claims made,
as described in Schedules B and D, were not outside
810
SUPREME COURT REPORTS [1960(2)]
r96o
the competence of the arbitrators. The High Court
., Ai-·r
, din appeal under the Letters Patent, did confirm the
""/S.
opi arsna
d
,
'd
h
d
b t th
a?td sans. Ltd. or er, setting as1 e t e awar ;
u
ere was no
v.
binding decision between the parties that the claim
The Union of Iudia described in Sch. B, that is, the claim for establishShah J.
January 2I
ment and contingency charges, was within the
competence of the arbitrators in reference under cl. 20.
It may be observed that according to the High Court
of East Punjab in the Appeal No. 31 of 1953, under
the Letters Patent, it was not necessary to express
any opinion whether the claim in Sch. U was within
the competence of the arbitrators, and the claims
described in Sch.]) does not appear to have been
agitated in the second arbitration proceeding.
We, accordingly, agree with the view of the High
.Court that the Award of the arbitrators was liable to
be set aside because of an error apparent on the face of
the award. In this view, the appeal fails and
i~ dismissed with costs.
Appeal dismissed,.
CHAMPALAL
v.
MST. SAMARATH BAI
(JAFER IMAM, J. L. KAPUR AND K.