TMI Blog2002 (3) TMI 938X X X X Extracts X X X X X X X X Extracts X X X X ..... to be referred but as to claims numbers 3 to 6 formed an opinion that the claims being 'excepted matters' within the meaning of Clause 63 of General Conditions of Contract were not liable to be referred to arbitration. An intra-Court Appeal preferred by respondent has been allowed and the four claims have also been directed to be referred by the Division Bench to arbitrator on forming an opinion that they were not covered by 'excepted matters'. The appellants have filed this petition seeking special leave to appeal against the decision of Division Bench. 2. Leave granted. 3. Clause 63 of the General Conditions of the Contract provides as under:- Matters finally determined by the Railway All disputes and differences of any kind whatsoever arising out of or in connection with the contract, whether during the progress of the work or after its completion and whether before or after the determination of the contract, shall be referred by the contractor to the Railway and the Railway shall within a reasonable time after receipt of the Contractor's representation make and notify decisions on all matters referred to by the contractor in writing provided th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Establishment period of 6 months at a cost of ₹ 10,000/- per month. These losses may please be paid. (Rs.10,000/-x6 ₹ 60,000). 6. The work of ₹ 5,95,000/- was required to be completed within 31/2 months meaning thereby, monthly progress would not be less than ₹ 1,75,000/-. As against the entire work could be completed within a period of 91/2 months i.e. ₹ 75,000/- per month. The losses sustained for less output may be compensated and this comes to ₹ 40,000/-. 6. According to the appellants, claims numbers 3, 4 and 5 are covered respectively by Clauses 9.2, 21.5 and 11.3. Claim No.6 is covered by Clause 11.3 of Special Conditions. On this there does not appear to be any serious controversy. The core issue is the interpretation of Clause 63 of the General Conditions and Section 20 of the Arbitration Act, 1940. 7. A bare reading of Clause 63 shows that it consists of three parts. Firstly, it is an Arbitration Agreement requiring all disputes and differences of any kind whatsoever arising out of or in connection with the contract to be referred for adjudication by arbitration, by the Railways, on a demand being made by the contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neer of Railways and his decision shall be final and binding on the contractor. The learned counsel submitted that so long as the remedy of decision by some one though he may be an authority of the Railways is not provided for, the contractor's claim cannot be left in lurch by including the same in 'excepted matters'. We find it difficult to agree. 8. In our opinion those claims which are covered by several clauses of the Special Conditions of the Contract can be categorized into two. One category is of such claims which are just not leviable or entertainable. Clauses 9.2., 11.3 and 21.5 of Special Conditions are illustrative of such claims. Each of these clauses provides for such claims being not capable of being raised or adjudged by employing such phraseology as shall not be payable , no claim whatsoever will be entertained by the Railway , or no claim will/shall be entertained . These are 'no claim', 'no damage', or 'no liability' clauses. The other category of claims is where the dispute or difference has to determined by an authority of Railways as provided in the relevant clause. In such other category fall such claims as were read o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of this Court. 10. It was next submitted by the learned counsel for the respondent that if this Court was not inclined to agree with the submission of the learned counsel for the respondent and the interpretation sought to be placed by him on the meaning of 'excepted matter' then whether or not the claim raised by the contractor is an 'excepted matter' should be left to be determined by the arbitrator. It was submitted by him that while dealing with a petition under Section 20 of the Arbitration Act, 1940 the Court should order the agreement to be filed and make an order of reference to the arbitrator appointed by the parties leaving it open for the arbitrator to adjudicate whether a claim should be held to be not entertainable or awardable being an 'excepted matter'. With this submission too we find it difficult to agree. While dealing with a petition under Section 20, the Court has to examine: (i) whether there is an arbitration agreement between the parties, (ii) whether the difference which has arisen is one to which the arbitration agreement applies, and (iii) whether there is a cause, shown to be sufficient, to decline an order of reference to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material and labour. An award given by the arbitrator for extra claim given by the contractor was held to be vitiated on the ground of misconduct of arbitrator. There were specific clauses in the agreement which barred consideration of extra claims in the event of price escalation. 12. In Ch. Ramalinga Reddy Vs. Superintending Engineer Anr., 1994 (5) Scale 67, claim was allowed by arbitrator for payment of extra rates for work done beyond agreement time at schedule of rate prevailing at the time of execution . Clause 59 of A.P. Standard Specifications, which applied to the contract between the parties, stated that no claim for compensation on account of delays or hindrances to the work from any cause would lie except as therein defined. The claim was found to be outside the defined exceptions. When extensions of time were granted to the appellant to complete the work the respondents made it clear that no claim for compensation would lie. For both these reasons, this Court held that it was impermissible to award such claim because the arbitrator was required to decide the claims referred to him having regard to the contract between the parties and, therefore, his jurisdiction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibid]. 15. In our country question of delay in performance of contract is governed by Sections 55 and 56 of the Indian Contract Act, 1872. If there is an abnormal rise in prices of material and labour, it may frustrate the contract and then the innocent party need not perform the contract. So also, if time is of the essence of the contract, failure of the employer to perform a mutual obligation would enable the contractor to avoid the contract as the contract becomes voidable at his option. Where time is of the essence of an obligation, Chitty on Contracts (Twenty-Eighth Edition, 1999, at p.1106, para 22-015) states a failure to perform by the stipulated time will entitle the innocent party to (a) terminate performance of the contract and thereby put an end to all the primary obligations of both parties remaining unperformed; and (b) claim damages from the contract- breaker on the basis that he has committed a fundamental breach of the contract ( a breach going to the root of the contract ) depriving the innocent party of the benefit of the contract ( damages for loss of the whole transaction ). If, instead of avoiding the contract, the contractor accepts the belated perfor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nty-First Edition, 1997) states vide para 1-027 (at p.15) Irritability. The issue of Irritability can arise at three stages in an arbitration; first, on an application to stay the arbitration, when the opposing party claims that the tribunal lacks the authority to determine a dispute because it is not arbitrable, second, in the course of the arbitral proceedings on the hearing of an objection that the tribunal lacks substantive jurisdiction and third, on an application to challenge the award or to oppose its enforcement. The New York Convention, for example, refers to non-Irritability as a ground for a court refusing to recognize and enforce an award. 17. To sum up, our conclusion are: (i) while deciding a petition under Section 20 of the Arbitration Act, 1940, the Court is obliged to examine whether a difference which is sought to be referred to arbitration is one to which the arbitration agreement applies. If it is a matter excepted from the arbitration agreement, the Court shall be justified in withholding the reference, (ii) to be an excepted matter it is not necessary that a departmental or 'in-house' remedy for settlement of claim must be provided by the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X
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