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Calcutta High Court · body

1990 DIGILAW 357 (CAL)

Nikunja Behari Halder v. Calcutta Metropolitan Development Authority

1990-08-29

MONORANJAN MULLICK

body1990
JUDGMENT This is an application under Section 30 read with Section 33 of the Indian Arbitration Act filed by the Award-bolder. The facts are briefly as follows : On 27th January, 1984 the Calcutta Metropolitan Development Authority (hereinafter referred co as C.M.D.A) issued a N. I. T. No. 4 of 1983-84 under tender No.7. On or about 6th February, 1984 C.M.D.A. being the respondent issued a corrigendum relating to balance road work for Park Circus Connector (Eastern Metropolitan Bye-pus) including construction of retaining wall, dwarft walls drainage work etc. The estimated cost was shown as Rs. 4,98,771.06p. but the real cost would be about Rs.98 lakhs. On or about 2nd Much, 1984 the petitioner submitted a tender for a total cost of Ra.46 lakhs which was 7.77% less than the estimated cost. The said tender was accepted by the respondent. By the order dated 28th Much, 1984 the respondent issued a work order in the business name of the petitioner and a contract was thereafter signed between the parties. In terms of the tender condition was thereafter singned completed within six months which was to execute on 27th September, 1984. By a letter dated 27th September, 1984 the petitioner applied to the Executive Engineer for extension of time at least 90 days to complete the job. No extension was communicated to the petitioner till 5th November, 1984. During this period the petitioner also carried on work with his own materials. The extension of time was subsequently however, granted by 5th November, 1984 upto 12th November, 1984 However, by a letter dated 12th November, 1984 the respondent purported to terminate the contract. Over such illegal termination of contract ultimately in terms of the arbitration agreement, the Chief Executive, C. M. D. A. referred the matter including all dispute and claims which the petitioner might have to the arbitration of the Director (S & D) Sector, C.M.D.A. on the basis of the said arbitration agreement. However, as the previous Arbitrator was not proceeding with the matter with reasonable dispatch the petitioner filed an application for change of Arbitrator before his Court and by the order dated 13th July, 1988 this Court in Matter No. 1987 of 1988 removed the authority of the appointed Arbitrator and appointed Sri Sambhu Chandra Ghosh, a former Chief Justice of this Court in place and stead of the previous Arbitrator. Sri Sambhu Chandra Ghosh made a award on 12th May, 1990. 2. The petitioner has in this application under Section 30 read with Section 33 of the Indian Arbitration Act challenged only two portions of the award. The sum of Rs. 4,98,771.06 p. which has been ordered to be deducted from the claim of the petitioner on the ground that the respondent was entitled to the said amount of penalty being the 10% of the gross value of the tender work. The petitioner has also challenged the award of Rs. 61.743.26 p. for the value of the excess work done by the petitioner after 27th November, 1984 and has claimed that part of the award may be rectified by enhancing the value of the said excess work to Rs.7 lakhs. It is therefore, prayed that the award dated 12th May, 1990 be set aside and/or rectified by deleting the deductions of Rs. 4,98,771.06 p. and by substituting the dues of the petitioner from Rs. 61,743.28 p. to Rs. 7 lakhs for the value of the excess work done by the petitioner after 27th September, 1984. 3. The respondent contest this petition contending, inter alia, that the petitioner under the provisions of Section 30 cannot pray for partial setting aside of the award and the application is therefore not maintainable. It is also submitted that the Arbitrator on considering the whole evidence on record and having been satisfied that the imposition of penalty under Clause 2 of the tender agreement being not arbitrable rightly affirmed the imposition of penalty under Clause 2 of the contract and did not commit any illegality whatsoever in deducting the said amount of penalty from the total claim awarded to the petitioner. It is also submitted that the amount awarded for the extra work done was on the basis of the evidence produced by the parties before the Arbitrator which arc all question of fact which this Court cannot interfere when the award of the Arbitrator is based on evidence and this Court does not sit in appeal over the award of the Arbitrator. 4. At affidavit-in-reply has been filed by the petitioner challenging all these contentions of the respondent. 5. At the time of the hearing Mr. Majumdar appearing for the petitioner has not pressed the second claim of the petitioner i. e. claim regarding the extra work done after 24th September, 1990. 4. At affidavit-in-reply has been filed by the petitioner challenging all these contentions of the respondent. 5. At the time of the hearing Mr. Majumdar appearing for the petitioner has not pressed the second claim of the petitioner i. e. claim regarding the extra work done after 24th September, 1990. He only submits that when there was no penalty imposed under Clause 2 of the tender agreement by the respondent and when admittedly the Clause 2 of the contract was not arbitrable then the Arbitrator having come to the finding that the said penalty was not arbitrable relying on the decision of the Supreme Court reported in (1) AIR 1989 SC 952 equivalent to 1989(1) SCC 657 , Viswanath sood v. Union of India and Another yet himself calculated the amount of penalty and deducted the said amount of penalty from the claim awarded to the petitioner. My attention has been drawn to the above decision of the Supreme Court and Mr. Majumdar has submitted that in Viswanath Sood's case the similar provision in the contract being Clause 2 providing for compensation of delay having been found by the Supreme Court not subject matter of arbitration under Clause 25 of the contract which contains the arbitration clause specifically excluded from the award of the arbitration the amount of compensation of Rs. 20,000/- awarded by the Arbitrator in favour of the Government alleged to be imposed under Clause 2 of the agreement and ordered the same to be deleted from this award. Mr. Majumder points out that in the Supreme Court decision Rs. 24.000/- was claimed by the Union of India by way of counter claim before the Arbitrator being the penalty imposed under Clause 2 of the contract and the Arbitrator awarded Rs. 20,000/- by way of penalty under Clause 2 of the contract but the learned Single Judge before whom the award was challenged ordered the said amount to be deleted on the ground that the imposition of penalty under Clause 2 was not arbitrable and the Arbitrator had no authority to award the said amount by way of counter claim of the respondent. He further submits that Division Bench in Appeal took the contrary view that the imposition of penalty was arbitrable and affirmed the award of Rs. 20,000/- in favour of the respondent Union of India. He further submits that Division Bench in Appeal took the contrary view that the imposition of penalty was arbitrable and affirmed the award of Rs. 20,000/- in favour of the respondent Union of India. In appeal before the Supreme Court the question arose as to whether the penalty awarded under Clause 2 was arbitrable or not. The Supreme Court having found that the penalty awarded under Clause 2 was not arbitrable set aside the order of the Division Bench and restored that of the learned Single Judge And ordered that the amount of compensation of Rs. 20.000/- under Clause 2 of the contract awarded by the Arbitrator in favour of the Government will stand deleted. 6. Referring the above decision of the Supreme Court it is submitted by Mr. Majumdar that in this case there was merely a notice for imposition of a future penalty under Clause 2 of the contract which would be gathered from the notice annexed in the petition being Annexure "B". He also submits that there was no final order or the concerned authority imposing penalty under Clause 2, that in the counter statement of the C. M. D. A. no amount of penalty as awarded by the Arbitrator was claimed by way of counter claim, that the arbitrator calculate the amount of penalty and then directed the said amount of penalty to be deducted even though the Arbitrator himself indicated in that part of the order that the imposition of penalty under Clause 2 was not arbitrable and cannot be questioned by him. It is the before, submitted that the error of the Arbitrator is apparent on the face of the record and the award is other wile invalid and the amount of penalty being Rs. 4,98.771.06/- which has been ordered to be deducted from the claim of the petitioner be deleted from the award. 7. On behalf of the respondent is submitted that when the amount of penalty was not arbitrable the Arbitrator did not commit ant illegality whatsoever nor was there any error apparent on the face of the record when the Arbitrator in view of the notice imposing penalty affirmed the imposition of penalty and the imposition of penalty not being did not commit any illegality by directing the said amount of penalty to be deducted form the claim of the petitioner. 8. 8. On hearing submission made by both the parties and on perusing the Supreme Court judgment already referred to the above I find that as in the contract which was subject matter of the Supreme Court decision in the present contract also there was a similar Clause 2 by which for delay in completion of contract the C. M. D.A. had the authority to impose penalty. It is also not disputed that such a notice was given by C. M. D. A. to impose penalty with effect from 1st August, 1984. But that was a notice for imposition of penalty from a future date. There is nothing to show that any imposition of penalty has ultimately been made. The Supreme Court in Viswanath Sood’s case has clearly held that the concerned authority has to take an administrative as to whether the full penalty would be imposed or not and the authority has also the power to waive the penalty. It is also dear from the judgment of the Supreme Court that according to Supreme Court the imposition of penalty under Clause 2 of the contract was not automatic. It is also clear from the judgment of the Supreme Court that such imposition of penalty if made is not arbitrable. The contract entered into between the petitioner and the respondent has also the arbitration clause being Clause 25 and the Raid arbitration clause also provides as follows: "Except where otherwise provided in the contract all questions and disputes .................. shall be referred to the sole arbitration of the person appointed by the Chief Engineer." While construing the similar arbitration clause in the contract the Supreme Court has clearly held that imposition of penalty under Clause 2 is not arbitrable. Both the learned Advocate for the petitioner and the learned Advocate for the respondent agree that the penalty if imposed under Clause 2 of this contract also is not arbitrable. In the Supreme Court judgment also both the parties were in agreement that when a penalty is imposed under Clause 2 of the agreement such imposition of penalty was not arbitrable. In the Supreme Court judgment also both the parties were in agreement that when a penalty is imposed under Clause 2 of the agreement such imposition of penalty was not arbitrable. In view of the above position the Supreme Court upheld the decision of the learned Single Judge that even if in the counter claim the penalty imposed under Clause 2 was claimed by the respondent, Union of India, the Arbitrator was not justified in awarding that amount as the imposition of penalty was not arbitrable. In this case also Arbitrator in the relevant portion of the award also admitted the position that the imposition of penalty under Clause 2 was not arbitrable and be could not call in question such imposition of penalty. But when Viswanath Sood’s case the Supreme Court upheld the Judgment of the learned Single Judge that the Arbitrator was not justified in awarding the amount of penalty imposed as it was not arbitrable yet the Arbitrator relied on that judgment but himself calculated the amount of penalty which Wall not admittedly arbitrable and deducted the said amount from the claim of the respondent. That is the error apparent on the face of the award. The Arbitrator in the same portion of the award having found that the imposition of penalty under Clause 2 was not arbitrable appears to have arbitrated over the amount of penalty and he only thought that the quantum of penalty was not arbitrable and cannot be refined to arbitration. It is not disputed by the Respondent that the respondent did not claim the amount of penalty in his counter statement. But the Arbitrator has ordered the deduction of Rs. 4,98,771.06 p. as according to him that shall be the total amount of penalty under Clause 2 of the contract. Therefore it is an error on the face of the record and the award is also otherwise invalid as the amount is expressly excluded from the purview of arbitration by the Arbitrator to be within his reference. 9. 4,98,771.06 p. as according to him that shall be the total amount of penalty under Clause 2 of the contract. Therefore it is an error on the face of the record and the award is also otherwise invalid as the amount is expressly excluded from the purview of arbitration by the Arbitrator to be within his reference. 9. On behalf of the respondent is submitted that if it be conceded the awarding of penalty and deducting the sums from the claim a warded under para (A) to the a ward is all error apparent on the face of the award and is otherwise invalid, then in that case this Court has to set aside the bole award even if a portion of the award appears to be illegal. 10. But in (2) Upper Ganges Valley Electricity Supply Co. v. U. P. Electric Supply reported in AIR 1973 SC 683 and (3) Mattapally Cheeamayya v. Mattapally Venkataratnam reported in AIR 1972 SC 1121 the Supreme Court has held that where the error which has occured in the award relates to a matter which is distinct and separable from the rest of the award, the part which is invalid being separable from that which is valid, there is no justification for setting aside the whole award. I find that in Viswanath Sood's case the Supreme Court bas also ordered deletion of the portion of the award being the amount of penalty of Rs. 20,000/- and allowed the remaining portion of the award to stand. In view of the above I allow the petitioner's application and direct that the portion of the award by which the Arbitrator has ordered Rs. 4,98,771.06 p. to be deleted from the claim (A) to the award is hereby deleted. The amount of interest payable to the petitioner will be worked out on the basis of the award as modified in the above. There will be no order as to costs. 11. All parties to act on the signed copy of the operative portion of this judgment on the usual undertaking. The stay of the operation of this judgment and order is prayed for by the respondent but the same is refused.