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2002 DIGILAW 770 (KER)

The State of Kerala v. P. K. Ramachandran

2002-11-25

K.A.MOHAMMED SHAFI, K.S.RADHAKRISHNAN

body2002
Judgment :- Radhakrishnan, J. M.F.A. No.412 of 1996 was filed under Section 39 (vi) of the Arbitration Act against the judgment and decree in O.P. (Arb.) No 109 of 1992 of the Sub Court, Kollam. M.F.A. No.1572 of 2001 was filed under Section 39(vi) of the Arbitration Act against the order in I.A. No 513 of 1993 in O.P. (Arb.) No 109 of 1992 of the same court. 2. M.F.A. No.412 of 1996 was filed with a petition for condonation of delay of 2,671 days. Appeal was filed challenging the judgment and decree of the Sub Court dated 30.10.1993 in O.P. (Arb.) No.109 of 1992 under Section 39(vi) of the Arbitration Act. State and the Department if wanted to challenge the judgment and decree in arbitration proceedings ought to have filed the appeal not under Section 39(vi) of the Act but on the ground available under Section 17 of the Arbitration Act. While challenging the judgment and decree of the court below in M.F.A No.412 of 1996 State paid court fee of Rs.16,618/- under Schedule II Article 4 Sub Clause (1)(c) amended as per Section 52 of the Court Fees Act which was not necessary if the State wanted to challenge the judgment and decree only. One – third of the court fee viz. Rs.5,539/- was initially paid. Since one-third of the court fee was paid in M.F.A No.412 of 1996 we have heard on merits both the cases after examining the grounds for condonation of delay. 3. There was considerable delay in filing M.F.A. No.1572 of 2001. However, M.F.A. No.412 of 1996 which was filed against the judgment and decree in O.P. No.109 of 1992 with a petition for condonation of delay after paying the court fee on a mistaken impression that State was actually challenging the order refusing to set aside the award. We have indicated in our judgment in M.F.A No.482 of 1998 and connected matters about the callous manner in which arbitration cases are being filed and conducted causing drain to the State exchequer. This is also yet another example which would show the callousness in conducting the arbitration cases by the State thereby public in large suffered. However, since considerable stake is involved we thought we would examine the petition for condonation of delay on merits. 4. This is also yet another example which would show the callousness in conducting the arbitration cases by the State thereby public in large suffered. However, since considerable stake is involved we thought we would examine the petition for condonation of delay on merits. 4. Sub Court passed two separate orders one passing the judgment and decree and another order refusing to set aside the award; both the orders were passed on the same day, i.e. on 30.10.1993. On going through the affidavit filed in support of the petition we find there was considerable delay in the office of the counsel who conducted the case before the court below as well as in the office of the Superintending Engineer, Kallada Irrigation Project in preferring the appeal. Since the State had already paid the court fee while filing the earlier appeal, we are of the view that it was only a bonafide mistake. We are of the view, public interest would suffer if we do not condone the delay and admit M.F.A. No.1572 of 2001 and hear the matter on merits. The learned Advocate General advised that there was no scope for filing appeal and the Government had passed an order for paying the interest amount. Public interest is supreme and court shall not be carried away by the manner in which the law officer and Government officials views alone. 5. For disposal of the appeals we describe the parties as claimant and respondent. Work in question relates to “Kallada Irrigation and Tree Crop Development Project Right Bank Canal System – Formation of Chavara Distributory from chainage 0 to 5000 M and from ch 6010 to 6210 m including canal structures and cross drainage works – Part II from chainage 1000 to 2000 M”. Agreement dated 30.10.1985 was executed on 11.12.1985. The total probable amount of contract was Rs.8,77,002/- and the agreed amount of contract was Rs.9.90,432/-. Time of completion of the work was eight months which was later extended thrice as requested by the claimant upto 30.9.1987. Since claimant had failed to compete work contract was terminated. Later on the request made by the claimant by letter dated 10.12.1987 time was extended upto 30.6.1988 and the work was completed during the said period. Disputes and differences arose between the parties, ultimately Chief Engineer, CABA, Trichur (retired) was appointed as the sole arbitrator. Contractor claimed an amount of Rs.29,28,013/-. Later on the request made by the claimant by letter dated 10.12.1987 time was extended upto 30.6.1988 and the work was completed during the said period. Disputes and differences arose between the parties, ultimately Chief Engineer, CABA, Trichur (retired) was appointed as the sole arbitrator. Contractor claimed an amount of Rs.29,28,013/-. Arbitrator passed award for Rs.20,23,680/with interest thereon at 15% per annum from 27.3.1989 till date payment. Claimant submitted claim statement on 28.5.1990. Respondent filed their defence statement dated 17.12.1990. Parties have also referred to various clauses in LCB Specifications including clauses 51 to 52. Second respondent raised preliminary objection on 22.5.1990 stating that the claimant had failed to invoke the arbitration clause in time in pursuance of clause 52 read with clause 18(e) of the agreement. Claimant filed replication dated 6.6.1990 against the preliminary objection raised by the respondent. On the side of the claimant as many as 73 documents were produced which were marked as Exts.P1 to P73. Additional documents were also marked Exts.P74 to P83. Claimant also produced Exts.P84 and P85. On the side of respondent eleven documents were produced along with the defence statement which was marked as Exts.R1 to R11. Claimant filed another replication dated 20.11.1991 Respondent filed reply on 24.4.1992. Arbitrator has also inspected the site on 4.2.1992. Respondent produced original agreement. Before the arbitrator the following issues were raised: (1) Whether the claim petition is barred by limitation. (2) Whether the respondents have failed to discharge the contractual obligations and if so what should be the relief. (3) Whether the claimant is entitled to get the cost for blasting metamorphic medium rock and if so, what should be the amount. (4) Whether the claimant is entitled to get the cost for the transportation and rehandling of the cut spoil to the dumping yard and if so, what should be the amount. (5) Whether the claimant is entitled to get the cost for procurement and transportation of rubble, metal and sand and if so, what should be the amount. (6) Whether the claimant is entitled to get the cost for the concrete and masonry works and if so, what should be the amount. (7) Whether the claimant is entitled to get damages for idling men and machinery and if so, what should be the amount. (6) Whether the claimant is entitled to get the cost for the concrete and masonry works and if so, what should be the amount. (7) Whether the claimant is entitled to get damages for idling men and machinery and if so, what should be the amount. (8) Whether the claimant is entitled to get interest on the amount due to him and if so, what should be the rate of interest. (9) Cost and other reliefs. On the first issue arbitrator found in favour of the claimant and held that the arbitration proceeding is not barred by law of limitation. On the second issue arbitrator found that the respondent State had failed to discharge the contractual obligation and delayed the work and held that the claimant is entitled to get damages. Issues 3 and 4 were considered together by the arbitrator and an amount of Rs.6,04,774/- was awarded. Issues 5 and 6 were also clubbed together and the arbitrator awarded a sum of Rs.11,63,306/-. On issue 7 arbitrator found an amount of Rs.2,55,600/- was due to the claimant for idling establishment, men and machinery. Arbitrator also found that the claimant is entitled to get 15% interest on the amount awarded from the date of notice 27.3.1989 till date of award on 19.10.1992. It was held if the amount is not paid within three months from the date of award claimant would get 15% interest from the date of award till date of decree whichever is earlier. 6. Learned Government Pleader appearing for the State Sri K.L.Joseph contended that the arbitrator had exceeded his jurisdiction in entertaining the claims 3 to 6 since those claims fall within the excepted category. Counsel also made reference to clauses 51 and 52 of the LCB Conditions. Counsel submitted that since those claims were not arbitrable the award is without jurisdiction and is liable to be interfered with. Counsel referred to several decisions including the recent decision of the apex court in General Manager, Northern Railway v. Sarvesh Chopra (2002 (4) SCC 45.). Learned Government Pleader also submitted that those claims would fall within clause 52 of the arbitration clause and arbitrable. Even then arbitrator had misconducted himself in awarding the amounts. Counsel referred to several decisions including the recent decision of the apex court in General Manager, Northern Railway v. Sarvesh Chopra (2002 (4) SCC 45.). Learned Government Pleader also submitted that those claims would fall within clause 52 of the arbitration clause and arbitrable. Even then arbitrator had misconducted himself in awarding the amounts. Counsel also attacked the finding of the arbitrator with regard to claim Nos.2 and 7 as well by which arbitrator held that respondent had failed to discharge the contractual obligation and also that the claimant is entitled to get benefits for idling establishment, men and machinery. 7. Counsel appearing for the claimant Sri. P.K.Balakrishnan Nair on the other hand contended that the arbitration award is not liable to be interfered with. Counsel submitted arbitrator has not awarded the entire claim but only reasonable amount after examining the rival contentions in detail. Counsel submitted that this court in the appellate jurisdiction is not justified in re-appreciating the findings of the arbitrator. Counsel also submitted assuming that claims 3 to 6 would fall within the excepted category having already addressed several letters to the Superintending Engineer as well as Chief Engineer in time arbitrator has got jurisdiction to decide those claims as well. Counsel also placed reliance on the decision in Indian Engineering & Textile Ltd. v. Delhi Development Authority (2001 (5) SCC 691) and contended unless there is violation of principles of natural justice in the passing of the award or error apparent on the face of it or that the arbitrator travels beyond the terms of the agreement, it is not open to the court to interfere with the award passed by the arbitrator as held by the apex court in H.P.S.E.B. v. R.J.Shah and Co. (JT 1999 (3) SC 151) and other decisions. 8. We are of the view scope and ambit of interference with the award is well settled by catena of decisions. We have examined the preliminary ground raised by the learned Government Pleader with regard to the question of limitation. Learned Government Pleader submitted that work was completed on 30.6.1988 even going by the averments contained in the petition itself. One should have invoked arbitration clause within six months going by the last limb of clause 52 within thirty days from the expiry of the period. Since same was not done learned Government Pleader submitted that claim petition is barred by limitation. One should have invoked arbitration clause within six months going by the last limb of clause 52 within thirty days from the expiry of the period. Since same was not done learned Government Pleader submitted that claim petition is barred by limitation. We find it difficult to accept this contention. We find completion certificate was issued only on 6.3.1990 though certificate says date of completion was 30.6.1988. He also submitted that the agreement was executed within the extended period. Arbitrator already found on facts that the respondent had failed to perform their part of the contract. Considering all the aspects we are of opinion that the view taken by the arbitrator in the facts and circumstances of the case is not to be interfered on the ground of limitation. We therefore fully endorse the view of the arbitrator that the claims are not barred by law of limitation. 9. We will now examine claim No.2 as to whether respondents have failed to discharge the contractual obligation as per the contract agreement. As per Clause 17 of the Specifications and Schedule C to the agreement, respondent is bound to supply departmental materials in time. Claimant had sent Exts. P23, P24, P25, P34 etc. alerting the respondent. Letter dated 12.1.1987 from Assistant Executive Engineer to the Assistant Engineer would indicate work was idled for want of M.S. rods. On inspecting the site also arbitrator had found water supply pipe and telephone cable passing by the side of the road also might have delayed the work of flume. Department files also would show respondents had made payment to the claimant for the foundation work, but the respondents had taken more than one year to drop the partly executed work. This has also caused considerable damages and loss to the claimant. On examining the departmental files arbitrator found that cement, bitumen and 10 mm. M.S. rods were not issued and part bill was not paid to the claimant in time. Arbitrator concluded that respondents had not discharged the contractual obligation and there was impossibility of performance of the contract and hence termination order dated 22.10.1987 issued by the respondent also was not in order. Later termination order was revoked by the respondent on 3.12.1987. Arbitrator had concluded that since respondent had failed to discharge contractual obligation work was delayed and the claimant was entitled to get damages from the respondent. Later termination order was revoked by the respondent on 3.12.1987. Arbitrator had concluded that since respondent had failed to discharge contractual obligation work was delayed and the claimant was entitled to get damages from the respondent. Considering all the aspects, we find no reason to interfere with the said finding of the arbitrator. 10. Before we examine claims 3 and 4, let us examine claim 5 and 6 in the light of the findings on claim No.2 by the arbitrator. Claim 5 relates to cost for procurement and transportation of rubble, metal and sand and claim 6 relates to cost, concrete and masonry work. Claimant had contended since the canal structures and cross drainage works were to be done with non departmental materials such as rubble, metal and sand, respondents had specified the source of rubble and mental in schedule D of the agreement at Mannady with time limit. Due to various reasons these materials could not be procured from there. Sand at Kadappuzha became salty due to inflow of salt water from the Ashtamudi lake when the cross bar was opened. Therefore, sand from Kadappuzha could not be used. Claimant had to procure sand from Chengannur and had to expend considerable amount also to transport the same to Chavara. Total cost of metal, rubble and sand with conveyance charge was Rs.5,74,235/-. It was also found that in similar situation Department themselves had passed favourable orders in favour of the claimants. Arbitrator perused the departmental files and schedule to the agreement and found the claims were justified. We find claims 5 and 6 would fall within the arbitration clause. Arbitrator after perusing the entire files and documents came to the conclusion that the claims are justified and ultimately awarded a sum of Rs.11,63,306/-. Since we have already upheld the award of the arbitrator stating that there was failure on the part of the State in discharging their part of the obligation under the contract, we are of the view the award passed by the arbitrator with regard to claims 5 and 6 is also justified since those claims fall within clause 52 of the LCB Conditions. We uphold those claims. 11. We may now examine whether claims 3 and 4 are arbitrable and fall within clause 52 of the LCB condition. We uphold those claims. 11. We may now examine whether claims 3 and 4 are arbitrable and fall within clause 52 of the LCB condition. Claim No 3 relates to cost for blasting metamorphic medium rock and claim No 4 relates to payment for transportation and rehandling of the cut spoil to the dumping yard. Claimant would contend that the work was to be done by excavating 14885.746 M3 of earth including excavation of 138884.108 M3 for canal and 1001.638 M3 for flume and earthwork filling for 1372 M3 as per the agreements. It is the case of the claimant that during the execution of the work, the nature of excavation of work was entirely different from the work contemplated in the agreement. Surface layer of 40 to 50 cm was earthwork as contemplated in the agreement. The substratum was metamorphic medium rock mixed with narrickal and it was removed by strong blasting using gelatin and detanators purchased from open market. It was also stated that bunds on either side of the canal was having an average width of 3 m and less than 1m on many portions. Since the canal bunds were narrow, the cut spoil could not be dumped on the banks of the canal. The canal was having approach road facilities at ch. 1620 m and the cut spoil was brought from the canal to the approach road; by head load of 250m. The cut spoil in excess of filing quantity was conveyed to the nearest dumping yard at Musaliarpadom at a distance of 12 km. through the conveyance contractor. According to the claimant, blasting and removing metamorphic medium rock was entirely different from the earthwork specified in the agreement, and the cut spoil was conveyed to the dumping yard. It is the specific case of the claimant that those are all extra items and those extra items had to be mutually agreed by negotiation under clause 32 of the LCB conditions. Claimant had sent Exts.P1, P2, P30, P38, P43, P52 and P55 letters on various dates. 12. We have perused in detail claim Nos.2 and 3 as well as the counter claim. There is no clear finding by the arbitrator whether award on those claims was beyond the terms of the agreement. Arbitrator awarded a sum of Rs.6,04,774/- for both the claims. 12. We have perused in detail claim Nos.2 and 3 as well as the counter claim. There is no clear finding by the arbitrator whether award on those claims was beyond the terms of the agreement. Arbitrator awarded a sum of Rs.6,04,774/- for both the claims. We are of the view arbitrator had misconducted himself in awarding the amount since those claims were beyond the terms of the contract. This question has pointedly come up for consideration in R.C.Reddy v. State of A.P. 2001 (4) SCC 241) wherein the apex court held that arbitrator has no jurisdiction to award for extra works done by the contractor. In that case contractor claimed payment at the higher rate relying on the basis of the clause in the agreement referring to supplemental items which were found essential during the execution of the contract. Apex court held that excavation was not covered under clause regarding supplemental items and the rejection of the claim by the arbitrator was upheld. The court further held as follows: “An arbitrator being a creature of the agreement, unless the agreement either specifically or inferentially provides for a higher rate to be awarded for any additional or excess work done by the contractor, it would not be permissible for the arbitrator to award for the so-called additional work at a higher rate”. We are also of the view that claim Nos.2 and 3 are not arbitrabile in view of non-compliance of clause 51. Counsel for the claimant submitted that grounds urged under clause 51 were not raised either before the arbitrator or before the Sub Court. Admittedly claims 2 and 3 relate to extra work which is not contemplated in the agreement. If the contractor considers any work which is beyond the terms of the contract he has necessarily to invoke clause 51 of the LCB Conditions. In this connection we may refer to clause 51 for easy reference. 51. SETTLEMENT OF DISPUTES If the contractor considers any work demanded of him to be outside the requirements of the contract, or considers any drawings record or ruling of the authority executing agreement on a matter in connection with or arising out of the contract or the carrying out of work to be unacceptable, he shall promptly ask the Authority executing Agreement in writing for written instructions or decision. Thereupon the Authority executing Agreement shall give his written instructions or decision within a period of thirty days of such request. Upon receipt of the written instructions or decision the Contractor shall promptly proceed without delay to comply with such instructions or decision. If the Authority executing agreement fails to give his instruction or decision in writing within a period of thirty days after being requested, or if the contractor is dissatisfied with the instructions or decision of the Authority executing agreement the contractor may within thirty days after receiving the instructions or decision appeal to officer designated shall be higher in rank than the officer giving the instruction. Chief Engineer of the Superintending Engineer executes Agreement and Superintending Engineer if Executive Engineer executes Agreement who shall afford an opportunity to the contractor to be heard and to offer evidence in support of his appeal. This officer shall give a decision within a period of sixty days after the contractor has given the said evidence in support of his appeal. If the contractor is dissatisfied with this decision, the contractor within a period of thirty days from receipt of the decision shall indicate his intention to refer the dispute to arbitration, failing which the said decision shall be final and conclusive. It is evident from the abovementioned clause that if the contractor considers any work to be outside the requirement of the contract, he shall promptly ask the authority in writing for written instruction or decision. Thereupon the authority shall give written instruction or decision within thirty days of such request. Contractor could proceed with the work only after getting written instruction or decision from the authority executing the agreement. If the authority fails to give any written instruction within thirty days of request or the contractor is dissatisfied with the instruction or decision right of appeal is also provided to the appellate authority before whom contractor could adduce evidence. Appellate authority also has to take decision within sixty days. Clause also provides that if the claimant is dissatisfied with the order of the appellate authority he could also invoke clause 52. We have perused various communications sent by the claimant to the Department. We are of the view procedure laid down under clause 52 has not been followed by the claimant in the manner as provided in the said clause. Clause 51 has got a purpose to achieve. We have perused various communications sent by the claimant to the Department. We are of the view procedure laid down under clause 52 has not been followed by the claimant in the manner as provided in the said clause. Clause 51 has got a purpose to achieve. If the contractor considers any work to be outside the requirement of the work while the work is on, he has necessarily to invoke the same so that the superior authority could have a chance to make on the spot inspection to decide as to whether those works which the contractor had to undertake are beyond the terms of the contract. We are convinced this procedure has not been complied with by the contractor. Consequently claims 3 and 4 are not arbitrable and fall within the excepted category. It would be profitable to refer to the decision of the apex court in Sarvesh Chopra’s case, supra (2002 (4) SCC 45) wherein the apex court held that the arbitrator has no jurisdiction to those claims which fall within excepted matters. On facts it was held that those works would fall within the excepted category and consequently did not fall within the arbitration clause under 52. We therefore set aside the award of the arbitrator with regard to claims 2 and 3. 11. Arbitrator had already found that respondent had failed to discharge their part of the obligation and consequently work was delayed. In such circumstances, we are of the view award for idling charges is justified. In such circumstances we are inclined to allow the appeal and set aside award in respect of claims 2 and 3 are concerned. In all other respects, award would stand. Award passed by the court below is modified accordingly.