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1991 DIGILAW 213 (BOM)

International Airport Authority of India v. Three Circles

1991-04-16

D.R.DHANUKA

body1991
JUDGMENT - DHANUKA D.R., J.:---By this petition filed under section 33 read with section 30 of the Arbitration Act, 1940, International Airports Authority of India has impugned the validity of award dated 15th November, 1989 made by Shri R.K. Katti, an expert and experienced Civil Engineer and the former head of the Civil Engineering Department I.I.T., Bombay, in his capacity as the sole arbitrator duly appointed by the Chief Engineer of the petitioner in exercise of power conferred on him under Clause 25 of Agreement dated 4th July, 1986. By the said award, the learned Arbitrator has rejected some of the claims preferred by the respondent and has allowed the remaining. By the impugned award, the Arbitrator has directed the petitioner to pay a sum of Rs. 3,45,507.65 P. and interest to the respondent as set out therein. 2. I have heard Counsel at length. I have gone through the pleadings and record of arbitration proceedings. 3. I must state at the outset that in my opinion there is no merit whatsoever in the grounds of challenge and the petitions is liable to fail for the reasons set out hereinafter. 4. The material facts are as under :- (a) On 11th July, 1985, the petitioner invited tenders for construction of 20-M Span RCC Bridge at Chainage 285-M on exit road from Pn-II Carpark to Link Road Junction, at Bombay Airport, Bombay. On 11th March 1986, the petitioner accepted the tender of the respondent, the same being the lowest, i.e. in the sum of Rs. 28,93,375/-. On 11th March, 1986, the petitioner issued the necessary works order for carrying out of the abovereferred work. It was a condition of the works order that the contract work must be completed by the respondent within six months from the date of commencement. On 4th July, 1986, a written contract was executed between the price of work, i.e. claim for escalation in the contingency specified therein to certain extent. The respondent could invoke Clause 10(C) of the said contract it there was an increase in price of material to be incorporated in the contract work (other than the material supplied by the petitioner) or the cost of labour as a result of a statutory order in excess of 10% subject to conditions prescribed thereby. Clause 25 of the said Agreement constitutes the arbitration clause. Clause 25 of the said Agreement constitutes the arbitration clause. The said clause is in widest possible language and enures for arbitration of all claims whatsoever in any way concerning the work or in any way arising out of or relating to the contract and would thus include claim for extras or escalation even on the basis of quantum meruit in the absence of an express or implied prohibition in the contract barring the claim in question. (b) Right from the beginning, the respondent had to face problems in respect of execution of project for no fault of the respondent. The adjoining owner of the land started litigation in the Bombay City Civil Court. Water pumps installed by the farmers on the site obstructed the work of excavation. The entire site could not be made available by the petitioner to the respondent. The agreement item of cement concrete 1 : 11/2 : 3 was found unworkable. Structural design of the bridge was changed by the petitioner midway. Specifications for use of cement concrete were changed by the petitioner. Originally the petitioner had planned for construction of a rectangular bridge. Soon after the contract, the planning was modified by the petitioner and the petitioner called upon the respondent to construct a skew bridge. Because of these problems, the work could not be completed by the respondent within time as originally stipulated for no fault of the respondent. Time for completion of work had therefore to be extended. The work was ultimately completed by the respondent on 20th June, 1987. On or about 5th September, 1988, the respondent signed the final bill prepared by the petitioner under protest. On 16th September, 1988, the respondent submitted its bill for escalation to the petitioner in the sum of Rs. 1,47,794. P. invoking inter alia "Clause 10(cc)", which clause does not form part of the agreement in this case. It is obvious that the respondent invoked the said clause by mistake. It is not disputed that the respondent made the claim for escalation on general principles of law and equity in accordance with the prevailing practice. The said claim is not covered by Clause 10(C) of Agreement dated 4th July, 1986. It is obvious that the respondent invoked the said clause by mistake. It is not disputed that the respondent made the claim for escalation on general principles of law and equity in accordance with the prevailing practice. The said claim is not covered by Clause 10(C) of Agreement dated 4th July, 1986. By its letter dated 5th December, 1988, the petitioner rejected the claim of the respondent for esclaration on the ground that the only escalation clause to be found in the contract was Clause 10(C) and the respondent could not make the claim for escalation apart from the said clause. (c) On 29th November, 1988, the respondent invoked the arbitration clause in respect of eight claims specified in its letter dated 29th November, 1988 addressed to the Chief Engineer. On 20th March, 1989, the Chief Engineer appointed Shri R.K. Katti, an expert Civil Engineer, as the sole arbitrator. The Arbitrator awarded claims Nos. 1 and 6 in full and claim No. 4 in part. The Arbitrator rejected rest of the claims made by the respondent. Parties filed large number of documents and also written submissions before the arbitrator. Clause 10(C) of the said agreement reads as under: "10(C). If during the progress of the works the price of any materials incorporated in the works (not being materials supplied from the Engineer-in-charge's stores in accordance with Clause 10 hereof) and/or wages of about increases as a direct result of the coming into force any fresh law, or statutory Rule or order (but not due to any changes in sales tax) and such increase exceeds ten per cent of the price and/or wages : Prevailing 'at the time of receipt of the tender' for the work and the contractor thereupon necessarily and properly pays in respect of that material (incorporated in the works) such increased price and/or wages : Prevailing 'at the time of receipt of the tender' (incorporated in the works) such increased price and/or in respect of layout engaged on the execution of the work such increased wages, then the amount of the contract shall accordingly be varied provided always that any increase so payable is not, in the opinion of the Chief Engineer/Project Director (Whose decision shall be final and binding) attributable to delay in the execution of the contract within the control of the contractor. Provided however, no reimbursement shall be made if the increases is not more than 10% of the said prices/wages, and if so, the reimbursement shall be made only on the excess over 10% and provided further that any such increase shall not be payable if such increase has become operative after the contract or extended date of completion of the work in question. If during the progress of the works the price of any material incorporated in the works (not being material supplied from the Engineer-in-charge's stores in accordance with Clause 10 hereof) and/or wages of labour is decreased as a result of the coming into force of any fresh law or statutory Rule or order (bit not due to any changes in sales-tax) and such decrease exceeds ten per cent of the prices and/or wages prevailing at the time of receipt of the tender for the work, International Airports Authority of India (i.e. the petitioner herein) shall in respect of materials incorporated in the works (not being materials supplied from the Engineer-in-charge's stores in accordance with Clause 10 hereof) and/or labour engaged on the execution of the work after the date of coming into force of such law, statutory Rule or order be entitled to deduct from the dues of the contractor such amount as shall be equivalent to difference between the price of materials and/or wages as they prevailed at the time of receipt of the tender for the work minus ten per cent thereof and the prices of material and/or wages of labour on the coming into force of such law, statutory rule or order. The contractor shall, for the purpose of this condition keep such books of account and other documents as are necessary to show the amount of any increase claimed or reduction available and shall allow inspection of the same by a duly authorised representative of International Airports Authority of India (i.e. the petitioner herein) and further shall, at the request of the Engineer-in-charge furnish verified in such a manner as the Engineer-in-charge may require, any documents so kept and such other information as the Engineer-in-charge may require. The contract shall within a reasonable time of his becoming aware of any alteration in the price of such material and/or wages of labour give notice thereof to the Engineer-in-charge stating that the same is given pursuant to this condition together with all information relating thereto which he may be in a position to supply." Clause 25 of the said agreement reads as under :- "25. Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specification designs, drawings and instructions hereinabefore mentioned and as to the quality if workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever, in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the work or the execution or failure to execute the same whether arising during the progress of work or after the completion or abandonment thereof shall be referred to the sole arbitration of the person appointed by the Chief Engineer, International Airports Authority of India, in charge of the work at the time of dispute or if there be no Chief Engineer, the administrative head of the Department of Engineering of the said authority at the time of such appointment. It will be no objection to any such appointment that the Arbitrator so appointed as an International Airports Authority of India's Employee that he had to deal with the matters to which the contract relates and that in the course of his duties as International Airports Authority of India's Employee he had expressed views on all or any of the matters in dispute or difference. The Arbitrator to whom the matter is originally referred being transferred or vacating his office or being unable to act for any reason, such Chief Engineer or administrative head of the Department of Engineering as aforesaid at the time of such transfer, vacation of office or inability to act, shall appoint another person to act as arbitrator in accordance with the terms of the contract. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor. It is also a term of this contract that no person other than a person appointed by such Chief Engineer or administrative head of the Department of Engineering of the authority as aforesaid should act as arbitrator and if for any reason, that is not possible, the matter is not to be referred to arbitration at all. In all cases, where the amount of the claim in dispute is Rs. 50,000/- (rupees fifty thousand) and above, the arbitration shall give reasons for the award. Subject as aforesaid, the provisions of the Arbitration Act, 1940 or any statutory modification or re-enactment thereof and the Rules made thereunder and for the time being in force shall apply to the arbitration proceeding under this clause. It is a term of the contract that if the contractor does not/do not make any demand for arbitration in respect of any claim(s) in writing within 90 days of receiving the intimation from the authority that the Bill is ready for payment, the claim of the contractors will be deemed to have been waived and absolutely barred and the authority shall be discharged and released to all liabilities under the contract in respect of these claims. The arbitrator(s) may from time to time with consent of the parties enlarge the time for making and publishing the award." 5. Shri M.H. Shah, the learned Counsel for the petitioner, has impugned the award in respect of claim No. 6, i.e. for escalation amount, on two grounds:- (a) That the arbitrator has ignored the plain provisions of the contract dated 4th July, 1986. The said award prohibits and bare claim for escalation except in cases falling under Clause 10(C) of the Agreement. The impugned award is in excess of jurisdiction of the arbitrator and suffers from legal misconduct and error apparent on the face of the award. (b) That there was no evidence whatsoever before the arbitrator on the basis of which the said claim could be awarded. 6. It is well settled that the interpretation of a contract is for the Arbitrator and the award is final both on facts and law. (b) That there was no evidence whatsoever before the arbitrator on the basis of which the said claim could be awarded. 6. It is well settled that the interpretation of a contract is for the Arbitrator and the award is final both on facts and law. It is equally well settled that if the view taken by the Arbitrator is a plausible view, the Court cannot interfere with the award and substitute its own view in place of the view taken by the Arbitrator, as powers of the Court to set aside an award are circumscribed under section 30 of the Act. It is common ground that the respondent has not invoked Clause 10(C) of the contract in support of its claim for escalation. Clause 10(cc) may perhaps be found in some contract but does not form part of the contract dated 4th July, 1986. The respondent is relying on width of Clause 25 of the contract in support of their plea that the Arbitrator had jurisdiction to entertain and accept the said claim. Shri Rahimtoola, the learned Counsel for the respondent, has argued with considerable force that Clause 10(C) of the contract cannot be interpreted to mean that the contract dated 4th July, 1986 prohibits making of a claim for extra amount under the law of the land on the basis of quantum meruit or otherwise in the contingencies not specified in Clause 10(C) of the contract. Shri Rahimtoola appears to be right. There is no express provision in the contract barring claim for escalation in other situation. The dispute raised pertains to interpretation of Clause 10(C) of the contract and the implications, if any, arising therefrom. The interpretation of the contract was left by the parties to the arbitrator. The Arbitrator was entitled to take the view which he took on interpretation of the contract. The impugned award is thus not assailable even if the Court would have interpreted Clause 10(C) of the contract differently. The Court is not concerned with reasonableness of the reasons. The view taken by the Arbitrator is a plausible view. In the case of (M/s. Sudarsan Trading Co. The impugned award is thus not assailable even if the Court would have interpreted Clause 10(C) of the contract differently. The Court is not concerned with reasonableness of the reasons. The view taken by the Arbitrator is a plausible view. In the case of (M/s. Sudarsan Trading Co. v. The Government of Kerala and another)1, reported in A.I.R. 1989 S.C. 890, it was held by the Apex Court that interpretation of the contract was a matter for the Arbitrator and the Court could not substitute its own view in place of the view of the Arbitrator. 7. Shri M.H. Shah, the learned Counsel for the petitioner, relied on the judgment of the Hon'ble Supreme Court in the case of (Thawardas Pherumal and another v. Union of India)2, reported in A.I.R. 1955 S.C. 468. Shri Shah submitted that the impugned award was assailable, as the Arbitrator had awarded the claim for escalation in teeth of a provision in the contract prohibiting entertainment of such a claim. Clause 10(C) of the contract provides for sanction of claim for escalation in specified contingencies. It does not follow therefrom that the said clause prohibits the Arbitrator duly appointed under Clause 25 of the contract from accepting the claim for escalation in other situations. Shri Shah relied on paragraphs 7 and 8 of the abovereferred judgment in particular. It is enough to refer to Clause 6 of the agreement construed by the Hon'ble Supreme Court in the abovereferred case. The said clause read as under: "The Department will not entertain any claim for ideal labour or for damage to unburnt bricks due to any cause whatsoever." In view of an express prohibition in the contract in terms aforesaid, the Court held that the award made by ignoring the abovereferred clause was without jurisdiction. No such clause exists in the contract in our case. No such clause can be inferred by necessary implication in our case. The language of Clause 10(C) of the contract does not warrant any such implication. The view taken by the Arbitrator is a plausible view. 8. The learned Counsel for the petitioner also relied on another judgment of the Hon'ble Supreme Court, i.e. in the case of (Continental Construction Co. Ltd. v. State of M.P.)3, reported in A.I.R. 1988 S.C. 1166. This case is also, with respect, clearly distinguishable. The view taken by the Arbitrator is a plausible view. 8. The learned Counsel for the petitioner also relied on another judgment of the Hon'ble Supreme Court, i.e. in the case of (Continental Construction Co. Ltd. v. State of M.P.)3, reported in A.I.R. 1988 S.C. 1166. This case is also, with respect, clearly distinguishable. In paragraph 10 of this judgment, the Hon'ble Supreme Court inter alia observed as under :- "It has to be borne in mind that in the instant case there are specific clauses referred to hereinbefore which barred consideration of extra claims in the event of price escalation. That was not so in Tarapore and Co.'s case. That made also the difference." In the case of Continental Construction Co. Ltd. (supra), the Hon'ble Supreme Court distinguished the case of (M/s. Tarapore and Company v. Cochin Shipyard Ltd., Cochin, and another)4, reported in 1982(2) S.C.C. 60, where the claim for escalation was upheld. The ratio of the judgment of the Hon'ble Supreme Court in the case of Continental Construction Co. Ltd. (supra) is of no assistance to Shri Shah in view of there being no clause in the contract dated 4th July, 1986 prohibiting the award of escalation amount, if a case was made out on facts and in law to the satisfaction of the Arbitrator in that behalf. 9. I have taken similar view in the case of Arbitration Petition No. 62 of 1985 in Award No. 12 of 1985, (Union of India v. M.N. Dastur and Company (P). Ltd.)5, in my judgment delivered on 19th November, 1990. 10. The learned Counsel for the respondent, Shri Rahimtoola, rightly relied on the judgment of the Hon'ble Supreme Court in the case of (S. Harcharan Singh v. Union of India)6, reported in 1990(2) SCALE 413 and the Division Bench judgment of our High Court in the case of (M/s. Noor Mohamed and Sons v. International Airports Authority of India)7, Appeal No. 213 of 1988 in Arbitration Petition No. 125 of 1987 judgment dated 21st February, 1991 delivered by Pendse and Jhunjhunwala, JJ.). I am in complete agreement with the view expressed in the abovereferred judgments cited by Shri Rahimtoola. I am bound by the ratio of the abovereferred judgments. I respectfully follow the reasoning of these decisions. 11. It does not appear to be necessary to multiply authorities. I am in complete agreement with the view expressed in the abovereferred judgments cited by Shri Rahimtoola. I am bound by the ratio of the abovereferred judgments. I respectfully follow the reasoning of these decisions. 11. It does not appear to be necessary to multiply authorities. I feel that the abovereferred discussion of authorities cited by Counsel is adequate for fair disposal of this petition. 12. It is also not possible to accept the second limb of Shri Shah's submission and hold that the award is not based in any evidence or material. The arbitrator was an expert Arbitrator. The respondent appears to have produced evidence in respect of some other transaction to considerate its claim. Even the petitioner has relied on Standard C.P.W.D. Manual. The Arbitrator has applied standard formulate which are usually applied in such cases, i.e. C.P.W.D. Manual, etc. for scrutiny of the claim for escalation. The Arbitrator has made his own calculations and has done his own exercise in the matter. It is not for this Court to assess or evaluate the material on record once again and examine the question as to whether the material on record was adequate or not so as to sustain the award. Clause 10(C) of the contract prescribes rendering of particular kind of proof if the claim for escalation was within the scope and ambit of the said clause. The said clause cannot be applied mutatis mutandis to claims for escalation not covered under Clause 10(C) of the agreement. In case of other clauses for escalation not covered under Clause 10(C) of the contract, the Arbitrator was not bound to require same kind of proof as prescribed only for the purpose of applying Clause 10(C) of the contract. 13. Shri Shah did not pursue his challenge to the award in respect of award of extra amount for extra use of cement concrete, etc. i.e. in respect of item No. 1. Even otherwise, there is no legal merit whatsoever in the challenge. 14. Shri Shah submitted that the arbitrator had made calculation mistake to the extent of about Rs. 3,000/- while awarding a sum of Rs. 23,887/- to the respondent in respect of claim No. 4. Shri Rahimtoola submitted that no such plea was to be found in the petition. Even otherwise, there is no legal merit whatsoever in the challenge. 14. Shri Shah submitted that the arbitrator had made calculation mistake to the extent of about Rs. 3,000/- while awarding a sum of Rs. 23,887/- to the respondent in respect of claim No. 4. Shri Rahimtoola submitted that no such plea was to be found in the petition. It is not possible to examine this ground in a petition to set aside an award in the absence of clear data. The dispute is purely factual. There is no merit in this ground of challenge also. 15. No other contention was urged by the learned Counsel for the petitioner. 16. In the circumstances, the petition is dismissed with costs. The petitioner to pay a sum of Rs. 3,000/- to the respondent towards the costs of the petition. Petition dismissed. -----