UNION OF INDIA v. SUPREME CONSTRUCTION — 1998 DIGILAW 22 (BOM)

ORDER S. S. Nijjar, J. - This petition under Section 30 of the arbitration Act, 1940 has been filed by the petitioners challenging the Award dated 29th December, 1995 of the sole Arbitrator Shri S. K. Ahuja Chief Engineer, copy of the Award has been attached to the petition at Exhibit-A. A contract was entered into between the respondents and the petitioner for the construction of telephone exchange building at Ulhasnagar. As per agreement No.14/PT(B-V) 1981-82 dated 26th November, 1981 entered into between the parties, the respondents were required to complete the construction work within 18 months. The work commenced on 11th December. 1981 and was actually completed on 31st December 1983. The respondent applied for extension of time and the same were granted under Condition No.5 of the general conditions of contract forming part of the contract. The final bill prepared as per the terms and conditions of the contract and an amount of the final bill was paid to the respondent. According to the petitioners, no further amount remained due and payable. The respondents received the payment under the final Bill under protest. Disputes arose between the parties and the matter was referred to the Arbitration. Initially sole Arbitrator Shri Surendranath, Superintending Engineer was appointed by letter dated 1st January 1989. Shri Surendranath resigned from the arbitration by letter dated 22nd March, 1991. Thereafter one Shri Chakravarthy, Chief Engineer was appointed as sole Arbitrator by letter dated 10th April, 1991. This Arbitrator vacated his office and resigned from the arbitration on 10th October, 1991 Thereafter one Shri J. Pal Engineer (Arbitration) was appointed as sole Arbitration by letter dated 22-1-1992. He also resigned on 10th December, 1993 In his place the present Arbitrator Shri S. K. Ahuja was appointed as a sole Arbitrator. The Arbitrator entered upon reference on 17th January 1994 and parties filed their pleadings. The respondents had filed a statement of claim on 29th June, 1987. As many as 18 claims were made for a total amount of Rs. 11,84,677.54 ps. In reply to the statement of claim the petitioners filed their counter statement denying the claims. The parties were heard by the Arbitrator. The Award was given on 29th December, 1995. It was served on the petitioners on 5-1-1996. In the Award the claim of the Respondent has been allowed to the extent of Rs. 3,09,261.46 out of the total claim of Rs. 11,84,577.54. The parties were heard by the Arbitrator. The Award was given on 29th December, 1995. It was served on the petitioners on 5-1-1996. In the Award the claim of the Respondent has been allowed to the extent of Rs. 3,09,261.46 out of the total claim of Rs. 11,84,577.54. 2. I have heard the counsel for the parties and perused the Award with aid of the Counsel. Counsel for the petitioner has restricted the challenge to the Award with regard to claims Nos. 1, 9, 11, 15 and 18. With regard to Claim No.1, it is to be noticed that the amount awarded is Rs. 938.57 against the claim of Rs. 91,015.51. A perusal of the Award shows that the claim has been partly allowed after hearing arguments advanced by the parties. After discussing the various points raised, the Arbitrator has found it fit to award only an amount of Rs. 938.57 ps. This Court is unable to see any error apparent on the face of the record for setting aside the Award with regard to Claim No.1. 3. The main challenge in the petition is with regard to Claim No.9. This claim as set out in the statement of claim is as under: "We submit that the work awarded to us on 26-11-1981 with the date of commencement to be reckoned as 11-12-1981 and specifying a period of 18 months for its completion. Accordingly the stipulated date of completion of the work was 10-6-1983. We submit that due to the various delays, hindrances and breaches of contract on the part of the respondent from time to time, the work could not be completed by the stipulated date of completion of 10-6-1983. The work prolonged beyond that date and was ultimately completed by us on or about 31-12-1983. We submit that during the prolonged period of construction 10-6-1983 to 31-12-1983 or period of 2/3 month, the prices of materials and labour had gone up considerably higher than those prevalent at the time of our tender and/than what we had contemplated while working out our tendered rates. We had to incur considerable extra expenditure in the prolonged period of contract due to increase in prices of materials and labour which we need not have incurred if the work was allowed to be completed by the originally stipulated date of completion of 10-6-1983. We had to incur considerable extra expenditure in the prolonged period of contract due to increase in prices of materials and labour which we need not have incurred if the work was allowed to be completed by the originally stipulated date of completion of 10-6-1983. We submit that as well had to incur this extra expenditure due to the delays, hindrances and breaches of contract on the part of the respondents from time to time, we are entitled to be compensated for the same by the Respondents. We claim an amount of Rs. 3,00,000/- as compensation on this account from the Respondents and pray that the learned Arbitrator may be pleased to award the same to be paid us by the Respondent. A perusal of the above shows that the claims is with regard to the delay in completion of the contract due to the hindrance and breaches of contract committed by the petitioner from time to time. It is claimed that the said work could not be completed on 10th June, 1983 and was in fact completed on 31st December, 1983. During this period of 6 months the prices of material and labour charges had gone up considerably higher than those prevailing at the time of the tender. Thus the respondents had claimed compensation in the sum of Rs. 3 lakhs. After considering the evidence placed on the record by the parties and after hearing the parties, the arbitrators has granted only a sum of Rs. 1,40,352/- against Claim No.9. According to the Counsel for the petitioner, these findings arrived at by the Arbitrator are beyond the compensation permitted under the contract. Counsel has relied upon Clause 10(c) of the conditions of contract which were applicable with regard to rate, tender and contract for works in the Post and Telegraph Department Civil Engineering Wing This document sets out the conditions under which the contacts have to be awarded in the Department of Posts and Telegraphs. Counsel has relied upon Clause 10(c) of the conditions of contract which were applicable with regard to rate, tender and contract for works in the Post and Telegraph Department Civil Engineering Wing This document sets out the conditions under which the contacts have to be awarded in the Department of Posts and Telegraphs. A perusal of this clause shows that if during the progress of the work, the price of any materials incorporated in the works or wages of labour increases as a direct result of coming into force of any fresh law or statuary rule or order, then amount of contact is to be accordingly varied provided, the increase payable is not attributable to delay in the execution of the contract within the control of the contractor. Any such increase in wages as a result of coming into force any fresh law is not to exceed 10 per cent of the wages prevailing at the time of the tender. Counsel for the petitioner does not claim any infringement of the above provision. He however, submits that the Award has been given totally contrary to what is provided as under in clause 10C. "The Contractor shall, for the purpose of this conditions 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 Government and further shall at the request of the Engineer-in-Charge furnish verified in such manner as the Engineer-in-Charge may require any documents so kept and such other information as the Engineer-in-charge may require " Relying on this clauses, Learned Counsel Mr. Shah has submitted that the Respondents had failed to submit any accounts as required under this sub-clause. It is submitted in the absence of such accounts it was not permissible for the Arbitrator to award any amount to the Respondents. A perusal of the reward would, however, show that increase in fair wages has been proved before the Arbitrator on the basis of the Government notification dated 26th August. 1982 and October 1983. The respondent had also requested for the release of payment by their letter dated 28-1-1983. A perusal of the reward would, however, show that increase in fair wages has been proved before the Arbitrator on the basis of the Government notification dated 26th August. 1982 and October 1983. The respondent had also requested for the release of payment by their letter dated 28-1-1983. This fact was acknowledge by the respondents vide letter at Exhibit R-108 Thereafter the Respondent was directed to produce the books of accounts vide another letter which is exhibited at R-111 of the Award preceding. This was duly filed by the Respondents. This was also acknowledged by the Respondents. Thereafter Respondents were directed to produce books of account which were also duly produced. No complaints about the labour were received during the performance of the contract. It is observed that the Respondents have filed detailed calculations towards the claim wherein 10 per cent of the increase of the labour wages was absorbed by them. The net amount of escalation, therefore, works out to the amount awarded. It is categorically observed in the award as under: "In view of the above, it is quite evident that there was increase in the fair wages of labour due to Government notification during performance of the contract and the escalation was demanded of the contract and the escalation was demanded by the claimant during execution of the work as provided under Clause 10-C. The books of accounts were also produced by the claimant for verification of the Respondent and also as per records, there was no labour complaint during this period in respect of payment of wages less than the fair wages as such the claimant was found fully entitled for escalation towards increase in the labour wages. After going through the calculations filed by the claimant through his Annexure CA 115 the claim for Rs. 1,40,352.00 is found fully justified and accordingly the same is allowed in favour of claimant" A perusal of the Award above would clearly shown that the Arbitrator has not committed any error which can be said to be apparent on the face of the record. Counsel thereafter has highlighted the findings in the Award with regard to Claim No.11. It is stated that in this particular claim the Respondents have failed to submit the detailed analysis of rates as required under Clause 12 of the conditions of contract. Counsel thereafter has highlighted the findings in the Award with regard to Claim No.11. It is stated that in this particular claim the Respondents have failed to submit the detailed analysis of rates as required under Clause 12 of the conditions of contract. A perusal of the reasons given by the Arbitrator with regard to Claim No.11, shows that the claim has been divided into various subheadings from Claim-(i) to (vii). A perusal of the reasons shows that Arbitrator has relied on the analysis of rates adopted by the respondents. Each and every item has been discussed in detail. In my view, it cannot be said that the findings given against Claim No.11, are such which go to the root of the Award. With regard to claim No.15 it is submitted that there was no evidence whatsoever before the Arbitrator to come to the conclusion. A perusal of the reasons given by the Arbitrator, however, shows that the facts were admitted to the effect that the area where thermocole required to be used was restricted by the petitioner and the material brought by the Respondent was not accepted by the petitioner for use on any other work. Thus obviously the Arbitrator has come to the conclusion that the respondent was entitled to claim losses. Mr. Shah submitted that from the Award it is not apparent as to how the Arbitrator has arrived at the figure of Rs. 10,000/- as the losses sustained by the respondents. The Arbitrator has obviously arrived at the said figure on the basis of some evidence and reasons. This Court finds no error apparent on the face of award. With regard to claim No.18, a perusal of the award shows that the interest granted is neither unreasonable nor unconscionable. 4. It is a settled proposition of law that the Court should not reappraise the evidence intrinsically or embark upon a close scrutiny of the same for arriving at the conclusion that the finding given by the Arbitrator are erroneous. With regard to claim No.18, a perusal of the award shows that the interest granted is neither unreasonable nor unconscionable. 4. It is a settled proposition of law that the Court should not reappraise the evidence intrinsically or embark upon a close scrutiny of the same for arriving at the conclusion that the finding given by the Arbitrator are erroneous. Such exercise of power which can be exercised by the Appellate Court with power to reverse the finding of fact is alien to the scope and ambit of challenge of an Award under the Arbitration Act, It is only where the error of law or finding of fact is patent and is easily demonstrable without the necessity of carefully weighing the various possible views for it that the Courts can interfere with the Award. Only very limited grounds are permissible on which the Award can be set aside. The reasonableness of the reasons given by the Arbitrator are not to be adjudicated upon in the Arbitration proceedings. The scope of the Court in interfering with the Awards given by the Arbitrator has been settled by a catena of judgments of the Supreme Court and various High Courts. The Award made by an Arbitrator is conclusive as a judgment between the parties and the Court is entitled to set it aside only if the Arbitrator has misconducted himself in the proceeding or when the Award has been made contrary to the provisions of the contract. An Award being a decision of the Arbitrator chosen by the parties to decide the dispute submitted to him is ordinarily not liable to challenge on the ground that it is erroneous. It is ordinarily final and conclusive. Having examined the Award from all angles, this Court is of the view that no meaningful challenge has been made out in the petition. I find no merit in the petition. The same is hereby dismissed with no order as to costs. 5. Decree in terms of the Award with further interest from the date of decree till the date of payment at the rate of 15 per cent per annum. Certified copy expedited Petition dismissed.