TMI Blog1989 (1) TMI 314X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellant : A. B. Rohtagi, Mrs. Urmila Kapoor, Miss S. Janani and Naresh K. Sharma For the Respondents : Miss A. Subhashini JUDGMENT The appellant Vishwanath Sood undertook the construction of a Farmers Community Centre Building at Thanedhar by an agreement entered into with the Union of India and the State of Himachal Pradesh dated 20.6.1968. Certain disputes arose between the parties to the agreement and in terms of clause 25 of the agreement, they were referred to a sole arbitrator. The contractor submitted a claim of Rs. 1,28,000 while the respondents also submitted a counter-claim. By an award dated 20.3.1972, the abritrator awarded an amount of Rs.31,932 to the contractor and a sum of Rs.21,504 to the respondents. The award was filed in the court. The contractor filed an application in the court for modification or correction of the award in respect of three items of his claim ( 1, 8 and 9) and item no. 1 of the respondent s counter claim. The Department also filed its objections to the award and prayed that a sum of Rs.8,080.29 should be awarded in favour of the Department or the award remitted to arbitrator. The learned single Judge dismissed the objecti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a proper conclusion arrived at. The third claim put forward by the petitioner (item no. 9) was for a sum of Rs.30,000, claimed as compensation for an amount spent by the contractor for the purchase of a truck for this work. The learned single Judge here again pointed out that no material had been placed before the arbitrator by the contractor to show that he was entitled to the amount and that, in any event, having regard to the fact that the work was executed by the Department at the cost and risk of the contractor, there was no question of the contractor preferring any claim in respect of this item. The above three claims of the petitioner were also rejected by the Division Bench which pointed out that the award made by the arbitrator was not a speaking award and that the face of the award did not show any error. We do not think that so far as these claims are concerned, that the appellant has any arguable case at all. As pointed out by the Division Bench of the High Court, the award was a non-speaking award. The arbitrator had considered the materials placed before him and had arrived at his conclusions. The award does not on the face of it disclose any error, much less any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -eighth of the work, before one-half of such time has elapsed, and threefourth of the work, before three-fourth of such time has elapsed. However, for special jobs if a time-schedule has been submitted by the Contractor and the same has been accepted by the Engineer-incharge, the contractor shall comply with the said time-schedule. In the event of the contractor failing to comply with this condition, he shall be liable to pay as compensation an amount equal to one per cent or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide on the said estimated cost of the whole work for every day that the due quantity of work remains incomplete; provided always that the entire amount of compensation to be paid under the provisions of this clause shall not exceed ten per cent, on the estimated cost of the work as shown in the tender." "Clause 25: Settlement of disputes by Arbitration: Except where otherwise provided in the contract, all questions and disputes relating to the meaning of the specifications, designs drawings and instructions hereinbefore mentioned and as to the quality of workmanship or materials used on the work or as to any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the learned single Judge that the arbitrator had traveled outside his jurisdiction in awarding a sum of Rs.20,000 as compensation to the Government against the contractor for the delay in executing the work. It will be seen from the narration above that so far as this item was concerned, both parties proceeded on the footing that the claim of the Government was a claim under clause 2 and that the arbitrator had awarded the sum only in terms of clause 2. This is also borne out by the fact that the claim of the Department was based on a percentage of the total cost of the work and the restriction of the claim to 10% also appears to have been the result of the proviso to clause 2. The award, therefore, on a fair reading of it, contains a grant by the arbitrator of compensation to the Government in terms of clause 2. It is therefore open to the parties to urge before this Court, as they did before the High Court also, that, on a proper construction of clauses 2 and 25, this award was not justified. It is in this respect that this counter claim of the Department stands on a different footing from the earlier claims of the contractor which have been rejected and which, we have hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontractor, and there was no matter submitted to the Superintending Engineer for determination. In these circumstances, the submission of the learned counsel for the appellant is that there was no dispute at all between the parties on the question of compensation and that a dispute cannot be said to arise merely because a counter claim is for the first time put forward by the Department before the arbitrator. On the other hand, the learned counsel for the Department contended that clause 2 is in the nature of a penal clause which automatically takes effect irrespective of any default. He described it as an "agreed penalty" clause. He stated that the clause made the contractor liable for the penalty prescribed therein whenever there was a delay in the completion of the contract, whatsoever might have been the reason therefore, the question as to whether the contractor was at default or not being totally immaterial. The Department was, therefore, entitled to automatically deduct from the bills payable to the petitioner the compensation or penalty at the rate mentioned in clause 2 or such reduced amount as may be determined in a particular case by the Superintending Engineer and that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f default and the degree of negligence or default that could be attributed to the contractor. This means that the Superintending Engineer, in determining the rate of compensation chargeable, will have to go into all the aspects and determine whether there is any negligence on the part of the contractor or not. Where there has been no negligence on the part of the contractor or where on account of various extraneous circumstances referred to by the Division Bench such as vis major or default on the part of the Government or some other unexpected circumstance which does not justify penalising the contractor, the Superintending Engineer will be entitled and bound to reduce or even waive the compensation. It is true that the clause does not in terms provide for any notice to the contractor by the Superintending Engineer. But it will be appreciated that in practice the amount of compensation will be initially levied by the Engineer-in-charge and the Superintending Engineer comes into the picture only as some sort of revisional or appellate authority to whom the contractor appeals for redress. As we see it, clause 2 contains a complete machinery for determination of the compensation whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r will not be capable of being called in question before the arbitrator. We may confess that we had some hesitation in coming to this conclusion. As pointed out by the Division Bench, the question of any negligence or default on the part of the contractor has many facets and to say that such an important aspect of the contract cannot be settled by arbitration but should be left to one of the contracting parties might appear to have far reaching effects. In fact, although the contractor in this case might object to the process of arbitration because it has gone against him, contractors generally might very well prefer to have the question of such compensation decided by the arbitrator rather than by the Superintending Engineer. But we should like to make it clear that our decision regarding non arbitrability is only on the question of any compensation which the Government might claim in terms of clause 2 of the contract. We have already pointed out that this is a penalty clause introduced under the contract to ensure that the time schedule is strictly adhered to. It is something which the Engineerincharge enforces from time to time when he finds that the contractor is being recalc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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