Paragraph numbers below are the court’s original numbering, recovered from the source text.
9. It is weU-s'ettled that an arbitration award is not vitiated merely because the arbitrator has not given item-wise award and has chosen to give a lumpsum award. A lumpsum award is not a bad award. So also it is well-settled that an award need not formally express the decision of the arbitrator on each matter of difference nor is it necessary for the award to be a speaking one. It will be presumed that the award disposes of finally . ….. all the matters in difference (see – State of Rajasthan v. M/s. R.S. Shanna and Co., (1988) 4 SCC 353, State of Orissa & Ors. v. Mis. Lall Brothers, AIR {1988) SC 2018, Finn Madan/al Roshallal Mahajan v. Hukumchand Mills Ltd., Indore, AIR (1967) SC 1030, Smt. Santa Sila Devi & Anr. v. Dhirendra H (1999) 1 S.C.R. A· Nath Sen and Ors., AIR (1963) SC 1677. The principle issue for decision is what is the effect· of absence of decision by the Superintending Engineer proceeding the demand for reference and commencement of arbitration proceedings.
10. The part of the clause in question is called a certification or B finalityclause in legal terminology. Hudson on Building and Engineering Contracts (Tenth Edition; at pp. 437"438) deals with the clause as under : c ''Where, therefore, a· contract provides for some matter to be dealt with by a certificate or approval, and by virtue of the prin~ ciples discussed in Section 3, above, such certificate is final be- twel!n the parties, the question still may arise whether an arbitrator appointed under the contract is bound by any approval or certifi- cate which may have been given or can, by his award, supply the deficieny where the certifier has failed or refused to issue the certificate to which either party claims to be entitled. In all such cases it is necessary to consider carefully the precise terms of the certificate clause and the arbitration clause, and to decide whether on its true construction the latter was iii.tended to confer the necessary power to override the certifier upon the arbitrator". "…… once the courts are satisfied that an arbitrator has juris- . diction to go into a matter, they will not, in the absence of a clearly expressed intention, allow his findings to be emasculated by any failure of the parties specifically. to make the necessary procedural provisions to enable him to give substantive effect to his decision, or by formal difficulties created by the specific provisions of the contract relating to the original certifier's decisions". (10,1) At pp. 470-471; Hudson, while sulllinlU"ising the discussion on approval and certificates states that an unreasonable refusal by the certifier · to give his cansideratioil. to the matter upon which he is required to certify, G constitutes a classification of cases by itself. In our opirlion, such class of . cases would not exclude judicial determination of the disputes by the arbitrator or the court, as the case may be. , (10.2) At pp. 504, 853-855, Hudson has dealt with Scott v. Avery type of arbitration clause, according to which the certificate of an architect or H valuer is a condition precedent of the contractor's right of action. The M.K SHAH ENGNN. AND CONTRACTORS v. STATE [RC. LAHOTI, J.] courts will give effect to the condition unless (i) the condition· has been A _, · waived, or (ii) the party seeking to set it up has somehow disentitled himself from doing .so.
11. Russel opines in Arbitration (Twentieth Edition, at page 324) :- "Where certificate is a condition precedent – In arbitrations under building and like contracts, the issue of an architect's or engineer's certificate is often made a condition precedent to a contractor's right to payment for work done by him. If in such a case there is a general reference of a dispute arising c out of a refusal to issue a certificate, and the arbitrator determines that a certificate ought to have been. given, he will normally have power to order payment for the amount for which the certificate should have been given".
12. We find ourselves in entire agreement with the law so stated by D Hudson and Russ¢11.
13. It was submitted by Dr. Ashok Chitale, learned senior counsel appearing for the resporidentcState of M.P. that the appellant- contractors are bound by the terms of the clause 3.3.29 voluntarily _entered into by E them. A decision by the Superintending Engineer is a condition precedent of the initiation of the arbitration proceedings for it is .the decision of the Superintending Engineer which alone will be the subject- matter of chal~ Ienge before the arbitrator and that too if raised within a period of 28 days, the contractual time bar, calculated from the date of decision by the Superintending Engineer, we find it difficult to agree.
14. In Halsbury's Laws of England (Fourth Edition) Volume 2, vide paras 652, 654, at pp. 363, 365 the law is so stated. The arbitration agreements may contain a clause which requires a certain act to be com- pleted within a specified period and which provides that if that act is not done either the claim or the ability to commence an _arbitration Will be ._ barred. Such clauses are sometimes known. a& 'Atlantic Shipping' clauses . The consequences of the expiry of a contractual limitation period before , the completion of the specific act may however be avoided in three circumstances : (i) if the Court exercises its discretion statutorily conferred on it, to extend the period to avoid undue hardship; (ii) if the arbitration H A clause confers a discretion on the arbitrator to extend the period and he exercises it; (iii) if the conduct of the either party precludes his relying on the time bar against the claimant.
15. In C.A. No. 5961/83, the case of M/s. M.K. Shah the disputes were raised and stated by the contractor to the Superintending Engineer calling for latter's decision. However, the Superintending Engineer instead of taking a decision by himself, referred the disputes to a sub-committee. There may be nothing wrong in the Superintending Engineer having chosen to solicit the opinion of a sub-committee membered by highly placed officials of the State Government for his own advantage and thereafter c taking a decision by himself. The nature of function performed by the Superintending Engineer under the first part of clause 3.3.29 is not judicial. However, the fact remains that the Superintending Engineer unreasonably delayed the decision and in spite of persuasion and protests by the con- tractor, did not promptly take and communicate his decision on the dis- D putes. The State Government ultimately yielded to the demand of the contractor by appointing an arbitrator. Once the arbitrator commenced the arbitration proceedings, the State of M.P. gave a second thought and receded its steps by choosing to raise an objection to the maintainability of the arbitration. The arbitrator allowed time to the Government of Madhya Pradesh for securing a judicial pronouncement on its objection E under section 33 of the Act. The State of M.P. initiated proceedings under Section 33 of the Act, but did not pursue the same. Rather it agreed to the appointment ·of a new arbitrator in place of the previous one.
16. In C.A. No. 5962/83, in the case of M/s. Chabaldas & Sons also, F the situation is more or less similar. The appellants had stated the disputes demanding decision by the Superintending Engineer. The letter dated 26.7.1971 by the Executive Engineer, Barna Dam Division conveyed to the appellants that it was the decision of the Superintending Engineer to not to accept the claim preferred by the appellants. On 7.8.1971 the appellants addressed a letter to the Superintending Engineer clearly stating that the appellants were not satisfied "with your final decision'', i.e., the decision by th.e Superintending Engineer. The Superintending Engineer never stated that the decision conveyed to the appellants rejecting their claims was not a decision by the Superintending Engineer. In either case the position does not improve for the respondent. If the claim was rejected by the Superin- H tending Engineer as communicated by the Executive Engineer in his letter M.K SHAH ENGNN. AND CONfRACTORS v. SfATE [RC. LAHOTI, J.] dated 26.7.1971, the appellants were fully justified, and had also acted A within time, in demanding reference to arbitration by their letter dated 7.8.1971. It the decision was by the Executive Engineer and not by the Superintending Engineer, then the respondent-State cannot take shelter behind clause 3.3.29 inasmuch as the respondent must thank itself for a situation created by its own Superintending Engineer who instead of acting B himself consistently with clause 3.3.29 made-over the dispute to the Execu- tive Engineer for decision . …. (16.1) In any case the appellant approached the Court for appoint- ment of arbitrator under Section 20 of the Act. The State of M.P. yielded to the appellants demand by voluntarily appointing an arbitrator. There c also an objection to the maintainability of the arbitration proceedings was taken up as a second thought and then given up followed by appointment of a new arbitrator in place of the previous one.
17. No one can be permitted to take advantage of one's own wrong. D The respondent-State of M.P. cannot and could not have been heard to plead denial of the two appellant's right to seek reference to arbitration for non-compliance with the earlier part of clause 3.3.29. In the case of M/s. Chabaldas & Sons, the clause was complied with. Alternatively, even if it was not complied with in the case of M/s. Chabaldas & Sons, but E certainly in the case of M/s. M.K. Shah, the fault for non-compliance lies with the respondent-State of M.P. through its officials. The plea of bar, if any, created by the earlier part of Clause 3.3.29 cannot be permitted to be set up by a party which itself has been responsible for frustrating the operation thereof. It will be travesty of justice if the appellants for the fault of the respondents are denied right to have recourse to the remedy of F arbitration. A closer scrutiny of Clause 3.3.29 clearly suggests that the parties intended to enter into an arbitration agreement for deciding all questions and disputes arising between them through arbitrator and thery- by excluding the jurisdiction of ordinary civil courts. Such reference to arbitration is required to be preceded by a decision of the Superintending G Engineer and a challenge to such decision within 28 days by the party feeling aggrieved therewith. The steps preceding the corning into operation _..,.., .JI of the arbitration clause though essential are capable of being waived and if one party has by its own conduct or the conduct of its officials disabled such preceding steps being taken, it will be deemed that the procedural pre-requisites were waived. The party at fault cannot be permitted to set H [1999) 1 S.C.R. A up the bar of non-performance of pre-requisite obligation so as to exclude .. ,.,., the applicability and operation of the arbitration clause. .. .
18. The subsequent conduct of the respondent in voluntarily agreeing to the appointment of the arbitrators in both the cases and not pursuing their objections under Section 33 of the Arbitration Act amounts to waiver B on their part of the plea of non-compliance with the earlier part of clause 3.3.29, if only there was such non-compliance . The respondent-State of .,…, M.P. has acquiesced in the appointment of arbitrators and the proceedings )>.. for settlement of disputes by arbitration. The respondent cannot be per- mitted to tum around and plead invalidity or non-maintainability of arbitra- c tion proceedings by reference to clause 33.29.
19. For the foregoing reasons,- we are of the opinion that the trial court and the High Court were not justified in setting aside the awards and remitting them back for decision afresh by the arbitrator on the ground of non-compliance with the earlier part of clause 3.3.29. The award except to D the extent to which it allows interest, was not liable to be interfered with by the Court.
20. So far as the award of interest by the arbitrator is concerned, the law had been settled by the decision of this Court in State of Orissa v. B.N. E Agarawala, (1997] 2 SCC 469. Admittedly, the reference in the cases at hand was made before August 19, 1981 when the Interest Act of 1839 was in force. Interest could not have been awarded in the absence of statute, contract, usage or custom. Therefore, the interest for the pre-reference period was liable to be set aside and has been rightly set aside by the trial court.
21. Now remains the question as to the award of interest for the period for which the references were pending before the Arbitrator. In Abadhuta Jena's case (1988] 1 SCR 253 (Three-Judges Bench) it was held that the arbitrator to whom the reference is made without the intervention of the court does not have jurisdiction to award interest pendente lite. The correctness of this view was assailed in Secretary (Irrigation Department) Government of Orissa and Ors v. G.C. Roy, AIR (1992) SC 732 (Five-Judges Bench). The view of the law taken in Abadhuta Jena's case on the power of the arbitrator to award interest for the period for which the reference was pending before the arbitrator was over-ruled in G.C. Roy's case. H However, their Lordships observed (vide para 47) – "even though we have M.K. SHAH ENGNN. AND CONTRACTORS v. STATE [RC. LAHOTI, J.) . 437 ~ i held that the decision in Jena's case does not lay down good law, we would A like to direct that our decision shall only be prospective in operation, which means that this decision shall not entitle any party nor shall it empower any court to re-open proeeedings which have already become finat In other words, the law declared herein shall apply only to pending Proceedings". G.C. Roy's case was decided on 12.12.91. ~ … , (21.1) Jena's case and G.C. Roy's case, both were considered by this …. Court .in Hindu Constrnction Company Ltd. v. State of I & K, AIR (1992) SC 2192. The arbitrator by his award dated 24.10.1972, had awarded interest at the rate of 6% p.a. from the date of reference ( 6.12.68) to date of payment or decree, whichever is earlier. By its judgment dated 28;8.92, c vide para 5, this court following the deciSion in G. C. Roy's case held that the principle of Section 34 of the CPC which provides both for awarding of interest pendente lite as well as for the post decree period is applicable to proceedings before the arbitrator though the section as such may not apply. The award of interest as made by the arbitrator was upheld by this Court. (21.2.) In the cases at hand the awards have not been made rule of the court so far and are being so made by this court today. The award of interest pendente lite by the arbitrator deserves to be sustained.
22. Both the appeals are allowed. The Impugned Judgments of the E High Court and the trial court ~ both are set aside in both the appeals. · Instead it is directed that both the awards dated 26.9.1978 shall be made rule of the court subject to the modification that the contractor-claimants · shall not be entitled to interest up to the date of the. reference i.e. 11.l; 74 in the case of M/s. M.K Shah, Engineers and Contractors and 28.11.73 in F ..,, the case of M/s. Chabaldas and Sons. Let the decrees be drawn according- ly. Both the appeals stand disposed of. No order as to costs .. A.KT. Appeals partly allowed,