TMI Blog1989 (3) TMI 392X X X X Extracts X X X X X X X X Extracts X X X X ..... first letter of the contractor requesting for extension was addressed on 17-12-1973. Extension was granted up to 31-5-1974. By another letter dated 22-7-1974 the contractor requested another extension till the end of August, 1974. It was granted subject to imposition of penalty of ₹ 50/- per day, after 1-9-1974. 3. After the work was completed, disputes arose between the parties with respect to the amount payable to the respondent. They were referred to the sole arbitration of the Superintending Engineer, R B, Cuddapah Circle, in accordance with the agreement. The arbitrator made his award on 25-3-1981. Apart from interest and costs, the respondent had preferred eight claims. The arbitrator awarded some or other amount under each claim. Claim No. 9 related to interest. The arbitrator awarded interest at the rate of 15% per annum from the date of award till the date of payment. So far as costs are concerned (claim No. 10), he directed the parties to bear their own costs. 4. The award is a non-speaking one. It does not give reasons for the several amounts awarded under each of the claims. It reads as follows :-- Now, I, Sri P. Vishnu Rao, Superintending Engineer, ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This comprises of Waiver of refund of fines imposed to an extent of ₹ 13,500.00. Award : I award that the respondents shall pay claimants ₹ 13,500.00 (rupees thirteen thousand five hundred only) towards this claim. Claim No. 7 : This comprises of ₹ 2,000/-being the refund of fine imposed for absence of Site Engineer on Rajahmundry side. Award: I award that the respondents shall pay the claimants ₹ 2,000/- (rupees two thousand only) towards this claim. Claim No. 8: This comprises of ₹ 72,645.42 towards refund of recovery made for excess steel consumed. Award : I award that the respondents shall pay the claimants ₹ 72,645.42 (Rupees seventy two-thousand six hundred and forty five and paise forty two only) towards the claim. Claim No. 9: This comprises of ₹ 1,32,359.00 towards interest on amounts claimed and disputed. Award : This claim is rejected. However, after careful consideration of all the factors, the claimants are awarded interest on the awarded amounts from the date of this award, i.e., 25th March, 1981 till the date of payment at 15% (fifteen per cent) per annum. Claim No. 10 : This refers to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount which was recovered from him towards excess steel consumed by him. The arbitrator allowed the claim in full. Claim No. 9 pertains to grant of interest from the date of the award till the date of realisation. 8. For the sake of convenience we may take up claim No. 9 first. Following the principle of the decision of the Supreme Court in Executive Engineer (Irrigation) Galimala v. Abnaduta Jena [1988]1SCR253 it has been held by two Benches of this Court in (i) CM.A. No. 292/1988 disposed of on 15-11-1988 (consisting of Jeevan Reddy Y. Bhaskar Rao, JJ.), and (iii) C.M.A. No. 993 /1984 and batch, disposed of on 17-3-1989 (consisting of Jeevan Reddy V. Neeladri Rao, JJ.), that the arbitrator has no power in law to award interest even for the period subsequent to the date of award. In this case, the arbitrator has not awarded interest for the period prior to the date of reference, nor has he awarded interest for the period the dispute was pending before him. He has awarded interest only from the date of the award. Since the reference to arbitration in this case is governed by Chapter II, i.e., without the intervention of the Court, the arbitrator was not competent to award t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able for any loss that is likely to be caused to the contractor on account of delay in supply. In case of delay, the contractor shall be eligible only for suitable extension of time. The scrap or cut pieces of steel left over shall not be taken back by the department. The loss, if any, on account of these scrap or cut pieces shall be borne by the contractor. The recovery of steel supplied by the Department shall be made for the quantities issued. The rates to be quoted by the contractor shall be for the supply and fabrication of steel including probable wastage up to 5% over the requirement as per schedule. Recovery for any excess quantity used over 5% wastage; shall be made at the market value plus 10% or supply rate whichever is higher. The contractor shall get binding wire required for use on the work at his own cost..... . 12. The preceding conditions in the same Section say that the cement, steel, and bitumen required for the work shall be supplied by the department at the specified rates, and that the cost thereof shall be recovered from the contractor's bills and other dues. The contractor was obligated to use the material exclusively for the purpose of the work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 22-6-1970 End of 12/1970 6 months 12 (7.7%) 11,057-80 K11 6/71 8/71 2 months 9(4.89%) 7,022-40 K10 6/71 10/71 4 months 14 (7.4%) 10,627-00 K9 6/73 1/72 6 months 13 (6.9%) 9,909-00 K8 6/71 4/72 10 months 19 (9.79%) 14,059-30 K1 to K3 1/72 1/72 to complete foundations and 5/73 to do substructure and superstructure 17 months 34 (15.31%) 21.987-00 K4 K3 1/72 9/73 21 months 39 (17.18%) 24,672-00 K5 K6 1/72 10/73 22 months 45 (19.3%) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fined by the Madras Public Works Department Code and the site (or premises) is handed over to him as provided for in the said conditions and agrees to complete the work within (42) Forty two months from the date of such handing over of the site (or premises) and to show progress as defined in the tabular statement, Rate of progress below, subject nevertheless to the provisions for extension of time contained in clause 59 of the Standard Preliminary Specification. (5) The said conditions shall be read and construed as forming part of this agreement and the parties hereto will respectively abide by and submit themselves to the conditions and stipulations and perform the agreements on their parts, respectively...... . 16. The 'Preliminary Specifications' mentioned in APDSS constitute the terms of agreement between the parties. Clause 58 of Preliminary Specifications says that on notification of possession of the site being given to the contractor, he shall begin the work forthwith and shall regularly and continuously proceed with the work and complete the same as provided in the agreement subject, nevertheless, to the provision of extension of time, mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite occupied by the Railway is not more than 3 months . It is clear that certain portions of the site which were to be handed over to the respondent were occupied by the Railway in connection with its own work; the agreement between the parties was that as soon as the Railway vacated its occupation, the site shall be handed over to the contractor within three months. The next letter is dated 8-3-1970 from the Chief Engineer, P.W.D., Hyderabad , to the respondent, in which it was stated, inter alia, 12.(a): In your letter reference (3) cited (reference is to the respondent's letter dated 23-1-1970 referred to above), you have agreed for not claiming any compensation for the delay in handing over site at piers 14 to 21 on Kovvur side beyond middle of '71 if the delay is not more than 3 months. You are informed that the last 6 spans can be handed over in the beginning of 1972..... . This letter is rather ambiguous. It speaks of delivery of pairs 14 to 21 beyond middle of 71 . Suffice it to note that as soon as the Railways delivered possession of the said sites, they were to be handed over to the contractor within three months. 18. The third letter is dated 13-3-1970 from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;s delay in handing over the sites. He requested for, and agreed to extension of the period of contract, and completed the work. It is not the respondent's case that while agreeing to extension of the period of contract he put the Government on notice of his intention to claim compensation on that account. Section 55 of the Contract Act reads thus:-- 55. Effect of failure to perform at fixed time, in contract in which time is essential : When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract. If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any Joss occasioned to him by such failure. If, in case of a contract void ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim compensation on account of delays or hindrances to work from any cause whatever . That the delays and hindrances contemplated by clause 59 include the stoppage, hindrances and delays on the part of the department as well is clear from the following sentence in the first part of the said clause, viz., the Executive Engineer shall assess the period of delay or hindrances caused by any written instructions issued by him, at 25% in excess of the actual work period so lost . Indeed, the second para of the clause also contemplates delays and hindrances being caused on account of the failure of the Executive Engineer to issue necessary instructions. In such a case, the contractor has a right to claim the assessment of such delay by the Superintending Engineer of the Circle, whose decision is declared to the final and binding on the parties. But, any such claim has to be lodged in writing to the Executive Engineer within fourteen days of the commencement of such delay, or hindrance, as the case may be. We find it difficult, therefore, to say that clause 59 has no application to the present case. The words from any cause whatever , occurring in clause 59, are wide enough to take in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te he must be paid as per the standard specification rates as the site was not handed over in time due to the fault of the department itself. We do not think Section 59 has any application at all. The decision of the Division Bench referred to by the learned Government Pleader has no relevance in ,the present context. In this Division Bench cases the contractor having agreed for reduction of rates and executing the final agreement, demanded escalation of rates complaining that the department committed delays and defaults. The Government relied upon clause 59 and Foot Note 7 of Schedule 'A' which prohibited payment of rates at the enhanced rates even during the extended period. The Division Bench negatived the claim of the contractor on the ground that the Foot Note 7 is clear to the effect that the agreed rate should prevail even during the extended period of the agreement. The Judgment of the Division Bench was more based on the specific prohibition contained in Foot Note 7 of Schedule 'A' of the agreement therein. There is no such clause in the present agreement. It is not a case of escalation of rates. Here the major portion of the site was handed over beyond the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work. On these facts, the Supreme Court held: The arbitrator misconducted himself in allowing the claim without deciding the objection of the State. In view of the specific clauses, the appellant was not legally entitled to claim for extra cost. The decision of this Court in Thawardas v. Union of India, [1955]2SCR48 is of no avail on this point. If no specific question of law is referred, the decision of the arbitrator on that question is not final however much it may be within his jurisdiction, and indeed essential for him to decide the question, incidentally. The arbitrator is not a conciliator and cannot ignore the law or misapply it in order to do what he thinks is just and reasonable. The arbitrator is a tribunal selected by the parties to decide their disputes according -to law and so is bound to follow and apply the law, and if he does not, he can be set right by the court provided his error appears on the face of the award. In this case, the contractor having contracted he cannot go back to the agreement simply because it does not suit him to abide by it. The decision of this Court in M/s. Alopi Parshad v. Union of India, [1960]2SCR793 may be examined. There it was ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 56 of the Contract Act due to abnormal rise in prices of material and labour. This being so and the contractor having completed the work, it was not open to him to claim extra cost towards rise in prices of material and labour. The arbitrator misconducted himself in not deciding this specific objection raised by the State regarding the legality of extra claim of the appellant.... . 26. Applying the principle of the above decision to the facts of the case before us, it must be held that clause 59 bars a claim for compensation on account of any delays or hindrances caused by the department. In such a case, the contractor is entitled only to extension of the period of contract. Indeed, such an extension was asked for, and granted on more than one occasion. (The penalty levied for completing the work beyond the extended period of contract has been waived in this case). The contract was not avoided by the contractor, but he chose to complete the work within the extended time. In such a case, the claim for compensation is clearly barred by clause 59 -of the APDSS which is admittedly, a term of the agreement between the parties. 27. Mr. P. Ramachandra Reddy, learned Counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 59 of the APDSS. Where a similar clause was found as in the case Continental Construction Co. Ltd. v. State of Madhya Pradesh [1988]3SCR103 , the Supreme Court held clearly that the arbitrator had no jurisdiction. It must be noted that the award in this case was a speaking reasoned award. 28. Mr. Ramachandra Reddy placed strong reliance upon the decision of the Supreme Court in M s. Sudarsan Trading Co. v. The Govt. of Kerala [1989]1SCR665 . Three questions were considered in this case, namely, (i) when is an award a speaking award; (ii) in the case of a non-speaking award, how and to what extent can the Court go to determine whether there is an error apparent on the face of the award; and (iii) to what extent can the Court examine the contract between the parties which is not incorporated or referred to in the award? We are not concerned with the first question of this case. The second and third questions are, however, relevant. On the second question arising before it, the Supreme Court referred to the decision of the Privy Council in Champsey Bhara Co. v. Jivraj Balloo Spinning and Weaving Co. Ltd.. AIR 1923 PC 66 and held that an award can be set aside on the ground of an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im/ count is still good between the parties. It is not open to the Court, it was held, to set it aside by speculating as to the reasons which must have impelled the arbitrator to come to the conclusion which he did, nor is it permissible for the purpose to establish by a process of inference and argument that the arbitrator has committed some mistake in arriving at his conclusion. In the second case, it was held that a non-reasoned award which contains no legal proposition which can be said to constitute the basis of the award cannot be interfered with by the Court. 30. We are, therefore, of the opinion that the decisions relied upon by Mr. Ramachandra Reddy do not lay down the proposition that where an award is questioned on the ground that the arbitrator had no jurisdiction to entertain a claim by virtue of the terms of the contract, the Court is precluded from looking to the terms of the contract. On the contrary, such a power is expressly recognized in one of the decisions cited, viz. Sudarsan Trading Co. v. The Govt. of Kerala [1989]1SCR665 . Further, as held by the Supreme Court in Continental Construction Co. Ltd. v. State of Madhya Pradesh, [1988]3SCR103 , where the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... self. 32. We may also state that it is not possible for us to apportion the amount awarded for the original period of contract and the amount awarded for the extended period, even assuming that the arbitrator was competent to make such an award for the extended period of contract. 33. For the above reasons, we are of the opinion that the arbitrator exceeded his jurisdiction in awarding the amount of ₹ 2,81,800/- under claim No. 1. The award of the said amount is liable to be deleted from the award. 34. Accordingly, the Civil Miscellaneous Appeal and the Civil Revision Petition are allowed in part. The amount awarded by the arbitrator under claim No. 1 shall be deleted. It is also held that the arbitrator had no power in law to award interest for the period commencing from the date of award till the date of decree of the Civil Court. However, the respondent-contractor shall be entitled to interest from the date of the decree (i.e., from 19-2-1985) at the rate of 15% per annum, till realisation. We are awarding interest at the rate of 15% per annum since that happens to be the rate which was adopted by the arbitrator in the award. There shall be no order as to costs. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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