# STATE OE ORIS.SA & ANOIBER v. KALINGA CONSTRUCTION to: (P) LTD •

- **Citation:** [1971] 2 S.C.R. 184
- **Court:** Supreme Court of India
- **Decided:** 1970-09-11
- **Bench:** J. C. Shah, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-oe-oris-sa-anoiber-v-kalinga-construction-to-p-ltd-5311
- **Pages:** 7

## Headnote

.
I
'
~rbitratio~A. ward b,v arbitrator after considering, and believing ce,.-·
taf.n evidence-If ppen to coutt to sit in appeal over such au1ard-Arhitration Act. 1940. Ss. 30 and. 33. ·
·
A
B
lb& responde':'t Company's tender for the movement and deprisitiag
c
of e;uth on the nght d:[ke o,f the Hirakud Dam was provisionally accepted by the Gove'rnment m December 1951. The work started in February
1952 and a formal contract was ..,xecuted in March 1953.
The
eartb
work was done by maIJual labour foi a-year in the beginning and thereafter it was done to a large extent by maChinet:Y.
The vertical movement was styled as "lift" and the horizontal movem'ent as
11lead".
When
the company started employing the heavy machine'ry from the beginning
of 1953. onwards a number of ,ramps had to be con>tructcd to· enable
n·
the machinery· to go up from the borrow pits to the dyke.• After the
work was completed, the respondent Company \Vas pai<l a certain amount
on the basis of a 'Scale set out in the contlract; but it claimed an addi.:.
tional subst;lntial sum ir.. respect of lifts and extra lf!ads and certain other
items together- with the interest on ·the amounts due.
It was provided
in the contract that if the average J.;ad mentioned had to be exceded,
the orders of the Chief Engineer in writing had to be obtained by the
:contractor.
The respopdcnt Company cloimed that it had ·~dght the
E
orders o.f the Chief Engineer in writing for the extra leads rcsu1iing from
the' conYersion of lifts into lea<ls and that although the Chief Engineer
did not himself make any such order, the 'Superintending ~ngineer with
whom the Company had been dealing Jid sign an order for the Chief
Engineer.
The contract provided for arbitration of disputes and differ~
encos.
After the matter was t.:.iken up fo:r arbitration, issues were framed
by the arbitrator· and considerable oral and documentary evidence was
F
led by bath the parties before him.
On the basis of this evidence the
arbitrator found that the tender must be taken to have been made arid
accepted on the basis that the whole work was to be done by mapual
lahour; he believed the evidence of. the Chief Engineer that he passed
no order allowing any extra leads and eventually held that no further
amount \Vas payable by the Government to the Company.
The respon·
dent thereafter filed n plaint under Sections 30 and 33 of th1.: Indian
Arbitration Act, 1940, challenging the award on variou·s grounds· and
G
praying for it to be set aside.
The subordinate Judge \Vho ~eard the
case set aside the tnvard ih March 1962. In an appeal to the High Court
thC t\\'o Judges \Yho constituted the Division Bench gave dissenting: judgments, i.e. one of them holding that the a\vnrd could, not h~ suhstained
and the other one being of the vic\v that the a\vard \V:t!' not liable to be
set asic!c.
The appeal \Vas the'rl heard by a third judge \Vho held that
the award was linhlc to be set aside on f\\'O of the ... issues:
as hi.! held
these issues to be ..severable. he proceeded to set aside the a\\'ard in resH
peel of them.
On appl:al to this Court.
•
r
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A
B
c
D
ORlSSA i·. KALINGA CONSTRUCTION ((Trover, J.)
185
HELD : The appeal must be alluwed and the order of the Htgh
Court setting aside the award in part must be reversed. The proceedings
ir.stituted by the respondent under Sections 30 and 33 of the Arbitration
Act must be dismissed.
A bare perusal of the judgment of the thiid learned Judge of the High
Court clearly showed that he decided the matter as if he was entertaining
an appeal against the award.
He re-examined and' reappraised
the evidence which.had been considered and believed by the arbitrator.
It· was
not open to the High Court to sit in appeal on the arbitrator's award.
[189 CJ
Once it was found that under the terms of the contract the Order of
the Chief Engineer in writing had to. be obtained before the work involving additional leads was executed, in the absence of any such written
order it was not open to the co

## Text

184
STATE OE ORIS.SA & ANOIBER
v.
.,
KALINGA CONSTRUCTION to: (P) LTD •
. September 11, 1970
[J. C. SHAH, K. S. H1m(>E AND A. N. GROVER, JJ.]
.
I
'
~rbitratio~A. ward b,v arbitrator after considering, and believing ce,.-·
taf.n evidence-If ppen to coutt to sit in appeal over such au1ard-Arhitration Act. 1940. Ss. 30 and. 33. ·
·
A
B
lb& responde':'t Company's tender for the movement and deprisitiag
c
of e;uth on the nght d:[ke o,f the Hirakud Dam was provisionally accepted by the Gove'rnment m December 1951. The work started in February
1952 and a formal contract was ..,xecuted in March 1953.
The
eartb
work was done by maIJual labour foi a-year in the beginning and thereafter it was done to a large extent by maChinet:Y.
The vertical movement was styled as "lift" and the horizontal movem'ent as
11lead".
When
the company started employing the heavy machine'ry from the beginning
of 1953. onwards a number of ,ramps had to be con>tructcd to· enable
n·
the machinery· to go up from the borrow pits to the dyke.• After the
work was completed, the respondent Company \Vas pai<l a certain amount
on the basis of a 'Scale set out in the contlract; but it claimed an addi.:.
tional subst;lntial sum ir.. respect of lifts and extra lf!ads and certain other
items together- with the interest on ·the amounts due.
It was provided
in the contract that if the average J.;ad mentioned had to be exceded,
the orders of the Chief Engineer in writing had to be obtained by the
:contractor.
The respopdcnt Company cloimed that it had ·~dght the
E
orders o.f the Chief Engineer in writing for the extra leads rcsu1iing from
the' conYersion of lifts into lea<ls and that although the Chief Engineer
did not himself make any such order, the 'Superintending ~ngineer with
whom the Company had been dealing Jid sign an order for the Chief
Engineer.
The contract provided for arbitration of disputes and differ~
encos.
After the matter was t.:.iken up fo:r arbitration, issues were framed
by the arbitrator· and considerable oral and documentary evidence was
F
led by bath the parties before him.
On the basis of this evidence the
arbitrator found that the tender must be taken to have been made arid
accepted on the basis that the whole work was to be done by mapual
lahour; he believed the evidence of. the Chief Engineer that he passed
no order allowing any extra leads and eventually held that no further
amount \Vas payable by the Government to the Company.
The respon·
dent thereafter filed n plaint under Sections 30 and 33 of th1.: Indian
Arbitration Act, 1940, challenging the award on variou·s grounds· and
G
praying for it to be set aside.
The subordinate Judge \Vho ~eard the
case set aside the tnvard ih March 1962. In an appeal to the High Court
thC t\\'o Judges \Yho constituted the Division Bench gave dissenting: judgments, i.e. one of them holding that the a\vnrd could, not h~ suhstained
and the other one being of the vic\v that the a\vard \V:t!' not liable to be
set asic!c.
The appeal \Vas the'rl heard by a third judge \Vho held that
the award was linhlc to be set aside on f\\'O of the ... issues:
as hi.! held
these issues to be ..severable. he proceeded to set aside the a\\'ard in resH
peel of them.
On appl:al to this Court.
•
r
I
I
~
A
B
c
D
ORlSSA i·. KALINGA CONSTRUCTION ((Trover, J.)
185
HELD : The appeal must be alluwed and the order of the Htgh
Court setting aside the award in part must be reversed. The proceedings
ir.stituted by the respondent under Sections 30 and 33 of the Arbitration
Act must be dismissed.
A bare perusal of the judgment of the thiid learned Judge of the High
Court clearly showed that he decided the matter as if he was entertaining
an appeal against the award.
He re-examined and' reappraised
the evidence which.had been considered and believed by the arbitrator.
It· was
not open to the High Court to sit in appeal on the arbitrator's award.
[189 CJ
Once it was found that under the terms of the contract the Order of
the Chief Engineer in writing had to. be obtained before the work involving additional leads was executed, in the absence of any such written
order it was not open to the court to hold that the appellant was liable
for payment of extra leads by applying some principle or rule analogous
to estoppel. Although it was true that the company had been writing to
the Engineering Department in the matter and that the latter did not,
for a considerable time, send any reply but the Company was debarred
from asking for any additional payment in the
absence of the
Chief
Engineer's order in writing..
If the arbitrator came to that conclusio.n,
it could not be said that th~re was any error apparent in his ·a\\'ard which
would, justify setting aside. [ 190 CJ
C1v1L APPELLATE JURISDICTION : Civil Appeal No. 2023 of
1969.
Appeal from the judgment and decree dated February 18, 1965
of the Orissa High Court in Misc. Appeal No. 53 of 1962.
E
S. T. Desai, Gobind Das and R. N. Sachthej, for the appellants.
F
G
H
V. T. Rangaswami, T. Raghavan~ B. Datta, D. N. Mishra and
I. B .. Dadachanji, for the respondent.
The Judgment of the Court was delivered by
Grover, J.
This is an appeal by certificate from a judgment
of the Orissa High Court relating to an award given by Shri A. V.
Viswanatha Sastri an Ex-Judge of the Madras High Court in a
dispute which arose between the respondent and the Union of
India in respect of a claim made by the former for a sum of
Rs. 35,45,080.91 which was stated to be due for earthwork done
en- the right dyke of the Hirakud Dam.
The Chief Engineer, Hirakud Dam, invited tenders on behalf of the Union of India for execution of work specifying certain
details as to how tenders were to be submitted.
It .appears that
before the tenders were invited certain estimates were prepared in
the office of the Chief Engineer. The intending contractors were
to submit tenders stating the rate for depositing earth on the
Right Dyke site including all lifts and leads.
The respondent
company submitted a tender which, according to the Chief Engineer, was not in the form invited by him as certain extraneous
L235Sup.CI-13
18G
SUPREME COURT .K&PORTS
[ J 971 J2 S.C.R.
matter,S1 w~re stated t..> have been introduced. The Chief Engineer
and the representatives of the respondent company held a conference at which certain agreements were arrived at.
The tender
of the contractor was provisionally accepted on December 28,
1951; the formal contract was executed much later on March 21,
1953.
The work., started ,in February 1952 and took four years
for completion.
The earthwork was done by the company
by
nianual labour for a year in the beginning and thereafter it was
done io a large extent by machinery
The earth required to erect
.the dyke was dug up from certain areas demarcated by the Engineering Department near the site of the dyke.
The places from
which the earth had to be taken were called "borrow pits'' or
''borrow areas".
The company dug up earth from the "borrow
pits" and dumped it on the site of the dyke upto the required speci·
fications.
This involved movement of the loose earth both verti·
~ally and horizontally from the borrow pit to the dyke. The verti·
cal movement was styled us "lift" and the horizontal movement us
"lead".
When the company started employing the heavy machi·
nery from the beginninii of 19~3 onwards a number of ramps had
to be constructed to enable the machinery td 110 up from the bMrow
pits to the dyke.
It has not been d.isputed that for the earth\vork <lone by the
company it ·received payment from the Government of an amount
aggregating Rs.
1,08, 19,543.00. This amount was paid in
accordance with the rate in item J -A of the contract (Ext. P-69).
According to that rate Rs. 45!- were to be paid for 100 ~ubic feet
of earthwork of all kinds of soil laid in 6" layers with rough dressing including all lifts and average lead not exceeding.
10".
According to the company an additional sum of Rs. 26,20,798.75
was due in addition to the amount already paid iri respect of extra
leads including lifts.
An amount of Rs. 2 lakhs was claimed on
account of the construction of ramps .. The company further
claimed a sum of Rs. 5.34,282.16 on account of interest on the
aforesaid two amounts. This claim was disputed by the Union of
India and it was maintained on its behalf that the company had
been fully paid for the earthwork done by it according to the terms
of the contract and that the company was not entitled to payment
for lifts nor was there any occasion for leads in excess of an average
of 10 and further that the ramps in so far as they were outside the
dyke were not to be paid for while those which had been incorporated in the dyke had already been paid for as a part of the
dyke.
The agreement by which reference was made to the arbitrator
was as follows :-
·
"The disputes and difference between the parties relating to payment of lift
equivalent
and leads for
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H
ORISSA V. KALINGA CONSTRUCTION (Grover, J.)
18 7
machine rcute are referred to the arbitration of Shri
A. V. Viswanatha Sastri, retired High Court Judge,
Madras and his award shall be final and binding on the
parties."
On November 16, 1958 the following issues were framed b)
B
the Arbitrator by the consent of both the partie's :-
"(i) ls the claimant entitled to any payment for lifts
under the terms of the contract between the
parties?
·
NOTE : Both sides agree that 1 foot of lifts is equal
C
to 12 t feet of !~ad.
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H
(ii) Whether the claimant is entitled to payment for
machine leads where machines have been used
for earthwork and if so, on what basis and at
what rates?
(iii) Whether in the case of machine leads, lifts are
not taken into account as pleaded by the Union
of India?
(iv) Whether the claimant is entitled to the cost incurred in putting up the ramps '?
(v) ls the Union of India estopped from denying
liability· for payment of lifts and machine leads
for the reasons stated in paragraphs 11 to 14 of
the Statement Claim of
Co. (P) Ltd.?
Kalinga Construction
(vi) Is the claimant entitled to interest for the period
during which the amounts payable to the claimant remained unpaid by the Government, if so.
at what rate ?
(vii) What is the amount due to the claimant from the
Union of India?"
A good deal of oral and documentary evidenctt.,was led by
both the parties before the arbitrator. After discussi!lg the same
he crune to the following conclusion~ :-
1. The tender must be taken to have been made and accepted
on the basis that the whole work was to be done by manual
labour.
2. According to the terms of the contract if tl'•e average lead
of 10 had to be exceeded the orders of the Chief Engineer in writing had to be obtained by the contractor and then the extra lead
188
SL"PREME COURT REPORTS
[197 l ]2 S.C.R
was to be paid for at the rate of Rs. 1.12 As. per 1000 cubic
feet. The company did raise the question of payment for lifts as
early as December 30, 1952 and sought the orders of the Chief
Engineer in writing for the ~xtra lead rnsulting from the conversion
of lifts into leads but the Chief Engineer never made any order in
writing.
The arbitrator believed the evidence of the Chief Engineer Shri Kanwar Sain that he passed no'"Orders allowing the company an extension of lead beyond the average 10. As the obtaining of the written order of the Chief Engineer was an essential
condition which had to be complied with before a claim for extra
lead could be made the coJllpany was not entitled to payment for
the extra leads beyond the average 10.
(3) The letter Ext. P-6 dated March 30, 1953 which was signed by the Superintending Engineer forthe Chief Engineer had not
been proved to have been written· either under the instructions of
. the. Chief Engineer or approved by him.
In this letter it wa!
stated, inter a/ia, that the word~ "average I 0 leads mentioned in
the special conditions of the agreement include the initial lead and
lift and all ether lifts between fae borrow area and the Dyke".
The Chief Engi12eer's evidence relating to Ext. P-6 was believed.
The final conclusion of the arbitrator on issue No. l was that
under the terms of the contract between. the panies the rate of
Rs. 45/- per 1000 cubic feet covered all lifts and that lifts had'
A
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not to be separately paid for.
On issue No. 2 the company's claim
I!:
for extra payment for machine leads was held to be untenable. .
The finding on issue No. 3 was that in case of machine leads lifts
were not to be taken into account. On issue No. 4 the arbitrator
held that the company was not entitled to recover the costs incurred in putting up the ramps.
On issue No. 5 it was decided
that the Government was not estopped from denying liability for
payment for lifts and machine leads.
On issues 6 and 7 the arbitrator found that no amount was payable by the Union of India
to the company rior was the Union liable to pay any interest.
The respondent company fil~d what was called a plaint under
ss. 30 and 33 of the Indian Arbitration Act 1940 in the court of
F
the Subordinate Judge, Sambalpur, challenging the award on
G
various grounds and prayed that it be set aside. It was further
prayed that another arbitrator be appointed to make a fresh award
regarding the disputes between the parties. The Subordinate
Judge set aside the award by his order dated March 17, 1962. The
Urion of India preferred an appeal to the High Court which was
heard by Barman and Das, JJ. Learned judges gave dissenting
H
judgments, Burman J., was of the view that the award could not be
sustained whereas Das J ., was of the opinion that the award was
not !iab1e to be set aside.
The appeal was then heard by a third
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ORISSA V, KALINGA CONSTRUCTION (Grover, J.)
18 9
Judge G. K. Misra J. On issues l and 2 Misra J. agreed with the
judg)llent of Barman J., but on issues 3 and 4 he concurred with
the decision of Das J. According to his judgment the award could
not be set aside on issues 3 and 4 whereas it was liable to be set
aside on issues l and 2.
As the issues were severable he set aside
the award only on issues l and 2.
A bare perusal of the judgment of Misra J. would show that
he decided the matter as if he was entertaining an appeal against
the award itself.
He re-examined and re-appraised the evidence
which had been considered oy the arbitrator and held that the
arbitrator was wrong in coming to the conclusion that the work
was contemplated by the coniract to be done by manual labour
alone.
According to him under the agreement payment for
machine leads was contemplated from the very beginning or at any
rate was not excluded. He examined a large volume of evidence
including Ext. P-6 as also the oral evidence of the Chief Engineer
Shri Kanwar Sain and. held that from the course of correspondence it was clear that in dealin~ with the contractor or the Executive Engineer almost all the letters on behalf of the <;:hief Engineer were being dealt with by the Superintending:E~J:r. Once
Ext. P-6 was admitted to be genuine and was bsu!lif{}y1he Superintending Engineer in the ordinary course of correspondence it
was for the appellant to establish by production! elf the relevant
records that that letter had been issued withol!t':lttd\hority of the
Chief Engineer. Misra J., had no hesitation in holding that Ext.
P-6 was written under the authority of the Chief Engineer and was
binding between the parties.
Here again what Misra J., did was
to appreciate the evidence which had been considered by the arbitrator, in particular, the testimony of the Chief Engineer.
The
arbitrator had believed the statement of the Chief Engineer that
Ex. P:6 had neither been.issued under his authority nor with his
approval.
Once this part of his statement was believed by
the
arbitrator it was not open to Misra J., to sit in appeal over the
conclusion of the arbitrator in proceedings for setting aside the
award.
The other serious error into which Misra J., fell was to record
a finding on the p«yment for extra leads beyond I 0 in reversal of
the conclusion of the arbitrator.
This is what the learned judge
proceeded to say :
"The next point for consideration is
whether the
payment for extra leads beyond I 0 are to be rejected
because the Chief Engineer's order in writing had not
been obtained before the work involving additional leads
was executed. Both under Ex. P. 2 and Ext. P. 69 this
term had been incorporated.
In the peculiar circumstances of this case, however, it must be taken that the
190
SUPREME COURT REPORTS
( 1971) 2 S.C.R.
condition had been fulfilled eveJL though there was no
A
order in writing. It was for the Executive Engineer and
the Superintending Engineer, who
were getting the
work done by the Company, to obtain the order in writing or not to allow the Company, to work beyond 10
leads including lifts without obtaining the order of the
Chief Engineer in writing."
B
Once it was found that under the terms of the contract the order
of. the Chief Engineer in writing had to be obtained befor(l the
work involving additional leads was executed arid in the absence
of any such written order it was not ope.n to the court to hold that
the appellant-Union of Jndia-was liable for payment of extra
leads beyond 10 by applying some principle or rule analogous to C
estoppel. It is no doubt true that the company had Ileen writing to
the Engineering Department in the matter and that the latter did
not, for a considerable time, send any reply but the company was
debarred from asking for any additional payment Jn the absence
of the Chief Engineer's order in writing. If the arbitrator came
to that conclusion it could not said that there was any error appa· D
rent in his award 'which would justify setting it aside.
For the reasons given above the appeal is allowed and the
order of the High Court setting aside the award dated July 19,
1959 in part as indicated in the judgment of Misra J., is hereby
reversed.
The proceedings instituted by the respondent under
ss. 30 and 33 of the Indian Arbitration Act, 1940, shall stand E
dismissed.
In view of the entire circumstances the parties are
left to bear their own costs in this Court.
R.K.P.S.
Appeal allowed.