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K.V. Joseph & Sons (P) Ltd., Engineering Contractors, Kochi, Represented by its Director K.J. Paul, (Formerly K. V. Joseph & Sons, A Registered Partnership) v/s State of Kerala, Represented by The Secretary to Government, Public Works Department, Government Secretariat, Trivandrum & Another

    ARB.A. Nos. 17 & 21 of 2021
    Decided On, 15 November 2021
    At, High Court of Kerala
    For the Appellant: K. Babu Thomas, Marykutty Babu, Advocates. For the Respondents: T.K. Vipindas, Sr. Government Pleader.

Judgment Text
C.S. Sudha, J.

1. These appeals preferred by the original claimant, impugns the common judgment dated 25.8.2020 in O.P.(Arbitration) No.54/2011 and 33/2012 passed by the Additional District Court-1, Pathanamthitta. The predecessor-in-interest of the appellant, namely, K.V. Joseph & Sons is the petitioner in O.P.(Arbitration) No.54/2011 and the respondents herein are the respondents therein. In O.P.(Arbitration) No.33/2012, the respondents herein are the petitioners and the appellant herein is the respondent therein. By the impugned common judgment dated 25.8.2020, Arbitral Award dated 09.08.2011 was set aside to an extent of Rs. 1,30,35,174/-. The said Award haddirected the respondents herein to pay Rs. 1,92,35,130/- to the appellanttowards a portion of the unpaid value of works carried out, and other amounts due in respect of “CRF works-improvement to Kadambanadu-Mannady- Enathu-Ezhamkulam Road in Pathanamthitta District”. The said works were undertaken by the contractor / claimant / appellant herein by virtue of agreement dated 25.5.2004 entered between the parties herein with initial contract price of Rs. 9,18,44,495/-. Aggrieved, the appellant has preferred theseappeals.

2. A brief reference to the events leading to the arbitration proceedings as narrated in the majority award is as follows-

In response to a notice inviting tenders for the work described as “CRF works-improvement to Kadambanadu-Mannady-Enathu-Ezhamkulam in Pathanamthitta District”, the claimant / contractor / appellant herein on 26.2.2004 submitted its tender. The work was for widening and strengthening of an existing road, which according to the contractor, has a length of 15.29 kms while the respondents claim that the same is 15.16 kms, which was under the control of the PWD and actually used by the public as a motorable road. After due negotiations, the total cost of the work was fixed as Rs. 9,18,44,495/- as indicated in the selection notice dated 25.5.2004. The aforementioned cost was 22.7% above the value of work shown in the tender notice. On 25.5.2004 itself, a formal written agreement was also entered into between the contractor and the Government of Kerala, acting through the second respondent. As per the agreement, the work was to be completed within one year from the date of order to start the work. The site of the work was formally handed over on 23.7.2004. The date of completion of the work was fixed as 22.7.2005. Thereafter, as per Ext.C3 communication dated 2.8.2004, the contractor informed the respondents that though the site was formally handed over in the last week of July 2004, the complete site has not been handed over since in various portions, land was still occupied by owners and therefore, without handing over the said portions, he would not be able to plan or proceed with the work continuously. Works like construction of drains and other RCC works have to be done which invariably require unhindered possession of the site. The electric posts with live lines, as also telephone posts with lines were causing major obstructions as it could cause threat to lives and properties. Besides, water supply lines and underground cables were also causing obstructions. The contractor informed the respondents that as they would be deploying heavy earth moving machinery, unless they are able to do the work continuously, they would not be able to achieve the required turn-out to maintain the targeted progress. Therefore, the contractor requested the respondents to ensure that the entire site on the sides of the road be taken over so as to enable him to attend the work without any hindrance or delay. On 11.8.2004 the contractor informed the respondents that he had made necessary arrangements for starting the execution of the work and requested the respondents to pay the mobilization advance amount as per the contract conditions. Though the contractor had complied with the conditions to be satisfied for claiming mobilization advance amount as per clause 51 of the Conditions of Contract (CC) to the satisfaction of the second respondent, and though the second respondent had passed orders for payment of the mobilization advance as per order dated 19.10.2004, the said amount of 91.80 lakhs was never paid to the contractor Rs.for want of letter of credit.According to the contractor, non- availability of land for widening at various locations, obstructions/hindrances caused as a result of existence of electric and telephone posts and lines, underground water pipes and cable systems pointed out as per Ext.C3 and requested to be removed, continued to remain as such for a considerably long period of time. The work could be commenced and completed substantially during the extended period. During the course of execution of the work, supplemental agreement no.1 was executed on 26.5.2005 between the parties, by which the contractor agreed to execute extra items of work. A supplemental agreement no.2 was also entered into on 31.5.2005 agreeing to carry out certain excess quantities of work. While continuing the work, the period of the contract was extended up to 31.3.2006, without fine since the work could not be completed within the originally stipulated time. As a result of the execution of the supplemental agreements, the total amount of the contract increased to Rs. 12,06,30,044/-. Asupplemental agreement no.3 was executed on 6.12.2005 containing the terms, subject to which extension was granted. Thus, it was agreed that no enhancement of the agreed rates would be demanded on account of the extension of time. The contractor continued to carry out the work after the extension even without specifically demanding for a revision of rates for doing the work during the extended period. Altogether, an amount of Rs. 8,91,65,267/- was sanctioned for payment as per CCs 1 to 6 and part bills. CC 6 and part bill is dated 30.3.2006. While so, the contractor was forced to stop the work due to various reasons stated in detail in his correspondence with the first respondent. On 19.6.2006, the contractor finally issued a detailed notice to the Executive Engineer (EE) terminating the work and also raising all his outstanding claims for adjudication by the EE. The EE as per letter dated 15.7.2006, rejected all the claims raised by the contractor and notified that the works executed after the last running bill would be measured and paid as and when the revised estimate is sanctioned. As all the claims were rejected, the contractor took steps to invoke the arbitration clause contained in the agreement as per Ext.C75 notice dated 31.7.2006. Since no steps were taken by the respondent, the contractor approached this Court u/s 11 of the Arbitration and Conciliation Act, 1996 (the Act). This Court constituted an Arbitral Tribunal consisting of three arbitrators.

3. The Arbitral Tribunal passed an interim award dated 24.12.2008 granting an amount of Rs. 2,43,67,846.95/- found to be admittedly due to thecontractor for the work done on and after the work for which payment was ordered as per CC6 and part bill dated 30.03.2006, and reserved the decision regarding the claim for interest on the said amount. Thus, a total of Rs. 11,35,33,113/- was received by the contractor for the works done by him as per the contract, the total amount of which was increased as per the supplemental agreement executed later as already noted to Rs. 12,06,30,044/-.The contract was ultimately terminated by the claimant leaving a small portion of the work undone.

4. As the members of the Arbitral Tribunal could not agree, a majority award dated 09/08/2011 and a minority award dated 15.5.2011 came to be passed. The Arbitral Tribunal by the majority award, out of the 15 different heads of claim raised by the claimant, disallowed claim nos.3,4,6,9,10,12, and 13. The claims under the remaining heads were allowed for the amounts shown in pages 129 and 130 of the award (running pages 271 and 272 of the appeal paper book). The original claim referred to in Ext.C68 notice is 34,75, 89,178.40/- which Rs. was reduced to an amount ofRs. 6.50 Crores.

5. Aggrieved by the majority award, the contractor and the respondents’ filed separate petitions u/s 34 of the Act, seeking setting aside of the majority award to the extent to which they are aggrieved.

6. In the petition the contractor alleged thus- he was awarded the work contract by the respondent for an amount of Rs. 9,18,44,495/- as perExt.C1 agreement dated 25.5.2004. The work included road work, construction of culverts, bridges and drains. As per the work agreement, he had to complete the work within a period of one year from the date of the order to start the work. The work site was handed over to him only on 23.7.2004, but he was not given hindrance-free site to carry out the work in accordance with the contractual terms. He further contended that the land owners were not willing to surrender their properties to widen the roads. Furthermore, utility lines drawn by KSEB and BSNL were not shifted from the site. According to the contractor he had already deployed his men and machinery at the site to carry out the work. But due to the aforesaid reasons, his men and machinery had to remain idle for a long time at the site which caused him huge loss. He further contended that due to the breach of the contract committed by the respondents in not giving hindrance free site, the period of the work originally fixed as per Ext.C1 agreement came to be extended up to 31.3.2006 by executing Ext.R16 supplementary agreement. The contractor further stated that during the progress of the work it was found that some extra items of work were to be done necessarily for the proper execution of the work and accordingly Ext.R14 supplementary agreement came to be executed. Likewise, considering the soil conditions prevailing at the site, i.e., dry rubber masonry, initially fixed as per Ext.C1 agreement was converted to RR masonry in CM 1:4 for which Ext.R15 supplementary agreement was executed between the parties, thereby the total work contract increased to Rs. 12,06,30,044/-. According to the contractor, evenafter the execution of Ext.R16 supplementary agreement, the respondents were not willing to co-operate with him and therefore he was compelled to stop the work on 19.6.2006. He preferred the claim petition claiming compensation for an amount of Rs. 34,75,89,178.40 /-, along with interest.

7. The respondents contended that as per the agreement the contractor was to complete the work within a period of 12 months from 23.7.2004. Even though there were some obstructions at some portions of the site, the contractor could have completed the works in other portions where no hindrance was reported as the length of the road was to be 15.16 kms. The contractor had completed only 15% of the work during the contractual period whereas he could have completed at least 95% of the work within the contractual period. The contractor had started clearing the site only on 14.9.2004 even though the site was handed over to him on 23.7.2004. The pavement work was done only on 23.9.2004; the earth excavation work on 12.10.2004 and the work of Edayar bridge was started only on 1.4.2005. The non-shifting of the posts standing on the sides of the road were not in any way affecting the formation of the surface. No mobilization advance was given to the contractor as he had not submitted the unconditional bank guarantee as contemplated under clause 32 of the contract. The contractor did not submit monthly statements of the estimated work as prescribed in clause 42 of the agreement. The department has therefore assessed the work only for an amount of Rs. 1,36,09,949/- and the same was paid to the contractor on31.5.2005. The extension of time was allowed only on the request of the contractor on the specific condition that no enhancement in the rates would be allowed. The respondents never committed any breach of contract as alleged by the contractor and the extension of time was necessitated only due to the fault of the latter. Therefore, they sought dismissal of the claim of compensation preferred by the contractor.

8. Heard the learned counsel for the appellant and the learned Senior Govt. Pleader and perused the records.

9. The contractor /appellant before the court below confined his challenge in respect of the findings arrived at by the majority arbitrators relating to sub claims (4) and (5) to claim no.1 and claim no.2 and 5. The challenge in respect of the findings arrived at relating to claim nos.1,3,4,6,7,8,9,10,11, 12,13 and 14 were given up and a memorandum dated 08.07.2020 filed to that effect before the court below. O.P.(Arbitration) No. 33/2012 filed by the respondents was partly allowed and the majority award for an amount of Rs. 15,35,174/- under item no. (5) of claim no. 1 and anamount of Rs. 1,15,00,000/- for item no. 2 to 6 of claim no.5 were set aside.The contractor filed Arb. Appeal No.17/2021 challenging the dismissal of his O.P.(Arbitration) No.54/2011 and Arb. Appeal No.21/2021 challenging the judgment which allowed O.P.(Arbitration) No.33/2012 in part.

10. The arguments advanced by the learned counsel for the appellant challenging the impugned judgment are –

(i) The impugned judgment has been passed without reading the award and the contract agreement between the parties and was acting beyond the jurisdiction vested in the court under Section 34 of the Act and is hence perverse. Reference was made to P.R.Shah, Shares and Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012)1 SCC 594), J.G.Engineers (P) Ltd. v. Union of India [(2011)5 SCC 758] and Associate Builders v. DDA [(2015)3 SCC 49] in support of this argument.

(ii) The award directing payment of Rs. 1,15,00,000/- towardsunpaid increased cost in works delayed beyond 22.7.2005 due to the breach of contact committed by the respondents, compensation events and variations, under claim no.5 was relying on an unauthorized and illegal supplemental agreement dated 6.12.2005 got executed on the insistence of the second respondent by his order dated 28.10.2005. Such a document was got executed under undue influence, coercion and duress on withholding 3, 33, 79, 961/- dueand payable to the appellant towards the value of works carried out and included in CC III and CC IV part bills paid on 16.12.2005, 30.1.2006 and 25.2.2006 which is illegal, invalid and null. The existence of such an agreement would not bar the Arbitral Tribunal from passing an award directing payment for increased cost for works delayed, as has been held in the decision in K.N. Sathyapalan v. State of Kerala [(2006) AIR SCW 6222].

(iii) The court by setting aside the award for 1,15,00,000/-towards the portion of the unpaid increased cost incurred for the works delayed by the respondents, has substituted its view. The court has acted beyond its jurisdiction and against the terms of the contract, i.e., clauses 44.2 and 47 of the GCC, clause 13.4 of the Instructions to Bidders (ITB) and clause 26 of the Contract Data, which stipulate price adjustment payment and increase in contract price for the works delayed due to compensation events/variations. This is contrary to the law laid down in Associate Builders vs. DDA [(2015) 3 SCC 49].

(iv) The interpretation of the contract by the Arbitral Tribunal is a plausible view of the contract in view of clauses 21, 28, 38, 39, 40, 44.1, 44.2, 44.3 and 47 of the GCC, clause 13.4 of the ITB and clause 26 of the Contract Data. The court was therefore not justified in interfering with the same. This is without jurisdiction and so is liable to be set aside as held in J.G. Engineers vs. Union of India [(2011) 5 SCC 758] and Parsa Kante Collieries Ltd. vs. Rajasthan Rajya Vydhututpadan Nigam Ltd. [(2019) 7 SCC 236].

(v) The contract to the extent not allowed to be performed within the period stipulated, became voidable at the option of the appellant as stipulated in Section 55 of the Contract Act. The respondents in such circumstances are liable to reimburse the increased cost incurred in the works delayed by them as held in General Manager Northern Railway v. Savesh Chopra [(2004) 2 SCC 45].

(vi) The finding that the terms and conditions incorporated in the original agreement dated 25.5.2004 are applicable only for the works carried out within the period of contract and that the contractor/appellant is not entitled to rely on the same for claiming reimbursement of increased cost incurred for the works delayed by the respondent beyond the period of contract, is against the terms of the contract, contrary to law and without appreciating the invalidity of the supplemental agreement dated 6.12.2005. This is against the fundamental principles of the law of contract.

11. The arguments advanced by the respondents are-

(i) Arbitration Appeal No.21/2011 is filed against the judgment in O.P.(Arbitration)No.33/2012, which modified the award of the Arbitral Tribunal on two claims. Against modification of the award, an appeal under Section 37 will not lie and therefore Arbitration Appeal No.21/2011 is therefore liable to be dismissed as an appeal is contemplated only against orders setting aside or refusing to set aside the award and not against an order modifying the award.

(ii) The argument of the appellant that the supplemental agreement dated 18.5.2005 is an illegal agreement, is incorrect. The Arbitral Tribunal has elaborately considered the issue and held that all the three supplemental agreements are valid and binding on the parties. Therefore, it is not open for the appellant to canvass the said ground in an appeal under Section 37 of the Act as there is no patent illegality or perversity.

(iii) The contention of the appellant that the supplemental agreements were got executed under undue influence, coercion and duress, is nothing but an afterthought. No evidence of any vitiating factors could be established before the Arbitral Tribunal.

(iv) the reasons given by the Tribunal for granting interest on Rs. 2,43,67,846.95/- @ of 12% from 14.6.2008 till thedate of the interim award is perverse. Clause 42.1 of Annexure I stipulate that the contractor shall submit to the Engineer monthly statements of the estimated value of work completed less the cumulative amount certified previously. As per clause 42, the Engineer should within 14 days check the contractor’s monthly statements. Therefore, the first step ought to have been initiated by the contractor himself. Failure on his part to submit the bills has been proved. In such circumstances, the respondent ought not to have been mulcted with the liability to pay interest from 14.6.2008 to 24.6.2008. As the finding is perverse, the court below was perfectly justified in setting aside claim no.1(v). Only if the claim had been modified or altered, it would have been an illegality in the light of the dictum in Project Director, NHAI vs. Hakeem (SLP (Civil) No. 13020/2021).

(v) item no.2 to 6 of claim no.5 pertain to claims for enhancement in the rates of labour, materials etc. The supplemental agreements which have been found valid by the Tribunal, specifically stipulates that the claimant is not entitled for any enhancement. So, the Arbitral Tribunal erred in relying upon the price adjustment clause provided in clause 47 of the CC read along with clause 26 of the Contract Data. Such an exercise was impermissible as it would defeat the express terms of the supplementary agreement. Therefore, the court below was justified in setting aside claim no.5(item nos.2 to 6) as it was passed against the terms of the contract and hence patently illegal.

(vi) the court below would have committed an illegality only if any of the claims had been modified/altered under Section 34. If any claim is either rejected or allowed under Section 34, there would be no illegality. When there are multiple claims, award has to be passed on each claim. When one particular claim is set aside, it would not amount to modification of the amount, but only setting aside the award on that claim. A contrary interpretation would render Section 34 of the Act nugatory. The respondents rely on the following decisions in support of their arguments - DLF Homes Developers Ltd. vs. Martin George (2021(3) KHC 590), Hindustan Construction Co. Ltd. vs. Governor of Orissa (AIR 1995 SC 2189), P.R.Shah, Shares & Stock Brokers (P) Ltd. vs. B.H.H.Securities (P) Ltd. (2012(1) SCC 594), H.B.Gandhi, Excise and Taxation Officer-cum- Assessing Authority, Karnal vs. M/s.Gopi Nath & Sons (1992 Supp (2) SCC 312), Kuldeep Singh vs. Commissioner of Police (1999(2) SCC 10) and ONGC Ltd. vs. Saw Pipes Ltd. (2003(5) SCC 705).

12. An arbitral award can be set aside by the court on one or more grounds stated in S.34(2) of the Act. An appeal under S. 37 can be heard only on limited grounds. Ordinarily, the Arbitral Tribunal should be the final arbiter of all the questions of fact and law referred to it. Normally, the award of the Arbitrator is final and conclusive so long as the Arbitrator had acted within his authority and according to the principles of fair play. It is not open to the court to re-assess the evidence in order to find out whether the Arbitrator had committed any error or to decide the question of adequacy of evidence as the Arbitrator appointed by the parties is the sole Judge of the quality and quantity of evidence when he delivers the arbitrary award. Courts would not be justified in interfering with an award, merely because in a given case, the interpretation on the terms of the contract by the Arbitrator, did not accord with the interpretation which the court, if it were to conduct the adjudication at the first instance, would have placed on such terms of the contract. The court cannot undertake an independent assessment of the merits of the award and it can only ascertain whether the power under Section 34 of the Act was exercised in terms of the provisions under Section 34 of the Act or whether the exercise of power by the court under Section 34 has exceeded the scope of the provisions thereunder. Therefore, the decision of the Arbitral Tribunal must be within the bounds of its jurisdiction conferred under the Act or the contract and in exercising such jurisdiction, the Tribunal cannot act in breach of the provisions of the Act. Therefore, if the award is contrary to the substantive provisions of law or the provisions of the Act or against the terms of the contract, it would be patently illegal, which is liable to be interfered with under Section 34 of the Act. However, such failure of procedure should be patently affecting the rights of the parties. Only if the Arbitrator construes the contract in a manner that no fair minded or reasonable person would do, the courts intervention would be justified. Further, in the light of Section 28(3) of the Act, the interpretation of a contract by the Arbitrator shall not ordinarily be interfered with. The court’s jurisdiction then is merely to see whether the Arbitrator has exceeded his jurisdiction or not. “Error apparent on the face of the record” employed in Section 34 (2A) would not imply closer scrutiny on the merits of the documents and materials on record and it if is found that the view of the Arbitrator is a plausible one, the court should refrain from interfering with the award. (DLF Homes Developers Ltd. vs. Martin George (2021(3) KHC 590).

13. The Apex Court in Ssangyong Engineering and Construction Co. Ltd. vs. NHAI (2019 KHC 6554) has held that if the Arbitrator wanders outside the contract and deals with matters not allotted to him, then it can only be said that he commits an error of jurisdiction and in such eventuality, the ground for challenge would fall under Section 34(2-A) of the Act, namely, patent illegality.

14. However, it has to be kept in mind that Section 34, as amended, will apply only to Section 34 applications that have been made to the Court on or after 23.10.2015, irrespective of the fact that the arbitration proceedings may have commenced prior to that date.

15. In P.R.Shah, Shares & Stock Brokers (P) Ltd. vs. B.H.H.Securities (P) Ltd. (2012(1) SCC 594) it has been held that the court cannot sit in appeal over the award by reassessing or re-appreciating the evidence to find out whether a different decision could be arrived at against the findings of the Arbitral Tribunal in the absence of grounds under Section 34.

16. In Sutlej Construction Ltd. vs. Union Territory of Chandigarh [(2018) 1 SCC 718] it has been held that when the award is reasonable and made on the basis of a plausible view, reappreciation of evidence cannot be done. When it comes to setting aside an award under public policy ground, it would mean that award should shock the conscience of the court and would not include what the court thinks it is unjust on the facts of the case seeking to substitute its view for that of the Arbitrator to do what it considers to be “justice”.

17. Interference, it has been held, is permissible only when the findings of the Arbitrator are arbitrary, capricious, perverse or when the conscience of the court is shocked, or when illegality is not trivial, but that which goes to the root of the matter. Interference should not be merely when another view is possible. Once it is found that the Arbitrator's approach is neither arbitrary nor capricious, no interference is called for on facts (see Associate Builders vs. Delhi Development Authority [(2015) 3 SCC 49).

18. Further, when cogent reasons are given by the Arbitral Tribunal qua the respective claims, the award is not required to be interfered with. Findings arrived on the basis of appreciation of evidence considering the relevant provisions and materials on record as well as on interpretation of the relevant provisions of the contract, which are neither perverse nor contrary to evidence on record, are not liable to be interfered with (see State of Jharkhand and others vs. HSS Integrated SDN and another [(2019) 9 SCC 798]).

19. Having thus reminded ourselves of the law on the point, we shall now consider whether the court below was justified in interfering with the award by way of the impugned judgment. Paragraph no.7 of the impugned judgment reads “Having considered the facts and circumstances of the case and the evidence on record and the rival submissions, I am of the view that the impugned portions of the majority award is liable to be modified for the following reasons”. The learned counsel for the appellant pointed out that Section 34 of the Act cannot be held to include within it, a power to modify an award. Reference was made to the dictum of the Hon’ble Supreme Court in Project Director, NHAI vs. M. Hakeem (AIR 2021 SC 3471) in support of this argument. The respondents also agree to this proposition that the court under S.34 cannot modify the award. However, according to the learned Senior Government Pleader, what the court below has done in this case is setting aside the award for item (5) of claim no. 1and the claim relating to items 2 to 6 of claim no.5, which according to him is not a modification of the award, but only setting aside the award on the said claims, which is well within the jurisdiction of the court under S.34 of the Act. In support of this argument reference is made to J. G. Engineers Pvt. Ltd. vs. Union of India, 2011 KHC 4418: AIR 2011 SC 2477 wherein it was held that if an award deals with and decides several claims separately and distinctly, even if the Court finds that the award in regard to some items is bad, the Court can segregate the award on items which did not suffer from any infirmity and uphold the award to that extent.

20. Annexure-1 of the detailed Statement of Facts and claims submitted by the claimant before the Arbitral Tribunal deals with claim no.1 which is stated to be compensation for losses on account of non-payment /belated payment of amounts calculated by way of interest @ 18% per annum. There are 5 items or 5 sub-claims to claim no.1 which are various amounts claimed as compensation for losses alleged to have been suffered on the ground of breach of contract. Item no. (5) relating to claim no.1 reads- “Interest on Bill amount for works completed (Rs.291 lakhs) – Interest @ 12% per annum from 4.5.2006 till 1.6.2006, the date by which payment should have been made and thereafter at 18% per annum till date of award by the Learned Arbitrators.”

21. The Arbitral Tribunal as per an interim award dated 24.12.2008, granted an amount of Rs. 2,43,67,846.95/- which was found due for the workdone under CC-VI and part bill without prejudice to the right of the contractor to establish his right to get more amounts, if any due for such works done. At the time of passing the interim award, the Arbitral Tribunal did not consider the question of granting interest on the amount from 11.8.2006 as claimed by the contractor and the said question was left open to be decided at a later stage. This was considered when the final award was passed. The Arbitral Tribunal found that the claimant after stopping the work, had requested the respondent to terminate the work as per Ext.C68 notice dated 19.6.2006. But the work done was measured only on 20.2.2007 and the measurements taken were re-checked only on 14.3.2008. The works so done consisted of both extra and excess quantities of work and so it was necessary to get the approval of the final bill on fresh rates as per the supplemental agreements. It was also necessary to execute a supplemental agreement. The Arbitral Tribunal noticed that none of these steps were taken, as the work had been terminated by the contractor, but the respondents still expected the contractor to restart the work. This was evident from the fact that the respondents were repeatedly requesting him to restart and complete the work. The contractor was also not submitting the monthly bills for the works done to the Engineer though he was bound to do so as per the contract (Clause 42.1 of CC). Despite this, the Department used to measure the work and prepare the bills from time to time. The Arbitral Tribunal also noticed the fact that the respondents had measured, prepared and passed six-part bills altogether for an amount of Rs. 8,91,65,267/- till the contract was put an end toby the claimant. However, after the issuance of Ext.C68 and stopping of the work by the contractor, no steps were taken by the respondents to sanction the revised estimate to execute the supplemental agreement and to pay the cost of work done after CC-6 and part bill. A sizeable amount of more than Rs. 2.43 croresremained unpaid. The contractor was deprived of the benefit of this amount for an unduly long period causing loss to him. According to the Tribunal, at least after the work done was measured on 20.2.2007 and check measured on 14.3.2008, the amount due for the work done must be considered due and payable. However, the same was not paid on account of the acts or omissions on the part of the respondents. Therefore, it was held that nonpayment of such huge amounts to the contractor who had carried out substantial work was unjustifiable. The Arbitral Tribunal did notice the default on the part of the contractor to submit bills for the work done by him as enjoined by the contract and observed that, had he done so as stipulated in the contract, some amount of delay could have been avoided. In such circumstances, it was held that allowing a period of three months for processing the papers and finalizing the bill, the amount can reasonably be considered as due and payable from 14.6.2008. It was also found that for the delay caused after 14.6.2008, the contractor could not at all be blamed and that the respondent alone is responsible. Therefore, the majority Arbitral Tribunal concluded that the claimant is entitled to compensation by way of interest on the amount found due from 14.6.2008 till the date of interim award i.e., 24.12.2008 at the rate of 12% as against 18% claimed by him, which would work out to Rs. 15,35,174/-. So the said amount was awarded for the sub claim or item (5)under claim no.1. Accordingly, a total amount of Rs. 27,00,174/- was awardedunder claim no.1.

22. The award of Rs. 15,35,174/- under item no (5) of claim no. 1 was interfered with by the court below on the ground that the amount had never been sanctioned by the authority and hence the contractor could not claim interest on the same. The learned ADJ relying on Associate Builders vs. Delhi Development Authority (2014 KHC 4742) and ONGC Pvt. Ltd. vs. Saw Pipe Ltd. (2003 KHC 1068) held that an award passed by the Arbitrator, if in violation of the principle of judicial approach or in violation of wednesbury reasonableness or ignoring the terms of the contract, is liable to be interfered with in view of Section 34 (2)(b)(ii) or Section 34(2)(a)(iii) of the Act. The learned ADJ also held that the contractor had no case that the respondent had willfully delayed the payments or that they kept the bills submitted by him with an intention to delay the payment. The learned ADJ concluded that the view of the majority arbitrators awarding interest under this head was only based on assumption and not on the basis of evidence and therefore it lacked reasonableness and judicial approach. Holding so, the court interfered with the findings arrived at by the Tribunal and held that the interest awarded under item no. (5) of claim no.1 is not sustainable and proceeded to set aside the same.

23. As noticed earlier, there were a total of 15 claims made by the contractor before the Tribunal. Some of these claims had several sub-items under them. As noticed earlier, claim no.1 had 5 sub items or sub heads under which claims were made. An amount of Rs. 27,00,174/-was awarded by thetribunal for claim no.1 and the total amount of the award comes to Rs. 1,92,35,130/-. Out of this total amount, the award of an amount ofRs. 15,35,174/- for sub-item (5) under claim no. 1 has been set aside by the court below. This is nothing but modification of the amount awarded under claim no.1, as is made clear by the learned ADJ in paragraph 7 of his judgment, which power is not contemplated under S.34.

24. Further, the respondents have no case that the works for which the six - part bills were prepared had not been done by the contractor. On the other hand, the respondents, in spite of the fact that the contractor had failed to submit the bills which he was bound to submit as per clause 42.1 of the CC, had prepared and also passed the six-part bills before the contract was put an end to by the contractor. Had the contractor not completed the works to the satisfaction of the respondents, it is improbable for the latter to have not only prepared the part bills but also to have passed them. That being the position, the Tribunal was eminently right in holding that the contractor was entitled to the amount for the works admittedly done by him and that the respondents were not justified in not paying the amounts due to him. It also needs to be noted that the interest for the entire period claimed by the contractor was not awarded. On the other hand, the failure of the contractor to do his part of submitting the bills as stipulated in the contract, was taken note of and corresponding deductions made on that account. There is nothing perverse or illegal or anything that is shocking the conscience of the court in the finding of the Tribunal on this aspect and therefore the interference by the court below was uncalled for.

25. Moreover, the Hon'ble Supreme Court in Ssangyong (supra) has held that under no circumstance can any Court interfere with an arbitral award on the ground that justice has not been done in the opinion of the Court. That would be an entry into the merits of the dispute which, is contrary to the ethos of Section 34 of the Act.

26. The second aspect on which the court below interfered with the award of the Arbitral Tribunal is relating to claim no.5 which as per the appeal memorandum is relating to “unpaid increased cost in works valued at Rs. 10,20,05,802/- delayed by the respondents beyond 22.7.2005 and prolonged up to 19.6.2006”. Annexure no. 5 in the detailed Statement of Facts and Claims submitted before the Tribunal deals with this claim. The award says that this claim has been amended. The total amount claimed by the claimant under this head was Rs. 5,45,58,280/-. This claim consists of 6 items or 6 sub claims. The findings relating to this claim is contained in paragraphs 101 to 106 of the award i.e., at pages 107 to 112 of the award (running pages 249 to 254 of the appeal paper book). Out of the 6 sub items, item no.1 was disallowed and for items 2 to 6, the Arbitral Tribunal awarded an amount of Rs. 1,15,00,000/-. According to the Arbitral Tribunal, items 2 to 6 of claim no.5are claims relating to enhancement in rate of labour, materials etc. for carrying out the work beyond the original period of 12 months. These are works coming within the principal contract as modified by supplementary agreement no.3. The Tribunal concluded that the contractor is entitled to compensation for the loss suffered on account of increase in price of labour, materials, oil, lubricants etc. The Tribunal noticed that the quantum of compensation claimed against items 2 to 6 were too exorbitant and that it required to be reduced substantially. The tribunal was not inclined to accept the evidence that was produced by the claimant relating to a different but similar work. It was held that the claim made for increased rate on the basis of a different agreement even though they were fixed contemporaneously, could not be accepted. However, the Tribunal noticed the fact that work was delayed beyond the original date of completion and extension of time was granted by the respondents on the ground that the contractor was not responsible for the delay as per order dated 28.10.2005 of the second respondent. Hence, the Arbitral Tribunal found that the contractor was entitled to the benefit of price adjustment as provided in clause 47 of the C.C. read along with clause 26 of the Contract Data and that the denial of such benefits during the continuation of the work was illegal. The method adopted by the Tribunal for arriving at the figure of Rs. 1,15,00,000/- reads thus - “In anattempt to find out what would roughly be the price adjustment benefit for which the claimant might be entitled to get if the provision in clause 47 is strictly applied, we have just gone through indices of labour, cement, steel, bitumen, P.O.L., plant, machinery, spares and others prior to 28 days from the date of tender and subsequent indices on the date of payment of C.C. and part bills. From the examination we find that except in the case of bitumen, as regards all other prices have gone up and if calculated in the manner provided in clause 47 of the C.C. and para 26 of the C. D. and as modified by us it will work out to less than Rs.112 lakhs. However taking all the relevant facts and circumstances of the case we find that a total amount of Rs.1,15,00,000/- is awardable as price adjustment benefit towards compensation for losses incurred as a result of carrying on the work beyond the original period of one year as the extension was not for any reason attributable to the claimant. We accordingly allow the claim to the extent of Rs.1,15,00, 000/-.”

27. This finding of the Arbitral Tribunal also did not find favour with the learned ADJ. The respondents before the court below contended that the contractor had been permitted to carry out the work beyond the original period of the contract only on the condition that no enhancement in the rate would be allowed and the said condition was incorporated in Ext.R16 supplementary agreement. It was pointed out on behalf of the contractor that the said claim was not based on the enhanced rate as per Ext.R16 supplementary agreement but on account of increase in the price of materials, cost of labour and transport etc. and due to the delay, default, latches as well as the breach of contract committed by the respondents. The court below held that neither the claimant nor the respondents could be said to have committed any breach of contract as alleged by them against each other. The contractor was permitted to carry out the work after the original period only on condition that no enhancement would be allowed and if that be so, the contractor would not be entitled to rely on the general terms of the original contract for claiming any enhancement in the rate for the work carried out after the original period of the contract. It was further held that the general provisions contained in the original contract could be availed only if the work had been executed within the original period and therefore it was impermissible to extend such benefit to the work executed beyond the original period of the contract. The court further held that while granting extension of the period as per Ext.R16 supplementary agreement, the contractor was well aware that he could not claim any enhancement in rate on account of increase in the price of materials, cost of labour, transport etc. Though the contractor claimed that he had executed Ext.R16 supplementary agreement under coercion, he failed to prove the said allegation against the respondents. But the arbitrators failed to consider the very basis of Ext.R16 supplementary agreement in its correct perspective along with the intention of the parties while awarding compensation under the said head. It was also held that Ext.R16 supplementary agreement was executed with a specific intention to restrain the contractor from making any claim for enhancement in the price of materials, cost of labour, transport etc. for the work executed after the original period of the contract. Finding so, it was held that it was impermissible for the Arbitral Tribunal to have awarded any amount to the claimant under this claim overlooking the supplementary contracts entered into between the parties. It was also held that when the allegation of coercion in execution of Ext.R16 contract had been negatived by the tribunal, the reason for the delay in carrying out the work in accordance with the original contract and the question as to who was responsible for the breach of the original contract are irrelevant considerations and therefore awarding any amount to the contractor under the said head is against the terms of Ext.R16 supplementary contract. The court below relying on the decisions of the Apex court cited in the judgment held that if an award is passed against the terms of the contract, it would be a patent illegality and, in such circumstances, the court would be justified in interfering with it under Section 34 of the Act. Finding so, the court below held that in the absence of any breach of the contract by the respondents, they cannot be directed to pay any compensation to the contractor overlooking the specific terms of the supplementary contract and hence the challenge made by the former to the findings arrived at by the majority arbitrators awarding an amount of Rs. 1,15,00000 in favour of thecontractor, was upheld.

28. This finding of the court below is apparently incorrect. The Arbitral Tribunal in paragraph 104 of the award has noticed that these works come under the principal contract as modified by supplementary ag

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reement no.3. Here the relevant clauses in the CC (Annexure A1 in this appeal) need to be referred to. – “Clause 42 Payment certificates 42.1 The contractor shall submit to the Engineer monthly statements of the estimated value of the work completed less the cumulative amount certified previously. 42.2 The Engineer shall check the Contractor's monthly statement within 14 days and certify the amount to be paid to the Contractor after taking into account any credit or debit for the month in question in respect of materials for the works in the relevant amounts and under conditions set forth in sub-clause 51(3) of the Contract Data (Secured Advance). 42.3 The value of work executed shall be determined by the Engineer. 42.4 The value of work executed shall comprise the value of the quantities of the items in the Bill of Quantities completed. 42.5 The value of work executed shall include the valuation of Variations and Compensation Events. 42.6 The Engineer may exclude any item certified in a previous certificate or reduce the proportion of any item previously certified in any certificate in the light of later information. 43. Payments 43.1 Payments shall be adjusted for deductions for advance payments, retention, other recoveries in terms of the contract and taxes at source, as applicable under the law. The Employer shall pay the Contractor the amounts certified by the Engineer within 28 days of the date of each certificate. If the employer makes a late payment, the Contractor shall be paid interest on the late payment in the next payment. Interest shall be calculated from the date by which the payment should have been made upto the date when the late payment is made at 12% per annum. (43.2 and 43.3 omitted) 44. Compensation Events 44.1 The following are Compensation Events unless they are caused by the Contractor. (a) The Employer does not give access to a part of the Site by the Site Possession Date stated in the Contract Data. (b) …........... (c) …......... (d) …....... (e) …....... (f) Ground conditions are substantially more adverse than could reasonably have been assumed before issuance of Letter of Acceptance from the information issued to Bidders (including the Site Investigation Reports), from information available publicly and from a visual inspection of the site. (g) …............ (h) Other Contractors, public authorities, utilities or the Employer does not work within the dates and other constraints stated in the Contract, and they cause delay or extra cost to the Contractor. (i) The advance payment is delayed, beyond 28 days after receipt of application and bank guarantee. (j) …......... (k) ….......... (l) …........... 44.2. If a Compensation Event would cause additional cost or would prevent the work being completed before Intended Completion Date, the Contract Price shall be increased and / or the Intended Completion Date is extended. The Engineer shall decide whether and by how much the Contract Price shall be increased and whether and by how much the Intended Completion Date shall be extended. 44.3. As soon as information demonstrating the effect of each Compensation Event upon the Contractor's forecast cost has been provided by the Contractor, it is to be assessed by the Engineer and the Contract Price shall be adjusted accordingly. If the Contractor's forecast is deemed unreasonable, the Engineer shall adjust the Contract Price based on Engineer's own forecast. The Engineer will assume that the Contractor will react competently and promptly to the event.” 29. Therefore, as per the terms of the original agreement itself, if the respondents had not given access to part of the site by the possession date stated in the contract, the Contractor was entitled to be compensated. Here admittedly, possession of the entire site was not handed over for very many reasons and the Arbitral Tribunal had found that neither party could be exclusively held responsible for the delay. It was after a consideration of all the facts and circumstances in the case, the Arbitral Tribunal had awarded an amount of Rs. 1,15,00,000/- under this head. Therefore, there is nothingperverse or illegal in the findings of the Arbitral Tribunal warranting an interference by the court below under Section 34(2) of the Act. Hence the appellant succeeds. Accordingly, the appeals are allowed and the impugned common judgment is set aside and the award of the majority arbitrators is restored. Parties shall suffer their respective costs. Pending applications if any, shall stand disposed of.